DigiCo Infrastructure REIT (DGT) Earnings Call Transcript

Okay. Good morning, everyone. That mood music reminded me of my kid's wedding during the year. So it sort of put you in a different sort of space to an AGM. But let's get serious now and good morning, and welcome, everyone, to the 2026 Annual General Meeting of DigiCo Infrastructure REIT. My name is Joseph Carrozzi, and I'm the Chair of HMC Digital Infrastructure Limited, which I will refer to as the company. This 2026 Annual General Meeting is a combined Annual General Meeting of the shareholders of the company and a general meeting of unitholders of HMC Digital Infrastructure Trust. Together, this company and trust form the ASX-listed stapled entity DigiCo Infrastructure REIT. As a quorum of security holders is present, and it's now just past 11:30, I declare the meeting open. In the spirit of reconciliation, we'd like to begin by acknowledging the traditional custodians of country throughout Australia, where our assets are located and celebrate their diverse culture and their connections to land, sea and community. We pay our respects to Elders past and present and extend that respect to all Aboriginal and Torres Strait Islanders present today here or online. In addition, today's being the 11th of the 11th, I'd like to acknowledge Remembrance Day and pay our respects to all those who have served and sacrificed for our country, lest we forget. Before I proceed to the formal aspects of the meeting, I'd like to introduce my fellow directors that are here. Their great faces have been on our annual report, and they are on screen: Rachel Grimes, who is also the Chair of the Audit and Risk Committee; Stephanie Lai; Kelly O'Dwyer; and David Di Pilla. Our executive team are also seated in the audience this morning. I'd also like to introduce 2 Directors of Equity Trustees Limited, who are present with us today, Andrew Godfrey and David Warren. Welcome to you both. Equity Trustees Limited is a responsible entity of HMC Digital Infrastructure Trust. On behalf of the Board, it is my pleasure to welcome all here today. In terms of the agenda, I'll provide a brief overview of the key aspects of our 2026 result. I will then ask Ralph Goninan and Simon Mitchell, the Co-Heads of DigiCo Infrastructure REIT, to address you and provide a more detailed business update. We will then move to the formal business of the day, the 3 resolutions that I've put before security holders. In addition to considering the 2026 annual report, security holders will be asked to support 3 resolutions as set out in the Notice of Meeting, namely the adoption of the remuneration report, the reelection of myself as a director and the reelection of Rachel Grimes as a director as well. These 3 resolutions are in the -- are resolutions of the company. In addition, Stephen Mayne has submitted a nomination for election as a director. Having considered Mr. Mayne's skills and experience, the Board has recommended that security holders vote against his election. Voting on all resolutions will occur by way of poll, and I declare that poll open. Once the votes are counted following the closure of the meeting, the results will be released to the ASX. I intend to vote any undirected proxies held by me as Chair in favor of all resolutions other than the resolution to elect Stephen Mayne as a director. Before I invite our Co-Heads Ralph Goninan and Simon Mitchell to address you, I'd like to reflect on the year that has been and on the position from which DigiCo now looks to the future. Financial year '26 was our first full year as a listed entity and marked an important transition for DigiCo. During the year, we undertook targeted capital allocation initiatives aimed at enhancing security holder value. We identify SYD1 as the project for priority growth offering superior returns to unitholders and recycled capital from the U.S. portfolio to accelerate and fund this project, refocusing the portfolio of DigiCo on Australia. Our priorities are very clear: to deliver on our key projects, to maintain discipline in how we allocate capital and to pursue growth where we believe we have a competitive advantage in Australia. This approach positions DigiCo to create long-term value for security holders. In terms of operational performance, the underlying EBITDA for the year ended was $127 million, ahead of our guidance of $125 million, on underlying revenue of $239 million. Distributions of $0.12 per security were in line with guidance, supported by adjusted FFO of $71 million. We have also maintained a disciplined approach to the balance sheet. At June 30, 2026, available liquidity stood at $706 million, with gearing of 39%, comfortably within our target range of 35% to 45%. On completion of our U.S. asset sales, gearing is expected to fall to a pro forma 18% with pro forma liquidity of approximately $1.2 billion. This gives us considerable financial flexibility as we enter a period of significant investment. During the year, we completed the 20-megawatt upgrade at SYD1 on time and on budget, thereby extending the life of the asset and enhancing its operating efficiency. Group build IT capacity reached 85 megawatts, providing a stronger recurring earnings base and demonstrating the operational momentum achieved across the portfolio