Qualitas Limited (QAL) Earnings Call Transcript & Summary

Thank you, and great to be able to welcome you all here today. I'm Andrew Fairley, I'm the independent Chair of Qualitas, and it's 10:00, and there being a quorum that is present at here at Hall & Wilcox, and thank you to them for enabling us to facilitate this AGM. It's my pleasure to declare the 2024 Annual General Meeting of Qualitas Limited open. A Notice of Meeting has been distributed, and I will take that as read. On behalf of Qualitas and also all of you present, I want to acknowledge the traditional custodians of the country on which we're meeting the Bunurong people of the Kulin Nation and pay our respects to elders, past and present and also to pay respects to elders and other communities that might be here or listening on our podcast today. I also want to celebrate the continuing connection of -- to country and culture of the Bunurong people. We're pleased to be able to hold this meeting as a hybrid meeting. Shareholders and their proxies are able to be present in person or remotely using our virtual meeting technology. We've made every effort to ensure that shareholders and their proxies enjoy a similar opportunity to participate today, whether they're actually here or whether they're remote, includes asking questions, verbally if you're here in person or you can ask the questions through the online platform. There will also be voting through the online platform and online voting card, and I'll discuss the procedures that we're going to use for that in due course. I want to now introduce the members of our Board and the executive team who are here. Let me first introduce the directors, and the first is Andrew Schwartz, our Group Managing Director, who most of you needs no introduction; the Chair, who's an Independent Non-Director is JoAnne Stephenson, who is Chair of our Nomination, Remuneration and Culture Committee; Mary Ploughman, who's an Independent Non-Executive Director and who is Chair of our Audit, Risk and Compliance Committee; and Darren Steinberg, who is an Independent Non-Executive Director who is Chair of our Investment Committee. So it's great to be able to have them all here today. I also want to say that we have a number of our key executives with us. They were to be seated in the front row they are apparently not in the front row, they were in the second row: Mark Fischer, who's our Global Head of Real Estate and Co-Founder with Andrew; Philip Dowman, our Chief Financial Officer; and Kathleen Yeung, our Global Head of Corporate Development. Also joining us today is KPMG's partner, Luke Sullivan, representing the external auditor. And we have our Company Secretary, Terrie Morgan with us, and she'll be reading out any written questions that are submitted by shareholders and proxies who are attending the meeting online. I also want to welcome members of the Qualitas team who are present in the room and virtually none of this can happen without the incredible commitment of that team all of the employees of Qualitas, so welcome. The agenda for today's meeting is that I will give my Chairman's address. Our Group Managing Director, Andrew, will provide an update on the operational and strategic developments of the business after that. Then I will conduct the formal items of business following his speech and set out -- which are set out in the Notice of Meeting, and that will provide an opportunity for questions on each of the issues that are dealt with. Then once we get to the end of that, we will have an opportunity for general business and any questions that will emerge from that discussion. So before I commence my presentation, I want to make a few comments about the procedures for voting and submitting questions. The first is how to vote. Voting on all resolutions, which are specified in the Notice of Meeting, will be conducted by way of a poll. Shareholders had the option of casting their vote before the meeting or alternatively appointing a proxy or an attorney or a corporate representative to do so on their behalf. If you, as a shareholder, have not done so, then you can vote at today's meeting in person at this premise by completing the yellow voting card that you would have been given when you checked in at registration. If you're joining us virtually, you can vote at any time during the meeting using the electronic voting card you received when you had the click the Voting Card button on your screen. Voting is now open, and you can vote at any time during the meeting, and it closes 5 minutes after the formal items of business have been dealt with. There is a timer at the top of the online meeting platform that will count down up to the time of completion of voting. The final votes -- voting numbers will be released to the market and posted to the Qualitas website, but we have already released the proxy results for votes, which were lodged prior to 10:00 a.m. on Wednesday. During the formal business session of the meeting, I'll take questions from the floor first, then followed by online questions. Shareholders attending online can submit written questions during the meeting by clicking the Ask a Question button and then typing their question and following the prompts. Relevant written questions will be read aloud to the meeting by Terrie, our Company Secretary. I encourage you to submit your questions as soon -- as early as possible as soon as possible. And if you've got difficulty using the virtual meeting platform, check the online portal guide that is on the Qualitas website or you can call the number that is also on the website. If we get multiple similar questions, then we'll aggregate them into one and choose the answer that will give -- choose the question that has the broadest possible answer to deal with all the elements of those broad range of questions. We'll make every attempt to answer the questions today. But if time prevents us from doing that, then the responses to unanswered questions will be posted in the Investor Centre at the Qualitas website following the meeting. In the unlikely event of we -- of us experiencing any technical difficulties in broadcasting at the AGM, we'll pause the meeting and aim to recommence at the earliest time. If the difficulties persist, I'll assess the circumstances and then communicate further with you. If we have to adjourn the meeting, we'll make an announcement to the ASX about that. Qualitas share registry provider, Link Market Services, is conducting the poll