WEBVTT - How to run a $2 Billion dollar industrial property porfolio 0:00:03.800 --> 0:00:07.200 Currakoto. Welcome to Shared Lunch. I'm Garth Bray and we're 0:00:07.240 --> 0:00:10.480 on location with the listed landlord that rents to some 0:00:10.560 --> 0:00:14.520 of New Zealand's big companies property for industry, builds, owns 0:00:14.560 --> 0:00:18.640 and manages two billion dollars worth of factory and warehouse 0:00:18.640 --> 0:00:22.440 space to some big global names, which also gives investors 0:00:22.520 --> 0:00:25.959 exposure to property assets without necessarily needing to talk to 0:00:26.000 --> 0:00:29.520 a mortgage broker. CEO Simon Woodhams has invited us here 0:00:29.560 --> 0:00:32.760 to East Tamaki to show us two stages of development 0:00:33.080 --> 0:00:37.040 under construction and already rented, and to share his thoughts 0:00:37.080 --> 0:00:40.400 on property industry in the year to come. Before we 0:00:40.400 --> 0:00:44.240 hear that some important information you should always consider. 0:00:44.600 --> 0:00:47.199 Investing involves the risk you might lose the money you 0:00:47.240 --> 0:00:50.559 start with. We recommend talking to a licensed financial advisor. 0:00:51.280 --> 0:00:55.080 We also recommend reading product disclosure documents before deciding to invest. 0:00:55.360 --> 0:00:57.720 Everything you're about to see and here is current at 0:00:57.760 --> 0:00:58.560 the time of recording. 0:00:58.640 --> 0:01:00.680 Well, Simon, thanks for inviting us here. I mean, as 0:01:00.720 --> 0:01:02.320 open homes go, this is pretty extra. 0:01:03.160 --> 0:01:05.160 Yeah, it's a pretty big open home, isn't it twenty 0:01:05.160 --> 0:01:07.920 five thousand square meters So no, no, this is the 0:01:08.000 --> 0:01:10.720 latest facility that we've completed. So we're very very proud 0:01:10.720 --> 0:01:12.720 of it. So welcome, great to have you guys here. 0:01:12.920 --> 0:01:17.760 Sure property, I guess as an investment class, it seems 0:01:17.800 --> 0:01:20.720 like it's something that an investor can kind of touch, feel, 0:01:20.800 --> 0:01:23.240 maybe understand a little bit more. Is that fair? 0:01:24.120 --> 0:01:26.600 Yes, yep, definitely. So we've got four and a half 0:01:26.640 --> 0:01:29.400 thousand retail investors, and I think for a lot of them, 0:01:29.480 --> 0:01:31.880 particularly the ones that have been with us for twenty 0:01:31.880 --> 0:01:34.120 five years. Plus the fact that it's bricks and mortars, 0:01:34.160 --> 0:01:36.240 there's actually a physical aspect to it, is a really 0:01:36.280 --> 0:01:40.160 important aspect to why they invest with us. It's certainly 0:01:40.160 --> 0:01:42.640 why myself and a lot of the team have been 0:01:42.640 --> 0:01:44.800 involved for a long time. We'd like to be able 0:01:44.840 --> 0:01:48.200 to create things and physically touch it. So no, no, 0:01:48.240 --> 0:01:50.320 I think that's probably one of the more important aspects 0:01:50.320 --> 0:01:51.480 of PFI. 0:01:52.360 --> 0:01:55.000 So where are we right now and who's moved in? 0:01:55.040 --> 0:01:55.720 Who's moving in? 0:01:55.920 --> 0:01:59.560 So we're at what we call seventy eight Springs Road. 0:01:59.800 --> 0:02:02.800 This is the Fisher and Pickle Appliants site. This is 0:02:02.840 --> 0:02:05.080 a ten and a half hectare site. So you think 0:02:05.080 --> 0:02:08.680 of rugby fields as an analogy ten rugby fields. We 0:02:08.720 --> 0:02:11.519 brought the site fifteen years ago from Fish and Pikele 0:02:11.960 --> 0:02:14.120 and what they call a sale and lease back transaction, 0:02:14.280 --> 0:02:15.880 so we brought the whole site off it and they 0:02:15.960 --> 0:02:18.280 rode a fifteen year lease to stay on the site 0:02:18.320 --> 0:02:21.840 and rent the buildings that we had. Originally they used 0:02:21.880 --> 0:02:25.600 to manufacture their appliance as I think refrigerators, washing machines, 0:02:25.680 --> 0:02:30.280 drives on the site. About thirteen years ago higher the 0:02:31.040 --> 0:02:34.240 Chinese manufacturer brought Fish from Pikele and they went to 0:02:34.280 --> 0:02:37.160 a slightly different model where they manufacture offshore and they 0:02:37.200 --> 0:02:40.720 were using the buildings here to distribute, so'd be built 0:02:40.760 --> 0:02:43.840 in Mexico or Thailand, arrive here in Auckland, be stored 0:02:43.840 --> 0:02:46.440 here and then shot out to the Nollemans of the world. 