Region Group (RGN) Earnings Call Transcript

Thank you very much, and welcome all to the FY '21 full year financial results for the SCA Property Group. My name is Anthony Mellowes, and I'm the Chief Executive Officer. Presenting these results with me today is Mark Fleming, our Chief Financial Officer. Our teams have been working extremely hard during these unprecedented times, and I'm personally pleased with the results that we've been able to achieve in the last 12 months, particularly the last 6 months where we have seen a real rebound. The current lockdowns being experienced in New South Wales, Queensland, Victoria and now the ACT present us with some challenges, but I'm confident that we will again see a rebound once restrictions are lifted consistent with what has happened during FY '21. We have remained true to our core strategy of investing in and managing convenience-based centers weighted to the nondiscretionary retail sector in Australia, with a strong focus on everyday needs, particularly grocery, food and the medical categories. At SCA, brand positioning for the last 6 years has been to love local, shop local and act local. This has never been as important as at present. Firstly, let me take you to Slide 4, which sets out our FY '21 highlights. Our FFO per unit of 14.76 cents per unit and distribution per unit of 12.4 cents per unit is an increase of 0.8% and a decrease of 0.8%, respectively, on FY '20. Our net profit after tax was $462.9 million, an increase of in excess of 400% on the same period last year. Our NTA increased to $2.52 per unit, an increase of 13.5%. Our portfolio occupancy is 97.4% and our specialty vacancy is 5.1%. This has remained stable compared to June '20. We made $452 million of acquisitions during the year. And finally, our weighted average cost of debt declined to 2.4% with a 5.3-year weighted average debt maturity. Moving to Slide 5, which sets out some of the key achievements and demonstrate how we continue to deliver on our strategy. There was a strong rebound in the second half of FY '21. Our convenience-based centers have benefited from the shift to shopping locally. Our anchor tenants have experienced sales growth and turnover rent has continued to increase. Specialty sales recovered quickly following the easing of restrictions, and there was a strong rebound in leasing spreads in the second half. Our cash collection rates returned to pre-pandemic levels by the end of the period. We have continued to progress our sustainability program, including setting a net zero carbon target for Scope 1 and 2 carbon emissions by 2030. COVID-19 did negatively impact some of our specialty tenants during FY '21. We provided $10.5 million of rental assistance to over 800 tenants. And the impact of the current restrictions in a number of states on the FY '22 financial year is uncertain. However, we expect specialty tenants to again rebound quickly once restrictions are eased. We contracted to acquire 9 convenience-based centers for $574 million in FY '21 and the acquisitions of 7 of those centers for $450 million were completed during the period. In June 2021, we agreed terms to acquire 2 further centers being Drayton for $34 million and Raymond Terrace for $87 million. Settlement of both of those transactions occurred in July 2021. The windup of SURF 1 and SURF 2 was completed during FY '21, achieving an IRR of 11% and 12%, respectively, for unitholders since the funds commenced in 2015 and 2017, respectively. We had a valuation uplift of $409 million or 13% for like-for-like properties during FY '21. Our balance sheet remains in a strong position. Our gearing of 31.3% is within our targeted range of 30% to 40%. And our weighted average cost of debt is 2.4% with a weighted average term to maturity of 5.3 years. We have cash and undrawn facilities of approximately $290 million. Finally, our funds from operation per unit of 14.76 cents increased by 0.8% and our distribution of 12.4 cents per unit decreased by 0.8% all over the same period last year. I'll now hand over to Mark to present the financial results.

