Earnings Call: H1 2019

Feb 18, 2019

Thank you for standing by, and welcome to the Precinct Properties Half Year Results 2019 Conference Call. All participants are followed by the number one on your telephone. I would now like to hand the conference over to Mr. Scott Prichard, CEO. Please go ahead. Thanks, Amber, and good morning, everybody, and welcome to the 2019 interim result briefing for present properties. I am Scott Richard, and I'm the Chief Executive for Precinct, and I'm joined today by George Crawford, Precinct's Chief Operating Officer and Richard Hilda. Our Precinct's Chief Financial Officer, as well as Henry Chung from First NZ Capital. The first half of the 2019 financial year has continued to be very active. We have completed the 1st building at Bowen Campus on time and on budget. We have increased portfolio occupancy to 100% we have secured a significant amount of pre commitment leasing for our developments. Each of these items have had an impact on precinct operating and financial performance, and we're pleased to be here today to provide an overview of the company's position. We're also pleased to be announcing an underwritten $150,000,000 equity raising to put the business into a position to take advantage of future opportunities. The program for today's call is outlined on page 8 of the presentation. I'll shortly provide an overview of the highlights of the results before reviewing our progress against our own 3 strategic pillars. I'll then hand over to George to summarize the property markets and our portfolio performance. Richard will then take us through the interim results and capital management position for pricing. I will then provide an update on our development activities an overview of the equity raising and finish with some concluding comments. Upon completion of the presentation, we will be happy to answer any questions which you may have. Moving to the highlights page. The first half of the twenty nineteen financial year has seen us record a strong first half profit of $25,500,000. Our operating income has remained consistent with last year, despite selling 50 percent of the AMZ center during the period. Pleasingly, our earnings per share on a pre performance fee basis have grown by 2.9% compared to the prior comparable period. Our balance sheet has been strengthened in the period with the sale of $191,000,000 of assets, positioning our gearing at 24% at balanced state. After assuming our $150,000,000 equity raise, our gearing will reduce to 18.5%, which positions the business to be able to fund our future opportunities. At an operating level we have seen continued strength in the performance of our portfolio with occupancy reaching 100 percent at balanced state. This level of occupancy is a clear indication of the strength of our markets and the position that our portfolio holds and meeting the needs of our occupiers. We continue to see solid rental growth in both the Auckland and Wellington market, And finally, we are pleased to announce today the acquisition by precinct of the remaining 50% of generator. The generator business offers flexible workspace and co working space for office occupiers based in the Auckland City Center. The philosophies and strategy for generator are well aligned with those of precinct, and we believe strongly that this acquisition places precinct into a stronger position in a market segment, which has been particularly active. Turning to Page 10. Prethink's broader strategy remains unchanged, which is focused on 3 distinct aspects, including operational excellence, developing the future and empowering people. Our portfolio continues to attract good demand from occupiers with 100% occupancy reported for just the second time in the company's history. This strength in market conditions gives us increased confidence about our developments and confidence about increasing our ownership of generator to 100% following significant growth in this business over the past 2 years. And finally, we are commencing a sales campaign for 2 of our government occupied assets in Wellington, Pastural House And Mays Fairhouse. Recycling capital from the portfolio into newer development continues to be an approach we will adopt given the success we have had to date. In terms of our development, we continue to see good leasing progress at Commercial Bay with retail and office leasing increasing to 84% 80% respectively. While leasing has progressed well, we have observed some minus slippage of about a month to the construction program at Commercial Bayne. At Bowen Campus, we have successfully delivered the Charles Ferguson building, and the Bowen State Building is due for completion later this year. We've had good leasing progress on both Winyard quarter stage 2 and 1 Queen Street in the period lifting the level of pre commitment in these two developments to 60% and 76%, respectively. And finally empowering people with the acquisition of the remaining 50% of generator and with this company becoming a wholly owned subsidiary of