Good morning, everyone, and welcome to today's briefing. Thank you for joining us on such short notice. I'm Christy, Director of Investor Relations. As you saw in our formal announcement released earlier this morning, we are incredibly pleased to share that Neil Slater has been appointed as our new Chief Executive Officer. Joining us today to discuss this exciting transition, we have our Chair, Duncan Owen, our CFO, Kok-Siong Ng, and our CIO, John Saunders. Before I hand the floor over to Duncan, a quick piece of housekeeping regarding our agenda. Duncan will share some opening remarks, followed by a Q&A session with the team. If you would like to ask questions during the Q&A, you can type your questions in the Q&A chat box at any time. With that, I will now hand it over to our Chair, Duncan. Over to you.
Thank you, Christy, and good morning, everybody. I'm absolutely delighted to be here today. This is a really important day for Link, and it's the culmination of an awful lot of work and a very exhaustive and exacting program to select our new CEO. The new CEO, which we've named, everybody will have seen, is Neil Slater, who is currently the Chief Executive Officer of Redevco, which is one of Europe's largest, if not the largest, owner of retail property across Europe. Neil really brings a wealth of experience. He is a CEO of a retail operating platform now primarily, but that platform also has all sorts of joint ventures and other things which are not dissimilar to parcel of Link strategy. This very much marks a continuation of the strategy, which we clarified in announcements earlier this year, beginning with January 2nd. It's a focus on retail.
It's focused on retail in APAC, and the ongoing sales of non-core assets, share buybacks, investments into the portfolio will very much continue. Neil, however, has deep international real estate experience. He was the global head of real assets and real estate at Aberdeen Asset Management. He's lived and worked in Asia. He has had teams in Korea and Australia and Japan and Singapore, and he has very detailed experience of Hong Kong as well. He has exactly the criteria that we've been looking for from a business leader. He's a humble character, as many of you will find out as and when you meet him, if you've not met him already. He has the highest levels of integrity, and we're absolutely privileged to have him and very fortunate. As I say, it's been a very rigorous search. It's been a global search.
We've considered many people from all parts of the global real estate markets, but it was really important that we had an international real estate investor that could complement our strategy ongoing, could understand the relative values of different real estate markets, albeit we have a focus, of course, on retail and a focus in the APAC region, and particularly with Hong Kong and Greater Bay Areas. As we've said, no less than 80% and currently over 90% of our portfolio is invested in the retail and the car parks, and we expect that to continue. So this is very much not a change of strategy. It's having the right person with a fresh pair of eyes, with the right experience of retail, international experience in real estate markets, being a CEO, and someone who knows what it's like to live and work in Asia.
I think those are the key points for our communication. We are very happy to hand over and see what questions there are that may follow. As I say, it is a really happy day for Link and everyone involved in Link. We really are delighted. This is a fantastic outcome for the company.
We cannot hear you.
Christy, you are on mute.
Thank you. Thank you, Duncan. Now we go to the Q&A sessions. If any of you want to ask any questions, please use the chat box to key in your questions. I got the first questions from Bank of America. Kyle: Given Neil's background, does it mean that Link will put more emphasis on asset- light strategy?
In a simple word, no. I think the focus is on the balance sheet, investing in retail malls in APAC. I think Neil has a lot of experience, as we do have with John Saunders and the team at Link already, but it won't be any greater emphasis. What we've said in the past will be very much a continuation, [Christy], in that we will be seeking exposure to the right types of assets. In some cases, that might be in joint ventures and with partnerships. Neil indeed has good experience of that, both at Aberdeen and much more recently at Redevco, where they have invested and co-invested alongside some very long-term and sovereign wealth investors.
We envisage that's something that potentially will be ongoing, but it's no change to the strategy and the focus on retail and retail in APAC, which, of course Neil running and being CEO of one of Europe's largest operators and owners of retail is very appropriate.
Thank you. Then we get a question from JPMorgan, Venus. Why Mr. Slater, despite he has no direct experience in Hong Kong, why didn't you hire someone with actual operational experience in Hong Kong? What makes him stand out among the candidates you met?
