The GPT Group (GPT) Earnings Call Transcript & Summary

Safety matters are very important at GPT, and we wanted to briefly outline the venue safety procedures in the case of an emergency. In the event of an emergency, an alert alarm will sound, which alerts you to exit the building. If this occurs, everyone is asked to walk towards the exit signs, which will take you down to the street below. Staff from the hotel will assist you in making your way to the exits. Good morning, ladies and gentlemen. My name is Vickki McFadden, and I am the Chairman of The GPT Group. And on behalf of my fellow directors, I welcome you to our 2024 Annual General Meeting. Before we commence, I acknowledge the traditional custodians of this land on which we are meeting today, the Gadigal people of the Eora Nation and pay our respects to elders past, present and emerging and to any First Nations people who are joining us today. I am advised by the Company Secretary that we have a quorum present, and I declare the meeting open. Joining me for the meeting today is your Board of Directors. And seated from my far left, Rob Whitfield, Tracey Horton, Mark Menhinnitt and Louise Mason. And from my far right, Anne Brennan, Shane Gannon, Marissa Bendyk, our General Counsel and Company Secretary and Russell Proutt. I am delighted to introduce Russell to our security holders here today. Russell commenced as GPT's Chief Executive Officer and Managing Director on the 1st of March this year, following the retirement of Bob Johnston. Russell will provide an address to security holders before I move to the formal business of the meeting. Also present today are members of the GPT leadership team who will be available after the meeting, if you wish to speak to them in person. Debbie Smith, the lead partner of the group's external auditors, PwC, is also in attendance. She is available to answer any specific questions you may have on the audited financial statements. Turning now to GPT's performance in 2023. I am pleased to report that GPT delivered funds from operations in '23, in line with guidance of some $601 million, which was marginally down on the prior year, primarily as a result of higher interest rates. Distributions to security holders for the year ended the 31st of December 2023 were $478.8 million representing an annual distribution of $0.25 per security and a payout ratio of 96% of free cash flow. The results reflect the quality of the group's diversified platform and the focus on executing our key strategic objectives, including growing funds under management, delivering logistics developments and maintaining high occupancy across our entire investment portfolio. However, higher interest rates and the disruption in the office sector did impact valuations and earnings during 2023. The group delivered a statutory net loss after tax of $240 million for the year after taking into account a net investment property valuation decline of some $819 million. Portfolio occupancy at year-end was 98.2%, supported by high occupancy for both the retail and logistics portfolios, which continued to benefit from favorable trading conditions with positive leasing outcomes achieved. The office segment result was impacted by elevated vacancy following lease expiries and a more cautious appetite for office space. The Board and management continue to exercise a disciplined approach to capital management during the year, especially given the uncertain outlook for valuations and the increased cost of capital. Gearing at year-end was 28.3% at the lower end of our target range of 25% to 35%. Our debt maturity profile has been conservatively managed with a weighted average term to maturity of 5.9 years as at the 31st of December 2023. The group maintained high hedging levels through 2023, and this continues into 2024 with our interest rate exposure 96% hedged over the year. A key focus for the group is growing funds under management and our '23 result includes the first full year contribution of managing UniSuper's portfolio of real estate investments, management of the Australian Core Retail Trust and property management of Pacific Fair Shopping Center. A highlight for '23 was GPT's appointment as Investment Manager for QuadReal's Australian and New Zealand student accommodation portfolio, which transitioned to the group in the second half of the year. The group was also recently selected by Commonwealth Superannuation Corporation to manage a property portfolio comprising of office and retail assets. Russell will share more details on these shortly. These appointments are a testament to the quality of the GPT platform as a trusted partner. GPT retains a strong commitment to being a leader in ESG. We ranked second amongst the listed real estate companies in the S&P Global Corporate Sustainability Assessment, 2024 Sustainability Yearbook. Recognizing the global threat posed by climate change, and the decline in nature, we released our first integrated climate and nature disclosure statement, which provides details of the work we are doing on delivering our net zero road map. All owned and managed office and retail assets are now operating carbon neutral with independent certification to be completed by the end of this year. Gender equality is a focal point of our diversity and inclusion strategy. GPT was recently ranked fifth globally from more than 3,700 listed companies across 27 markets and first in the property sector by Equileap in its gender equality global report. An inclusive and respectful culture and environment where people feel that it is safe to speak up, are key priorities for the group. And our 2023 engagement survey results, pleasingly supported our desired culture. 90% of our employees said they were proud to work at GPT. Corporate governance and effective risk management are fundamental to the way we operate at GPT. Tracey Horton, who is the Chairman of the Human Resources and Remuneration Committee, Shane Gannon and I have met with a number of security holders over the recent weeks to discuss group performance and our approach to remuneration and general governance matters. The Board continues to review its composition and manage director succession to complement existing skills and experience. Louise Mason was appointed to the Board earlier this month as part of our ongoing Board renewal process, and she is standing for election at today's meeting. Louise's extensive background as a property executive is complementary to the Board's existing skills mix, particularly given her experience across multiple property sectors and across development. Rob Whitfield is retiring from the Board at the conclusion of today's AGM. Rob has been a Director of GPT since 2020 and has made a significant contribution to the Board and the committees on which he has served during his tenure, but particularly as Chairman of the Board's Sustainability and Risk Committee. We thank Rob for his valuable contribution to GPT and wish him the very best in his future endeavors. In March, we were delighted to announce that Merran Edwards will be GPT's next Chief Financial Officer. Russell will share more details about Merran in his address. I would like to express our gratitude to the leadership team and all of the staff at GPT for their efforts, dedication and commitment to GPT. And on behalf of everyone at GPT, I extend our appreciation and gratitude to our former CEO, Bob Johnston, for his outstanding stewardship of the group and his valuable and significant contribution to GPT during his tenure. Finally, I thank our security holders for their continued support of GPT. I now invite our CEO and Managing Director, Russell Proutt, to address the meeting.

