Region Group (RGN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to SCA Property Group's 2021 Annual General Meeting. On behalf of the Board, I extend a warm welcome to all our unitholders, proxies and guests participating in today's virtual meeting. I'd like to commence by acknowledging the traditional owners of the land on which we are formally conducting this meeting, the Gadigal people of the Eora nation. Recognizing that you may be participating in this meeting on land other than traditional custodians, I pay my respects to their elders past and present and emerging of all of those custodians. If we experience any technical issues today, a recess or adjournment may be required depending on the number of unitholders being affected. If this occurs, I shall advise you. My name is Philip Marcus Clark, and I'm Chair of the group. I've been appointed Chair of this meeting, and I now table my letter of appointment. This afternoon, we are simultaneously holding the meetings of Shopping Centres Australasia Property Management Trust and Shopping Centres Australasia Property Retail Trust. And for the rest of the meeting, I will refer to the business of each trust conducted as 1 meeting. I'd like to introduce SCP's Independent Directors and senior management who are joining me today via webcast. My fellow Independent Directors, Steve Crane, Beth Laughton and Belinda Robson. And our Executive Directors, Anthony Mellowes, our Chief Executive Officer; and Mark Fleming, our Chief Financial Officer; our General Counsel and Company Secretary. Erica Rees is also in attendance, as is Andrew Coleman from the group's auditors, Deloitte Touche Tohmatsu. We also have representatives of the group's registry Link Market Services joining us today, Link will be moderating the webcast platform. I've been informed by our company secretary that a quorum is present, and I declare the meeting open. The agenda for the meeting will be as follows. The chair's address, the CEO's address, formal business of the meeting, which includes the resolutions of the meeting, general business and questions. Voting on resolutions will be conducted by way of poll. Unitholders attending the meeting online will be able to cast their vote using electronic voting when online registration is validated. Please refer to the SCP Virtual Meeting Online Guide 2021, which is available on the SCA Property Group's website, or use the help line specified in the guide. Following the voting, general business questions will be taken. Please click on ask a question button, type your question and click submit. I encourage unitholders to send their questions through as soon as possible. Voting will close 5 minutes after the meeting closes. General business questions received from unitholders prior to the meeting will be addressed during the general business questions period. I now present my Chair's address. My presentation today will cover the following. SCA's financial performance and return to unitholders, the impact of the COVID-19 pandemic on our business, SCA strategy and a report on governance matters. First, financial performance and return to unitholders. As I've done at previous AGMs, I will focus on return to unitholders, and we'll leave it to our CEO, Anthony Mellowes to present our FY '21 results and to update you on the outlook for FY '22. Returns to unitholders. Our commitment to our unitholders is to deliver secure and sustainable earnings and distributions, which grow over time. FY '21 was another challenging year for SCA due to COVID, but we continue to deliver solid results. FY '21 statutory profit after tax was $462.9 million, up 441% compared to FY '20. FY '21 funds from operation was $14.76 per unit, up 0.8% compared to FY '20. And FY '21 distributions to unitholders totaled $0.124 per unit. That comprised $0.057 per unit for the first half and $0.067 per unit for the strong second half. This improved on the $0.05 per unit paid for the first half -- paid for the second half of FY '20. Steve Crane, our Deputy Chair and I recently met with several of our institutional investors and with representatives of the Australian Shareholders Association. They were all pleased with our FY '21 results and with the quarterly update and guidance, which we issued last month. We are guiding AFFO of at least $0.15 per unit in FY '22. If we achieve that, and we expect to, distributions for FY '22 will be back on the growth trend we established pre-COVID. Unit price performance. The COVID-19 pandemic impacted the SCP price in FY '20 and FY '21. Our units closed at $2.18 on the 30th of June 2020. Pleasingly, SCP's unit price has risen significantly since then following the release of our FY '21 results and October market update and guidance. Units have recently been trading above $2.80. At the time of our initial public offering in December 2012, the unit price was $1.40. So our unit price has doubled since then, and we've been paying distributions every year. Total unitholder return, as you know, measured both unit price growth and distributions. In the last 5 years, SCA has delivered a total unitholder returns of 44.8%, outperforming many of our listed retail property peers and outperforming the ASX 200 A-REIT Accumulation Index. We've grown the value of our portfolio to over $4 billion. Net tangible assets per unit increased up to $2.52 at 30 June 2021. We continue to pursue a successful acquisition strategy with acquisitions of $452 million completed in FY '21 and significant additional acquisitions completed since 1 July 2021. Unitholders saw a strong property valuation uplift of $354 million in our June results. And based on the performance of our centers and the price being paid for assets like ours in the market, we expect to announce a further valuation uplift next month. We'll turn now to the impact of the COVID-19 pandemic, and I'll speak to the impact on our operating results on our property valuations and on our people. The impact on our property -- on our operating results. In FY '21, the COVID pandemic and lockdowns continued to disrupt our business and impacted our operating results. Anthony will elaborate, and further details are set out in our financial statements. Some of our specialty tenants suffered lower sales due to lockdowns and restrictions, particularly during the Victorian lockdowns. SCA provided $10.5 million of rental assistance in the form of rental waivers and deferrals to over 800 of our 2,000 tenants to help them through this difficult period. Pleasingly, we saw a strong rebound once lockdowns and restrictions eased with all tenant categories achieving positive sales growth for the