Earnings Call: H1 2020

Feb 19, 2020

Slides

Ladies and gentlemen, thank you for standing by and welcome to the Present Properties Half Year Results 2020 Conference Call. At time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I'll now turn the conference over to your first speaker today, Mr. Scott Prichard. Thank you. Please go ahead. Thanks, Christian, and good morning, everybody, and welcome to the 2020 interim result briefing for precinct properties. I'm Scott Rich Arden, I'm the Chief Executive for Precinct, and I'm joined today by George Crawford, Precinct's Chief Operating Officer and Richard Hilda, Precinct's Chief Financial Officer. The first half of the 2020 financial year has been a busy period. We have completed the 2nd building at Bowen Campus on time and on budget. We've maintained portfolio occupancy at 99% and we have advanced our development projects both in regards to construction milestones and leasing activity. Each of these items have had an impact on precincts 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 will shortly provide an overview of the highlights of the result before reviewing our progress against our own 3 strategic pillars. I'll then hand over to Richard, who will take us through the interim results and capital management position for precinct. George will summarize the property markets and our portfolio performance. Olvin provide an update on our development activities and finish with some concluding comments. Upon completion of the presentation, we will be happy to answer any questions that you might have. Moving to the highlights page. Aside from a range of positive results for the first half, the most pleasing outcome has been the continued strength of our markets and the performance of our portfolio. On a like for like basis, we've recorded a 7.5 percent lift in net property income following strong leasing outcomes, 0.8% in the first half compared to the previous corresponding period. This gives us great confidence to reconfirm our dividend guidance for the year of $0.063 per share, resulting in a 5% lift over 2019. We have refinanced a $150,000,000 bank facility, which was due to expire in November this year, and our balance sheet will be strengthened following the sale of Pastural House for $77,000,000 once it goes unconditional at the end of this month. Current gearing now sits at 25% and will reduce to 23% following the sale. At an operating level, we have maintained our occupancy at 99% and have an extended weighted average lease term of 8.7 years. This follows leasing transactions, which have provided an average increase of 9.2% over passing rents. And finally, we are pleased to announce today the expansion of the generator business into the Wellington market, following the acquisition of a dedicated heritage building the central city of Wellington. This follows a period of real strength for this business with an average 95% occupancy secured in the period. George will discuss this in more detail shortly. Turning to page 4, Precinct's well line strategy remains unchanged, which is summarized into 3 distinct aspects, including operational excellence, developing the future and empowering people. Our portfolio continues to attract good demand from occupiers with 99% occupancy and strong growth in rental levels. We have improved our global real estate sustainability benchmark score from 69 to 77 and has surpassed the global average of 70 2. The Grizzby benchmark is the most comprehensive sustainability measured globally, and it is here that we are focused on measuring and improving our sustainability performance. We are also focused on reducing our carbon footprint and are working towards a comprehensive approach to managing our emissions. In terms of development, we are delighted with the progress at Commercial Bay, both in regards to construction and leasing. We have maintained our program to completion and remain on track to open the Once commercial bay is complete, it will trigger a sequence of events which will result in the balance of our Auckland portfolio being largely occupied and provide 1 queen Street on a vacant position basis to enable construction works to commence. Works at Windyard Quarter continue to advance and we are pleased to have committed the remainder of the office space. And finally, the successful of Defense House in Wellington has resulted in a net development being fully completed with 100% occupancy and enhanced returns. And finally, empowering people. We are delighted to have been awarded rainbow tick certification demonstrating our commitment to maintaining a high performing, inclusive and supportive culture, which supports diversity of thought and promotes equality. I'd now like to ask Richard to take you strong first half with total comprehensive income after tax of $53,600,000. This compares with $25,500,000 for the same period last year. The main differences related to higher operating income, liquidated damages and the movement in financial instruments. Net operating income after tax was $60,500,000 or around $0.646 per share. Adjusting for liquidated damages, net operating income was $41,300,000, which was around 9% higher than the comparable period. Importantly, generated operating performance continues to improve. The business contributed $1,200,000 to Precinct's net operating profit. AFFO was around $3..1 per share, 7% higher than the comparable period. The calculation of AFFO included in the appendix shows the deduction for liquidated damages revenue. This will be retained offset costs of delay relating to commercial pay. Dividends for the first half totaled $3.15 per share, reflecting an annual increase of 5%. Full year guidance remains unchanged at An internal review of the June 2019 property valuations has been undertaken. Despite a favorable valuation environment