0:02:47.880 --> 0:02:52.360 About four years ago we started talking to the Fisher 0:02:52.400 --> 0:02:55.680 and Pikele appliants as exec team and with that change 0:02:55.680 --> 0:02:57.600 in business model they had they needed what we call 0:02:57.639 --> 0:03:01.160 a distribution center a DC. Yeah, we got into building this. 0:03:01.400 --> 0:03:03.280 So this is a state of the art, twenty five 0:03:03.320 --> 0:03:07.720 thousand square meter DC center. It's sustainably it's five Green 0:03:07.760 --> 0:03:10.320 star rated, so it's got all the boughs and whistles 0:03:10.360 --> 0:03:15.480 in terms of solar rainwater harvesting electric charges. You can 0:03:15.520 --> 0:03:17.720 see out there, and they've moved in and committed to 0:03:17.720 --> 0:03:21.280 another fifteen years. So for us, it's an ongoing thirty 0:03:21.320 --> 0:03:22.800 year commitment, which is pretty pleasing. 0:03:23.680 --> 0:03:25.800 That thirty year commitment. Is that a typical sort of 0:03:25.800 --> 0:03:28.639 investment horizon for p FI or is that a bit longer? 0:03:29.280 --> 0:03:33.120 So our portfolio, we've got ninety properties, predominantly here in Auckland. 0:03:33.360 --> 0:03:36.120 It's fair led it just over two billion dollars. Our 0:03:36.200 --> 0:03:39.680 average weighted least term is five and a half years. 0:03:40.200 --> 0:03:43.280 When we build new like this, it's a big commitment 0:03:43.320 --> 0:03:45.280 both for ours olves but also for the tenant, so 0:03:45.320 --> 0:03:47.480 you tend to get a longer least term up front. 0:03:49.160 --> 0:03:52.000 Other recent developments have been twelve and fifteen years, so 0:03:52.080 --> 0:03:54.160 it's pretty common to get ten years plus on that 0:03:54.200 --> 0:03:58.600 first initial commitment. So yeah, typical for the new builds. 0:03:58.560 --> 0:04:00.920 But you are potentially now looking at stuff that you're 0:04:00.960 --> 0:04:04.680 not going to actually get to the end of its 0:04:04.720 --> 0:04:06.400 life cycle or get to the end of its tendency 0:04:07.120 --> 0:04:09.360 until the middle of the next decade kind of thing. 0:04:09.520 --> 0:04:11.760 Yeah. Yeah, Well, we'd like to think this building's fit 0:04:11.800 --> 0:04:14.880 for purpose for the next fifty to sixty years. You 0:04:14.920 --> 0:04:18.000 don't want to be knocking buildings down in rebuilding them 0:04:18.000 --> 0:04:21.200 if they're perfectly good. So the design features that have 0:04:21.279 --> 0:04:23.720 gone in here is with the intention that needs to 0:04:23.760 --> 0:04:26.840 be fifty years plus. So yeah, we're a long term company. 0:04:26.839 --> 0:04:29.040 We've been around for thirty years. We celebrated thirty years, 0:04:29.120 --> 0:04:31.920 been listed last year on the NXX. So's so many 0:04:31.960 --> 0:04:34.560 companies that can say that, and so every sort of 0:04:34.560 --> 0:04:37.719 decision that we make has that long term sort of 0:04:37.920 --> 0:04:40.200 view to it, which is again part of the attraction 0:04:40.240 --> 0:04:40.839 of investing in. 0:04:40.880 --> 0:04:44.520 Property and pair five. So you're not an riit. 0:04:44.360 --> 0:04:47.679 No, but it's a very common when they talk about rets, 0:04:47.960 --> 0:04:51.120 they're talking about listed property vehicles. So some people have 0:04:51.120 --> 0:04:54.200 different structures. Ours is a simple limited lability company. 0:04:54.920 --> 0:04:58.880 How does that fundamentally differ from someone taking a direct investment, 0:04:58.920 --> 0:05:02.520 becoming a landlord themsel investing in a think scale. 