Vicinity Centres (VCX) Earnings Call Transcript & Summary

Good morning security holders, fellow Directors, employees, and guests. My name is Trevor Gerber, and I am the Chairman of Vicinity Centers. On behalf of my fellow directors, it is my pleasure to welcome you to the 2023 Annual General Meeting of Vicinity Limited and meeting of the unitholders of Vicinity Centers Trust, which I will refer to together as the meeting. As it is just past 11:00 a.m. and therefore with a quorum, I declare the meeting open. In doing so, I would like to acknowledge the traditional custodians of the various lands on which we meet today and pay my respects to the Elders, past and present. I recognize and respect their cultural heritage, beliefs and relationship with the land, which continue to be important to the traditional custodians living today. Presenting with me today is your CEO and Managing Director, Peter Huddle. Also joining us today are your directors: Tiffany Fuller, Tim Hammon, Dion Werbeloff, Janette Kendall, Clive Appleton, Georgina Lynch, Michael Hawker and Peter Kahan. In addition to the Board, here with us today is: Rohan Abeyewardene, our Group Company Secretary; Michael Collins, representing Vicinity's external auditor, Ernst & Young; Jane Kenny, our General Manager, Investor Relations, who will relay any online questions to me today and various other senior members of Vicinity's management team. The returning officer for today's meeting is Jim Kompogiorgas from Link Market Services, our security registry. Before we proceed, I do have a couple of housekeeping points. As a courtesy, I would appreciate it if all the mobile phones in the room could be turned to silent mode. Recording devices and cameras must not be used during the meeting. And in the event of an emergency, please follow the emergency exit signs and instructions of the venue staff. Today's meeting is being held in a hybrid format. We are pleased to have some of our security holders here in person with us today at Hotel Chadstone and to offer our online meeting platform to those who can't be with us in person. Instructions on how to proceed in today's meeting are included in the Notice of Meeting and online meeting guide, which are both available on our website. We wouldn't address any security holder questions during the discussion on relevant items of business. Questions submitted may be moderated to avoid repetition. And in the interest of time, lengthy questions may be summarized. I do encourage online participants to submit your votes and any questions you may have earlier in the meeting via the online platform to ensure they are received and questions can be addressed at relevant part of the meeting. If you are a Vicinity security holder and would like to ask a question via the online meeting platform, please click on ask a question button on the meeting web page and follow the instructions. [Operator Instructions] For those in the room, if you were issued with a yellow or blue card, you are entitled to speak at this meeting. If you need assistance, please see a Link Market Services team member at the registration desk. Should security holders attending online encounter any technical difficulties during the meeting. The webcast will be subsequently made available on our website. If we experience any technical issues today, a short recess or an adjournment may be required. If this does occur, I will advise you accordingly. The Notice of Meeting outlines the items of business before the meeting today and has been made available to all security holders. I will take the notice as read. Voting on all resolutions today will be decided on a poll, and I now formally open the poll on all resolutions. The poll will remain open for 5 minutes after the conclusion of the meeting, with the results of the meeting to be announced to the ASX as soon as possible following the meeting. I would like to formally thank security holders, who are participating today and also those who submitted their votes ahead of the meeting. Following the conclusion of today's meeting, I would like to invite the security holders here to join the Board and executive leadership team for some light refreshments just outside the room. Today, I will share my reflections on the 2023 financial year at Vicinity. I will then ask our CEO, Managing Director, Peter Huddle, to address you. After Peter's address, I will take any questions you may have on Vicinity or today's presentation before we move on to the formal part of the meeting. So FY '23 was a year of strategic progress, important organizational change and strong financial performance at Vicinity. Over the past 18 months, the retail sector has shown remarkable resilience in the context of aggressive monetary policy tightening, compounded by inflation-led cost of living pressures for Australian households. And while the rate of growth certainly moderated in response, notably in the second half of FY '23, there is no doubt that the Australian retail sector continued to be a benefactor of our strong employment market and the deployment of household savings accumulated during the pandemic. Amid the shifting macroeconomic settings, the team acted, to not only deliver a strong FY '23 result, but also focus on embedding resilience in our earnings growth profile for FY '24 and beyond. I'll come to the retail -- the result headlines shortly. The FY '23 was also a year, where we made some challenging and important decisions about Vicinity's leadership. In November last year, the Board became acutely aware that we needed to appoint a new leader and elevate our focus on and commitment to ensuring Vicinity