Earnings Call: H1 2021

Feb 24, 2021

Thank you for standing by, and welcome to the Precinct Properties 2021 Half Year Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Scott Pritchard, CEO. Please go ahead. Thanks, Thanks, Amanda, and good morning, everybody, and welcome to the 2021 Interim Results Briefing for Precinct Properties. I'm Scott Richart. I'm the Chief Executive for Precinct. I'm also joined today by George Corford, Precinct's Chief Operating Officer and Richard Hilder, Precinct's Chief Financial Officer. The first half of the twenty twenty one financial year has certainly been unique with the completion and opening of Commercial Bay at the start of the period in the middle of a global pandemic. It's fair to say that when we started this $1,000,000,000 project, we never imagined we would be completing and opening the project with our borders shut and with us having spent several weeks locked down in Despite this, the business has demonstrated remarkable resilience as the strategy that we have followed for the past 8 years has put us in good stead. We've completed high quality new assets attracting high quality clients with long leases, which provide very defensive investment characteristics. It is the quality of our portfolio that has driven Precinct's operating and financial performance and we're pleased to be here today to provide an overview of the company's position. The program for today's call is outlined on Page 2 of the presentation. I'll shortly provide an overview of the highlights of the results before reviewing our progress I'll then hand over to Richard, who will take us through the interim results and capital management for Precinct. George will summarize our markets and our portfolio performance. I'll then provide an update on our development activities and finish with some concluding comments. Upon completion of the presentation, we will be very happy to answer any questions that you might have. Moving to the highlights page. Undoubtedly, the most pleasing outcome has been the revaluation gain recorded at the half. With growth in excess of 8% in Wellington and over 4% in Auckland, our portfolio is benefiting from having a low In Auckland, our portfolio is benefiting from having a low risk high quality set of occupiers who are on long term leases with structured Growth. These characteristics have been recognized by the independent valuers given the quality of the real estate and the performance of the portfolio during the period. This revaluation has led to a total comprehensive income of $167,000,000 underpinned by a growing earnings profile and growing AFFO. Our balance sheet has been strengthened in the period with the sale of the remaining 50% of the ANZ Center for 177,000,000 With settlement due to occur in April. And finally, the performance of our investment portfolio and development activities have been outstanding and are reflected in the interim revaluation gain. While there has been significant Discussion around the strength of office markets. It is pleasing to record over 11,000 square meters of leasing transactions with new leasing securing growth in rents of Close to 8% over passing rents. These outcomes give us further confidence in our business, in our strategy and in our markets Despite some commentary to the contrary. Turning to page 4. Precinct has benefited from a well established and clear strategy for This slide outlines the strategy that has been established including our focus on our people, our operations and our developments And also identifies the opportunities for precincts to outperform, which is centered around stock selection, development activity and operating activities. Over the page, our progress in the past 6 months with regards to our strategy is highlighted here. Most pleasing, we have once again increased our GRISB score now achieving 83 out of 100, which is significantly ahead of the global average of 70. Consistent with our approach to sustainability, we have also launched the sustainable debt program and launched our climate related financial Our investment portfolio and developments have further advanced in the period, which is consistent with our strategy. Our continued investment in our people has continued in the period with an ongoing commitment to training and development for our staff. Page 6 sets out the major themes that we are facing, which remain consistent with the themes identified in August last year at our annual results. While the same themes exist, there has been subtle shifts, which are worth identifying. Workplace trends are continuing to evolve. It is clear that employers are offering increased levels of flexibility. However, it is also evident certainly within our portfolio that our client base is utilizing their offices with between 85% 90 of physical occupancy now evident. I'll touch on workplace strategies again shortly. The occupier market remains resilient With the emergence of some sublease space, however, much of it exists within secondary and fringe locations. To date, Precinct has had just one occupier out of its entire portfolio who had proceeded with subleasing their space