Vital Healthcare Property Trust (VHP) Earnings Call Transcript & Summary

[Foreign Language] Welcome, everyone, to the 2022 Annual Meeting of Vital Healthcare Property Trust. This is the unitholders' meeting. My role here is to facilitate unitholders, having the opportunity to express views, ask questions and say anything they want to say. So I see myself as more of the custodian of the meeting than the chair, but my name is Graham Stuart, and I am the Independent Chair of Vital Healthcare Property Trust, and Vital's supervisor have appointed me as the Chair of this meeting. As you are aware, we're holding this meeting in-person in Auckland as well as via Computershare's virtual meeting platform. Unitholders, proxies and guests can attend this meeting either in-person or virtually. All attendees can watch a live webcast of the meeting and read the associated company documents. In addition, unitholders and their proxies have the ability to ask questions and submit their votes. Holding this meeting in-person and online should provide our unitholders with the maximum ability to participate in the meeting no matter where they are. If you're a unitholder or a proxy holder and are attending virtually, you can submit written questions during the live meeting. [Operator Instructions] Should you require any assistance, you can type your query into the Q&A tab, and one of the Computershare team will assist with the chat function and reply to your inquiry. Alternatively, you can call Computershare on 0800-650-034. Please note that while you can submit questions from now, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or, if we receive multiple questions on the same topic, amalgamated. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course via e-mail or by posting responses on our website. Voting today will be conducted by way of a poll on all items of business. To provide you with enough time to vote, I will shortly open the voting for all resolutions. I will also invite questions from the floor and will conduct a poll for unitholders and proxies attending in-person in the normal way. Computershare will collect voting forms and will collate results. Results of the poll, covering the online and in-person voting, will be released to the NZX later today. If you're eligible to vote at this meeting, you will be able to cast your vote under the Vote tab. Once the voting is opened, resolutions will allow voters to be submitted. To vote, simply select your voting direction from the options shown on the screen. Your vote has been cast when the green tick appears. To change your vote, simply select Change Your Vote. You have the ability to change your vote up until the time I declare that voting is closed. The Notice of Annual General Meeting has been circulated to all unitholders. It sets the scope of what we are scheduled to discuss today and includes the details of the one resolution that we are due to formally consider. I'm pleased now to confirm that there is a quorum present and that I declare the 2022 Annual Meeting of Unitholders of Vital Healthcare Trust open. The resolution is open in the Vote tab. Please submit votes at any time, and I will give you adequate warning before I move to close voting. The order of today's meeting is as follows. Following general introductions, I will give my address as the Independent Chair. Following my address, I would introduce Aaron Hockly to give his Fund Manager's address. I will then table the annual financial statements and invite questions on any matter relating to the Trust or the presentations other than Angela Bull's election. We will then move to the formal business being the proposed resolution that Angela Bull be elected as an Independent Director of NorthWest Healthcare Properties Management Ltd., Vital's Manager. This will include an address by Angela and any questions on her proposed election. After voting is complete, we have an opportunity for general business. I will then invite you to ask any other relevant questions that you may have. We will then conclude the meeting. Copies of the minutes of last year's Annual Meeting are available on Vital's website. The full Board of the Manager are attending today. Angela Bull and Craig Mitchell are here in person with us, and Paul Dalla Lana and Dr. Michael Stanford are attending virtually. I would also like to mention and welcome Vital's Fund Manager, Aaron Hockly; Justine Wealleans and Evan Kennerly from Trustees Executors; Silvio Bruinsma, Andrew Boivin and Rebecca Clark from Deloitte, the auditors of the Trust; Toby Sharpe from Bell Gully, the legal advisers to the Trust. We also have several of