is ubiquitously safe and inclusive, and it's a workplace that is thriving for everyone. While these things take time, I know I speak on behalf of all directors, when I say how pleased we have been with the progress that has been made in this regard. With the support of his executive leadership team, Peter is engendering a speak-up culture that is not only safe, but is being enriched with greater diversity of thought, perspective and experience. And speaking of diversity of thought and renewal, the Vicinity Board has had the privilege of welcoming the fresh ideas and discourse this year from the 4 new directors formally elected at last year's AGM. Strong and sound judgment, passion, experience and diversity of thought are what I believe to be fundamental attributes of a healthy Board. And I'm indeed proud to lead such a Board here at Vicinity. In an environment of heightened volatility and increased uncertainty, our debates have been lively, robust and productive. And the partnership between management and the Board, I believe, has never been stronger. Today, capital markets are thin and the cost of capital is substantially higher than it has been since the GFC years. There is no doubt that as the owner of 59 retail centers across Australia, Vicinity is a capital-intensive business. Vicinity is cultivating a reputation for its disciplined approach to capital allocation and strong financial stewardship. This, together with our intense focus on prioritization and long-term value growth, are our guiding principles when deploying precious capital. Yesterday, we announced to the market that Vicinity has agreed to acquire the remaining 49% interest in Chatswood Chase in Sydney for $307 million. Investing in premium assets with long-term growth potential is central to our portfolio strategy that Peter and his team are driving. In addition to the recent sales of a 50% interest in Broadmeadows Central for $135 million at a 5% premium to book value, we also announced yesterday the sale of Roxburgh Village shopping center for $123 million, representing a 9% premium to June 2023 book value. These transactions align strongly with our refreshed strategy of active portfolio curation, that is enabled by our appetite to recycle capital from selected assets, where we can achieve attractive pricing and ultimately preserve the strength of our balance sheet and our credit ratings. Peter will talk to the Chatswood Chase transaction in more detail shortly. But I will add that this was a decision that management and the Board took after a great deal of thought and debate. Security holders should feel confident that Vicinity's conservative balance sheet, for which the company has been rewarded in recent years, will continue to be managed for the long term, and where low gearing, high interest rate hedging and our strong credit metrics remain articles of faith for us. In terms of FY '23 result guidelines. Vicinity delivered a net profit after tax of $271.5 million for the year. Importantly, funds from operations grew 14.5% to $684.8 million, which equated to $0.15 per security. Pleasingly, our results were better than our earnings guidance as the outperformance was driven by better-than-expected trading. The Board was pleased to declare a final distribution of $0.0625 per security bringing the total distribution for FY '23 to $0.12 per security and representing a payout ratio of 95% of adjusted funds from operations. And as of 30th of June, gearing remained at the low end of our target range at 25.6%. From an operational perspective, the results demonstrated the team's strategy to execute at pace to embed resilience in our income growth profile. The team negotiated the highest number of leasing deals since Vicinity's inception since 2015. Importantly, these deals were delivered with positive overall leasing spreads, representing the eighth consecutive quarter of leasing spread improvement. Leases on holdover reduced to just 4% of income from 7% at June 2022. Occupancy lifted to 98.8%, its highest point since the onset of the pandemic. And our occupancy cost ratio of 13.5% further enabled Vicinity to enter FY '24 with a strong platform for continued rental income growth. During the year, 5 key development projects were delivered, largely focused on fresh food and experiential retail. And in the context of our disciplined focus on capital deployment and value creation, these projects are already delivering returns in line with or above our approved feasibilities. And this is despite the cost and supply chain challenges faced by the construction industry over the last 2 years. And importantly, Vicinity continues to be on track to achieve net zero for Scope 1 and Scope 2 emissions for common mall areas across wholly owned assets by 2030. There is no doubt that the team are working tirelessly to further operationalize and embed a purposeful ESG program into the business, and I know Peter is looking forward to sharing more on this in the coming year. Before I hand to Peter, who will discuss our first quarter trading update and talk to the Chatswood Chase transaction in more detail, I would like to acknowledge and thank Peter, his executive leadership team and everybody at Vicinity for an outstanding year of delivery, resilience and progress. As a Board, we can see that the company entered FY '24 with the right strategy, the right leadership team and a strong foundation for continued growth and success. And I extend that gratitude and acknowledgment to my fellow directors for their contributions and to you, our securityholders, for your continued support of Vicinity. I'll now hand over to Peter Huddle.