full FY '21 year. This rebound allowed us to achieve positive leasing spreads in the second half of FY '21. And our rent collection rates returned to pre-pandemic levels by the end of FY '21. The more recent New South Wales and Victorian lockdowns also had an impact. But we've learned a lot about managing lockdowns, and we were able to limit the impact. We have again seen a robust rebound. Finally, the impact on property valuations. When the pandemic first hit in early 2020, there were expectations that retail property values might decline across the board. Some did, particularly lower quality regional and subregional assets. But our portfolio of convenience-based neighborhood and smaller subregional convenience centers has proved to be very resilient. Indeed, as I mentioned, we've seen a substantial increases in the value of our portfolio. Finally, the impact on our people. The pandemic has subjected our management and staff to stress and anxiety in both their working environment and their personal lives. They have responded magnificently, and our senior management team have taken some great initiatives to make life a bit easier for those most severely affected. The Board and management team have worked very well together, but significant demands were made on Board members, particularly as our numbers were down. I take this opportunity to thank my Board colleagues for their extra effort, their strong commitment and contributions during this difficult period. I'll now turn to strategy. The Board keeps our strategy under close review, and it's a strategy which has served us well. Our core strategy remains unchanged, but we will continue to adapt it to take advantage of suitable growth opportunities. Our focus is serving our local communities for their everyday shopping needs. We will execute by first partnering with our supermarket anchor tenants to provide convenient local supermarket offerings, including last-mile logistics for online fulfillment, click-and-collect and pick-up facilities. Secondly, actively managing our centers to ensure that we have sustainable specialty tenants, providing predominantly nondiscretionary goods and services and paying fair sustainable rents. And finally, by implementing our ESG initiatives. We will continue to pursue suitable accretive acquisition opportunities, utilizing our management expertise and extensive industry knowledge, and utilizing our strong balance sheet. We are actively exploring funds management opportunities, which fit with an enhanced strategy to broaden and diversify our revenue streams and to provide growth opportunities. Above all, the Board remains committed to our key objective, which is to deliver, secure and sustainable earnings and distributions, which grow over time. And we have the right management team to deliver that outcome to unitholders. Finally, I'll report on governance matters. First, our management team. At the beginning of the meeting, I introduced our key management personnel, Anthony Mellowes, our CEO; and Mark Fleming, our CFO. Anthony and Mark are particularly capable and experienced team. Their skills complement each other, and they work well as a leadership team. Their collective knowledge and experience has helped get SCA where we are, and successfully steered us through the challenges posed by the COVID-19 pandemic. Anthony and Mark are supported by a relatively small but capable and effective team. We have a good combination of experienced managers, supported by some very talented young people. Having built this team, we certainly don't want to lose them. So staff retention is a top priority in a very competitive market for property talent. I take this opportunity to acknowledge our team and to thank each of them for their commitment and hard work, for the results they have delivered, and for the way they have responded to the challenges posed by the pandemic. During the recent meetings with institutional investors and ASA, they all went out of their way to acknowledge the strength of our management team. They respect our team, and they trust them to deliver on our strategy. Next, our sustainability strategy. Anthony will report on our relaunched sustainability strategy. But I particularly wanted to acknowledge the progress made in the last 12 months. SCA has set a net-zero target for Scope 1 and Scope 2 carbon emissions by 2030. And we have a credible detailed plan to achieve that target, which Anthony will outline. The market response to our sustainability strategy from both institutional and retail investors, from analysts, from proxy advisors and from the communities we serve has been gratified. The Board strongly supports our sustainability strategy, which just charges our responsibilities to society but also strengthens our business and delivers good outcomes for unitholders. The Board: Dr. Kirsten Ferguson retired as a director effective 17th of August 2021. Kirsten had been a Director of SCA since 2015. Her extensive knowledge and experience, particularly in safety and governance, has been invaluable to the Board. I thank Kirsten for her contribution, and wish her well for the future. Mark Lamb, our General Counsel and Company Secretary, resigned as Company Secretary on 31 December 2020, and retired as an employee of SCA on 1 July 2021. And Mark was appointed General Counsel and Company Secretary before we listed in 2012. He played a significant role in our successful listing, and he's also played a significant role in the growth and evolution of SCA. On behalf of the Board, I thank Mark for his long and valuable service to SCA, and wish him well. I am pleased to report that we are well advanced with the search to identify and appoint 2 additional Independent Non-Executive Directors. One appointment is imminent. I expect that appointment will be announced next month. We all are also in discussions with the second candidate who has complementary skills to join us in the first half of 2022. I've been considering my own position in consultation with my Board colleagues. I've [ entered ] to my Board colleagues that I wish to retire from the Board following the November 2022 AGM. The Board has a well-developed succession plan in place and ample time to consider the transition to a new Chair. I am totally committed to continue to serve you to the best of my ability until the day I retire. Finally, I do acknowledge that 2021 has again been a difficult and stressful time for our unitholders. Thank you for your continuing support, and thank you again for taking the time to join us virtually here today. I'm just sorry we could not meet in person. I'll now hand over to Anthony.