during the year. In October, we announced what I regard as a defining milestone for DigiCo. The execution of a 15-year contract for 71 megawatts of capacity at SYD1 with a global technology firm supported by investment-grade credit. With the remaining 17 megawatts at SYD1 leased to our colocation customers, SYD1 is now fully contracted across its entire 88 megawatts. You might recall that when SYD1 was acquired, our plan was to fully lease and develop the site over 5 years. We now expect to achieve that well ahead of schedule, demonstrating the quality of the asset and indeed, the quality of the team that manages it. For the Board, the priority is prudent delivery of this growth with appropriate oversight of funding, construction risk and delivery milestones. Ralph will shortly outline the delivery arrangements and timetable for SYD1. In the United States, and we can make lots of comments on the U.S. at the moment, we completed the expansion at Chicago 1, derisking that asset with contracted rental income in place. Having realized that value, we sold Chicago 1 with the transaction completing on 10 September of this year. And we continue to progress LAX as well. We also agreed terms to extend the leases of our Kansas City and Dallas facilities to 10-year terms expiring in 2036. These transactions are an important part of DigiCo's strategic positioning. They allow us to redeploy capital from lower-yielding U.S. assets into SYD1, reducing portfolio's complexity and concentrating our resources on Australia's supply-constrained market where we know the operating environment and have demonstrated our ability to respond effectively to consumer demand. Complementing SYD1 is our Adelaide 1 expansion, which will add a further 15 megawatts of IT capacity. Taken together, SYD1 and Adelaide 1 provide a clear pathway to approximately $250 million of Australian platform stabilized EBITDA by the end of financial year 2028 once both of these assets reached stabilized occupancy and contracted capacity is online and billing. The Board is confident that we have the right leadership team to execute this strategy. In August, Ralph Goninan and Simon Mitchell were appointed co-heads of DigiCo while retaining their responsibilities as Chief Development Officer and Chief Financial Officer. Their appointments provide continuity in a very important time of the business. Strong leadership must also be supported by clear accountability and effective governance. The Board remains actively engaged with management on the execution of SYD1 and Adelaide 1, the deployment of capital and the opportunities that will shape DigiCo's long-term growth. We will continue to hold management accountable for delivering against the commitments we make to security holders and for maintaining the financial and operating discipline required to create long-term sustainable value. The structural drivers of demand for cloud artificial intelligence and high-performance computing remains strong. Even a sentiment within the data center and AI-related sectors has shifted. DigiCo has been affected by broader market volatility, clearly, and I understand the frustrations which many of you feel. We remain focused on what we can control, executing on the opportunities in front of us to create long-term value. Importantly, many of the risks weighing on the broader sector are not present in our business. The SYD1 expansion is fully funded with no new equity required. Its cash flows are underpinned by a 15-year contract with investment-grade credit support. And power, water access and planning approvals are secured. The Board and management remain resolutely focused on delivery, and we're confident that consistent execution will, over time, be reflected in the value which the market ascribes to DigiCo. We do recognize that social license and community acceptance must be earned. We, therefore, engage and will continue to engage proactively and collaboratively with stakeholders, with government, with local communities to build a greater understanding of the essential role that data centers play in modern life and indeed in the Australian economy. In line with evolving federal and state government standards, our sustainability strategy focuses on responsible development and early community engagement to support sustainable long-term growth. At SYD1, this includes the adaptive reuse and optimization of an existing building, reducing the need for new construction and the associated embodied carbon. Our priorities include seeking to match 100% renewable energy for new greenfield developments, increasing renewable energy adoption across our existing portfolio and developing a community impact plan by the end of FY '27. By managing our impacts responsibly, we can reduce development risk, build trust and create enduring value for our security holders, for our communities and for the broader stakeholders. In closing, on behalf of the Board, I want to thank security holders, consumers, staff and partners for their continued support. Our more focused business, high-quality contracted growth and development program give DigiCo a clear pathway to a sustainable long-term set of earnings growth. It is now my pleasure to invite our co-heads, Ralph Goninan and Simon Mitchell to address the meeting.