since COVID emerged 12 months ago. The construction market has evolved rapidly in the last 6 months. Our expectation 6 months ago was for a softening in this with a corresponding reduction in construction costs expected. However, the market has responded rapidly in the last 2 to 3 months with elevated levels of construction activity occurring, leading to a resurgence in construction costs and a further tightening for resource. And finally for this slide, it is clear that city centers around the world have been impacted by COVID. However, the Auckland City Center has been heavily disrupted, Particularly by the flow on impacts of COVID and the heavy concentration of MiQ facilities in the city center. Despite this impact and the ongoing impacts of city center construction works, we remain firmly of the view that the long term drivers for city centers will We're encouraged by the early signs in the 2021 calendar year, which showed increasing pedestrian counts And an increased number of occupants on floor in our portfolio. Following on from the workplace Trending, page 7 sets out our perspective of the proposition for working from the office. Our view remains that the City Center office As important as ever, with Occupiers benefiting from higher productivity, enhanced collaboration And teamwork and the benefits of being immersed in an environment that has energy, activations and encourages motivation. With that in mind, Precinct's long term strategy of creating spaces for clients to thrive has never been more important. The idea of having concentrated ownership of real estate supported by high levels of amenity enhances our ability to attract occupiers back to the office. Consistent with this strategy, we have launched Precinct's first loyalty program, The Commercial Bay Club, an app based program which is exclusively for occupiers at precinct buildings in Auckland's Commercial Bay. Our approach is simple. We plan to offer our occupiers a range of benefits that are highly valued, attractive to every worker in our precinct and ensure our community is thriving. This will in turn ensure that our clients remain in our buildings and for them help them with their productivity and help them drive value for their owners' shareholders. Launched in the last 6 months, we already have over 2,000 members who are benefiting from Benefits such as free weekly fitness classes, yoga classes, discounts through our commercial bay, VIP access to barge and restaurants as well as Notwithstanding the obvious benefits of this loyalty program, we also see significant to capture data that this program will also offer us. In summary, our view is that this approach ensures that Precinct We'll have a relationship with every occupier of our buildings, not just the CEO or COO. We think this strategy will have huge benefit for Precinct and we expect to broaden this offering for the balance of our portfolio over time. I'd now like to ask Richard to take you through the financial results. Thank you, and good morning, everyone. As mentioned by Scott, total comprehensive income After tax for the half was $167,900,000 This compares to $53,600,000 last year With the difference relating to the strong revaluation gain of around $149,000,000 Operating income before indirect expenses was up Since due to the recent completion of Commercial Bay. The completion of this project has also seen indirect expenses increase due The lower level of capitalized interest and a high level of base management fees. The reintroduction of depreciational structure And a favorable ruling in relation to contaminant expenditure has led to a positive tax outcome. Expenditure relating to the removal and encapsulation of contaminants as part of the demolition of building structure have been ruled as being deductible expenditure. Over the past 4 years, Precinct has spent $13,000,000 on this type of expenditure, including site remediation at Wynyard, the demolition of the old downtown shopping center And significant works within the Wellington RFP assets. Turning to the next slide. Net property income increased 22 percent to $60,200,000 which was largely due to development completions. Pleasingly, despite multiple cutouts In extended void periods throughout the Auckland portfolio, investment income remains stable. COVID continues to impact the business With operating income for the period adversely impacted by $6,000,000 This impact can be broken down to both temporary timing differences relating to the occupation of Commercial Bay and other impacts. The delay in occupation of Commercial Bay resulted income for both the tower and retail center being around $5,000,000 lower than anticipated. It is important to note that this is a timing difference only. The lower income was partly offset by higher occupancy and income at HSBC Tower, AMG Centre And the now decanted on Queen Street Building. Precinct continues to help retail businesses impacted by COVID Through a range of measures with $1,000,000 of support provided. In addition to this, we are investing in marketing and promotion to support our Retail clients. Prefix operating businesses were also impacted