Thank you very much, Phil. And good afternoon, ladies and gentlemen. My name is Anthony Mellowes, and I'm the Chief Executive Officer of SCA. Phil Clark outlined the group's achievements since listing. And this afternoon, I'll run through some of our key achievements for FY '21, and update our outlook for FY '22. For those of you not familiar with the SCP portfolio, it consists of 99 shopping centers across Australia, and approximately 48% of our income is derived from Coles, Wesfarmers and Woolworths. And as at the 30th of June 2021, our portfolio was valued at approximately $4 billion. And we now have approximately 2,150 specialty tenants with a total occupancy in excess of 97%. I'll now take you through some of the key highlights for the financial year FY '21, and towards the end of my presentation and the outlook. While our earnings continue to be impacted by the COVID-19 pandemic, we saw a strong rebound in the second half of FY '21. We delivered funds from operation of $0.1476 per unit, an increase of 0.8% on the prior financial year. This enabled us to pay distributions to unitholders of $0.124 per unit, which was a slight decrease of 0.8% on the prior year, and this represented a payout ratio of around 98.5% of AFFO or adjusted funds from operations, effectively our cash position. Our total funds from operations was $159 million for the year, which was an increase of nearly 13% on the prior year. And our net profit after tax was $462.9 million, which was an increase of 440% on the prior year due to valuation uplifts. Our gearing at the 30th of June 2021 was 31.3%, which is well within our policy range of 30% to 40%. Our NTA at 30th of June 2021 was $2.52, which was an increase of 13.5% on the prior year, with a portfolio weighted cap rate of 5.9%. And our portfolio occupancy was 97.4%, which equates to a specialty vacancy amount of 5.1%, which is fairly consistent with the prior period. During the year, we acquired 7 convenience-based centers and some adjoining properties or $452.4 million, and also we contracted 2 further centers in June 2021, which settled in the first quarter of FY '22. While some of our tenants suffered lower sales due to COVID-19 lockdowns and restrictions, particularly in Victoria and New South Wales, we saw a strong rebound once lockdowns ended and restrictions eased. Our convenience-based centers have benefited from the shift to shopping locally and our customer principal for the past 6 years of love local, shop local, act local has never been more relevant. Our supermarket and discount department stores benefited from customers eating at home and staying local, which drove strong sales growth, and in turn increased turnover rent. Additionally, our specialty tenants demonstrated remarkable resilience and adaptability throughout the year and recovered quickly following the easing of restrictions. As a result of their strong trading performance, most of our tenants were able to resume paying their full rent, and across the entire financial year, we're able to collect 96% of invoice rent. We did, however, provide $10.5 million of rental assistance to over 800 specialty tenants. Other consequences of the tenant's strong sales growth was the positive rental reversions we were able to achieve in the second half of FY '21, with renewal spreads of 1.6% and new lease spreads of 3%. We're confident of continuing to achieve rental growth into the future on account of our rents being low compared to our peers, with specialty occupancy cost of only 8.6%. During the period, our valuations increased by $409.4 million or 13%. Our balance sheet remains in a strong position with the gearing at June of 31.3%, and our weighted average cost of debt was 2.4% with a weighted average term to maturity of 5.3 years. We expect cap rates for convenience-based centers to continue to compress with demand for quality convenience-based centers to remain strong. Based on the recent transactional evidence we are seeing in the market, we expect our NTA will increase in December 2020 once our next valuation cycle has been completed. As I noted earlier, during the period, we continued to grow our portfolio in a disciplined manner. We acquired 7 centers for $452 million, and contracted to acquire a further 2 centers, which settled in July for a combined total of $574 million. Historically, on average, we have acquired approximately $240 million of centers each financial year, and so FY '21 was a busy year for us. We've continued this momentum through into FY '22, settling on those 2 centers in July, and also contracting to acquire Moggill Village, the neighborhood center in Brisbane, for $54 million. Three assets from SURF 3 fund for $54 million and Delacombe Town Centre in Ballarat for $112 million. We believe we've got an opportunity to continue to consolidate the fragmented ownership of this sector by remaining disciplined in our approach in utilizing our management capability, industry knowledge, and funding ability to source and execute acquisition opportunities, both on and off market. Funds Management. Our SURF 1 and SURF 2 fund will round up during the period, crystallizing an internal rate of return of 11% and 12%, respectively. While not during FY '21, and as I noted previously, our SURF 3 fund also sold its remaining assets to SCA for $53.6 million, which represents an approximate 11% internal rate of return for the SURF 3 investors. These are all very pleasing results for all SURF unitholders. And as the Chair commented, we are continuing to explore some future funds management opportunities in FY '22. Sustainability. While love local, shop local, act local remains a core focus for SCA, we also understand that loving local communities means acting on climate risk that could impact those communities. We therefore decided to relaunch our sustainability strategy this year to focus our efforts on 6 key areas where we can have the most impact in our local communities team. Energy and carbon, water, waste, leading local, health and well-being and diversity and inclusion. In each area, we have set ourselves challenging but achievable targets, and we're very proud to have committed to achieving net-zero carbon by 2030 for our Scope 1 and 2 emissions. We intend to achieve our net-zero target by installing solar panels at many of our centers over the next 9 years, starting with the installation of 7.5 megawatts of solar panels on our West Australian centers during FY '22. In addition to our net-zero commitment and the relaunch of our sustainability strategy, some additional sustainability highlights achieved during FY '21 include: $4.1 million invested in sustainable initiatives; $21.2 million of investment approved for sustainability initiatives due in FY '22, including a $13.6 million investment in solar generation; 3,000 megawatts of solar power generated from the roofs of our centers in calendar year 2020; 1,600 tonnes of greenhouse gases saved through the solar generation in calendar '20. Our 40-40-20 gender target was adopted, and achieved for our Board and senior leadership team. And we supported 128 families through our partnership with the Smith family. SCP strategy has remained unchanged since we listed 9 years ago, and a lot has changed in 9 years, particularly the challenges faced in the retail industry as a result of the pandemic. My senior team and I, in conjunction with the Board spent a lot of time challenging ourselves as to whether we, in fact, have the right strategy or whether we should vary or change it. We are unified in our belief that our strategy is, in fact, the correct strategy for these challenging times, and we are seeing an increasing propensity to shop local, which our centers are ideally located to cater for. As well as an increasing use of our centers by tenants, not only is retail outlets, but also was last mile logistics centers for online purchases, fulfillment and click and collect. We will continue to deliver defensive, resilient cash flows to support secure and growing long-term distributions to our unitholders. We'll do this by continuing to focus on convenience-based retail centers which are weighted towards the nondiscretionary retail segments of food, pharmacy and medical and also retail services. These are the necessities for the everyday spend of households. The benefit of these retail categories is that there is a very low volatility required by all demographics every day of every week of the year. We're focused on continuing to deliver the growth by progressing our development pipeline and actively exploring additional funds management opportunities that will broaden our diversity of revenue streams in a capital-efficient way. We'll continue to have an appropriate and conservative capital structure, and we'll continue to see growth opportunities which suit our risk profile in a very disciplined way. We believe that store-based fulfillment model will remain the predominant model for online grocery fulfillment in Australia. Notwithstanding the growth of online retail and during the pandemic on account of Australia's relatively low population densities, large distances, established existing supply chains and higher temperatures. Our centers are ideally located within local communities, making them well suited for last mile logistics. Both Coles and Woolworths are using our centers for both pickup and home delivery. Importantly, for SCA, online sales are included in the definition of turnover, in our supermarket and discount department store leases, meaning that we can participate in this upside by way of turnover rent. Key priorities and outlook. We'll continue to deliver on our stated strategy in FY '22, focusing on optimizing our core business by serving our local communities for their everyday needs, partnering with our supermarket anchors to improve their online offer, actively managing our centers to ensure that we have successfully specialty tenants paying appropriate rents and executing on our sustainability initiatives. We'll focus on our growth initiatives by seeking value-accretive acquisition opportunities that are consistent with our strategy and investment criteria, progressing the identified development pipeline and consider these further funds management opportunities. We'll actively manage our balance sheet to maintain our diversified funding sources with long weighted average debt expiries and the lower cost of capital that's consistent with our risk profile. Of course, if there's any material change to the current macroeconomic conditions of our strategy, we'll need to adapt to these changes. But at this stage in the property cycle, I believe that maintaining our gearing at our preferred range is the appropriate setting. As outlined in our trading update, and FY '22 guidance announcement of 19th of October 2021. The sales performance of our portfolio has remained resilient. Our cash collection rates will continue to improve as the lockdowns for New South Wales and Victoria are removed. And we also reiterate our guidance that we gave for FY '22 being -- distribution per unit of at least $0.071 per unit for the first half to December 2021 and the distribution per unit of at least $0.079 per unit for the second half. This giving a FY '22 adjusted funds from operation guidance of at least $0.15 per unit. Thank you for your time this afternoon. I'll now hand back to Phil.