precincts, the increase in staff numbers associated with the precinct business increases to over 100. Secondly, precinct has benefited from a strong and stable governance regime with a high quality board of directors who have strongly supported the strategic of the company and its activities 12 months to ensure a seamless transition. And finally, our approach to ensuring an inclusive and supportive weakened environment is something that we prioritize staff, which has this year seen us commence with obtaining a RevoTek certification. I'd like to now ask George to take you through a market overview and update on our portfolio performance. Thanks, Scott. On page 12, as our business continues to evolve, so do the City Center Market which we are invested. In terms of City Center Retail, we continue to see strong interest from retailers as evidenced by the commercial bank leasing progress. Scott will speak to shortly. However, this is against the backdrop of softer retail trends and increasing market activity as other developments progress. The City Center Hotel market is now seeing new supply start to come online, and this is seeing room rates stabilize after a period of strong growth. Around current elevated levels. This is as expected and occupancy levels and room rates remain robust. Moving to Page 13, the Auckland office market is in very good shape with the shortage of available space and solid demand. New supply beyond our own developments continues to be limited and lower than anticipated occupier demand. There are differing views across the market in terms of the extent to which this will translate to rental growth. However, as shown on the top right hand side, even the more pessimistic commentators have lowered their vacancy expectations as the market has continued to perform well. The Wellington market is also performing well. Solid demand from both public and private sector, combined with record low vacancy rates and limited new supply are underpinning the market Moving to page 15, our investment portfolio continues to perform well. And across both markets, we are seeing our portfolio deliver rental growth higher than what is being forecast for the market generally. Across our leasing in 6 months, the rentals we achieved were on average 5.7% higher than the market rentals assumed in last 30 June's valuations. Which is a good indicator of the strength with over 16,000 square meters completed in the period in addition to portfolio leasing. This has included a new 15 year lease with Media Design School over percent of the space we're building at winning our quarter stage 2. Concluding a 15 year commitment with Bell Gully, which will be for at least 3800 square meters 1 Queen Street and agreeing terms for the tower portion, which is all of the remaining space at London Terrace in Wellington. Moving to Page 17, we are really pleased to report further progress at AAON Center. With all of the space available following the IAG expiry now being fully leased. These premium floors at the top of the building have been entirely refurbished with UHVAC and upgraded base build. And we have also been able to create an additional 800 square meters of net lateral area at the top level of the building. On average, the rentals achieved have been over 21% premium to the previous passing rent, and overall, we delivered an incremental yield of 12.6 percent on the capital spend. Moving to Page 18. We're pleased to report that number 1, the Terrace Podium refurbishment is now complete. And Treasury are in occupation. When the government Wellington accommodation project leasing was announced back in 2016, the tower component of one of the tariffs remained as pending vacancy. We've now agreed terms for an occupier to take all the remaining space of the tower. On a new 9 year lease following the completion of the tower refurbishment, which will be at the end of this year. Moving to Page 19, and as covered by Scott, we are announcing today and moved to 100% ownership of generator. We made our initial 50% investment in May 2017, And since that time, we've seen really strong growth in demand. We opened the Windyard quarter locations in October 17, and then a further site at Brinavess Place in July last year. Combined, this ethane generator now running 12 1600 Square Meters of SICE, and become the largest Flexible Spice provider in Open City Center with around 60% market share. We see this investment as being strongly aligned with present strategy. This sector of the office space market is seeing growth in demand from smaller businesses who want access to the sort of amenities usually reserved for larger occupiers. In addition, underlining the presets client base, we're seeing demand for more traditional corporate up fires. We are keen for flexible space to form one part of their overall real estate solution. We now have a very clear strategy and targets for the generator business. With a solid platform and market position established, we have had operating losses as the business is traded up. The