Thank you, Chairman and all Vicinity Directors, and good morning. It gives me great pleasure to present to you, our security holders, as Vicinity's CEO and Managing Director. I've been with Vicinity for over 4 years after following almost 20 years in a variety of leadership roles at Westfield, both here in Australia as well as in the United States and South America. I joined Vicinity for 3 reasons: the quality and uniqueness of Vicinity's portfolio of retail assets; Vicinity's team of sector-leading professionals; and the potential for this business to deliver truly long-term value creation. These attributes remain relevant, perhaps even more so today. And I'm privileged to lead Vicinity through its next phase of strategic progress and growth. As the Chairman discussed, FY '23 was a big year at Vicinity, where we acted at pace to future-proof our income growth profile with the expectation of more challenging trading conditions, stemming from elevated inflation and interest rates and therefore, pressure on consumption. FY '24 is no different, in terms of the pace at which we are now operating to drive stronger for longer income growth and, at the same time, prudently managing our balance sheet and credit metrics. Following COVID-19 pandemic, retail landlords have enjoyed the benefit of strong tailwinds as shoppers have returned to traditional retail with a keen appetite and significant capacity to spend. Today, however, the cumulative impact of the 400 basis points of interest rate hikes is certainly impacting the consumer. However, we continue to observe resilience, both in terms of sales growth as well as retailer confidence. In this context, I'm pleased to update the market on our first quarter of FY '24 results. Total portfolio sales were up 2.7% for the quarter, largely driven by the continued recovery of our CBD retail, which was up 7.2%. We are seeing a strong conversion of rising visitation to retail sales growth, which reflects the investments we've made during the pandemic to introduce new flagship stores to our portfolio as well as new concepts for retailers across our entire centers. Occupancy across our CBD assets is nearing pre-COVID levels, and we remain confident that our CBDs are steadily returning to their former vibrancy. Specialty Stores in mini majors reported a 1.9% growth in the first quarter. While homewares, apparel, footwear underperformed, it's important to note that the slowing demand in this space is exacerbated by the prior comparative period, which experienced very high sales growth as it was the first winter and early spring out of COVID lockdown since 2019. An ongoing highlight remains the resilience of our Food Catering and Retail Services, which are traditionally more discretionary-orientated categories that in the past have been the first cohort of categories to soften with the advent of the consumer downturn. Cafes, restaurants and in-center services such as beauty, hair services and optical are all part of the shopping experience and remain a drawcard for shoppers. They position retail malls as one-stop shops for goods and services as well as leisure, dining and entertainment, none of which can be replicated online. Importantly, these high-performing categories, the categories I just mentioned, are typically dominated by small businesses, which is further assisted in building Vicinity's resilience. Luxury sales were up 6.3% for the quarter on a same-store basis. The ongoing success of luxury sales growth provides much of the impetus behind increasing desire of the world's best luxury retailers to expand their store presence in Australia. And we are proud to be a partner of growth for luxury retailers in Australia, and I'll talk more about this shortly. The confluence of us continuing to execute at pace and have a focused leasing agenda, provided twin benefits this period, being increased portfolio occupancy, which ticked up to 98.9%. While at the same time, we achieved solid increases in rents on new leases. The average leasing spread achieved for the quarter was 4.5% positive, representing the ninth consecutive quarterly improvement. The first quarter spread is above our guidance assumptions and was influenced by deals being skewed to this beautiful asset, Chadstone and our premium Outlet portfolio, which collectively delivered 14.3% spread. Needless to say, we are pleased with the relatively strong operating metrics for the first quarter but we do remain cautious in the outlook, given the potential for further interest rate rises and the tendency for leasing cadence and the pricing of leasing to soften after a lag of retail sales. In the first 6 months of my role as CEO, we worked on a refreshed strategy, which we announced to the market as part of our FY '23 results in August. We now have a laser focus on being a high-performing, property-led organization. That means above all else, we are prioritizing the enhancement of our investment portfolio. Our strategy remains focused on increasing our exposure to premium malls and premium Outlet centers and at the same time, unlocking our mixed-use development opportunities. This is enabled by an active investment strategy, where we are continuously curating the portfolio by recycling and allocating capital to fund both accretive retail and mixed-use developments and strategic acquisitions. Yesterday, we announced a major step forward in the execution of our investment strategy with the acquisition of the remaining 49% interest in Chatswood Chase Sydney, a premium major regional asset on Sydney's North Shore. As a reminder, this asset is located in the most affluent catchment in Australia, where household incomes are 32% above the Sydney average, and the center is proximate to bus, rail and metro transport lines. Chatswood Chase is an iconic asset with significant growth potential and is an asset that we have managed for a long time and that we know well. As we speak, the asset is currently under a major revitalization of the fresh food and dining areas and dining offers throughout its lower ground floor. And in particular note, we are now in a position to expedite the major redevelopment of the asset's upper floors, which will not only reinforce this asset as Northern Sydney's premier retail destination but also represents one of the most exciting and transformational projects to be undertaken in Australian retail property today and, to be honest, into the foreseeable future. Our plans for Chatswood Chase reimagine a contemporary mini Chadstone, incorporating significant luxury component, combined with the very best Australian design of fashion retailers as well as what we call athleisure technology and new-to-market concepts that we know the customers and the retailers want for this asset. The total project cost is expected to be approximately $620 million. We have worked hard to derisk the development, having already secured more than 45% of the income. Just on that for the 20-odd years I've been doing retail development across the world, typically, we would secure somewhere between 5% and 15% of the income before a 2-year development program. So 45% of the income is off-the-charts level of risk management in terms of the security that we're providing going into a development of this nature. And to the extent possible, in this particular environment, we've also mitigated the construction cost risk and signed an agreement with the contractor earlier this week. Importantly, we expect to deliver the project with a stabilized yield of greater than 6% and an unlevered IRR of greater than 10% with a stabilized valuation of the redeveloped asset on completion, which will capture around $200 million of development profit upside. We will commence early work shortly with the main construction to begin in March of next year. And the project will be completed ahead of Christmas 2025. As I said earlier, part of our investment strategy involves divestment of selected assets, where we're able to achieve attractive pricing. Following on from the half share of the Broadmeadows Central shopping center we sold in June for a 5% premium as the Chairman notified. We have since sold 100% of the separate Broadmeadows Homemaker Center which was across the road from the center and a range of other smaller land parcels and adjacent properties to premiums to book value. And yesterday, we also announced the sale of Roxburgh Village in Victoria for $123 million, representing a 9% premium to the 30th of June 2023 book value. Echoing the Chairman, these transactions demonstrated disciplined execution of our active and ongoing investment program, premium retail assets, such as Chatswood Chase, present more resilient income growth profiles and deliver sustained value creation through cycles. And we are recycling and redeploying capital to facilitate greater exposure to these assets while at the same time preserving our balance sheet and credit metrics. Yesterday was an exciting day for Vicinity and a statement to the future of this company, and I look forward to demonstrating continued execution of our strategy and delivering on our financial commitments for FY '24 and indeed beyond. Thank you, security holders. And with that, I'll hand the meeting back to the Chairman.