Thank you, Vickki, and welcome, and good morning to everyone participating today. I'm delighted to be here today addressing you, our security holders, so early in my tenure as Chief Executive Officer. I'd like to thank the Board for their support and guidance to me and the broader GPT team during the recent transition has been greatly appreciated. It's only been 2 months since I joined GPT as CEO. During this period, I've made it a priority to connect with as many stakeholders as possible, including GPT team members, security holders, strategic partners and tenants. I've been listening to their views on our business and sharing my early observations and perspectives. Even in these early days, it is clear to me that there's a strong foundation of operational capability across the platform. There's also a deep commitment to serving our investors, tenants and the communities in which we operate. The Board has tasked me with developing and executing on a strategy to deliver long-term value and growth for you, our security holders. Today, I'll share some initial views as well as provide an update on our recent performance. Since my commencement, I've enjoyed getting to know my colleagues and gaining an appreciation for the talents and capabilities across the business. The depth of experience and expertise is evident and this is consistent with the excellent reputation of the GPT Group. Operational excellence is and will continue to be the foundation of our success. This is in all aspects of the business, from investment in asset management, to development, to corporate operations to our integrated sustainability program. GPT's scale underpins our ability to operate across multiple sectors with the depth of capability to deliver superior results. In the discussions I've had with our investors, there has been a recurring theme that the GPT brand is affiliated with trust. GPT is seen as a trusted partner and custodian of their assets and portfolios. This endorsement is reflected by GPT recently being awarded several additional mandates from new and existing partners. We're going to build upon this foundation and capability to drive profitable growth and ultimately, long-term value creation. This growth will come from our continuation of our capital partnering in the form of funds, partnerships and mandates. It will also involve expanding in our current core sectors in which we operate as well as selectively extending into new ones. Our success will be achieved by continuing to be a trusted partner who is committed to delivering value to all stakeholders. As is well known, GPT is a property specialist that invests in and manages a diversified real estate portfolio at exceptionally high standards. This capability makes GPT an attractive partner for domestic and global investors who are increasingly looking for experienced managers with proven capabilities across multiple property sectors. GPT today has assets under management of more than $35 billion. This includes nearly $13 billion of balance sheet portfolio investments and managing approximately $22 billion of assets on behalf of our more than 60 institutional investors and this is across our entire management platform. We work in close partnership with these investors to deliver bespoke and targeted strategies to meet their investment objectives. GPT's track record of leadership in sustainability and being a trusted manager positions the group to grow with these investors, as mentioned, growing our assets under management with existing and new aligned capital partners is key to our strategy and will ultimately be a key contributor to the returns generated by GPT -- for GPT security holders in the future. I'll now provide a brief performance update for the March quarter, which reflects the solid position of the business and performance. Overall, GPT maintains a very high-quality investment portfolio with occupancy at 98%. In our retail division, the quality of our retail portfolio was evident with strong metrics achieved in the quarter. Occupancy for our retail portfolio remains high at 99.8%. Center sales growth in the March quarter was up nearly 5% compared to the March quarter last year. We are delighted to have Melbourne Central recognized as the most productive center in Australia in 2023 by the shopping center news Big Guns report. The center achieved record moving annual turnover, or MAT, in 2023, now surpassing pre-COVID retail sales levels. Our retail portfolio remains well positioned and we continue to benefit from high occupancy and fixed contracted rental increases. Now with respect to our office team, they were able to achieve a significant amount of leasing across the portfolio in what continues to be a very challenging market with above average vacancy in the key Sydney and Melbourne markets. Our occupancy is now sitting at 92%, including heads of agreements with nearly 35,000 square meters of leasing achieved and the portfolio has weighted average lease expiry of nearly 5 years. Our tailored products and strong sustainability credentials have been key to securing these leasing volumes. And while the leasing market remains competitive, we are targeting to deliver office net income results for the year of 2024 in line with 2023. Our logistics portfolio continues to deliver strong results as well. Tenant demand and low vacancy in each of our key markets is driving rents higher and we're capturing these rents through re-leasing spreads and our development completions. Occupancy for the logistics portfolio, similar to retail, is now 99.5% with just over 20,000 square meters of leasing achieved in the quarter. There were 5 logistics developments completed in -- during 2023 and adding over 111,000 square meters of prime grade assets. Our Logistics portfolio remains well positioned to benefit from these favorable market conditions and will be a contributor to the growth of the business. Now with respect to the management platform. At the beginning of the last -- beginning of last month, as Vickki mentioned, we commenced investment management of the Commonwealth Superannuation Corporation, or CSC's portfolio of office and retail assets. The circa $2.6 billion mandate includes the super-premium office tower of 101 Collins in Melbourne, the premium office tower of QV1 in Perth and the superregional [ Indooroopilly's ] shopping center in Brisbane. This builds on the momentum of GPT's commencements as investment manager of our partner, QuadReal's 5,000-bed student accommodation portfolio last year and contributes to more than $9 billion of new assets under management being awarded to GPT in just the last 24 months. As mentioned earlier, growing our management platform with capital partners will continue to be a fundamental element of our strategy going forward. And in terms of corporate matters, the group continues to be -- or take a prudent approach to capital management. We maintain a very strong balance sheet with gearing well within our target range and ample liquidity investment capacity. We also announced the appointment of Merran Edwards, as our new Chief Financial Officer. Merran is an experienced CFO, having held senior roles in the real estate sector in finance, advisory and investment banking. Merran joins us from Investa where she's most recently been the CFO and Head of Investment Management since late 2021. We know Merran's extensive experience and leadership will be valuable and contributing to drive our success at GPT, and we look forward to welcoming Merran to the team in a few months' time. And in terms of earnings and distribution guidance for the group, we continue to expect to deliver funds from operations around $0.32 per security and a distribution of $0.24 per security for the full year 2024. In closing, I'd like to thank you, our security holders, for your ongoing support of GPT, and I will now hand back to the Chair.

Thank you, Russell. Turning now to the formal business of the meeting. The voting procedure. All resolutions will be decided on a poll. security holders, proxy holders and representatives can -- here at the meeting and entitled to vote can cast their votes on the yellow voting card provided on registration. If you are a GPT security holder and you do not have the appropriate voting card, please see a Link Market Services representative who are located just outside this room. Voting cards will be collected by Link Market Services representatives at the conclusion of the meeting. The results of the polls will be declared and released to the Australian Securities Exchange later today. I will now open the poll in respect of all motions that security holders will vote on today. The poll will close at the conclusion of today's meeting and Link Market Services representatives will collect all of the cards at that time. Some of you may have questions, and we will ensure there is plenty of time for you to ask them. Members of our team are standing with microphones throughout the room. And if you would like to ask a question, please raise your yellow or blue card and a microphone will be made available for you to ask your question. Please introduce yourself and say your name prior to asking your question. I would ask that you direct questions to me in the first instance. A copy of the notice of meeting has been distributed, and I will now move to the matters set out in the notice. Item 1 calls for the receipt of the director's report and financial statements for the year ended the 31st of December 2023, together with the auditor's report. While there is no resolution for this item, this is an opportunity to discuss the director's report, the auditor's report and the financial statements and ask any questions you may have for the Board or for our auditors, PwC. I now invite questions in relation to those reports and financial statements. Please raise your yellow or blue card if you have a question.

Good morning, Vickki. My name is David Kingston from K Capital. My group has been a significant holder for over 5 years. My belief is the results have been very poor. Why do I say that? It's a falling icon, not quite as bad as Lend Lease, but let's look at it. 20 years ago, GPT was an Australian property icon definitely. It was the second largest REIT on the ASX. Now it's not even in the top 5. 10 years ago, its share price was around $4. It peaked at over $6 and its price today is around $4.20. The capital value has gone sideways. Investors would have been dramatically better off buying Sydney residential. GPT, I think it used to be general Property Trust, but perhaps it stands for the growthless property trust. Let's look at it more specifically, it's in the annual report, the past 5 years, not my figures, but the company's, been really weak. For those of you with the annual report, Page 82, in my view, it's an indictment of GPT's results over the long run. Let me pull out a couple of aspects of it. In the last 5 years, security price down from $5.60 to $4.64 as at 31 December 23, but lower today at $4.20. FFO per security, down from $0.3268 in 2019 to $0.313 today, an average total shareholder return, which is what investors are looking at combination of distribution and capital growth or capital loss. Some up years, some down years, on average, a misely 4% per annum, totally unacceptable for an icon -- what once was an icon. Even comparing with the peers. Total shareholder return relative to the peers, over 5 years, GPT has delivered well below its peers. The NTA has fallen down from $5.80 to $5.61 per unit over the past 5 years. GP units are trading at a 25% discount [indiscernible]. And those metrics are even worse if we adjust for inflation over the past 5 years. It's quite a long time, 20 years, 10 years, 5 years. Disturbingly, there is no relief in sight with GPT targeting a reduced distribution per unit of $0.24 per unit in the 2024 year. That's a very poor yield of 4.3% on the NTA of $5.61. Investors will be better off putting their money in a CBA term deposit. In my opinion, the annual report is full of platitudes and euphemisms. It misses the real point of financial return to the owners who own the company. I'll read out to you one reference in bold in the annual report. Through the successful execution of our strategy, we aim to deliver growing earnings -- growing and predictable earnings and maximize total returns over the long term. Well, how long does the Board want? You haven't delivered on that aim in the last 5 years or 10 years. REITs are meant to deliver income plus capital growth. And what that means is that if you're getting an income of 5% and capital growth of 4% or 5%, throwing a bit of gearing, the TSR in property, in my view, if well-chosen and well run, should be around about 10%. But GPT's TSR over the last 5 years has averaged 4%, a big failure to deliver. It's actually even worse because as the annual report says and as Russell has said, a big growth area is funds under management. Well done. You've got some good funds under management, which you make fees out of. $19.7 billion on the funds management platform. If you attributed a fair value to that FUM, GPT's NAV, net asset value per unit would increase way above the NTA of $5.61 would go into the $6s. So the Board, each of you are governing over $6 per unit of value and you're delivering a very poor result in my opinion. The discount to NAV would worsen as would the yield on NAV if you add a fair value for the very substantial and valuable funds management platform. Let me also raise another concern. GPT is basically distributing everything it make, every dollar of free cash flow. It's in the annual report. Distribution of between 95% and 105% of free cash flow. There's no doubt, in my mind, the long-term value is determined by free cash flow, not FFO. FFO ignores things like all the leasing costs and maintenance CapEx, all those things, which are real cash costs. So -- but the long-term outcome of GPT is going to be determined by its free cash flow. GPT, to give you credit, Vickki, you define it as operating cash flow, less maintenance and leasing CapEx and inventory movements. And at least you've been transparent that the free cash flow is pretty poor. So on the basis of your distribution policy, you are retaining minimal cash in the business to support growth. Let me also raise another concern. Well done to the Treasurer. GPT has 71% of its debt hedged at 3.5% per annum for a number of years. So well done to the financial controller, or Treasurer. Problem is when that expires and you revert to the current higher interest rates, there will be a materially negative impact on FFO and free cash flow per share. I've racked my brain as to why having been an investor for 5 years, GPT has failed to deliver good results. Can't blame it on COVID, that's one are truly finished. Yes, interest rates and cap rates have increased but conversely, so have most rents. You may have overpaid for the Ascot Logistics portfolio at an additional cap rate of 4.3%, okay, rental growth, but it was a pretty aggressive acquisition. But I suspect the key issue in the poor 4.3% free cash flow to NTA yield is GPT's large head office, your land banking, your development of new projects, all of which involve interest costs, and major rent-free fit-out allowances. I was at Parramatta a couple of days ago, if you truly cost at your Parramatta projects, I would suspect your IRR is very poor. Let me also raise another point which Chairman proudly claimed GPT rates brilliantly in global metrics on a number of nonfinancial stats. Raises the issue is GPT prioritizing its responsibility to deliver optimum profits for all of its owners? Or is it to [ work ]? GPT is a for-profit commercial enterprise. I'm just not sure that it's optimizing that. Let's look at the table on Page 21 of the annual report, which really concerns me. The owners have shown is just one of 7 groups that GPT is creating value for. That table in the annual report says, who we create value for? One, tenants and customers. Number 2, hallelujah, investors, #3 employees, #4 supply chain partners. #5, traditional custodians and First Nations people. Number 6, government and local authorities, #7 industry groups. So that the long-suffering investors are ranked 1 of 7. I accept to run a successful property business, there are multiple stakeholders. But in my view, GPT is not focusing enough on unitholder value. It is a concern that the annual report has so many references to noncommercial objectives. Yes, ESG is important. But the GPT annual report is a high watermark for the work approach as evidenced by the Chairman's references to the globally higher rankings. Indeed, the annual reporting suite includes a modern slavery statement. I'll be honest, I didn't bother to read that, Vickki. Being work is okay for philanthropists, but GPT is not delivering a good outcome for its owners. Over a long term, I'm certain Donald Trump is not an investor in GPT. But if you read the annual report, he would be unimpressed. So my questions are twofold to the Chairman. Why has GPT gone backwards on so many key metrics over the past 5 years? Let's cut away from all platitudes and euphemisms that we said in the presentation. Why has it gone backwards on what really counts the key metrics? And secondly, if the Board can't deliver a proper outcome, there have been rumors from time to time of the sale of GPT, a bid for GPT. Why not sell it, give the holders an NTA of $5.61 or arguably over $6, including the undoubted value of the funds management platform. Thank you.