business is now achieving breakeven on a run rate basis. In the short term, we're focused on lifting occupancy levels into the range of 85% to 90% which will see us achieve annualized revenue of around $20,000,000 and enable us to deliver an EBIT of 10% to 15% of revenue. Longer term, we see opportunity for further profitability improvement as the business grows, and we start to use the spaces more efficiently. Over the long term, we see continued growth in demand from this section of the market, in particular in the Oakland of Wellington City Centers. According to Collier's Flexible Spice is currently just 1.2% of the Oakland City Center market. If we compare that to other global cities, reflexible space usage is approaching 5%, we can expect to see further significant growth in demand for this type of space. Thank you. I'll now hand over to Richard to take us through the interim results. Thanks, George, and good morning, everyone. We had a strong first half of total comprehensive income after tax of $25,500,000. This compares with $17,700,000 for the same period last year. With the difference mainly attributable to the prior period fair value movement at 10 Brandon Street and the movement in financial instruments this period. Earnings per share, pre performance seats increased around 3 percent to 0 point 3 $2.4 per share. The graph shown provides a bridge to the comparative period and illustrates the main drivers. As noted by George the portfolio benefited from strong leasing and 100 percent occupancy. This performance, combined with the completion, of H And M at Commercial Bay and the Charleston Building Building in Wellington resulted in net property income being consistent to the comparative period This was despite the settlement of a 50 percent interest in the AMV center. Tax expense for the period of $400,000 was $2,300,000 lower than the comparative period. This low tax expense reflects the significant amount of activity currently underway within both the development and investment portfolios. For the first time, we are reporting liquidated damages in relation to commercial Included within the commercial based construction contracts is the right to liquidated damages of certain milestones are not met. As at December, $15,400,000 of liquidated damages had been withheld from the contractor. The amounts withheld have been recognized as part of the current liabilities and the contingent assets have been identified. An internal review of the during 2018, property valuations has been undertaken. Despite market rental growth, There was no material value movement in the period for all the ATMs. Since June, interest rates have fallen significantly since which should support valuation cap rates at year e/nd. This fall in interest rates, however, led to a fair value loss in financial instruments, which was the primary reason for the value of net tangible assets per share falling to $1.39. The business remains on track to deliver full year earnings of around $6..6 per share, which is unchanged since August. Slide 24 provides a summary of net property income. After allowing for development of transactions and investment assets being redeveloped such as won the tariffs, net property income on a like for like basis was 1% higher. In Auckland, net property income was 1.8% higher, or Wellington income was broadly flat. And Wellington net property income was impacted by forgone income associated with floors currently under development, For instance, the top floors of the AAON Center in the lower levels of number 1, the tariffs. The completion of these projects along with a strong occupier market will lift net property income in future periods. Turning to Slide 25. As noted, tax expense for the period was $400,000. Significant leasing success across the development portfolio resulted in a higher than expected level of leasing fees. In addition, development activity led to a high level of deductibles, due to the disposal of fixtures and fittings across several assets. With around 90,000 square meters of development works currently underway, and material works occurring throughout the investment portfolio, tax expense is expected to remain low. The second half of the financial year, we will commence work at Pastrell House and Tower Works at number 1, the Terrace. These projects along with further leasing fees to be paid are the main contributors to this expected tax position. Finally, on capital management. During the 6 months, we refinanced around half our bank facilities, and settled the sale of Canyon Street and the 50 percent interest in the A And D center. Despite continued development spend, these sales led to gearing falling in the period to around 24%. The announcement today of our $150,000,000 equity issue we'll see pricing steering, which is disregard to the convertible note reduced further. Following the issue, pro form a gearing as at December, falls from 24% to 18.5 percent. Total committed funding remains around $1,200,000,000 for a weighted term of around 3 0.6 years. We