DEXUS (DXS) Earnings Call Transcript

Good afternoon, everyone, and welcome to the 2022 Dexus Annual General Meeting. My name is Richard Sheppard, and I am the Chairman of the Board of the Directors of Dexus Funds Management Limited. And I table my appointment as Chairman of the meeting. On behalf of the Dexus Board, let me welcome you to the AGM, which we're holding today at the Quay Quarter Tower, which is the future Dexus Sydney or head office. This is a fantastic asset in which our Dexus Wholesale Property Fund has an ownership stake. And following the completion of the AMP Capital transaction, which I'll speak about a little later, we will also be responsible for the management of this property. Now we appreciate that not all Sydney -- not all security holders can attend in person, and we're pleased to be able to provide the opportunity for everyone to participate in the meeting through our hybrid or online meeting format. And given that we've got a lot of technology in the room. Before we start the meeting, can I ask our audience in the room to ensure your mobile phones are off, which means I've got to turn off my watch. I'll fall into that trap before. And just to make sure everything is on silent. In the event of an emergency, the fire exits are located in the lift lobby corridors, either side of the atrium kitchen, and the restrooms are also located near the lift lobby corridor. So as I've mentioned I table my appointment as Chair of today's meeting, and I formally open the meeting. We are pleased to be able to hold this as a hybrid AGM this year and to see security holders able to attend in person for the first time in 2 years, we've missed you. We've enhanced our experience for security holders unable to attend the meeting in person by using an online platform, including video, which enables securityholders to view the meeting live, as well as vote while the meeting is underway and submit questions. And this year we also have a conference call facility available through which security holders can ask questions directly to the meeting. For securityholders who are online, if you are yet to access your voting card to vote on the resolutions for the meeting, you should click the get a voting card button on the top of your screen to register first, which will then enable you to submit your vote at any time during the meeting. If you are a securityholder, you will need your security holder number and post code to register your vote. If you are a proxyholder, please enter the proxy number issued to you by Link Market Services in the proxy detail section and click the submit details and vote button. Online voting will close 5 minutes after the close of the meeting, and the results will be released to the ASX later today. If you have any questions to put to the meeting today and you are not on the conference call, telephone line, we suggest that you submit your questions as early as you can, specifying whether the question relates to general business or a specific resolution, and these will be addressed at the appropriate time during the meeting. For those of you joining us in the room today, we ask you to raise your admission card during the question time to indicate if you have a question. We will take questions from the floor and then ask for questions on the conference call telephone line, followed by questions submitted via the online platform. Although I was recently informed at the moment, we don't have any questions on the conference call. We'll obviously endeavor to answer all questions during the AGM and for any questions that we do not have time to address will ensure that we get back to those investors separately. On behalf of the Board, I'd first like to acknowledge the traditional custodians of the land on which we are presenting from today and pay our respects to their elders past, present and emerging. I would also like to extend that respect to and welcome any First Nations people who are joining our meeting today. Today, I'm joined by our independent directors. Now I'll just ask the directors to stand, turn around while I introduce them. Penny Bingham-Hall, Warwick Negus, Tonianne Dwyer, Nicola Roxon, Patrick Allaway, Mark Ford, Elana Rubin and Dexus' Chief Executive and a member of the Board, Darren Steinberg. And you'll hear from a number of my colleagues today, and you are welcome to ask any of the questions during the course of the meeting. I'd also like to welcome our company secretaries and representatives from the Group Management Committee along with our representative from our auditors at PwC. Where is Matty? Matty there -- [ Matthew Lan ], and our lawyers at King & Wood Mallesons. Now before we start the business of the meeting, I'd like to acknowledge Tonianne Dwyer, who you just met. Tonianne Dwyer is retiring from the Board today. And Tonianne has served as a nonexecutive director of Dexus for more than 11 years, joining the Board in August of 2011. Tonianne has made an outstanding contribution to the Board over that time, including the Board Audit and Board Nomination Committees and in recent years, and this is very important, as Chair of the Board Risk Committee. And in doing that, she's brought a wealth of knowledge to the boardroom with her extensive property funds management and corporate strategy experience. So on behalf of the Board and the group management, I'd like to publicly thank Tonianne for her significant contribution over the last 11 years and wish Tonianne all the best for her future endeavors. Thank you, Tonianne. Now succession planning, as I probably mentioned in previous meetings is an important focus for the Board. And as announced to the ASX on September 29, 2022, Warwick Negus, who you met a few moments ago, will succeed me as Chair effective tomorrow, the 27th of October. Warwick has been a member of the Board since February 2021, and brings extensive funds management, finance and property industry experience to the Board, and he will lead Dexus as it embarks upon its next phase of growth, underpinned by the acquisition of the AMP Capital real estate, an infrastructure platform, which I'll talk about a little later. And you'll hear from Warwick later when our directors who are up for election address the meeting. So let me commence the meeting with my address, which will provide you with an overview of key aspects of our 2022 result as well as our position in the current operating environment. I'll then hand over to Darren, who will discuss our recent operational matters. We'll