Thank you for your question. David, is -- and you gave a long commentary on a broad range of things, but came down to 2 questions. I just want to touch on one thing, first of all. I think the Board has a -- in relation to the distribution policy, the Board is very insistent that it should be based on free cash flow and not even AFFO because we too share the importance that the group doesn't distribute beyond its free cash flow. AFFO is a proxy for free cash flow, but not always aligned. And so the Board has kept that measure for that very reason. So I want to let you know that we are aligned in the priority of cash flow for the group, and that's why that measure is in place. That is, I think if we look across our sector inconsistent or different to others. In relation to your particular questions, which why has GPT gone backwards in the last 5 years. I would like to comment that we also measure our relative performance to REITs. And I don't think it's fair to just attribute it to GPT, the poor performance of REITs in the last 5 years. In relation to GPT in particular, the -- I think we face 2 particular challenges. One is an elevated level of office vacancy across our portfolio. There's a convergence of greater office vacancy in our portfolio because of the age of buildings when they were leased up in 10 years and then a lot of them have fallen vacant at the same period of time. And that elevated level of office vacancy is confronted for our office team in filling that vacancy with reduced office demand following the work from home done dimension and an oversupply. So we do believe there is a structural as well as a cyclical factors at play in the office sector, and that is adversely impacting The GPT Group and those who have a big exposure to office. We are doing our best to address that in a proactive and relatively enhanced -- relative to our competitors approach. Using we've talked about design suites, for example, the way that we can attract tenants to our office buildings. The other 2 items that I would like to refer to is the change in cost of debt and REITs cost of debt -- the cost of debt interest rates. Interest rates have a significant impact, as you know, on REITs. It increases -- interest expense is the biggest single expense for a REIT. And so we have seen a huge increase in interest expense, which impacts our FFO, obviously, impacts our free cash flow as well. But it also has an impact on valuations because it has an impact on the cap rate, which is assumed by the valuers in valuing our assets. So it has a dramatic effect on the value of REITs and the impact on their performance. And we are not protected from that impact. In relation to -- there are a multitude of matters that lead into the ultimate performance of the group. But the Board has charged Russell with designing a strategy which will achieve growth for our investors over the next period. And that's a long-term view. It's not easy to change matters immediately, but that is the brief that Russell has and he has the board's full support to achieve and sustainable earnings profile of growth for the group going forward. He touched on some of that. Russell's has only been with us some 9 weeks. So he hasn't had the opportunity to put a completely developed 5-year strategy. He has some views and we will be releasing his strategic priorities as they get agreed by the Board.

Just a follow-up to a couple of [indiscernible]. You actually have underperformed your peers over the last 5 years. It's in your stats. Secondly, those stats do not include Goodman over the entire period. So if you include Goodman, you are way below your peers. But secondly, I accept interest rates have gone up, I accept office is challenged. But office is only 1/3 of the portfolio. As either you or Russell said, there are contracted rent increases through your long-term leases, both retail and offices and logistics. Rents have gone up substantially in logistics in the last few years. So I think it's not quite correct to use those excuse. The bottom line is you've underperformed your peers based on your own stats, but I'd also say Vickki, I wouldn't be making these comments if it was 1 year, 2 years or 3 years, property is a medium-term position. It's been 10 years Vickki, 10 years. You've gone sideways. I say again, the growthless property trust, which, to be frank, is embarrassing. You've been on the board for 5 years, 5 or 6 years, Russell, you've got an alibi, brand new, you're off the hook mate. But how long does it take? To me, it's a sleepy organization. It doesn't focus enough on delivering proper financial outcomes for the owners of the company. And that's why I described it as a very [ woke ] company too [ woke ]. And rather than be excited that you're ranking second in the world or tenth in the world on X, Y Z, I think that's an embarrassment because I think it highlights you're looking at the wrong issues. You're going far to [ woke ] anyway.

Thank you. Are there any other questions.

My name is [ Allan Williams ], a very long-term shareholder. I think this company grew way out of another company called Growth Equities Mutual. Is that right? Could you please confirm that?

No. It was part of the Lend Lease. It was demerged from the Lend Lease Group.

Okay. Understand, corrected. The New South Wales government has got a man who looks at 40 buildings and then requires corrections. My question is, are any of our buildings getting bad marks from that commissioner? Can I ask a second question? I think I heard you say that the company lost $90 million. Did I hear you say that was due to lower valuations. I'm very deaf, I didn't hear the answer. I wonder if you could just enlighten me on that.

Can you just repeat the second question for me, sorry, which number that I gave you.

I think I heard you say earlier that the company's valuation of properties dropped by $90 million. Correct me if I don't get that. And the explanation for that.

Okay. Thank you, [ Mr. Williams ]. The first question was about the certification of the buildings. Yes. The short answer to that is, no, we have not. But it is a very important priority for GPT to ensure that all of their buildings and assets comply with the required legislation in each state. And we constantly review that to make sure that our assets are up to standard. But no, we had not had that issue. Thankfully. Your second question was in relation to our loss. Our statutory loss for the year which was following a -- I'm just finding my correct page here, so I get the numbers exactly right, that we had last year for the full year, and net investment property devaluation, so a decline in value of $819 million. The reason for that is it was across all sectors. And the primary reason that drove that valuation decline was the increase in interest rates, which moved the capitalization rate outputs reduces the value. To some extent, that is offset by the increase in rent achieved at those assets. Thank you. Are there other questions?

Good morning, Chairman. My name is [ John Lin ] from the Australian Shareholders Association. Today, I'm representing 703,821 votes for -- with 71 proxies. We'll be voting all our proxies for the motions today. I have 2 questions. What strength can we expect from the synergy between the new CEO and new CFO, first question. Second question, what approach to continued growth in logistics while minimizing debt from high interest rates?

Did you -- for the first question, did you say strategy?

Strategy strengths.

Strengths. Thank you, John. The Board went through a very rigorous process to effect the appointment of Russell and also for the appointment of Merran, with which Russell was very involved. We believe they will be very complementary to each other. They bring an external perspective to the group. They bring very valuable property experience. In the case of Russell, he brings very significant experience from his time not only at Charter Hall, but at Brookfield where that was all about building a growth of real assets business. And Merran has had a similar background, and we see the combination of Russell and Merran to be very complementary with a growth and disciplined mindset for the future of the group. And the second question was I'm sorry.

Approach to growth in logistics.

