Earnings Call: H2 2019

Aug 15, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Percent Properties Full Year Results 2019 Conference Call. At this time, Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Scott Richard. Properties. I'm joined today by George Crawford, Precinct's Chief Operating Officer and Richard Hilda, Precinct's Chief Financial Officer. The 2019 financial year has continued to produce great results for the business. We have enhanced the portfolio with the addition of H And M at Commercial Bay, and our Bowen campus assets. We've sold assets to recycle capital. We've progressed our developments. We've raised equity and source non bank debt to strengthen the balance sheet. And most importantly, we have grown earnings and dividends for our shareholders. The program for today's call is outlined on page 2 of the presentation. I'll shortly provide an overview of the highlights the result before touching on some major themes and reviewing precincts progress relative to our strategy. I will also provide some insights into the strengths of our 2 City Center Mark and then hand over to Richard who will cover off the financial result before George provides an overview of our operational performance. Following that, I will provide an update on our development activity. And as usual, we will be delighted to answer any calls that you have at the conclusion of call. Moving to the highlights page. This year, as outlined on this page, there are a number of highlights for the business. We have recorded solid growth in our operating earnings of 3.7 percent. We have recorded a revaluation gain of 162,000,000 which has led to our NAV per share increasing to $1.49, an increase of over 6%. Perhaps most pleasingly, we are continuing to drive meaningful growth in our earnings per share, with a 4.7% lift on a pre performance fee basis, at the same time as transforming the portfolio into higher quality assets. In addition to the financial result, we have an active year managing our capital. We've completed $152,000,000 equity raise and secured around $160,000,000 in non bank debt through a USPP issue. We completed the sales of $191,000,000 of assets in the period and post balance date have entered into a conditional sale of pastoral house for $77,000,000. These sales, along with our capital management initiatives, have strengthened our balance sheet and reduced our gearing to around 20%. Pleasingly, we continue to see real strength and demand for our portfolio of assets with 99% occupancy and a 9 year WALT. We're achieving strong and continued growth from our portfolio with 3.9% growth and like for like property income. The 100 percent acquisition of generator places our business as the leading Flex space provider in the Auckland City Center and we are the Bowen campus project, while commencing and advancing Vineyard Court in stage 2. Turning to page 4 in major themes. Similar to last year, we wanted to provide an overview of the major drivers of our business and the markets we're operating in. Firstly, our long held view population and a higher relative contribution to New Zealand's GDP Auckland of New Zealand's major gateway city, attracting more people to work, live, and play. While Wellington remains as New Zealand's capital city and is underpinned by Crown employees, Preston continues to see Auckland as New Zealand's high growth city offering significant opportunities as it evolves to meet the demands of Greater Auckland. Secondly, and as outlined in more detail shortly, we have seen Auckland's working age population continue to grow, particularly in the city centre. We have at business monitored the growth and trends in the number of city center workers for a number of years and believe it provides a very good proxy for city center office demand. Thirdly, consistent with last year, the challenges that we are all seeing in the construction market are driving considerable increases in the replacement costs of assets. We expect that this will continue to underpin market values and importantly limit supply. And finally, activity levels in Auckland will continue to remain elevated. We acknowledge that business confidence is lower, but we continue to observe demand for our space from businesses that are both growing and also trading up in the quality of the office accommodation. Turning to page 5. Our strategy has been well published over the past 8 years as we have reviewed, refined, and adjusted our strategy as we have progressed. Page 5 sets out the key moves the business has made in order to position it as it is today. Importantly, the decisions we made in 2011 and the drivers of those decisions remain as valid today as they did in 2011. With regard to a higher quality portfolio, a targeted increase in our cash earnings and a more active business focused on meeting opportunities, growing our market position in the flex space and co working market and looking to secure future opportunities to grow value for shareholders. Last year, we articulated our refined strategy, which was summarized into 3 distinct pillars comprising empowering people, operational excellence and developing the future. Page 6 outlines the progress made on our 3 pillars. Firstly, we continue to invest heavily in our team and the culture of the business. With the addition of the generated business, our staff numbers have increased significantly. And we remain committed remains an ongoing area of attention. Pleasingly, our annual surveys of staff engagement continue to show high levels of engagement and our we continue to measure the improvements of our operational performance. The table on the top right hand side details the improvements across our key criteria. Often lost amongst our metrics, we remain very satisfied with a weighted average lease term of 9 years across our portfolio and outstanding outcome. Our development portfolio has further advanced in the period with the completion of Bowen campus and the advancement of commercial bay and Vineyard quarter stage. 