then turn to the formal aspects relating to the resolutions, which were outlined in the notice of meeting and the explanatory memorandum sent out in mid-September. Accordingly, I now formally call for a poll on all resolutions to be put to the meeting and declare the polls open. So shareholders can now start to lodge your votes. So let me now turn to the business of Dexus. I was appointed as a Director on the Dexus Board 10 years ago. So as I actually told our board today, both Tonianne and I, we have 22 years of experience on the Dexus Board, together. Around the time we reset our strategy. We built on our strengths of office ownership, divesting our exposure to offshore properties and reinvesting in high-quality assets located in Australia's major cities where we have strong expertise and deep customer relationships. And in fact, if you look out the window, you can see some of the Dexus assets in the skyline. At the same time we've grown and diversified our funds management business to include new partnerships with global investors in the office, industrial and healthcare sectors. Our platform at 30th of June included 19 funds and different types of investment vehicles across the traditional real estate sectors of office, industrial and retail as well as healthcare, real estate securities funds, opportunistic funds and venture capital. So the total funds under management across the group has grown from something like $13 billion 10 years ago to over $44 billion today, with a substantial development pipeline that will create future value. Our next phase of growth will be underpinned, as I mentioned before, by the acquisition of the AMP Capital platform, which will add a further roughly $18 billion to the group portfolio and an additional 20 investment vehicles. Now this slide shows the composition of our portfolio post completion of the AMP acquisition, which positions Dexus as one of Australia's leading real asset groups, managing a high-quality portfolio of property and infrastructure assets, infrastructure assets being -- I mean, Dexus has been a property platform for the 10 years that Tonianne and I have been on the Board, and the addition of infrastructure assets is an important strategic new acquisition. So that includes our $18 billion investment property portfolio. That means the $18 billion of properties that we have on our balance sheet. And our combined $44 billion funds management business being assets that we manage for other investors. We released our 2022 annual report and sustainability report in August, which reinforced our focus on creating long-term value from both a financial and nonfinancial perspective and covers our key ESG achievements, and both reports are available on our website. Let me now turn to financial outcomes. 2022 has been a complex and challenging operating environment for real estate as we continue to deal with ongoing COVID-19 lockdowns in Sydney as we did -- as we continue during the year to deal with continued lockdowns in Sydney and Melbourne. These lockdowns impacted the economy and the ability for our customers to trade normally and delayed the return to the office into calendar year '22. In that period, Dexus' activity drove a solid financial result for the year. From a challenging starting position during the pandemic, we provided initial guidance for distribution per security growth of not less than 2%, better-than-expected outcomes and an active management effort from the Dexus team enabled us to announce in May this year a guidance upgrade to growth in distributions per security to not less than 2.5% and ultimately we delivered a full year distribution of $0.532 per security, up 2.7% from the previous year. Dexus has consistently held or grown distributions each year since fiscal 2012, delivering average growth of 4.7% per annum. In the '22 financial year, we delivered a return on contributed equity of 9.7%, driven largely by AFFO, which is funds from operations, and development completions at some of our industrial properties. Our strong balance sheet was maintained with gearing sitting below our target range of 30% to 40%. These were good results in the circumstances. So on behalf of the Board, I'd like to acknowledge the efforts of management and all of our employees in achieving these financial outcomes. Now at the same time, the financial outcomes have been good. The Dexus share price hasn't been that great. Security prices across the A-REIT sector, the real estate investment trust sector, including Dexus have declined significantly since April this year. This has been due primarily to global economic factors, in particular, the sharp rise in interest rates that we've experienced. Dexus delivered a total security holder return in line with the A-REIT 200 index. That's the index of the 200 companies in the sector. For the 12 months to 30th of June 2022, and continue to outperform the index over the last 10 years. But nevertheless, we certainly acknowledge that the share price is down. Let me turn to our strategy. During the year, we further progressed our strategic objectives of generating resilient income streams and being identified as the real estate investment partner of choice in Australia. Our strategy is supported by the size of our balance sheet, access to pools of capital, our group development pipeline with committed projects of around 620,000 square meters and our commitment to sustainability, the development pipeline, a lot of good pictures of some of the future projects in the annual report. The acquisition of the AMP Capital platform accelerates our strategy and positions Dexus as a leading real estate manager, underpinned by our best practice governance and risk management framework and as I mentioned before, adds infrastructure assets, which is an important and growing asset class onto our platform. Last year was a year of very significant transactional activity. We have continued actively recycling assets to improve the quality of our balance sheet portfolio and to fund our higher returning development pipeline. And as you can see on this slide, at a group level, we sold slightly more assets than we acquired, redeploying capital into a range of sectors. In terms of the development pipeline, our portfolio of city-shaping projects is the cornerstone of the development pipeline, which has now grown to over $17 billion. Now not all of that is committed, but these are assets that we own and which we have plans to develop. We see development as a key driver of