0:05:02.680 --> 0:05:05.760 Really, you know a lot of your investors it shares 0:05:05.839 --> 0:05:08.920 is will have a few hundred dollars to invest. The 0:05:09.040 --> 0:05:12.680 valuation on this building on completion is over one hundred 0:05:12.720 --> 0:05:16.480 million dollars. So as a landlord, very few people have 0:05:16.520 --> 0:05:20.279 access to that type of product. And even what we 0:05:20.320 --> 0:05:23.480 would consider a smaller asset. Our average asset size is 0:05:23.480 --> 0:05:26.440 about twenty million dollars. So again, the type of investor 0:05:26.480 --> 0:05:29.479 that can take that on personally is a very small 0:05:29.520 --> 0:05:32.800 part of the population. So by having a limited liability 0:05:32.800 --> 0:05:36.200 company with a portfolio of assets, it allows the investor 0:05:36.200 --> 0:05:38.720 to own a share in a wide variety of buildings 0:05:38.760 --> 0:05:42.039 and tenants. We've got onels one hundred and thirty different tenants. 0:05:43.480 --> 0:05:46.040 A lot of them are government tenants or listed companies 0:05:46.160 --> 0:05:49.800 or international companies that sit within the portfolio. So it's 0:05:49.800 --> 0:05:53.559 a very low risk secure investment, is how we would 0:05:53.600 --> 0:05:55.279 describe ourselves. 0:05:54.760 --> 0:05:58.039 Because you're diversified across not just one site, but across 0:05:58.120 --> 0:06:02.200 different different tenants, different cities. We're around the company. 0:06:01.920 --> 0:06:04.360 Yep, so eighty five percent here in Auckland, but we've 0:06:04.360 --> 0:06:09.600 got property in Towering Napier, christ Church, Willington, New Plymouth, 0:06:09.640 --> 0:06:11.440 so yeah, it is the firstified by that, but eighty 0:06:11.480 --> 0:06:14.719 five percent based here in Auckland, which is the biggest, deepest, 0:06:14.720 --> 0:06:17.640 strongest market now of you, so you're pretty comfortable with that. 0:06:17.839 --> 0:06:19.680 But I'll get onto your take on that shortly. 0:06:19.720 --> 0:06:21.560 But in terms of the investment, I suppose a little 0:06:21.560 --> 0:06:25.000 more liquid than literally owning a share or outright in 0:06:25.080 --> 0:06:27.000 a property too, yeah, exactly. 0:06:27.040 --> 0:06:29.440 And by being listed you can trade your share on 0:06:29.440 --> 0:06:32.000 a daily basis, you can price it on a daily basis. 0:06:32.080 --> 0:06:34.520 So a lot of the property investments you see out there. 0:06:34.680 --> 0:06:37.360 If you want to buy a building by yourself and 0:06:37.400 --> 0:06:39.320 if you need to realize money, it takes a while 0:06:39.360 --> 0:06:42.280 to advertise the building, sell the building, settle the building. 0:06:43.120 --> 0:06:46.080 You've got property syndication which is a next step down 0:06:46.080 --> 0:06:48.440 where you buy one building with a group of investors, 0:06:48.480 --> 0:06:50.400 but same thing. If you want to get your money 0:06:50.400 --> 0:06:52.080 out quickly, it can take a little bit of time. 0:06:52.080 --> 0:06:55.200 Whereas you know, the New Zealand Stock Shange trades five 0:06:55.279 --> 0:06:55.800 days a week. 0:06:55.880 --> 0:06:59.039 You've got some experience in that unlisted property sector as well, 0:06:59.040 --> 0:07:03.560 haven't you. What are the advantages I suppose compared to 0:07:03.600 --> 0:07:06.120 the costs and compliance of floating. 0:07:06.360 --> 0:07:08.920 That's probably touching a little bit on the history of PFI. 0:07:09.120 --> 0:07:12.480 So PFI was originally set up in the early nineties 0:07:13.400 --> 0:07:17.280 by the original guy, Malcolm McDougall, who sold the management 0:07:17.440 --> 0:07:19.560 business that was running the portfolio at the time to 0:07:19.640 --> 0:07:25.240 amp Capital in Australia in nineteen ninety seven, I think 0:07:25.240 --> 0:07:28.800 it was and Malcolm then moved to Auckland he was 0:07:28.800 --> 0:07:31.160 based in Willington and set up another company called Direct 0:07:31.200 --> 0:07:34.640 Property Fund and that was an unlisted fund where they 0:07:34.640 --> 0:07:38.600 had a series of investors who built up a portfolio 0:07:38.600 --> 0:07:40.520 of assets and that's where I got involved. So I 0:07:40.560 --> 0:07:43.520 turned up in two thousand and three worked for Malcolm 0:07:43.600 --> 0:07:46.280 another guy, Greg Reedy, and we grew that company to 0:07:46.320 --> 0:07:50.200 about four hundred million dollars. And then in late two 0:07:50.240 --> 0:07:53.520 thousand and must have been twenty ten, Greg jumped on 0:07:53.520 --> 0:07:56.040 a plane over to Australia and convinced AMP Capital sew 0:07:56.120 --> 0:07:59.760 the management contract for PFI to our group of investors. 