National Storage REIT (NSR) Earnings Call Transcript & Summary

Good morning, all. I'd like to begin by acknowledging the traditional custodians of the land on which we meet today as well as the traditional custodians of the land on which our centers are located across Australia and New Zealand. And I'll pay my respects to elders past, present and emerging. On behalf of the Board of National Storage REIT, it is my pleasure to welcome you to the 2023 Annual General Meeting. My name is Anthony Keane, and I'm the Chairman of National Storage Holdings Limited, the shares of which are stapled to units in the National Storage Property Trust and listed on the Australian Securities Exchange as National Storage REIT. Our business operates across every state and territory of Australia and throughout New Zealand. We're grateful to be part of the local fabric of so many local communities, and offer our thanks to all Australians and New Zealanders for their support as well as acknowledging the importance of diversity, tolerance and respect for each other on a range of issues in our daily lives. I'm also the Chairman of National Storage Financial Services Limited, the responsible entity of the National Storage Property Trust and have been appointed as Chair for the meeting of the unitholders of the trust, which will be run contemporaneously today. We are holding this year's AGM as a hybrid meeting. Security holders were given the option to attend in person here in Brisbane or to participate virtually through the Computershare meeting platform. The Computershare meeting platform will allow those security holders, proxies and guests who elected to participate virtually to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, security holders and proxies can ask questions and submit votes. For those attending online, we're published on our website and on the ASX, the virtual meeting online guide, which explains how to attend and participate in the AGM virtually. Online attendees can submit written questions at any time. [Operator Instructions] This year, security holders can also make comments or ask questions verbally through the questions and comments audio facility through the Computershare meeting platform. To ask a verbal question, please follow the instructions written below the broadcast. Information about the audio facility, including how to access and use the facility is set out in the notice of meetings and in the virtual meeting online guide. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic, amalgamated together. For those attending in person today, there will be an opportunity for comments and questions in respect to each item of business following the conclusion of item 9. Voting today will be conducted by way of a poll on all items of business. I will shortly open voting for all resolutions. I will start by outlining the procedure of the voting in person. On entering the meetings, security holders, representatives, attorneys of security holders as well as proxy holders should have received a yellow voting card. Relevant voting instructions and all resolutions are printed on the voting cards. I encourage security holders and their representatives to complete their voting cards after each item has been discussed. However, voting cards will only be collected at the conclusion of discussion of all items of business. To vote, simply place a mark in 1 of the 4 against or abstain boxes for each resolution. If you mark the abstain box, your votes will not be counted for that resolution. If relevant, please indicate whether you are voting as an attorney or representative. At the time of voting, if you are uncertain about any of the voting procedures or require any assistance, please raise your hand and representative from Computershare will be happy to help you. At the conclusion of the meetings, please ensure that you have marked your votes for the respective resolutions and then give your completed voting card to a representative of Computershare. I will now outline the procedure for voting online. If you're eligible to vote once voting opens, press the vote icon and all resolutions that are open for voting will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit to submit or enter button as the vote is automatically recorded. You will receive a voting confirmation notification on your screen. You can change your vote up until the time I declare voting closed. The meeting has been called under the Notice of Meetings dated 22nd of September 2023, the details of which were sent to all security holders. If there is no objection, I propose to take the notice as read. A copy of the notice can be found on the National Storage Investor website if required. It is now 10:06 a.m. Brisbane time, and I've been informed by our share registry, Computershare, that a quorum is present. So I formally declare the meetings open and, therefore, formally open the poll for voting on each relevant item of business now. I would now like to introduce the directors and senior executive team of the company and nonexecutive directors: Howard Brenchley, Chair of the Audit Risk Committee, a member of Nomination and Remuneration Committees; Inma Beaumont, member of the Audit and Risk Committee, -- both Audit and Risk, Nominations and Remuneration Committees; Scott Smith, Chair of the Remuneration Committee, member of the Audit and Risk and Nomination Committees; our Managing Director, Andrew Catsoulis; our Executive Director and Company Secretary, Claire Fidler; our Chief Financial Officer, Stuart Owen; and our Chief People Officer, Manny Lynch. Please note that Howard Brenchley and Claire Fidler are both standing for reelection. Details of which are included in the notice of meeting. Representatives of our auditor, Ernst and Young our share registry, Computershare; and our lawyers, Allens, are also present at the meeting today. This morning, I will provide a brief outline of our business, and we'll then hand to Andrew for an operational update. We will then turn to the formal part of the meeting as set out in the notice of meetings. National Storage has delivered another year of solid growth outcomes in FY '23 despite marked changes in the economic environment, highlighting the strength