including some market rental growth and cap rate compression, there was no material value movement against book cost as at 31 December. Turning to Slide 7. Overall net property income was $2,000,000 or 4 percent higher The completion of bond campus helped increase net property income by $5,000,000. However, this increase was offset by the 50% sale of the ANZ Center. And foregone income associated with the development works at pastoral health and number 1, the tariffs. After allowing for development and transactions, net property income on a like for like income increasing by 9% 5%, respectively. In Wellington, net property income was higher due to the top floors of the AAON Center being income producing, following development works in 2018. While in Auckland, high net property income related mostly to the A And P Center, We major leasing rent reviews and development activity have occurred in recent years. Turning to the next slide. As you will see in our financial statements, there have been several changes since June. We have a wholly owned generator since period where the business has been fully consolidated. As noted, generator continues to meet expectations, contributing $4,800,000 to operating income before indirect expenses. The biggest impact to our interim account has been the adoption of IFRS 16. IFRS 16 requires lessee to recognize leases on balance sheet and replaces rent expense with lease depreciation and interest expense. Generators leases fall under the standard, which has impacted our financial results. This is detailed as an appendix and summarized in the table. On our balance sheet, a right of use asset and lease liability, both totaling $46,000,000 have been created. Eliminating the rent expense has increased operating income or the introduction of lease interest and depreciation has reduced net profit after tax by $1,200,000. Precinct will continue to calculate adjusted funds from operations and operating income on a pre IFRS 16 basis We believe this will provide a more accurate measure of operating performance. And finally, in the period we've recognized $50,000,000 liquidated damages as these have been assessed as being virtually certain. These have been allocated to capital and revenue, compensating precinct for cost of delay. Finally, on capital management, during the 6 months, we settled the $163,000,000 USPP. We have now successfully diversified our funding with around half of our funding coming from non bank sources. Post balance date, we refinanced the $150,000,000 bank debt facility, which was due to expire in November 2020. Total committed funding remains around $1,200,000,000 with the new 5 years facility increasing the weighted average turn to expiry to 4.4 years. The balance sheet remains in a strong position with gearing of 25%. We continue to have sufficient capacity to deliver all committed developments. The conditional sale of pastoral house for $77,000,000 will reduce gearing and help fund future opportunities. Our weighted average interest cost has reduced to 5.1% with hedging currently sitting around 80%. I would like to hand over to George. Thanks Richard. On Page 11, The markets we invest in continue to benefit from strong city center investment and growth in population, but each market is also being influenced biophone unique drivers. The flexible space part of the office market continues to stood and accepted across a range of occupiers of differing sizes. We anticipate further development and differentiation in this market, particularly amongst larger businesses using this type of space. There will be new supply added to this segment in Oakland over the next couple of years. And while we expect that this will be met with good demand it will also limit the extent of pricing growth. In terms of City Center Retail, we continue to see strong demand for well located space, which is still in short supply. This is evidenced by the impressive list of retailers we have managed to However, the trading backdrop for retailers is clearly challenging. This is impacting on affordability of rents and will limit retail rental growth. The Auckland Hotel market is expected to be impacted by the combination of new supply starting to come online, and the further delays to the convention center following the unfortunate fire last year. This is likely to be further impacted by disruption to travel patterns due the COVID-nineteen outbreak. Both of these impacts should be relatively short term, and in our view, do not detract from the strong long term fundamentals in the Oakland Hotel market. Oakland City Center will continue to be an attractive place to visit and the City Center as a tourist destination will be further improved by the huge public realm investment underway currently by Oakland Council in preparation for the Americas CAP, as well as by Private Developments like Commercial Bay and the Convention Center. Moving to Page 12, the Auckland office market remains in very good shape with a shortage of available space and solid demand. While the average net effective market rental growth is indicated at just 1.1% for the last 6 months for Auckland, Our own portfolio continues to deliver stronger growth in this. With annualized growth indicated by new leasing and rent reviews that we've completed, of greater than 3%. The confirmed outlook for new supply beyond our own developments continues to be light, However, there are 1 or 2 new city center developments being talked about, which have the potential to materialize beyond 2023. The Wellington market also continues to perform well. There is solid demand from both public and private sector and very low vacancy rates. These strong market dynamics, combined with the market consisting on seismically strong buildings, is seeing new Wellington benchmark rental levels being set in order to us