Thank you, Joseph, and good morning, everyone. Simon and I are pleased to address you today as co-heads of DigiCo. We thank the Board for its confidence and recognize the responsibility we share to deliver for our security holders. FY '26 was a year of tangible operational delivery for DigiCo and the priority now is executing the next stage of growth. DigiCo provides the resilient power, cooling and connectivity that enables enterprise, government and AI workloads to operate securely and reliably. Our established facilities and development pipeline position us to meet a broad range of customer requirements, including the larger high-density deployments required by high-performance computing. With a compelling demand backdrop, our role is to deliver safe, reliable capacity on time, on budget and in accordance with our customer requirements. We have already demonstrated our delivery capability at SYD1, completing the first 20-megawatt upgrade during FY '26 on time and on budget. We are now building on that experience as we move into the next phase of our expansion. The next 52-megawatt stage of SYD1 has been substantially derisked across the critical imports to delivery. Grid capacity, water access and state significant development approval are in place. SYD1 requires 120 MVA of grid capacity for full deployment with 80 MVA currently in place and the remaining 40 MVA secured. The additional supply will be delivered through underground cabling from the nearby substation. SHAPE Australia, who completed the first 20-megawatt expansion has been appointed under a fixed price lump sum design and construct contract. Laing O'Rourke continues as an integrated delivery partner, providing clear cost and schedule accountability. These arrangements provide a disciplined delivery framework that prioritizes service continuity for existing customers throughout the works. The expansion will be delivered progressively in 10-megawatt tranches to align with our customer requirements. The first tranche is expected to be energized and income producing in late Q4 FY '27 with the remaining capacity delivered progressively throughout FY '28. Our approach at SYD1 also demonstrates the value of adaptive reuse. By retaining the existing building footprint, we can bring capacity to market more quickly while extending the life and improving the efficiency of the asset. Now beyond SYD1, our next brownfield project is the 15-megawatt expansion at Adelaide 1. We are advancing the project and customer discussions are well progressed. For the longer term, we are evaluating potential greenfield opportunities against customer demand and the evolving federal and state government regulations and standards for data centers. These opportunities aim to provide further capacity and support DigiCo's long-term growth. We have strengthened the organization to support this delivery program, adding specialist engineering, project delivery, commercial and operational capability. The aim is to build the capability we need to deliver a larger portfolio while maintaining discipline over how we add resources as the business expands. As we grow, we remain focused on rigorous engineering and delivery standards with safety central to both project delivery and the day-to-day operation of our facilities. Customer requirements are equally important. Our delivery and operating decisions need to reflect customer needs, while also protecting service reliability as we bring additional capacity online. Together, these principles guide how we grow the business efficiently while maintaining high standards of safety, reliability and performance. I'll now hand over to Simon to take you through our financial performance and outlook.