0:08:00.040 --> 0:08:02.480 For a couple of years we ran an unlisted fund, 0:08:02.640 --> 0:08:07.320 which has benefits in that there's not as much compliance, 0:08:07.360 --> 0:08:10.800 there's no listing regulations, et cetera. And we ran PFI 0:08:10.880 --> 0:08:12.720 as well, side by side, and then we merged the 0:08:12.760 --> 0:08:17.160 companies together in twenty and thirteen and that created this 0:08:17.280 --> 0:08:19.280 sort of an an entity of seven hundred and fifty 0:08:19.320 --> 0:08:23.480 million dollars which we've grown reasonably aggressively over the last 0:08:23.480 --> 0:08:26.240 decade through to where we are today two point one 0:08:26.280 --> 0:08:29.280 billion dollars. And it's pleasing to say we regularly get 0:08:29.760 --> 0:08:33.200 emails and people turning up to the AGM of investors 0:08:33.200 --> 0:08:35.400 and PFI have been there for the full thirty years. 0:08:35.480 --> 0:08:36.240 It's incredible. 0:08:36.360 --> 0:08:38.480 You sound like you understand them pretty well. And what 0:08:38.559 --> 0:08:41.240 it is that those PFI investors want sort a more 0:08:41.240 --> 0:08:43.439 conservative proposition than a growth rough a balanced kind of 0:08:43.480 --> 0:08:47.079 a thing. Is its chasing the income from the dividend 0:08:47.080 --> 0:08:48.600 stream rather than the capital growth. 0:08:48.679 --> 0:08:51.560 Yeah, we call ourselves a dividend stock, so a dividend company, 0:08:51.640 --> 0:08:57.760 so people tend to invest into both unlisted properly enlisted property, 0:08:57.840 --> 0:09:01.319 So PFI for a regular dividend, So we pay a 0:09:01.400 --> 0:09:04.679 quarterly dividend and have done for thirty years. We've managed 0:09:04.720 --> 0:09:06.920 to grow that dividend over that period of time, so 0:09:07.400 --> 0:09:09.560 currently our dividends about four four and a half percent 0:09:09.559 --> 0:09:11.440 per andum. And then on top of that, we've had 0:09:11.520 --> 0:09:14.240 capital growth throughout the period as well. So first and 0:09:14.280 --> 0:09:17.960 foremost we say invest for the dividends and then secondly 0:09:17.960 --> 0:09:20.360 the capital growth is the is the icon on top. 0:09:20.440 --> 0:09:22.439 But if you look at over the thirty years, we've 0:09:22.440 --> 0:09:24.880 done total returns perum of around nine nine and a 0:09:24.920 --> 0:09:28.000 half percent, so it's a it's been pretty good ride 0:09:28.360 --> 0:09:29.760 the last three or four years has been a bit 0:09:29.800 --> 0:09:33.200 tougher as interest rates have gone the way they have grown, 0:09:34.880 --> 0:09:37.080 but you know, in terms of valuations, et cetera, that 0:09:37.120 --> 0:09:39.280 we've seen them stabilize in the last six to twelve 0:09:39.360 --> 0:09:42.920 months and hopefully in the near future will start to 0:09:42.960 --> 0:09:44.400 grow away. It's the plan. 0:09:44.640 --> 0:09:46.640 You're not the only players in this game, now do 0:09:46.760 --> 0:09:48.400 you How do you compare against the competition? 