as we seek to get underway with stage 2 of Bowen Campus. Moving to Page 13. Our investment portfolio remains in strong shape with both portfolios virtually full. Across both Wellington and Auckland, We are seeing our portfolio deliver solid rental growth, with net effective rentals achieved across our leasing in the 6 months, on average 9.2 months for leasing with over 17,000 square meters completed in the period across the portfolio. Highlights have included 5 new leasing transactions at Commercial Bay, taking it to 92% leased, a new commitment to Winyard quarter to conclude the leasing of Stage 2. Within our Oakland portfolio, we are seeing particular strength in the A And P Center and Zurich Cars, and we this will continue to be the case as commercial buy completes. The rents within these assets remain relatively affordable, and we believe will offer the opportunity for continued rental growth. The benefit of these rental uplifts as well as improved occupancy is now coming through purely with an uplift of $1,400,000 and net property income for the period for A And P Center. Our particular interest has been the impact of technology businesses on demand. 40% of our new leasing are over 5000 square meters, has come from technology businesses in the period across a range of tenancy sizes. This is an interesting trend and one that we believe continue to positively influence our market. As these types of businesses become more important in the share of the employment market, They are increasingly appreciating the benefits of being located in high quality buildings in the city centre. We are continuing to reinvest into our assets to ensure that we provide a level of amenity and service at the very best in the market. Consistent with this strategy, we are underway with creating a brand new lobby and meeting suite of the current PwC tower at 188 Key Street. We believe that 188 Key Street remains one of the most desirable and sought after billings in the market. And this reinvestment to create a new level of immunity will ensure that it stays that way. We have also recently completed new end of trip facilities at 1 88 Key Street and at the A And P Center, which are best in class for these assets. Moving to Page 16, a year ago, we announced a move to 100% ownership of generator with a target to get to annualized revenue of around $20,000,000 and an EBIT target of 10% to 15% of revenue. We are pleased to report that these targets have been achieved and that the business is in good shape to grow in a way which is supportive of underlying with precinct strategy. The opportunities for growth through precinct clients of generator spices, as well as generator members growing into precinct buildings have started to be realized in the last 6 months. And greater opportunities exist in this area going forward. Almost all major leasing RFPs in the market nice seek a flexible space element as part of the response and our unique position in the market as both a landlord and operator of shared space gives us a competitive advantage. We will shortly be opening the new meeting and event suites at Commercial Bay, and we are also building a meeting suite as part of the 188 Key Street lobby redevelopment. Both of these will be managed by generator as we build a network of meeting and events spaces throughout the city, provide Moving to Page 17, we are pleased to advise that we will be launching generator in Wellington next year. Precinct has acquired the Dunbar Sloan Building, which has a really central Wellington location on Wearing Taylor Street next to our Central And Midland Park Building. This building will be strengthened to 100 percent of MBS as part of a comprehensive redevelopment and will provide a full generator offer. We're confident that there will be strong demand for generator services in Wellington. This reflects feedback from our Oakland members as well as from the local Wellington market. We have had strong market feedback indicating demand for this amenity as part of the leasing inquiry we've received, whilst marketing the 2nd stage of Bowen Campus. This has come from occupiers with an interest in core leases alongside desks and generator. As a consequence, we are also exploring the opportunity to include a generator facility as part of our planned Bowen Stage 2 development. Thank you, and I'll now hand over to Scott to take us through the balance of the presentation. Thanks George and turning to Page 19. The current committed development pipeline consists of 3 development comprising Commercial Bay, Vineyard Quarter Stage 2 and 1 QuinStreet. Combined, these developments total around $1,000,000,000 in capital spend and provide the business with a blended profit on cost of over 30% and a blended yield on cost above 7%. These developments are now 88% pre committed as at balance date with a weighting to Auckland of 100%. In total, these developments will provide precinct with close to $400,000,000 in development profits. The next stage of our development pipeline consists of Bowen Campus Stage 2 and winning at quarter stages 3 and 4. With anticipated returns of a 15% profit and 6.5% yield on cost. 