growth and contributed to long-term returns with a number of these projects progressed. Some of the key projects in the pipeline include -- and these are really major city transforming assets in the cities that they are located. So there's Waterfront Brisbane, which is on the left of the slide, this is a major redevelopment of the Eagle Street peer site in Brisbane for those of you who know Brisbane, and we'll make way for two office towers creating a vibrant retail and public space. Here in Sydney is the Central Place project, which has been receiving publicity over the last few days, which is a large-scale mixed-use development within the broader central station precinct renewal, which is an exciting location for Sydney, which is where the state government wants to put a technology precinct. Right next door to the central place Sydney development, and again, for those of you who familiar with Sydney, that's where you get your passports renewed at the moment, but that will be redeveloped. Right next door to that is the Atlassian central development, where construction has started. This building will push the boundaries of what the future of workplace looks like and how it works, adopting leading sustainable credentials. And we reckon -- the management team reckons this will be the best office building in Australia. This one is the best at the moment, but that's for the future. The pit and bridge strict precinct, which is where we just down there to my left, for those of you in the room, is a significant future office tower development in the financial core of the Sydney CBD, where Dexus has consolidated all the smaller office properties in that block of the city. And then in Melbourne, where over the last 2 years, we've developed -- or finished the development and completed the development of 80 Collins Street, which again is one of the best buildings in Melbourne. Right across the road from that is 60 Collins Street, which is the old reserve bank building in Melbourne. We own that, and we will develop that we will develop that into a new office building, which will create a premium grade office tower as I say, across the road from 80 Collins Street. Well, turning from the buildings to environment, social governance matters. This next slide shows our achievements in environmental, social and governance or ESG for short, across key areas of our business were there. Now why is that important? It's important to our shareholders, it's important to our tenants, it's important to government, and it's important really for the planet. Our ESG performance is globally recognized, for the third consecutive year, Dexus was the only real estate company to achieve a gold-class distinction in the S&P Global Sustainability Yearbook, retaining our leadership on the Dow Jones Sustainability Index. For more than a decade, Dexus has been focused on energy efficiency as well as reducing the group's emissions and environmental footprint. Now last year at the AGM, we said we had a commitment to deliver net zero within the year. We delivered on that commitment to achieve net zero emissions by 30th of June of this year across the group portfolio. We also launched a reflect reconciliation action plan, and you can find more detail of this in our annual report. We have a strong commitment to progressing gender equality across our workforce, and Dexus has been named as an Employer of Choice for Gender Equality for the fifth year running. Let me now turn to remuneration. At last year's AGM, we had a first strike against our remuneration report. And in response to that strike, the Board has undertaken a thorough review of the remuneration framework, including extensive consultations with investors and proxy advisers. As a result, the Board has made a number of changes to the framework to ensure that maintains alignment with Dexus' strategy and remuneration framework. This slide provides a summary. I won't go through them. I'm happy to answer questions later. But this slide provides a summary of the key changes to the senior executive remuneration structure, which are also listed in your AGM notice of meeting and discussed in quite a lot of detail in the remuneration report, which is part of the annual report. These changes will come into effect from fiscal '23. And as you'll see a little later in the proxy results have been strongly supported by Dexus shareholders. So in summary, what you've heard in my address today. Dexus has performed well across all financial and nonfinancial areas throughout fiscal '22. And the business has demonstrated resilience over the past few years despite the quite considerable impacts of the pandemic. Our high-quality portfolio continues to perform well and recycling assets has enabled us to maintain a strong balance sheet, providing capital to fund our development pipeline and growing funds management business. We anticipate a challenging period over the next 2 years, with rising interest rates and continued economic uncertainty. And so does the stock market, and that's what's reflected in the share price. Based on current expectations relating to interest rates, continued asset sales and barring unforeseen circumstances, we expect to deliver distributions of $0.50 to $0.515 per security for the 12 months ended 30th of June 2023, which is something we announced the annual results. And that is below the $0.532 per security delivered in fiscal '22. And I personally am proud of what we've achieved over the past decade during my time at Dexus and Tonianne's time, and I leave the business in very capable hands, and you'll hear from [indiscernible] in a moment as we integrate the AMP platform and we are set to emerge as one of the leading real estate managers in the Asia Pacific region, with total group funds under management of around $63 billion. We're confident of being able to continue to deliver long-term value through the cycle through our experienced Board and management team. Our scale and capability across traditional and emerging real estate sectors and in our infrastructure, our diverse customer and investor base. Our development pipeline and our funds management business, which is diversified into new sectors. So finally, I'd like to take this opportunity to thank my fellow directors, our leadership team, our employees, and our security holders for all of your support, and that's something I really do mean. So let me now pass over to Darren to provide his address and then I'll come back for the formal part of the meeting.