0:09:48.440 --> 0:09:50.480 How do you rate yourselves? Yeah, so there's probably I 0:09:50.480 --> 0:09:53.160 think there's about ten listed entities on the x X 0:09:54.080 --> 0:09:57.439 who we compare ourselves to. I guess one of the 0:09:57.480 --> 0:10:00.200 key strategic difference with PFI is we focus solely on 0:10:00.280 --> 0:10:04.160 industrial property. There's another competitor out there who do the 0:10:04.160 --> 0:10:08.640 same and do it very well. Industrial property, particularly in 0:10:08.679 --> 0:10:11.000 the last five to ten years, has been the number 0:10:11.040 --> 0:10:13.800 one performing asset class, and by asset class, the other 0:10:13.840 --> 0:10:17.559 eset classes are obviously there's residential, there's commercial so you 0:10:17.640 --> 0:10:22.679 think office towers, there's shopping centers, and then there's health assets, 0:10:22.760 --> 0:10:26.480 so they're the mainseic classes in New Zealand, and industrial property, 0:10:26.480 --> 0:10:29.160 both on a rental growth and on a capital growth 0:10:29.200 --> 0:10:31.320 point of view, in the last decade has been number 0:10:31.360 --> 0:10:34.600 one by a long way, so you've picked the right horse. 0:10:34.800 --> 0:10:36.760 So there's some themes there that have played into our 0:10:36.880 --> 0:10:40.040 particularly in and around the COVID area. So if you 0:10:40.040 --> 0:10:43.040 look at e commerce is a big one. So you know, 0:10:43.840 --> 0:10:48.000 people like retailers are moving away from having that store 0:10:48.040 --> 0:10:51.280 on Broadway and New Market to delivering direct from the warehouse. 0:10:51.559 --> 0:10:54.080 It has been massive demand growth for warehouses like the 0:10:54.080 --> 0:10:57.240 one we're sitting in here now, direct to consumer DC 0:10:58.280 --> 0:11:02.600 discretion centers. So that's played to our into our hands. 0:11:02.800 --> 0:11:04.960 Because at the moment, I would have thought most bricks 0:11:05.000 --> 0:11:08.200 and mortar investment into any other kind of space if 0:11:08.200 --> 0:11:10.480 it's office space, you see people being sort of begged 0:11:10.480 --> 0:11:12.720 to return to the office. Yeah, you must be looking 0:11:12.720 --> 0:11:15.800 at that going cracky, glad we're not too much or 0:11:15.840 --> 0:11:16.120 at all. 0:11:16.360 --> 0:11:19.360 Yeah, yeah, we're not in that at all, which we're 0:11:19.360 --> 0:11:21.800 happy about that. I think what you've seen in the 0:11:21.840 --> 0:11:24.199 office sector is you're seen with the work from home 0:11:24.320 --> 0:11:27.559 thematic that there's no doubt that that's my view, that 0:11:27.600 --> 0:11:31.360 won't change. But the prime stuff, the A grade officers 0:11:31.360 --> 0:11:34.720 are doing very very well because people have to attract 0:11:34.720 --> 0:11:36.680 their staff back into the office. But the B and 0:11:36.720 --> 0:11:40.319 C grade stuff that the city fringe stuff that's struggling. 0:11:40.640 --> 0:11:42.680 You know, the stats will tell you that. So again, 0:11:42.679 --> 0:11:45.880 work from home. That's a thematic that's played into It's 0:11:45.880 --> 0:11:48.080 pretty hard to run a warehouse from home. You need 0:11:48.120 --> 0:11:50.040 people in the office or in the warehouse. 0:11:50.120 --> 0:11:52.800 So the more online we are and the more we 0:11:52.840 --> 0:11:55.280 are moving away from traditional sort of retail and stuff, 0:11:55.600 --> 0:11:57.080 the better you'd say your visit. 0:11:57.280 --> 0:12:01.800 It's definitely a thematic that supports us. Your original question was, 0:12:01.880 --> 0:12:04.360 you know, how do we differentiate ourselves by being solely 0:12:04.400 --> 0:12:08.360 focused on industrial. That has played into our hands the 0:12:08.400 --> 0:12:10.800 team that we've built over the last decade. You know, 0:12:10.800 --> 0:12:13.440 we call ours sales industrial specialists, and that's all we do. 0:12:13.520 --> 0:12:16.160 So we don't do healthcare assets, we don't do residential. 0:12:16.160 --> 0:12:19.520 We're all focused and know this market particularly well. So yeah, 0:12:19.559 --> 0:12:21.720 that has been a strength of ours. 0:12:21.840 --> 0:12:23.920 Let's talk a bit about the market and some of 0:12:23.920 --> 0:12:26.160 the people that you're dealing with in it. I imagine 0:12:26.200 --> 0:12:27.520 with one hundred. 