2. Now turning to page 7. Supporting our strategy are our markets and the Auckland Cbd continues to produce strong economic growth on the back the Auckland region continues to outperform New Zealand's GDP, while the Auckland City Center GDP continues to outperform that of the Auckland region. Most notably in the period, we have seen a significant increase in the number of workers in Auckland Cbd. With 7800 more workers than Auckland City Center. Of those 4700 workers are office workers providing a strong catalyst for positive of office space. Page 8 provides an overview of with considerable growth in the number of Crown employees driving increased demand for City Center Office Space. Our expectations are that increased activity levels with central government will continue to place upward pressure on the number of Crown employees, which will be supportive for office markets in Wellington. I'd now like to hand over to Richard to take you through the financial results. Thank you, and good morning, everyone. As mentioned by Scott, it has been another good year for Precinct. With total comprehensive income after tax of $190,000,000. Net property income once adjusted for developments and transactions was 3.9% higher than the previous year, and this helped increase net operating income by 33.7%. Adjusting for performance fees, earnings were in line with guidance at $0.0662 per share. As noted at the time of interim results, tax expense was expected to be low given the amount of activity occurring within the portfolio. The low expense was due to a higher level of leasing fees disposal of depreciable assets and deductible CapEx. It is pleasing to see operating performance or funds from operations grow, However, we continue to focus on adjusted funds from operations. AFFO provides a better measure of funds available for distribution and this grew by 7.1 percent or 3.9 percent per weighted security. The 2019 dividend of 16 per share was 3.4% higher than the previous year and reflected an AFFO payout ratio of around 100%. Following the acquisition of the remaining 50 percent interest in generator, we now have full control and have consolidated the business into our financial accounts since acquisition in February, generator has formed part of operating income. Business performance continues to improve and George will discuss this in more detail, including its outlook later in the presentation. Slide 11 provides a breakdown of net property income. The completion of on campus and HCM Building In the period helped offset the impact of selling a 50% interest in the Andi center and a foregone income associated with the Wellington government assets. On a like for like basis, Auckland's net property income was 6% higher while Wellington income was broadly flat. The strong growth in Auckland reflects rental revision, but also a strong occupier market and demand for quality space. In Wellington, net property income was impacted by foregone income associated with floors being developed at AAON Center And Dimension Datahouse. With insurance being a key contributor to net income growth in the capital, we were very pleased to keep insurance broadly unchanged for FY 2020. This outcome, combined with low vacancy and a solid occupier market, should help deliver net income growth in coming years. Turning to Slide 12, The reevaluation gain of around $162,000,000 reflects a 6% increase on year end book values, and is evenly split between investment revaluations and development profit recognition. The gain was also evenly split between cap rate compression and mark rental growth. Over the 12 months, cap rates in Auckland fell by around 20 basis points, while in Wellington, cap rates compressed by 15. Both cities also benefited from low vacancy levels in the support of occupier market, which resulted in market rents increasing by around 5%. The portfolio value now totals $2,800,000,000 with increasing NAV per share at balance increasing to $1.49. The revaluation gain contributed to the lift in NAV. However, this is partly offset by loss in financial instruments. Turning to the next slide, our approach to capital management remains proactive and we remain focused on initiatives that support our strategy. In the period, we raised $152,000,000 of new equity at a premium to NTA and sold $190,000,000 of assets. Because of these initiatives, net borrowings and gearing levels fell in the period as at June, gearing, which excludes the convertible note, was 22%, well below our banking covenant house in Wellington. This sale will provide further funding capacity and reduce our committed gearing to around 30%. In addition to these initiatives, we recently undertook our SEC in U. S. Private placement. The issuance comprised 2 tranches totaling $162,000,000. This transaction demonstrates the strong demand from US investors and shows investor confidence in the quality of our business. The private placement has added funding diversity with around 50% of our funding now secured from non bank sources. It has also increased the tenure of precincts borrowings and reduced refinance risk through a more laddered debt maturity profile. Despite the full and interest rates, our weighted average cost of debt increased year on year. This was due to a high hedging levels following the reduction in gearing and forward swaps that were put in place in 2015 to coincide with the original completion date of commercial bay. Average hedging in FY 2020 is expected to be around 80% as we continue to draw on