and conservative positioning of our operating business model. The business has maintained its occupancy at very high levels and grown its revenue across Australia and New Zealand, building on its robust growth trajectory. Our high-performing teams across all business sectors have demonstrated their commitment to our business. And in these increasingly challenging economic conditions, we remain confident that National Storage business model will continue to evolve to deliver strong results for our stakeholders. Our key results achieved across FY '23 reflect the strength and resilience of our business. Underlying earnings increased $0.085 to $0.115 per security. Group RevPAM increased 3.6% to $270 a square meter. Group rate per square meter increased 8.2% to $319 a square meter. While group occupancy reduced slightly to 85%. Valuations of our investment properties increased by $561 million to $4.3 billion. With valuation uplift driven by improved operational performance and a largely unchanged weighted average portfolio capitalization rate of 5.91%. Our net tangible assets increased by 6% to $2.48, reflecting our ability to add value to the portfolio through enhancing operational performance while creating operating efficiencies. Total revenue for the group increased to $330 million, up 18% on the prior year. Our operating margin also increased, up 2% to 66%, illustrating our ability to drive synergies and economies of scale from the National Storage self-storage platform, now encompassing over 230 centers across Australia and New Zealand. As our business matures, it's important to refine and evolve our strategies to ensure that our core objective of maximizing return on security holders' funds invested is achieved. Our Board members, executive team and heads of department have spent considerable time and effort reviewing every aspect of our strategy and current business operations to evolve our systems and processes in the pursuit of excellence as part of our 4 pillars growth strategy. As a result of this whole of business review, our 4 pillars have evolved to embrace the following: organic growth; acquisitions, developments and expansions; technology and automation; and sustainability. The introduction of our new sustainability pillar demonstrates our tangible commitment to ensuring sustainability underpins all aspects of our business. This reflects our determination to be the most attractive investment in our sector through superior performance while we overlay our business with a sustainable lens, creating trust and confidence that we are building a truly sustainable business model for the benefit of our security holders, customers, employees, communities in the planet. More information on our sustainable practices can be found in our 2023 sustainability report available on our website. Through our NS Cares program, we are committed to providing meaningful support to 4 charitable organizations. We are proud to currently partner with charities across the important areas of medical research, mental health, disability support and safety, all housed under the umbrella of creating safe spaces, a cornerstone of our mission at National Storage. Our acquisition strategy remains focused predominantly on off-market value-accretive opportunities sourced from our team's long-standing industry insights in an aim to enhance our existing footprint. The second limit of this strategic pillar is to provide ongoing build capacity by way of a development and expansion pipeline as well as undertaking selected center optimizations to improve center efficiency. National Storage has secured an unrivaled portfolio of 60 new development and expansion opportunities, which will add important new build capacity of the portfolio ensuing years. The importance of scale in the Australian and New Zealand markets cannot be overstated. This strategy will enable us to build an unrivaled network of self storage centers in key markets, whilst creating value through our sustainable approach to building new centers. Our current development pipeline has increased to approximately 360,000 square meters with 45 active projects at various stages of completion, providing national storage with the opportunity to strategically break ground at the appropriate time relating to market forces and customer demand. A unique combination of in-house development capability and trusted development partnerships provides a robust delivery capability that can efficiently respond to market dynamics and produce best-in-class value-added assets. Our considered approach remains focused on making sustainable choices through design and delivery in line with National Storage's sustainability pillar. In line with our increased focus on technology and automation, National Storage has a suite of technology and innovation projects, all designed to optimize every aspect of our business, from inquiry generation, a new customer conversion into sales and center efficiency, whilst reducing overheads. Our focus areas in FY '24 include: the further evolution of our cybersecurity program; new telephony platform for centers aimed at delivering AI for greater automation; integration of workforce management tools and our core sales platform; and the automation of accounts receivable processes. These initiatives strive to drive efficiency, reduce costs and enhance the customer experience. National Storage remains well positioned for growth, notwithstanding these uncertain and challenging times. Our platform is highly scalable and by far, the largest owner-operated fully integrated, fully internally managed storage-specific region in Australasia. We will focus on expanding the National Storage business in Australia and New Zealand with a view to maximizing earnings per security for the benefit of all stakeholders. We would again like to offer a sincere thanks to all stakeholders. You have again provided National Storage with unwavering support during these uncertain times, support for which we are both humbled and grateful. We remain focused on working together to achieve best-in-class results for our stakeholders year after year. I would now like to introduce our Managing Director, Andrew Catsoulis, to report on activities for the year.