Thank you, Ralph, and good morning, everyone. As Co-head and Chief Financial Officer, today, I'll focus on the financial discipline and earnings growth that support our commitment to delivering long-term value for security holders. Our customer profile strengthened materially during the year, improving both the quality and visibility of DigiCo's earnings. Group billed IT capacity reached 85 megawatts, up from 53 megawatts at the start of the year. We also recently announced a 15-year contract for 71 megawatts at Sydney 1, which takes the facility to 100% contracted. Counterparty strength remains key to our contracting approach with our portfolio weighted to large technology, enterprise and government-related customers. The recently announced 71-megawatt contract at Sydney 1 increases the weighted average lease expiry of DigiCo's Australian portfolio from around 3 years to more than 10 years, with weighted average annual escalations of around 3%. As Joseph mentioned, we have also taken decisive steps to strengthen the balance sheet and simplify the portfolio through recycling capital from our U.S. assets. At 30 June 2026, available liquidity was $706 million, and gearing was 39%. Following completion of the U.S. asset sales, pro forma liquidity is expected to increase to approximately $1.2 billion and gearing to reduce to approximately 18%. The SYD1 88-megawatt project is fully funded through existing liquidity, available debt facilities and proceeds from the U.S. asset sales with no new equity required. The June independent valuations support the underlying value of the portfolio with the Australian and U.S. assets valued at approximately $4.1 billion, providing an adjusted NAV of $4.47 per security. Importantly, this does not include the Sydney 1 52-megawatt expansion. U.S. asset sales provide further market support for these valuations and reinforce the quality and underlying value of DigiCo's portfolio. The waterfall chart on Slide 14 and shows how we expect Australian platform stabilized EBITDA to build to approximately $250 million by the end of FY '28, as additional capacity is progressively delivered. The 52-megawatt expansion at SYD1 is the primary driver of this growth, supplemented by the proposed 15-megawatt expansion at Adelaide 1. This pathway relates solely to the Australian portfolio and excludes our U.S. operating assets in Kansas City and Dallas. For FY '27, we expect underlying EBITDA of between $120 million and $125 million, inclusive of 2 months' contribution from the Chicago 1 asset prior to its sale. Excluding the recently divested Chicago asset, this guidance represents strong underlying growth of 15% to 21%. Distributions are expected to total $0.15 per security, an increase of 25% on FY '26, while capital expenditure is expected to be between $300 million and $500 million. Our FY '27 financial priorities are clear: preserve balance sheet capacity, allocate capital to the highest return opportunities and convert contract capacity into earnings and cash flow. Delivering against these priorities will support sustainable distributions and long-term value for security holders. Thank you. I'll now hand over to Joseph to conduct the formal business of the meeting.

Thank you, Simon, and to Ralph as well. Moving now to the formal business of this AGM. As this is a securityholders' meeting, only security holders, their attorneys, proxies and authorized representatives are entitled to speak and vote at this meeting. As you registered today, you were issued with a colored card. Yellow cards are for security holders who are entitled to speak and vote at this meeting. Security holders wishing to address the meeting should raise their hand and show the yellow admission card. As a reminder, securityholders dialing into the webcast will not be able to ask questions live. As a courtesy to all security holders, please also state your affiliation if you are not here today in your personal capacity. To enable all security holders a reasonable opportunity to be heard, we're asking all speakers to restrict themselves to no more than 2 questions or comments at a time, please. The questions indeed or comments must relate to the item of business under consideration. The Notice of Meeting sets out the information regarding the resolutions to be put to today's meeting. All resolutions are to be considered at the meeting, and they'll be decided by poll, and I remind security holders that the polls are open. You may complete your voting card at any time during this AGM. I will also pause at the conclusion of discussion on each resolution to give you an opportunity to vote on that resolution. At the end of the meeting, please place your completed voting card in the ballot boxes held by MUFG. I am holding open proxies in my capacity as Chair, and it is my intention to vote all proxies in favor of resolutions 1, 2 and 3 and against resolution 4, as I mentioned earlier. If you require any assistance completing your voting card, representatives of MUFG, our registry, can assist with this. The first item of business is to consider the financial report and the sustainability report and the reports of the directors and the auditor for the financial year ended 30 June 2026, all contained in our annual report. Security holders are not required to vote on this item of business, but you may ask questions or make comments. Our annual report is available on our website. I confirm that no questions have been received prior to this meeting, so you'll now have the opportunity to ask questions about and make comments on the annual report and the audit and the management of the company. And at this time, I want to take the opportunity to welcome Jessica Davis and Lawrence Newell of KPMG to the meeting. KPMG is the auditor of DigiCo for the year ended 30 June 2026. You will also have the opportunity to ask questions of Jessica and Lawrence about the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by DigiCo in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct of the audit. So please raise your hand now if you would like to ask a question and state your name prior to asking the question regarding the financial reports of the auditor or the directors' report, please. I think we've got a microphone for the benefit of our...