Okay, why? Neil does have experience in Hong Kong and has invested in Hong Kong, just to correct that. He clearly has Pan-Asian experience and lived and worked and was based in Tokyo when he lived and worked in Asia. So he has a good sense for relativities of real estate market, and a very good experience of operating retail platforms, obviously being CEO of Redevco as Europe's largest retail owner and operator. So I think he ticks all of those boxes. Where he was quite exceptional, those people that will have met him, one of the most common things that's commented on him is he has a ferociously high intellect. Our process brought that out because we had very detailed assessments, and aptitude assessments as part of a system that's used commonly now for CEO selection with Saville Swift, and he scored really very, very highly indeed in those.
His character, he has lived and worked abroad. He knows what it is like. His character, he loves Asia. It is something that he has really wanted to get back to. I think his character is exactly right for Link. He will be able to lead by example. Really, is made of the highest integrity, and I think all of those things put together made him a complete package and a very good fit for Link. I think there is also plenty of runway. Neil could be with us for a very long period of time, and I think will evolve as Link evolves. There is plenty of runway. So I think his criteria, at the risk of repeating myself, knowing retail property, knowing Asia, being a CEO, being a global head and an international investor, are all really key criteria that Link were looking for.
As I say, we looked locally, we looked internationally, and Neil came out on top.
Thank you. There is also a second question from Venus. Is our understanding correct that the total maximum compensation is HKD 46.5 million, including HKD 9 million from base, HKD 13.5 million from STI and HKD 24 million from LTI? For LTI, what is the criteria for the new CEO to receive the maximum LTI?
Okay. I think there were three or four questions there, so let me just bear in mind. I think we have set out what the year one compensation is in granular detail in the stock exchange announcement. I think that is crystal clear in the stock exchange announcement. So there are some buyouts and as part of that also reflected there is a minimum guaranteed first-year bonus of HKD 13.5 million. Yes, the salary is HKD 9 million. The maximum potential is higher than the figure that was mentioned here. I think it is a little bit over HKD 60 million if all of the long-term incentive plan performance targets are met. I think the most important message on remuneration is absolutely consistent with the published remuneration that is set out in detail in the year report and accounts.
There has been full consultation with the largest shareholders on that before that was announced. There is complete alignment. Yes, it is lower compensation than the previous CEO, but there is complete alignment with the remuneration policy that was put in place. There is no variation of that remuneration policy in any shape or form. The key performance shares issued under the long-term incentive plan are very much related still to total shareholder return and outperformance of our cost of capital and to relative shareholder return with the peer group that we have, which is 30 REITs. The largest minority, I should say, which are the Hong Kong REITs, but there are also some of the REITs in Australia, Singapore, and other regions in Europe and North America.
It is a demanding peer group, which we have to outperform for the CEOs and all of the executive team's LTIs to be met and its relative and absolute performance criteria. There is absolutely no variation to the remuneration policy previously put in place.
Thank you. Just a reminder, if you want to ask any questions, you can type your questions in the chat box. There is also one question from Venus again, which I think we sort of addressed it in the first questions because she is asking whether the back to basics is still your strategy to go and if there would be any change regarding this.
Yeah. So back to basics remains absolutely in place. There is no change to that whatsoever. We will continue in the interim period before Neil joins full time in the sale of non-core assets. In pursuing share buybacks as and when appropriate, but that is very much our intention and there is no change. To focus on ensuring we are continuing to reinvest in the existing retail mall portfolio, and making sure that the focus on retail malls remains. For sure, there will be certain long-term partnerships, some people might describe them as funds, some people might describe them as joint ventures, that we would continue where it gives us the ability to access assets as a significant co-investor to maximize returns for our unitholders. But the focus is on maximizing the balance sheet returns for our unitholders and partnering where appropriate with really good long-term investors.
Absolutely no change to the back to basics. Thank you. It is a good question to clarify.
Thank you. Again, if you have a question, you can type it into the chat room. I think we explained really clear because I could not see. Let me see. Okay. There is a question from DBS, Percy. "Any change in region preference that we are looking for reinvestment? Would we ride on Mr. Slater's experience to expand into Japan further?"