continue to have sufficient capacity to deliver all committed development of a balance sheet in good shape Over the next 12 months, our borrowings will increase by around $300,000,000. As we complete Boeing Campus, commercial bay and progress work at Winyard Stage 2. Our weighted average interest rate remained largely unchanged in the period or hedging around 80% at December. I would now like to hand over to Scott who will take you through the remainder of the presentation. Thanks, Rich, and turning to Page 28. The current committed development pipeline consists of 4 developments comprising Commercial Bay, Phone and campus, winning our quarter stage 2 and 1 Queen Street. Combined, these developments total over 1,200,000,000 in capital spend, and provide the business with a blended profit on cost of over 30% and a blended yield on cost of 7.3%. These developments are 83% pre committed as at balance date with a waiting to Auckland of 85%. In total, these developments will provide precinct with about $318,000,000 in development profits. The next stage of our development pipeline consists of Bowen campus stage 2 and Winyard quarter stages 3 and 4 with anticipated returns of 15% profit and 7%, a minimum 7% yield on costs. Turning to Page 29. In the period, we have committed 2 new developments, namely Winiard Quarter Stage 2 and 1 Queen Street. Combined, these developments offer around 30,000 square meters of space, of which 20,000 square meters has already been committed. Importantly, this slide sets out the leasing progress made in the last 3 years across all of our developments with a particular focus on uncommitted space. In total, over that period, precinct has the least or committed around 50,000 square meters of space across a range of assets in order to reduce the extent of leasing risk and lock in significant development profits whilst also repositioning the quality of the portfolio. Pleasingly, we have continued our leasing progress at Commercial Baywood retail leasing increasing to 84% and office leasing increased to 80%. The retailers continuing to attract good interests from well known and new to New Zealand retailers who want to be a part of this new retail the nation. Of the retail remaining to be leased, the ground floor is the main focus with food and beverage, unisex fashion on level 1 and the service based retail being largely complete. The office leasing has increased slightly in the period. We are pleased with the inquiry and continue to feel comfortable about ensuring we are at least 90% occupied by practical completion. After including the small suites on one floor, we have just five floors remaining to be leased in the tower. Turning to page 31. In the period, we have made some minor scope changes, which has seen increase which has increased our total project cost budget to $690,000,000. These changes have been made to optimize the design of certain aspects of the development as well as create additional value. The additional $4,000,000 of changes will drive around $6,000,000 in value which was captured in the 30 June valuation. In addition, we remain on target to deliver a yield on costs of 7.5%. As always, we continue to observe the progress made on-site relative to the construction program. There is around 1 month slippage to the program, which may impact on the previously disclosed completion tower and the retail remains as the most important factor in terms of meeting program. Bowen Campus continues to progress on time and on budget. Charles Ferguson building was successfully delivered in December 2018 with Occupier Ministry of Primary Industries steadily moving in over the September, January period. The Bowen State Building now called Defense House continues to progress with the majority of baseball works now complete and the continuation of the integrated sit out progressing. This asset will begin generating rentals from 1 April this year despite defenses fit out not completing until October this year. Vineyard Court of Stage 2 is now underway. And we are delighted to have secured the media design school on a 15 year lease term for 60% of this building. Works to date are progressing well as we begin bulk excavation and in ground works. We are engaged with the confidence party for 1 of the 2 remaining floors in the building and hope to complete this transaction in coming months. Turning to 1 Queen Street, The main progress in the period is the conclusion of a major leasing transaction with Bell Going for at least 3800 Square Meters in the building. Following this transaction, the development is now 76% committed and on track for words to commence midway through next year. One of the key areas that we are looking at in terms of our development pipeline is a focus towards our next set of developments at Windyard Quarter in Bowen, Kemper These two sites offer us a further 42,000 square meters of area over 4 to 5 buildings which can be developed in relatively small lots. We think this is attractive as the level of pre commitment is lower than a