Thanks, Anthony, and good morning, everyone. I'll start on Slide 7, which shows the sales performance of our tenants and our cash collection rates during the COVID pandemic. On the top right-hand side of this slide, you can see the moving annual turnover performance of our tenants, which overall has been very strong over the last 12 months. Many of our specialty tenants suffered sales declines during the various lockdowns, as you would expect, particularly in Victoria during the first half of the financial year. But what we've consistently seen is that specialty tenant sales rebound strongly once restrictions are lifted, and that's what happened in the second half of the financial year because for most of that period, there were only limited restrictions in most parts of Australia. In terms of cash collection, it's a similar story. You can see that over the second half of the financial year, our cash collection rates returned to historical levels with around 90% of rents collected within 30 days and 96% of rent due in the period was collected by 30 June. Moving on to Slide 8, which shows the impact of COVID-19 on our earnings. As the top right-hand chart shows, we've assessed the direct and quantifiable earnings impact of COVID-19 in FY '21 at around $7.3 million made up of 3 components. Firstly, we waived $6.9 million of rent during the year. Secondly, other direct impacts of the pandemic amounted to approximately $4.4 million. And finally, partially offsetting these impacts was a reduction in the expected credit loss allowance of $4 million, because increased allowances for deferred and unpaid rent during the year were offset by greater-than-expected collections of FY '20 unpaid rent. Other indirect impacts, such as increased vacancy and reduced leasing spreads are difficult to attribute and quantify and are excluded from this analysis. The bottom right chart shows our distribution per unit trend in half years. And as we've previously indicated, we would expect to return to the pre-COVID level for AFFO per unit and distributions of at least 7.5 cents per unit per half year once the impact of the pandemic has ended. Turning now to Slide 9, profit and loss. Our statutory net profit after tax was $462.9 million, which was up by 441% compared to the same period last year. The primary reason for that increase was an increase in the fair value of investment properties during the year. Stepping down the P&L, net property income increased by $10.1 million or 5.6% due to acquisitions and reduced COVID impacts compared to the prior year. Funds management income increased due to performance fees realized in relation to the SURF 1 and SURF 2 retail funds. Corporate costs increased due to an increase in directors' and officers' insurance premiums and because no KMP STIP was paid in respect of the FY '20 financial year. Fair value of investment properties increased due to a combination of cap rate tightening, improved NOI outlook and removal of allowances for future lost rents due to the pandemic. Fair value of derivatives has decreased by $65.9 million due to the cross-currency interest rate swaps associated with our U.S. private placements due to the appreciation of the Australian dollar and a steeper yield curve. Finally, interest expense includes $9.1 million of swap termination costs. Our weighted average cost of debt reduced from around 3.5% in FY '20 to around 3.1% in FY '21. And the spot cost of debt as at 30 June '21 was around 2.4%. Moving to Slide 10, funds from operations. To get to funds from operations, or FFO, we reverse out the noncash and one-off components of our net profit after tax, including fair value adjustments. FFO of $159 million is up by 12.9% on the prior year, primarily due to acquisitions, reduced COVID impacts and lower cost of debt. AFFO of $135.8 million was up by 9.3% on the prior year, slightly less than the FFO because of an increase in maintenance CapEx and leasing incentives. AFFO per unit of 12.6 cents per unit was slightly lower than the prior year due to the dilutive impact of the capital raisings late in FY '20, which weren't fully redeployed until the second half of the FY '21 financial year. Distributions were 12.4 cents per unit, representing a payout ratio of 98% of AFFO. Turning now to Slide 11, which shows our summary balance sheet. Cash has reduced to more normal levels due to utilizing $180 million of term deposits to repay the medium-term note in October last year. The book value of our investment properties has increased to $4 billion due to $452.4 million of acquisitions and $409.4 million increase in the like-for-like valuation of investment properties. Other assets has decreased due to the reduction in the mark-to-market valuation of our cross-currency interest rate swaps as discussed earlier. Net debt has increased primarily due to acquisitions during the period. Net tangible assets per unit increased to $2.52 per unit due to the investment property fair value increase partially offset by the decrease in the fair value of derivatives. Finally, our management expense ratio has increased slightly to 41 basis points due to the $1.8 million increase in our D&O insurance premiums, and because no KMP STIP was paid for FY '20. Moving to Slide 12, which deals with debt and capital management. Our gearing sits at 31.3%, which is toward the lower end of our target range. During the year, we repaid the $225 million expiring medium-term note. We issued $50 million of new 10- and 15-year notes, and we increased some of our bank facilities to fund acquisitions. As at 30 June, our weighted average cost of debt has reduced to 2.4%, our weighted average debt maturity has increased to 5.3 years. We have $290 million of cash and undrawn facilities, and we have no debt expiring until FY '23. Finally, as you can see, we are well within our banking covenants. Thank you, and I'll now hand back to Anthony for the operational performance overview.