today and Jeffrey Wu is the returning officer for the meeting, and you would have seen Jeffrey at the entrance as you came in today. So let me now move to my remarks and my address. This year, we have once again confirmed -- Qualitas has once again confirmed its position as the leading Australian alternative real estate investment manager. The 2024 financial year saw the firm deliver strong results and growth ending the period in a solid position and setting us up for the year ahead and beyond. Our results reflect an elevated demand from borrowers for alternative commercial real estate finance and Qualitas's reputation as a partner of choice has been enhanced for real estate private credit. We're fortunate to have an enviable track record of investing in assets across a range of the real estate sector. Since inception in 2008, through to the end of FY '24, the firm has financed over 300 investments with a combined asset value of over $27 billion. In addition to borrower demand for alternative financing, our growth continues to be driven by significant investor demand for private credit, particularly from overseas institutional investors. And illustrating that in terms of what we have received from the 4 major commitments for our managed private credit strategies in FY '24, the contributions have been incredible. $750 million additional commitments from an institutional investor in the Qualitas Construction Debt Fund II; $550 million mandate from a new North American global institutional investor; $700 million additional commitment from a wholly-owned subsidiary of the Abu Dhabi Investment Authority in the first half of FY '24 and a further $300 million in the second half of 2024. The way we conduct business has always been underpinned by our unwavering focus on risk, our strong corporate governance and our intensive financial oversight. We believe that it's these practices that have held us in good stead that is established and then burnished our reputation and ultimately rewarded both our investors and our shareholders. During the year, we committed further investment to our IT platform, which will increase efficiency of the firm. This -- the project will deliver several benefits, including the facilitation of the automation of investment monitoring and reporting capabilities, the streamlining of the investment approval process and improving data quality which provides valuable insights for investment origination and management. We are absolutely committed to building a best-in-class funds management capability supported by a strong technology platform. The strength of our brand and our people was recognized this year by PERE, a leading publication dedicated to the global private real estate industry. Qualitas was named Firm of the Year as part of the -- for Australia as part of their 2023 awards, which was a really great honor for us. In an increasingly competitive and challenging capital raising market, it's testament to the team at Qualitas to be ranked first in Australia as part of PERE's Real Estate Debt 50, which features the 50 largest capital raises globally over the 5 years to the end of 2023 with Qualitas ranking second in Asia Pacific and 14th globally, a stellar achievement. Since the release of our annual report last month, which detailed our approach to ESG, we published Qualitas's first voluntary Modern Slavery Statement. It reflects our commitment to ethical and responsible business practices and an important first step in our response to addressing the risks of Modern Slavery. Acknowledging both financial and operational milestones achieved during the last year, on behalf of the Board and the Qualitas team, I want to extend our thanks to the entire Qualitas team for their extraordinary work and commitment for us. Your enthusiasm, your incredible hard work and your single focus on achieving our outcomes has delivered another successful year for shareholders. Turning to the Board and some recent changes that we have made. At the end of the financial year, we farewelled our long-serving Independent Non-Executive Director, Michael Schoenfeld, and that was announced, of course, at the time. Over 15 years, Michael had brought his extensive experience and invaluable insights to Qualitas and contributed significantly to the firm's growth. particularly his stewardship during our IPO in December 2021. He held various roles with us, including Chair of the Investment Committee and also as a member of the Audit Risk and Compliance Committee. We also recently announced the retirement of Brian Delaney, which was effective on the 23rd of October. Brian was initially appointed as a member of the Qualitas Advisory Board in March 2021 before our IPO, and then he was subsequently appointed as a Non-Independent Non-Executive director to the Board for the IPO. He held various roles, including as Chair of the Nomination, Remuneration and culture Committee and the board representative on the ESG advisory Group. We extend our appreciation to both Michael and Brian for their contribution and their commitment to Qualitas in enabling us to achieve what we have achieved. We continue to consider the right size and balance of the skills and experience on our Board to guide the company as we continue to grow. In September, we were really pleased to announce that Darren Steinberg was joining our Board on 1 October as an Independent Non-Executive Director. The ratification of his appointment is going to be considered later as an item of business at this meeting. Darren brings over 30 years of experience in property and funds management with an extensive background in property investment and development. Following the Board change, we changed some of the Chairs of the committee. So JoAnne Stephenson took over as role of Chair of the Nomination, Remuneration and Culture Committee, succeeding Brian Delaney. Darren was appointed to the role as Chair of the Investment Committee, subject to being elected today for a further term. And Mary Ploughman remains as Chair of the Audit, Risk and Compliance Committee. So in closing, I wanted to thank my fellow Board members for their incredible support. The strong performance we see year after year at Qualitas is underpinned by the insightful guidance that each of you provides and the decisions that we collectively make as a Board. I want to now invite the Co-Founder and the Group Managing Director, Andrew Schwartz, to speak and to provide details on Qualitas growth over the past year.

