Good afternoon, ladies and gentlemen, and welcome to the Region Group's 2025 annual general meeting. On behalf of the board, I extend a warm welcome to all security holders, proxies, and guests participating in today's hybrid meeting. I would like to commence by acknowledging the traditional custodians of the land on which we're formally conducting this meeting, the Gadigal people of the Eora Nation, and recognizing that you may be participating in this meeting on land with other traditional custodians. I pay my respects to their elders past, present, of all those nations. Just before formally commencing, I'd like to acknowledge the passing of Phil Clark, the inaugural Chairman of what was Shopping Centres Australasia, is now Region. Phil passed away earlier this year. I had an opportunity to know him actually before my life on the board.
A fantastic guy and a really great human being, so he'll be sadly missed. If we experience any technical issues today, a recess or an adjournment may be required depending on the number of security holders being affected. If this occurs, I shall advise you. My name is Steven Crane, and I'm the Chair of the group, and I've been appointed Chair of this meeting. This afternoon, we are simultaneously holding meetings of Region Management Trust and Region Retail Trust, and for the rest of this meeting, I'll refer to the business of each trust conducted as one meeting. Today, I will share my reflections on the 2026 financial year for Region. I will then ask our Managing Director and Chief Executive Officer, Greg Chubb, to address you. After Greg's address, I'll move on to the formal business, which includes the resolutions of the meeting and take any questions.
I would now like to introduce my fellow independent directors, Beth Laughton, Angus James, Antoinette Milis, Jane Lloyd, and Guy Farrands, our new director, which I will come to later. I would also like to welcome the following people who are present today: Greg Chubb, our new Managing Director and Chief Executive Officer; Erica Rees, our Chief Operating Officer and Company Secretary; David Salmon, our Chief Financial Officer. David, you might just stick your hand up there in the front seat. Paul Thomas, KPMG Audit Partner. Where is Paul?
Oh, there he is, right at the end there. Thank you. We also have representatives of the group's registry, MUFG Corporate Markets Limited joining us today. MUFG will be moderating the webcast platform. I have been informed by the Company Secretary that a quorum is present, and I declare the meeting open. It gives me great pleasure to share with you today my perspective on the performance of Region over FY 2026, a year that marked a significant leadership transition for us.
On behalf of the Board, I acknowledge and thank Anthony Mellowes for his significant contribution over 13 years as Region's inaugural Chief Executive Officer. Anthony was instrumental in building Region into Australia's leading internally managed essential retail portfolio and establishing strong foundations for its future. We thank Anthony for his leadership and wish him well. The Board was pleased to appoint Greg Chubb as Managing Director and Chief Executive Officer. Greg brings deep property experience, a strong understanding of the sector, and a clear focus on performance and execution. Under Greg's leadership, management has evolved Region strategy and enters its next chapter from a position of strength. Financial year 2026 demonstrated the resilience of our essential retail portfolio. Our centers are focused on the everyday needs of Australian communities, underpinned by Australia's leading supermarket partners and non-discretionary retailer base.
This essential retail focus supports enduring customer demand, resilient income, and sustainable returns throughout the economic cycles. Operational performance was strong over the year with the portfolio occupancy increasing from 97.5% to 98.1% this year. Supermarket sales growth of 4.1% and comparable net operating income growth of 3.3%. We also completed 380 specialty leasing deals during the year with an average annual rental increase of 4.4% and average leasing spread of around 4%. This strong momentum across key operating metrics, combined with the proactive capital management initiatives, resulted in FFO per security growth of 3.2%. Sorry, FFO per security growth and AFFO per security growth of 3.2% and 2.9% respectively, with 100% of AFFO per security distributed to security holders. Excluding the impact of the increase in the weighted average cost of debt, FFO per security and AFFO per security grew by more than 5%.
We just wanted to highlight the impact. Even though we are reasonably hedged, the increase in interest rates during the year still had a fairly significant impact. Our FY 2026 performance demonstrated these strengths with total security holder return of 9.8% over the period, which outperformed both the ASX 200 and ASX 200 A-REIT indexes. Maintaining financial strength and flexibility remains a priority for the Board. We are focused on ensuring capital is allocated with discipline. The balance sheet remains appropriately positioned, and Region retains the capacity to invest in its portfolio and other growth opportunities. Region's performance depends on more than the quality of the assets we own. It is supported by the strength of our relationships with tenant partners and communities, and the experience and commitment of our people.
Maintaining these relationships together with strong governance, responsible management of our assets, and disciplined capital management remains central to protecting and creating value for security holders. The board also continued its renewal during the year. As previously announced, Belinda Robson retired from the board after serving as a director since Region's listing in 2012. On behalf of the board, I sincerely thank Belinda for her service. Recently, Michael Herring also retired from the board. Michael made a valuable contribution to Region, bringing extensive governance experience and steadfast commitment to the group. On behalf of the board, I thank Michael for his service and wish him well for the future. The board has nominated a new independent director, Guy Farrands, for election at this year's AGM. Guy has over 30 years' experience in direct and ASX-listed property markets in Australia and internationally across commercial, retail, industrial, and retirement property sectors.
I would like to thank Greg, the management team, and all of the Region's people for their contribution during an important year for the group. Region enters FY 2027 in a strong position with a high-quality portfolio and experienced management team who have a clear direction for the business. The board is confident in Region's ability and capacity to build on those foundations and deliver growing distributions and security holder returns. Finally, on behalf of your board and management team, I thank all of you for your continued support. I will now hand over to Greg.
Thank you, Steven. Good afternoon, ladies and gentlemen. Thanks for joining us today. My name's Greg Chubb, and it's a privilege to welcome you to my first AGM as the Managing Director and Chief Executive Officer of the Region Group. Firstly, I would like to echo the statements made by the Chair regarding Anthony and thank Anthony for his support throughout the handover in recent months, which has contributed to a very smooth transition. Having now been with the business for some seven months, I have spent significant time in our assets around the country, meeting our teams and engaging with our major tenant partners at Woolworths, Coles, Wesfarmers, and Aldi. These interactions have helped me challenge our capabilities and culture to ensure they are aligned with our strategic priorities and market opportunities ahead.