Thanks, Anthony. Ladies and gentlemen, we will now progress to the formal business of today's meeting, matters requiring resolution, which are outlined in the Notice of Meeting. The resolutions for consideration today may only be voted on by unitholders, proxy holders and unitholder company representatives. Unitholders participating online through the virtual meeting website will have the opportunity to ask questions or make comments on each matter being put to unitholders. I've been informed that the notice of meeting was sent or made available online to all registered members within the notice period required. I now table the Notice of Meeting, and unless there are any objections, I will take the notice convening this meeting as read. A reminder again that we are simultaneously holding the meetings of Shopping Centres Australasia Property Management Trust and Shopping Centres Australasia Property Retail Trust. And although 1 resolution only will display on the presentation slides, and you will only be asked to vote once on each resolution, your vote will be taken as a vote for each trust. In accordance with the Corporation Act as Chair of this meeting, I demand a poll on each resolution to be considered at this meeting. I will endeavor to give all unitholders who wish to comment or ask a question a reasonable opportunity to do so. I ask that you please keep your questions or comments related to the matter at hand and as succinct as possible. To allow participants the opportunity to ask questions, please limit your questions to 2. Each resolution set out in the Notice of Meeting is an ordinary resolution, and as such to pass must be approved by a simple majority of the votes cast by unitholders entitled to vote and voting on the resolutions. I have demanded a poll on the resolutions. You should record your vote by selecting the form against or abstain squares for the relevant resolution shown on the electronic voting card when I put each motion to vote. We will announce the results of the vote to the ASX following the end of the meeting. I now open the poll. I appoint Link Market Services as our scrutineer for the poll. In accordance with the Corporations Act, each member will have only 1 vote for each dollar of the value of total SCP securities held by them. Link have the details of this value per security. I've been advised by Link that all proxies received have been checked and those that have been found to be properly completed, I declare valid for voting at this meeting. I will disclose proxy votes on the screen prior to the vote being taken for each resolution. These figures will be as at the closing time for receipt of proxies, which was 2:00 p.m. Monday, 22nd November 2021. These figures may change if a unitholder who previously submitted a proxy has joined the meeting online today and revoke their proxy. We will disregard any votes on the relevant resolutions by those persons set out in the voting exclusion section of the procedural notes section to the Notice of Meeting. I remind the meeting that the Chair will vote any undirected proxies in favor of all resolutions. All voting by the chair is subject to the voting exclusion details included in the Notice of Meeting. The first item of notified business is to consider the annual financial report, Directors' report and the auditor's report for SCA Property Group for the financial year ended 30 June 2021. There's no resolution in respect of this item of business, but if there are any questions or comments on the annual report, you may submit them now. Moderator, do we have any questions on the phone line?