Yes. Thank you. Sorry, I was taking notes, and I missed that. Yes, well, any growth in logistics or any growth, any development by the group is always a balance of how we manage our capital and the best and proper use of our capital. And we will continue to pursue that discipline. Are there any further questions?

Charlie Kingston, K Capital. Just a question on what does appear to be a chronic discount to NTA and the valuations that support that NTA. Now I do believe you've tried to sell some assets, Australia Square, which didn't occur. We've seen some market evidence of offices trading in the 6% cap range, 7% cap range. GPT owns at Westfield, which I believe Westfield center themselves are buying one of their own assets back at a 7% cap rate. I was just hoping to get the Board's thoughts on why you think the valuations are fair and the NTA is fair, given that NTA -- where the shares trade does appear to be a chronic discount to that price, please?

Thank you, Charlie. There is a disconnect, we believe, between the values of which are REITs, including GPT are trading and the NTA. Most of them are trading at a discount to their NTA. The valuations in the NTA for the GPT Group are undertaken by external valuers, who rely on market evidence to establish the value that they attribute to those assets. In that process, it's a very rigorous process conducted by GPT. We challenged the assumptions that the valuers do. We also cycle the valuers so that we are not stuck with any particular valuer for an asset for a period of time and that's set out in our valuations policy. Those valuations are backward looking and the market is forward-looking. And our assumption is to disconnect as you would probably also agree is that the market expects further devaluations. And there is a lag between the external valuers work, which comprises the NTA.

Do you share the market's view? Do you think there is more pain to come in terms of the NTA?

Well, I think as transaction evidence occurs, where you see and you cited some of the cap rates, that will be filtered into the valuer's work. And if cap rates move, we will see that move upwards consistent with the market evidence. We will see if they're greater than what they were assuming before, all things else being equal, they will see a decline. But as I said, valuations have being set off by rent increases. So where it's a cap rate movement.

And then maybe I'll say for the remuneration, but I do know that it has been removed, the NTA of the total share growth has been removed from the LTIs. But maybe I'll save that question, but it could be related to if all it does anticipate further falls in that NTA, which has been replaced by AFFO growth, but maybe you could address that now as to why that has been removed in terms of the NTA or total growth, which I suppose is very relevant for shareholders.

I think I'm happy to address it now. The 2 LTI measures, we've retained, we've made 3 changes to our LTI program. One is to extend the period for vesting from 3 to 4 years, and we'll have a transition year in relation to the '24 year. We think that's important because it -- the property sector and the REIT business, in particular, is a longer-term business. So we have moved to that. We've made that change. In relation to the 2 performance hurdles, the first relative TSR, that has remained the same because we think that's a fair measure. In relation to the second measure to which you refer, it's an absolute measure. We have, in the past, had total return, as you point out, as our absolute measure. Total return has been -- Tracey and I would say this, it's been a bit of a stab in the dark to try and guess what the impact will be of the interest rate environment, in particular, to achieve total return. Our purpose in setting -- to changing was we wanted to have a measure which incentivized management to exercise control on the things that they could control. They can't control interest rates. And they can't, therefore -- and the interest rates were having the biggest swing factor on the total return measure compared to earnings performance. So we believe a compound annual growth rate of AFFO, and we deliberately chose AFFO and not FFO because -- refer to something that David referred to before. It's an important measure because it includes incentives and maintenance CapEx, and we need the control by management over those CapEx measures. So they can control those. That's why we changed from a total return measure. So that component of NTA, where we couldn't find -- if you -- after you take out the distributions per security and if you assume that there at 4%, and if there is devaluations, which the market looking forward, would seem to be projecting. We would be picking and unpalatable for investors and an unincentivizing criteria, performance criteria for the group. So just we -- it was very important for us that we had 2 measures. One was an absolute and one was a relative measure and that we incentivized management to control the things that they could control. The hurdles that we put in, in relation to the AFFO growth, compound annual growth required are very stretchy on the basis of our current scenarios.

Just a final comment. I know you can't control interest rates, but you certainly can't control gearing and to give you full credit, you did sell some assets very well in 2019 to reduce gearing, but over that 5-year period, you actually have spent well over $1 billion on new assets. You have chosen to deploy money. I presume part of the GPT role is to buy assets well. So you do control gearing, which ultimately does show how much interest you have to pay. So I presume -- I don't think it's fair to say that interest rates are out of your control and therefore, valuations like -- you are timing the market to a degree you're buying and selling assets of which we entrust you to buy the right assets. Goodman, for example, their gearing is exceptionally low. Yes, they've had the industrial tailwind, but it's no surprise that they have performed so well because they're now in a great position to be buying assets because they have controlled that gearing and their balance sheets. Just may be I'll leave that as a comment that -- I don't think it's fair to completely blame it on the interest rate cycle. So NTA growth, certainly, I do believe, is within the Board's control and should be a target.

Thank you. Are there any further questions? Yes.

Ron Strauss, just some quick questions with regards to your funds management business. Do you go out and buy the right to manage these funds? What special qualities does your company have in funds management? And roughly, what are the margins in managing other people's funds?

We have not gone out to buy funds management. I think our funds management platform is highly respected by our partners, and in particular, the skills of our asset management teams in looking after their assets for them. I can't answer off the top of my head what the funds management margins are. I don't know if that's a public information. Russ, can I hand to you?

Generally speaking, just to maybe go back to answer the question, there's different forms of funds management mandates where you're just actually operating the assets on behalf of the ultimate owner being a super fund or otherwise a partnership where we have investment alongside of our partners or a pool fund where it's much like a listed REIT, but non-traded. All those have different fee scales and different services. But if you bundle that all up, our business EBITDA margin on that business is a little over 50% right now as we speak. It takes scale to increase that margin over time and also the nature of the services.

Are there any further questions?

Thank you, Madam chair. Point of -- sorry, Annabel Fieldhouse. Point of clarification. I've been GPT investor for quite a long time. And I do recall that it was GEM that was sort of the off -- where we came from, GPT. So I'm just -- just like that sort of cleared up. I'm not sure in my mind about that wrong thinking...

I am going to ask Mark Fookes, who is in the front of the audience here to answer that.

Yes, GPT did acquire the GEM office and retail portfolio some time ago. So some of the assets GPT have today where assets were acquired by acquiring the GEM portfolio, but GPT was actually established as a REIT in 1971 as GPT, managed by Lend Lease and then ultimately separated from Lend Lease in 2005 in a stapled structure.

Thank you, Mark. Are there any further questions?

[indiscernible]. You've repeatedly mentioned the cost of capital. Have you considered reintroducing or introducing the dividend reinvestment plan? And will that help in some small way, reducing the cost of capital because shareholders will be lending you money interest free. Have you considered that at any stage? Or have you had -- I can't remember whether GPT had a dividend reinvestment plan. What was the participating rate? And how much money did you get in to the coffers?

In my history, I can't recall the DRP operating. So I can't give you the participation rate. At each year and half year end, we give consideration to the entire distribution policy and scenario, including whether or not we would have a DRP in place. And we have chosen at this stage, not to put the DRP in place.

Why I'm saying that is you buy that on the market. I mean, you're not increasing the number of shares, but you're giving the people who are shareholders the opportunity to increase the investment and help the company at the same time. So that is from what I understand are the clear benefits that accrue to our company as well as the shareholders. So it's a mutually reciprocating benefit to both parties. But if not, would you consider it?

I think we will consider it at each half year when we determine the distribution.

And I've been saying discussing it as a general principle, general concept to take it up and if and when the time comes. Thank you.

Thank you.

Just one follow-up. And it can either be under the [ REM section Chairwoman or no ]. Look, welcome, Russell. I think you've got a challenge ahead of you. But look, I've -- I don't just make comments, I try and explain the basis for my comments. So I've spelled out based on your own metrics, why I believe that the performance has been very poor, not just for 5 years, but for 10 years. But I'd just be interested to hear from the new CEO, whether he accepts that 0 capital growth over 10 years is unacceptable. Whether he will change the new name of the company from Growthless Property trust to Growing Property Trust, which is what the company, each of your directors are asserting in black and white in the annual report. Big bowl that your aim is to deliver growth. You're not doing it, though. So that's why I described it as euphemisms and platitudes. Easy to say, but you're not delivering, but I'd love to hear from the new CEO, whether he will deliver a growing company, growing not just in size, but growing in share price because that's what most investors want. They invest for 2 reasons only, distribution and capital growth. For 10 years, it has been growthless, so appreciate your thoughts, Russell. Thanks.