So we will shortly move to the formal business of the AGM. But before we do so, I will now open up to any questions that security holders may have on Vicinity or the presentation you've seen today. A reminder that only security holders, who hold a yellow or blue card may ask a question in the room. To do so, please raise your yellow or blue card, wait for the microphone and identify yourself before asking your question. Before the meeting today, we received three questions from security holders. But why don't I hold off on those until we open to the room.

My name is Henry Stephens, and I'm from the Australian Shareholders' Association. I have got about 1 million proxies. I read in the annual report, the wholly owned portfolio has achieved a 32% reduction in absolute emissions since 2016 and the company is on target to the net zero by 2030. The 32% reduction in emissions does not include the larger jointly owned portfolio of properties. Can you tell us what your plans are for the jointly owned portfolio in terms of reducing emissions, waste and water use? And will the jointly owned portfolio be net zero by 2030?

So that's a very good question, Henry. We have, as you know, multiple joint ventures over which we have shared control. Our ability to influence those emissions are similar to what is known as Scope 3, where you effectively measure those, which you don't have control over by external parties. This is no different. So in terms of the challenge we undertook, it was first to do with the portfolio that we could influence. And the second and current step being undertaken is to see how we can influence and get authority and agreement over those assets, which we don't necessarily control outright. So you should be hearing from us soon. We are currently moving through that process, costing it and coming up to targets.

I've got a second question. What's the company's policy on making donations to or supporting charities and social issues? Did you make a donation to the Voice? Can you please explain to us the rationale for making or not making a donation to the voice?

So we did not make a donation to the Voice. We had a pretty lively discussion on the issues. I think it's fair to say there were lots and lots of views. And ultimately, we felt that it was better for the individuals, we have 1,300 people. It was better for the individuals to make their own choice. We, as a Board, did not necessarily have the right to guide where our employees should vote.

Stephen Mayne, shareholder. Is this the time for sort of general question or will we have questions on the individual items?

For you, always, Mr. Mayne.

So I went to the Endeavour Group AGM.

Let's try again, I'm sorry.

I went to the Endeavour Group AGM yesterday where you had a billionaire with 15% of the company making hell, publicly slamming them and trying to get a second director on the Board to move from 1 to 2. Now this company, we've got a billionaire shareholder with 15% who has 2 representatives on the Board, Dion and Clive. Statistically, that's slightly overrepresented as opposed to the 15% stake. So I just need to hear from one of the Gandel nominees about how the relationship is going. Any risks of how do we avoid sort of Mathieson Endeavour style of blowups over [ allegiance ] here. But why does it need to be 2 rather than 1, given the percentage holding in the company?

So let me start off by addressing some of the issues which you raised, which are clearly understood and exist when you have a major shareholder. The first thing I would say is that the Gandel Group not only own 15% of our securities but they also are our joint venture partner in this building where we all sit today, which is worth close to $7 billion. So they have a very significant investment other than their shareholding. Now that doesn't change the principles. The principles are they vote as a shareholder. They're entitled to express their views as a shareholder. But more critically, it's not so much governance that's the key priority necessarily in that they are a very knowledgeable, skilled, experienced group. And they bring a lot to the table, both in this asset and more broadly. I have to say that I don't view them as Gandel representatives when we're having discussions. We have, both of them have tremendous experience and judgment in their careers, thus far. We welcome them to the table. So I'm not all that fussed about the numbers. And I caution you, as I'm sure you know, Mr. Mayne, you cannot tar people with the same brush because they have 3 or 4 headlines that appear to be similar. It's important to dig below that, which is, I guess, why you're asking me the questions.

It is great to have them here. I mean unlike the founders of Westfield who sold out, they're still with us, which is great. So I'm not pissed off, I'm just -- it's always interesting to work and hear how the dynamics are going. Probably a nice segue into the $6.6 billion book value of Chadstone. Obviously, we're trading at a fairly material discount to client net assets. And our biggest asset is the $3.3 billion, 50% valuation of Chadstone. Could we hear from the auditor as to the interrogation of that $6.6 billion? And Chairman, can you put your hand on your heart and say, I know it's good. You've proved book value with Roxburgh and Broadmeadows, but they're very bite-sized chunks. If you put Chadstone up for sale, hand on heart, do you really believe someone would pay $6.6 billion for it?

Look, the short answer is yes. I think there would be very few assets of this quality and caliber globally. And I think there are sufficiently capable institutions, financially capable, that would love to own a piece of this building. It's not for sale. It's jealously guarded. I can't speak for the Gandel Group, but certainly for us, and I suspect they would share that view. So yes, I can. I won't give you a stat deck because I don't think that I am not obligated to do so. But I can give you not hand on heart, but I can give you a commitment to say that we signed off on those accounts, fully believing and testing with the right measures on the asset values, which includes that. Might I also add, you did raise the point and you're correct in this, is that the underlying assets at the moment are trading at a 20% discount in the security price versus the asset values. And that does, of course, create a discourse about the underlying property valuations themself. But we have just sold, in a short space of time, 2 assets. One of the 5% premium to our book value and the other one and an 8% premium to our book value. There is no better test with all the calculations in the world and all the scientific assessments of a willing buyer and willing set of sale. So we rest very comfortably, thank you. Michael, would you like to add to that? Michael Collins from Ernst & Young.

Thank you, Chairman. Thank you, Mr. Mayne for your question. Yes, clearly, the value of the assets on balance sheet for investment property are significant and the most significant on the balance sheet for the company. And as you'd imagine, it is an area of significant area of focus. It's in fact, one of the key audit matters, which we call out in the audit report. The work is extensive around asset valuation. We are focused on not only the process, which we currently adopt to arrive at those values, including the use of intended experts. We're focused on the inputs to those valuations, and we bring our own valuation to that discussion. It's always difficult, obviously, in looking for market evidence, particularly over the last few years. But we do reference market transactions to try and get the guide, the values we work through the valuation process. So it's actually detailed on Page 1 and 19. Yes, there's significant scrutiny, which is focused upon those valuations.

You're good for the moment, Mr. Mayne? I believe there's a question at the back.

I've just got a follow-up question on property. The property, the wholly owned property portfolio, I think the decrement in valuation was about $200 million. That seems awfully small for a $14 billion portfolio. I'm just wondering if the value have captured all of the 12 interest rate rises that we've had in these valuations and the continuing high inflation rate we've got at the high. It's a huge increase in cost of living that consumers are finding. I'm just wondering if, in 2024, we're going to see a bigger decrement coming through in terms of overall property valuations.