by COVID lockdowns and delays. Generator operating income fell $1,700,000 while commercial based hospitality recorded a loss for the period of $800,000 Lastly, with over 70% of our revenue coming from office occupiers, it is important to note that no further support was provided Turning to the next slide. Funds from operations and adjusted funds from operations were both higher. SSO grew by 13%, while ATSO grew slightly less by around 7% due to higher leasing costs The first half dividend of $0.035 per share was 3% higher than the previous year And reflected an AFFO payout ratio of 98%. Slide 13 provides a valuation overview. The revaluation movement reflects a 5% increase on book values. Excluding development, the investment portfolio saw a 5.4% increase The Wellington assets recording an almost 8% uplift. Overall, cap rates across the office portfolio have firmed by 40 basis points 4.9 percent with Wellington cap rate affirming 60 basis points driven by strong investment market. This shift in sentiment has benefited the Wellington corporate assets with NTT Tower recording a 17% increase in value. The occupier market in Wellington remains strong with continued demand for quality, seismically resilient buildings and a growing government workforce. This demand has resulted in some market rental growth for the Wellington asset. In Auckland, the revaluation reflected a 4 5% increase on book values with cap rates coming 20 basis points and market rents remaining flat. Excluding commercial Bay retail, Which broadly remain unchanged. The Auckland office portfolio saw a 6.6% revaluation gain. As at 31 December, this portfolio value totaled around $3,300,000,000 with Precinct's NAV .committed share at balance date increasing to $1.55 Turning to the next slide. We continue to take a proactive approach To Capital Management, following the sale of AMD Center, gearing will reduce from 30% to 26 Putting the business in a strong position to deliver future developments. Total committed funding remained around $1,200,000,000 With the weighted average term to expiry, excluding the convertible note of 3.8 years, we continue to look at capital sources, including further capital recycling opportunities. With the expectation that the convertible notes will be converted to equity, the next liquidity event We are focused on remains the maturity of the $75,000,000 bond in December. Our weighted average interest rate has reduced to 3.7% With hedging levels remaining around 60%. Effective hedging levels will increase over the next 6 months Due to forward starts and the sale of ANZ Center, interest coverage remains good at 2.1 times against A covenant of 1.75 times. Turning to Slide 15. It has been a busy period in relation to Sustainability. We again improved our growth rating to above the global average, aligning with our Oceania peers who are global leaders in this space. Supporting us, we have achieved a CDP score of B-, meaning we are achieving to a management level And have disclosed our TCFD risks, a commitment we made to shareholders last year. One of the key successes has been the establishment of Sustainable Debt program. This program requires eligible assets to have a minimum 5 star Green Star rating or to have Enable Energy rating greater than 4. Both these ratings are defined as meeting New Zealand excellent levels. Finally, we continue to have confidence in our earnings outlook And the potential for further dividend growth. Our portfolio is well positioned benefiting from quality occupiers under renting a long walled High occupancy levels and list review structures that will generate earnings growth. These portfolio characteristics You should also see our maintenance and leasing costs remain low for some time. The developments to be completed over the next couple of years We'll provide additional earnings accretion with an attractive average year on cost of 6.4%. And lastly, we continue to target an EBITDA margin for generator of between 10% to 15%. With COVID related earnings reversion to And the business expanding in Wellington, it is expected that Generator will make a meaningful contribution to future Thank you. I will now hand over to George. Thanks, Richard, and good morning. Turning to Section 2 under markets on Page 18. As Scott noted, the city centers and Auckland in particular have borne the brunt of the impacts of COVID-nineteen in New Zealand. Not only have we had the loss of international visitors with the border closed, but local visitation to the city center is also down. The chart on the right hand side overlays the last 12 months public transport use on the prior 12 months. And you can see the impacts not only of the lockdown periods, but also the lag and recoveries post lockdown. Encouragingly, the data has shown a faster recovery from the 2nd lockdown. However, for Auckland, we are still 30% to 40% down on the prior year, While Wellington is around 20% down. While these impacts are real, they are strong by comparison with Australian cities. We firmly believe these impacts are temporary and that the importance and economic value of city centers will be sustained and will