Good morning, everyone. I'd like to admire and welcome to Tony's welcome and also reiterate Tony's acknowledgment to traditional owners of the land on which we're operating today. My role today is to provide a brief synopsis of the year-end review. Tony has already extensively touched on that. So I'll be brief in that regard. I'll then turn to an update for our activities to date in Q1. And reaffirm our guidance and outlook. I'll also be making a brief announcement regarding some changes to our executive management team, which we're excited to be able to announce today. So I'll start with the year-end review. FY '23, as we know, was a very strong year for National Storage. Our IFRS profit of $320.4 million, underlying earnings of $141.8 million, up 12.1% year-on-year. Underlying EPS of $0.115, up 8.5%. Note that was upgraded during the year. NTA of $2.48 per stapled security up 6%. And as Tony has stated, that was predominantly and pleasingly driven primarily from operating performance out of the centers rather than any compression in cap rates. FY '23 total return to shareholders at 10.7% and group RevPAM up a healthy 3.6% to $270. In terms of our FY '24 outlook, we're pleased to announce today that we're maintaining our underlying earnings guidance of $0.113. Underlying earnings -- that represents underlying earnings of greater than $154 million. That earnings -- underlying EPS number is really primarily impacted by increased borrowing costs and our significantly expanded development pipeline, which I'll touch on a little later. I'll now turn to an operational update for Q1 of FY '24. Our focus continues to be on the active management of right and occupancy in order to optimize. Revenue management strategies at National Storage are really focused on optimizing financial performance. Just a quick note before I get into the actual numbers for Q1. We've updated the reportable group of centers from 195 centers in FY '23 to 210 centers for FY '24. Group RevPAM is essentially stable at $266 as at 30th September. Group rate remained stable at $316. These are pleasing results, given the challenging economic environment and also the fact that these are traditionally our slow months of the year through winter, and we would expect those numbers to improve as we come into our busier spring summer months. And we really see this as a return to a business as usual state, albeit in a more challenging environment post turbulence. It really takes us back to the traditional limited seasonality that we've seen historically in the industry pre-covered. Group occupancy remains at a healthy 84.6%, slightly down, as I said, seasonally adjusted essentially 0.3% from 84.9% as at 30 June 2023, occupancy across the 14 let-up centers as of 30 June 2023 has grown 3.1% to 52.3%, contributing positively to ongoing earnings. And you'll see at the bottom of the slide there, a breakup, which I'm not intending to go through with the group and distinguishing the Australian and New Zealand results individually. Next, I'll be speaking about the acquisition and development pipeline. So as you'll no doubt be aware, by now, we've completed 33 acquisitions in FY '23 totaling $234 million. that comprised 10 operating storage centers and the freehold of one previous leasehold center. Acquiring freeholds of leasehold centers is consistent with our strategy of bringing the leasehold centers where possible into our freehold ownership structure. It improves our optionality and opportunities for value accretion in those centers. The acquisitions are high-quality acquisitions located across Australia and New Zealand, with a focus on value-accretive opportunities rather than targeting the stabilized fully developed centers already operating at an optimal rate. And we're seeing some very good upside coming out of those centers as a result. Really, this is all part of capitalizing on the scalability of NSR's operating platform, which continues to drive efficiencies across the business. I'll talk a little later about some of the AI tech and automation opportunities that we see to further enhance efficiencies and scalability across the business. From a development expansion and redevelopment perspective, 4 projects were completed in FY '23, adding an important 22,200 square meters of new net lettable area into the portfolio and continuing to build that build capacity that's so important to enable us to drive both occupancy and revenue growth into the future. We have 20 projects delivering 145,900 square meters of additional NLA under construction or with DA obtained. And our focus remains on development expansion, redevelopment projects, leveraging NSR's in-house development expertise to deliver long-term enhanced earnings and NTA uplift outcomes. Turning briefly to FY '24 as an update. We've made 7 acquisitions to date totaling $53 million that have been settled in Q1 of FY '24. This comprises 2 existing storage centers for development sites and the freehold of our previously sold center, continuing that strategy I previously mentioned. Our forward-looking acquisition pipeline remain strong, and we are well positioned from a financing perspective with a modest level of gearing to execute on these future opportunities. From a development expansion and redevelopment perspective, 2 projects have been completed in Q1 FY '24, adding an important 15,000 square meters of additional net lettable area. These are milestones in Victoria and the expansion of our Port Kennedy Center, which has already hit its initial stabilized occupancy in a very quick let-up period, enabling us to build a significant expansion on to that center. You'll see below there that we've also acquired 4 new development sites in Q1 FY '24 and we have a project pipeline aggregate net lettable area in excess now of 385,000 square meters. With a breakup, you'll see below there on the right-hand side of that slide, which I won't speak to in detail. I'll now turn to our technology and automation. So really, our focus here is systems and process innovation and data analytics, harnessing automation and productivity initiatives, real-time data in tenant with a focus on real-time data intelligence and analytics. From a cybersecurity perspective, we have a comprehensive program with ongoing active management and implementation of a comprehensive cybersecurity program focused on governance, technical controls, monitoring, detection and response. From an embedding technology perspective, our focus is on enhancing the scalability efficiencies by -- of the group by an implementation of key technologies in both new and existing centers, evolving the business to prepare for the next phase of growth, automation and streamlining of systems through the use of enterprise AI and innovative technology solutions to further build on that scalability and efficiency that we're seeing develop through the business. From a process improvement perspective, we're looking at enhanced contact center and user experience through innovative technology solutions, refined customer analytics to improve our marketing sales and of course, our customer experience. and continuing to evolve our front-facing business applications to streamline internal processes. I'll now turn to sustainability and provide an update there. So sustainability, as you'll be aware, is our important fourth pillar of growth. I'm going to touch on 4 highlights out of our FY '23 sustainability report, which has just been released. So we have formed a stand-alone ESG committee internally, and that's really focused on driving best practice ESG outcomes. We've completed the physical climate risk assessment of the NSR portfolio, the entire NSR portfolio. and we're well progressed in establishing a target date for achieving carbon neutrality. Our comprehensive FY '23 sustainability report, which is, as I mentioned, just been published demonstrates the continued progress across the group in delivering on our sustainability objectives. Some highlights from that report, 4-megawatt hours of power generated from solar in FY '23, a 4.1% reduction in Scope 1 to carbon emissions during calendar year '22. A 32.7% of waste was diverted from landfill, 97% of our cardboard boxes are comprised of recycled content. We've supported 138 community partners throughout the year in various shapes and forms. And we have an ongoing focus on our cybersecurity and technology and automation programs, which Tony has mentioned earlier. I'll now turn to a brief update of some changes to the National Storage REIT executive management team. So firstly, I'll speak to Stuart Owen's role. Stuart is sitting to my left here. And as you all know, has performed the Chief Financial Officer role now for verging on 9 years for the entire National Storage REIT Group. Stuart, in addition to maintaining his role as CFO will take on a new role of Chief Investment Officer effectively overseeing all acquisitions and development proposals made by the executive team to the Board. Secondly, I'll speak to Claire Fidler, who is sitting at our main table to my right. Claire will maintain her Jill roles as Executive Director and Company Secretary of National Storage REIT. In addition, she will assume an additional role of Chief Governance and Risk Officer and Head of Sustainability. And I'm sure you'll agree critical roles going forward in terms of National Storage future. We're also excited to announce the appointment of 2 additional members to the executive team. firstly, Emily Ackland. Emily is sitting next to Stew to my left, to your right. Emily will be elevated to the executive and appointed General Counsel and Head of Legal. Emily has performed admirably in her former role as Chief Counsel over the past 3 years with National Storage REIT. From a personal perspective, might I say that it's fantastic to see our team continue to evolve and develop and flourish. And we're thrilled that Emily has agreed to take on this important new role and welcome her to the executive team. Secondly, I'll mention Nicolas Crane. Nick is sitting in the front row just in front of me. With the amalgamation of our acquisition and developments teams into a single team. Nick will be appointed to the exec and assume a new role as Head of Acquisitions and Development. Nick has really redefined our development program with his professionalism, commitment to excellence and determination to continuously improve the systems and processes in the development area. As our business evolves, we consider it sensible to bring acquisitions and developments into a single unit under Nick's guidance and control. So I'm sure you'll all join me in congratulating all 4 with the new roles in joining the executive and continuing to see this fantastic growth in the -- an evolution of the team within National Storage and providing that depth of management and important options going forward. So that concludes my presentation. I'll hand back to our Chairman, Anthony.