large lot and development and can be met by a wider set of potential pre commitment target. Each site is being advanced from a design perspective and discussions are progressing with potential occupiers on each site. Now moving to section 5 and the equity raising announced today. The purpose of the capital raising is to position the business for future opportunities, including Bowen Stage 2, and the 3rd and 4th stages of linear quarter. These developments are between 6 to 12 months away And so we will use the funds initially to pay down bank debt, which will see our actual gearing to reduce to 18.5%. The equity issue includes a $130,000,000 underwritten placement and a $20,000,000 underwritten retail offer with the ability to take over subscriptions. I'll shortly invite Henry Chung15 to capital need to explain more details of the offer. Turning to page 38. To provide context for the equity as you announced today, sit out on this slide as the progress we have made over the past 4 to 5 years. We launched our 2020 vision in 2014 to transform our business and in so doing commenced 3 large scale developments, commence of sales program for over $500,000,000 of noncore assets and undertake a comprehensive capital management plan which match our active management approach. This table sets out the gains achieved by transitioning the portfolio from an older a grade quality portfolio into a premium grade portfolio offering higher returns. Page 39 then sets out the value derived from this transformation. Most notably, precinct has delivered around $0.16 per share in NTA accretion, which is directly attributable from development activities. In addition, our earnings per share has increased by on average 3.5 percent per annum since 2012, And finally, our weighted average lease term is sector leading at 8.5 years as a consequence of entering into long term leases associated with our developments. Page 40 sets out the details of the opportunity to proceed with over $300,000,000 of developments, including Vineyard Quarter Stage III And Bowen Campus Stage II. Like many of our other developments, we will seek enhanced returns with anticipated margins of 15% and yields on cost of 7%. Following this equity issue, Precinct's committed gearing will reduce to 32% providing sufficient capacity to be able to fund these future developments. And as outlined during the presentation, it is anticipated that President's gearing will reduce further following the sale of Castro and MACEA House. Importantly and reflecting the strength of our occupier market and the performance of our portfolio, we are maintaining our earnings guidance for the FY2019 period of $0.06 per share pre performance fees. This ensures our guidance for the full year dividend remains at 0 point 0 6 dollars share representing a 3.4% increase compared to the prior period. I'll now hand over to Henry Chang, the first Thanks, Scott. As mentioned earlier, the offer is being structured by way of $130,000,000 placement and $20,000,000 retail offer underwritten by the jointly managers. Faceted capital and credit slip. The placement is open to Allison Investors and the jointly manager has separately distributed details on the book book process. The final price under the placement will be determined by our book book process today, subject to our underwritten floor of $1.45, which represents a 5.5 discount to last close. Under the retail offer, all existing New Zealand Residence shareholders will have the opportunity to apply up for perhaps our $50,000 of new shares at the clearing price of the placement. Please make makeup have an additional $10,000,000 of OE prescriptions at a subscription. All shares issued under the placement and the retail offer will be eligible for the upcoming quarter 2 dividends. Looking at the time table, on Page 43, The placement book order is being executed today, while precinct isn't trading hold, and the book order is open until 5 pm. Allocations will be advised overnight and precinct will resume train tomorrow following announcement of the final price. The placement will settle this Friday, 22 February, with the retail offer following closing on 5th March. I'll hand it back to Scott to run through page 44 and the rest of the presentation. Thanks, Henry. Finally, in terms of the equity raising, while we are proceeding with a placement and retail offer, we are focused on ensuring that we offer all shareholders the opportunity to participate fairly and ensure that investors who are willing to seek a pro rata share of the offer will be catered for. The decision to proceed with replacement and retail was to ensure we had greater execution certainty in a market which has demonstrated elevated levels of volatility. Finally, Halmi, Precinct's largest shareholder is not participating in the offer. This will see their holding reduce 17.3 percent of all shares on issue. While they have chosen not to participate in this transaction, they remain very supportive of the business and its strategy and they have no intentions