[ David Kingston ], Care Capital. Really just want to get a little bit more color on a few of the key issues. Look, I think it's been a good year overall. There's been several positives. At the UBS conference yesterday on a property panel, Sid Sharma said data centers would be the best-performing property class. So that's good. GPT And others didn't agree, but that's Sid's view. Couple of other positives. You are mainly avoiding the huge problems of Australian greenfields developments, which are really difficult, albeit there are some challenges with brownfields. But secondly, well done. I think you executed a couple of well-priced asset sales, which has put you in a much stronger position. But I suppose an issue that a number of people here today would be interested in some color from the Chair or the executives or David. With 2 years past the hyped IPO at $5, there were 4 underwriters and 13 brokers queuing up to support a great demand for the stock. But here we are 2 years later, and the stock is languishing at half the IPO price and also, Chair, at a 40% discount to NAV. The problem is certainly not the sector. If you look at the major global digital player, Digital Reality Trust, it's performed strongly. Personally, I'd love to see a little bit more detail in the accounts. They are a little bit opaque. There are many adjustments between the statutory loss shown in the P&L and the adjusted FFO in the presentations. You do talk about FFO. Personally, I prefer seeing a adjusted FFO. It tends to be a more accurate indicator of free cash flow. Look, briefly, if we look at the cash flow statement, yes, it needs adjustments. But cash flow from operations in the last year, $135 million, invested $250 million and distributed $93 million. That's a little bit of catch-up in there, Chair, because I think the actual declared distributions were lower than that. But that's culminated in cash decreasing over the year by $220 million to $205 million, albeit there is a very large receivable from asset sales that may or may not have come in yet. Total equity has reduced by around $200 million, Chair. So I have 2 questions just to give us a little bit more color, and I appreciate it's an evolving company with brownfields development. So it's certainly not in a steady state form. It's evolving with a lot happening. But the first question, which I'm sure a few shareholders would share, will stock price ever recover to either the IPO price or to NAV per security, which is low 4s. And second question is, as I said, I'm delighted you're not doing Australian greenfields because as Next DC have found, it's not easy. But what is the risk of CapEx blowouts and time delays on the major expansions, your brownfields expansions you're undertaking? It's almost endemic that greenfields projects blow out in CapEx. I think, 9 out of 10, do and also blow out and time line. But brownfields are easier, but I appreciate the guidance you gave today. But if someone could give us a bit of color on the risks of CapEx blowouts or expansion and time line.

Yes, a really good question. Thank you, and there's a lot in there. Before I can pass some of the comments to Simon, in particular, the reality of the sector from the IPO date, and we reflect on that at every Board meeting just how quickly the structural, political and geopolitical changes are occurring in this sector. Now one of the reasons why we believe strongly in essential infrastructure is because it matters to the community. They are regulated assets, so it's a little bit different to a business on the side of the -- of what really makes Australia tech data centers do. So Sid's comments on that, I'm assuming, relate to the importance strategically of data centers. The U.S. geopolitical uncertainty was not expected at the time of IPO, no doubt about that. The strategic pivot from redeploying capital from Chicago 1 and selling that as you rightly mentioned, for a good price back into SYD1, which is a capital project, so earnings are going to be substituted for CapEx until that gets -- hits its straps in FY '28. That explains a lot of the story. The focus on accounting result reduction in equity, the numbers on which the accounting standards are built, we follow to the letter and the auditors are here to confirm that. The operating dynamic that we follow as a business relates more to EBITDA and adjusted FFO, as you say, and linking that to distributions to shareholders to give us stable yield on our business. So there's a lot in understanding that, how the sector has changed. The decision to redeploy into Australia, where we are close to the action, but more importantly, we are close to the regulators. Don't forget, within 6 months of listing this entity with a new team, SYD1 received HCF certification from the Department of Home Affairs, who indeed worked with us to draft their regulatory requirements for the data centers like this that were being repurposed. That connection with government, state and federal, and I think, David, you and I met with federal and state representatives over the last month as recently as that, that's critical because essential infrastructure assets and investors in them want to see predictable, confident posture in terms of where the business is going and the ability to bring stakeholders along. We do watch the fact that we are a new business. So if I, on behalf of the Board, tell the market we're going to spend $1.2 billion, there is a new kid risk on that spend because we haven't been around for 10 years and haven't, therefore, proven that trust in the market. I can understand some level of share price moderation until not only do we hit the streets on the 20 megawatts SYD1, which we did on time and on budget, but we start to redeploy and deliver the outcomes associated with the 71 megawatts that's left as well. So we need to earn that right through action, through what we can control. David, we've decided with the co-head arrangements to absolutely make sure that leadership focus is on the operating dynamic, the balance sheet, the cost of capital and the returns that we expect through budgets and performance. And that's Simon's gig. And this business isn't going to be run successfully by upfront salespeople. That -- those days are gone. You may have noticed that as well. We've wanted -- not that you're not a good salesman, Ralph. We've wanted to empower strong experienced engineers that Ralph is to have his main game on the capital deployment that we have. If we don't get that right, then the next meeting that I stand in front of you would not be a very helpful or happy one. So Ralph's focus on capital deployment, execution of development, working with Laing O'Rourke and the many, many groups of engineers that we've expanded both internally and through contract arrangements will help us win back the confidence that what we say we're going to do, we will do. And for a business that's been underway for 18 months now or 2 -- nearly 2 years, we'll bring those runs to the scoreboard. I hope that helps. Did you want to add anything, Simon, on the conversations around cash and the like? Any -- are you happy with that?