Excellent, thank you very much, Mark. So looking at Slide 14 and the overview of our convenience portfolio, we now have 80 neighborhood, 1 freestanding Woolworths and Big W and 11 convenient subregional assets comprising 744,000 square meters with approximately 2,000 specialty tenants and 122 anchor tenants. Our weighted average cap rate is 5.9%. And as you can see, our geographic diversification is well balanced across all states in Australia. 48% of our gross rent continues to come from our income tenants, including Woolworths, Coles, Wesfarmers and Aldi. And of the other 52%, there is a heavy weighting towards our core nondiscretionary categories being food, retail services and pharmacy and medical. Slide 15 describes our portfolio occupancy. Specialty vacancy is stable despite the COVID-19 challenges. Our occupancy level decreased to 97.4%, primarily as a result of country target at The Gateway, Langwarrin exiting in April 2021 and replacement tenant is close to being secured. The total special vacancy remained at 5.1%, which is slightly above our targeted range of 3% to 5%. And the long-term stability of our portfolio occupancy illustrates the resilience of this portfolio. Specialty tenant monthly holdover has been a particular focus for the team, and that has remained stable at just over 1.3%. And we have 3 anchor tenant expiries in FY '22 and all terms are agreed on these 3. Turning to Slide 16, the sales growth and turnover rent. Strong sales growth has been continuing and our supermarket MAT has increased by 3.2%. The panic buying experienced in FY '20 was not repeated. However, the living local and shopping local continues. Our discount department stores have strong sales growth of 9.2% and BIG W's performance continued to be positive throughout the year. Mini Major sales growth has strengthened to 6.4%, primarily from discounters and pharmacies in our portfolio. Our specialty sales increased strongly by 9.7%, and the lockdown in the last quarter of FY '20 were not repeated in the last quarter of FY '21. Nondiscretionary categories MAT growth was 10.9%, continuing to outperform the discretionary categories. Our subregional centers MAT growth of 13.5% outperformed our neighborhood centers of 7.8% as trading restrictions were lifted allowing some of those nondiscretionary retailers to trade. Our turnover rent continues to increase. We now have 42 anchors or 34% of our anchors contributing turnover with a further 15 anchors within 10% of the turnover threshold. And there were 9 anchor tenant turnover rents were captured in a base rent review during the year. Turning to Slide 17, our specialty key metrics for our existing centers are outlined and we saw a strong rebound in the second half of FY '21. Strong second half leasing performance with positive renewal spreads. The second half was 1.6% versus the first half of minus 4.6% and improved new lease spreads in the second half was 3% versus 0.8% in the first half. In addition to the above, we also executed 75 COVID lease extensions for an average extension period of 13.5 months. The strong sales growth and reducing occupancy costs positions us well for future rental growth. Our sales productivity increased to just under $10,000 per square meter, and our average rent per square meter has increased by 1.9% to $793 per square meter. And our occupancy cost decreased to 8.6%. Our strategy is focused on taking a considered position on tenants holding over while targeting positive renewal spreads and maintaining a high retention rate on the renewals at 73%. Reducing specialty vacancy with a focus on reducing our longer-term vacancies, 127 new deals were done with positive rental uplifts and lower incentives in the second half. And we continue to remix towards those nondiscretionary categories. We also continue to achieve our 3% to 5% annual fixed rent increases for 88% of our specialty tenants. Slide 18 outlines our sustainability strategy. FY '21 was a very significant year for SCP with respect to sustainability. We're now targeting 6 key areas where we can have maximum impact, being energy and carbon. We've set a target of achieving net zero in our operations by 2030 on our Scope 1 and Scope 2 emissions. Two, water. We've set a target to reduce our water use by 25% across our largest consumption sites by 2025. Waste, we're looking to divert 60% of our operational waste from landfill by 2030. Leading Local, we are continually working with the Smith family to build strong, sustainable communities. And Health & well-being, we're continually improving the health and well-being of all of our employees. And sixth diversity & inclusion. We have achieved and will look to maintain our 40/40/20 leadership team split going forward into FY '22 and onwards. Slide 19 outlines our pathway to net zero by 2030. We started this journey in 2015, 2016 and 2021, '22 has and will be significant years for us in our journey. We have a realistic plan and as a group, we're committed to reaching the 2030 net zero target on Scope 1 and 2 carbon emissions. More detail is included in our sustainability report, which was also released today. Turning to our growth opportunities, which starts on Slide 21. SCP has a strong track record in acquisitions within our sector. On average, we have acquired 6 centers for $238 million each financial year since our inception in December 2012. Slide 22. FY '21 was a particularly active year for acquisitions. We contracted 9 centers for an excess of $515 million and we completed 7 of those centers for $452 million during FY '21. Raymond Terrace in New South Wales and Drayton Central in Toowoomba, Queensland were settled in July 2021. We also acquired the adjoining land at Greenbank in Brisbane and also the adjoining petrol station in Warnbro, WA. FY '21 was our most active year after FY '19, when we acquired a significant portfolio from Vicinity. Slide 23 continues to highlight the fragmented ownership within our sector, which provides SCP with further acquisition opportunities. We are the largest owner by a number of neighborhood centers, and we will continue to consolidate by utilizing our funding and management capability to execute acquisition opportunities. Since listing, we have now acquired 57 convenience centers for over $2.1 billion in aggregate, and the majority of these acquisitions have been off market, and we expect this to continue. There has been a continued demand from investors for the neighborhood centers during the year. SCP will continue to be disciplined with respect to acquisitions, and we could debt fund approximately $190 million of acquisitions while still keeping our gearing below 35%. The demand for quality neighborhood assets remains strong with recent transaction cap rates less than 6%. Slide 24 outlines our indicative development pipeline over the next 5 years. In summary, we've identified and are working on 30 potential developments, totaling CapEx spend in excess of $170 million with a significant focus on sustainability for FY '22, in line with our sustainability plan. Slide 25 outlines our retail funds management business. In FY '21, we successfully concluded both the SURF 1 and 2 funds, achieving 11% and 12% IRRs, respectively, for those unitholders. This generated $1.2 million of performance fees for SCP. SURF 3, which was launched in July 2018, now has 3 assets. Swansea was sold in July 2020. The proceeds were used to repay debt and strengthen the balance sheet of that fund. We will explore additional funds management opportunities going forward in FY '22. I'd now like to talk about our key priorities and outlook. Turning to Slide 27. Despite the impacts of COVID-19, our core strategy remains unchanged. In fact, as a result of COVID-19, we believe that our strategy is even more resilient to the current impacts facing the industry. We'll continue to seek and deliver defensive, resilient cash flows to support growing distributions. We will continue to focus on the convenience-based retail centers with a strong weighting to the nondiscretionary retail segment. We will be seeking long-term leases to quality anchor tenants such as Woolworths, Wesfarmers and Coles, which was again demonstrated by our latest acquisitions. And we will continue to explore both the core business growth opportunities as per our development pipeline and acquisition opportunities within our sector and also some future fund management opportunities. I'd now like to hand over to Mark to discuss some online retail implications for our sector, the future impact of COVID-19 and our longer-term AFFO growth targets.