of selling down their stake. And lastly, some concluding comments. While global markets remain volatile, we continue to have confidence in the occupier markets of Auckland and Wellington and the key drivers which are supporting them. The business is well positioned after today's results and the equity raise and the business is set to further leverage its internal opportunities. We're excited about our ownership of generator and believe 100% ownership of this business and exposure into this sector will give precinct further operational leverage and exposure into this fast growing sector. We continue to believe in our long term strategy and the development opportunities which we have. We remain focused on progressing our market position and transforming the city centers which we operate in. I'd like to thank you all once again for dialing in today. And we're Your first question comes from Joshua Dale from Craig's Investment Partners. Please go ahead. Good morning, guys. Just a few questions from me. First of all, curious about the progress with back for leasing in Auckland. There's generally not a lot of commentary on that. It seems like the 2 key gaps are sort of close to 5000 square meters in each of the ANZ and PWC towers. You know, putting the chat interest space and also the balance of the PwC floors, can you sort of talk to the level of interest you're seeing there? Hi, Josh. George here. Yes, look, we're seeing really good interest across the the space vacated by will be vacated by PwC. That space is now or leased Fire One Park floor. And across AMZ sensor, we're seeing good interest there from part on single floor occupiers. And we are launching a marketing campaign for the remaining space, shortly. So overall, the demand on the balance of the portfolio that's fully based. Okay, great. And just on 1 Queen Street, the FY18 result, 50% of the construction costs have been fixed. Do you have sort of an update on the remaining 50% when you expect to lock that in? Yes, we'll say we're progressively working through that. We have advanced that through to sort 65% to 70% at the moment, I'd expect that in the next, 3 or 4 months will progress another 15% to 20% of that. And then there'll generally be sort of 10 to 15 that will remain, sort of work in progress through design development and provisional sums. Okay. But at this stage, you're still comfortable with the $298,000,000 figure? Yes. Everything that we're seeing today in terms of the pricing that we're receiving is, consistent weather or inside that figure. Okay, great. And, just one thing I noticed that was missing from your pack was commentary on the underwriting position. At FY18, it was 6.4%. Can you sort of talk to that and what you're seeing there? Yeah. So we haven't undertaken an external valuation at 31 December. The leasing progress that George took during the presentation suggests that it's widened because the deals that we've done to date, we're at a premium to valuation of around 5.7%. So a smaller sample pool of evidence, but it sort of suggests that 6.4% may have widened in the period. We'll undertake an external valuation of 30 June and get a clear steer on where that underwriting is lending. Okay, great. Thanks guys. Thanks, Josh. Your next question comes from Jeremy Simpson from Forsyth ahead. Hi, good morning guys. Just a couple of things. Thank you. The committed gearing 32% now post the issue. Can you just remind me where that's what that covers? I mean, does that cover 1,000,000 and 1,000,000,000 and 1,000,000,000? Or is it just the current committed projects? Yes. So, that includes everything we've committed to, so commercial bay, Bowen campus, when you have quarter stage to 1 Queen Street, as well as the government RFP assets and now one that and the works that we'll be undertaking there for that new leasing deal that we've just announced. Great. So not the stage 2 then. 34. Correct? Not it includes stage 2 of winter quarter, but it doesn't include doesn't include when you are stage 3 and 4 or Bowen Stage 2. And is there any assumption there of gains being made on, from the from the development gains being incorporated into the asset values there? Or is it just on book values? Jeremy, Richard here. It's assuming the development profit on the projects is realized, but no further CapEx compression, over and above valuations from P2C. Cool. And just on the, just a couple more things. What sort of tax rate do you think we should use? I know it's a tricky one to move around a bit, but we should use over the next, 2 to 3 years through this period. I think for this year, I'd be looking at around that if it's a tax rate of 1% it will be a low second half. In next year, we'll continue to work with, with Mapier, past drop continuing. So and worked in number 1, as well. So I'd be low single digits as well. Cool. And just the liquidity damages, is that, is that if everything sort of stays on track from here, or is there potentially more of if things go wrong? No, no. So that is what we have levied to date