Thank you. As Andrew mentioned, the 2024 financial year was another milestone year for Qualitas. Our results demonstrate our ability to continue to attract long-term scalable capital and deploy funds into high-quality transactions. Before we move to the business of the meeting, I wanted to give you a sense of how we are seeing the economy and what this means for us under a variety of scenarios. Qualitas has consistently delivered strong growth in challenging market conditions, and we are well positioned for a variety of economic circumstances. Over the past year, interest rates have stabilized at higher levels, reflecting a broader economic slowdown. We expect rates to decrease gradually over the next year, though they're likely to remain higher than the past decades averages in the near to medium term. While cost growth has eased, labor shortages persist in the construction sector. The gradual decreasing rate environment should help stabilize property values and make more projects viable. In addition to this, we are seeing positive policy changes, including off-the-plan stamp duty concession in Victoria and planning approval reform in New South Wales. These combined mean we foresee an environment where there is higher volume of investment opportunities in our funds. Our focus remains on 3 key areas to support growth: Firstly, growing top line funds management revenue; second, improving scalability through larger investments and mandates; and third, strategic use of the balance sheet to aid growth. Collectively, these contributed to the Qualitas financial year '24 results and a milestone year for the firm. Despite a slowing economy, pleasingly, we achieved record deployment of $4.2 billion. This is underpinned by the structural shift to private credit in commercial real estate financing. Now moving to the FY '24 performance. Not only did we achieve a record deployment, we also achieved a record $2.8 billion net capital inflow in financial year '24. This brings our total committed funds under management to $8.9 billion. This is up 46% on FY '23 and represents a CAGR of 37% since inception in 2008. This further demonstrates our ability to raise capital through the cycle from existing and new institutional, wholesale and retail investors. Our ability to attract large-scale capital from institutional investors is just one of the key advantages that differentiates Qualitas and underpins the success of our platform. Having an institutional funds management model means we don't need to raise capital on a deal-by-deal basis. We also don't need to rely on fund leverage to boost our returns or funds management earnings. Our discretionary funds enables us to make efficient investment decisions in the best interest of our investors. Our record deployment supported by 25% growth in normalized group EBITDA to $41.9 million compared to $33.6 million in financial year '23. The core funds management EBITDA, excluding contribution from performance fees, was up 43% from FY '23 to $37.9 million. A final fully franked dividend of $0.0575 per share was declared. This increased the total dividend for the year to $0.08 per share, representing a payout ratio of 91%. Since listing, our quality of earnings has improved significantly, demonstrated by the increased contributions from reoccurring fee-related revenue and principal income. We focus heavily on balance sheet returns and continue to see this as a significant opportunity for future growth. Improvement in our scale, efficiency was exhibited through our funds management EBITDA margin expanding to 52%, which now exceeds our stated long-term goal of over 50%. Our balance sheet remains robust with cash balance of $194 million as at 30 June 2024. Drawn and undrawn co-investments of $110 million and $154 million, respectively, highlight the strong deployment activity and earnings potential from balance sheet capital. I'd now like to move to a business update. It is abundantly clear to us that the strength of our firm is our ability to enjoy high rates of growth due to our disciplined approach and track record in delivering strong returns to our investors, particularly in private credit. To this end, our goal is to leverage our existing investor relationships and over time, broaden our private credit offering to other asset adjacencies. In addition, our house view is that the property valuation cycle is at or near the trough of the market. At the right time, we will look to further build our existing $1.7 billion in FUM -- in our real estate equity business. Our deployment pipeline as of the 26th of November 2024 is $2.89 billion, which is up 25% on our pipeline as of the 16th of October 2023. $1.93 billion is in construction private credit. Investment Committee approved and closed transactions represent 73% of our pipeline, up from 38% as of the 16th of October 2023. The remaining 27% of these pipeline investments are mandated, so still subject to due diligence and Investment Committee approval. As the all-in return of private credit reaches an historical high, we have seen increasing capital flow from retail and wholesale channels into the sector, particularly at the smaller end of the market. Private credit is today an important part of the financial system, providing another source of capital that supports growth, drives competition, innovation, adds overall liquidity and stability. Importantly, not all private credit financiers are the same. Borrowers must do their due diligence on their financiers. Investors must ensure they understand the risk and return profile that they are investing in. Our access to institutional capital is a key differentiator, as it ultimately enables us to invest in larger transactions. This is increasingly evident in our pipeline, which is the strongest we've ever seen. Combined with our track record and market-leading position, borrowers can have confidence in our ability to finance the entire development cycle for their projects. Strong and consistent new investment opportunities are from repeat borrowers. We can finance the same project through the development cycle, typically 4 to 7 years, including construction financing, all the way through to residual stock loans. With more green shoots in the development market, we've continued to hire new talent into our origination and investment teams. At the current stage of the interest rate cycle, our priority is to maintain an uncompromising approach in our risk assessment and asset management process. Our investment team has over 40 highly experienced investment professionals. This represents one of Australia's largest commercial real estate alternative investment teams who have a focus on private credit. Our deep bench of talent is essential to ensure we are appropriately positioned to deliver the next phase of growth for our shareholders. This week, we announced amendments of the terms related to the Arch Finance Warehouse Trust. These amendments resulted in changing accounting treatment for the Trust and making it consistent with other investment vehicles managed by Qualitas. Going forward, assets and liabilities of the Arch Finance Warehouse Trust will no longer be recognized in the Qualitas statutory financial statements. Now turning to outlook and guidance. Looking ahead, we are currently at the forefront of entrenched residential shortages and declining availability of credit from traditional avenues, mainly due to regulatory changes. We expect increasing demand from more flexible financing solutions for commercial real estate. We've seen how private credit involved to become a prominent player in the financing sector for developed economies like the United States and the United Kingdom. Australia is still in the early stages of a decade's long growth runway, and we are excited about the opportunities ahead. For financial year '25, we expect to see strong growth across base funds, management fees, principal income, driven by the financial year '24 deployment and increasing utilization of the balance sheet. Transaction fees will be dependent on the mix of capital deployed during the financial year given differing fee arrangements. As we continue to scale, our margin increase may not be linear as our investment in the platform can take time for corresponding growth to be realized. Based on no material adverse change in current market conditions, we again reaffirm our market guidance for this financial year of between $49 million and $55 million in net profit before tax and earnings per share between $0.115 per share and $0.1291 per share. Over the last 16 years, we've been growing at a very significant pace. This could not have been achieved without the long-term commitment from our talented team, in particular, our founding employees who collectively have a substantial shareholding in the business. I would also like to take this opportunity to personally thank Michael Schoenfeld and Brian Delaney. I'm grateful for their significant contribution to Qualitas over the past 15 years and 3 years -- 3.5 years, respectively. As Co-Founders, together with Mark Fischer, I'm excited for the next phase of our growth in our firm. We are fully committed to execute our long term growth plan. I'm deeply grateful for the hard work and dedication of every member of the Qualitas team. I'm also deeply appreciative of our investors and ongoing support for Qualitas. Thank you. That formally concludes my Group Managing Director address.