borrowings which in turn will reduce interest costs over the year. Turning to the next slide. We have announced today the decision to move to an AFFO based dividend policy aligning dividend to AFFO is considered best practice Compared to other operating performance measures, AFFO is a better measure of sustainable cash flows and the dividend capacity of a REIT. With an average AFFO payout ratio of the past 6 years of 101%, the previous policy of paying around 90% of net operating income after tax has been very effective. However, we believe it is now time to move explicitly to an AFFO based policy and that this decision will provide long term sustainable dividends. With our strategy progressing well, we continue to see dividend in AFFO growth. By developing our own assets and entering long term leases, for instance, at Defense House, we expect maintenance CapEx and leasing costs to reduce over the medium term. Turning to Slide 15. Earnings for 0.8 dollars per share. As we execute our strategy, we continue to have confidence in our earnings outlook, a strong WALT, high occupancy levels and underwriting of 5% should deliver stable long term growth, while our development opportunities will continue to provide further earnings accretion. In addition, we expect generator and lower market interest rate to support earnings dividend by 5 We continue to make good progress on sustainability. In the year, we improved our gross pricing to above the global average and lifted our NECI ESG rating to A. As a direct result of our strategy, the environmental performance of our portfolio is improving. The recently completed Mason Brothers Building, achieved a 6 star green star rating and won the Green Building Property Award at the 2019 Property Council Awards. We are very pleased that our carbon emission intensity across our operating business has reduced. Since we began reporting this metric in 2016, we have reduced emission intensity by around 22%. While we have made good progress, we will look at ways to improve our reporting and explore other and reducing our carbon footprint. Thank you. I would now like to hand over to George. Thanks, Richard. Good morning. As we outlined on Page 18, the City Center markets we invest in continue to generally perform well, but to differing degrees. Our core market and prime office is the stand out and I will speak to conditions in each of Auckland and Wellington shortly. As shown by generator occupancy nicely at 88%, demand for flexible space in Auckland and Wellington continue to grow as it's increasingly understood by office occupiers and included as part of their real estate strategies. We expect there to be new supply in Open City Center over the next 1 to 2 years in response to this trend. And we think that will come from both new to market and existing operators. Retailers remain under some pressure and this is affecting affordability and keeping a lead on rents. However, despite this, we are seeing international retailers willing to commit to Prime City Center retail locations. The quality of the leasing mix at Commercial Bay, Bexville South. International arrivals continue to grow underpinning hotel demand, but there is some weakness with Chinese arrivals down. A number of new hotels have now been delivered ahead of the NZCC opening, this is causing some weakness in hotel performance. Our view is that well located assets will outperform over the longer term, and that the current weaker conditions and high construction costs will act to constrain new supply. The Auckland Prime Office market continues to perform better than has been predicted, with both JLL and CBRE significantly reducing their CIC look over the last year. This is supporting continued forecast growth in office rentals with JLL reporting mark growth of 1.3% year on year. Our own portfolio has experienced higher levels of rental growth than this, which I will touch on more shortly. The Wellington Prime market continues to show very low vacancy levels with just 17.50 square meters currently vacant. This is seeing strong rental growth forecasts, but with an expectation that growth will moderate as new supply comes online. Our observation is that while there are a few projects being planned, construction cost escalation and the availability of capital are limiting the amount of new supply, And we think they will these projects will probably be delivered lighter than is currently indicated. Moving to Page 21, the cost of construction continue to increase and funding is becoming harder. We are seeing construction cost escalation now becoming more widespread, including in Wellington, and these factors are limiting new supply in both markets. In terms of the investment market and the outlook, Richard has already covered the growth in our portfolio While capitalization rates are at new lows, with the move lower in interest rates, the spread between cap rates and interest rates has now widened significantly. In terms of rentals, affordability remains good. And with supply constraints, the outlook for rental growth is sound. Importantly, if we look at the chart on the bottom right hand side of page 23, This shows the together indicates continued support for valuation growth. In particular, the move we have seen lower in interest rates since 30 June was not anticipated when our year end valuations were carried out and is supportive of value growth. Turning now to the portfolio performance. Across Wellington and Auckland, we remain in very strong shape. Highlights during the year included a new 9 year lease Ministry of Education over 1 of the Terrace, as well as the leasing of the new mezzanine space at AAON Center to Medical Council. In Auckland, we concluded a new 10 year lease to Jarden at Zurich Costs as well