Mr. Chairman, there are no further questions.

Moderator, are there any questions or comments by the online portal to the management of the group?

We have 2 questions currently. First question, it's noted that SCA acquired and completed the purchase of 7 centers in FY '21 at a reported total cost of $452 million. So far in FY '22, further acquisitions or settlements, including SURF 3 total about $342 million with presumably more to come during the remaining 8 months. How does SCA propose to fund recent and future acquisitions?

Thank you. Before I send that question to our CEO, Anthony Mellowes, I'd just like to say a few words about the Australian Shareholders Association. Australian shareholders associations made up of experienced investors who volunteer their time to look after your interest as investors. They do a great job holding companies to account on your behalf, and they're good people to deal with. Anthony, could you respond to the question, please?

Yes. Sure. Thank you, Phil, for that. We have funded these acquisitions predominantly through debt. If you remember, we raised a substantial amount of equity back in April in 2020. And basically, that is just redeploying that equity. Our gearing is now up at around 35%. And we are looking at other forms of -- we have some assets that we could sell. We can raise some further capital by other uses, whether it's a unit holder purchase plan or we can do a DRP underwrite, which we do each year. There are a number of different sources that are available for us there. But the key aspect that we look at is our gearing ratio, and it is still at the level that we're very comfortable with being in the middle of our range.

Next question, given the challenges that you've acknowledged management and staff have faced over the last 12 months with the impact of COVID-19. Could you advise on what initiatives have been put in place to a system cope during this time and remain fully engaged with their work for SCA Property Group.

Thanks. I'll ask our CFO, Mark Fleming, to respond to that. And Anthony to comment as well.

Yes. Phil, I'll answer that.

You'll answer that?

Yes. It's not a problem. It has been a really tough time for us that a lot of people, all of our staff have been working remotely. But we have encouraged a lot of ongoing social and informal connections with each other while working virtually. We've had lots of WhatsApp challenges Friday afternoon catch-ups, coffee roulettes lets online to a number of different social activities. We've also demonstrated and reinforced the understanding of the need for flexibility, working parents and other home commitments has been the #1 priority for our staff, account work appropriately at home if their kids are running around. So that has been their priority and they've been working other hours to make up for that. Well-being is really important and a priority for us. We've had lots of step challenges, yoga sessions, we've been encouraging people to get away from their desk and take breaks. And we've also have an employee assistance program there as well. And then finally, we've had regular communications and check-ins using technology to stay connected, lots of video on Teams, messaging as well, and continue to put a focus on our future fit, which is our cultural program to ensure our employees continue to remain engaged and motivated with the direction in which we're heading.

Thanks, Anthony. Moderator, are there any other questions or comments on the financial statements and reports?

We have 2 questions, currently. First question comes from unit holder Mohammed Fazim, Mr. Clark mentioned the impact of lockdowns and revenue in New South Wales and Victoria. What is the proportion of our holdings in the 2 affected states?

Do you want to do that, Mark?

Yes.