Again, no change. It is refreshingly clear this time. Absolutely no change. Link primarily is an owner of retail malls. That remains. We are primarily an owner of retail malls in Hong Kong and the Greater Bay Area. Yes, we have some retail malls, which are really good investments in Singapore and in Australia and some joint ventures. They would continue. And yes, we would look to sell down non-core assets that do not fit that. And some of those are in the market and very much in the public domain. We hope to maximize value in those disposals, but we will dispose of non-core assets, as and when appropriate, at the right pricing to maximize that value. But absolutely no, this is not about focusing in Japan. Neil does not have a particular favor to one region or the other.
I can tell you, having spent considerable time with him in Hong Kong, he is an enormous fan of Hong Kong. He has been around several of our malls, and he is very much committed to the strategy that we have. I very much hope that will evolve gradually over time as circumstances change in due course, but no change to back to basics, no change to the focus on malls, no change to where we are invested geographically.
Thank you. Another question is from Bank of America, Karl. "Any update on the progress of asset sales?
I won't throw John Saunders in the deep end. I can see him grimacing online. Yes, good progress has been made, and announcements will be made in due course. We are an owner of real estate. It's good real estate, but real estate takes time to negotiate transactions. They don't happen at the press of a button on screen. There are very much, I think people are aware that we have some assets in the market. They've been competitively sought after and bid, but we need to conclude the negotiations on those.
Thank you. There's another question from Victor Yang. "When will we have the chance to meet with Mr. Slater?"
Yes. That is a good question. We have a long stop date of Neil joining on March 1st. If there's an opportunity and his current employer are agreeable, we would love to give the opportunity for various people to meet with Neil in due course. We will first and foremost respect the wishes of his current employer, and that would only be done by agreement. I expect there will be a good opportunity, between now and Neil starting, for people to meet with him and be introduced.
Equally, it will be as, if not more meaningful as someone said to me this morning, whose view I respect greatly, said to me, "Equally, it could be as much use for people to meet Neil when he's been in here for three or six months time, when he's got to know the company a little bit better." We'll just be mindful of that, because, people want to meet him, but he'll need to get his feet on the table before anything meaningful can be said by Neil.
Thank you. I understand that some of the participants may not be able to type in the questions in the chat box because of compliance reasons. If you want to ask any questions and then you cannot use the chat box, feel free to email me and I will ask out in this call. My email address is christy.wm.lam@laml.com. I will continue because I got some questions from emails. This is a question from UBS, Mark. "Will we have any strategic reveal going forward when Neil is on board?"
Gosh, strategic review is a very broad definition that's often used to communicate a number of things. If I just sort of narrow what that means, yes, it will be great to have a fresh pair of eyes working with KS and John, our CFO and CIO, and the rest of the team to review where we have got to. Will that be a drains up complete review of everything?
No, because as you would imagine, we've had an exhaustive recruitment process, which has involved some detailed discussions about strategy and ensuring that the new CEO has understood the history of Link, the importance of Link to Hong Kong and the Hong Kong communities, which has been absolutely vital to us, and the importance of him understanding our balance sheets, the types of leverage that we have, as well as really the DNA of Link and our superpowers, as the phrase is often used internally in operating retail malls. Yes, I would expect, and I would hope any new CEO coming in will want to review things. Yes, I would expect there will be an evolution, as facts change, as the economics change, et cetera. There'll be an evolution of strategy moving forward.
No, I wouldn't expect there will be a revolution and there'll be something that might ordinarily be described in headlines as a strategic review, because that often signals greater change in the short term than I think we and you should reasonably expect as shareholders or commentators on the business.
Thank you. There's questions from John of UBS. It seems that the new CEO has a track record of converting retail assets to multipurpose assets, such as residential plus retail in Europe. Is this something that Link may look into?