as a number of smaller leasing transactions, which help keep our portfolio occupancy at 99%. Across our leasing transactions, we had an increase of 9 0.5% against previous contract rents, implying strong annualized growth of 4% since those rents were last set. This reflected growth of 11.6% against previous contract for Auckland and 7.7% for Wellington. Looking forward to the 2020 financial year expiries, we are making good leasing progress. At Devention DataHOUSE, We currently have one floor for lease following Forsyth bars relocation to another floor, and we expect the balance of expiries in that building to be retained. In Auckland, at PwC Tower, we are currently marketing level 8 with the balance of the expiring space already committed. At ZurichOS, have one floor remaining to lease with the other expiry already renewed. Our most significant leasing exposure in Auckland is at the ANZOD Center. We have strong interest in some of this space. However, inquiry there has been slower than on our other Oakland assets. In terms of asset sales, we are pleased to advise progress on the sale of pastoral Hoists with a conditional agreement for sale, and settlement expected post completion of refurbishment works in February 2020. Moving to Section 4. Our occupier market is continuing to evolve. Corporate Real Estate Strategies now span a range of accommodation solutions. From long term lease commitments through to co working. They often include multiple components from across the spectrum to match organizations' needs. For precinct, we are responding to this change by adapting our offering. While long term leases remain where most of our exposure sits, being able to offer solutions to the market across the spectrum is a strong differentiator for us. The acquisition of Generator has accelerated this broadening. It has helped us to better understand and to service the needs of our occupiers. We see generator as being highly complementary to our strategy. Through generator, we've been able to secure occupiers into the precinct portfolio that we otherwise wouldn't have done. This has become a reality over the last few months with 2 examples of significant scale technology businesses with growing needs who are with generator through their growth phase and are committed to move into precinct space. Through generators meeting and event spaces, we are able to provide precinct clients with increased levels of amenity, as well as in using generator space to manage their growth and office space requirement for project teams, etcetera. This is providing value by helping our clients use their office spaces more efficiently. There are already a number of examples of precinct clients using generator space in this way and there is greater opportunity. Through these spaces, we can also have a relationship with pretty much every occupier in the city center, irrespective of their size and whether or not they are in a precinct billing. Generator has seen strong growth in demand across the year. With revenue lifting from $7,600,000 to $16,400,000 at 100% and this is translated to a steady growth profitability. We opened our new site at Brindermark Place at the start of the year. And by the end of the year, we have achieved our target across the business of occupancy sitting in the 85% to 90% range. Our other key target was to have the business running profitably by the year end, and this has been achieved with expectations that we will see a return of around 10% on our investment over the next year. Looking forward we see a number of key opportunities for generator. We can lift performance through improving the utilization of space within our existing sites We intend for generator to run the commercial bay meeting suites, which will provide important amenity to our commercial bay clients on-site. As well as the opportunity for them to utilize other generator spices. We also believe that there is a strong opportunity in the Wellington market and we are looking for a generator site there. Wellington has a low level of co working provision, but we see strong demand in that market as there are many small scale but high quality occupiers. Thank you. And I will now hand back to Scott to take us through the balance. Thanks George. Page 34 sets out a summary of our current development commitments. We expect to cure a blended return on cost of at least 30% and a blended yield on cost of 7% or higher In the last 12 months, we have committed to 1 Queen Street in Vineyards Quarter Stage 2, and we have completed Bowen Campus Stage 1. Our future development pipeline offers us significant opportunity to drive further value for shareholders, with additional stages at Bowen Campus in Wellington, and Vineyard Quarter in Auckland. We expect that we will achieve a return on cost of at least 15% and a minimum yield on cost of 6.5 percent for these projects. Now turning to page 35 and focusing on Bowen Campus. Bolan Campus is now income producing with the completion of the Charles Ferguson tower in December 2018 and the rent commencing in Defense House in April year. Pleasingly, these projects have been completed with return metrics that are ahead of our board approved feasibility with a total return on cost of $41,000,000 due to increased rent, lower cap rate and higher occupancy. Commercial Bay set out on page 37 has benefited once again from a lift in its completed evaluation, having achieved further leasing success. The expected profit on 0.4% to 7.5%. As outlined in May, we have adjusted our opening dates to now be March 2020 for the retail center and April 2020 for the PWC tower. Since announcing the delay in May, we have monitored the level of production on-site and are pleased to report that progress is being achieved, which is