I'll ask our CFO, Mark Fleming, to respond to that.

Yes. Thanks, Phil. So Victoria accounts for around 17% of our assets in our income and New South Wales about 31%. So it's about -- 48% of our revenue and assets are in those 2 states.

Thank you, Mark. The next question comes from unitholder Wolfgang Frank. For the distribution declared in June '21 and 17.6% of unitholders elected to participate in the DRP. Why was it necessary or appropriate to underwrite the remaining 82.4% of the distribution? Was the cost of this underwrite more expensive or cheaper than a DRP discount, if any?

Yes. I can answer that. Look, the reason is, as was referred to in the previous question, we've actually completed on top of $450 million of acquisitions last year, we've already completed $347 million this year. So we've been very active in acquiring. And as Anthony said, our guiding principle when it comes to funding is to keep our gearing ratio in that 30% to 35% range. And the way that we do that is by raising equity. The DRP, as Anthony said, is one of those levers that we use to raise equity. If you look back at our balance sheet back -- before we started the acquisitions, we were at the lower end of our range, but as Anthony said, we're now at the higher end. So it was really a decision to raise some equity to keep our gearing within the range that we want. In relation to costs, the DRP is a relatively cost-effective way to raise equity. There's basically no cost associated with underwriting a DRP except for a 1% discount. And that's exactly the same discount that all unitholders receive if they participate in the DRP. So it's the same price that all of those unitholders who elect to take up the DRP pay for their units.

No further questions, Chairman.

Thank you, moderator. Are there any questions or comments relevant to the conduct of the audit or the preparation of [ content ] of the auditor's report?

No questions currently, Chairman.

Thank you. I'll now move on to the next item of business. Resolution 1 is the adoption of the remuneration report. It's displayed on the screen and will be taken as read. This resolution is an advisory, nonbinding ordinary resolution and does not bind the Directors of Shopping Centers Australasia Property Group RE Limited. On behalf of the Board, I'd like to take this opportunity to thank the members of our Remuneration Committee, the Chair, Steve Crane, and his colleagues for all of the work they've done. I'll now hand over to Steve Crane to present the report.

Thanks, Phil. Good afternoon, ladies and gentlemen. I'm pleased to present the SCA Property Group Remuneration Report for Financial Year 2021. The COVID-19 pandemic continued to impact trading conditions for our tenants, customers and customers throughout financial year '21. However, notwithstanding this, as you've heard, SCA performed well, which is a credit to our management team. At the beginning of the financial year, the Board directed management to focus on 2 key performance indicators in order for them to maintain distributions and unit value. Those 2 performance indicators were AFFO per unit. As you've already heard, that's really our connection to dividends and rent collection. For the first time, the Board split the financial year into 2 distinct performance periods given the uncertainty around COVID, and allowing the Board to take into account the external operating environment when setting targets and metrics and in particular, to set higher stretch targets in the second half of the year if the COVID-19 situation continued to improve. Both our AFFO per unit and rent collections well exceeded the stretch targets set by the Board with our management team being particularly effective in the second half of the year as encouraging signs started to appear in the retail environment and prior to the new lockdowns that started to take place in July of 2021. There were no increases in fixed remuneration awarded to the KMP in financial year '21. As we've recently announced, we have awarded increases in fixed remuneration, and the overall total remuneration opportunity for KMP in the FY '22 year following an external benchmarking exercise undertaken by the Remuneration Committee. These increases reflect the high regard for our team held by the market and the very competitive environment for executive talent in the property sector. we have favored increasing the at-risk component of each executive's total remuneration opportunity in order to ensure alignment between the interest of unitholders and the KMP. We have received a number of questions in advance of this meeting, and we take note of those questions very closely. One of the themes I'm often asked as Chairman of the Remuneration Committee is why do we need to pay our KMP incentives at all? Why isn't a fixed salary enough. There's no doubt that for many people, the remuneration of our KMP seems like a lot of money. Our policy at SCA is to reward you KMP fairly for a job well done. We also want to attract and retain a high caliber of executive so he must be competitive. Therefore, in order to make sure we recruit and retain the highest quality talent, we motivate our executive team to achieve the best they can through setting targets, which are in the best interest of all unitholders and we hold all of our executives, including our KMP to account to ensure they are meeting these targets. What I mean by this is that our KMP -- that for our KMP, a large proportion of their total remuneration opportunity is at risk and represents the maximum they can achieve. If they don't achieve the targets we set, they will not receive the full remuneration opportunity. We believe this is appropriate to ensure our executive focus on achieving the short- and long-term goals of SCA. In addition, and as I've noted earlier, we regularly benchmark our KMP's total remuneration against companies of a similar size, complexity and structure. We take fair remuneration for a job well done incredibly seriously at SCA, and we'll continue to monitor it closely. We will not hesitate to adjust our remuneration framework if we feel it's no longer in the interest of our unitholders. While this year has presented unique challenges, we believe our remuneration framework aligns unitholder interests with those of senior management to provide unitholders with an outcome that is fairly reflective of the current environment. And on behalf of the Remuneration Committee, we look forward to your ongoing support in achieving the best results for unitholders in FY '22. Phil, I'll hand back to you.