Thanks, Richard, and good afternoon, everybody. Despite the complex operating environment, we've had an active quarter, and it's encouraging to see customers across our portfolio, returning to a business-as-usual approach following disruption due to lockdowns and border restrictions that Australia has experienced over the past 2 years. Leasing was solid over the first quarter with over 175,000 square meters of space leased across our office and industrial properties. Rent collections were high at 98.6%. We progressed a number of projects across the development pipeline, as Richard said, completing 63,000 square meters of industrial development, commencing construction at Atlassian Central and receiving DA approval for Central Place in Sydney. During the quarter, we also divested $577 million from the balance sheet portfolio ensuring balance sheet strength. Looking at the performance of our property portfolio, we continue to see a flight to quality with many customers upgrading and seeking to centralize their tenancies into prime CBD offices. Our portfolio occupancy remains high at 95.6% for office and 97.7% for industrial, with the weighted average lease expiry maintained across both portfolios. Our portfolio benefits from fixed annual increases within lease agreements and around 10% to 20% of our portfolio resets to market each year as leases expire. As Richard mentioned, our customers are looking to invest in their workplaces to support business success into the future. The office is a key driver for culture, collaboration and innovation. And quality workspaces remain in demand by companies seeking to differentiate themselves in order to attract talent. Over the past quarter, we've also been working with AMP and third-party stakeholders to achieve the conditions precedent required to finalize the acquisition of the AMP Capital platform with completion expected shortly. We now expect circa $18 billion of funds to transfer across from the AMP Capital platform. The earnout payable by Dexus has reduced to a maximum of $25 million and will be finally assessed 9 months post completion of the transaction. As Richard mentioned, our next phase of growth will be underpinned by the AMP Capital transaction, which will position Dexus as a leading real asset manager. It will bring with it an expanded product offering, new capabilities in infrastructure and an enhanced retail platform. As our investor base allocates more capital to real assets, we will provide a complete offering for third-party investors. Post the transaction, Dexus' funds under management will increase to circa $63 billion across real estate and infrastructure assets. Our third-party funds business will grow to around $44 billion, with investments across pooled funds, joint ventures, mandates and listed funds. So to conclude, we are well prepared to continue to deliver for our investors. In this challenging environment, we continue to deliver on our strategic objectives and are focused on integrating the AMP Capital platform. All of this is enabled by our quality people, scalable and efficient operating platform, strong balance sheet and significant development pipeline, which provides embedded growth for Dexus and our third-party investors. Our commitment to investors is to deliver superior risk-adjusted returns over the long term. Before passing back to Richard, I'd like to thank him for his commitment to Dexus and its investors during his time as Chair, on behalf of the Board and our management team. I'd also like to thank Tonianne for her contribution, and I wish each of them all the best for their future endeavors. And finally, I'd like to thank you, our investors, for your continued support. Thank you, and I'll pass back to Richard.