consistent with those dates. During the year, we have lifted our retail commitments to 95% of the available space. This is a major movement and demonstrates the significant demand that we have received. We are delighted with the composition and mix of retailers and very pleased that we'll be bringing some new entrants to the New Zealand market. We have also lifted our total commitments in the office building to 82% during the period. While we have actually leased around 8 percent of the tower in the period. We have decided to terminate the lease on level 3839 of the tower, due to non performance by the tenant. So our total occupancy has now reached 82% are lift from 78% last year. This leasing leaves us with around 6000 meters left to lease and we remain very confident that we will lease the majority of this space prior to completion in April next year. Now turning to Page 38 and focusing on Winyard's quarter. Stage 2 of Vineyard's quarter has progressed well during the year. We committed to this project with no leasing in late 2018 and are delighted with the construction and leasing progress to date. Construction has progressed very well. 4 of the structure and have advanced our works slightly ahead of program. On the leasing front, we are delighted with progress to date. We have leased around 5000 square meters to media design school and have conditionally leased the remainder of the office space. The next area of focus will be on Turning to page 40 and focusing on 1 Queen Street. The design and preparation for works has progressed well in the last 12 months. A key area of focus has been on the design and cost plan for the hotel and ensuring that we are designing and building a hotel that meets the needs of the open market. We have observed that the hotel market has softened a little in the last 12 months. However, we do remain confident in the positioning and integration of intercontinental Auckland into the Commission Bay Crescent. Now to our future development sites. Page 41 sets out size and latest is for the remaining land at Bowen Campus. The land consists of around 4000 square meters and will allow development of 21,000 square meters of office space. We are excited about what this land and these latest designs can offer both the corporate market and government occupiers. The billings are receiving good levels of inquiry and we're decided to progress these projects so that we can start construction during the next 12 months. And finally, on the development section, page 42 sets the details for the final stages of Winyard Quarter. We have progressed our design for a further 19,000 square meters of space, and had recently lodged for resource consent. The design continues to progress and based on the success of 10 Madden Street, we are considering expiry dates for a number of occupiers supports a construction staff in the next 12 months. Now turning to page 44. PreSync has a well defined strategy, which is focused on investing in New Zealand's 2 major city centers. We believe the results announced today demonstrate that the strategy is working well. Our markets are supportive and we see more opportunity as supply demand dynamics support those investors who have access to capital and driving meaningful growth in our cash earnings with an emerging strong growth profile for our AFFO. In terms of the outlook, we believe that precinct is well positioned to create further shareholder value and develop high quality real estate and strategic locations. We have a good strategy We have a great team, a team who had learned a lot from our activities, and we're focused on how we can continue to use that capability we had a strong balance sheet with capacity for future opportunities. We're excited to lift our dividends for the FY 2020 year by 5%. And we're particularly pleased to do so on the back of key strategic decisions and well executed delivery. Thank you all very much for dialing in today. I'll hand back to Edison and we're happy to take calls. Thank you. Your first question is from Nick Mar from Macquarie. Please Sachs. Good morning guys. A few. Just on the guidance for FY 2020, could you provide a bit more color included in that as well? Yes, Sean. So interests, yeah, I noted that we're 100% hedged. That will fall as we start we spend on Commercial Bay and the other projects. I think overall, the kind of average interest rate will be about 5 just over 5% for the year, and hopefully end of the year will be below that. In terms of, kind of, tax expecting it to be really low for the year, just with the amount of activity that we're undertaking at the moment. And also on generator, yes, there is an assumption within that, of around about $1,000,000. Post tax? Yes. So the tax rate, would you assume low single digit effective tax rate? Yeah, it'll be quite low again just, again, what we're doing at Pastwell House may fear, number 1 Nomont Tower down in Wellington and also the development projects that we've got. Cool. Now that makes sense. And then just on Commercial Bay valuations, can you provide a breakdown of the uplift this year that was a release of profit and risk as you progress the program versus, change in the final cap and therefore the value uplift from that? I'd say the majority of it would be, profit recognition, there would be a small amount from the shift and the value of the overall asset. Yes, because obviously Auckland cat rates now 20 points, if you run that across a pretty chunky number? Bay. We've seen about a toy, I'll probably need about a $20,000,000 gain in terms of the value on a completed basis for commercial bay. And out of the eval this year, $77,000,000 of it was development profit recognition. And the majority of that was conveying. And when you talked about the