Before I hand over to Russell, as we talked about in the -- my answer in relation to the remuneration question, in particular in the LTI measure, and the mandate that we are giving Russell as the Board, it is to pursue our long-term sustainable profitable growth for the group. So Russell?

Right. Thanks for the question. When I look forward, rather than commenting on the past, I've been fortunate enough in my career the last 20-plus years working only in growing companies. And in engaging with the Board, I'll do my best engaging with the Board. My -- the match of coming in to join GPT, they're -- who they are pursuing in the role of CEO, growth was the fundamental discussion point. It's the growth in earnings, the growth in value delivery over time. And that is my mandate, is to grow the business. I won't comment on what you've analyzed in the history of the business. I do see the platform, 2 months into the role, as being very sound, good operator of property. I think the focus on allocation of capital, the introduction of third-party capital will be fundamental to growing the earnings of the business. I've experienced that in my last two roles in business. And that is where the focus will be. I do believe if I do not grow earnings on a per-security basis over the next 3 to 5 years in a meaningful manner, that will not be a success.

But I do think the past is relevant because the old saying, which is very important, if you do things the same way, you're going to get the same outcome. And to be fair to GPT, you're not alone. The majority of REITs are regarded as growthless in terms of capital value. Goodman shot the lights out. Arena and a few people like the specialist REITs have done very well capital-wise. But whether it's GPT, Scentre, Stockland, Mirvac, it's just recycling assets. Bit of a distribution every year but no capital growth, the vast majority of Australian REITs. Not just Australian, U.K. REITs are equally as bad, British Land, Land Securities. American REITs are all over the place. But I do think you can't ignore 10 years of 0 growth. And I think each director has to look at this in a very, very serious manner. I've given you a couple of views why I think that there's no growth. At least, you're honest about the huge amount of capitalized maintenance CapEx expenses, the huge amount of capitalized lease incentives, huge. Now every REIT of your nature has those, so not a criticism. And good on you, it's a very honest, transparent REIT here. And great you are looking at distributions out of free cash flow because FFO, to be frank, is rubbish. And the whole industry needs to wake up that it's rubbish. AFFO is all right. But certainly, free cash flow is the holy grail, so well done for looking at that. But please don't disregard 10 years of 0 growth in share value. It's embarrassing. And unless you do things differently, we're going to be sitting around here in 3 years' time, and you're going to need to explain why there's no growth. I do think development is a very tricky game. As I said, I think if you truly factor in all the costs of things like your Parramatta offices, the implied interest on the capital going into them, the rent development period, which is a long period, the share of management costs, the massive rent-free periods, incentives you've got to give to get office tenants in, the IRR on those would be terrible. I looked at them. I was walking around a couple of days ago. I do think -- and it's not just a criticism of GPT. It's Mirvac and a whole range of REITs that these new developments, at the end of the day, they look at it at the end of the day and they say, we put X amount of capital in, the value is Y, the IRR is okay. But they're ignoring all the rent-free incentives. They're ignoring the interest on the capital allocated. They're ignoring the share of management time. And I do think that's one of the fundamental reasons why GPT has delivered 0 growth. When you really drill down to it, the free cash flow is a little bit over 4% of NTA. It's distributing all of that. There's your answer, there's no growth. The actual act of development, in my opinion, is not adding to growth. It's great, recycle assets, interesting for management. But is it adding to shareholder value, in my unitholder value? In my opinion, no. But good luck. I think you've got a big challenge ahead to break this nasty cycle of a growthless GPT. Thank you.

Are there any further questions in relation to this first item?

The gentleman just mentioned about doing the same thing. I think it was Albert Einstein who said, "Insanity is doing the same thing over and over again and expecting different results," so just a little reminder. But what I need to know is this hacking has become a regular thing reported almost daily. And what measures have you taken to safeguard the information -- our information? And is there any expertise in this area on the Board? Do any of the Board members have any special expertise that continue to upgrade and broaden and secure information that we've given to you?

The Board has, through its experience on different boards, a good deal of experience in privacy and cybersecurity protection. There's an extensive program within GPT for cyber risk management and protection. And in fact, we had a Board meeting yesterday where we had a detailed presentation about our cyber risk prevention and a recovery plan should we face a breach. We also have a very important secondary health check, which is to make sure we minimize to the absolute essential information only that we keep and store on our systems. So that should we be the victim of a cyber risk attack that, that information that is available is or encroached upon is not -- is minimal.

Okay. I raised this because almost every day, the most secure organizations are repeatedly reporting that they've been hacked or one thing or another. And everybody, at least particularly the rogue states, are -- that's their main source of income apparently, so it seems. And I raise this as a issue, which I read about every -- almost every day. Thank you.

Thank you. Are there any further questions on the first item? If there are no further questions on the first item, I will proceed to the first resolution. As Resolution 1 concerns my reelection as a director, I will hand over to Tracey Horton in a moment to Chair this item. I am honored to be considered for reelection by security holders at this meeting. I joined the GPT Board on the 1st of March 2018, and I'm very privileged to have served as Chairman since May 2018. As an experienced company director, I bring a broad range of skills and experience to GPT. This diversity of experience, together with that of my Board colleagues, is a critical element in a Board's valuable contribution to the governance and leadership of an organization. I assure you of my ongoing focus and commitment to GPT to fulfill our responsibilities to the group, to our security holders and to our employees, based on our fundamental values of teamwork, accountability, social responsibility, respect and integrity. All of which are essential to the way we do business. Now I'll hand over to Tracey.

Thanks, Vickki, and good morning, everyone. Before we put the 1st resolution to the meeting, I would like to let you know that Vickki's reelection does have the unanimous support of the directors. I'd also like to share with you the proxies that were received prior to the meeting, and they are shown on the screen. Are there any questions on this resolution? Yes?

You've got an excellent CV, Vickki, investment banker, which I think I met you a while ago in that area. We all know the old joke that investment bankers are bright. They're great at deals. They're lousy business people. I think I'm a pretty good business person. And hopefully, you are as well, albeit my pretty strident criticism of the poor results over the last 5 years happens to coincide with your period as a director. So unlike Russell, you don't get an alibi. I'd just be interested in your thoughts. I've given my reasons why I think this company is to woke. You're the Chair, you're setting the culture. You're proud of the work achievements, recognition globally. Do you think I'm right that you are to woke and you have lost the commercial attitude, which is necessary to make money and deliver proper investment returns? Bit of a trade-off. Yes, you've got to be conscious of ESG. But if you're too paranoid about woke issues, you tend to be a profitless or certainly a growthless business. So I'd be interested in your thoughts on that, Vickki. Secondly, with the NTA at $5.60, I've explained why the NAV, if the management business was valued, would be north of $6 a unit. Bearing in mind your free cash flow is, call it, 4% yield, would you entertain a bid at NTA by another group? And thirdly, you may disagree with my thesis. But if you agree with my thesis about the growthless property trust, what will you do differently, assuming you are reelected to be Chairman Director and, therefore, the Board reelects you as Chairman? What will you do differently, Vickki, to break this, in my view, terrible situation of 0 capital growth over 10 years?

Vickki, would you like to address that question?

Thank you, Tracey. Your first aspect, are we to woke? No, I don't believe we are too woke. What -- the way we think about sustainability is it must -- in particular, I'll just use it as an example, but all elements of ESG, including the gender statistics that I referred to, is that they must be an embedded part of the way we do business to achieve our strategic objectives. Our strategic objective, as I've outlined, is to achieve growth. And so you call us the growthless, that hasn't been to the level that we would like to see, and there are a variety of reasons for that. But I do not accept that we are too woke. There is -- within the group, an understanding and it's embedded in the way we think that we will have high regard to the sustainability and other social and governance requirements that are expected of a group to operate. But that has to be in the context of profitable, sustainable growth, which produces the right return on capital. And that's how we think about it. In relation to a bid at NTA, should an offer be made for the group, we, the Board and management, would, of course, look at that and determine whether that outcome would produce a better outcome for shareholders, security holders, than proceeding on a stand-alone basis, and that would be considered at the time. I've had the good fortune or misfortune, as you probably know, of sitting on a number of boards that have been subject to successful bids, and that is the process. And I'm very proud of the way boards properly consider that in the interest of shareholders or security holders, as the case may be. In relation to the third aspect of your question, how do we break forward change. I think you lumped everybody together. And the Board has been, in the appointment of Russell, we were very determined and we took our time to appoint him through a thorough process to make sure we appointed somebody who we believe would be able to achieve the desire of long-term growth, sustainable and profitable growth, with a decent return on capital for the business. That's why we were particularly enamored by Russell's background in growth businesses, particularly Brookfield, and his understanding of that. What made him even more attractive is he has good property experience as well and real asset experience. And that's quite hard to find if you're breaking this cycle, as you -- or them. So that is one of the elements that the Board is doing to try and address producing and achieving growth, profitable and sustainable, for the future of the company.