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. This is evident in the chart on the right hand side, highlighting that our total development exposure will shortly be the lowest it has been for over 5 years. Now moving to Commercial Bay on page 20. Pleasingly, we remain on track to complete the project in March April this year. We are working very closely with our main contractor can confirm that the retail center will open in late March and we expect to open the new PWC tower during April. We have maintained our investment returns for the project and are delighted with the leasing progress which made on-site, which I will talk about in more detail shortly. As outlined in our release today, we have also recognized a further $15,000,000 in liquidated damages above the $2,000,000 recognized in June. 2019. This reflects that Fletcher and precinct have resolved all claims and counter claims and are focused on completing the project on time and with a quality finish. We are excited about opening the retail center to Aucklanders, and welcoming our clients into that the center is now fully list. The mix and quality of retailers is outstanding, and we believe we have collected a highly complementary and unique set of towers that will bring something very new and exciting to the city centre. The weighted average lease term for the retail center is 7.3 years, and the leasing secured has been consistent with our original feasibility. The office leasing has also increased in the period. Our target at the commencement of the project was to secure 90% commitments by the time we completed the tower. Today, we are thrilled to announce that the tower is now 92% leased following a series of leasing transactions completed in the 6 months. This leaves just one full floor and 2 half floors left to lease. The tower has awaited lease term of 11.8 years and the leasing has been completed in line with our original feasibility. Turning to page 23, where we provide an update on 1 Queen Street. This project will commence once we are able to migrate the occupiers from final three office floors in this building offering both flex space and event space. This follows the continued strength and performance of the generator business, particularly the demand for our Britham Art site. Moving to when you had called out stage 2. Progress on-site continues to advance very well. We remain ahead of program and on budget with Hawkins as main contractor continuing to perform very well. We have now committed all of the office space and are commencing our leasing on the food and beverage space now. Please, we remain on track to achieve our return metrics with a yield on cost of 7% and a return on cost of 15%. Now moving to our future developments. Bowen campus stage 2 presents as our most immediate development opportunity. We have progressed design to a point where the design is now complete, which gives us a good level of confidence and clarity to secure good construction pricing. We are advancing negotiations with a range Our expectation at this stage is to build both buildings at the same time, although we do have the option staged the construction one building at a time. The final stages of Vineyard Quarter is set out on page 27. Between the two buildings, we can provide a further 19,000 square meters of office space. Our expectation is that we will commence these two buildings in 2 separate stages, and we hope to commence with the 3rd stage later this year. Given the success of Vineyard quarter stage 2, We feel confident about progressing with Precent has had the benefit of a very clear strategy for the past 8 years. This has given the team clarity about where we focus and how we take advantage of the markets we are operating in. Our developments are creating world class real estate and providing outstanding returns. These returns are now providing an AFFO growth profile, which will underpin dividend growth evidenced by the Liston dividend by 5% this year. While global out while the global outlook remains uncertain, the New Zealand economy and in particular, our markets continue to perform well. Interest rates are set to remain low for an extended period of time, while activity levels, particularly in Auckland and Wellington remain elevated. This place is precinct in a really strong position and we feel very excited about our future. That brings us to the end of our presentation and we're very happy to take any questions which you may have. Your first question today comes from the line of Nick Ma from Macquarie. Please go ahead. Could you just talk through the earnings a little bit more in terms of the distributable profit? You've obviously included either all of it or none of it in the AFFO number. And just trying to reconcile that back to the $0.06800 that you'd previously guided to. Yes. Sure, Nick. So the $0.608 did include an assumption of liquidity damages revenue coming through. The $26,000,000 will go into that net operating for the full year earnings guidance. In terms of our AFFO, we've taken that number out, you'll see in the appendix there, with the intent to hold that or not withhold to retain that to essentially cut opposite the cost of delay in relation to capitalized interest. So the number that you've got is essentially the final number and it will be spread across the remaining period to cover liquidated damages or is there more to come? Are there more liquidated damages to come? Yes. We don't expect there to be any more liquidated damages. Okay. So if you kind of apportion the liquidated damages, for the period, what the distributable profit number is for that? I haven't done that, Kalk. That is the liquidity of damages since they came into effect from the essentially the original contract date for the retail and also the office. Yes, but it sounds like you've included essentially the second half ones in the first half because you've received them today. Is that correct? We've received we recognized them all in one line as at 31 December as when they become virtually certain. So there's not a we can't choose when we can recognize them essentially. It's when they become certain to presync. Nick, because it's gone here because June last year, there were a bunch of claims encountered claims still outstanding. It was very hard to make a determination of what was virtually that balanced back last year. And just to be clear, Nick, the AFFO excludes the LDs. Yes. No, no, that's fine. It's just trying to kind of work back towards a portion of the 6.8 is quite