Our nationwide portfolio of essential retail centers under management is underpinned by Australia's leading supermarket operators and a diverse non-discretionary retailer base that serves the essential needs of the communities in which we operate. During the financial year, comparable portfolio moving annual turnover, or MAT, sales grew by 3.3% to be over AUD 6 billion, of which supermarkets generated more than AUD 5 billion of that amount. Woolworths, Coles, Aldi, Wesfarmers, and other major retailers generate 45% of our total gross rent across the portfolio. Our partnership with more than 2,200 specialty tenants contributes to our essential offerings across the country and results in some 88% of our total income being generated by non-discretionary retailers. Our strategy is to maximize performance from Australia's leading internally managed essential retail portfolio. In doing so, we generate defensive and resilient cash flows that support growing distributions and security holder returns.
Our scale is an important advantage, and it supports deep retailer relationships, specialist capabilities, and insights across a national portfolio and provides opportunities to apply successful initiatives across multiple assets. As we look to the future, our strategy will evolve to build on these strengths. Our integrated operating platform is fundamental to our strategy. It brings our capabilities together around clear asset-level priorities and supports consistent decision-making and execution across the portfolio. In turn, this enhances our ability to actively manage our assets and capture opportunities for growth across the portfolio. We will continue to pursue proactive organic growth opportunities through active asset management, including leasing and targeted asset enhancements to improve the performance and productivity of our assets. Our strategy combines this organic growth with selective inorganic growth. Portfolio optimization provides an opportunity to recycle capital and direct investment towards assets and opportunities with stronger growth potential.
We will also consider acquisitions, including opportunities through the Metro Fund alongside our global institutional partner, where these complement our existing portfolio and create value for security holders. Across each of these pathways, our approach to capital management remains disciplined and focused on sustainable returns. During the year, we continued to make progress against our sustainability objectives. On the environmental front, we now have 21.8 MW of solar PV installed and operational across 33 of our assets, with a further 3.2 MW currently in design. This ongoing investment improves the efficiency and resilience of our portfolio, while supporting our pathway to net zero Scope 1 and Scope 2 emissions by financial year 2030. Our center teams have contributed more than 2,100 hours to local causes during the year, reinforcing the role that our centers play as trusted community hubs.
We remain on track to meet mandatory Australian Sustainability Reporting Standards, or ASRS, during FY 2027. Throughout the year, we continue to strengthen our climate governance, data systems, and reporting capabilities to ensure we are well-positioned for the new reporting framework. Region enters FY 2027 with a high-quality, internally managed, essential retail portfolio, significant scale, strong retailer relationships, and an experienced team. Despite persistent inflation, elevated interest rates, and ongoing global uncertainty, our non-discretionary retail focus continues to support resilient operating performance. Pleasingly, the strong momentum across key operating metrics, including comparable sales growth and specialty leasing activity, has continued into the first quarter of this new financial year. We continue to closely monitor customer behavior and tenant performance while remaining confident in the resilience of our portfolio and the essential nature of the goods and services our centers provide.
Our strategy provides clear pathways to 3%-4% plus AFFO per security growth, while the characteristics that have long underpinned Region's performance remained unchanged. Our essential retail focus, resilient income, and disciplined approach to capital management. FY 2027 sees us focusing on active asset management, disciplined investment, and consistent execution across the portfolio as we continue to lay the foundations for sustainable growth over the longer term. At our FY 2026 results that we presented in August, Region provided FY 2027 earnings guidance of 3% growth in FFO to AUD 0.165 per security and 3% growth in AFFO to AUD 0.145 per security, with a targeted distribution payout ratio of 100% of AFFO. Since then, we've exchanged contracts for the divestment of three neighborhood centers for a total consideration of AUD 73.5 million.
Against that backdrop, and assuming no material change in market conditions, FY 2027 earnings guidance is maintained at FFO of AUD 0.165 per security and AFFO of AUD 0.145 per security. With a high-quality, essential retail portfolio, a strong balance sheet, and continued momentum across the business, I am confident that our team at Region is well-positioned for the year ahead. Thank you for your attention this afternoon, and I will pass it back to Steve. Thank you.
Thank you, Greg. Ladies and gentlemen, the resolutions for consideration today may only be voted on by security holders, proxy holders, and security holder company representatives. Security holders participating in person or online will have the opportunity to ask questions or make comments on each matter being put to security holders. We did not have any security holders register to ask questions by phone. I have been informed that the notice of meeting was sent or made available online to all registered members within the notice period required. I now table the notice of meeting, and unless there are any objections, I will take the notice covering this meeting as read.
A reminder that we are simultaneously holding the meetings of Region Management Trust and Region Retail Trust, and although only one resolution will display on the presentation slides that you will be asked to vote on, that you will only be asked to vote on once on each resolution, your vote will be taken as a vote for each trust. Voting on the resolutions will be conducted by way of poll. In accordance with the Corporations Act, as chair of this meeting, I demand a poll on each resolution to be considered in this meeting. I will now hand over to Erica Rees, our company secretary, to explain how to vote and ask questions at today's meeting. Erica?
Thank you, Steve. Good afternoon, everyone. Steve, as the chair of the meeting, has demanded a poll on all resolutions. You should record your vote by selecting the For, Against, or Abstain squares for the relevant resolution shown on the paper or online voting card when the chair puts each motion to vote. For those security holders participating in the online portal, you will need to register to vote by clicking on the Get A Voting Card button at the bottom of your screen. Once you have registered, your voting card will appear with all of the resolutions to be voted on at the meeting. You may need to use the scroll bar on the right-hand side of the voting card to view all resolutions. Following the voting, general business questions will be taken.
For online participants, please click on the Ask a Question button, type your question, and click Submit. We encourage security holders to send their questions through as soon as possible. Voting will close five minutes after the close of the meeting. Security holders attending the meeting here today may vote using the voting cards provided from the MUFG registration desk. Members who are entitled to vote should have received a yellow voting card. Members who have voted before the meeting should have received a blue admission card. Those in possession of either a yellow or blue card are welcome to ask questions, while those with a red visitor card are requested to only observe during the meeting. If you have not received the correct card, please go to the registration desk where an MUFG representative will assist you.