0:12:27.240 --> 0:12:29.480 And twenty odd yea thirty tenant YEA one. 0:12:29.480 --> 0:12:33.000 Hundred and thirty tenants, mostly industrial, you'd be getting a 0:12:33.040 --> 0:12:36.720 pretty good sounding on how our economy is working at 0:12:36.760 --> 0:12:38.920 the moment right now, where the pressures. 0:12:38.559 --> 0:12:41.719 Are, where the opportunities are yeah, right, yeah, We've got 0:12:41.720 --> 0:12:43.440 our sales a bit of a bell weather really by 0:12:43.960 --> 0:12:46.880 having that many tenants, and they're all in different industries. 0:12:46.960 --> 0:12:49.800 So we've got, you know, kitchen manufacturers next door. You 0:12:49.800 --> 0:12:54.240 know who manufactured kitchen. So when the residential markets struggling, 0:12:54.600 --> 0:12:56.480 these guys, we hear about it from those guys. When 0:12:56.520 --> 0:13:00.000 the residential market's doing really well, they're building wardrobes and 0:13:00.000 --> 0:13:02.480 baundry systems and kitchen so we know that's doing well. 0:13:03.520 --> 0:13:07.200 We've got logistics companies that move freight around New Zealand 0:13:07.200 --> 0:13:10.800 all over New Zealand, you know, from DHL to Move Logistics, 0:13:11.840 --> 0:13:14.560 main freight, all the big guys. So we're tapped into 0:13:14.559 --> 0:13:18.000 this network of people that, you know, give us what's 0:13:18.040 --> 0:13:22.880 happening at the cold face, give us the goste. I 0:13:22.880 --> 0:13:25.680 think everyone said about twelve months ago, survived to twenty 0:13:25.720 --> 0:13:28.520 twenty five. From what we can see, it's going to 0:13:28.520 --> 0:13:30.679 be the end of twenty twenty five. It's still pretty 0:13:30.720 --> 0:13:35.640 tough out there, but there's definitely some positivity. I think. 0:13:36.400 --> 0:13:38.240 I think there's a bit of hope from a political 0:13:38.280 --> 0:13:40.480 point of view that some of the rhetoric that you've 0:13:40.480 --> 0:13:42.080 been here in the last three to six months. Will 0:13:42.120 --> 0:13:44.520 start to see some action towards the middle of this year. 0:13:45.320 --> 0:13:48.040 Interst rates is a big driver of the property market. 0:13:48.280 --> 0:13:50.520 As they go up, property prices tend to go down. 0:13:52.360 --> 0:13:53.959 You know, everyone's watching what's going to happen in the 0:13:54.040 --> 0:13:56.360 end of February. Reserve Bank. Will there be a fifty 0:13:56.640 --> 0:14:00.520 point basis cut or more or less there? There's some 0:14:00.559 --> 0:14:04.920 thematics there, the labor force. If you went back three years, 0:14:05.200 --> 0:14:09.120 a regular comment was we can't get good staff. Towards 0:14:09.200 --> 0:14:10.680 the middle of last year was how do we hold 0:14:10.720 --> 0:14:13.319 on to our good staff, as in, you know, we're downsizing. 0:14:14.440 --> 0:14:17.280 So yeah, I think there's a bit more pain to 0:14:17.320 --> 0:14:19.880 go through in the next six to nine months. But 0:14:20.520 --> 0:14:22.400 looking at our tenant base, a lot of them are 0:14:22.640 --> 0:14:24.760 large businesses that have been around for a long time 0:14:24.800 --> 0:14:27.600 and do invest for the long term. I mean Fisher 0:14:27.600 --> 0:14:29.920 and Picle. You know, they've signed a fifteen year lease 0:14:30.000 --> 0:14:32.160 with us, so they're planning on being around for the 0:14:32.200 --> 0:14:34.720 long term, which is really good. Next door, we've got 0:14:34.720 --> 0:14:37.120 another development you can see the diggers working on it already, 0:14:37.120 --> 0:14:41.200 which is another company, my Tech, who have signed on 0:14:41.240 --> 0:14:43.200 for twelve years. So that building down there will be 0:14:43.200 --> 0:14:46.040 finished towards in the next year. So there are companies 0:14:46.040 --> 0:14:49.440 making long term decisions and looking through the cycle. So 0:14:49.600 --> 0:14:52.480 for us, it's a question of you know, in our view, 0:14:52.560 --> 0:14:55.480 quality attracts quality. If we can get the product right 0:14:55.520 --> 0:14:58.200 in the right areas, then we should still continue to 0:14:58.200 --> 0:15:02.200 attract good quality tenants, which will ensure good cash flow, 0:15:02.360 --> 0:15:04.480 which means we can carry on pain and growing divid 0:15:04.520 --> 0:15:07.040 into our to shareholders. Yeah. 0:15:07.040 --> 0:15:09.360 I think in your last results you were talking about 0:15:09.640 --> 0:15:12.880 p FI effectively. I think undercharging is that the right 0:15:12.920 --> 0:15:16.320 way to put it. That you under rented sixteen percent. 