Look, that's a fair question, but the value doesn't just look at interest rate movements, although that is a key component, but there are lots of other facts. The most critical component of any valuation is the expected cash flow annually from that asset. By far, the biggest determinant of any valuation. And the secondary process is what rate would you like to apply to those cash flows to bring it back to today's value, recognizing the entire present value of the asset. So the value doesn't wait, Henry, for every 25 basis point movement by the reserve bank and then change the valuation. It's far more complex than that. And there are also multiple tools, the value it uses, including capitalization rates and various other mechanisms. So the short answer is the value, it takes into account everything that they can see coming out roughly over the next decade in the cash flows and the discounting of those cash flows. Sorry, I'll hand over to a fellow who knows something about this stuff.

I think you've explained it very well. I mean Henry, the other thing that really took into account to the valuations this year is coming out of COVID. The COVID provisions were released from the valuations. And then also, the team has done a tremendous job in the occupancy increase, better with long-term leases rather than assumptions that had future cash flows, as Trevor mentioned. And as a result, the growth of those occupancy, the growth of the long-term leases and bonafide cash flows flow through the valuations, removal of the residual cover provisions that were in there. Some of those assets also had some risk and opportunity associated with developments being delivered when they were delivered and above feasibilities, those risks and opportunities were taken out of the valuations. And therefore, the valuations went up. Thank you, Peter.

Just the last general question. For the CEO because it's probably a bit about -- in Victoria. Just curious as to what the company's view is of the Victoria Government's revolution in planning laws to try and facilitate development. I put on the table, I'm a councilor at the City of Manningham. We have the tallest building. We have the Doncaster Hill that's about 9 stories. And I've read, I think the Vicinity was looking at, perhaps, it was north of 30, 35 at Box Hill. Box Hill, in our books is at $388 million. So I'm interested to hear where things are at with that. Is this just going to be a straight state government decision with the Council sidelined? And just dealing with the environment in Victoria. I know people argue that the state government is broke, borrowing $1 billion a month net debt to the $155 billion. And they're really going after property owners big time. Tax increases all over the shop. Is our exit from Broadmeadows and Roxburgh influenced by rising land taxes? And what is the environment like down there? We're very proud at the Manningham. We don't have a differential on commercial. So Westfield is only paying $3.3 million in rates. But over there in Northland, they have 300% differential. Melbourne Airport is paying $20 million in rates to Q. So what environment, for instance, is like here? Does our local council apply differential rates, punitive tax rate on us? And what is the overall environment like in Victoria, particularly the rising land taxes? And is that offset by what's going to be a different regime on planning, which could help facilitate approvals and high increases at placements like Box Hill?

So I'll just give a forward comment and then hand over to Peter for the specifics in Box Hill. We work within planning and regulations, as you know. Sometimes we agree with them. Sometimes, we don't agree with them. But we know where the regulations lie. We know where the authority lies. And we probably wouldn't generally be discussing those publicly in the interest of getting the right outcomes for what we're seeking to achieve. It's best done personally and privately. And I'll hand over to Peter for the Box Hill question.

Thanks, Chairman. I think there's about 20 questions in there, Stephen. And I think I remember dealing with you in Manningham about 20 years ago as well with Doncaster. But so broadly, there's some very good signs coming out of the current change of leadership with the state government in Victoria that's welcome to us. Particularly around the housing crisis and trying to facilitate, at least, even behind the scenes and publicly, how to, again, remove the red tape associated with planning process to facilitate the correction of the deficit of housing that's required in the state at the moment. So we're seeing, at this stage, we'd like to see that talk turn into action further. In terms of some of the projects that you spoke about specifically and then I'll come back to the taxing issues. It is really council-dependent. Manningham has been a good council. I've had personal experience with them. Whitehorse Council, which is Box -- around Box Hill and the council in which this asset resides, which straddles 2 councils have all been very productive councils that we've been able to work with. The types of developments that we typically do in those assets are highly complex, major activity that typically stretches council's planning resources that, quite frankly, are normally not dealing with that size of activity. So we tend to have concurrent processes going with the Department of Planning that ultimately lead to panel process at a state level for determination of major projects. Box Hill, the panel process has, part one has been concluded. Part 2, we're about to enter into. It's another 2 days. And we have one at Victoria Gardens in Richmond. And we've just entered this week into a process, which is after 2 years of negotiation into that state determined process. In terms of the question around 50% sell-down of Broadmeadows or 100% sell-down of Roxburgh. We look at the total returns over the next 10 years on a forecast basis, on a risk-adjusted forecast basis, which includes our view of where tax policy will end up or rates policy on those assets. And we look at the return profile of that versus on a comparative basis versus other opportunities that we have in the portfolio, and that's what we do for asset recycling. And when there's attractive asset pricing in the marketplace above premiums and they are already listed on assets that we think can potentially be divested, then that's an opportunity to use that capital to fund our more accretive acquisitions or development pipeline. In terms of the taxation policies, we have unfortunately been implemented already this year and will roll into next year on what we call COVID tax recovery policies which typically come in the form of increased land tax for a temporary period. We haven't got a definition of what temporary actually means. But that is rolling through the P&L to the tune of about $1.5 million on an annualized basis. We do expect that there will be continued pressure on councils and state government in part around there's always an arm wrestle around land valuations. And we can and we would expect that, that will continue to occur, particularly in Victoria in the short to medium term.