We will endeavor to give all members who wish to ask a question or make a comment a reasonable opportunity to do so. We ask that you please keep your questions or comments related to the matter at hand and as succinct as possible to allow all participants an opportunity to ask questions, which we ask be limited to two per participant, please. If you wish to ask a question, please come to the microphone at the center of the room, and please stand close to the microphone so that you may be heard. Before asking your question, please identify yourself and confirm that you are a security holder or a duly appointed proxy for a security holder by displaying your voting card. General questions received from security holders prior to the meeting will be addressed during the general business questions period.
Each resolution set out in the notice of meeting is an ordinary resolution, and as such, to pass must be approved by a simple majority of the votes cast by security holders entitled to vote and voting on the resolutions. We will disregard any votes cast on the relevant resolution by those persons set out in the voting exclusion section of the procedural notes section of the notice of meeting. We remind the meeting that the Chair will vote any undirected proxies in favor of all resolutions. All voting by the Chair is subject to the voting exclusion details included in the notice of meeting. The voting cards will then be collected at the end of the meeting, and the votes tallied. We will announce the results of the vote to the ASX following the close of the meeting.
If you have to leave before all resolutions are voted on, you may provide your completed yellow voting card to an MUFG representative on your way out. I will now hand back to Steve.
Thank you, Erica. I now open the poll. I appoint MUFG Corporate Markets Limited as scrutineer for the poll, and in accordance with the Corporations Act, each member will have one vote for each dollar of the value of their RGN securities held by them. MUFG have the details of this value for security. I have been advised by MUFG that all proxies received have been checked and have been found to be properly completed. I declare valid for voting at this meeting. I will disclose proxies on the screen prior to the vote being taken for each resolution. These figures will be as at the closing time for receipt of the proxies, which was 2:00 P.M. on Friday, October 16. These figures may change if a security holder who previously submitted a proxy has joined the meeting today and revoked their proxy.
The first item of notified business is to consider the annual financial report, directors' report, and auditors' report for Region Group for the financial year end June 30, 2026. There is no resolution in respect of this item of business, but if there are any questions or comments on the annual report, you may submit them now. For this item and all those that follow, may I request that you take time to identify yourself before asking your question, and in the case where you are a proxy holder, please identify on whose behalf you are holding a proxy. Are there any questions or comments on the management of the group or on the financial statements and reports? Yes.
[Phil Azoka] almost joining the board. It's that close.
Yeah.
Welcome to Greg. David Kingston, DRK Super, K Capital. Welcome to Greg. Good luck. Nice to have a chat to you before. He's a neighbor. I've only got a few brief comments today. Appreciate interest rates have gone up, Chair.
Appreciate retail is a little bit more challenging than it may have been a year or two ago. I understand that the share price has been flat, even slightly down from last year. But again, I would repeat my theme of my comment last year that is this entity a bond proxy, or will it ever deliver capital growth? And I accept in the last year, capital growth was unlikely because the interest rate is going up, the economy is challenged. Good to have Guy Farrands on the board. I think you had a role in ALE—
I did.
—with Andrew Wilkinson.
Subsequent to him.
Yep. Outstanding entity. It delivered both coupons and capital growth consistently. It was brilliantly managed by Andrew and yourself, and cost control was terrific. It was one of the great performers. Triple net leases, great performer, income and capital. The only thing I would put to the board, and I am sure you look at it all the time, I am not 100% sure that you should not be managing your own properties. I think you are leasing them, but whether it would be more economic to manage them, I am not sure. I am certain you have all looked at it, but be interested to know next year whether it potentially stacks up. Overall, I think it is a good entity. It is safe and reliable. I think you are doing the right thing by not being aggressive.
You are certainly doing the right thing by not developing assets, because most of the developers out there are losing money, whether it is Dexus or Mirvac. I spoke to a major super fund the other day, and they just said they cannot make anything stack up with virgin developments. I think you are doing the right thing by being conservative. Being a bond proxy is not the worst thing in the world. Your yield at the moment is 6.5% on AFFO basis. Again, I congratulate you, Chair, and the company on looking at AFFO. I think a number of REITs that look at FFO are misleading. I think well done on owning up to the fact that there is a lot of costs between FFO and AFFO. Other than that, I really do not have much to say this year.
I said a few things last year, but look, good luck, and I think it is a well-run entity. Maybe see if you can tighten up on the costs. I am not 100% sure the costs are at the optimum level. Thank you, and I apologize, I have got to leave reasonably soon today for another commitment.
That is okay.
Thank you.
Thanks, David. Well, I think the interest rate environment's made it very difficult for organizations like our own. That's why I did draw the analysis that in fact our AFFO would've been up 5% if it hadn't have been for the impact of interest rates during the year. And that's from somebody who has a fairly hedged. We're pretty highly hedged. But just shows you what the impact was. And I think in the last 12 months, and even in the last quarter, I think in the last quarter we were actually the top-performing REIT, or we were very close to the top-performing REIT. We were certainly in the top quartile for the last 12 months, so to June. I think we're very conscious that we want to deliver more than just the yield, but the environment hasn't been there for us.
Greg, I don't know whether there's any comment you want to make to those comments.
No, I think just your question, David, around how we manage the assets is a good one. We've got a portfolio of 100 properties across the country. We're represented in every state and territory around the country. We've got a partnership with Knight Frank. We've reassembled that partnership over the last six months, and we're taking more of a participatory interest in that relationship. We've pulled some roles out of the Knight Frank frame and brought them in-house. But all of the very significant functions that are taken to run a shopping center portfolio effectively, leasing, asset management, and where we can add value is absolutely taken in-house. And I think with us taking more of a participatory role in the relationship with our property manager is for the near term, the right thing for us to be doing.
Okay. Any other quest— yes, over the lady here.
My question is, look, I'm not going—
Sorry, I have to ask you, I'm sorry, because there's people—
We can take the mic.
—online. If you could come to the microphone or if somebody could take the microphone to the lady, please. I, yeah. Sorry, I know it is sometimes a bit daunting to stand in front of a microphone.
Please come and stand.
Just that we have got people online.
Is this me?
Yes, that's you. Yeah.
I'm [Rowan Cecilia Mary Weir].