Now at this stage, is the time to pause and ask if anybody has questions that I'd like to ask concerning what we've touched upon so far before going on to the formal business and resolutions of the meeting. So let me, first of all, ask if they have any questions on the floor of the meeting, and then I'll go to those who are online.

Just 2 questions. If you can talk about infrastructure in terms of what that represents as a new acquisition in terms of what sort of assets are we talking about? And when you talk about the AMP platform, is that -- can you just give a bit of definition to that? Is that the overall buildings? Or is it a software platform or is it something else?

Okay. In relation to -- and thank you for the question. In relation to infrastructure, well, let me start with the AMP platform. This is the Australian funds management platform of the AMP group, which they divested during the course of the last 12 months. They also had an international platform. And by platform, what we mean is business which invests in assets on behalf of investors. So that initially started off at around about $30 billion. And the structure of the acquisition by Dexus is the price -- we anticipate there are some assets that other groups were interested in and we anticipated that some assets might lose the platform. So the price was -- the acquisition terms were on a basis that the price was adjusted in the sense -- in the event that any assets left the platform, which some have. But what we're left with is about $20 billion of assets on the platform. So these are a number of investment funds, which are managed on behalf of mainly institutional investors, but also some retail investors. Of that $20 billion of funds, in the infrastructure, I think includes, as we've said, infrastructure assets, the biggest real estate fund is a shopping center fund. And then in the case of the infrastructure assets, there's approximately $10 billion of assets. The major investment asset is Melbourne Airport. But we will be defining infrastructure in a relatively broad sense because it also includes social infrastructure, such as medical facilities, hospitals, certain types of assets. So it will be the whole range and infrastructure. I mean there's also big infrastructure funds like Transurban that invest in roadways. So you can assume that the investable asset class will include everything from airports, roads, in energy transmission, social assets, those types of things, and they'll probably be divided in a number of funds, which specialize in particular areas. It's a new area for Dexus. We have an experienced management team joining us from the AMP. It is clearly going to be a growth area because the country obviously needs substantial investment in infrastructure and are you going to throw in dams and things like that with the recent fighting. Governments are financially constrained to pay for that infrastructure themselves. So there's going to be a whole array of investment funds focused on this area over the next decade or so and beyond. So that's what we -- that's what we mean by the acquisition of the AMP platform and the some of the types of assets that we'll be investing in an infrastructure and we currently invest it. Are there any other questions from the floor or while the floor is thinking about if there's any other questions. I'm told there are no questions from the telephone connection. Do we have online questions?

Yes. We have received a question from a retail investor, asking about the extent that COVID-19 lockdowns have affected rental income being received by Dexus.

Darren, do you want to address that?

Yes. So during the last year, the financial year that finished we had an impact, but it was relatively minor. Moving forward, the lockdown or the COVID impacts have dropped away and we're back to what will be business as usual now. And the biggest impact, I suppose, the flow in from COVID has been twofold. First of all, if many of you look around the cities, you can see that some of the food courts there's a lot of vacancies because all the traffic hasn't come back. There's a lot of people sort of working more flexibly now. So there's still some sort of smaller vacancies, very small when you look at our occupancy today in some of the food courts. The second impact, I suppose this has been the way people are using offices. There's a lot of dialogue, a lot of media on that. It's not impacting our occupancy at this stage. We're running at about 95.6%, but that has been the other impact that people aren't working 5 days a week, and we can -- I can talk to many of you privately about that, but there's a lot of sort of media talk and articles on that as well. But at this stage, that's the impact, and there's no sort of COVID relief ongoing at this point in time.

In fact, I've got to note that the direct impact, we're about $7 million last year, which was about half the year before. And to put it in context, $7 million our funds from operations in Dexus are around about $600 million or $700 million. So it's not a very big percentage. Are there any more questions online?

Chair, we've received a question from Stephen Mayne. Was the timing of the Chairman's retirement at the end of today's AGM influenced by the recent adverse New South Wales government report into Star Entertainment, where he was a Director for almost a decade. Could both Richard and new Chair, Warwick Negus comment on what drove the timing of the Chair transition?

Yes, I can answer that. The answer is no. And I should also mention that the inquiry into the [indiscernible] personally is a suitable person to continue to be involved in that business. The timing of the chair succession is something the Board has been talking about for the last couple of years. My term would have finished next year, but in view of the major acquisition of the AMP platform, I put it to the Board that I thought now is the appropriate time for Chair transition, and that's what we've done. And Warwick, doesn't need to add to that. Are there any other questions?

Yes. Chair, we've received another question from Stephen Mayne. Did any of the 5 main proxy advisers, ACSI, Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions? Thank you for disclosing the full proxy position to the ASX along with the formal addresses. There was 24% protest vote against Nicola Roxon's re-election. Which proxy advisers recommended against and what concerns did they raise which clearly are also shared by multiple institutional investors who voted against. How are we going to respond to this protest vote?

Well, I think the answer is yes. One proxy adviser did recommend against Resolution 3.2, which -- and I think what I'll do is, I'll address when we get to that particular resolution.

Chair, we have another question from Stephen Mayne. Thank you to Tonianne Dwyer for her 11 years of service. It is always helpful for investors to have access to some exit perspectives from retiring independent directors. In her final contribution, could Tonianne please comment on what she regards as the best decisions Dexus made during her time on the Board, and does she have any regrets?

I'm going to give Tonianne about 2 minutes to answer that.