Thanks, Peter. Okay. So before the meeting today, we received three questions from security holders, which I shall now respond to. The first question was from [ Stephen and Joanne McCarthy ], who asked whether shareholder value should improve before we drive performance incentives to the CEO and Managing Director. So thank you, [ Stephen and Joanne ], for the question. In terms of Item 4 specifically, approval is sought for the grant of performance rights to the CEO as part of a long-term incentive or LTI plan. So once granted, these performance rights remain on foot for a full year period prior to an investing as possible. They do not automatically vest at the end of the full year performance period. The performance rights will vest provided the Board is satisfied that the best in conditions described in the notice have been met at the end of the performance period. So yes, we certainly expect a level of performance to be achieved before those incentives vest. Our next question is from [ Natasha Lee, ] who notes that the property revaluation was negative despite an increase in net property income and very high levels of occupancy. [ Natasha ] notes that while it was stated that factors such as lower foot traffic were excluded, it does not mean, seem to make sense that a discounted cash flow method would reduce the value of the property portfolio. Can I explain? So thank you for the question, [ Natasha ]. You are right that, this year, there has been an improvement in net property income, which is in part due to higher occupancy of the portfolio. However, valuation metrics such as capitalization rates and discount rates used in discounted cash flow analysis have weakened and gone up. And then when these valuation metrics increase, it puts a downward pressure on the valuations, which, in this case, had a greater impact on the valuations than the increase in the net property income. Final question was also from [ Natasha Lee, ] who notes that the company's commitment to have at least 40% women on the board, which has fallen short. And there does not seem to be any commitment to achieving other forms of diversity on the Board. [ Natasha ] asks if the Board will give a serious commitment to achieving the 40/40/20 gender target? And ask the Board to set a broader diversity target and report to it in the annual report as a Board should reflect the community. Thank you again, [ Natasha,] for the question. I note that you did ask some of the questions last year and my answering part remains similar. I can assure you that we take seriously our commitment to improve gender diversity across all levels of the business. It's part of the executive leadership scorecards. I can tell you that 61% of our employees are female and 50% of our people leaders are female. However, when you get to more senior levels of management, we still have a heavier weighting to males, which is in part a legacy issue. Nonetheless, an issue we are focusing on addressing. I should also mention that our business leadership team, which is effectively the level below the executive has improved from 21% female in FY '22. To 34% in FY '23. And with our Board renewal in 2022, the gender diversity split of the 4 new elected directors was 50-50. But we acknowledge that we have more to do at the senior levels of Vicinity and Board. And I can assure you it remains a focus for us. In terms of other forms of diversity the Board, with the assistance of Nominations Committee, considers a range of factors in identifying potential director candidates. This includes their personal attributes, our skills and experience matrix and relevant diversity criteria, including, but not limited to, diversity of gender, background, ethnicity, geography and age. We will continue to assess potential candidates based on this broad range of factors as part of an orderly renewal and the ongoing review of the mix and skills and experience on our Board. And of course, we are always focused on diversity of thought and having people with the right character and values on our board. That concludes the questions received ahead of the meeting and from the room. I'll now ask the operator if there are any questions on the phone line.

Chairman, there are no more questions.

Thank you. Jane, any questions online?

No questions online. Thank you, Chairman.

Thank you. We'll now move to the formal part of the meeting, and in particular, the resolutions, the items of business I described in the notice of meeting. The first item of business is to receive and consider the financial reports of Vicinity Centers and the reports of the directors and auditor for the year ended 30th of June 2023, which were included in the 2023 annual report, which is available on our website. There is no requirement for security holders to vote on this item of business. The group's external auditor, as we know, Ernst & Young is represented by Michael Collins, who is present at today's AGM and can answer relevant questions to the conduct of the audit, the preparation and the content of the audit report, the accounting policies adopted by Vicinity Centers and the independence of the auditor. I'll now open the room for any questions. I'll now ask the operator if there are any questions on the phone line.

Chairman, there no questions.

Jane?

No further questions.

Thank you. The voting exclusions that apply to today's resolutions are described in the Notice of Meeting. All items are ordinary resolutions. Ordinary resolutions are passed if more than 50% of the votes cast by or on behalf of security holders entitled to vote on the resolution are in favor. Proxy votes received on each resolution before the meeting will be shown on the screen when each item is being considered. As set out in the Notice of Meeting, as Chairman of the meeting, I intend to vote undirected proxies in favor of each resolution. And I now formally vote all undirected proxies in this manner and all directed proxies in accordance with the direction instructed by security office. Moving to item 2. The Remuneration Report for the company was released to the ASX on the 16th of August 2023 as part of our 2023 annual report, which is available on our website. As outlined in the Notice of Meeting, the Remuneration Report outlines Vicinity's reward principles and framework, Vicinity's performance for 2023 and the link between Vicinity's 2023 financial performance, strategy execution and the remuneration outcomes for our executive key management personnel, or KMP, as we refer to them, and the remuneration received by nonexecutive directors in FY '23. The vote on the Remuneration Report is advisory only and does not bind the directors, the company, all the responsible entity. However, directors will take into account the outcome of any vote and any security or the feedback when considering relevant remuneration matters in the future. The Board recommends you vote in favor of this nonbinding resolution. The words of the proposed resolution are displayed on the screen. The summary of proxy votes received before the meeting will now be displayed. And I'll now open the room for any questions on item 2. Any questions operator?

No question, Chair.

One second. Jane, I'll just cover online.

No questions, online.

Mr. Mayne, you have your hand up?

So good to see strong support for the proxies. Just wondering if next year you'd be able to get the program and release the property position with formal addresses. So obviously, these are the only slides that you hold back from the ASX to surprise the meeting with. The practice is to come out with the formals and then people can sit back and consider that and then decide any issues. So I'm presuming there's no approaches based on any notes on all 3 items? Is that...

There's no what? Sorry.

No material against vote on any of the items today, I'm guessing.

On Rem or the reporting?

The other items and any direct relations, like you've got a clean bill. It's 98% with everything. No issues?

No. Look I mean, the fact that you have 98% means there were 2% that have voted against them. People there might feel uncomfortable describing this as irrelevant, but that's what democracy is all about.