NorthWest's senior executive team attending, including Chris Adams, Executive Director of Projects; Richard Roos, Executive Director of Portfolio. Richard and Chris are both attending here personally. Chief Financial Officer, Michael Groth; and Regional General Counsel and Company Secretary, Vanessa Flax, are attending online. Following another very successful year for the Trust, it gives me great pleasure to deliver my address as the Independent Chair of the Manager. It's always disappointing to report a decline in the unit value. But over the last year, in a relative sense, Vital has once again outperformed both the NZX50 Index and the NZX All Real Estate indices. Even recording a negative return of 10.2% for the last 12 months ending at 30th of June, this compares favorably against an overall real estate index decline of 13.6%. It's been a busy year for your Board. In October '22 and May this year, we undertook on-market capital raisings totaling $342.8 million. This capital is being used to fund Vital's strategic objectives, which in turn will provide future earnings growth for unitholders. Vital paid $0.094373 per unit in distributions over the 2022 financial year. This was up 6.3% on the prior year. We have provided guidance for this year of at least $0.0975 per unit in dividend total over the year. The past year has been another active one in terms of transactions. And we also saw a sharp rise in interest rates. The volatility of capital markets has underscored the importance of having a disciplined approach to capital management and to our investment strategy. Last year was the second year of our 5-year growth strategy that targets earnings growth per unit. This includes further diversification of asset types that increases our emphasis on developments and particularly so in quality medical precincts. This year, the Manager supported by the NorthWest teams in Australasia and in Canada have continued to pursue this strategy in a disciplined and focused manner. In July 2021, we completed Stage 1 of the Wakefield Hospital development in Wellington at a total cost of $50.8 million. In August, we acquired the Hutt Valley Health Hub, also on Wellington, for $46.5 million. In October, we announced the purchase of the Tennyson Centre in Adelaide for AUD 92.75 million. The commencement of Stage 2 of the Wakefield Hospital was also announced in October, a $92.5 million development. And the agreement to undertake $74 million of development projects across 5 of Evolution Healthcare's facilities in New Zealand was also announced in October. In November, we completed Stage 1 of the Playford development in Adelaide and announced the signing of a memorandum of understanding with Calvary Healthcare for a $92 million facility as part of Stage 3 of that development. In the first quarter of this calendar year, we acquired 2 important strategic developments in Sydney, a $76.6 million site in Southwest Sydney for a multi-staged development and another site for the expansion of the Hills Clinic. We also completed the Epworth East Wing Tower in Melbourne, and we completed -- and we commenced construction of Stage 2 of the Playford Health Hub in Adelaide. In April, we made our first acquisitions in Te Wai Pounamu, the St Asaph Street in Christchurch and the Kawerau Park in Queenstown along with development projects in Auckland, which totaled $84 million. In June, we announced a AUD 98 million development in Hobart. It's extremely pleasing to the Board to be rated in the top quartile of our real estate peers in the GRESB assessment. This assessment is an investor-driven global ESG benchmark and a reporting framework for property companies. Our top quartile rating confirms that we're on the right track for meeting global standards of environmental, social and governance practices. All these activities represent a small part of what the company has done over the past year. Aaron will provide greater detail in his report. We also completed, during the year, our Board renewal process. In April, we recruited Angela Bull. Angela will address you today before you are asked to elect her. She has the unanimous support of this Board. With Angela's appointment come Andy Evan's retirement after almost 15 years on the Board, preceded by a time in executive roles. It's accurate to say, in one way or another, Andy's fingerprints are over everything good that has happened at Vital this century. Makes him sound old, doesn't it? I would like to take this opportunity to acknowledge Andy's vast contribution to the fund and to wish him the best for his future. It's my pleasure now to introduce Aaron Hockly, Vital's Fund Manager.