recover. On a positive note, the Wellington market continues to be underpinned by strong demand from an increase in the public sector workforce. Since 2017, there has been an increase of 27%, which as a typical government flow year over year ratio would equate to demand growth Over 80,000 square meters and will continue to underpin that market. Turning to Page 19. Both Auckland and Wellington are seeing robust levels of leasing activity, reflecting underlying business confidence, which has surprised on the upside. While the Auckland market has had increased vacancy, this is largely focused in secondary locations, which I will talk to further shortly. Wellington leasing demand remains solid with very low levels of prime vacancy. The shared workspace market is tipped to be a beneficiary of the Acceleration of current occupier trends towards greater flexibility and the need for a workspace to provide more than a desk. With the short tenure typical in this part of the market, it has also been much quicker to adapt to current workspace trends. This is reflected in around half of our generator occupiers now over utilizing their private office space. For example, through having a 10 person office While retail sales have outperformed expectations, prime city center retail is challenging. However, those retailers that have continued to perform are focused on securing high quality locations for their brands and retain a desire to have a city center presence. Turning to Page 20. Overall, Auckland City Centre office vacancy has increased by around 4 percentage points to set close to 9 But this is not reflective of the Commercial Bay submarket where we are many invested. The Commercial Bay precinct vacancy remains tight At 2.9%. The depth of demand for this location is shown by the extent of leasing activity, which we have completed And the growth in rentals and new leasing, which I'll talk to you more shortly. We attribute this largely to the changing workplace trends, Where businesses are willing to pay a premium for the location of their choice with good benefits and amenities for their staff. Turning to Page 21. Strong occupier demand in Wellington continues to see solid rental growth and very low levels of prime vacancy. As Richard noted earlier, we have seen a strong uplift in Wellington valuations, which has been underpinned by some strong sales evidence. As outlined on Page 22, there has been extensive market commentary around the potential for a large amount of sublease space coming to market and the expectation that this could depress market rents. In Oakland, sublease activity has been concentrated in Higher quality buildings around the CBD fringe and the volume of space coming to market has been less than initially indicated. Our understanding is that several of the larger spaces available have now been subleased, with the excess space being absorbed by businesses, which we're struggling to secure suitable premises when we entered this current market phase. Similarly, in Wellington, We understand that the sublease space available in good buildings is being highly sought after and is not impacting on market rents. Within our own portfolio, excluding ANZ Center, we are now not aware of any significant spaces, At our last results, we mentioned 1 larger financial services occupier who is in the market to sublease I'm pleased to say that we have agreed to surrender there to enable us to complete a new long term release with an existing client. Moving to Section 3. Our core office portfolio remains in very good shape. And despite the environment, We've had a busy leasing period with 11,300 square meters of leasing completed in our stabilized portfolio. Good quality businesses remain attracted to our assets and are showing the confidence to commit to new long term leases. Pleasingly, we have continued to secure solid rental growth with an average uplift on previous contract of around 8%. As set out on Page 25, our portfolio metrics remain very strong with just 4% of the portfolio expiring this year And a weighted average lease term at 7.7 years. The strength of our core office portfolio continues to underpin our cash flows And the quality of our occupiers is shown in the fact that we have had no rental abatements whatsoever in our office portfolio for the 6 month period. Turning to pages 2627. We acknowledge that there's been a number of headwinds during the 1st 6 months of Trading for commercial based retail. So for this context, we are pleased with the sales performance. The impacts of the city center lockdowns on foot traffic, lack of international visitor spend as well as the major streetscape works Have made a read through to the underlying performance challenging. We remain highly confident in the quality of Commercial Bay and the current performance indicates that it will perform strongly as these markets recover. We were encouraged by a strong November December trading period and are seeing a continued strong sales performance from the Harbor East foothold as well as from international fashion retailers in particular. Overall, we estimate that our sales are sitting around 15% to 