Right.
My question's like, I'm not game to buy any shares or anything. With everything that's happening in the Middle East and the blockage and everything, I'm just wondering how you're sort of approaching it yourself because it's, you think, "God, I can't travel there, can't buy that." It's sort of—
Yeah.
—a bit stationary. I think I've come to the end of that question.
That's okay. I understand what you're saying.
Yeah, but—
I understand what you're getting at.
Okay.
It's a very uncertain world, and I think that's why in some ways we would see ourselves as a very safe option in this very uncertain world. I think we've got ourselves, we think, in a fairly, well, we're fully hedged pretty much virtually for this financial year. We're actually still relatively highly hedged for the following financial year. And we've got the major, most of our customers are major retailers who we all know and are doing. And people have still got to, even when the world goes a bit haywire, there's still the need to buy groceries and the essentials of life. I think we're in about, if I cross fingers, and I don't even know whether I should say it, but I think given the circumstances we're in, we provide hopefully a bit of safety in that sort of environment.
I think with Greg and the team, I can tell you they are working every day to try and make sure that that stays the case, and that they actually even eke out a bit more value out of what we do on behalf of the security holders. Are there any other questions? Are there any questions online?
Chair, there are no questions at this time.
Right. Thank you. I am also obliged to ask, are there any questions or comments relevant for the conduct of the audit or preparation and content of the auditor's report, or the report for the directors of the auditor? Does anybody have any questions regarding the audit, please?
Good afternoon. My name is [Lindsay Somerville]. I am a proxy holder for Stephen Mayne.
KPMG are our auditors.
Paul's here today. Is he one of the 400 people that maybe get the sacks in or have had the sack from KPMG?
They've told lies to the Senate committee. They've had an abysmal year.
Why are we still with them? How long have we been with them, and are we looking at a tender?
Well, thank you very much, Lindsay. We tendered this audit last year, well, before the end of last year, and we've had our previous auditors since listing, and it was considered good corporate governance for us to. We'd done it before. We'd had a look before. We had a formal review, as I say, before last year, and we interviewed all the four major firms, and we were very comfortable that KPMG was the best suited for our needs. The team has remained intact. That's right. I can say after the first audit, we're very pleased that we've moved to KPMG, and I don't see any. I understand the broader issues within KPMG, but I have to say, the service that we've been getting, we're happy that we've got KPMG as the auditor.
Paul, I don't know whether you want to say anything on them.
Look, I can. Obviously, it's your team.
You're going to have to come to the mic. Yeah. Come to the microphone. Yeah, sorry.
Just in relation to acknowledging your point. The firm obviously accepts that there were very few partners who, in, I guess, most people's eyes, acted inappropriately. The firm is taking a range of measures to address those. But I can confirm that none of the partners or staff who work on the Region engagement have been involved in any allegations from the whistleblower that we had, and no information from Region has been shared, nor was it part of any of those allegations.
Thanks for that. Thank you. Do we have any questions for the auditor from online?
Chair, there are no questions from online.
Thank you. All right, so I'll move to resolution one as displayed on the screen. This resolution is an advisory, non-binding, ordinary resolution, does not bind the directors of Region RE Limited. On behalf of the Board, I would like to take this opportunity to thank the Remuneration Chair, Angus James, and each of the members of the Committee for all the work they have done. I'd now like to hand over to our Remuneration Committee Chair, Angus James, to present the report.
Thanks, Steve, and good afternoon, shareholders. The board approach to remuneration is straightforward. We seek to attract and retain high-quality executives, reward the delivery of strong business performance, and align executive outcomes with the interests of security holders. Importantly, a significant proportion of the executive remuneration remains at risk and is linked directly to performance outcomes. This reflects our longstanding pay-for-performance philosophy and the board's commitment to ensuring executive reward is earned. Today, I'll recover the Remuneration Report outcomes for the year and changes we have made to the remuneration framework for FY 2027. As part of the annual remuneration review of Region's executive, or KMP, Anthony Mellowes and David Salmon received a 3% increase in total fixed remuneration as of 1 October 2025.
Greg Chubb's total fixed remuneration and STI opportunity were established consistent with his predecessor on a pro rata basis for FY 2026. Greg did not participate in the FY 2026 long-term incentive plan. As disclosed in the Remuneration Report, Greg was granted sign-on award rights subject to your approval, security holder approval today, to compensate a proportion of the equity incentives he forfeited when leaving his previous employer. Importantly, the value of those rights is lower than the assessed value of the incentives forfeited, is in equity, and will vest in periods extended beyond those with which he would have had at his old employer. Turning to the remuneration outcome for this year. The FY 2026 short-term incentive framework was designed to reward performance against a balanced scorecard of financial and strategic measures.
These included AFFO per security, comparable NOI growth, specialty vacancy reduction, capital management and deployment, growth in external funds under management, carbon emission reductions, and individual performance objectives. During FY 2026, Region delivered a total security holder return of 9.8% and an AFFO per security of AUD 0.141 per security, exceeding the initial guidance we provided to the market. Performance across the STI scorecard was strong, with each measure achieved either in full or in part. As a result, the STI outcome for executive KMP was 86.7% of maximum opportunity, with awards to Greg Chubb and Anthony Mellowes apportioned pro rata for their respective periods of executive KMP employment during the year. Importantly, these outcomes reflected the achievement of performance objectives set by the board at the start of the year, and the delivery of outcomes and long-term value creation for security holders.
The FY 2023 long-term incentive award was tested in FY 2026 and included two performance measures: relative total security holder return, weighted at 60%, and AFFO per security growth, weighted at 40%. Neither performance hurdles was achieved, and as a result, no amount will vest or be awarded to the KMP. While executives were awarded for delivering the FY 2026 operational and strategic outcomes through the STI framework, no long-term reward was earned because the required long-term performance thresholds were not met. This demonstrates the operation of Region's remuneration framework as intended. Long-term rewards are only delivered when long-term value creation is obtained. Looking forward to the FY 2027 remuneration framework, the board has reviewed the framework to ensure it remains aligned with Region's strategy, market practice, and the interest of security holders. There will be no change to fixed remuneration for executive KMP in FY 2027.