Yes. So I guess what I'm saying, so there hasn't been a protest by a proxy advisers about the exit payments to the former CEO? Well, everything is in good shape. I was saying that's good to see. Next year, if you could do the proxies to the ASX before the meeting, that would be great. And just the final sort of procedural thing, quite a few companies, including the ASX have moved to disclosing the voting results by shares and shareholders. And the benefit of this is that it publicly reflects the retail shareholder sentiment. So at the moment, our small shareholders just feel swamped. Mr. Gandel's got 15%. What's the point in voting? And hence, turnout has crashed to less than 5% of retail shareholders. So the way to get the turnout up...

Turnout being?

Being the number of shareholders who vote. Your 25,000 shareholders, probably less than 1,000 would have voted to that. The way to get turnout up is to report the turnout, including how the turnout voted. So I'm guessing on Rem Report, it will be 98% in favor but close to 50% of the shareholders because it's a core group, often probably all hand who just vote against every Rem Report no matter what. But it will be nice to see that sentiment. And companies are moving to that, which is to reveal the folks because Computershare and Link have got the data, it's very easy to put out. So that's my question, just can think about doing that. So we can see on this resolution, it was 600 shareholders in favor, 426 against. That's retail sentiment publicly disclosed. And a few more of us will vote if we know that we can see the data of our retail sentiment made public by voluntarily disclosing companies such as Vicinity.

Understood. Thanks for the suggestion. We'll have a look at that. I think you may have probably issues at work than just simple voting at AGMs and the like, Stephen. But you know that as well as I do. Anyway, any progress is good progress. Any other questions on this item? No. We've dealt with the phone votes and the phone questions and the Internet questions. So move on to Item 3, which seeks your approval for the reelection of Mr. Peter Kahan as a Director of Vicinity Limited. Peter Kahan is eligible for election as a Director and offers himself for reelection accordingly. The Board, other than Mr. Kahan, recommends that you vote in favor of this resolution. The proposed, the words of the proposed resolution are displayed on the screen. Peter will now speak to his reelection.

Thank you, Chairman, and good morning, everyone. I'm delighted to stand for reelection as an Independent Nonexecutive Director of Vicinity Centers. I believe I bring to the Board a good understanding of Vicinity's business, having been associated with the group and the sector for a long period. My property and broader exposures includes executive and nonexecutive roles at a number of relevance organizations, including as a director of Vicinity and the Chairman of the Remuneration and Human Resources Committee as well as being on the Audit and Nomination Committees, and as an Executive and Director at the Gandel Group and as a Director on the Boards of Diversified Property Group, Charter Hall and Texas Wholesale. I'm also the Chairman of the Advisory Board of Quintessential Equity. It's a private property development company specializing in the development and regeneration of commercial property. Additionally, I've held senior financial roles across a range of industry sectors, including manufacturing, wholesale, distribution and services. This exposure has provided me with a wide range of experiences across public and private companies and enables my contribution across areas of governance, strategy, finance, investments, business oversight and business development. If reelected, I will feel privileged to continue to serve on the Board and on behalf of all investors, Thank you.

So thank you, Peter. The summary of the proxy votes received before the meeting will now be displayed on the screen I'll now open up the room for any questions on item 3. Henry Stephens?

Thank you, Mr. Chairman. The ASA is a very strong believer in independent directors for publicly listed companies. The Board is heavily represented by 3 directors, who have considerable experience at the Gandel Group. Both Mr. Appleton and Mr. Werbeloff are currently working for the Gandel Group and are considered nonindependent directors. Mr. Kahan has had a long history with Gandel company including major roles as the Executive Deputy Chairman, CEO and Finance Director. Mr. Chairman, when we met recently, we discussed whether Mr. Kahan is truly independent and you made some very strong points in his favor. And so for the benefit of the shareholders here, can you please explain why we should view Mr. Kahan as being truly independent director of our company?

Yes, of course. Thank you, and I'm frankly delighted to do so. So we have lots and lots of rules and regulation, which govern listed companies in particular. And some of those are represented by the Australian Stock Exchange guidelines. It actually has an area dealing with independent directors and definitions thereof. And the definition very simply is that if there was a shareholder of an associate, an employee of the associated shareholder, then they need to have a 3-year time gap from when they can sit on your Board as an independent director. Peter left the Gandel Group in 2017, so 6 years ago. It's well and truly beyond the 3 years. So definitionally and governance-wise, for all those that have to read that stuff, he is well and truly independent. But I have to say that if that's all we focused on, then it would be a crying shame. The issue is you need directors that have experience, judgment, independence of thought and diligence. And Peter comes with bucket loads of all of that. So I would say, irrespective of definitions, I would say he is the epitome of an independent director and brings a powerful amount of thinking to our Board. Mr. Mayne, you had your hand up?

Just to follow up on that point. It's obviously with a 4.5% modest protest, but the independence question has a little bit of traction with perhaps a couple of institutions, maybe 1 proxy adviser. I was wondering if you could explain if any of the proxy advisers have recommended against. And I love this Board's deep property experience. There's too many Boards with box tickers, the accountant, the lawyer, blah, blah, and no relevant industry experience. So this is a really good group with deep property experience and Peter represents that. In terms of your definition about passage of time and regaining of independents, that's certainly very solid. We're talking about an institution. So when the CEO of JD Hi-FI came back on the Board, after 5 years, they can call them independent. It is slightly different when you're dealing with a billionaire because they're a person, and there may be a friendship. So I would like to hear from Peter as to whether he's friends with Mr. Gandel after working for him for several years. If he could summarize his actual relationships with the shareholder in which the independent question debate comes up. That's all you can ask, is what is your relationship with that person because it's not an institution, it's a person. And also as Peter is the Chair of the Rem Committee, we should hear from him on how he, as Chair of the Rem, handled the exit of the CEO last year and the curtailing of significant benefits that wasn't a big exit payment, which was good and the fact that you've had a strong rem growth, which is good. But as Chairman of Rem, one of the Directors, that was a very unusual situation around the AGM last year. He as the Chair of Rem, how did he handle that process?