difficult for the half. Yes. Yes. That is cool. In terms of the portfolio, given the kind of increase on passing that you've seen on market and new leasing, Where do you think the underwriting sits in the portfolio? I'm appreciating you haven't gone through a full valve of the half? Yes. Across the portfolio, if we're against if we compare it with last 30, June, rents, we were 5% on the rented across the portfolio, split between sort of 4 for Auckland. And so 6% for Wellington. As to where we would sit today, we would we would expect that level of underwriting has probably increased, by another sort of 1% to 2% based on what we're achieving in, in our leasing currently. Okay. That's clear. And then in terms of generator, what kind of return metrics would you put on the new building that you're purchasing and spending $25,000,000 on in total how do you look at that from a return on cost perspective, I guess both from pricing and then generator perspective? Yes. So, if we look at it both as stacking up as a development in its own right, and then making sure that the generator portion has a return, what you'd expect for that business activity. When we look at it overall, As you said, just over $25,000,000 of total project cost. The generator portion of that work out at about, $2,500,000 a square meter. And in terms of a blended yield on cost that we'd expect to get out of it overall, we would be looking for that to be sort of north of 9% Yes, that's clear. And then lastly, just on the valves, you obviously didn't do a full valve this time. How come there wasn't any release of profit risk from commercial value over the half year given leasing and movement in terms of time to completion? We do that within the internal valuation exercise. So we do assess the proctor risk, within that process so that goes into the kind of the calculation and judgment of whether there has been a material movement. Yes, okay. So you put that into a blended 5% threshold instead of just booking that because that's, I guess, more certain than anything else really? Yes, yes. Okay. No, that's fine. Thanks a lot. Thanks, Nick. Your next question comes from the line of Owen Batchelor from Jarden Securities. Please go ahead. Good morning guys. Just a question on the turns agreed for around half a space at Barn Campus Stage 2, is that 2 new tenants to the portfolio or existing ones? That is to, new occupiers to the portfolio. Okay, great. Thanks. And then, On when you're called to stage 3 and 4, can you just remind me what the sort of target pre commitment is there before you, risk go on those? Yes, look, we've been pretty encouraged by, when you had quarter stage 2, which we kicked off with no pre commitment at all. And, we are open to commencing on stage 3 or 4 down the track. With little of no pre commitment given the strength of the Auckland market. So, at the moment, looking through the expiry profile of the type of occupiers that we're looking at. We think there's a pretty good opportunity for delivery in 20 2223 to meet that demand and certainly getting pretty good levels of inquiry. Okay, great. Thanks. And then just my last one, just on the sale of Pastrell House, it's still conditional and it's also being syndicated present. Can you just talk to the reasons why it's still conditional from your point of view? Is it that if the required equity isn't raised? Prior to the closing date the sale will fall over or is there some sort of underwriting in place of that deal? No, exactly what you see. I mean, subject to them raising the equity we were quite comfortable taking that risk given the strength of, of the market and syndications. And so we've confident that they will be able to raise the equity required. But that raising closes in the next couple of weeks. Yes. And but just to confirm, if they only raised 75% of equity, that will sort of building will go back to you guys? Yes, if they don't meet the threshold, then yes, the transaction, won't proceed. Okay, cool. Thanks. That's all for me. Thanks, Alan. Your next question comes from the line of Jeremy Kinkade from UBS. Please go ahead. Good morning guys. Just one question for me. Could you give an indication of where you expect committed gearing to go following all of these developments in the future and also whether or not that number includes an assumption of assets that need to be sold? Yes. Coming to gearing is around 33%. So that's got everything, Commercial Bay, HSBC, Vineyards, including the Dumber amount as well. Pastral sale will bring it down. So that doesn't include Pastral. So Pastral will bring it down from here, based on the $77,000,000. So roughly 32%. Does that help? Yes. But that doesn't include Bowen Campus Stage 2. No, that doesn't include Bowen, Kemba stage 2. If you included Bowen stage 2 in the past or sale, you'd probably be around mid-30s. Okay, great. Thank you. Your next question comes from the line of Adam Billy from Craig Investment Partners. Please go ahead. Hi, good morning guys. Just a quick one in terms of back for leasing for the remaining spaces at ANZ and the Alpeter If you just give a bit of an update on how that's progressing? Yes. In terms of PwC building, the available space within this building is 100% leased. In terms of ANZIP center, we've completed, one leasing transaction there. And we have active interest over further two floors. So basically our main, our main sort of area of, of some backfill vacant remaining is that AMZ Center. And it's kind of a feeling as to how close you are to terms on that remaining space? So on those two floors that there's the negotiation of present, that's, well advanced. In terms of the remaining space, there is interest in that space. There isn't a lot of vacancy in the market. So we're confident around leasing the balance of AMZSender. Okay, very good. And then