20% lower than our pre COVID estimates after taking account of lockdown periods. Given that we expected international tourists to comprise around 30% of our sales and we've got less domestic city center visitors. We think this is a strong sales outcome and bodes well for how 29 to our operating businesses on Pages 2829, comprising our commercial body hospitality venues and generator. The commercial body hospitality venues achieved successful openings under circumstances, However, recorded a net loss of $700,000 after covering rent expenses. Before rent expense, The business has made a positive contribution. And while we acknowledge the environment will remain challenging, we expect that these businesses will be stable over the next 12 months And importantly, we'll continue to underpin the high quality food and beverage offer at Commercial Bay. Generator has outperformed expectations over the last 6 months despite the impact of the second lockdown. The Events business had a particularly strong period Considering it had to close during lockdowns and had a November December performance ahead of the prior year. Membership has contracted as anticipated, but is now back in growth mode with good levels of inquiry and sales. We retained a higher than expected number of members through delivering on the promise of flexibility and supporting as many as possible to downsize rather than leave. We are now seeing their growth return. We controlled expenses tightly, and we remain on track to breakeven over the full financial year. The business now has an improved quality of customer who see Generator as their core business accommodation and value the flexibility and amenity that Generator provides. We are confident that Generator is on track for a profitable second half And we'll continue to support Precinct's broader strategy of providing high levels of amenity as well as further earnings growth. Thank you. And I'll hand back to Scott. Thanks, George. And turning to Page 31. The current committed development pipeline consists of 3 developments comprising Wynyard Quarter Stage 2 and Bowen Tampa Stage 2, which includes 4044 Bowen Combined, these developments total around 30,000 square meters of office space and provide the business with a blended development margin of over 23% and a blended yield on cost of around 6.4%. These developments are 60% pre committed as at balance day With Wynyard Stage 2 now effectively completed with its office space fully leased. The next stage of our development pipeline consists of 1 Queen Street And Wingyard Quarter Stages 34 with anticipated returns of 15% margins and a minimum of a 6% yield. Most notably, as we advance our developments and successfully complete each project, we are enhancing the business and reducing the risk that the business carries. Moving to Wynyard Quarter Stage 2. 10 Madden Street baseboard works are now complete with client's fit out works currently underway. Media Design School will commence its operations from the site on March 1 and the U. S.-based tech firm Who believes levels 56 is currently fitting out. Pleasingly, the development will record a margin in excess of 15% with a yield on cost of around 7%. Bowen Campus Stage 2 on page 33 outlines a real success story for our business. The second stage is the final 4,000 square meters of land to be developed on this site following its initial acquisition in 2012. Bowen Stage 2 consists of around 20,000 square meters of office space with a combined entry lobby and large low rise floor plates. Initially designed and intended for Crown occupation, the corporate market has been attractive to this development due to its proximity to government, The seismic resilience of the design and the benefits the broader campus can provide. Most pleasingly, we are attracting high levels of interest from for the remaining vacant space and the return metrics for this development look very promising. On page 34, we now turn to One Queen Street. This development was initially designed and committed during 2018. However, following the emergence of COVID 12 months ago and taking advantage of the fact that we hadn't started Construction, we worked with our main contractor to revisit the design and composition of the building. We remain incredibly excited About this project and the prospect of continuing to build a hotel here. However, our expectation is that once we commit, Which is anticipated to be in the next 6 months. The hotel component will be much smaller with additional office and some dedicated flex The revised composition of uses for 1 Queen Street is set out on page 35 And highlight the reduction in hotel space for the project. We are now advancing with the scheme with revised design underway and a separate And lastly, some concluding comments. There is no doubt that we remain in uncertain times. And the most recent lockdown last week is evidence of this. Despite this uncertainty, we remain convinced that the position of our portfolio with an 8 Year weighted average lease term combined with the very highest quality occupier base will ensure that the business maintains and grows its AFFO and