Thank you, Andrew. And can I -- the Board's congratulations to those announcements of the management broadening, which, I guess, reflects the continued growth of our business and the experience of the team that runs it on a day-to-day basis. I'll now move to some procedural matters. In respect to voting at today's meeting, on a poll, each member voting through the portal in person or their proxy, attorney or corporate representative has 1 vote for each security held. Only 1 vote is allowed per joint holding. If more than 1 joint holder tenders a vote, the vote of the member named first in the register must be accepted to the exclusion of the others. If a proxy has been directed to vote in a particular manner, if the proxy is entitled to vote, he or she must vote in accordance with the direction. And for some items of business, certain votes will be disregarded as explained in the voting exclusion statements in the notice of meetings. As Chair of this meeting, I advise that I intend to vote all undirected proxies in favor of the resolutions in items 2 to 9, and I'll now declare voting open. I will now move to the formal part of the meeting. There are 9 items on the agenda. Item 1 relates to the financial statements and does not require a vote. Items 2 to 9 are ordinary resolutions for consideration today, meaning that in order for each resolution to be passed, more than 50% of votes cast on the resolution must be in favor of it. The Notice of Meetings invited all security holders to submit any written questions electronically either prior to today's meeting or through the report or during the meeting. As mentioned earlier, we will respond to written and verbal questions following the conclusion of item 9. The first item of ordinary business listed in the notice of meeting is to receive and consider the financial statements of the company and the trust for the year ended 2023 and the reports of the directors and auditors. Wade Hanson from EY, the entity's auditor, is in attendance with us at this meeting, and questions may be directed to him through me relevant to the conduct of the audit and the preparation and content of the auditor's report, the accounting policies adopted by the company and the trust and the independence of the auditor. It is not necessary for the meeting to formally approve the financial statements or reports. This item gives security holders the opportunity to ask questions about the company and the trust and the operational performance of the REIT. Please submit any comments or questions you may have in relation to the financial report, the director's report, the auditor's report or on the operations of the company and the trust so that we can respond at the end of the meeting. I'll now move on to Item 2. The next item on the agenda today is to present security holders with the remuneration report for the financial year ended 2023. I would like to make a few introductory comments and put the report into context. The remuneration report looks back at the remuneration arrangements for the 2023 financial year and relates to the remuneration of key management personnel and fees paid to directors during the year. The remuneration report contained in the FY '23 annual report provides securities holders with detailed disclosure regarding the terms of and rationale behind the company's remuneration framework. We believe we have developed policies which balance the need to attract and retain senior executives with value for security holders. The objective of the remuneration policy is to ensure that the company's remuneration is competitive, reflects the responsibilities of the offices, and ensures that the company can attract and retain directors and key management personnel with the skills and capabilities required to deliver the REIT's objectives. Our policies demonstrate the relationship between performance and remuneration and aim to motivate senior executives to pursue the long-term growth and success of the company. The Board believes it has a successful remuneration structure that creates incentives for high-performing executives, and which delivers financial reward to them when the company increases earnings and value. Please note that a vote on Item 2 is advisory only and is not binding. However, any discussion on this item and the outcome of the nonbinding vote will be taken into consideration by the Board. In light of this context, are hereby propose to move that the remuneration report for the financial year ending 30th of June 2023 as detailed in the company's annual report be adopted. Details of the valid proxies received by the company on this resolution appear on the screen. A voting exclusion applies to this item as set out in the notice of meetings. The voting exclusion means no key management personnel or members of the senior management team or any of the closely related parties may vote on this resolution. We moved to the resolution ordinary business item 3, being the election of Howard Brenchley as a director. Mr. Brenchley's biography is set out in the notice of meetings. For the company to meet the requirements of the ASX listing rules and the company's constitution, there must be an election of directors at each Annual General Meeting. Mr. Brenchley has offered to retire as a director of the company and offers himself for reelection as a Director of the company. The company accepts Mr. Brenchley's retirement. In accordance with Rule 11.3b of the constitution, the directors of the company, except for Mr. Brenchley, who is abstaining from this resolution, recommend Mr. Brenchley be reelected as a director of the company and recommend that security holders vote in favor of the resolution. Details of valid proxies received by the company on this resolution appear on the screen. We move to the resolution ordinary business, item 4, being the election of Claire Fidler as a Director. Ms. Fidler's biography is set out in the notice of meetings. For the company to meet the requirements of the ASX listing rules and the company's constitution, there must be an election of directors at each general