Thank you, Graham. [Foreign Language] Good morning, everyone. I would like to start by thanking the Board and staff of Vital's Manager as well as the wider NorthWest team both locally and also in the region and globally. I'm very pleased that a majority of the Board with us here today in-person as well as all of my New Zealand-based colleagues who make up a majority of the audience, I think, and my colleagues, Chris and Richard, thanks for attending from Australia. All of us are available after the conclusion of this meeting to meet with you in person. I would also like to acknowledge the ongoing support of you, our investors. Your support has enabled us to continue to grow Vital to the third-largest NZX-listed property group with assets on balance sheet of $3.6 billion. The most enjoyable part of my role is the opportunity to speak to so many of you and your advisers across New Zealand and beyond. It won't have escaped any of you that equity markets are much lower now than from 12 months ago. However, it is in these volatile times that the benefits of an investment in a low-risk, diversified and well-managed entity like Vital come to the fore. Despite market uncertainty, our core goal of growing AFFO and distributions by 2% to 3% per unit per annum over the medium term has not changed. The vast majority of Vital's tenants remain in sound financial health, underpinned by high levels of government support and nondiscretionary spending. This allows our tenants to continue to afford rent even in periods of heightened inflation, noting that over 80% of Vital's leases are linked to CPI. I don't want to downplay the challenges faced by health care operators in the current environment, particularly due to workforce shortages in both countries. But economic downturns have much less impact on health care operators when compared to other parts of the economy. And this leads me to my final initial acknowledgment to our tenants and to their staff. Thank you for the work you do for the health -- supporting the health and well-being of individuals and communities across New Zealand and Australia. Vital delivered a 3.3% increase in AFFO per unit in FY '22, slightly above our medium-term target. This growth and the work undertaken during the first 5 months of this financial year has allowed us to maintain distribution guidance of $0.0975 per unit. And although this 1.2% growth in distributions year-on-year appears modest, FY '22 was 8.5% above FY '21, meaning our 2-year average is nearly 5% growth per unit per annum and our 3-year average nearly 3% growth per unit per annum, the top of our target range. We extended and increased debt facilities during FY '22 and raised $370 million of new equity to support acquisitions and developments. In early October, we increased the percentage of drawn debt, which is fixed to 62.3%. We have increased this again over recent weeks so that now over 70% of Vital's drawn debt is fixed. This increase in fixed debt removes some of the potential interest rate uncertainty over the next few years, particularly in a rising interest rate environment. $287 million of acquisitions were undertaken in FY '22, including Vital's first investments in the South Island. The assets acquired all include development potential, enabling us to expand these facilities in the future and help us to continue to grow earnings for our unitholders. $100 million was spent on capital works in FY '22 across the portfolio, primarily on developments of new or expanded facilities. During FY '22, we reached practical completion of Stage 1 of the Playford Health Hub in Adelaide, the East Wing Tower of Epworth Eastern Hospital in Melbourne and Royston Day Surgery in Hawke's Bay. Work also continued on other committed developments. However, we are adjusting to market conditions, primarily increased construction costs and higher funding costs. The Board and management are currently reviewing all yet to be committed developments, and we will update the market if changes to our previous announcements occur. We will only commit to new developments where we see both long-term value for unitholders and supportive business cases from our operating partners. We invest for the long term. Our business model is built on enduring partnerships with our tenants. However, like any investment manager, we regularly review our holdings to ensure we are making the best possible use of your capital on a risk-adjusted basis. Vital's weighted average lease expiry remains long at 17 years, providing unitholders security of income over the longer term. Over time, the opportunity costs associated with holding a particular property change. If another party sees more value in an asset or where we think we have extracted maximum value, we will consider recycling capital into other investments that more closely match our strategic objectives. So as a result, we continue to evaluate opportunities to divest assets in line with our 5-year portfolio strategy. We have provided a detailed breakdown of future rent reviews across the portfolio. As noted, this is a key strength in times of heightened inflation. Approximately 80% of the portfolio's rent is linked to CPI, as shown on this slide, although there are significant differences across individual leases. As the slide is very detailed, all of these slides are available on the NZX should you wish to review in detail after this meeting. Sustainability has become an increased focus for the health and property sectors in general and for us at NorthWest in particular. As a result, we have dedicated greater resources to the measurement of data, to a focus on risk and opportunities, to reporting and to a reduction of environmental impacts. Sustainability considerations now form a core part of our acquisition, development and operating processes, as they should. We are targeting increasing Vital's exposure to green buildings, including through developing accredited Green Star buildings in Adelaide and Sydney, as shown on this slide. And this will be an ongoing process, primarily of improving the portfolio's environmental performance, but also continuing to improve our governance and our community impacts. We are very conscious of the role we play as an employer, a developer, funder, corporate citizen, investment vehicle and, perhaps most importantly of all, of supporting health care sectors in New Zealand and Australia. Among other things, we have commenced processes of improving engagement with indigenous Australians and iwi in New Zealand. We have joined the Green Building Councils in both countries and provided comprehensive sustainability reporting. As Graham mentioned, we are delighted to have achieved high accreditation across a range of areas from GRESB, formerly known as the Global Real Estate Sustainability Benchmark. Vital achieved a 5-Star ESG rating from GRESB for developments as well as scoring second place for listed health care globally, third place for standing investments across health care peers globally and being in the top quartile for developments in the Oceania region for all listed entities. More than 140 institutions with $47 trillion use GRESB to monitor ESG progress. So this is an important measurement tool for