0:15:16.360 --> 0:15:20.160 That means there's extra value that you could be that 0:15:20.360 --> 0:15:23.680 relies on the ability of your tenants to be financially 0:15:23.760 --> 0:15:25.680 healthy enough and see the way forward to. 0:15:25.600 --> 0:15:28.240 Pay that so exactly right. That comes back to the 0:15:29.000 --> 0:15:32.120 quality of your tenant, I guess. So we call it 0:15:32.120 --> 0:15:34.520 an under renting. So when you sign a long term lease, 0:15:34.560 --> 0:15:38.200 it's not unusual to have what we call fixed rent reviews. 0:15:38.680 --> 0:15:41.320 So for instance, this the least we've done with fish 0:15:41.320 --> 0:15:44.520 from Pikele here. Every year the rent increases by a 0:15:44.520 --> 0:15:48.280 certain amount, and that's to try and stop neither the 0:15:48.360 --> 0:15:50.440 landlord or the tenant being in a position where you're 0:15:50.960 --> 0:15:53.680 out of market, where you know you're heavily under rented 0:15:53.760 --> 0:15:55.600 or heavily over rented, it's got to be fair for 0:15:55.640 --> 0:15:58.520 both parties. And what we found the last three years, 0:15:58.520 --> 0:16:01.920 particularly since COVID is in the industrial property market anyway, 0:16:01.960 --> 0:16:04.560 there's been massive rental growth. So we've seen rents go 0:16:04.720 --> 0:16:07.360 up ten to fifteen percent per annum. So if you 0:16:07.960 --> 0:16:09.880 haven't had a rent review for three years, you could 0:16:09.920 --> 0:16:13.160 be thirty to forty five percent under rented. And so 0:16:13.200 --> 0:16:16.280 you have this rent review mechanism within the lease which 0:16:16.400 --> 0:16:18.840 allows you to bring the rent back up to a market. 0:16:18.880 --> 0:16:21.040 And conversely, if they're over rented, it brings the rent 0:16:21.040 --> 0:16:22.960 back down, so the tenant benefits there. 0:16:23.920 --> 0:16:25.560 So sixteen percent achievable. 0:16:25.880 --> 0:16:28.560 So across our portfolio, that's what the values are saying. 0:16:29.080 --> 0:16:32.840 We're under rented. Again, it's when you get access to that, 0:16:32.880 --> 0:16:35.040 when's the time and of that rent coming through. But yeah, 0:16:35.040 --> 0:16:37.640 the last couple of years we've been achieving a lot 0:16:37.680 --> 0:16:40.600 more than that in certain cases, so we had catch 0:16:40.640 --> 0:16:44.360 up rent reviews effectively or new leases. So yeah, we're 0:16:44.440 --> 0:16:46.920 pretty confident. If you look through our tenant profile again, 0:16:47.000 --> 0:16:50.400 businesses like main freight, fishrimpipal plants as DHR. These are 0:16:50.400 --> 0:16:53.000 big companies. They know the trends or what's happening in 0:16:53.000 --> 0:16:56.120 the market. One way you could say it is it's 0:16:56.240 --> 0:16:58.480 under rented, but it could also you could turn around 0:16:58.480 --> 0:17:00.600 and say a tenant where you've benefited over the last 0:17:00.640 --> 0:17:02.960 three years from not paying the market rent. And as 0:17:03.000 --> 0:17:05.119 long as you're having these conversations early on in the 0:17:05.160 --> 0:17:08.200 piece and do it in a respectful manner, then yeah, 0:17:08.480 --> 0:17:11.480 it seems to be readily achievable, which is good. 0:17:12.840 --> 0:17:14.720 We're talking about interest rates before. Do you have a 0:17:14.760 --> 0:17:17.720 personal view given where things are going? Do you claim 0:17:17.720 --> 0:17:19.919 any greater knowledge from listening to the people that you 0:17:19.960 --> 0:17:20.280 talk to. 0:17:20.800 --> 0:17:24.040 I think if you went back six months when they 0:17:24.080 --> 0:17:26.399 started cutting the interest rates is a bit of a surprise, 0:17:26.440 --> 0:17:28.520 and now everyone's thinking they're going to go very, very low. 0:17:29.400 --> 0:17:31.840 I think what's happened the last two to three months. 