Look, I think the part of the question wasn't responded to is the risk of CapEx blowouts and time delays on the major brownfields, which is a really important issue.

Yes. That's a great question. Sorry, I missed that. Maybe Ralph, that's for you because that -- we did make a comment, David, that we were expecting a 15% yield on cost for that project. And I think we're now expecting double digit still, but cost increases have been a reality of the sector. over to you, Ralph.

Yes. Thanks, Joseph. Thanks for the question, David. I think to provide a bit more color or build on some of the detail that Joseph has outlined in terms of the measures we are employing to manage the risk of CapEx blowouts or time delays, talking specifically about some of the measures that we've done down at SYD1, so we have de-risked it in a number of different ways. The first thing we have done is use LCI, 1 of the leading engineering houses to design the project to a normal 70% completion. So in doing so, taking away a lot of the unknown elements of the technical. We then employed an ECI, an early contractor involvement process. So by doing so, getting the key technical trades involved in the design development so that it is buildable, and it can be done the most efficient and cost-effective way possible. We have then also integrated the delivery team with Laing O'Rourke, Laing O'Rourke being a Tier 1 engineering enterprise through an integrated delivery partner with clear accountability on time and cost control and a role that they're very familiar with in terms of delivering major projects with City Metro, delivering the Brisbane games or the Arkos submarine projects as well as other projects around the world. And we've also bolstered out very deliberately and very carefully our in-house design, technical and delivery capability, drawing from some of our competitors on the operations design, technical side as well as other people in the ecosystem and in delivery from the builder side. So we have a well-rounded team supplemented by Laing O'Rourke to ensure that we can control against time and cost movements.

And a fixed cost contract as well, I think, Ralph.

Yes. And we've tended in a competitive environment to award SHAPE Australia as a fixed-price lump sum D&C contract.

Any other questions from the floor? Yes, sir.

[ Charlie Kingston ]. A few questions please. Maybe just first on valuations. As David mentioned, NTA or NVA is low 4s. Clearly, you're not the only REIT in the market that's trading at a discount to NTA. There are a lots of those, but notwithstanding the strength in the U.S. REIts. They don't really talk to NTA at all. But one thing that has never really been touched upon in the accounts is the cap rates or which basically every other REIT does talk to. It's now a little bit different given you sold, and well done on that sale in Chicago. But it is becoming more of a development play. But could you just talk to the valuation behind the existing suite of assets. I mean the remaining U.S. assets, they are just double or triple net type lease assets, but I don't think you mentioned the cap rates. But clearly, the market doesn't believe the NTA. Again, you're not alone, but maybe part of the reason is because you don't give the methodology behind why those values are fair. I think SYD1 is roughly in line with what you paid for it. Clearly, you're going to spend over $1 billion now, but which will deliver $250 million of EBITDA. But if you can just provide some extra detail on how those assets are valued. I know they're all independently valued, but all REITs say that. But for whatever reason, the market hasn't believed the values to date and you did sell Chicago well, I think was above cost. Yes, didn't mention what it was in relation to book. Maybe it was a touch below book, but just first question, if you could clarify the cap rates or give any more detail around EBITDA multiples because that would help if there was more transparency there, please.