meeting -- annual general meeting. Ms. Fidler has offered to retire as a director of the company and offers herself for reelection as a director of the company. The company accepts Ms. Fidler's retirement. In accordance with the rule 11.3b of the constitution, the directors of the company, except for Ms. Fidler, who is abstaining from this resolution, Recommend Ms. Fidler be reelected as a director of the company and recommend that security holders vote in favor of this resolution. Details of valid proxies received by the company on this resolution appear on the screen. We move to the resolution ordinary business, item 5, being the approval to issue 158,042 stapled securities to Andrew Catsoulis on behalf of the company and the trust, as payment of the equity component of the short-term incentive and long-term incentive payments awarded to Andrew Catsoulis for remuneration for the financial year ending 30th of June 2023. On the terms set out in the explanatory notes of the notice of meetings. Details of valid proxies received by the company on this resolution appear on the screen. A voting exclusion applies to this item as set out in the notice of meetings. The voting exclusion means that Mr. Catsoulis and any other person who will obtain a material benefit as a result of the issue of the securities, except the benefit solely by reason of being a holder of staple securities or any associate of those persons, any person who is a key management personnel or any of their closely related parties may not vote on this resolution. We moved to the resolution ordinary business item 6, being the approval to issue 34,531 stabled securities to Claire Fidler on behalf of the company and the trust, as payment for the equity component of the short-term incentive and long-term incentive payments awarded to Claire Fidler for remuneration for the financial year ended 30th of June 2023, on the terms set out in the explanatory notes of the notice of meetings. Details of valid proxies received by the company on this resolution appear on the screen. A voting exclusion applies to this item as set out in the notice of meetings. The voting exclusion means that Ms. Fidler and any other person who will obtain a material benefit as a result of the issue of the securities, except the benefit solely by reason of being a holder of stapled securities or any associate of those persons, any person who is a key management personnel or any of their closely related parties may not vote on this resolution. We moved to the resolution ordinary business, item 7, being the approval to issue 45,100 performance rights to Andrew Catsoulis, on behalf of the company and the trust under the NSR equity incentive plan in respect of the equity component of this FY '26 LTI award. On the terms set out in the explanatory notes of the notice of meetings. Details of valid proxies received by the company on this resolution appear on the screen. A voting exclusion applies to this item as set out in the notice of meetings. The voting exclusion means that Mr. Catsoulis, who is eligible to participate in the NSR equity incentive plan and associate of Mr. Catsoulis or any person who is a key management personnel or any of their closely related parties may not vote on this resolution. We move to the resolution ordinary business item 8, being the approval to issue 84,100 performance rights to Claire Fidler on behalf of the company and the trust under the NSR equity incentive plan in respect of the equity component of the FY '26 LTI award on the terms set out in the explanatory notes of the notice of meetings. Details of valid proxies received by the company on this resolution appear on the screen. Next slide, please. Thank you. A voting exclusion applies to this item as set out in the notice of meetings. The voting exclusion means that Ms. Fidler, who is eligible to participate in the NSR equity incentive plan, an associate of Ms. Fidler or any person who is a key management personnel or any of their closely related parties may not vote on this resolution. We move to item 9. Under the ASX listing rules, generally, a company must not issue more than 15% of the number of ordinary equity securities on issue during any 12-month period. However, if security holders subsequently approve the issue of securities, it allows in a National Storage REIT to issue up to the 15% of the number of ordinary equity securities on issue over the following 12 months without further security holder approval. On the 22nd of March 2023, National Storage REIT announced that it would be undertaking an equity raising by way of a fully underwritten institutional placement to eligible security holders and a non-underwritten security purchase plan. As a result of the completion of the placement, NSR issued 124,491,328 stapled securities in NSR on the 28th of March 2023 at an issue price of $2.41 per staple security. And the terms set out in the explanatory notes of the notice of meetings. The purpose of the equity raising was to support the delivery of NSR's growth strategy by plenishing its investment capacity and providing additional funding flexibility for future acquisition opportunities and to underwrite the development pipeline going forward. The directors of the company unanimously recommend that security holders vote in favor of Item 9. Details of valid proxies received by the company on this resolution hopefully appear on the screen Polling on this resolution will be conducted through the online voting platform during the meeting. As a voting exclusion, the company and NSPT will disregard any votes cast on Item 9 by any person that participated in the issue of stapled securities or any associate of any of those persons. We will now answer questions relating to resolutions 1 to 9 that have been submitted throughout the meeting, and welcome security holders to ask additional questions. We will begin by answering any questions from the floor followed by written questions or verbal questions via telephone. For those in the room that wish to ask a question, please raise your hand now to indicate your intention.