us. Our goal is to use the benchmark to continue to upgrade the portfolio over time, and it is already making -- leading to changes in the way we do things. Vital also participated in CDP, otherwise known as the Carbon Disclosure Project, with results anticipated in the coming weeks. And this work will help us prepare for mandatory reporting in climate change, which for us starts next year. Given the importance of developments in how we add value for unitholders, I wanted to provide 2 development case studies from Vital's 2022 Annual Report. Epworth Eastern Hospital is Vital's largest single asset valued at approximately NZD 450 million and was originally constructed by Vital in 2005. This private hospital, operated by Victoria's largest not-for-profit private operator, is co-located with the Box Hill Public Hospital and located within the Box Hill Health and Education Precinct, one of the leading health precincts in Australia. The latest development, being the East Wing project, costing AUD 97 million, added 5 operating theaters to the existing 8 and 63 beds to the existing 208. It also added 4 levels of consulting space. Most of the expansion was pre-leased to Epworth Foundation for over 20 years, providing a blended yield, including consulting space, of approximately 6%. This development is a good example of NorthWest's ability to undertake long-term partnering with major health care operators in key health care precincts. This has been a 2-decade-long journey drawing on NorthWest's significant development expertise. Our development program in this precinct is far from complete. Vital owns 5,500 square meters of development land, providing scope for Vital to continue to expand in this growing precinct over the longer term. To an example from Aotearoa. Vital acquired Grace Hospital in 2020 in a sale and leaseback with hospital operators Southern Cross and Evolution Healthcare. Part of the attraction of both -- for both the hospital operators and Vital was further developments of Tauranga's only private in-patient hospital. The first stage of this $30 million expansion opened earlier this year with detailed planning underway for the remaining development works. The development has already increased the operating theater capacity from 9 to 11, and ongoing development will further increase the overall capacity and efficiency of this hospital. This is an example of Vital partnering with preferred operators to secure a modern facility in a favorable catchment with immediate development potential. Vital acquired the asset for $95 million less than 2 years ago, and it is now valued at $115.5 million, reflecting a combination of value-add development works, rental increases and other valuation gains. Debt is supposed to be boring, but suddenly, it is all anyone wants to talk about. I want to reassure our unitholders that we remain in a comfortable position to withstand both the current interest rate environment and falls in property valuations should they occur. Debt to gross assets was 32.9% at 30 September 2022, well below the position a year prior. Similarly, the measure under our banking facilities was materially lower at 30 September this year compared to last and at 35.4% is well below the covenant level of 55%. For context, property values could fall by over 35% before we were at risk of breaching our banking covenants. And this equates to property yields increasing to over 7%, which seems unlikely for the premium hospitals representing the bulk of Vital's portfolio. Vital has no debt expiring until October 2023, and work is currently underway to extend this by the time we report our interim results next February. As previously mentioned, we have increased -- recently increased the percentage of drawn debt, which is on a fixed interest rate to over 70% with a weighted average term of 3.6 years. The increase in fixed debt will help remove some of the potential interest rate uncertainty over the next few years, particularly in a rising interest rate environment. At 30 September 2022, Vital's net asset backing was $3.38 per unit. This is around 30% above where Vital is currently trading on the NZX. Whilst valuations often lag equity markets, the broad indiscriminate sell-off of property stocks, in my view, fails to give due weight to the differences between entities, most importantly, earnings quality, stability and longevity. The core contributor to the net tangible assets of $3.38 per unit is the $3.6 billion property portfolio Vital owns. Given recent interest rate rises, we expect to see modest downward adjustments to health care property valuations over the next 12 months. However, underlying demand for health care real estate assets with long WALEs and CPI-linked reviews, like those in the Vital portfolio, remains very strong. Health care real estate is a defensive asset class with health care services a need, not a want, and much of the core services required to be undertaken in person rather than remotely. I was at a health care precincts conference last week, and one of the speakers noted how different health care is from other property classes. People don't have to work from offices anymore or go into physical shops, technology has provided a range of options for previous users of the space. Similarly, in primary health care, telehealth has increased -- has an increased importance for GPs, pharmacists and other diagnostic providers who don't require health care providers and patients to be in the same physical space. However, you can't have surgery or an MRI at home, and approximately 80% of Vital's income is sourced from health care uses which require a patient to attend a facility in person. There is no alternative. That said, as we roll out our precinct strategy, we want to make sure that our health care precincts are not just places where people have to go, but where they want to go. And we'll achieve this through a mixture of increased amenity, full-service offerings and community-based design. The underlying resilience of health care assets has 2 key drivers: firstly, as mentioned, hospitals and other similar health care assets require meeting in a physical place and so are much less exposed to technological disruption than other sectors; secondly, the earnings of operators and, therefore, their ability to pay rent, is not typically linked to business conditions or economic cycles. The difference in asset classes is demonstrated by recent acquisitions in the health care sector, as shown in the appendix to this presentation released to the NZX earlier today. Vital's portfolio also benefits from a strong linkage of CPI with rent increases. The resilience that I've mentioned is borne out in Vital's returns, as shown on the slide. Vital has outperformed the NZX REIT index over the last 1-, 3- and 10-year periods. Any changes we look to make to Vital's portfolio over coming years will seek to continue to provide growing returns for our unitholders whilst also holding to the core strategies that have helped deliver this outperformance and made Vital the leading listed owner of health care real estate in Australasia. Thank you for attending today virtually or in-person. [Foreign Language] I will now hand back to Graham Stuart.