Thanks, Steve. I'd now like to open this item for discussion. Moderator, do we have any questions in relation to resolution 1 on the phone line?

There's no questions on the phone, Chair.

Thank you. Do we have any questions via the online portal?

I have one question currently, which reads Section 3.7 of the annual report details and maximum FY '21 LTI for CEO of 100% of TFR, which was $965,000 at 30th of June 21. NXP of the Notice of Meeting details 474,744 LTI rights to be issued to the CEO with a grant value of $1.2 million, which represents 132% of TFR. Why the discrepancy? Similar discrepancy for the CFO, where LTI is 70% of TFR of 662,500 but 244,853 LTI rights to be issued with a value of 652,900, representing 98.5% of TFR.

Yes. Well, it's not actually a discrepancy. It's a good question. It's -- as a result of some confusion, we actually issued a notice in stock exchange on the 8th of November to be read in conjunction with the Notice of Meeting just to resolve any concerns. But the Notice of Meeting is dealing with the financial year '22. The annual report is referring to the LTI rights granted in FY '21. So they are 2 different -- they represent the amounts for 2 different years. And -- but as I say, I refer if you have -- may have missed it, clarifying note that we put out on the 8th of November. But as I say, it's just a quirk of the way we deal with LTIs they dealt with in advance for this year. So...

No further questions, Chairman. Thanks for that.

Thank you. Now proceed to voting. The proxy voting statistics on this resolution are shown on the screen. If you have a moment to look at those. And I now put this motion to vote. The Directors unanimously recommend that unitholders vote in favor of this resolution. [Voting]

I'll now move on to the next item of business. Resolution 2 in your Notice of Meeting is the reelection of Mark Fleming as an Executive Director. The resolution is displayed on the screen, and is now taken as read. I'd like to invite Mark Fleming to make a few comments.

Thanks, Phil. My name is Mark Fleming. I'm the Chief Financial Officer of SCA, and I'm honored to offer myself for reelection to serve you as an Executive Director. I joined SCA 8 years ago in August 2013 as Chief Financial Officer, and was appointed to the Board in May 2015. I'm also a member of the Board's Investments Committee. In his speech earlier in the meeting, the Chairman summarized the strong financial performance that SCA has delivered for unitholders over the last 5 years, and I'm very proud to have been the Chief Financial Officer throughout that period. I'm particularly proud of our stewardship of SCA during the COVID pandemic period. And I believe we're emerging from the pandemic in a stronger position than ever with our focus on local grocery-anchored convenience centers and new emerging opportunities in areas such as last-mile logistics and funds management. We remain in a very strong financial position, and that allows us to execute on opportunities that will create value for unitholders, including, for example, the 19 acquisitions that we've completed over the last 12 months for around $800 million, and our $20 million investment on solar panels, LED lighting and building management systems, which underpins our commitment to net-zero carbon emissions by 2030. My credentials and skills are set out in the annual report. I've spent over 25 years in senior finance and investment banking roles. I'm very committed to the continued success of SCA Property Group, and I'd like to continue to contribute to that success. Ladies and gentlemen, I seek your support to serve for a further term.

Thanks, Mark. I'll now open this item for discussion. Moderator, do we have any questions in relation to resolution 2 on the phone line?

No. Chairman.

Do we have seen any questions or comments via the online portal in relation to resolution 2?

Not at this time, Chairman.

Voting statistics on this resolution are now shown on the screen. I'll give you time to read that. And I'll now put the motion to vote. The Directors, Mr. Fleming abstaining, unanimously recommend that unitholders vote in favor of this resolution. [Voting]

I'll now move to the next item of business. Resolution 3. Resolution 3 is displayed on the screen, and is taken as read. I'll give you a moment to read that. I'll now open this item for discussion. Moderator, do we have any questions in relation to resolution 3 on the phone line?

There are no questions on the phone, Chairman.

Have we received any questions or comments via the online portal?

Not at this time, Chairman.

The voting statistics on this resolution 3 are shown on the screen. Give you a moment to absorb those. And I'll now put the motion to vote. The Directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend that unitholders vote in favor of this resolution. [Voting]

I'll now move to the next item of business. Resolution 4. Resolution 4 is displayed on the screen, and is taken as read. I'll now open this item for discussion. Moderator, do we have any questions in relation to resolution 4 on the phone line?

Not at this time, Chairman.

Do we have any questions or comments via the online portal?

Not at this time.

Voting proxy statistics on Resolution 4 are shown on the screen. I'll now put the motion to vote. The Directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend that unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 5. Resolution 5 is displayed on the screen, and is taken as read. I'll give you a few moments to absorb that. I'll now open this item for discussion. Moderator, do we have any questions in relation to resolution 5 on the phone line?

Not at this time, Chairman.

Have we received any questions or comments via the online portal in relation to resolution 5?

No. Not at this time.