Thanks, Anthony. Moving to Slide 28, our online retail implications. One of the questions we get a lot is what impact online retail is having or is likely to have on our centers. Our view is that our centers are likely to benefit from the trend toward online retail. The reason for this view is that our centers are located closer to the end consumer than any other commercial property, and as such, are well suited for last mile logistics. We believe that the store-based fulfillment model will remain the predominant model for online grocery fulfillment in Australia due to low population densities, large distances and established existing supply chains, including cold chain. Over the last 12 months, we've seen this play out with both Woolworths and Coles increasingly using our centers for last mile fulfillment, both pickup and home delivery. 75% of the supermarkets in our portfolio have dedicated Click and Collect parking bays, and we're ramping up plans for drive-throughs at several of our centers. And we're happy to work with the supermarket chains on these initiatives because online sales generated in our stores are included in our turnover rent calculations. We're seeing similar trends with our specialty tenants who are also using their stores for pickup or delivery to the local area. And again, we expect this trend to continue to grow in coming years. Moving on to Slide 29. We've included this slide to help people think about the potential impact of the ongoing pandemic on our FY '22 results. As we saw in both FY '20 and FY '21, the primary impact of the pandemic this financial year is expected to be reduced rental income from specialty tenants whose sales are impacted by government-imposed lockdowns. In prior periods, the bulk of that impact has been in 3 specialty tenant categories, being apparel, services and cafes and restaurants. Both New South Wales and Victoria are currently in lockdown, with both states announcing that the code of conduct will be reinstated until January 2022. As you can see from this table, the 3 most impacted categories in New South Wales and Victoria represent around 7% of our gross rental income or around $2 million per month. As the duration and extent of the lockdowns is changing on a daily basis, it's not possible for us to accurately forecast what the impact will be on our FY '22 earnings. But hopefully, this slide is useful for those who want to run some different scenarios. Finally, as you can see from the sales growth numbers in this table, every time lockdowns have ended, we've seen very strong rebounds in tenant sales, particularly in those 3 most impacted categories. And we'd expect the same thing to happen again this time around. I'll move now to Slide 30, longer-term AFFO growth target. While the pandemic is expected to negatively impact earnings in FY '22, we still believe the longer-term earnings growth potential of our business is strong. Over the medium to longer term, our target is to achieve earnings growth in the range of 2% to 4% per annum, made up from a combination of comparable NOI growth supported by supermarket turnover rent and fixed specialty rental increases, developments, acquisitions and funds management, underpinned by disciplined control of our operating expenses and capital expenditure. Anthony, back to you for the closing comments.