is at 31 December. Our expectation is that, that will grow, given the, extent of delay on-site. Thanks guys. That was all for me. Thank you. From Jonathan Davis from ACC. Please go ahead. Good morning team. I was wondering if you providing me with some details on the fees associated with the capital raise. And do you anticipate any break fees associated with paying down debt? In terms of the in terms of the fees of that generally market rates, I'm not going to get into the details of what they are, but they've been tested, they're competitive. We're comfortable with them. Rich in terms of the break fees. In terms of the bank facilities, we're not cancelling any bank facilities. We're just going to repay that down. Thank you. So, yeah, we're just three times. Thank you. Okay. And just on Commercial Bay, is it your expectation that Saddle completes during March now or is that being pushed out? No. So the previously disclosed dates for completion of September, 19 for the retail and December 19 for the tower. What we have observed is that there is around 1 month slippage the construction program. It's been measured sort of immediately post a pretty unproductive period in terms of Christmas and New Year. So that's got that you may impact on those dates and that's kind of what we're signaling at this stage. I think the next couple of months are going to be really important in terms of sending just how much productivity there is on-site. Okay. And, the 1.6 mil that you received in the half from Bowen, is that just purely the Charles Ferguson tower? Yes, that's right. Yes. Okay. That was it from me. Thanks Jonathan. Thank you. Your next question comes from Nick Ma from Macquarie Group. Please go ahead. Good morning guys. Just a quick one on the generative thing. Now that it's 100% owned, how does the management structure work in terms of you guys spending time looking at that business and also from the external management contract perspective, Hi, Nick. So hard work on a day to day basis. As we've, as the business has grown there over the last 18 months, There's a really strong layer of management within that business, which will remain after the founder inputs. And then on a, that management team there will report through to us as a management team here on myself in particular. In terms of a sort of management arrangement, from a fee perspective, under the MSA, there will be an additional service and the fee that will apply to that will be set at market rates. So it hasn't yet been, determined by the independent directors and the HML. But that's there's an approach, which is set out within the management services agreement for that to be set at market levels and reviewed every 2 years. Yes, that's great. And the large majority of the management function sits within that business it's not. Yes. That's cool. And then the number 1, the tariffs, do you know roughly how much the additional CapEx is on that one for the new lease? So in terms of the refurbishment we'd expect to be spending around $7.50 a square meter. In addition to that, there has been strengthening of the building carried out already as part of the, of the previous labeling of the podium levels. Yes. No, that's great. Cool, that's all for me. Thanks a lot. Thanks, Nick. Thank you. Your next question comes from Shane Solley from Harbor Asset Management. Please go ahead. Good morning guys. I've got a couple of questions. Who's the there's no evaluations through the no readouts in the period. Did the board take any desktop at all? Yeah, we did a comprehensive internal review, which basically tips evidence that we're aware of in the market as well as our own internal evidence based on leasing transactions. The review that and the approach that we take is where we're an asset sort of demonstrates movement in excess of 5% up and down, then we'd trigger an internal value and external valuation. None of the none of the assets moved by greater or less than or greater than 5% either way. So it didn't trigger any, any external valuations and and we we had an internal assessment, but we haven't sort of adjusted the valuation of the 31 December. Okay. Just on the asset sale, it's potential what's potential timing on pass through on Naysia? Well, both assets are subject to, sort of reasonably significant refurbishment words, which are part of the development agreements that we've agreed with the crown. Look, our expectation is that, it's more likely that a counterparty would contract on the basis of those works being completed end, for the price to be determined on a yield on cost basis. In which case, partial works are underway and that'd be in the next 9 to 10 months and the settlement would likely appear after that. Mayfair will start towards the end of this year. In the program for those weeks would be another 9 to 10 months. So that's our expectation. It doesn't discount the possibility of someone coming in and actually stepping into the DAs and undertaking the works. But we are sort of looking at unlikely outcome with