Simon, do you want to pick that up? And any comments from Jess as well on the valuation side? But Simon?

I think you made the point, Charlie, on the cap rates. This now has a strong development bent to it as well in terms of the business. It's a little different to REITs that are throwing off regular, predictable, stable yields. So it's not as easy to compare. But over to you.

Yes, Charlie. As we've said and as you pointed out, we do value the assets every 6 months. We're a little bit different to other REITs in the most of the asset base now is carried on the accounts as property, plant and equipment. And there's obviously impairment testing done at each balance date against those values. I take your point on disclosure of cap rates, multiples, et cetera, and we can take that onboard and look to see if we can improve, but they are independently valued, and they are fully reviewed by KPMG. Jess, I don't know if you want to make any additional comments.

[indiscernible] and we assess the impairment every 6 months in terms of the tests that management undertakes. And as you said, they're held at cost should probably imply that there'd be greater value in SYD1 given what's happened the time that you've acquired that asset.

Yes. Anyway, more transparency, I think going forward would be helpful because, yes, we've got EBITDA guidance, but I don't know what the asset base is going to be on the post development. Maybe close to [indiscernible] or thereabouts and $250 million EBITDA and [indiscernible] multiple, et cetera.

The other thing to note there, Charlie, as well is when we talk about the -- and I know that everyone says the valuations are independent. The valuations in this case are actually reviewed by the independent directors because they have a number of functions. One is management fees, of course, as well. But we do look at those as independent values, and KPMG reviews the methodology and assumptions used. As Simon said, we carry the Australian assets as property, plant, equipment, and they're not carried in a market value, but the Australian assets have increased pursuant to those valuations as well. We'll pick up your point on transparency and cap rates and multiples, et cetera. I think that some of that was in the IPO documents, but we can keep that validated going forward as well. Thanks for asking.

And then just a second quick one, yield on cost. What does that mean? Is that -- if you spend your $1.2 billion, you get 15%. Like is that an actual free cash because EBITDA again is one thing, but b, is a real cost, especially for a data center. So there's a lot of costs that come out below EBITDA. But what is the actual definition of yield on cost? Is that post? Is that stamp duty? Or obviously this is a brownfield, but capitalized interest, et cetera. So if you could just give clarity on the actual definition, please.

Yes. So the yield on cost is a cash measure. So it's effectively EBITDA over the cost of the capital. So if it's $1.2 billion capital spend, and we're seeing double-digit yield on cost, then it's simply that percentage applied to the capital cost should get you close to EBITDA. So it's a cash flow measure, not an accounting cash profit.

Okay. But then just lastly, what does come out below EBITDA? So if you got $250 million stabilized EBITDA from the Australian platform, but then I think we need to add the U.S., which is basically just cash rent, no CapEx associated with that, but what comes out below EBITDA? Because, again, that's one thing, but what's actually available for shareholders and distribution and to do, whatever, pay down debt or return to shareholders, what would be the big 2 in actual AFFO figure or free cash? Because ultimately, that's what is going to be the sustainable number to return to shareholders going forward.

Yes. It should be pretty straightforward in that we take the EBITDA and that's the interest cost, comes off that, and then there's a small amount for maintenance CapEx. But as you can imagine, the amount of capital we're sinking to these assets over the next couple of years means that maintenance CapEx has been reasonably minimal, at least for the near term.

Thank you. Thank you so much, Charlie. Any other questions on the accounts or auditor's report from the floor. Thank you all. If there are no further questions, I'll move to the next item of business, which is the remuneration report. Turning to resolution 1, being the remuneration report. Resolution 1 asks securityholders to adopt the company's remuneration report, the reports on Page 27 of the annual report. It outlines the remuneration fees paid to the key management personnel, including the directors and external investment and asset managers as well as the remuneration policies of the company more generally. Resolution 1 is advisory only and doesn't bind the directors of the company or the company itself. However, the Board will take the outcome of the vote and discussion of this meeting into account in setting the remuneration policy for future years. I now open the floor to questions on this item of business. David?