[indiscernible] Can I make a comment and then maybe some questions here. Will there be a chance for questions at the end or this -- as you said this [indiscernible] how do we... One comment. It's good to see so many people here today because some of the months in the past having many people, it's been pretty quiet and I don't know have many shareholders and how many proxy but I hope they're all shareholders. Then that the auditors. No, I mean, it's good to see because it may not be in chair for probably 50-odd years. I've been in many, many AGMs and some very small some very big and at times of under why people they take more of an interest in their investments. I know a lot of the companies are the major shareholders here, but a lot of moms and dads here around as well. And I think it's taken more of an interesting what's going on here. So that's just my comment, and I'll have a couple of questions after you give someone else to change. Thank you.

Yes. someone I'd like to make some comments on the opposition. Yes, [indiscernible] are involved with the storage business and how they are hoping or not hoping. Andrew, could you be happy to address it?

I think everyone can hear me. Sorry, we have been online. I'll come over [indiscernible]. Thank you for that question. There's probably 2 aspects to that question. There's global aspect to it and then there's a more local Australia and New Zealand. So start global, and then I'll work back to the Australia and New Zealand market. Globally, Storage, which has been the premier really performing property class in the U.S. and other markets, particularly in the U.S., has seen some unique challenges in that market over the last 12 to 18 months. driven primarily out of 3 key areas: first, being interest rates. As we know, interest rates are a little higher in the U.S. than they are here. And combined with interest rates, historically, gearing levels are much higher in the U.S. for a number of storage operators than they are here. So it's not unusual for storage operators in the U.S. to be operating at a 60% gearing and unlisted capacity into that 40% plus range in a listed sense. In our case, we're sitting at low 20s in terms of the gearing level and where we have a substantial amount of hedging invoice. So we are well positioned to differentiate in that regard. The second key factor that has been impacting the U.S. market more recently has been the level of building that has occurred over the last sort of 5 to 6 years, particularly. So the U.S. market is obviously a much more deeply penetrated market in storage and Australia. -- largest cities running, off and running at around 12 square feet had population compared to Australia at 2 square feet approximately per head of population. There's been roughly 6% of new product come into the U.S. market a year over the last 5 or 6 years, which has created a substantial amount of new capacity. By comparison in Australia, we run it at or slightly under 1% of built capacity coming into the market a year. So in that context, we're seeing roughly 20 to 25 new centers come into the Australian market a year, and we're responsible for a substantial number of those centers in our line right. So we just don't have the amount of built capacity nor do we have the amount of new build capacity coming in nor do we have the amount of existing capacity on a square foot ahead of population. So we're in a substantially better positioned to absorb capacity in this market than in the U.S., I would suggest. The final factor, which is actually quite interesting for those I'm sure, in the room is the residential housing transaction levels. So, as some of you will know doubt be aware, there is a predominance of 30-year fixed -- 25, 30-year fixed lines in the U.S., slotting it often very low interest rates based on historically many of those lines have been taken out over the last 5 years. Those loans generally are not assignable to new properties. So what that means is that it's had a significantly depressing impact on the number of housing transactions occurring in the U.S. market because if someone is trading out of a home into a new home, they're likely to be going from a 2% fixed line to our 8% fixed line. And so we're seeing residential transaction volumes in the U.S. at levels they haven't seen since the global financial crisis. Of course, in Australia, our market operates substantially differently. And the bulk of those, fixed lines now have rolled off. So people in the Australian market don't have that unique constraint in the U.S., which has really created a level of transactional paralysis. So for all of those reasons, we're not seeing anywhere near the same impact of those constraints that are existing in the U.S. And I think it's important to differentiate the Australian market at a macro level. in that regard. So then to answer your question on a micro level. We still have 3 major players in this market ourselves being by far the largest owner-operator in the Australian market, followed by one listed competitor and one large long multigenerational private family ownership group. They're the 3 major competitors. They, in aggregate, run at about 30% of total market share. So 70% of the market essentially still rest in [indiscernible] and smaller individual and multi-site operator hands. There's a couple of important aspects to that. One, what we're finding at a national storage level is with increased scalability becomes increased efficiencies, increased opportunities to be an early adopter of AI, tech and automation, which are really going to differentiate us in the market comparatively to our listed and unlisted competitors, I believe. As well as that 70% of essentially independently owned smaller operators gives us a nearly infinite long-term acquisition pipeline from an opportunity perspective. So I guess, generally, in terms of market competition. The competitive landscape remains largely unchanged. We see some unique opportunities going forward to entrench and improve our position by virtue of scale and efficiencies that we can bring to the table. But we haven't seen any undue discounting any massive drops in occupancy in our portfolio. Obviously, we don't have full transparency into other operators, but there's nothing that leads us to believe that we're in any kind of precarious position operationally at this point. Is that okay?

Thanks, Andrew. Thanks. Other questions? No one else? You have the floor.

Coming to you on, by the way. Interesting, you might -- Andrew, remarked about the interest rates, well, some of the older people in the room might remember back in the '80s, we were paying 80% 90% interest rate on your home loan and to the next task, we would think 6% to 7% is tough but 80% to 90%, that was tough, but we got there. So I mean low light into the tunnel. In the performance highlights here, I see the profit is $220 million. Now Andrew mentioned that 48%. You just said that the amount of properties have dropped 48%, that's a massive drop. The past performance will be very good. And I congratulate you all for doing a pretty good job. The distribution per security has gone up a little bit, too, which is always appreciative. So also here, the net tangible assets per security $2.48. The present share price is hovering around $15 to $25. So the share market must not see the same value in the company that's actually there. And I wonder if you'd like to comment on the difference in that? And then I have another question after that. please...

I guess in terms of the changing profit, the majority driver of that was the changing value of the assets. So the prior year, as you might recall, there was massive growth in asset value. So our increase in asset values were somewhat higher. So -- and I guess this year, probably FY '23 return to more -- probably more normalized levels. So there was a one-off increase in asset values the prior year, which from a statutory point of view, has to be shown as profit. I guess that's one of the reasons we tend to prefer to work on underlying profit, which is the profit from our from our business operations day today and quote that more comprehensively.

That does look pretty bad, 48%. That's not really the take?

I guess no, that's right. It's reflective of the prior almost extraordinary level, Andrew, you might comment [indiscernible].

And it's a good observation, but I think important to recognize that, that's an IFRS profit. So it's really driven out of an accounting standard. As a -- as you're probably aware, I'm a shareholder, and I think the single largest individual shareholder in the company. And what I look at -- so I'm fully aligned with you, and what I look at is where the rubber hits the road for me is underlying earnings, and that really reflects our profit per security. So whilst it's nice to see that larger IFRS number driven out of that valuation upside. I think the 2 important things to note is we're still seeing significant valuation uplift based on operational performance rather than cap rate compression. We did see significant cap rate compression last year, which really contributed to that growth in IFRS profit. This year, we've seen essentially flat or slightly expanded cap rates by a handful of points. Notwithstanding that, we've still driven property uplift through operational performance quite substantially in -- on a same-asset basis as well as driving underlying earnings growth. And to me, everything drives out of that underlying earnings growth from a go-forward profitability and increase in value perspective. That's really the key metric in [indiscernible]. But said with the greatest of respect. And your other question regarding share price to NTA, I'm involved with the agreement with you that the market doesn't see the true underlying value of the company. I couldn't agree with you more. And my belief is that given the fairly difficult transactional operating conditions of the entire property REIT market, we have been somewhat, I would humbly suggest unfairly markdown with the balance of the herd from a cattle perspective, whereas I believe our performance comparatively, both at a global comparative basis and on an individual comparative basis from a property REIT perspective has been quite outstanding. I would humbly suggest, and I think that will manifest in the fullness of time with recognition in the market as we move forward. And really, the metrics of our business remain very strong. We're in a business that has significant tailwinds. From an operating perspective, the downsizing phenomenon, the move into closer to the city accommodation, e-commerce, the proliferation of new housing as the housing transactional market improves off the back of the -- hopefully, the moderation in interest rate rises, I think that will all contribute to future growth as well as immigration of course, is another driver of our business. So I think those tailwinds haven't changed. I think we're well positioned to take advantage of those tailwinds. And I think ultimately, we will get the credit that I believe that the team deserves from a go-forward perspective in terms of recognition. But I'm a humble servant of the company. I don't control the broader market sentiment, which, as we know, is a pretty tough place at the moment.