So I'll probably going to incur your wrath, Mr. Mayne. The Rem Committee is a subcommittee of the Board, let's be very clear about this. It has no specific authority other than to recommend to the full Board of Directors. And the purpose behind the committees is to share the responsibilities diligently. So we're all divided into various committees so we can apply ourselves to those issues, which are relevant without necessarily all doing the same thing over and over. So your question is more appropriately due to myself and the entire Board, which is fine. I'm happy to address it. The second issue is I am not going to let Peter talk to his friendship, good or bad with Mr. Gandel, because that is actually irrelevant to our assessment of him. I see fierce independence. And if he gets coached by somebody, who happens to be a billionaire or not a billionaire, might I say, I'm grateful that he brings that judgment to the table. So for me, it's as simple as that. As far as the departure of the previous CEO and the discretion exercise and the process we took, it was a very emotionally difficult process for all of us. It involved our Ex-CEO. It involved the entire Board of Directors, including, may I say, new Directors that have just come on the Board and the whole thing blew up. And I think I apologize to each of them individually just as they came on board. But I have to say that the true test of Directors and their judgment and their behavior is when you're under pressure. When things are difficult. When things are good, it's really, really easy. They never are, consistently. And I am absolutely proud of the debates we had and the judgment that was exercised. And as you well know, we deleted and confiscated every dollar that was on the table that had not yet vested and been paid. And that was done with a lot of debate and discussion. So forgive me if I'm not letting Peter address you directly, but I think it is a Board issue, not an individual's issue. Any other questions on this item? Operator, any questions on the phone line?

Chairman, there are no questions.

Jane?

No questions, Chair.

No? Now on to Item 4. This resolution seeks your approval for the grant of performance rights to our CEO and Managing Director, Mr. Peter Huddle, under the facility center's equity incentive plan. The Board, other than Mr. Huddle, recommends that you vote in favor of this resolution. The words of the proposed resolution are displayed on the screen. The summary of proxy votes received before the meeting will now be displayed on the screen. I'll now open the room for any questions on item 4. Operator, any questions on the phone line?

Chairman, no further questions.

Jane, the internet?

No questions.

Mr. Mayne, you have a question?

Yes. Just a final comment. So thanks for offering the hybrid. Please don't ditch the announcement you put up. Feel free to ditch the phone next year, nobody ever uses that. Just go over the online questions. And I just want to make sure you'll be publishing an archive of webcast, ideally, a transcript as well just so there's a record for the 25,000 shareholders, who were unable to attend. And all the question for Peter, and obviously, the proxies are fantastic, which suggests there's no issues. But it's always interesting to hear our CEO answer this question. And that is having been here for 4 years, it's all very complicated, rolling annualized 3, 4, 5-year LTIs, what proportion to this and what proportion to that. So it's really good to get the CEO to actually just briefly summarize their experience of vesting or nonvesting over this rolling 4-year cycle. And often, a Chair like you will say it's all been displayed, look it up at the annual formal report to the ASX. And to that I say, Chairman, it's complicated. And the CEO could just explain very simply in 60 seconds. So I'd advise you to do that.

What is the actual question? You've confused me.

The history of vesting or nonvesting of previous LTI and also his equity trading and the stock. Has he sold his stock? Has even worked online or market or he's only relying on the LTI grant, building that position to come?

Understood. Understood. And look, thank you for raising the issue because it is something where I am not sure the listed sector has got these structures right. So in our case, I can tell you it not just affects Peter Huddle. It does affect the team that actually gets these LTIs. We have had -- in the last 6 years, we have had only half vesting in 2 of the years and 0 in the other years. Frankly, that doesn't fill me with joy. I would happily pay them out 100% on behalf of the company when and if the results justify that. Because that means shareholders are getting a greater return and you're happy to pay a small portion of that away to the people generating it. I'm not sure the measurements we all do, the relative TSR and all that complicated stuff. And you're right to say it's complicated, maybe unnecessarily so. But we have created communities of Rem consultants, of lawyers, who spent hours and hours poring over the stuff. I'm not sure that it's given us the best outcomes. So our job is to make sure that Peter and his reports that get those LTIs value them and know that if they work really hard and achieve the results, they can bank the money that they've been promised. But a lot of it is out of their control, as you well know, when you're talking about share market movements and the like. So if you don't mind, I'm not going to have him speak personally because it's not only him, it's the entire team that gets affected. But maybe you can use your clout to change the structures. And you'll recall, as to why a few years ago, Adam Gray had tried to get a number of institutions alongside together to try and change the structures. That had faded into obscurity. Thank you very much. We're done with questions. Before we close, I do want to check if there are any more remaining questions on the phone line.

Chairman, no further questions.

Thank you, operator. And Jane, nothing on the internet, and nothing more from the floor, everybody? Well, thank you very much. Now that we've considered all the items of business, that concludes the formal business of today's meeting. I now declare the meeting closed, subject to completion of the poll. The poll will remain open for 5 minutes to allow any final votes to be submitted. If you have not yet submitted your votes via the online meeting platform, please do so now. The final results of today's meeting will be released to the ASX and placed on our website as soon as possible following the meeting. On behalf of the Board, I thank you all for your participation and continued support of Vicinity. The meeting is now closed. Thank you.