Just one brief follow-through. My [ inner ] thoughts says that you only have one active development project at the moment. That's gratifying because a lot of development projects really destroy value. How many though are you sitting on as potential projects? How many projects are you land banking? Because again, that is a very poor use of capital, particularly for accumulating sites, which are not delivering income but chewing up capital. Appreciate some guidance on that. Thank you.

I think -- I know Tracey is chairing this, but I might refer to Russ. Would you answer that, please? You got the question?

Yes, I understand the question. So I think you have to take a -- we're very focused on office in the discussion, but a focus on sector by sector. We have several logistics land banks, not a large capital number allocated to it. And we're actually looking at introducing capital and several of them to partner in the development profile because I understand the -- very closely the risk and reward associated with development. On the office side, we have a handful of sites. You've mentioned Parramatta, North Sydney, but they're actually in the Office Fund, so they're actually not directly on balance sheet. We have a significant exposure there, so we do have some exposure. And retail, we really don't have any per se greenfield sites. However, we have opportunities within the existing portfolio to whether to expand the retail platform, extend into maybe mixed use. But they're not unyielding capital work, just holding land banks. So it's actually a relatively narrow amount across the entire exposure of, let's say, the $10 billion net equity.

And just to follow on from that, your erstwhile parent LLC, I think it's appropriate to describe it as a boiling frog. Steve McCann jumped from there to casinos, made a lot of money out of casinos and might get a new one soon. But at the end of the day, they were swimming around as an icon. The water was starting to boil. They didn't face reality. They didn't objectively look at the fact that they were destroying shareholder value. When McCann sold his shares at $20, they're now $6. It's been a debacle for what was undoubtedly a great icon of the Australian real estate industry. GPT is not quite at that stage, but I would ask you all to really have a look at yourselves in the mirror, really analyze the last 10 years of growthless performance, and try and avoid becoming a boiling frog. Smart frogs recognize the water is starting to heat up. They jump out of the boiling water. Dumb frogs stay in the boiling water. If you know the medical issue, they don't feel the boiling water. They swim around happily, happily, happily. Oh, there's some bubbles happening. That's great. Then they explode, splatter all over the kitchen. So don't become a boiling frog would be my advice. Please look at this pretty hard and fast. It's been 10 years. Thank you.

Well, thank you very much for your contributions and the advice. I don't think any of us want to be boiling frogs, so we appreciate that. I think we've got another question in the middle there, sir?

I'm just going to say, I don't want to get into personal wokeness or unwokeness or awake or not, whatever. But I just wondered why it is that the figures, say we hear what they are and what support she's got, I have great respect for Ms. McFadden, but I'd much rather have these figures revealed after award. Otherwise, you were saying to us, look, the decision has been already been made, say what you will, and that whatever you -- whichever way you vote is not going to make any difference. So can I suggest that in future meetings, can these figures please be held back until after we've had a say. Thank you.

Thank you very much for that observation. As you know, you can't please everyone all of the time. Different people do have different perspectives on that. But understand your perspective, and we'll certainly think about it for the next meeting. Sir, in the front here, you have a question?

Bright shiny new CEO, I don't know what your background is. Would you -- I want to ask very politely, you look like a mean [ master ]. But can you please tell us what your background is? Well, [ you've written it out ] to start with. But speaking of very loud voices, I can't hear a single word that's being said here.

Russell, we might ask you -- we did have Vickki give a little overview of your background earlier. But perhaps, it might come better from you in your own words.

Sure. I will do my best to speak up. All right. I -- originally from Canada. As you can probably tell, I don't have quite the Australian accent.

That's a plus.

So I'm not that mean of a -- per your comment. Been in country nearly 20 years. I've worked in property, infrastructure, real estate, private equity for probably around 20 years as well. Previously, was the Chief Financial Officer at Charter Hall Group in Australia, Charter Hall Group. And then prior to that, I was a managing partner at Brookfield Asset Management in both Australia and in Canada. And before that, I spent 10 years as a banker and I'll do my best to be a good businessman. Investment banker with Credit Suisse as well as a boutique firm. So by training, I'm a chartered accountant, way back in the day. But I've really been focused on funds management, investment management of real asset businesses for the last 20 years.

Are there any further questions on this resolution? Okay. Well, if there are no further questions, I put Resolution 1 to the meeting as an ordinary resolution of the company. And I ask that you now record your vote for Resolution 1 if you have not already done so. [Voting]

Okay. Thank you. Congratulations, Vickki.

Thank you, Tracey. And thank you for your support. Resolution 2 concerns the election of Louise Mason as a Director. Louise was appointed to the Board as an Independent Non-Executive Director on the first of May 2024, and Louise's extensive background as a property executive is complementary to the Board's existing skills mix, particularly given her experience across multiple property sectors and development. This is Louise's first AGM since being appointed to the Board. And being eligible, she offers herself for election today. Louise's election has the unanimous support of the Board, and I now invite Louise to address the meeting.

Thanks, Vickki, and good morning, everyone. I'm honored to address you today as a candidate for the position of Non-Executive Director on the GPT Group Board. As outlined in the Notice of Meeting, I've spent more than 30 years in the property industry in both operational and executive roles. I began my career at Lendlease, working in both retail property management and retail development. My roles that followed at AMP Capital allowed me to gain deeper retail expertise and also acquire experience in office and logistics. My recent role as CEO of Commercial Property at Stockland allows me to bring an in-depth knowledge of the property industry to GPT as a Non-Executive Director with currency in all aspects of an Australian REIT with a particular focus on growth and sources of capital. Retail, logistics and office are each in a different phase of the property cycle, and my recent experience as a senior executive in these asset classes can help GPT strategize on future positioning and opportunities and navigate the challenges of the sectors. In my past role, I've placed great importance on the views of investors, which will complement GPT's strong track record of alignment with the best interest of the investment community. I hold a Bachelor of Arts and Bachelor of Law, and I'm on the council of Macquarie University, where I hold the nonexecutive position of Deputy Chancellor. This role has given me insight into another sector, the education sector, with its challenges and growth opportunities in Australia. GPT has an excellent real estate investment and management platform, and it's well positioned for future growth, as evidenced by success in growing its investment mandates over the past couple of years, which were won in a highly competitive environment. I see a positive culture at GPT within both management and the Board, and it's a culture which encourages debate and challenging the status quo. If elected, I look forward to joining this debate and setting out a future path, whilst upholding the high standards of governance in the interest of all security holders. Thank you.

Thank you, Louise. The proxies received prior to the meeting are shown on the screen. Are there any questions on this resolution?

Yes. Louise you've got an excellent CV, so welcome to the Board. I'm sure you will be endorsed. Bearing in mind each director has participated in the release of the annual report and it's, as I mentioned earlier, in my opinion, plenty of platitudes and euphemisms, just -- but let's convert that into a more tangible situation. What is your personal view about the growth in capital value that the company should -- that the trust should be delivering over the next 5 years? Is it 5% a year capital return? Let's make it more tangible than, frankly, euphemisms in the annual report. We know the income, but what capital growth is the target that you personally would set for the trust?

Thank you, David. I don't think it's appropriate to ask Louise for -- as a Director of the Board, to give a, albeit as you say, personal growth target for capital.

I'll be looking forward to working with the Board, and I think we've heard a lot from Russell about his future views and working with the team on that strategy, and that will be something that will be done together.

With respect to the Chair and you're running the meeting, that's why I did say personal view, not to -- for her to ordain the Board's position. But would you agree, Louise, that if investors are sitting here in 5 years' time and the share price is in the low $4s, that would be a consummate failure?

Again, I don't think that's appropriate question, David. And perhaps if you -- Louise will be available to talk to you after the meeting on her personal views.

Okay. Fine. Thank you.

Are there any further questions?

I think fresh eyes are always welcome because they give a new and fresh perspective. So let's look forward to it and see what happens. What I'd like to know is you said that you have some association or taken up something to do with a university at the moment. Universities have come under attack repeatedly by liberals and labor governments. Now how do you see the universities contributing to the society, in general, and the property trust, specifically? Can you add something to that enriched viewpoint that you say you've had in recent times?

Look, I'm going to put forward an answer then ask Louise to confirm. Her experience as a director or a council member at the university is very helpful in her understanding and contribution to the GPT Board. Each of the directors here have experience on a variety of different companies and organizations. And from that experience, they bring a diversity of thinking and experience to the table, which we can share with management and also used to help us govern and lead the organization with best practices as we see them in our other experiences. And I think that is what Louise was referring to in citing her experience at the university. As for the topic about universities themselves, that's not a matter for this meeting.