For the CFO, David Salmon, however, the proportion of remuneration at risk will increase both with his STI and LTI opportunities by 10% on the maximum basis. This better aligns the role with Region's peer group while maintaining a clear pay-for-performance orientation. The FY 2027 STI framework will continue to balance financial performance with strategic priorities, with some measures refined to reflect the evolving direction of the business. The FY 2027 LTI will remain the same in performance conditions and weightings as FY 2026 and continue to operate over a three-year period. The one-year deferral period following the performance period has been removed, bringing the structure more closely in line with market practice while maintaining a strong long-term focus. In closing, the FY 2026 result demonstrates the board's continued commitment to pay for performance.
Executives are rewarded for delivering against FY 2026 performance scorecard, while no reward was delivered under the FY 2023 long-term incentive plan because the required long-term performance hurdles were not achieved. The board believes this outcome appropriately aligns executive remuneration with company performance and security holder interests. We will continue to review the framework to ensure it remains effective and supports the successful execution of strategy, and promotes sustainable long-term value creation for all security holders. On behalf of the Remuneration Committee, I'd like to thank security holders for their continued support. Thank you very much.
Thanks, Angus. I'd like to open this item for discussion. Are there any questions or comments? Is there any questions online?
Chair, we have two questions.
First is from security holder Stephen Mayne. "Which of the proxy advisors covered us this year, and did any recommend a vote against any of today's resolutions, including this remuneration report item? If so, what reasons did they give, and did this translate into any material protest votes? Steve Crane gave the best answer to a question like this last year with a clear factual summary of the LTI debate with Ownership Matters, with none of the usual confidentiality arguments that some Chairs put up. Well done for that, and speak up again today.
Yeah. Well, thank you. We try to be transparent where we can. No, look, I can answer that question. The answer is this round, and just to be clear, Angus and I do the round of major proxies and major shareholders where they want to have an interaction with us ahead of this meeting, and we've had no pushback on this resolution, and we saw all the major proxy advisors. I think the voting, has it gone up yet? I can't remember now. No. Anyway, I think when you see the voting, you'll see that there was no issues there.
Chair, the next is a comment from security holder [Celestine Ekeric]. "Would the Chair and Board cease immediately the awarding of bonus issues to senior executives? This is unnecessary and a shocking example of corporate greed.
Yeah. Well, look, I think I sort of understand when people sometimes look at the remuneration of senior figures in the market, and they're large sums of money. But the reality is, we're in a competitive market, and one thing for sure is we don't set the pace. We're trying to be competitive to attract good quality staff and, of course, ultimately, a good quality Chief Executive because that's what drives an organization. In appointing Greg, or whether it was Anthony before him, we're just trying to make sure that the package that we come up with is competitive so that we can attract people of that standing. We've demonstrated, or has been demonstrated, sometimes they don't get paid much of their, they get their fixed, but you quite often see they don't get much or they don't get any sometimes of their longer term incentives.
It is all designed to try and create incentive to achieve long-term and short-term objectives. I think the one thing we benchmark it against the whole market or the market that we operate in, and we are very comfortable that we are comfortably in the right place for an organization our size and complexity. I think that is just, we do not set the pace. We just try to be somewhere where it is competitive, and we can attract the right people.
Chair, there are no further questions at this time.
Thank you. Is there any other questions just before I Okay. Sorry, I have done that one. The voting statistics are now, on this resolution, are now shown on the screen, and I put the motion to vote. Directors unanimously recommend security holders vote in favor of the resolution. I will now move to the next item of business. We now move to resolution two on your notice of meeting, the re-election of Antoinette Milis as an independent director. The resolution is displayed on the screen and is taken as read, and I would like to invite Toni to make a few comments. She will make them from where she is sitting. Thanks, Toni.
Thanks, Steve. Good afternoon, everyone. I am very pleased to be here today seeking your support for my re-election as an independent non-executive director of Region Group. Since my appointment in December 2022, I have been a member of the investment and nomination committees, and last year was appointed chair of the investment committee and a member of the remuneration committee. My career spans over 35 years of experience as a property industry executive, including previous leadership roles at Lendlease Group, where I worked across various areas of real estate, in particular across sectors of mixed use, including retail and residential development, capital partnerships, asset and funds management, property and facilities management, and construction and infrastructure. Throughout my career, I have also developed specific skills and knowledge in areas including acquisitions, M&A, strategy risk management, corporate governance, compliance, stakeholder engagement, and international experience.
In addition to my Non-Executive Director role at Region Group, I am also involved in other real estate ventures, including my role as Non-Executive Director of Lavande Proprietary Limited, of which I am also a member of the Development Committee and Chair of the Sustainability Committee. In addition to those board roles, I undertake real estate advisory work with publicly listed private and government organizations, all of which ensure I maintain my broad skills and macro industry understanding. I consider myself well-equipped with the necessary skills and experience to contribute to the ongoing success of Region Group, and am fully committed to the continued growth and performance of the Group. I believe I have made a meaningful contribution to the board since my appointment.
With your support today, I look forward to continuing to work with my fellow directors and the Region management team to deliver the ongoing performance of Region Group. I thank you for your consideration.
Thanks, Toni. I now open this item for discussion. Are there any questions or comments? Are there any questions online?
Chair, there are no questions at this time.
Okay. I will put this to the meeting. The voting of proxy statistics on this resolution are shown on the screen, and I put that motion, as I said, to the vote. The directors, Ms. Milis abstaining, unanimously recommend shareholders vote in favor of the resolution. I will now move to the next item of business. We now move to item three, resolution three, election of Guy Farrands as an Independent Director. The resolution is displayed on the screen and taken as read. I would like to invite Guy to make a few comments.
Good afternoon, everybody, and thank you very much for the opportunity to present my credentials for you today. In seeking your support for my election to the Board of Region Group as an Independent Director, I would like to thank my fellow directors for the confidence they showed in appointing me to the Board in August this year. Since joining, I have also acquired securities in the Group worth around AUD 175,000, aligning my own interests with those of all the security holders. My own career has been in three parts. My formative experience was gained in the investment sales team at Jones Lang LaSalle, and as joint head of property at Heine Management Limited, before moving to Macquarie Bank's investment banking group, where as a division director in the real estate team, I managed IPOs, equity raisings, mergers and acquisitions for many of Australia's listed property companies.