Voting proxy statistics on this resolution are shown on the screen. And I'll now put the motion to vote. The Directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend that unitholders vote in favor of this resolution. [Voting]

I'll now move to the next item of business. Resolution 6, which is displayed on the screen, and taken as read. I give you a moment to absorb that. I now open this item for discussion. Moderator, do we have any questions in relation to resolution 6 on the phone line?

Not at this time, Chairman.

Do we have any questions or comments on the online portal in relation to resolution 6?

No, not at this time.

Thank you. Proxy voting statistics on resolution 6 are shown on the screen. And I now put the motion to vote. The Directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. [Voting]

I'll now move to the next item of business. Unitholders are reminded that they can submit their vote until 5 minutes after the meeting closes. Ladies and gentlemen, this concludes the formal business of the meeting. I'd now like to invite our unitholders, if you haven't already done so, to please send through any general questions or comments for the Board and management. Moderator, have we received any general questions or comments on the phone line?

Not on the phone at this time.

Thank you. Have we received any general questions and comments via the online portal?

We have. We have a number of questions, Chairman. First being, what action is the Board taking to ameliorate the company from the impact of anthropogenic climate change?

I'll ask the CEO, Anthony Mellowes to respond to that in the context of our sustainability strategy.

Thanks very much. First of all, we've employed a National Sustainability Manager in the last 12 months. And as we've previously mentioned, we set targets and developed pathways for net-zero carbon emissions by 2030. Within that, there's 48 ESG targets that have been set. With '21 environment, specific targets set for energy and carbon, waste and recycling and water, and we are also installing smart technology, including smart energy meters, building management systems and building controls to reduce our energy consumption using data to drive our decision-making.

Thank you, Anthony. Moderator.

The next question, does the Board have a view on future AGM holdings in personal, virtual as proposed by the government?

I'll answer that and perhaps ask our company secretary to respond. I much prefer personal meetings, and I think everybody in this room does. But the utmost -- the primary consideration must always be people's health and safety. So if the significant risks, we will certainly take that into account. In relation to legislation, I'll pass over to the Company Secretary and General Counsel to comment on that.

Thank you, Phil. Our intention will always be to hold an AGM in person where we can. Last year, we put a resolution to the meeting to amend our constitution to allow for virtual AGMs, which was not passed by the meeting. So in future, to the extent that legislation does permit us to hold hybrid AGMs, we will look at doing that, but we will not be looking at holding virtual AGMs that's not permitted.

Thanks, Erica. Moderator?

Next question. What is the company doing to be a leader in adopting renewables, either by letting out the roof space on the shopping centers or fitting out and producing green energy yourself. Will SCA convert all vehicles to electric power?

The CEO touched on that in his address, but I'll ask if he wanted to elaborate.

Yes. Thanks, Phil. Really as being leaders, we have set those net-zero 2030 targets. Our current emissions at 18,000 tonnes from Scope 1 and 2 operations. That's our baseline. 85% offset by installing 25 megawatts of solar by 2025, a 15% reduction by energy-efficient programs and provide our tenants with on-site generated renewable energy through our embedded networks and the solar panels that we installed. With respect to electric vehicles, we do have a current electric vertical partner, Chargefox and they only use renewable energy for charging.

Thanks, Anthony. The next question is, will the Board consider a buyback of small unit holdings?

Thank you. We'd love to buy them back, but it's a difficult process. I'll ask General Counsel, and Company Secretary will explain.

Thank you, Phil. As you mentioned, while small unit holdings are an issue that both parties would like to resolve, SCA is required to treat all unitholders equally. And therefore, we are unable to offer a buyback facility to only those unitholders with small unit holdings. The exception to this requirement is in relation to unmarketable parcels of units, which are valued at less than $500. SCA has previously run 2 small unitholding sale facilities in 2013 and 2014, and now has a relatively small number of unitholders who now hold unmarketable parcels. At the present time, we have no plans to run a third small unitholding sale facility.

Thank you. But I would remind you that you can always set your units through a stock broker or online facility. Moderator?

The last question or comment. I'd like to congratulate Mr. Clark and the Board for undertaking a rigorous program to cut our emissions to reach a 2030 target. What savings has SCP made as a direct consequence of this effort as opposed to doing nothing or a comparative basis on what was happening before we started.

I'll hand that over to our CEO, Anthony Mellowes.

Yes. We saved 1.6 tonnes, and we anticipate reducing our CO2 emissions by 15% over the next 24 months through energy-efficient programs.

I'd just like to point that Anthony made in his address that we subject our investments in renewable energy projects to hurdle rates, satisfactory hurdle rates. Any further questions?

There are no further questions.

Thank you, unitholders. I need to clear the meeting closed. I would like to take this opportunity to thank my fellow Independent Directors, Anthony and his management team and all of the staff of SCA for their diligence and commitment to the business. We are indeed fortunate to have an outstanding team. I also thank all our unitholders, old and new, large and small, for your continued support and confidence. And finally, thank you for your attendance today, and we look forward to seeing you hopefully in person next year. Thank you very much.