So I'm going to make a comment on that. You just said you're humble servant to the company on $1.5 million a year. That's pretty humble, isn't it?

I think it's a reasonable reflection for the value that we've created over the last 10 years to provide some insight into that. When we IPO-ed the company 10 years ago, I was on a very, very humble starting. So you may not be aware of this, but my shares were held in escrow in almost indefinitely. And one of the things you won't see in companies IPO-ing today is that we put in place something that was effectively risk reversal where we agreed to sacrifice any distribution on our shares, not until you as a shareholder received a minimum per share return. But until you received $0.0875 per share return for -- not 1 but 2 consecutive earnings periods. So that's called putting yourself in a position where if there is any disadvantage, you will meet that disadvantage head on before any shareholders. From there, we've grown the company from a market cap of $200 million. to a market cap of $3.5 billion in 9.5 years. And we've grown assets from $260 million to $4.5 billion in assets over the same period. We are 1 of the top 3 performing REITs over that period. And you, as a shareholder, if you've been in from that point, have received in excess of the 300% return on your money over that period. So I think in the context of that, I feel my salary is warranted and justified in addition to which my salary comparatively and a comparator group sits at around about the 40th, I believe, 40th percentile -- low 40th percentile of the comparator group against the 98 percentile performance from a broader comparator group perspective. So I actually think that's not unreasonable in the circumstances.

Then need not cited there. I appreciate. I know that history how the company started. I've been here for a few years as well, and I appreciate what you've done. And I acknowledge it to other shareholders here. I mean I think you've done a pretty good job, really. But you should have [indiscernible].

I'm very happy to responding call. You'll get a straight answer from me. If you ask us go.

And if I could just say that our remuneration report comprehensively covers the process by which the Board reviews and remunerates our people, and we do, do comparisons, and we do benchmarking against peers and other companies. And I think as Andrew did mention, he's not the outlier in terms of that. And I think he is very much warrants the remuneration he gets. And we're very grateful for the effort and commitment against the organization. You have to get to pedal pretty hard. I'll give you that is a 24/7 follow -- so yes, next question.

Thanks for doing this. It's -- I agree with the gentleman who people should be bit more engaged and the businesses in the community. Just 2 primary questions. One is on the cap rates, 5.8%. You don't see many REITs losing their cap rates. Sort of in this environment, rates at has gone from 0% to 5% over 12 months. Clearly, there's a big impact on cost of capital. So maybe if you can just elaborate a little bit around the thinking around our trading cap rate year-on-year. And I noticed in the results that your investment portfolio, our freehold properties, you've got external audits, but about 30% of those external orders you use valuation. Maybe just provide some color for investors as to why it's not higher?

I mean certainly on the valuations, I mean, it's -- I think it's a standard practice older we work with our auditors about the valuations as the -- we basically rotate so that every value -- every asset is valued at least every 3 years. So -- and we get a -- every year, we get a broad we work. It's not just the same 30%. We get a broad spectrum of assets throughout our portfolio so that we get a pretty good view of what's happening in the marketplace from a value perspective. So you're essentially doing it every 3 years and then utilizing that external valuation and using the same criteria. So Stu's financial team go through every asset using the criteria and the model, the same model that a value would use. And we get -- so we're using the same calculation process that external value would use to come up with the overall portfolio.

Do you want to comment on the on cap rate?

Tony is into correct. And is -- and thank you for your question, actually. I fully agree with you that it's great to have some interactivity at an AGM. So just to add to Tony's explanation, once that process, it's a very rigorous process. Once that process is completed the entire valuation model is submitted to the auditors for independent verification, not just the external valuations, but all of the directors' valuations as well. So there is a series of checks and balances there to make sure that there is Obviously, when you've got 240 centers, it's almost impossible to have them all valued every year. Hence, that 1/3, 1/3, 1/3 approach. The properties that are valued essentially randomly selected, so we get a full cross-section of external valuations then the internal directors valuations have built off that first posters team independently verified by the Board and then by the auditors. So it's quite a rigorous process that we go through. I guess the sanity check, if you like, from a practical perspective is looking at market transactional activity. And ensuring that, that aligns with the values being ascribed and there is a consistency with that as well, of course. And I think one of the important things to point out at a macro level with that is we are one of the few property sectors in the entire REIT universe, sovereign universe where our weighted average capitalization rate across the portfolio of our properties is still above our weighted average cost of capital. So we're actually buying properties that are day 1 accretive in yield terms. And we really focus on those acquisitions upon yield accretive acquisition opportunities. So what does that mean? That means properties that we can see a disparity in the prevailing rate per square meter being charged by the previous operator, and we see upside in being able to bring that up to a more market rate that we're seeing across comparative centers in our group or properties that are underoccupied, that we can see an opportunity to bring on to our platform and take the advantages of that scalability that we have. So essentially, what does that mean? That means areas like our digital marketing where once you come on to our platform, that property might be 2 pages back on the results of a Google search. But once it comes on to our digital marketing platform, that might go to the top of the Google rankings as a result of the dark arts of our digital marketing team that does an exceptional job in being able to emphasize our listings from a search engine optimization perspective. And then, of course, that flows through to our contact center, which has a very high conversion rate or indeed our in-person service at a similar level. So all of that contributes to our ability to add value in a value accretion sense of the properties that we identify. And sits well with my earlier comment that we don't really look for properties that are trading at a very high level of occupancy and a higher rate per square meter because we don't see that value accretion in them. So that should give you some level of comfort around the fact that our valuation process is rigorous and independent. The values that are being ascribed to these properties are actually above our -- from a capitalization perspective are above our cost of debt, our weighted average cost of capital as well. And so, we're really targeting those properties going forward that have that opportunity to significant value accretion through that operational performance and ability to drive revenue through the centers.