Thank you, Andrew, for that. I now want to move to the formal items of business. The Notice of Meeting was lodged with the ASX on the 28th of October 2024. And the notice is available on the Qualitas website in the Investor Centre section. Each resolution that is set out in the Notice of Meeting is to be considered as an ordinary resolution of the company and pass by a simple majority of votes cast by shareholders present in person or by proxy. We'll display the votes of shareholders and proxies received prior to the meeting following discussion with each item of business. For each of these items and in accordance with voting exclusions that apply to each resolution undirected proxies have been given to me and will be voted in favor of those items. I remind all shareholders that voting has opened and will close 5 minutes after the formal items of business. The results of the meeting will be released to the ASX then and published on the website later today, as I've previously indicated. I want to remind shareholders attending online that written questions can be submitted during the meeting by clicking on the Ask a Question button. I encourage shareholders who have questions to submit them as soon as they can. And shareholders and proxy holders attending today here will be given the opportunity to ask the question on each item as we deal with those specific items. We will address the questions on the resolutions as we proceed through each of the items, and general questions will be addressed at the end of the meeting in the general business section. I want to take all questions from -- in the room first and direct questions received the appropriate member of the Board or the management team, if that's necessary. So the first item of business is to receive and consider the financial report of the company and its controlled entities and the reports of the directors and the auditor for the year ended 30 June 2024. This item of business is for discussion only as the Corps Act directs that no vote on it is required. The annual financial report, directors' report, auditor's report are contained in the company's 2024 annual report, which was released to the market on the 28th of October and can be found on our website. As I noted earlier, Luke Sullivan from KPMG is joining us and is available to respond to any questions relevant to his conduct and his firm's conduct of the audit and the preparation and the content of the independent auditor's report and the independent's declaration. So I now invite questions from shareholders on this item of business. I'll initially take questions from shareholders and proxies in the room followed by online questions. So are there any questions in the room that anyone would like to ask? It seems no. Any questions online in relation to this item of business, Terrie?