dividends. The clear strategy that we have had in place for a long time and the completion of over $1,500,000,000 in development Has ensured that our business presents low risk defensive characteristics. The decision to target structured growth And on a very young portfolio of assets will ensure good growth as we progress into future periods. That brings us to the end of our presentation and we're more than happy to take any questions. Thank Please pick up your handset to ask your question. Your first question comes from Ari Dekker from Jarden. Please go ahead. Hi, good morning. Just a couple of questions focused on the development slides that we just finished on. Firstly, with regards to 1 Queen Street, I mean, you mentioned you're going back out to tender on that. But In terms of the redesign, do you expect the cost to be broadly in line with what you previously indicated? Yes, we do, Ari. I don't think that's going to change too much. Sure. And then in terms of commitment By the end of calendar year, what sort of minimum level of pre commit have you sort of We've still got as we've announced previously, Yes. We still have an agreement with large law firm who remain really focused on moving into the building. And we're working through our commercial arrangements with Intercontinental Group at the moment. So on the basis of Admittedly, a slightly smaller hotel, but with the addition of that office commitment, we would actually be comfortable to go ahead Based on the current level of commitment that we have, what we're really focused on at the moment is completing the redesign, which is underway, Which is not extensive, but it is worth concluding that so that when we go out and Get really firm tender bids. We can be certain that our designers advanced enough that there's not a lot of sort of risk around Sort of cost increases throughout the project. So we're engaging with the subcontractor market through our main contractor quite extensively at the moment. We're trying to take advantage of the construction market. We do acknowledge that actually costs are starting to rise again. But we do think that if we go with a really clear package that we can get good pricing. Yes. So it is really a process Confirmation of cost that is the remaining gating item to pressing the go button rather than leasing? Yes. We're certainly focused on trying to get a cost plan that we're comfortable with and that offers us really good prospects for returns that meet our hurdles. And then just with regards to 44 Bowen Street, and I guess 40 as well. What's your sort of expectation? What is in terms of timing for an announcement of Additional deals and do you have something in mind in terms of where you'd like to be on commitments by the end of this calendar year? Certainly, our expectation for 44 is that would be fully leased by completion and if not fully leased very close to it. And the engagement that we're having with the moment with occupiers suggest that we'll be able to achieve that. As it stands at the moment, we've got both Crown and corporate occupiers looking at that space and we're really encouraged by that. We've got Quite a lot more inquiries than we have space available. And so it's clear that that market has a real thirst for High quality space that's seismically resilient and so we're benefiting from that at the moment. So look I think by the end of this calendar year, we will have advanced Quite a bit of leasing in this project. Yes. I mean you have a well positioned side obviously and a good offering there. I mean in terms of competitive tension For occupiers on the supply side, are you noticing anything there that increases the risk of So completing the leasing up or not? Yes. I mean the main the other main supply that's coming, The most significant one is the old Kel Tec site and that's fully leased. And then in addition to that is Site 9 on the Waterfront, Which is a very small building that's less than 5,000 square meters and a large chunk of that is already gone. So there's not a lot of other uncommitted space that's coming to market It could compete. So that I think puts us in a pretty strong position. We would also comment on that. The price point that we can offer to the market at Bawen As well within the price point of the Waterfront locations, which is in our favor. Right. Thanks, Scott. Thanks, Aaron. Thank you. Your next question comes from Jeremy Kinkade from UBS. Please go ahead. Good morning, team. Just firstly on COVID costs. You mentioned there's likely to be no Further rent relief for the core office portfolio, but should we interpret that as there's still some more relief to be Hi, Jeremy. George here. So look across That's correct. Across the office portfolio, we don't anticipate anything further. Across both office and retail, obviously, We're in an environment of uncertainty as regarding lockdowns, and we have to respond to that. As it currently stands, We have only a very small number of retailers who we would be providing further relief to. But Obviously, we'd have to respond to what happens over the next 12 months or so. Great. That's And then just moving on to