Thank you, Aaron. The annual report and financial statements for the year ended 30 June 2022 have been circulated to all unitholders and are now formally tabled at this meeting. If there are any questions relating to the Trust or to the presentation, now is the opportunity to raise them. Only unitholders or proxy holders are permitted to ask questions. You may ask questions through the Computershare platform if you're attending virtually or you may raise your hand in the room. Those wanting to ask a question online, please do so as early as possible to ensure that it is received and answered. In consideration for other unitholders, we ask that questions that relate to your personal situation or your personal unitholding be dealt with outside this meeting, either by talking to one of us after the meeting or with management via e-mail or phone.

We're now open for questions. Bruce?

I'm Bruce Parkes from the Shareholders' Association. My first question is refunding for further growth, how do you intend to do that? Through more capital raise or what?

Do you want to have a go at this, Aaron?

Yes, sure. Thanks for the question, Bruce. So we have funded our recent acquisitions primarily by equity because that's been the best use. Prior to that, we were funding them predominantly by debt. At the moment, we're really signaling that we're pausing on large acquisitions. The market conditions, the yield versus where our cost of capital is sitting probably aren't supportive of us to fund acquisitions. So it's a little bit hard to say we're going to fund in a particular way when we're probably pausing on acquisitions overall. I think in terms of the development side, which obviously we've got a large development pipeline we're looking to fund, you'll see a mixture of some asset sales to fund the development pipeline, which will include anything new we might add to that development pipeline. But you'll also see a mixture of both our debt, we also have the DRP switched on, which raises a consistent amount of capital. We don't want to raise a large amount of equity either in this environment where the price is a bit depressed, but also you don't want to raise a lot of equity upfront for developments that you don't start receiving a yield for a number of years.

Thank you. My second question is around carbon emissions. Your GRESB scores are impressive, but a year late as always. What are you doing with your tenants to reduce their Scope 2 and Scope 3 carbon emissions?