Thanks again, Mark. Just turning to Slide 31, which outlines our key priorities and outlook for FY '22. We will continue to deliver on our strategy and to love local, shop local and act local. Our core business focus will continue to be serving our local communities for their everyday needs, partnering with our supermarket anchors to improve their online offer, actively manage our centers to ensure that we have successful specialty tenants paying appropriate rents and also executing on our sustainability strategies. This will support our strategy of generating defensive, resilient cash flows to support those secure, growing and long-term distributions to our unitholders. With our growth opportunities, we do have excess capacity to fund some acquisitions. However, we will be remaining disciplined and true to our strategy. We will continue to explore value-accretive acquisition and divestment opportunities that are consistent with our strategy. We will progress our identified development opportunities, including our sustainability investments. And finally, we will consider further funds management opportunities in the future. With respect to capital management, we will continue to actively manage our balance sheet to maintain diversified funding sources with long weighted average debt expiries and a low cost of capital consistent with our risk profile, and our gearing will remain below 35% at this point in the cycle. Due to the uncertainty related to the current COVID-19 lockdowns, we will not provide FY '22 guidance at this time. And it is our intention to target a distribution payout ratio of approximately 100% of FFO. Our target is to return AFFO per unit to our pre-COVID levels of 7.5 cents per half or $0.15 per unit per annum once the impacts of the COVID pandemic have ended. In conclusion, I'd like to say that during these difficult times, we will continue to deliver on our clearly stated strategy and objectives. We'll continue to focus on and optimize our core business, taking into account the impacts of COVID-19 on our tenants, with a particular focus on rent collection and continued deal flow on renewals and reducing vacancy. We've built strong foundations to enable us to continue to seek out and execute on our growth opportunities that are consistent with our strategy and risk profile. FY '21 was a particularly challenging year for the team. However, the strong rebound experienced in the second half of FY '21 reinforces our strategy, and we see no reason to deviate from it. Remember, love local, shop local, act local. I'd now like to invite any questions.

