Waypoint REIT (WPR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Waypoint REIT General Meeting. I would now like to hand the conference over to Mr. Laurence Brindle, Chairman. Please go ahead.

Thank you. Good morning, ladies and gentlemen. My name is Laurence Brindle, and I am the Chairman of Waypoint REIT. On behalf of my fellow directors, I would like to welcome you to this Extraordinary General Meeting of Waypoint REIT Limited which has been called to consider the proposed consolidation of stapled securities, the security consolidation, to be undertaken following a return of capital to security holders, the capital return. It is now just after 10:00 a.m. Australian Eastern daylight time. We have a quorum present, and I therefore declare this general meeting of Waypoint REIT Limited open. We are holding this general meeting today as a virtual meeting conducted entirely online in light of the continuing COVID-19 pandemic. And therefore -- and before we begin, I will quickly run through some procedural matters. Voting on the sole item of business today will be carried out by way of a poll. Security holders had the option of casting their vote before the meeting or appointing a proxy to do so on their behalf. If you have not already done so, you can vote at today's meeting online. You can also do so at any time during the meeting, starting from now, as the polls are now open for voting. Voting will close shortly after the end of the meeting. [Operator Instructions] You do not need to wait until we get to the formal item of business to submit your questions. There may be a slight delay in transmission of up to 20 seconds, so I encourage you to start submitting your questions now, and we will address these shortly. You also have the option of asking a question via telephone. I refer you to the numbers included in the notice of meeting if you wish to ask questions using this facility. I am joining you today from Brisbane. We also have joining us virtually the rest of Waypoint REIT's directors; Mr. Hadyn Stephens, Chief Executive Officer and Managing Director; and your nonexecutive directors, Georgina Lynch and Stephen Newton. Our Chief Financial Officer, Kerri Leech; and company Secretary, Tina Mitas, are also joining us online today. I will now move on to my remarks of -- on the business of today's meeting. Over the course of the last 12 months, Waypoint REIT has embarked on a noncore asset disposal program with the aim of improving the overall quality of its portfolio. To date, Waypoint REIT has sold or agreed to sell 39 noncore fuel and convenience properties, including 2 additional properties that we have sold since the release of the notice of meeting on the 30th of September '21. Total sale proceeds to date are $136 million. And the 10.7% average premium to prevailing book value achieved reflects the strong buyer demand currently being experienced for fuel and convenience retail assets. Waypoint REIT has 7 remaining noncore assets classified as held for sale, with a combined book value of $22.4 million, and we are currently working through the disposal of these properties. In order to maintain an efficient capital structure and return capital in excess of its current and projected capital requirements, Waypoint REIT is implementing a -- capital management initiatives totaling $150 million through the combination of, firstly, the on-market buyback program which was initiated on the 30th of July 2021 and concluded today. Approximately 7.1 million securities were bought back under this program for a total of $19.5 million. Secondly, the capital return under which Waypoint REIT will make a pro rata capital return of $0.17 per security. The proposed capital return is not subject to security holder approval and will proceed even if security holders do not approve today's resolution. And finally, the proposed security consolidation, which is the matter that we are seeking approval for at today's meeting. If approved, Waypoint REIT will undertake an equal and proportionate security consolidation of 0.9382 securities for every 1 security held, currently held. In practice, this means that every 100 securities currently on issue will convert into 94 securities. Following completion of the capital management initiatives, Waypoint REIT's pro forma gearing will be 28.7%. And pro forma liquidity will be approximately $140 million, leaving Waypoint REIT in a strong financial position. The Board has therefore determined that the capital return is in security holders' best interests; and will be paid to security holders on Friday, the 12th of November 2021, regardless of the outcome of today's meeting. In relation to the proposed security consolidation, I note that this not -- this does not of itself impact returns for our security holders. However, as set out in more detail in the notice of meeting, it is nonetheless an effective means by which to neutralize the impact of the capital return on the trading price and net tangible assets of Waypoint REIT stapled securities, all other factors being equal; and will also enable Waypoint REIT to maintain a consistent distributable earnings security (sic) [ distributable earnings per security ] profile that is not distorted by the noncore asset sales and capital return. The management team and Board therefore believe that it is in the best interests of security holders to proceed with the security consolidation, and we respectfully submit it to you for approval today. If approved, Waypoint REIT's securities are due to start trading on a consolidated basis on Tuesday, the 9th of November 2021. Ladies and gentlemen, we now come to the formal part of the meeting. The resolution set out in the notice of meeting is to be considered as an ordinary resolution and, as such, must be approved by a simple majority of votes cast by security holders entitled to vote and voting on the resolution. Only security holders, proxies, power of attorneys or authorized company representatives are entitled to vote or speak at this meeting. The resolution one is the security consolidation. We received the following question from a security holder prior to the meeting. The question reads, "Electric vehicles are expected to become more prevalent in the future. How is Waypoint planning for this future? Is the sale of noncore assets related to this planning?" The answer to the question is as follows. The energy transition is clearly a long-term strategic consideration for Waypoint REIT and its tenants also. The issue rightfully gets a lot of attention in the media, and there are widely divergent views out there as to the speed and impact of the transition. We believe that the risk of alternative fuel significantly impacting our portfolio remains a long-term one for Waypoint REIT, noting that electric vehicles takeup to date has been very slow, with the lack of government support being one of the key reasons. We also note that the CSIRO central scenario forecast predicts that only 25% of the Australian vehicle fleet will be fueled by alternative fuels by 2040, so despite the fact that we believe we have a relatively long runway on this issue, we have formulated the strategy that we believe will mitigate the risks as much as possible. It is important to remember that we are not the operators of the sites. And we merely own the land and the buildings that are then leased to operators on long-term leases, and they have quite enjoyment rights. Accordingly, our portfolio strategy essentially consists of 2 components. Firstly, we will be supporting our tenants to evolve and adapt their offerings over time as the energy transition progresses. This could range from simply providing consent for installing -- the installation of EV charging stations to more complex site repositionings and redevelopments where we will act as capital partner. Secondly, we will proactively manage our portfolio through noncore asset disposals and highly selective acquisitions. Our aim here is to own the highest-quality sites that are able to not only thrive and survive in the near to medium term, but they are also positioned to remain relevant over the long term as the fuel and convenience retail landscape evolves. Finally, it is important to remember that we are also somewhat protected from the energy transition through our staggered lease profile and our portfolio diversification, with 470 assets spread across Australia, all of which will be impacted in different ways and at different times as the energy transition plays out. Are there any other questions online?