Well, thank you, Stephen. You've just given me a platform, and I've been given 2 minutes. The most important thing that a Board does is the appointment of our Chief Executive. And I have to say in the 12 years that I've been on the Board, I think that has been one of the defining things, one of the defining decisions we made was the appointment of Darren. And I think the track record that Richard put up earlier, shows what a huge amount of shareholder value here and the management team he pulled together have created over our time on the Board. As for regrets, being given 30 seconds notice to answer a question like this, Stephen. Look, there's always things you sort of look at in hindsight, but I think we've made some really big calls over the decade. And I think on the main, we've got them right and you only look forward, you never look back. But thank you for your question, and good luck to everyone. It's a great company. It's a great management team, and thank you very much.

Thanks, Tonianne. And if I could also give a supplementary answer to Mr. Mayne, I turn 74 at my next birthday. So I really figure it's time to sort of hand over to a younger generation to run this country -- this company. Do we have any further questions?

Chair, we have a question from Stephen Mayne. From 2012 to '16, I was Chair of the City of Melbourne Finance Committee and was aware that Dexus had a highly favorable lease arrangement on the council owned car park at the back of the Melbourne Club on Collins Street. The lease expires in 2026, and the logical play would be a joint development with council and the Melbourne Club. Have any discussions being held as to the post-2026 management and development of this valuable property near Parliament House and the Paris end of Collins Street are we likely to be fair weld in 2026?

Darren?

Discussions have been -- we've been discussing with the council for the last probably 5 years, and those discussions continue, hopefully towards a favorable outcome in due course.

And of course, we've also been in -- the Melbourne Club is also next door to very close to 60 Collins Street. So we've been actively discussing that development of the Melbourne Club as well.

Chair, we have one final question from Stephen Mayne. A question for the auditor Matthew Lan. How could Matthew and his team sign off on the 2021-'22 accounts claiming that we have net assets of $13.56 billion when the current market capitalization is only $8.24 billion? Can the auditor or the CEO cite any other ASX 200 companies with a $5.3 billion market cap discount to claimed book value? Shouldn't we simply be taking a major write-down to reflect changed valuations after COVID, particularly with office occupancy?

Will ask Mr. Darren to address that question. But I mean, the short answer is that the valuations in Dexus balance sheet are based upon independently commissioned valuations.

Thank you, Mr. Mayne, and everyone in the room, and I think it was one of the first question I've had to answer as an auditor through to an AGM. So it's quite a special occasion. So look, I think one of the things that an order to looks at is the market cap of an organization to determine whether that's an indicator of impairment in any of the assets they're held on the balance sheet. Typically, you'd go first to goodwill or other assets are intangible assets now in relation to Dexus, all of those intangible assets, primarily management rights, based upon valuations that look at future cash flows that are built up in accordance with accepted methodology, and we have our own valuation experts look at those to ensure that those models support that came out of those. As you would all know in this room, as you know, Mr. Mayne, the primary assets on the balance sheet of Dexus are investment properties that held at fair value, and as the Chairman has already pointed out, all of those properties are externally valued by independent third-party valuers. We get access to all of those valuation reports. Part of our audit procedures are to look at those valuation reports. Again, we perform procedures using our own experts over those independent valuations to ensure that they're not held amounts that exceed their fair value. At the end of the day, if you actually had to value what net assets are on a company's balance sheet based upon the market cap, which is not the way accounting standards are written, you would have fluctuating assets going up and down all the time, which would be inappropriate and very difficult for investors to understand. So very confident in the matter in which I was able to sign off on the net assets that they were in accordance with accounting standards and they are supported by independent valuations predominantly. Thank you very much.

Thanks, Matty. Rowena, are there any further questions? I've got one from the floor, but are there any further from them?

There's no further online.

Okay. Yes, from the floor.

Doris Patrick, long-term shareholder. I just have a question to Darren. When was the last time you have seen such a deep discrepancy between net tangible value and what market price is? And what are the key risks that market is telling us?

Thank you. In fact, the discount is actually worse than against the value of the assets because if you take that math into account, it's saying our funds management business is worth nothing and there's plenty of examples of funds management companies out there with very strong multiples. So it's obviously very frustrating for myself, the management team and the Board when you look at that. But we are not alone in this discount. In fact, it's a global phenomenon right now. And I got back from a global trip a couple of months ago talking to peer companies everywhere, and there's companies of the [indiscernible] in the U.S. that are trading at 55% discount. We're one of those weird markets and listed always overshoot and undershoot and at the moment, it's undershooting. So I'm confident as the world moves through this period of rising inflation. And for those of you that follow that, there's inflation right across the globe right now. And the increase in interest rates has moved a lot quicker than what many people anticipated, especially equity markets, and we're seeing the impact of that reflecting on the share prices. So I'm very confident that over time, that will normalize, and we will get back there and the management team, myself, look at it every day with great frustration, and we're doing everything within our control to work on that discount. However, there's many things that are outside our control. So what we can control is to the best of our ability to manage through this period, continue to provide good, strong cash flows, continue to grow the business. And hopefully, within a period of time, which I can't tell you how long that will be, it will be reflected once again in the share price.