some of your Aukman portfolio over the last 6 months, there was obviously a bit of activity in the likes of the PWC tower. Are there any other major refurbs And some of your other officetels, which we could expect to see sort of temporary periods of no rent? Nothing major, Jeremy. We've completed a lot in What's now the HSBC Tower and Lobby Refurbishment here. We've also completed a Lobby refurbishment at Jarden, so that's a period of disruption largely through that. Yes. Sorry, the old HSBC old habits die hard. That's all for me. Thanks. Thanks, Jeremy. Thank Your next question comes from Adam Lilly from Craig's Investment Partners. Please go ahead. Good morning, gents. Just a couple from me. What's with One's Queen Street? It's helpful kind of seeing the redesigned scheme. It's very visual. Is there a plan to kind of reclaim some of that office space over time as the tours and hotel market Stabilizers or is this pretty much going to be a seat? How the tail is going to look going forward? No. We it's a good question. We actually have the ability to scale up the hotel if we want to. And if we did that we'd move into that flex Space which is identified in orange at the bottom of the tower. So currently we've got 6 levels of hotel which run from level 6 Through to level 11. So if we had confidence in that market down the track and we wanted to sort of grow the hotel, we can grow it downwards. Okay. And so this might be a bit of a naive question, but what's the difference between an office and a private office? Are there kind of Different rental price point? Very much so. So that is sort of taking the learnings that we Head out of level 36 within the new PWCT tower, which is where we have private suites, which we fit out. It's unserviced, but Short or late term and what we're finding is that we're able to get really premium rates in that space. And our experience has been very good. We've got very So we think in this building that product would go really well. Right. So you do the fit out in the Design, but separate from a generator in that it's not a subscription. It's more just a kind of a different type of lease attached? Yes, that's right. Yes, so we design it. We fund the fit out and our potential occupiers basically Come in, plug in and operate. And we look for our base return plus our return on CapEx that we spend on top of that. What that offers our potential occupiers is that it doesn't obviously require them to outlay the capital and we're So happy to take shorter lease terms because we're finding there's not a lot of this product in the market and there's a big market for that size of occupier which Sort of ranges between kind of 180 and maybe up to 300 square meters. Okay. Nicole, thank you for that. And then so I'm not quite sure if I heard, but did you mention looking at potentially further capital recycling opportunities And the portfolio going forward, some of these further developments are aligned. Yes, absolutely. So I mean we have obviously a core set of assets within the portfolio That would probably be reluctant to put on the market and look to recycle out of, but there's also a couple of other assets. 1 in particular that If we have a requirement for capital that we would look to exit those. So like we've done really, I mean, for the last 5 or 6 years now, I think we sold about $600,000,000 or $700,000,000 worth of real estate so far. We're always looking to kind of Take some capital out of the portfolio if we can and put it to work and get better returns elsewhere. Okay. So Are they likely to be more down the Wellington way of those assets? Yes. The Wellington government assets, some of the All the ones in particular were really long term leases. As evidenced I guess without revaluation, The market is definitely paying up for long term leases with high quality occupiers. So that would be something that we Okay. And just sorry, just one last one for me. Talking about the Waterfront Submarket and future plans for you to continue to develop and grow the portfolio. Are there any other opportunities within that waterfront space that you think are open or potential for you? We hope so, Adam. It kind of depends on how things play out. But yes, look, I think there are further opportunities. I probably want to give you 5 of them on the call, but we're pretty active in this market and we're doing as much as we can as a business to position ourselves Ensure that we can take advantage of any opportunities that do come our way. That's all from me. Thanks very much. Thanks, Adam. Thank you. Ladies and gentlemen, this will be your last opportunity to register for a question by pressing star 1. We will pause as we allow questioners to join the queue. There are no further questions at this time. I will now hand back to Scott for closing remarks. Great. Thanks, Amanda. And look, just thanks to everyone for taking the time to dial in to the call this morning. We really appreciate your support. Please hang out if you've got any other questions. Have a great day and thanks very much. That does conclude the conference for today. Thank you for participating. You may now disconnect.