No, no, I realize that. But I think as a broad sweep, so to speak, does she see the university sector play an important role to educate and to bring forward the research and whatever they do to help expand and improve both management standards as well as their contribution to the community as a whole? That's all I would say. Nothing specific. But generally, I think it's always, as I said, best to get fresh perspective and to bring in somebody from -- who's had close association or new association with the university sector. And they are important, no matter how much they come under criticism, that it's very, very important that we continue -- for all their faults. I'm not saying universities are perfect. I've been there many times, repeatedly, post-graduate work, et cetera, et cetera. But I'm saying that I think some of that criticism of universities is unwarranted, but it's important. And I'm just saying, well, can you add something that will add value to not only the community but also to GPT management? Thank you.

Thank you very much. I think your point is very well made. I think you may be interested to know that the Property Council of Australia, through its program of Women in Property and Girls in Property, in particular, have a working relationship with the certain universities to improve the education of, in this case, young girls, so that they can proceed to follow a university career, which will lead them into the property sector. It's a very compelling program. You might be interested to Google it. It's very interesting.

Yes. No, I agree what you're saying, but all I'm saying is online, lifelong learning is something we should be addressing. And I think, in particular, the female sector has been set back for many years. And I hope you've overcome that bet and to say, it's the world of ideas, and it doesn't matter whether it comes from a female or a male body.

Absolutely. Thank you very much. I was giving you an example. Thank you. Are there any other questions on this resolution? Okay. There being no further questions, I put Resolution 2 to the meeting as an ordinary resolution of the company. I ask that you now record your vote for Resolution 2 if you have not already done so. [Voting]

Congratulations, Louise. Resolution 3 is for the adoption of GPT's remuneration report for the year ended the 31st of December 2023. The remuneration report is part of the director's report and commences on Page 77 of GPT's 2023 Annual Report. It describes GPT's remuneration policies and sets out the remuneration arrangements for key management personnel and directors. The Board considers that the arrangements and outcomes described in the remuneration report provide a balanced compensation platform, enabling us to be competitive and attract talent in the property sector, whilst aligning remuneration to the achievement of GPT's strategic objectives and returns for our investors. The Board is committed to seeking regular security holder feedback on our remuneration framework. And prior to this meeting, Tracey Horton, Shane Gannon and I met with a number of you to discuss our approach. We value that input and commend the remuneration report to you. The proxies received prior to the meeting are shown on the screen. Are there any questions in relation to the remuneration report or this resolution? David?

Thank you. A few comments, questions. Look, firstly, I'd note the disappointing -- the low director alignment. Vickki, you've got 112,000 shares. The nonexecutive directors range from 12,000 to 42,000 apart from yourself. That's disappointing. My group has a substantially larger holding than the entire directors' holding, excluding the executive directors who received a lot of free shares, Bob Johnston. So I'll just make that point, a disappointing alignment. Secondly, I note that the LTI in the past was adjusted to exclude Goodman from the peer group review over the '21 to '23 year period. That's disappointing because Goodman is a relevant comparator. It's got low debt. It's been in a hot sector. You've got nearly 30% in that same sector. Disappointing you've excluded Goodman because the allocation of 80.4% achievement of LTI to executive directors last year would not have occurred if you hadn't excluded Goodman from the peer group review. I'd be interested to know what that 80.4% would drop to if you had not excluded Goodman. I'd also make the comment that it's a little bit confusing what's in the annual report. But on the group performance, it states, the Board has taken a robust approach to determine executive remuneration. Goes on to say that 50% weighting to funds from operations. As we discussed before, in my view, funds from operations is very misleading. Either adjusted FFO or free cash flow are the relevant things. It also seems to be funds from operation rather than per share. As Vickki would know, being an investment banker, the only thing that's relevant to investors is not the total amount. It's what is delivered per share. And if you happen to issue more shares, whether through a DRP or a placement or rights issue, that's not adding value to shareholders. That's just enlarging the company. So I'm just concerned if 50% of the weighting in the past was on funds from operations. So really, 3 issues: low director alignment, why have you adjusted the peer group review to exclude the star of the sector, and why you're still focusing significantly on FFO. And I appreciate the metrics for Russell's incentive are different. I'll make a couple of comments on that later. Thank you.

Thank you, David. Let me take each of those points in turn. The nonalignment of directors' shareholdings. The directors have -- I'm going to say 3 years, but it might be 4 years, to achieve their minimum shareholding requirement. For a lot of last year, they were unable to buy even when there were trading windows open, and that was because we were going through the process of CEO succession. And so the...

Going through the process of?

The CEO succession. And so they were unable to buy even when the trading window was open. In fact, we're just talking about that yesterday. And they are -- notwithstanding the trading windows being opened, they, of course, as you would expect, require prior approval to be able to vote. And with the appointment of a CEO and a CFO, it wasn't possible for directors to trade. We do expect -- I do expect that, that alignment will improve so that they satisfy their minimum shareholding requirement. In relation to the LTI and the relative total shareholder return, excluding Goodman. I am going to look to my colleague here on the left, but I believe that has been the case for quite some years, for 4 years, I'm going to say, but that's off the top of my head. So bear with me if I've made a mistake. We did that because Goodman is a global business only in one sector and actually was -- had a disproportionate amount of the weight in the index for -- and so it was skewing the performance. In relation to LTI vesting for our executives. The current program that is vesting, so the program that was issued in 2021 to which you refer, which is vesting as to 82%, it's first time the LTI has vested at all for management for 4 years. The 2020 LTI plan was withdrawn during COVID, and so there was no grant of LTI. And the prior 2 years did not vest at all. So I'd just like to make that observation about the alignment of the LTI with the outcome for shareholders. In relation to the measure of FFO as the financial measure in the scorecard. Historically, FFO has been the measure by which GPT has measured the financial metrics. It has been both FFO -- the achievement of FFO and also an achievement of a budgeted level of growth in FFO over 1 year. The Board and the Remuneration Committee have the intention to change from the current scorecard arrangement to a balanced scorecard going forward. And we don't have that in place for '24. We are trying to mimic that, but we are going to a balanced scorecard to introduce further financial metrics in that balanced company scorecard, consistent with the strategic objectives that we are seeking to achieve. They will include measures such as a return on capital. That was not possible for us to put in place in '24 because we needed Russell's input to be able to do that in a meaningful way. I agree with you on the per security. But just to assure you that we adjust for a per security basis, so that distortion to which you refer would not occur. Are there any further questions?

Charlie Kingston again. Just -- I'm just going to find the section. But when you said GPT -- sorry, Goodman was excluded because it was a disproportionate part of the index, correct me if I'm wrong, but going forward, for the relative shareholder return, each constituent is weighted equally for the purposes of determining the relative performance. So I'm not sure why you wouldn't just include Goodman if that is the case, given that means that the weighting in the index wouldn't be relevant. And it's been the best performer, it's in industrial, you bought industrial. So I do find that strange that, that is excluded, but please correct me if I'm wrong on that.

As I said, there were two reasons, if I can interrupt you. There are two reasons. One, it's a different business to ours, albeit it operates in the logistics sector but is -- which is but one business, but it's also a global business and ours is not. And also, we have moved from, as you point out, the way we calculate the relative total shareholder return. And we were keeping consistent with what we did before, which is excluding, so I'm just pointing out those two things to you.

Thank you. And then why is there no absolute total shareholder return going forward? Do you think the share price is not within your control or something that you can influence, which is sort of what you've indicated today, based on interest rates and valuations, et cetera? But to be honest, all shareholders can access -- we can't access the NTA. We can obviously access the distributions, even though that's not a metric to which remuneration is tied but -- or we can access your share price, which is not a metric for the LTIs or STIs. I guess, I missed it. But why is that not the case, please?

I explained earlier why we chose compound annual growth rate for adjusted FFO as our absolute measure. The principles which the Remuneration Committee and the Board have determined the long-term incentive framework is that we were going to have two measures, one would be an absolute measure and one would be a relative measure. That is a view that we've canvassed with our proxy advisers and significant investors on our remuneration and governance roadshow. And those three principles, those are fairly much unanimously agreed by -- to have those 2 metrics, one absolute, one relative. And they were also very happy with the extension to a 4-year metric. In relation to the absolute metric performance condition, both the Remuneration Committee and the Board had a lengthy debate about what measure was appropriate. And the overwhelming view of the committee and the Board was that a growth in AFFO was the best of not perfect measures. We would like to have a really good return of capital measure in there too, but we didn't have one. There are some people, some investors who like an absolute total return measure. But setting the target range for that is like a dartboard for us and would not achieve the objectives that we're trying to seek in incentivizing management in an appropriate way over matters that they can control. So that's why we ended up with the metric of AFFO, compound annual growth rate as our absolute measure over that time. Some people, some of our investors, they have -- well, one of our investors in particular, he would advocate for relative total return. But there's not constant alignment, just to explain to you the basis on which we reached that view.