No, we've not received any questions online.

Thank you. Then let's move to our next item of business, the adoption of the remuneration report. Item 2 is to adopt the remuneration report for the year ended 30 June 2024. The Board submits its remuneration report to shareholders for your consideration and approval. And it sets out on Pages 45 to 55 of the -- of our annual report. It sets out our policies, our RIM policies and reports on the RIM arrangements in place for our key management personnel during 2024 financial year. The Corporations Act requires companies to put the remuneration report to a nonbinding vote to enable shareholders to voice their opinion on matters relating to that report. So I invite questions from shareholders on this item of business, noting that aspects of the remuneration report are also the subject of further resolutions later in the meeting. Are there any questions in the room on the remuneration report? Any questions online, Terrie?

Yes. We have received a question from shareholder, Stephen Mayne. Which proxy advisers covered this meeting and did any of them recommend against any items, including this remuneration report?

Thank you, Stephen, for that question. I can report that 2 proxy advisers covered us, and there was not any recommendation against any of the matters that has come in before this meeting. Thank you. Then I think the proxy votes are displayed on the screen. So I now put the following resolution to the meeting that the remuneration report of the company, which forms part of the director's report for the financial year ended 30 June '24 be adopted. If you've not already done so, please complete your voting card for this item now. Item 3. At today's meeting, we're asking shareholders to consider, and if thought fit, pass a resolution on the election of Darren Steinberg as a Director. Darren was appointed to the Board as an Independent Non-Executive Director with effect from 1 October 2024. He joined the Board Nomination, Remuneration and Culture Committee and is the new Chair of the Investment Committee as from that time and subject, of course, to his election today. Darren brings extensive experience in commercial property and funds management with a broad range in Korea over 30 years. I'd now like to invite Darren to say a few words in support of your support for his election. Darren?