Well, I think we should have an open mind to look at everything. Primarily, where they've had great success, and particularly in partnerships with some sovereign investors is, you could read across, Link has a very powerful and good consumer appeal amongst its shoppers and its customers inside its malls. Sometimes services that are immediately adjacent or appropriate for those customers that could be related to healthcare and could be related to elderly stage living would be an obvious thing. There's benefits that he has that experience and he could assess that. But I really think that's tactical. I really think that's maximize highest use value in a particular type of real estate. If somebody has a higher value for another use that's ancillary to a retail mall or can be integrated into it, that would be something that you'd normally see as business as usual.
I would say it's very much something that Link and the team, Emmanuel Farcis with John Saunders, have been beginning already. We do have the Link Collect units as an example of an adjacency that Link has been utilizing in its retail space for click and collect services already, to capture some of the benefits of online and to integrate with online sales. So I would expect more of that, but I would think that's day-to-day business as usual and just maximize the value of the real estate we've got for complementary uses.
Thank you. Riding on this question, there is a question from BOCOM Philipp. Does Link's mandate have permission for us to do residential?
In the trust document, I do not know off the top of my head. I think we have the ability to do many things that are complementary and ancillary. I think there are things that we have considered. It may be that John and KS want to add in any particular points of detail on that. But Link has the ability to invest in real estate. Clearly, our purpose and mission is focusing on retail malls.
Thank you. Another question from John of UBS. The new CEO has strong track record in capital raise and debt restructuring. Is it fair to say that Link may want to do more capital recycling like Hongkong Land?
Well, capital recycling, yes, in the fact that we are doing it already with sale of non-core assets and share buybacks and reinvesting in our existing portfolio. As I said earlier in the call, we would continue to do that. Neil has very good experience. I mean, the early stages of his career were at Man Group, and there was lots of experience that he had there with debt and debt restructuring, et cetera. But KS and Keith and KS's team have a very steady handle on that tiller and our balance sheet and the debt is very well balanced in the company. We are not intending to have much more debt. We think we are probably about the right level, and the cost of that capital is accretive to us. So I do not think there is any great change with that.
I think it is incumbent upon every owner of real estate, especially REITs, that if we think an asset is ex-growth or we have done what we can do to maximize its value, so simplistically, someone else might see greater value in it than us going forward, that we shouldn't be holding those assets. We should sell those assets. But I don't think that is different to the strategy that we are undertaking at the moment.
Thank you. So for those of you who cannot type in the questions in the QA, I have put my name as my email address, so you can email me for any questions that you want to ask. Okay, let's continue. There is a question from JPMorgan, Mervin . Should we expect the remaining Link REIT management teams to remain in place?
Yes, absolutely. John and KS have both, of course, met with Neil, as have other team members. I think there is an obvious chemistry there, and I think this is about taking the company forward in the long term. Link has already done a number of things which have made cost optimization very important for Link. We have reduced costs. There has been some headcount reduction already, and I think a lot of that heavy lifting has been done by KS and John already. Is Neil's arrival about changing senior leadership or team structures? Absolutely not, no. I think we have got a team that is fit for purpose in managing retail malls.
Thank you. Then another question is from Cindy of Citi. Does this indicate that potential global European expansions for Link REIT?
No.
Okay. Very quickly. Another question is also from Cindy. What would be the KPI for the new CEO?
Exactly the same. We've set it out. I'm not being flippant at all here.
Yes.
I'll repeat myself. It is set out. There's no change to remuneration policy. The long-term incentives, his performance incentives will be just the same as they are for the other senior management team. It's about return on capital employed and total return, absolute, and it's about relatively outperforming the peer group of 30 REITs of similar sizes, and particularly those invested in APAC and in retail. They're very demanding, but they are stretching and they're achievable. If they are met, Neil and the management team will be very well paid, but there will be absolute alignment with the shareholder experience.
Thank you. I think we have time for one more question if there are any. Again, you can email me with my email address here under my face. Okay. I think we are all good. I checked all my stuff. I couldn't receive any further questions, so I think we are all good now. Okay. With that's the end of our briefing. Thank you for everyone who joined us in this very short notice. If you have any further questions or if you want to have a chat, please feel free to email me. Thank you.
Thank you, everyone. Thank you very much.