Thank you, Chairman. We have one question. The question reads, "Why the properties have been selected as noncore. What is the basis and the rationale?" Thank you, Chairman.

Okay, I might ask Hadyn Stephens, our Managing Director, to answer that question.

Sure. Thanks, Laurie. And thank you for the question. We've been through a process over the last few months of looking at our portfolio. And we have the benefit of some selective data from our tenant in relation to volumes and profitability on a site-by-site basis, so that's really helped us to form views on each site and its viability moving forward. What we've really sought to do is derisk the portfolio from an income point of view with a focus on the next 8, 9, 10 years, so we've looked at each site, looked at the performance of that site. And that's informed us or helped us reach an educated sort of view on the chances of retaining the tenant at the back end of the lease. What we will then also do is look at whether or not there are alternatives in that particular market that we might be able to bring onto that site in a situation where they'd have left. And we'll also look at alternate uses for that site. So there's really 3 parts to it: the performance of the site today, who else we might be able to bring in if they did leave at the end of the lease and what else we might be able to do with that site if we couldn't find an alternate fuel and convenience tenant. So we've been through that process, as I say, across the portfolio; and the majority of the sites that we've identified have come about for sale through the process.

Okay, thank you, Hadyn. Are there any other questions?

I confirm there are no other questions either online or on the telephone. Thank you, Chairman.

Okay, thank you. Well, thank you, everyone. Please now select either for, against or abstain for resolution one on the voting card. Security holders are reminded that they can submit their vote online until 5 minutes after the meeting closes. [Voting]

Ladies and gentlemen, that concludes the business of the meeting. On behalf of the Board, I would like to thank you for your support, and I now declare the meeting closed. The results of the poll will be announced to the ASX later today. Thank you for your attendance and participation in this meeting. Good morning.