Are there any other questions from the floor? Well, if not, the directors and the management team will certainly be around after the meeting if anybody would like to discuss anything one-on-one with us. But if there are no further questions, let me now turn to the formal business of the meeting.

Today's meeting has been convened in accordance with the constitution of each Trust and the Corporations Act. And I have been informed by the registry Link Market Services that a quorum is present to enable the formal resolutions, the subject of the meeting to be considered and passed. I'd also like to table the 2022 report, which I've got down there, which includes the directors' report, the financial report and the independent auditor's report for the financial year ended 30th of June 2022. In accordance with the notice of meeting and voting form, for instances where I, as Chair, have been appointed as a proxy, but not directed how to vote, I intend to vote undirected proxies in favor of resolutions 1 to 4 and against Resolution 5. The way we will run the meeting is that we will go to a poll on all resolutions and look at each resolution and the proxies received individually, at which time you'll have the opportunity to ask questions or make comments about each resolution. Accordingly, I formally call for a poll on all resolutions to be put to the meeting and declare the polls open. You can vote on all resolutions and for our attendees here at Quay Quarter Tower, and you can hand your yellow voting card to the representatives from Link Market Services at any time during this part of the meeting up at the rear of the room. For security holders joining us on our online meeting platform, you can access your voting card and complete your voting as we proceed through the resolutions. You would have all received the notice of meeting, which sets out the resolutions and the accompanying explanatory memorandum, which provides security holders with information to assess the merits of the resolutions. So let me now turn to Resolution 1. Resolution 1 is an ordinary resolution and concerns the adoption of the remuneration report for the year ended 30th of June 2022. Under the Corporations Act, a listed company is required at its AGM to put it's shareholders a resolution to approve its remuneration report. Consistent with our corporate governance framework, the Board has determined that Dexus will be subject to this obligation even though it is a listed [ stapled ] group comprising real estate investment trusts and therefore, not technically required. The vote on resolution is advisory only and does not bind the directors or Dexus Funds Management Limited. The proxies received are set out on the screen behind me and represent roughly 76.5% of issued capital. In last year, we received first strike, as I mentioned before, against the remuneration report. We value the views of our security holders highly and have consulted extensively this year to understand the reasons for the strike and to discuss any concerns. As detailed in the 2022 remuneration report, the Board conducted a thorough remuneration framework review in fiscal '22 and changes have been made to the short-term and long-term incentive programs with effect from fiscal '23 and a summary of the changes have been shown earlier in today's presentation. In addition, while the retention awards made in fiscal '21 to ensure this continued service of key members of our senior management team, have been successful in achieving that objective, no further retention awards have been granted in fiscal '22 or will be made in fiscal '23. So let me now ask are there any questions in relation to Resolution 1? No questions on the floor. Any questions online?

There are no questions on line, Chair.

All right. As I said, voting is in progress with that resolution. And I should note that reflecting the consultations and changes that we've made, there appears to be strong support for that resolution. Resolution 2 is an ordinary resolution and relates to the grant fiscal year '23 long-term incentive performance rights to the Chief Executive Officer. Dexus is not required to seek security holder approval for the grant of performance rights as we buy the Dexus Securities on market. However, for transparency and good governance, the Board has determined to seek security holder approval for the grant to be satisfied. These performance rights are subject to meeting board approved hurdles over 3- and 4-year periods. The proxies received are detailed on the screen and represent approximately 76% of issued capital. As shown earlier, in the remuneration report this year, I know we showed on the slide, we didn't really talk about it. We've replaced as one of the hurdles in the long-term incentive. We've replaced absolute total shareholder return, which means putting a number on shareholder return from the next year with relative shareholder return against the ASX 200 A-REIT index, which means to achieve the hurdles, Dexus has to outperform the other companies in that index. And that change was in response to feedback from investors. The other hurdle -- the other major hurdle in the long-term incentive scheme is return on contributed equity or a form of return on capital, and that remains unchanged as -- and then the third component in the long-term index is the strategic measures, which evaluates management for the attainment of measures, which the Board considers are important to Dexus' strategy. So this approach balances the use of internal and external measures and financial versus nonfinancial strategic measures to assess performance holistically in the long-term incentive. Now I've summarized what is a more complicated story, which is set out in much more detail in the remuneration report. But are there any questions in relation to that resolution? Not on the floor or any online?