[Operator Instructions] Your first question comes from Lou Pirenc from Jarden Australia.

Two questions, if I may. The first one, on your Slide 29 with the impact on COVID-19, and I appreciate that additional color. Can you confirm kind of what percentage by income or by specialty stores is currently not operating? Is that in line with that 7% of those 3 higher-risk categories? Or is it more, is it less?

Yes, thanks. I'll answer that one. It is pretty much in line with what we've put on Slide 29 there because a couple of them happened just over the weekend. We're just still getting all the exact numbers, but it's very close to what is in those percentages there.

Great, and then what's the percentage of SMEs versus the -- or under the code of conduct? Is it about -- I mean -- are the majority of those SMEs or...

It's about 50-50, it's about 50-50 approximately.

Great. And then secondly, just on the longer-term acquisition outlook, kind of what are you seeing at the moment? It feels like it's getting more competitive. How comfortable are you that you can kind of maintain that average of looking it up to 38 million a year in this kind of competitive environment?

Yes, it's a very good question. Certainly, over the last 18 months, really strongly the last 12 months, we've had some increased competition from institutions, the likes of HomeCo and Primewest on behalf of GIC and some others. Certainly, we have had a strong year in the last 12 months. I wouldn't like to predict that we'll have another strong year like that, but I think we will -- should be able to do our average quite well. Most -- it's very rare we actually win an auction, a straight public auction. The strong -- the large majority of our assets come from off-market opportunities, and I think that's going to continue. Prices have compressed and continue to compress. And it is getting harder, but I think we still will be able to eke out appropriate accretive acquisitions, but we'll do it in a disciplined way. We're not going to pay over and above what we think an asset is worth. So -- but I'm confident that we will still be able to deliver on what we think it is, which is that average. And there's a lot of owners of these shopping centers that are families, individuals that sell for lots of different reasons. But there is certainly some more increased competition, but we've got to find different ways of finding those assets.

Your next question comes from Simon Chan from Morgan Stanley.

Just wondering if you could elaborate on one of your comments about exploring further funds management opportunities in FY '22. Like is that just a throwaway comment? Or are we close to something? And if we are, can you give us some insights as to size, scale, quantum, timing?

Good pickup, Simon. It was a deliberate change of language versus what we had there before. And this is really just flagging to the market so there are no surprises. There's nothing imminent, but we are strategically starting to explore some funds management opportunities using institutional capital rather than retail capital. But the exact nature of those opportunities, whether it's in our core categories or in adjacent categories, who the partners might be, all of that is still being worked on. So there's nothing imminent to announce, but we just wanted to, I guess, flag to the market that we are starting to consider moving into that institutional funds management space.

That was fantastic. The adjacent category, can you elaborate on that? What do you mean by adjacent?

Look, there's nothing specific at this time, but it would be related to convenience-based retail in some shape or form. So I don't know to really talk about specific categories because there's no specific proposals at the moment. It's something that's similar to our current core business.

No problem, sounds good. Second question is in relation to your maintenance CapEx in leasing costs. They seem to have gone up a bit this year. I think in total, it was $16 million in FY '20, and it became $23 million in FY '21. Yet lease deals actually declined from 50,000 square meters to 39,000 square meters. Are you simply offsetting leasing spreads with higher incentives?