Chair, David Kingston. Look, because this is externally managed, the actual key full-time executives are not part of the rem report, rather, the KMPs or the directors of the company . Also conscious, Chair, that you mentioned before that an important part of the role of the Ned's independent directors is to review the valuations. So that's good. So I just appreciate if the ever colorful Kelly, who's got a brilliant finance background, and she always enjoys questions. She's an important member of the Board of Barrenjoey, which has been a huge success and obviously had a brilliant career in politics in...

What were they called again, Barren?

So her views are well sought after and always beautifully expressed. So I just appreciate if Kelly could give some color as to why she believes the stock is trading at a 40% discount to NAV and a 50% discount to the IPO. And just a couple of specifics, Kelly. I do have a question later for Rachel, who's also very sophisticated. But Kelly...

I won't take that personally, David.

Well, but you've already eloquently answered so many questions. We cannot let you dominate the microphone.

Share the load.

Share the load to the women and Mr. Di Pilla has been required today. So maybe he can crack a mention later on.

I think he's like he's got laryngitis. So we're actually quite happy with that.

Okay. But in all seriousness, I'd love to hear from Kelly and then later Rachel. But Kelly, do you think the intangibles of $360 million realistic is part of the reason why the market is discounting the share price below NAV, below in -- they actually don't value the intangibles, which are goodwill of $215 million and customer contracts of $145 million? And also, do you think that the company paying out distributions well over AFFO is a cause for concern?

Happy to pass the microphone to Kelly, as you say, always eloquent and valued. She is not an independent director to when we talk about us considering -- sorry, over to you.

Yes, I was just going to say, the only thing I would say, David, and thank you very much. It was a very kind introduction, and I always welcome the opportunity to converse with you in this forum. But what I would say is that, on this particular Board, I am an independent director on the HMC Capital Board. But on this particular Board, I'm not considered an independent director because I am on the parent company Board. So I think probably in light of that, if you want to go to the specifics around the rem, it would be more appropriate, perhaps, Joseph, if you or Rachel might answer that part of the question, then I'm happy to answer the other parts of your question, if you like.

But Kelly, I'm happy for you to respond as a nonindependent because you are an excellent experience in finance and love to hear your views on those 2 issues as a non-independent director.

Right. On the rem specifically first?

Well, the relevance of the rem is that, normally, it's the key full-time executives who are covered, and they respond to questions. Where you have an externally managed company, the KMPs are each of the directors, both the independents and the nonindependents. So thank you for clarifying you are a non-independent director. I'd just love to hear your response to those 2 particular questions.

Yes. So the questions around that and the NAV and why we're trading, how we're trading and the environment that we find ourselves in. Look, I think Joseph has, in fact, covered a fair bit of the landscape that's changed as to when we first started as a company, not that very long ago, geopolitically, also in Australia. We're focused very much on recalibrating the strategy back to Australia because that will optimize the outcome for shareholders. So much more is within our control. So much has changed in the United States. And so we have redeployed that capital into expanding where we see the best opportunities. And as you've rightly articulated, David, brownfield sites are actually the sites you want to be in at the moment because they give you the greatest or a greater path of certainty because you already have power secured, water secured. You have no need for additional permits regarding what you're looking to build, like you would do in a greenfield site. And so that is why we have been very much focused as a business on making sure that we can optimize both sites that we have at the moment, and we believe that, that will deliver the best possible shareholder value. And in optimizing those sites, we're also delivering on our sustainability goals as well. We have expanded the number of customers who can use that Sydney 1 site now because of the hosting certification framework that certainly expands the customer base that can use it. And we've been very successful, as you would have seen very recently, in being able to secure for our expansion the -- a very significant customer, and we can't obviously name the customer but who will take up much of that expansion.

But I tried to narrow the question a little bit from discount to NAV to 2 specifics. As a director, non-executive director, do you believe that the market is skeptical about the $360 million that you are signing off on personally as a director with the support of the auditor and the management team? Do you believe the market is disregarding that $360 million of goodwill? And secondly, do you believe the market's a little bit skeptical that the actual distributions are always nice, but they're way, way over AFFO, which is probably negative? Just appreciate your guidance on those 2 issues.