kind of fifty-fifty breakdown of, reeval from cap rate versus market rents, how do you classify the $77,000,000 in that or is that separate from it? That's separate. So the $160,000,000 goes to the $77,000,000 goes to the development properties, which is separate to that equation, yeah. But then the remaining kind of 85 odd, you just divide that by 2, is that, hey, you talked about that fifty-fifty? Yes, essentially. Yeah. Yeah. No, that's cool. And then just on the divestments, you guys were obviously marketing hospital in Mayfair as a combined transaction. Can you just talk through the rationale for not transacting that way in the end? Yes, I think probably one of the lessons out of that process has been, pre selling assets like that. Has been a little more challenging. So I think the reason that we've had success on pasture was that the works are underway and our expectation is that those books will be completed by theendofthisyear. So for those people that are looking to acquire those assets, there's sort of less risk around what might happen in the market around interest rates and yields in the meantime. Mayfair is further out. So we're expecting Mayfair construction to start February next year. So that means it won't be completed for another 12 months after that. I think one of the lessons we've learned out of attempting to do that is that there's probably just a bit too much uncertainty for the market. So At this stage, we're hoping things will go well on pass through in terms of completing DD and that will become unconditional a bit later this year. And then we'll look and reconsider make it down the track. Cool. And just a 77 number versus book of 60 and how much you've left to spend on that? Yes. So I think 77 you'll see us exit at around book we took a small rebound gain effectively this year. So, once we exit with the like for like around Perfect. And then just on the future development pipeline, the half year, you talked about kind of targeted return on cost of or yield on of 7 now at 6.5 to 7, you've talked through the changes in thinking there? Yes, look, I just it's very much a function of continuing construction cost escalation. And sort of I suppose communicating, we'd still have an aspiration, to be honest, to get yields on costs that are in the 7s. We think that's really value accretive to shareholders, but At the same time, if we had a really fantastic opportunity, to get underway with the development with a really good occupier and it was in the mid to high sixes, We think that based on our funding cost right now, we think that is still a feasible thing to do. So just wanted to communicate that that bottom end may have come in a little Yes. No, that's great. That's all for me. Thanks. Your next question is from Jeremy Simpson from Forsyth Bar. Please ask. Hi, guys. You brought on on the FFO adoption and the Divi guidance too. That's great. Thank you. Just in terms of, I guess, the sort of climate we're not at the moment, I mentioned your feedback from how your non government tenants are thinking about life, I guess, and in the needs of space. And then I guess that married against the tight space outlook, I guess they're being sort of forced to make some decisions as well, but interested in sort of what in those sort of drives? Jeremy, George here. So look, in terms of demand from occupiers outside of, outside of government, We've talked to Wellington first. We're seeing that demand as really quite strong. And it's sort of I guess, not really connected to the economic conditions. It's more to do with the property market conditions down there, with the impacts of seismic concerns on existing buildings, stock having to be taken out of the market. And also a lot of the non government occupiers in that market are still quite related to government activity. So their own activity levels are pretty strong. And so we're seeing sort of expansion and move up in quality within that wellington market. And Auckland, generally, it's a fairly similar picture that business's own needs for space tend to be increasing. And we're seeing most occupiers either occupying their space fully or, in some cases needing additional space and it's very tight. So we aren't seeing yet a transmission of, what you might think from, what's driving lower interest rates through to impacts on demand. Cool. Thanks for that. Just I'm sorry, I missed the answer to next question about generator, what was the post tax contribution expected to be for that? That's around $1,000,000 for next year that we're assuming. Great. That's all for me guys. Thanks. We have a question from Victoria Young from Business Desk. Please ask. Oh, hi, guys. I was just looking for an update on how much, you might have withheld from fixtures and liquidated damages on Commercial Bay and also if you could name any of the other retailers you've picked up since the last announcement? Hi, it's Richard here. We've withheld 36 just over $36,000,000 from Fletchers. And to three other questions, I'll hand over to Scott. Yes, Victoria, we haven't yet released some of the new leasing that we've done in terms of retailers, we are talking to them at the moment about their optimal timing as to when they'd like to release that. And so I suspect and hope that it'll be in the next month or so, but we are pretty excited about whether of getting to. We've had really strong demand from retailers in the last particularly in the last 2 months. I think there's more certainty has become obvious around completion of the center and opening dates, the retailers have really responded well. Can you say are they, the big international brands or is it still veterdamaxel. Any hints, I guess? Yes, I think our momentum in the last in the last couple of months has been international brands. Looking to get a city center position. So we're really excited by that. We've only got a handful of stores left. Great. Thanks. Thank you. We have our next question from Angus Simpson from ANZ. Hi, guys. Just the first question, just a quick one. So what is the exact completed further on commercial by now and how much CapEx is left to spend on commercial by? The value on completions 1.035 1.037 in that order. 