Thank you, Andrew. Good morning, everyone. I'm pleased to be here today and present myself for election as a Non-Executive Director of Qualitas. In terms of background, as Andrew said, my career has spanned more than 30 years in a range of roles across the property, financial services and funds management industry. For the past 12 years, I held the role of CEO of Dexus, a fully integrated Australian real asset group. In that role, I was responsible for the leadership, strategy, governance and risk management of the company, alongside the executive team and Board. Prior to joining Dexus, I held senior leadership roles at Colonial First state, Stockland and Westfield. From an industry perspective, I was made a Fellow of the Australian Property Institute and the Royal Institution of Chartered Surveyors. I'm also a Life Member and Former National President of the Property Council of Australia. I've sat on the Boards of listed, unlisted and not-for-profit groups since 2001. I believe the breadth and depth of skills and experience I've gained in both my capacity as a senior leader and my Board level roles provides me with the ability to serve Qualitas shareholders and make a strong contribution to the business. I'd like to take this opportunity to thank the Qualitas Board of Directors and the executive team at Qualitas for presenting me the opportunity to join the Board. With your support, I look forward to being elected as a Non-Executive Director and serving all stakeholders as we progress through the next exciting phase of Qualitas's growth. Thank you.

Thanks, Darren. So the directors other than obviously, Darren, unanimously recommend shareholders vote in favor of this resolution. So are there any questions before I put the motion? Any questions in the room? Any questions online?

Yes. We have a question from shareholder, Stephen Mayne. Darren Steinberg is a good hire. Could he comment on whether any of our top 10 shareholders were influential and persuading him to join the Board? Also, what is Darren's history, if any, with our CEO and Co-Founder and which of our directors did he know before engaging with the recruitment process?

Thank you, Stephen. Let me just give you a little bit of background. We went to an international search firm for this appointment. There were a number of really outstanding candidates that we spoke to, interviewed. And at the end of that meeting -- that series of meetings and interviews, we appointed Darren. We asked Darren to join us. During that period, we were certainly not aware of there being any linkage other than just knowing people in the sector with Darren people on our Board did not have specific relationships with him. He has really come through quite a detailed and intrusive process to find the right person for the job. So I think that, that really is probably sufficient to answer the question. Are there any other questions?

There are no further questions on this item.

So proxy votes received for the resolution displayed on the screen. I now formally move the resolution by poll for Darren Steinberg's election as set out in the Notice of Meeting. If you've not already done so, please complete your voting card for this item now. So let's move to Item 4. Item 4 concerns the approval of the allocation of loan shares to Andrew Schwartz, the Group Managing Director. The company proposes to grant loan shares to Andrew Schwartz as a long-term incentive under the -- this new loan share plan. The long-term incentive opportunity being awarded is a maximum of 150% of his fixed remuneration of $1,560,000. As the loan will need to be repaid under the terms of the grant, the company has had the proposed arrangement valued by an independent valuer as outlined in the explanatory notes. Loan shares will be delivered to Mr. Schwartz under the loan plan, either by issuing the shares or by procuring the transfer of shares purchased on market. We have not yet made a decision to issue new shares or acquire on market shares to satisfy the delivery of loan shares to him. And shareholder approval under ASX Listing Rule 10.4 is being sought to provide the company with the flexibility to be able to either issue new shares or the other alternative if it determines. I now invite shareholders to ask questions on this item. Any questions in the room? Any questions online, Terrie?

Yes. We have one question from shareholder, Stephen Mayne. Thank you for disclosing the proxy position early to the ASX, along with the formal addresses and well done for receiving such strong report on all resolutions, including this incentive grant. You've also run a good hybrid AGM and serious presentations in respect to the agenda. The only extra ask I've got is for voluntary scheme disclosure of the poll results, so we can see how small the retail turnout was and what retail shareholder sentiment was as others are voluntary doing this.