Chair, we have a question from Stephen Mayne online. Darren Steinberg is one of the longest-serving CEOs in the ASX 200. Chair succession has now been sorted. So no doubt it will come to Warwick Negus to lead the succession process for the CEO role. Could Darren please comment on whether he believes there are multiple viable internal successes and how many more years does he expect to be receiving LTI grants?

Well, look, I can comment on that because long-term succession is the matter for the Board rather than in consultation with Darren. Dexus has a very talented management team. It has a range of potential internal successes. And the Board considers that matter -- as a matter of its normal deliberations. As for Darren, Darren has been, as we've talked about, an outstanding Chief Executive. You've heard before in my address Dexus' achievements over the 10 years that he has been the Chief Executive. The Board hopes that Darren will continue to do that for some time to come. Darren doesn't have a retirement date and the Board hasn't got a retirement date for him, but we will review that as a matter of course, or I won't. So I won't use the word we. Warwick and his Board will review that with Darren over the period ahead and treat it as it should be as an important Board consideration. And while Darren remains a Chief Executive, yes, he is entitled to his normal remuneration arrangements, which include LTI.

Chair, we have another question from Stephen Mayne. Is it right to do an LTI grant using relative TSR at a time when the share price is trading at a massive $5 billion discount to book value? Isn't the starting point for this incentive artificially low failing to take into account the plunging share price since April this year?

Well, as I mentioned in my address, unfortunately, the share price discount to net tangible assets is a feature of the A-REIT sector, so Dexus is not alone and the discounts to the tangible assets are reasonably comparable across the sector, although there are some sectors like retail that have outperformed relative to some other areas. So all of the REITs are starting off in effectively from the same position. So the Board has determined that, that is appropriate and not only has the Board determined that, but we've had very strong feedback in our consultations with shareholders that they would like us by a considerable majority of shareholders to move the LTI to our relative shareholder performance measure.

All right. Well, if there are no further questions on that subject, let me -- what we're now going to do is move to the reelection of a number of our directors. But before I move to that, I'd like -- I'm going to ask Warwick to -- as the new Chairman to speak to the meeting. Warwick is not up for reelection. So you don't have to -- you don't have to vote, only his today, but this is an opportunity for you to hear from Warwick.

Thanks, Richard, and good afternoon, ladies and gentlemen. It's a bit disconcerting standing in front of a giant coffee of your own face. So apologies for those of you in the front row. It's a pleasure to have the opportunity to talk to you this afternoon. At the conclusion of this meeting, as we've already heard, two of our directors, Tonianne and Richard will retire from the Board. And I'd just like to take a few moments just to reiterate a vote of thanks to both of them. Notably, for Tonianne, her help in the development of risk governance will continue to benefit Dexus for many, many years to come. And to Tonianne, thank you for your great efforts and your friendship, and we wish you all the best. Today marks the final day as Chair for Richard, who joined Dexus in 2012 and Dexus has a debt of gratitude to Richard for his guidance, his unwavering support and his continued commitment over the last decade. Richard has overseen the growth of Dexus to a platform with a high-performing investment portfolio and resilient balance sheet and a significant diversified fund management business. Dexus has developed a reputation as a company with high standards of governance, where strategy is clear and where risk taking is measured. To achieve this requires strong and consistent guidance from the top. And for this, we are extremely grateful to Richard. Thank you. We have much to look forward to. As we begin the integration of AMP Capital real estate and domestic infrastructure platform, we look forward to welcoming our new colleagues to Dexus and supporting them in their careers. The business also brings many new client relationships, and we hope that we can continue to exceed our investors' expectations into the future. The combined business will have a range of new opportunities to develop in both real estate and infrastructure. And as a Board, we very much look forward to supporting management as those plans take shape. I would also like to extend my thanks to the employees of Dexus, who in 2022 have endured the continued disruption of COVID, combined with increased economic uncertainty, you have remained committed to Dexus and to delivering positive outcomes for our shareholders. Thank you for your amazing efforts in '22. At the conclusion of this meeting and upon Richard's retirement, I will take the Chair. I'll be retiring from several other Board roles in the coming months to ensure that I have ample time to execute this role in a manner that you expect. I've been a Director of ASX Company now for many years, having served on my first ASX Board in 2004. We have a Board that is fully engaged with diverse skills and experiences. I am grateful for the support the Board has shown me in electing me to become the next Chair. It's a moment in time where the economy and the industry face great challenges and always for Dexus, great opportunities. I look forward to continuing to work with the Board and the people of Dexus to deliver great outcomes for our investors and all our stakeholders. Thank you.