135. 135 and we've got about 100 milligrams spend. Great. Thanks. And then just, I'm not sure how much you can say on this, but just a comment on the Wellington market, the government's willingness to sort of pay mark rents now? When you built rents? Yes, look, I think like all occupiers in the Wellington market, particularly after 2016 losses of buildings, there's a real focus on resilience and the ability to remain in buildings post to quake. And that's seeing occupiers across the market, including government being willing to pay for that resilience. Okay. Thanks. And then just one last question, and then maybe may not get answered as well, but the 36,000,000 of liquidated damages, how will that be treated from an accounting point of view? Will that come through as a revenue and FY2020 or how can you sort of just talk through how we expect that expected to be recognized in the P and L? Yes. So, currently we've got a current liability sitting there and a consent to NetSuite identified Look, some of it will come through as revenue and some will go to capital, but the vast majority will go to revenue as our expectation as that is what the LDs would be to compensate pricing for. Okay, thanks. Thank you. Your next question is from Nikmar from Macquarie. Please ask can let you guys off this easily. Can you just talk about the under renting? It's obviously gone down since you guys last reported, and it doesn't seem like market rents have really rushed off that much. So is it just a realization impact? Hi, Nick, it's good to get you back. Yeah, it has gone down. ATPC we reported in underwriting last year. It's been pulled out this year, just given that it's we won't get that revision on that asset given the development there. So that pulled it back a bit, but most of it's today with a lot of good leasing and new leasing at A and P entering the open portfolio, but George is probably there to talk to that. Yes, look, AMP building, we've had really good growth coming through. And my view is that we'll you to see that there, even with where the sort of valuers are, are positioning market rents. We think there's still opportunity for growth. The other one is pretty zero cost where we see the potential there as well. Yes, that's good. Then just on Bowen Stage 2, are you guys still running with the design not base isolated? Can you just talk through what your kind of feedback is from tenants about having it the way you're doing it versus fully base isolated? Yeah. I mean, so we're, we're designing to a specification, which is sort of a low damage performance, which means that in the event of a quack and willing to meet a building will perform significantly better. Designed to be operational post, post event. There's a number of ways in which you can achieve that. One is base isolation. Another is, using dampers within the structure of the building to facilitate some flexibility in the structure. And that minimizes the extent of damage within the frame and within the building. So it gives occupies much greater confidence that they will be able to go back into the building immediately after or shortly after and continue to operate. That approach is attracting quite a lot of interest from from government occupiers, particularly for those agencies that require resilience in terms of their operations. So It comes with a slight cost premium. But to date, based on our engagement, there's an absolute willingness to try and sort of to try and achieve that and have a building that performs like that. And do you know how much more base full base isolation would cost? The difference between what we're doing and what base isolation is, I don't actually know off the top of my head, Nick. Base ice installation was a premium to what we're doing. And so we place a great dealer reliance on our structural engineers and the modeling that they do and trying to just understand a basic cost benefit analysis. We have another question from Jeremy Simpson from Forsyth Just one more, guys. Just the tenant non performance on level 3839 in Commercial Bay, is it somewhat unusual, but is it same time a bit of an opportunity, I guess, with, where how tight space is now? Yes, look, it's a shame. We it was an offshore investment company and the type of party that sort of jumps at those opportunities to be on the top of the tower. They haven't performed. And we've given them plenty of opportunities performance. They just haven't got there. So we've had to make Paul. We're not uncomfortable with that. We've only got 6000 meters left to late in as you say, it's not there's not a great deal of opportunities to get on the top of a tower like that. So We feel very confident that we'll get that space away. We've already had a couple of phone calls from people who have interest in have had awareness that that space might be available. So it's great space. Hello, we're to the guys here. Thanks Jeremy. We don't have any other questions as of the moment presenters. Please continue. Thanks, Edithson. And once again, everyone, I'd like to thank you all for dialing in. We're really pleased with the results Thank you for your interest and thank you for your ongoing support and we're happy to take any further questions after the call. Thank you, Greg. Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may all disconnect.