Well, thank you, Steven. I think that probably is a question for general business rather than for the loan share. But anyway, let's answer it. I think what we do is we comply with all of our requirements under the regulations and the rules about disclosure. But if you have some suggestions as to the way in which we might deal with them in future AGMs, we're happy to consider that. So let's -- then -- we've got the proxy votes received for this resolution on the screen. I now propose the resolution is set out in the Notice of Meeting and put that resolution to a vote by poll. If you've not already done so, please complete your voting card on this item now. So we move now to general business. Shareholders are invited to ask questions in general business regarding the company. Are there any questions for general business from anyone in the room? Any questions online, Terrie?

Yes, we have a question from shareholder, Stephen Mayne. The Victorian government keeps on jacking up property taxes to what are now the highest in the country. Could the CEO comment on the different property tax regimes across the country and whether that is impacting valuations or where we are prepared to direct future capital investments?

Andrew, do you want to take that?

It's actually a question I've been asked one over the last 6 months in particular, not just from shareholders, but also from our various fund investors as well. And it's really getting to the heart of Victoria and our confidence levels relative to other states of Australia. And I think it is a fair comment to say that confidence levels amongst property investors is lower in Victoria relative to other states. And certainly, I think what we are seeing is more appetite by offshore investors to invest in other states outside of Victoria. That doesn't mean they're not investing in Victoria. It just means there's more weight towards other states. I do think that the stamp duty changes of very recent times announced by the Victorian government is actually a very big positive push in regards to off-the-plan residential sales in Victoria. It's not necessarily a new scheme. It's one that we saw several years ago that have had a very large effect on creating an appetite for investors to buy off the plan. I think the government -- it's a personal opinion, but I think the government needed to introduce a plan such as that to create a catalyst for people to buy off the plan. One of the large issues in the market at the moment is the fact that we've had very substantial cost increases for construction, delivery, not necessarily met by revenue increases. And I think the plan introduced by the government to provide stamp duty savings will be quite a big pull-forward effect into Victoria. And I think should that occur, which is my personal view, I think it will actually lead to an investment in future revenue for the government as more buildings get built and more residents choose to live in Victoria. So I wouldn't say they're not doing anything, but certainly, the introduction of that stamp duty is a very significant thing for those that may have heard the press this morning or seeing the news overnight at the federal level, withholding tax changes were introduced to -- for MIT as well in regards to build to ramp, that's on a national level. I also welcome that. I think that it will also lead to more built to ramp projects being more viable, and I believe that, that will create more housing in Australia as well. Thank you, Chairman.

Thanks, Andrew. We have another question from Stephen Mayne. So you want to read that question out, Terrie?

Thank you, Chair. The CEO mentioned labor shortage and cost of construction as an issue for the property sector going forward. Could he comment on whether the federal government's appointment of administrators to the CFMEU has had any noticeable impact so far? Whilst it was our contracted builders who dealt directly with the CFMEU, not us, we ultimately paid for many of the excesses. How did we handle this delicate issue in the past as the culture and practices on CFMEU work sites clearly deteriorated as the various media reports detailed?

I actually don't think it's appropriate for me to get into sort of political views around CFMEU. But I will make a more generalized comment, which is Australia does need a viable construction industry. And we've had a 40% rise in construction costs over the last 3 years. And depending on what state of Australia you're actually operating in, the construction industry has differing issues that it's facing into, as an example, Queensland with its infrastructure, investment and build has quite severe labor shortages. So -- and I won't go through all the states, but each one has different cost structures and different levels of issues that they're facing into. So certainly, we do need a very viable industry. And I think, pleasingly, what we are seeing in Qualitas does see a lot of projects and a lot of project feasibilities right across the country is that revenue levels are responding to the market. And we are actually seeing more feasible projects even in light of the increase in construction costs over the last few months. Thank you.

Thank you, Andrew. Well, there'll be no further questions, I now want to declare this Annual General Meeting of Qualitas Limited closed. And on behalf of the Board, I want to thank you to our shareholders and online -- whether hear or online for participating in the AGM today. We really appreciate your support, your loyalty -- and you look forward -- we look forward to sharing with you a rewarding year ahead. So thank you, and I think there's some refreshments that we have available for you now. Thank you very much.