Yes. The first focus for us is really helping them understand what their emissions are. So we've got a program being rolled out for all our tenants or offer to all our tenants that tracks their water, waste and energy usage. So we're rolling that out in partnership with them at the moment. That will help them see differences between different hospitals, for example, where they might have peaks in energy consumption. And then we're using that data to then support other initiatives, including solar. So we've rolled out a number of solar initiatives across Australia. So we're adding solar to a number of facilities. We charge the tenant back. But there's a win-win there, they reduce their emissions, we receive an income from the solar.

Thank you. One last question about your share price. Some of my proxies asked this. You've already mentioned it in your addresses. What are the institutions saying about the share price? Why is it so low?

Yes. I think there's a mixture of things. The first is that a lot of retail holders are selling out. You've seen a lot of redemptions, both from us, but also from a number of the institutions, and that means that people obviously need to sell. So that has an effect on all unit prices, and you're seeing that throughout the sector. Unfortunately, a number of our natural buyers, large institutions, they are buying, but they just don't have the volumes to take up the -- what's still a relatively small amount of selling, but they're just not on the position to rather buy significantly at the moment. So there is support there, they are buying, but just not at the volumes to maintain the unit price where it was trading a couple of months ago.

And if I might just add to Aaron's comments there, I mean Aaron and the management team's primary focus is maintaining that $0.0975 dividend and maybe even growing it. So the focus of the fund is on achieving earnings per unit growth, which is quite important, I think. And so yes, our job is to get the earnings per unit up, and then the market and the economists and the central banks determine what the yield is going to be that determines the unit price ultimately. Yes?

[ Evan Streinif ] is my name. I'm a unitholder, a fairly substantial unitholder actually. Particularly after the presentation, I find that I've got so many questions that I couldn't even address them. It will most likely take you an hour to answer them. A lot of these are a reflection, I think, of the fact that you operate as a trust and that the obligations on you if you're operating as a limited company under the Companies Act are quite different and more specific and perhaps, in many respects, more definitive. I mean we don't look at the property trust. If you compare this with the NZX companies that are listed, all of those other loans are limited companies apart from Goodman. I think that's right, I don't know of any other one that's a trust. And when I actually look at your performance, it seems to be below that of Goodman property, but their trust -- but their unit price wasn't ravaged as much as yours was. Perhaps this also is a reflection of the fact that you're a trust and not a limited company. And well, I think -- well, particularly myself, at times, I'm quite apprehensive about the fact that we have such limited control that the unitholders actually have over the company, that it's run independently. I mean even a tenant seems that he couldn't get much further away. So at past means -- as much as, I think, for the past 2 or 3, I've raised the question of actually corporatizing the trust. And I would raise that again because I think that is in the best interest of unitholders. It gives them more control over the company via the Companies Act than we've got at present. So I would challenge you to compare your results with Goodman's. The trust fees of the 2, being you 2 trusts, Goodman and yourselves, those actual trust fees are quite different. Some of them have been quite material in respects. I'd raise the question again. And when I had raised this question of corporatizing, that was before there was the attempt to actually split Vital into 2 units, Australia and New Zealand, but that was voted down by the unitholders. Why can't you corporatize? I mean there seems to me -- in the past, I've been told that there was a high cost to corporatizing. But -- and yes, if you split out, you'd be producing 2 corporations, wouldn't you? And so the price will only be half to corporatize one of them.