Thank you. But isn't the rights for the next resolution based on relative total shareholder return? And if so...

Yes. Relative absolute return -- relative total return, not shareholder return.

Right. So that relative shareholder -- so if the shares fall or shareholders incur a loss, but the peer set incurs more of a loss, does that still mean management can receive their rights? Is that correct?

In relation to LTI, if they achieve in 3 to 4 years' time a performance in the -- in relation to the relative total shareholder return metric, if they achieve above the 50% quartile, they're entitled to 50%. And above the 75% quartile, in the top quarter, they receive 100%. That is in relation to that 50% metric. So that, yes, in theory, if there was a decline in share price, but they were the best relative performer in relation to 50% of that LTI grant, they would achieve 100% for that 50%. Too many percentages here. In relation to the other metric, the absolute metric, which is the AFFO growth over compound annual growth rate, which ranges from -- and Tracey will shout if I get this wrong, it ranges from 3% -- this is compound annual growth rate, 3% to 6%. If they achieve 3%, they receive 10%. And then it's on a straight line vesting schedule to 100%, if they achieve 6% or more. That's important to note because most other schemes start with a 50% threshold. So that if you achieve the range at the bottom, you get 50%. That's not the case in our scheme. You get 10% if you achieve a 3% compound annual growth rate of AFFO over the measured performance period.

Thank you for that clarification. But just as a comment, I don't think it's a very fair target to say that if shareholders, GPT shareholders lose, but we lose less than others, therefore outperform, that management should still get remunerated accordingly. I think that's a fairly [ self ] target, but I'll just leave that as a comment. Thank you.

Thank you. Are there any other questions on the remuneration report?

Just one brief follow-up. Look, I'm all in favor of large incentives for management. Bob Johnston, if he delivered his short-term incentive, long-term incentive, he received a maximum of 275% over his base. Mr. Fookes, sorry if I have mispronounced your surname, but I think from memory, receives a maximum of 200% over his base. Now I support that because as the saying goes, show me the incentive, and we'll see the outcome. Yes, how it's defined maybe a little bit different, but I'm fully in favor of major incentives for the key people. The flip side of that though -- and I appreciate, Vickki, you're creating new records. I think you said that in one work area, you were second best rated in the whole world, so you clearly are not limiting yourself to conventional standards. You're not wanting to be Johnny average or Mary average. You shoot for the stars in woke areas, anyway. But I would just put to you, and I appreciate what you said in your answer, that it takes a little while for some directors to move from 0 to the minimum holding that they need to have. Several years, sometimes. But I put to you that, in my opinion, a lousy $170,000-odd of shares, it's Mickey Mouse stuff. If the stock drops 10%, people lose $17,000. Grocery change, to be frank. I'd much prefer a situation where Russell and Mr. Fookes are hugely incentivized to deliver a great outcome on this multibillion-dollar company. But I'd also just put to you as Chair that I appreciate the general standard is that directors should hold roughly 1 year's remuneration as their shareholding, roughly. But to me, it's a very small amount of skin in the game. And maybe you can break a record, Vickki, and ask the directors to hold 3x their annual remuneration because at the moment, they're not really particularly incentivized, very little skin in the game. Thank you.

Thank you. I don't think I need to comment on that question. Okay. Are there any further questions in relation to the remuneration report? There being no further questions, I will now put Resolution 3 to the meeting as a nonbinding resolution of the company. Can I please ask that you now record your vote for Resolution 3 if you have not already done so? [Voting]

We now move to Resolution 4. Resolution 4 seeks approval to grant the company's CEO and Managing Director, Russell Proutt, performance rights as his long-term incentive under the GPT Group Stapled Security Rights Plan. As set out in the Notice of Meeting, in 2024, the Board reviewed GPT's remuneration framework to ensure alignment between strategic goals and remuneration outcomes over a multiyear horizon. As a result of this review, the Board has agreed two performance measures, and each performance measure will be tested against 1/2 of the rights to be granted to Russell under this resolution. The measures are adjusted funds from operations, per security compound annual growth. The Board has determined this measure to align remuneration outcomes with growth in earnings, adjusted for capital expenditure and lease incentives. Growth in this metric will reward management in a manner which is aligned to the underlying performance of the portfolio. Relative total security holder return, this measure compares GPT's TSR performance with the TSR performance of the individual constituents sourced from the ASX 200 A-REIT Index, excluding Goodman Group. Relative TSR is a widely used LTI performance measure for listed entities in Australia. It ensures the value is only delivered to participants if the investment return received by security holders is sufficiently high relative to investment returns provided by the comparator group over the same period. As part of changing the performance conditions, the Board has decided to change the performance period for the LTI performance measures for all LTI participants from 3 to 4 years with 2024 being a transitionary year. In this transitionary year, the award will be split into 2 equally weighted performance periods ending in 2026 and 2027. The proxies received prior to the meeting are shown on the screen. Are there any questions in relation to this grant of performance rights or this resolution? And I note that I have answered quite a number of questions about the LTI structure. But are there any further questions? David?

Look, I'm totally supportive of major incentives. Great to have you on Board, Russell. You've got an excellent CV. Youthful guy. Sure fresh face, so a fresh review of the lack of growth will be great. So look, certainly, the adjusted FFO is my preferred metric. I think as Charlie said, if the index goes down 10% and GPT only goes down 8%, it's hardly a win for the investors, but totally spot on. The only thing I'd say to you, Russell, is that I was somewhat concerned when you mentioned that you had a period with Charter Hall, which is obviously a huge behemoth of the industry. But I think it's well known that Mr. Harrison is a growth for growth's sake sort of person, and a number of their listed REITs, Charter Hall WALE, have performed very poorly. And I just hope that you don't look at growth for growth's sake, which is obviously driven by Charter Hall being externally managed. Clearly, I think the messages got through loud and clear that investors are looking for capital growth as well as a reasonable income. But please isolate that experience at Charter Hall please, and go forward with delivering some capital growth. Thank you.

Thank you for those comments. Are there any other questions?

[ Allan Williams ] again. This is the first time I've met you, Mr. Proutt. You look all right. Your CV's all right. But as part of your job, you've got to look at your senior people here and there. And at times, you're going to eyeball them. And so if you're not pulling your weight, if you don't pull your weight, move on. That is your job. I'm hoping you've got the strength to do that. Secondly, I address you Madame Chairman. You're Chairman of the Board. Have you got the strength of character to look at your directors and find one or two that aren't contributing and say to them, move on? I hope you have. That's your job.

Thank you, sir. I appreciate that.

It's never easy. I've done it. I didn't like it. But you've got to do it.

I appreciate that. And we are undertaking, as I mentioned in my address, constant Board renewal to ensure that we have the level of stewardship, governance and appropriate skills at the Board level. And that's an ongoing...

[ I hope you are that ].

Thank you. I think some people would describe me as that, so thank you very much for that. Are there any other comments or questions in relation to this resolution? There being no other questions, I'm now going to put Resolution 4 as an ordinary resolution of the company and the trust. I ask that you now record your vote for Resolution 4 if you have not already done so. [Voting]

We can now move to Resolution 5. Resolution 5 is to reinsert the proportional takeover provisions in the constitutions of the trust and the company, which expire on the 13th of May 2024, 3 years after they were last approved. Reinsertion of these provisions will continue to provide security holders with the opportunity to vote on any proportionate takeover bid. The proxies received prior to the meeting are shown on the screen. Are there any questions in relation to this resolution? Given there are no questions, I will now put Resolution 5 to the meeting as a special resolution of the company. Can I please ask that you now record your vote for Resolution 5, if you have not already done so? [Voting]

That concludes the formal business of the meeting. And we will now take any general questions or comments from security holders. Are there any questions? Given there are no further questions, I will ask that the registry representatives now collect all the yellow voting cards. The votes will be compiled by Link Market Services representatives, with the results announced to the ASX and posted to the GPT website later today. On behalf of the Board and the management and employees of the GPT Group, thank you for your support and your participation in today's meeting. I ask you now to join the Board and management for refreshments outside, and I declare the meeting closed. Thank you.