0:17:32.119 --> 0:17:33.959 If you look what's happening off sure in America, etcetera, 0:17:34.000 --> 0:17:35.840 they might not go as low as people think they're 0:17:35.840 --> 0:17:37.399 going to go, and it might take a bit longer 0:17:37.880 --> 0:17:40.480 to get them down there. So there's still a little 0:17:40.480 --> 0:17:44.080 bit of inflation floating around. I know our headline inflation's 0:17:44.080 --> 0:17:46.520 at two point one, but rates insurance that non tradable 0:17:46.520 --> 0:17:51.200 inflation is still pretty strong. So yeah, for what it's worth, 0:17:52.080 --> 0:17:55.120 Adrian Or seems to march the beat of his own drum, 0:17:55.240 --> 0:17:58.880 rightly or wrongly. So yeah, I don't think it's a 0:17:58.920 --> 0:18:01.480 dead suit that it's going to fall away aggressively over 0:18:01.480 --> 0:18:02.720 the next twelve months. 0:18:02.560 --> 0:18:04.359 And no idea how long it'll stay like that. 0:18:04.720 --> 0:18:07.159 Oh idea. Yeah, And that's why if you look at 0:18:07.160 --> 0:18:10.960 the leases that we sign, they have these fixed growth 0:18:11.040 --> 0:18:14.560 built into them. We have these opportunities to review the 0:18:14.640 --> 0:18:19.679 leases to market and primarily that's not just for the landladle, 0:18:19.720 --> 0:18:22.160 it's for both parties, landlord and the tenant. You've got 0:18:22.160 --> 0:18:24.480 to try and keep those rents out or around market. 0:18:24.520 --> 0:18:26.359 It doesn't really benefit anyone in the short term. It 0:18:26.359 --> 0:18:28.240 sounds great are getting these big rent reviews, but it 0:18:28.280 --> 0:18:30.199 just means you haven't been at market for the two 0:18:30.280 --> 0:18:33.399 or three years earlier. And then if you're overcharging your 0:18:33.440 --> 0:18:36.760 tenant that's not a great scenario either. It just means 0:18:36.800 --> 0:18:39.639 at some point they'll be looking around. So yeah, it's 0:18:39.680 --> 0:18:40.920 got to be fair for both parties. 0:18:41.000 --> 0:18:43.879 Australia as a market or as a potential place to 0:18:44.080 --> 0:18:46.639 invest for property. Is that ever crossed your minds? 0:18:46.680 --> 0:18:48.520 How we've looked at it in the past, it's fair 0:18:48.560 --> 0:18:53.480 to say, and at times it's been attractive depending on 0:18:53.680 --> 0:18:57.360 exchange rates. There's a tax regime that at times looks 0:18:57.400 --> 0:19:01.320 quite attractive. But what we've found under is a little 0:19:01.320 --> 0:19:02.960 bit of stick to your knitting. There's some big boys 0:19:02.960 --> 0:19:06.159 in Australia that live there, breathe there, have operated there 0:19:06.160 --> 0:19:09.400 for a long time, you know, particularly in Auckland. It's 0:19:09.440 --> 0:19:11.960 a pretty big market here and we think there's plenty 0:19:12.000 --> 0:19:15.080 of opportunities here. So you've really got to we want 0:19:15.119 --> 0:19:16.840 to knock it out of the park here in Auckland 0:19:16.840 --> 0:19:20.240 and New Zealand first and foremost. But never say never, 0:19:20.400 --> 0:19:23.240 you know, as part of a portfolio acquisition or you know, 0:19:23.640 --> 0:19:26.479 a partnership with a company that goes offshore, we wouldn't 0:19:26.520 --> 0:19:26.840 say no. 0:19:27.080 --> 0:19:30.440 So let's bring it back right here where we are now. Then, 0:19:30.480 --> 0:19:32.879 So this is a green star building, you're saying, what 0:19:33.119 --> 0:19:33.680 does that mean? 0:19:34.080 --> 0:19:38.680 So the New Zealand Green Building Council has a rating system. 0:19:38.880 --> 0:19:41.560 So yeah, we've designed the building. So right at the 0:19:41.600 --> 0:19:44.320 start you make the decision with all your consultants, your architects, 0:19:44.320 --> 0:19:46.160 the engineers that you want it to be rated by 0:19:46.160 --> 0:19:48.840