But there's some -- let me -- there's some questions in there. I think let me start off by observing, you're comparing our performance to Goodman's. And yes, there's probably a whisker between us. But between the 2 of us, I think of the 12 listed real estate entities on the New Zealand market or maybe it's 13, Goodman and ourselves have consistently been the best performers and both of us are unit trusts. So that's my first observation. If there is anything between us and Goodman over the time, it would be a whisker. But we outperform them and they outperform us, it's just a matter of which period of time you're looking at. So I think it's quite erroneous to say that the trusts are underperforming corporates when the evidence would be the 2 trusts listed on the New Zealand market have outperformed all of their corporate peers. Whether it's 1 year, 5 years or 10 years, we've always sustained that performance. So first off, I don't think unitholders are in any way suffering from the corporate form of this is a trust rather than a corporation. So we have no plan to incorporate other than as a trust. We have looked at other ways of enhancing unitholders' value by finding different configurations on the capital structure that will reflect the Australian and the New Zealand assets to different types of investors. As you pointed out, we tried that 2 years ago. We put a proposal to unitholders. Unitholders exercised their votes and their rights, just as they would have in a corporation, and declined at that time. I can say that the fund is managed by Aaron, who lives in Auckland. He is supported by people like Richard and Chris, who live in Australia, where 75% of our assets are. And Craig is here, who's the head of the Australasian part of NorthWest Healthcare, which provides most of the services to the Manager. So it's appropriate that the management is geographically located between New Zealand and Australia. Our assets are 25% approximately in New Zealand, 75% in Australia. So certainly, we have a large unitholder who is the ultimate shareholder of NorthWest that's sitting in Canada. But from a management point of view, from a governance point of view, this is very much an Australian and New Zealand managed and governed entity. Other than by saying, we have no intention in the near term or in any term for that matter of corporatizing a trust structure, which has been demonstrably working to unitholders' favor now for -- since its listing in New Zealand around about 2014 from memory.

I'll dispute that.

Well, we can only look at the numbers. Aaron put a slide up, I think, which showed unitholder performance relative to other indices, relative to our peer groups.

That doesn't tell much about what's going on in the background.

Well, yes, our role here is to maximize returns to unitholders, and we work hard to do that and I think we're achieving that. And I think if you make comparison between Vital's performance and other listed entities in New Zealand, it's clear that we've been successful in that role to date.

I think as far as your trust fees are concerned, could you confirm that it's fairly specific about what items can be included in the P&L account and it doesn't allow you to include revaluations there, unrealized revaluations included? Is that correct?

No. No, we do include revaluations. We revalue the portfolio every 3 months, every quarter, as is consistent with all other listed. Aaron has indicated to you that currently, we have carrying value, the book values, the latest valuations of properties on the portfolio of $3.6 billion. That's about 32% higher than the market price at the moment. But that average is consistent with almost every other listed real estate entity.

But isn't it a fact, as far as the financials accounts are concerned, you can't include revaluations in there?

No, we do. The $3.6 billion of total assets held by the trust is the latest valuation of the property portfolio and other assets that we hold. And that's revisited and revalued every quarter.

Because a lot of the -- most of the other property companies, actually the listed, they're railing into trouble now because a substantial amount of their profits in the past have come from unrealized increases in value.

Yes, I don't want to go too far down this route where we are debating what is or isn't in our accounts. But what I can tell you...

But I'm talking about the comparisons, not about the accounts...

Yes, so I can't comment on other companies. What I can comment on is that, yes, our 5-year strategy is about increasing adjusted earnings from operations per unit. That's the amount of money and cash that is earned by the business that is available for distribution by dividend. So every reporting period, we report our adjusted earnings from operations, our AFFO, which is our cash earnings, unaffected by property revaluations. That's the amount of money which is available for distribution. This year, that's going to be a shade less than $0.12. We are paying out $0.0975 by way of dividend. That's the focus of the management, and that's how we report largely to unitholders. And you've seen those in the financial presentations today. So we're not reporting paper -- we are reporting paper profits in the sense that you'll see those in the financial statements, but it's not what we're highlighting in our presentations to unitholders.

Well, one other question that's a little less comprehensive. Aaron Hockly is described as the fund manager. Why do you call -- is he the property manager or the fund manager? I mean exactly what do you mean by the fund manager?

So Aaron manages the fund, the fund of $3.6 billion worth of properties. And his role is to manage that fund on behalf of unitholders. So he's the person within the NorthWest management team who has the responsibility for managing this fund. NorthWest manages other funds as well. So we're able to tap into a pool of executives that are actually operating a much larger investment portfolio than just ours.