just otherwise, in terms of other disposals in the portfolio, is there anything else over and above the pest or sell, is there anything you're contemplating in the short to medium term? I'll look forward to that for no good offer, Adam, but, we're not we're not actively, sort of undertaking any campaigns at the moment. Thanks. Thank you. Your next question comes from the line of Shane Solly from Harbor Asset Management. Please go ahead. Good morning guys. Thank you for the rundown. A couple of quick questions from me. Firstly, on generator, can you just talk about at what point does it a positive earnings per unit contribution? Great to see a good uplift in returns there. Yes, Shane. So it's making a positive contribution life. So, it's contributed $1,200,000 over the period. Which is, in terms of what we have invested to date and, and generator in terms of the acquisition and all capital that's gone in there is a total of about $24,000,000. So on an annualized basis, it's currently generating around a 10% return on that capital. Okay. Thank you. So plenty of growth there still. You've obviously committed to quite a meaningful step up there. So you came to keep growing this business? Yes, look, we think, that the market is demanding it We think sort of our position of being a landlord who also operates flexible space is quite unique in the market. And it means we can respond, in a way that, that others can't We think the returns are good. Within Wellington, we think that's a logical place for us to go to next. And, we've talked about our investment in the Dunbar own building, but also, considering that within Bowen Campus, that would take us to about sort of 5 1000 to 6000 Square Meters. And Wellington, which we think would be a good next step. Beyond that, there is sort of new supply new competitors entering the market in Auckland, with WeWork's recent announcement and, also spaces opening within commercial bay. So I think that'll take a while to be absorbed, but beyond that, and the longer term, generator having a presence in sort of commercial buy precinct also makes sense for further growth. Okay. Thank you. My next question is on sustainability. Is there a plan to become to target a carbon neutral portfolio at any stage? We are so we're in the process of getting our carbon certified and we are occurring for the offset of that. So we do intend on going to a Carbon 0 from an offsetting perspective. I think the next stage for us after that will be then how do we start to reduce our carbon footprint rather than just offsetting. So yeah, we are looking at that. Okay. One question, just where do you think where is the cap rate likely to trend from here? I think, to be honest, post Christmas, the sentiment is towards further compression. And that's the things we're getting from from the market generally. So, it's a bit of an estimate at this stage, but my sense would be that we'll see more compression rather than expansion. Your next question comes from the line of Angus Simpson from ANZ. Please go ahead. Good morning guys. Just following up on Adam's question, just with the lease that's been signed in ANZ, is that over one floor? Did you announce that? It's over most of one floor, not an entire floor. Okay, brilliant. And then just the last question for me, a little bit granular, but the rent from commercial bay that was reported, is that solely H and M? And can you remind me again how much space H and M is currently leasing? And then also, are they paying any turnover rent at present? Yes, it's about a four thousand meter store and they're not paying anything over rent. And that is all the rent, that is the rent in combat. Your next question comes from the line of Nick Ma from Macquarie. Please go ahead. Hi, sorry, just one follow-up. I just on the pipeline, previously you guys had the yield on cost target of 6.5 to 7. Now it's just 6.5. What's changed there. And secondly, the total incremental spend on when you add 3 and 4 has gone up by about 20 mil. Can you still through those changes? Yes, thanks, Nick. Really the pressure around the yield on cost is reflecting that construction costs have probably run ahead lesser than, growth in market rents. So that's that kind of thing that we've been talking about for a while where it's still, you know, it's still challenging to be able to put these developments together. The profit on cost has been protected because we've seen tighter caps, but but the increased construction costs are having an impact on yields. So we still think though, if we can get a 6.5% yield on cost, it's worth doing when these completed assets are sort of sitting in the low 5 range. Second question around size, or increased in CapEx, that's really a consequence of, just design development on that location and we think we're able to get slightly more GFA than what we what we could last time. In fact quite a bit more GFA. So we're just working that really hard at the moment. We're in the process of engaging on, our land value calculation with Panuku. And, and so the revised feasibility has slightly bigger buildings, and that's what drives the extra cost Perfect. Thanks guys. Thank you. There are no further questions at this time. I will now hand the conference back to today's presenters. Please continue. Thanks, Christian. And look, I just want to thank all of you folks on. And today, we really appreciate the interest that you take in the building. In the business, should I say? If, as we said, during the presentation, we're really pleased with the steps that we have taken in the last 6 months and we're really excited about what the next 6 months, 12 months holds for the business. So thanks very much for your support. And if you have any further questions, then feel free to contact us directly. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.