My senior executive career followed, spanning more than 30 years in direct and listed property markets in Australia and internationally. This includes commercial, retail, industrial, residential, and retirement asset classes. I held Managing Director and Chief Executive roles at three ASX-listed groups, Valad Property Group, Villa World Group, and ALE Property Group, which prior to its takeover was Australia's largest freehold owner of pubs. I was also Chief Financial Officer of Viva Energy REIT, now Waypoint REIT, giving me direct experience in essential and convenience retail property, closely aligned to Region's own supermarket-led portfolio. This is on top of leasing and shopping center sales and development experience gained earlier in my career. Alongside that, I have built a listed company board career spanning more than a decade. I have served as a Non-Executive Director of Aspen Group, a provider of affordable accommodation, more recently as Chairman.
I believe this combination of direct property executive and governance experience is complementary to my fellow directors, and I am joining the Board at a time of real momentum for Region under Greg Chubb's leadership as Managing Director and CEO. I hope to continue the continued growth and performance of the Group in the interests of all security holders. Thank you very much for your consideration.
Thanks very much. Thank you. Thanks, Guy. I now open this item for discussion. Any questions or comments? Any questions from online?
Chair, we have one question. It comes from security holder Stephen Mayne.
Could the new director, Guy Farrands, and the Chair comment on the recruitment process that led to his appointment to the Board. Was a headhunter involved? Did the full Board interview any other candidates? Did Guy know any of our directors or KMP before engaging with the recruitment process?
Right. Well, we did use a headhunter, an independent group, to search the market. I am happy to say we came up with four candidates. We narrowed that down to two. There was a couple of directors who narrowed the field down to the two. Once we got down to the two, all directors met with those candidates, and following a board discussion, we decided to offer the role to Guy. To my knowledge, other than people I think know Guy, but Guy, you could—
That is right.
Yeah. There is no other connection other than that he has been in the property industry for a long time, and we are in the property industry, so people know each other, but that is the extent of it. We are very pleased to have him on the board. So, I don't—
There are no further questions.
Yeah. Okay. I think I got everything he asked in that question, but okay. Right. No other comments or questions? Okay. I have now put the statistics for this resolution on the screen, and I now put the motion to a vote. The directors, Mr. Farrands abstaining, unanimously recommend security holders vote in favor of this resolution, and I will move to the next item of business. Resolution four is the issue of short-term incentive rights under the executive incentive plan to the Managing Director and Chief Executive Officer, Gregory Chubb. I now open this item for discussion. Are there any questions or comments? Are there any questions online?
Chair, there are no questions at this time.
Thank you. Well, the proxy statistics for this resolution are on the screen, and I now put the vote. The directors, Mr. Chubb abstaining, unanimously recommend security holders vote in favor of this resolution. And I might say, we obviously covered this in some detail with all the proxy advisors, and Angus and my talking with those people prior to this item being voted on. I will now move to the next item of business, the issue of long-term incentive rights under the executive incentive plan to the Managing Director and Chief Executive Officer, Greg Chubb. I now open this item for discussion. Are there any questions or comments? Anything online, moderator?
Chair, there are no questions at this time.
Thank you. The voting statistics on this resolution are shown on the screen. I would now put the motion to a vote. The directors, Mr. Chubb abstaining, unanimously recommend security holders vote in favor of this resolution. I will now move to the next item of business. Resolution six is the issue of sign-on award rights under the executive incentive plan to the Managing Director and Chief Executive Officer, Gregory Chubb. These were things that Angus mentioned in his address. The resolution is displayed on the screen and taken as read. I now open this item for discussion. Are there any questions or comments?
We will just bring the microphone over to you.
I am sorry. I cannot quite get your question. Sorry. That is okay.
I am becoming infamous, but never mind.
It's okay.
It's a whole lot of rights. Once you would complain about all those things being given to the share and all our shares would go down, a long time ago. I suppose it's okay. I'm going back a few years, but you were aware that if there were so many shares in the company, that it was better payment to you, a better investment. Then when you get so many other rights, you're getting payment share on that too, and it sent our value down. I may have misunderstood it, but that's nothing.
No. Yeah.
I'm quite happy for you to have them. It's just that I'm out—
Well, I wish I did have them, but they're not mine. They'll be his. Yeah, that's okay.
Oh, well.
No.
I'm a bit doubtful about you, but never mind.
Well, maybe so you should be. I am not sure.
I think they only let me out on Tuesday, but never mind.
No.
I will not.
Well, as Angus mentioned
Apparently everything's given up on
Yeah. As Angus mentioned in his opening remarks in his address, these were awarded to Greg in compensation when in his previous employee, he had some rights to acquire shares, and that had a certain amount of value attached to them for him. Part of our discussions with Greg was to actually come to an agreement on how we would help compensate him for walking away from those entitlements. We came up with the arrangement you are voting on here today. As I have mentioned previously, we have been through all this with the proxy advisors and other major shareholders. The sum that we agreed on was actually a discounted amount of money. Unfortunately, Greg wanted to come back to Australia and didn't want to keep working where he was working.
A discounted amount of value of securities, and as a consequence, we recommend that shareholders. But we have to get your approval before we can actually finally pay these amounts, and so that's why we are here today. It gets paid in shares, so for Greg, immediately starts to give him ownership in the company, so that he builds his stake in the company and gets more and more incentive to make the company perform. So, in terms of its impact on, I think you are sort of saying more rights getting issued impacts on everybody else. This really doesn't impact, given the number of shares that are in the market, this doesn't really impact in any meaningful way on the other shareholders.
We think it helps us acquire a, if I have to say, he could close his ears or put his hands on his ears, helps us acquire a first-class Chief Executive for our company, which is what we set out to do, and what you would want us to do. Is there any other questions or I hope that helped answer the question. Is there any other questions or comments? Sorry, did we ask about online on this one? I am not sure.
There are no questions, Chair.