Well, I'll deal with maintenance CapEx first and then go to leasing CapEx. But maintenance CapEx has been increasing, but so has our portfolio. If I look at that $9.7 million as a percent of our current asset value, it's about 25 basis points. It has been gradually increasing, and I think it will continue to gradually increase as our portfolio ages and grows. The leasing CapEx, there is a specific reason which is that there was a whole lot of deals done in FY '20 prior to the lockdowns in March, April, May And because of those lockdowns, the actual opening date of those shops, those tenancies wasn't until the FY '21 financial year. So the leasing statistics we give are for deals done within the period, whereas the leasing capital that goes into the AFFO is based on when the shop opens. So it was really just a timing issue in that a lot of the FY '20 deals weren't actually opened until FY '21.

Your next question comes from Sholto Maconochie from Jefferies.

Just following on from Simon's question. When you say adjacent asset classes, would that include like convenience retail service stations, for example? Would you look at those?

Look, again, this is complete speculation. But yes, it could include petrol stations. We already have a number of petrol stations obviously in our portfolio. But yes, that would be an example of what we could look at. But again, this is very hypothetical at this stage.

Yes, and then just on the -- I know you appreciate it's -- this pandemic seems to never end. But if you look at the assistance provided in '20, you gave $20.5 million, but then you wrote back $4 million of ECLs So it would have been $16.5 million, $87 million this period. So where -- assuming somewhere between the $2 million to $7.3 million and $20.5 million is where it probably lands for '22. So obviously more impacted in the first half?

Well, there's a reason we haven't given guidance because we -- yes, it was only on Friday night that New South Wales announced the Code of Conduct, for example. So this is changing every day. But what I would say, just to give you a little bit more color, is what we saw last time -- last year and the year before during lockdowns. And in New South Wales, when New South Wales was locked down in FY '20, we roughly gave about $0.5 million per month in waivers and deferrals. Likewise, during the height of the Victorian lockdowns in the first half of this financial year, we were giving approximately $0.5 million per month in waivers and deferrals. So if I had to sort of stick a finger in the air and say, well, what's my gut feel, I would stick to about that, which is $0.5 million a month in New South Wales, $0.5 million a month in Victoria while the lockdowns are in place. But obviously, that's a very indicative number based on what happened last time around.

And we just don't know how long the lockdowns will be in place for. That's the issue and also whether anything else will change. So that's our uncertainty. And you have as good a view on that is what we do.

And I don't think anyone knows what that do. Like just thought we get out of it quicker than anything. Just on your gearing, so you're happy to go to sort of 35%. But to get your indicative sort of target, the range you'd probably -- you go above that 35%. So would you bring in capital partners for some acquisitions in line with that funds management discussion before?

Well, I think there are 2 separate things. So on balance sheet, we own 100% of all of our assets, and our preference is to stay with that. So on balance sheet, I can't see us not owning 100% of every asset unless there was something very -- some very specific deal. But the strategy is to own 100% on balance sheet and that our gearing range is, as I said, 30% to 40%, but preference is to stay below 35%. If we were to look at a fund, then that -- the gearing of that fund would be assessed at the time depending on the assets, depending on the partner, depending on the characteristics of that fund. So that's probably a bit hypothetical to...

And you just keep a co-investment stake in that fund?

And presumably, we would have a co-investment stake in that fund, correct.

Your next question comes from Richard Jones from JPMorgan.

I've a few similar type questions. Just in terms of cash collection, do you have the July and maybe any early data on August?

I do. So July cash collection was 92%, which was obviously pretty strong and consistent with what we saw in the second half of FY '21. In New South Wales, it was 89%. In Victoria, it was 91%. So limited obvious impact in July, but the caveat there is that rent is due in advance. So a lot of the rent was obviously paid in the last week of June before the lockdown happened. August, I think it's really too early to say, and I don't want to throw out numbers because we're only a couple of weeks into it. But there is signs that those numbers are going to be weaker, obviously, in August, as you'd expect, with New South Wales and Victoria trailing at the moment and weaker than where we were in July at this point in time.