That's helpful. Can you give us a sense on what higher rates will do ultimately for your cost of debt and perhaps your?

Sorry, could you repeat the question?

Could you give us a sense of what the higher interest costs will do for your broader cost of debt in your portfolio and the cash flow?

Yes, we can do so. edging in place. Happy to provide some in. So I think one of the important things to understand about storage as an asset class is -- it's quite ironic because when we go back to our early pre-IPO days, and I did the rounds of investors taking the team car asking for them to consider investing in this start-up IPO. 1 of the criticisms leveled at us was that our weighted average lease term is a month. And then we were often told well, that's a terrible business model because you don't have a long lease tenure. That actually worked significantly to our advantage because in high inflationary times such as we have now. We're almost in that -- we almost have a natural hedge against inflation because our rates can reflect both supply and demand and inflationary pressures in the economy. So we're not locked into a long-term fixed rate because our rates actually dynamically move based on our revenue management system, they can move weekly or monthly, and then we get the opportunity to provide regular rental increases as a result. So that does provide somewhat of a natural hedge against rising interest rates and rising inflation. I think at present, 40% of our debt book is hedged stood just under 40% of our debt book is hedged. We've actually factored in to our forward projections from an earnings perspective for FY '24. Any -- how we see the likely movement in interest rates. So with that $0.113 per security guidance number actually embodies a forward projection of where we think rates are going to go. Is that -- do you want to add anything to that? Are there any other questions from the floor?

Yes, you wouldn't mind -- Sorry to take time [indiscernible] one quick question. When you mentioned with the freehold and leasehold, you're trying to get more -- or convert a lot of properties to be sold in the freehold. I agree, I think that's a very good idea. If you've got 3 hours, you got much better. Is the same amongst [indiscernible]. So I think that's a good idea. It's a good philosophy. And the other comment I'd like to make with those resolutions up there before 1 to 9 or 2 to 9, whatever it was with the proxy. And some of those are coming at 99%. I mean, I haven met at many AGMs. We get -- I know about 80% of the proxies National major companies net. But I haven't seen a lot of AGMs I have been to where you get up to 99% on that. I mean some [indiscernible] did get to 100%.

Thank you for your comments. Are there any other questions from the floor? Okay. Well, I'll now move to the online questions. Hang on. Okay. So just quck one. So the first question has been asked by Mr. Kevin Daly. The question is, I noticed you've reduced your CO2 emissions to a very low level by employing rooftop solar. Were there any special characteristics of your electrical law that made this worthwhile investment? Our response to that is, our operations naturally have low energy and CO2 intensity. The installation of solar has both economic and environmental benefits that are considered when making investment decisions. The energy load is 1 of the many items that are considered when assessing solar installations. For further information on that, if you refer to our sustainability report, which is on our website, which will give some more details on that. Okay. And we'll get to the next one. Another question from Mr. Daly. Where is the revenue growth coming from? Lettable area is up 8%. Revenue per square meter of lettable area is up 3.6% and occupancy is down 4%. So I'd expect revenue growth to be about 8% plus 3.6% minus 4% equals 7.6%, but it's much higher at 18%. What's going on here? There is a response to that is revenue growth comes from a combination of factors, including the rate achieved for let space. The amount of space let as well as revenue contribution from newly acquired and developed centers. There was also significant growth in the rate achieved for let space during FY '22, which has also contributed to FY '23 revenue growth. Question again from Mr. Daly. The question is on the expense side, I greatly appreciate your delineation of the various components of your costs. Except for insurance costs, all items grew faster than growth in lettable area of 8%. Was this due to inflation? The 2 big moves were advertising/marketing costs and IT communications costs, small quantities but growing at more than 20% inflation or something more specific responses, the number of centers is also a contributing factor to the growth in expenses as the portfolio increases, so do the expenses. In relation to advertising, NSR has prioritized this spend in order to attempt to mitigate the impacts of the slowing economy. IT and communications also reflects the number of centers, but also the focus on cybersecurity, technology and innovation in alignment with our 4-pillar strategy. Are there any more questions? Okay. So that concludes our discussion on the items of business. In a couple of minutes, I'll close the voting system and formally ask Lewis Brimelow to act as returning officer to count the votes following the expiry of that period. Please ensure that you've cast your votes on all resolutions. If you're voting in person, please ensure that your voting cards have been completed for each resolution for these days. Representatives from our share registry, Computershare, will collect your completed voting card shortly. If you're uncertain about any of the voting procedures or require any assistance, please see Computershare staff back of the room or at the registration desk, who will be happy to help you. If you are voting via the online portal, please remember to click on the submit vote at the bottom of these resolutions to submit your voting card. I'll now pause to allow you time to finalize these votes. [Voting]

So, I now declare voting closed. The results of the poll on items 2 to 9 will be released to the ASX shortly and will be made available on our website today. In conclusion. Thank you for your continued support and for your attendance today. And I do acknowledge and agree with the comments that's great to have people in the room again after a couple of years. That concludes the official business of this meeting, and I now declare the National Storage REIT 2023 AGM closed. Thank you, and good morning.