No questions? Right. Okay. The voting proxy statistics on this resolution are shown on the screen, and I will now put the motion to vote. Directors, Mr. Chubb abstaining unanimously recommends security holders vote in favor of this resolution, and I will now move to the next item. Online security holders are reminded that they can submit their vote online until five minutes after the meeting closes. Ladies and gentlemen, this concludes the formal business of the meeting. MUFG representatives. Yeah. MUFG representatives will now collect the yellow voting cards to tally the results for the meeting. I would now like to open the floor to general questions or comments that have not been addressed in any other part of the meeting, and invite our online security holders. If you have not already done so, please send through any general questions or comments for the board and management.
Has anyone any general questions or comments? Yes, sir. Please.
Good afternoon. It's great to see so many women on this board. There's lots of boards at meetings that I go to, and there are all these old blokes like me sitting up there. So great to see women here, and hopefully there will be more women and less men at some stage.
Yay.
My question is about AI. How many full-time equivalent staff do we have—
Yeah.
—at the moment that are affected by AI, and do you think that will change in the foreseeable 12 months?
Yeah.
My second question is there a takeover risk for the company that you see, and what steps would you take to overcome that if that was the case?
Well, let me deal with the second question first.
Yeah, sure.
Then I'll pass over to Greg. We're trading at a discount to our assets and therefore that means in some senses there's vulnerability. Sorry. That means in some sense there's vulnerability. But we're trading at one of the smallest discounts. There's a whole bunch of REITs at the moment, and all of them are trading at discounts. I think nearly all of them, if not all of them. And we're at the high end of where the value is trading relative to our security. So, I'd just say that we're as well-positioned or not to be taken over as anybody else. Although we have a very attractive asset class. That's why we're trading at the more modest discount, is because we have assets that are generally regarded as very good for the times that we're in. So I think, who knows?
We're always alive to it, but I don't think we don't spend too much time thinking about. What we spend time thinking about is trying to make the company grow, get bigger, build our asset base, grow our earnings. That's really the only way, long-term, how we can defend ourselves. But Greg, you might answer the AI question.
Sure. Just before I do, just on the takeover piece, performance is the best form of defense in my mind. So we're very focused on the performance of the business. Your question on AI, we've got a full-time equivalent in our corporate office of 80. That number's remained fairly constant over the last few years. I think, speaking broadly, AI is something that's available to all of our staff. We've got licenses with Copilot and Claude, and we make that available to all of our staff. We are seeing it being used more generally by our teams for those really onerous, repetitive tasks. So we're seeing some efficiency gains there. I don't think it will change our headcount too much in the near term. It's all about our teams being able to add value more effectively, is the way that we're looking at it.
I think we're still very early in the journey. So where it takes us, time will tell. But we're giving all of our team members the opportunity to utilize the technology. We're seeing some interesting things evolve through various parts of our operating platform, and hopefully we'll see that continue. So innovation is a very important part of our business, and AI forms part of that innovation platform.
Thank you. Is there any more questions or comments anybody wants to make in the room?
Yes.
Yes.
Greg, further to our discussion—
We'll get you a microphone because we are—
Yeah.
—online as well.
Yeah, because we've got people who are listening outside the room.
Yeah, just further to our discussion prior to the meeting. In the future, you said, Greg, that the shopping center growth is not going ahead all that fast. But you are looking at other retail, as in McDonald's standalone-type opportunities. Can you expand on that?
Sure.
What sort of people you got involved, and what sort of expertise? I would be interested.
We are spending a lot of time adding value to the assets that we already own. The example we spoke about with regards to McDonald's, we have lots of residual land around our shopping centers. We are looking at ways that we can monetize those bits of residual land. We are in the process of developing what we call quick service restaurant pad sites with people like McDonald's, Guzman y Gomez, KFC, and others. The other attribute that we are looking to build on is with Aldi. The vast majority of our supermarkets across our portfolio are occupied by Woolworths and Coles, and there is a number of opportunities for us to bring Aldi into some of our properties. It is more intertwining those offerings within our existing asset base, rather than going off and doing them separately.
It is a matter of enhancing those assets and creating more value and more opportunity for us to grow those assets over time.
Okay. Any other questions or comments? Anything from online?
Chair, we have five questions.
Five. Right. Okay.
The first question is a two-part question from security holder [Slobodan Mijoski]. What specific strategic initiatives is management prioritizing to close the 15% discount to NTA and ensure the market fully values our central retail property portfolio?
The second part is—
Yeah.
—with FY 2027 distribution guidance heavily tied to full payout ratios, what capital management tools such as an expanded on-market buyback or strategic divestments is the board willing to deploy to drive stronger capital growth for security holders?
Yeah. Okay. Well, I'll start that and Greg might want to chop in later. Yeah, the discount is, well, I think we've talked about a little bit. That's a bit symptomatic of the whole sector, and reflects interest rates, and a bit of lack of confidence in what's happening in the economy. So we're trading at a bit of a discount. It is actually a very tight discount, even though we don't like it either. I'm not saying we accept it. We would like to see us trading at a premium, which we certainly have done in the past. But at the moment, that's where we are, and we're trading at a tighter discount than most others, if not all others, pretty much. Yeah, I think that'd be pretty right. On the FY 2027, so the buyback, yeah. Look, we're in a blackout at the moment.
We actually have had the buyback operating six weeks out from the AGM. We enter a blackout period, so we haven't been active in the market. After today, we can reactivate the buyback, and we would intend to be back in the market buying securities as per the approvals that we have. So that's what I'd say. Greg, I don't know whether you want to add anything to that.
I think just bridging the gap on the NTA discount, it is all about our operating performance. We are looking to drive our FFO and AFFO. We have given guidance of 3% growth for the year ahead, and we are looking to actively manage the portfolio as best we can and focus on what we control and not get distracted by what we cannot. As I said in my prepared remarks, the first quarter performance has opened well for us this financial year. Supermarkets that make up the vast majority of our income, and certainly our retail sales, are performing exceptionally strongly, and that underpins the performance of our portfolio more broadly. We are very focused on delivering the guidance that we have given to the market for the year ahead, and we think we are very well positioned to do that.
I think that is the biggest contributor that we can bring to bridging the NTA gap at this point.
Yeah. Next question.
Chair, the next question comes from security holder [Victoria Elwood]. Going forward, can the online portion of the meeting be done by video and not just a picture of the people and slides, please?