someone who will take those out once the works are completed. Key thing there will be obviously counterparty covenant and so we'll be very focused on that. It's no surprise that we don't miss early need to cash in the short term, but it would be good to have down the track to fund our developments. Okay. Thank you. On gearing, where do you see optimal gearing precincts through this cycle? Yes, it's a good question. I mean, we, post the equity issue, commit year into 32. Once you overlay the sale of partial methionine, you're sort of getting into the into the sort of high 20 You know, we see it in that we see it in that sort of early thirties range. We're still seeing really good growth in the market. We still feel really confident about our development book and the prospects for when they are called to stage 3 and 4 and Bowen stage 2. So We're still very much minded towards continuing to drive growth out of our developments and keep improving the portfolio. Okay. Thank you. On guidance, are you at allowing for dilution from the capital raise asset sales generated consolidation Is that right? And then it seems the 6, 6 guidance. Yes, that's correct, Shai. And what does it look like after to come to? I think it's around 6, around 6, 4. Okay. So dividends covered at 1 100 percent covered at FFO level or not? Sorry, what was that, Shankh? What's the FFO coverage ratio on your dividends then? It should be around the same guidance with our policy. So it will be around about 100%. Okay. Thank you. And just my final question, are me not participating in the cap rates? Any particular reason for that? No, no, no reason other than, look, these guys, deal in large chunks of capital and, it's often challenging for them to actually put through approvals for relatively small parcels and in this instance, the sort of pro rata share would have been, almost too small for them to put up well, it was too small. Okay, thank you. Absolutely, there's no reason for them to be, to changing their view. They remain very supportive. Thank you. Your next question comes from Tony Sherlock from Morningstar. Please go ahead. Good morning guys. Just on the generator, can you talk to the difference in the all in rental return that you get per square meter versus what you'd get on the conventional lease? Yeah, I can, I can talk to that, Tony? So look, the way that, the way that generator provides space is on a sort of depth per person per month charge rate, all in gross that I'd ever think included. So it's quite different from, how you look at it traditionally on a per square meter basis. And it would be, it would appear as a multiple of, what our rental rate per square meter would be. But with quite a lot more costs to come out of that in terms of depreciation of that set out, the provision of, staff to service the space, etcetera. Okay. So there's no real comparison that you get a 40% rental premium if you're converting space from one to another. If you're looking at from an increment, you've mentioned you're 1.2% of the city versus potentially as high as 5% in other markets. Do you see that getting to, what, 2, 2a half? Is that a reasonable fit of Auckland? Yes, look, I think that's absolutely reasonable for Auckland. There is some new space, and the pipeline already. Not from generator, but from other operators. And we expect to see other operators come into the market I would expect that it could longer term exceeds that 2.5% sort of level. Within Wellington, it's currently sort of less than 1%. So that market is, is even less, from memory, I think from Melbourne and Sydney, we'll be sitting around 2.5% to 3% currently. Okay. And just finally, should we view the Wellington assets as a, as a just a long term funding source or or are you more likely to come to the market and raise capital as you've done today? No, look, I think, the assets that we're developing at Bowen Campus, we consider those absolutely as long term holds, as we do with one that tariffs, just given the quality and the location, and core government assets, which we don't which we don't intend to exit. And then beyond that, we've got a couple of corporate assets, which we think well positioned that grade A assets we think there's actually quite a bit of revolutionary potential on the rents in both of those assets. So we don't anticipate bringing those to market in the future. What we've done today is really position ourselves to be able to fund what's in front of us and the sale of partial and NICE here. Couple of sort of slightly older government assets, we'll use for anything else that comes our way. Thank you. There are no further questions at this time. I will now hand back to Mr. Frichard for closing remarks. Well, look, once again, thanks to everybody who has taken the time to dial into the call this morning. As we stated during the presentation, we're really pleased with the steps that we've made in the last 6 months towards our longer term strategy. And I'd like to thank you all once again for your support. David, good day.