So he doesn't actually manage the properties, he manages the fund because I see a difference, maybe subtle, but actually, I think, appreciable. But he's not managing the properties, you're saying, he's managing the fund?

So we have a team of people who manage leasing, who manage building development, who manages the properties, who manages statutory compliance and finance. So sitting in behind Aaron is a team of over 80 professionals in Australasia and New Zealand and Australia, who have the skills required to undertake each of those sets of functions that are required overall to manage a fund. So Aaron directs those resources and...

So he's virtually the equivalent of a CEO?

Yes. Good. Thank you. Any further questions? Do we have any questions online?

No, I don't think so.

All right. There being no further questions, I'd now like to move to the formal business of the meeting, which is the proposed election to the Board of the Manager of Angela Bull. The voting will be conducted by a poll, comprising proxies lodged in advance of the meeting and votes lodged through the forms for those in the room and via the Computershare platform for those attending virtually. Angela's nomination has the unanimous support of the Board. And now I'd like to invite Angela to address the meeting.

[Foreign Language] Good morning. Thank you, Graham, for the opportunity. My biography has been circulated previously as part of the papers for this morning. So I just really wanted to highlight a few things. And then, of course, very happy to take some questions. Firstly, I am a lawyer by training, but it's been a very long time since I have been practicing as a lawyer. I started off as a commercial and environmental property lawyer and then saw the light, some might say, and moved into the commercial property space. Firstly, as a super -- in the supermarket space as a commercial property development role there. And then since 2016, I've been the Chief Executive of Tramco Group, which manages New Zealand's -- one of New Zealand's largest privately held property portfolios, predominantly in Auckland, but also a large farm in the central North Island. And so I've done that since 2016, and I will be stepping down from that role in the new year. In addition to that, I hold a number of governance roles with Foodstuffs South Island and Foodstuffs New Zealand and in the real estate sector through the Real Estate Institute and the real estate digital portal, realestate.co.nz. So that's a little bit of a highlight or highlights of my bio that might be relevant for this morning. In terms of Vital, I think Vital Property Trust plays a very important role in the provision of health care infrastructure in both Australia and New Zealand, and that is what attracted me to the role. I think there probably hasn't been a more relevant time for the health care sector and the provision of health infrastructure in both countries. And to Aaron's point, the resilience of that sector is something that particularly appeals to me and that I think I can contribute my skill set in terms of both commercial property and development and an understanding of infrastructure, too. So I am looking forward to my continuing contribution to Vital Property Trust. Thank you for the opportunity to speak this morning, and I'm very happy to take any questions.

I had a general question, perhaps not directed specifically at you, relating to the actual voting offers. I don't know what proxies there are as far as this voting is concerned. You've got the support of the directors, say, of the Board. Does that mean that they are voting in your favor? Because I really think that's a conflict of interest for them to be voting on this resolution when you're an independent director.

Yes, as I understand it, the Board are recommending the resolution to the unitholders, but it is the unitholders that have the vote, not the directors per se. Are there any more questions? No? Thank you.

Thank you, Angela. The details of the proxies received are now on screen. If I'm appointed as a proxy, I will vote. And if I'm not directed on how to vote, then I will vote in favor of this resolution. If you're attending virtually, please cast your vote by clicking For, Against or Abstain through the Computershare platform. Your vote has been cast when the green tick appears. To change your vote, simply select Change Your Vote. You can change your vote up until the time I declare voting closed. A reminder will be given 10 seconds on screen before I close voting. Once voting is closed, you will not be able to amend your vote. If you're attending in person, pass your completed red form to a Computershare representative. Whilst voting occurs, we'll be playing a short video showcasing NorthWest as the Manager, which includes several of Vital's key assets in New Zealand and Australia. [Presentation]

Voting will close in about 10 seconds. [Voting]

Voting has now closed. The results of these votes will be released to the stock exchange later today. I will now open the meeting for any general business. There being no general business, I wish you all a very festive season and a healthy and prosperous new year. Thank you all for those attending online and for those here in the room. Aaron and the team will be staying around for a cup of tea, if anyone wants to ask any questions informally after the meeting. Thank you, everyone.