I think I'm getting We could, but let's take that on notice. I think that's about the best I could take that on notice. Yeah.
Chair, the remaining three questions are from security holder Stephen Mayne.
Right.
The first is, I was disappointed with the former CEO's lack of interest in helping curb the illegal tobacco trade. When commenting at last year's AGM, he said it was up to various state health departments. How many dedicated tobacco shops, not associated with a major retail chain, do we have in our centers? How are things going with the insurers of these centers? What steps do we take to prevent illicit tobacco from being sold at our centers?
Yeah. Well, first of all, I think I was obviously here at the last annual general meeting, so I remember the answers. Look, I think illegal tobacco is something we're very aware of, but as much as people might like us to be, unfortunately we're not enforcement people. We don't have any legal right to remove people, unless we have some good reason to. Even then, I'm not sure whether we've got But I'm going to pass to Greg because it's a regular discussion. We've reduced the number of tobacco retailers that we have in our centers. That's down a meaningful amount. A number of those tobacco retailers, a big proportion of them, are actually legitimate tobacco retailers that we can put hand on heart and say they are legitimate. Undoubtedly, there may be some that aren't. But I'll pass on to Greg.
Sure. So in broad terms, we've reduced the number of tobacconists across our portfolio now to about 60. That's reduced from over 70, 12 months ago. Part of that question is a good one about the major chains. The biggest chain in Australia for specialist tobacconists is a business called Smokemart, which is now owned by Viva Energy, which is an ASX 100 company. So they occupy just under half of our 60 stores. Since the last AGM, and I understand from reading the transcripts of the meeting from last year it was quite a discussion, in various states and territories, we do now have the power to terminate leases if it has been proven that a retailer has been selling illicit tobacco. So we are working with the authorities. We do recognize that it is an issue.
But I would also echo Steve's comments that it is a legal product when it is not illicit, and there are some very legitimate operators. So we will look to reduce our exposure to parties that might not be doing the right thing, and we'll continue to support those that do. And we do have now the ability to terminate leases for those that are raided and been seen to being selling illicit tobacco. At this point, I'm not aware of any untoward insurance issues that we're dealing with across our portfolio that relates to tobacco. But it's something we keep a very close eye on, I can assure investors of that.
Yeah, that's right. It's something we discuss regularly. In other words, trying to make sure that where we are, we're dealing with any issues that we should be. Any other questions there?
There is, Chair, from security holder Stephen Mayne. Since joining the business, could Greg Chubb please comment on the biggest reporting, delegation process, and personnel changes that he's made? His predecessor abolished the property compendium disclosure on the grounds that it gave competitors too much information. If GPT, Dexus, Scentre Group, Vicinity, and Mirvac, several other listed REITs do this, what is his view on bringing this back? Does Steve Crane agree that it wouldn't be too much of a pain to bring this back?
Well, Greg, why don't you go?
Yeah. Just on the disclosure of the property compendium values, I guess we're very different to the peers that Mr. Mayne has referenced where the average size of their assets is many hundreds, if not billions of dollars. The average asset size across our book is about AUD 50 million. So it's very difficult for us when we are an active manager, and I mentioned in my prepared remarks that we've sold AUD 73 million worth of assets. That's three properties, so less than about AUD 25 million average asset size. If we're disclosing the values of our assets, it puts us in a very, very difficult position to then trying to be able to sell those assets at premium to our book value. So, I don't have any intention of bringing back the values associated with the property compendium for competitive reasons.
The first question about what have I done to change in my time here, I've been in the business now for seven months. I'm very fortunate to have inherited a very strong operating platform and a very strong business. So it's not a burning platform. So I haven't had to make too many changes. The one change that I would talk to, though, is us taking more of an active role, as I think I spoke to in the question from Mr. Kingston, in our relationship with Knight Frank, who are our property and facilities manager. So we're taking a significantly greater involvement in that, and that alongside Erica, who's on the stage with me, who's our Chief Operating Officer, is a very big focus, and we think it will stand us in good stead in the near term.
So that's probably the biggest change that we've made in the last six or seven months.
Thanks, Greg. Any other questions?
Chair, there's one further question from Stephen Mayne.
I'm from debt-laden Victoria where everyone complains about the highest land tax rates in Australia. How bad is it for us? Is it correct that our Victorian land tax bill is higher than the rest of Australia combined? Both sides of politics have promised land tax changes if they win next month's Victorian election. Is either side offering material relief to us?
The answer is probably no. Victoria is an important state for us, though. It's our third-largest state in terms of our asset allocation. So we've got 18% of our balance sheet allocated to Victoria. And I must say that from a day-to-day performance point of view, Victoria still performs very well for us, and some of our better quality assets are in the state of Victoria. The one thing that I am very agitated about, though, given we do have a partnership with a global institutional investor, is Victoria is uninvestable for international capital, and that puts us at a significant disadvantage when it comes to potentially the valuation of assets over time. So if there was one change that I would love to see, it would be the abandonment of the foreign landholder surcharge in Victoria. It's archaic. It's ridiculous. It makes no sense.
Victoria is an important state, and we'll remain invested in Victoria for the foreseeable future.
Chair, there are no further questions.
Right. Well, just finally before I wrap, is there any further questions? Has any of that prompted any questions from the floor?
Just following on from land tax in Victoria. Yeah, following on from the, particularly say Victoria, the increase in land taxes, are our leases structured so that they're passed on to the lessees like the Woolworths and the—
In most states and territories, you are not able to recover land tax. It is non-recoverable through retail leases legislation. It is near on impossible, and it is our largest expense line. About 18% of our operating expenses are statutory expenses. But pleasingly, this year we haven't seen a great increase across our national portfolio in our statutory expenses. But unfortunately, non-recoverable.
Okay. If there is no more questions, I will now declare the meeting closed. I would like to take this opportunity to thank my fellow independent directors and Greg and his management team, indeed all the staff of Region for their diligence and commitment to this business. We are fortunate to have an outstanding team. I thank all of our security holders, old, new, and large and small, for your continued support and confidence. For those security holders attending here in person, I invite you to stay for afternoon tea. Finally, thank you, and thank you all for your attendance.