U.S. Markets open in 4 hrs 38 mins

Edited Transcript of ARV.NZ earnings conference call or presentation 18-Nov-19 9:30pm GMT

Half Year 2020 Arvida Group Ltd Earnings Call

AUCKLAND Dec 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Arvida Group Ltd earnings conference call or presentation Monday, November 18, 2019 at 9:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jeremy Nicoll

Arvida Group Limited - CFO

* William Adam McDonald

Arvida Group Limited - CEO

================================================================================

Conference Call Participants

================================================================================

* Andrew Steele

Jarden Limited, Research Division - VP of Equity Research

* Jeremy Andrew Simpson

Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of New Zealand Equities

* Shane Solly

Harbour Asset Management Limited - Director & Portfolio Manager

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by and welcome to the Arvida Group interim results conference call. (Operator Instructions) Please be advised that today's conference is being recorded.

I'll turn the conference over to your first speaker today, Mr. Bill McDonald, Chief Executive Officer of Arvida Group. Thank you. Please go ahead.

--------------------------------------------------------------------------------

William Adam McDonald, Arvida Group Limited - CEO [2]

--------------------------------------------------------------------------------

Good morning, everyone. Thanks for joining on the call this morning for our 6 months results for the first half of FY 2020. It's been a very busy 6 months for us, as you would imagine, with the major transaction which we undertook during the period. It was a very strong financial result for us over the period with a 31% lift in underlying profit of $23.4 million. We're very pleased with that, and that's our key measure of course. We -- that was made possible by a high care occupancy rate, continuing to sit at around that 95% mark, that underpins those recurring cash flows.

We had 148 resales and 44 new sales during the period, which was -- on total sales, were up about 16% on the prior corresponding period. So a very strong result there. 53% lift in total gains over those sales of $17.9 million, so that was reflected in a higher volume and pricing and margin, which I'm sure Jeremy will touch on later in the discussion.

Importantly, we delivered 94 new units in the first half. That was a terrific result, and we're on track to deliver another 106 in the second half of the year, which is in line with our guidance for 200 for the full year, and we're still on track to deliver 250 plus in the following year. So very pleased with the way in which our development and our construction teams are performing.

As I said, we completed the acquisition of the 3 Sanderson villages during the period, Bethlehem Shores and Bethlehem Country Club in Tauranga and Queenstown Country Club in Queenstown. Three great assets, which we are very pleased to own and are very happy with the way in which our teams at the villages and in the construction side of the business have integrated in. And also very pleased to welcome the residents onboard into the Arvida Group, and very pleased with the interaction that we've had there and the way in which our personnel integrating into our greater business.

It was a little varied from our normal acquisition transaction in that we also acquired a couple of construction teams, both in Tauranga and Queenstown. That is emerging as a core part of our strategy going forward, having that capability to develop and construct in our own right, and we're very pleased with the way in which it's gone.

Also worth noting that the $152 million cap raised, which assisted in the acquisition went particularly well with very strong support from existing shareholders and the investment community. So very pleased with the way the whole transaction evolved. And of course, we saw some strong support post the transaction, which was very pleasing.

We conducted our second staff engagement survey during the period, which identified that 96% of our staff give their best efforts every day, which I think across the survey, we saw some broad improvement in our engagement index, which is also very pleasing to see. And we also gained another 4-year certification, bringing us to 18 of our 25 care facilities now having attained a 4 years of a gold standard certification there. I think that's a real indication of how well our teams are performing and how well our Attitude of Living Well care model is being not only accepted by our residents and teams, but how well the audit teams from the Ministry of Health are viewing our processes and care model.

If we flip the page in the pack to our -- to the graph there on Page 3, I would think the key point there is our underlying profit, which was up 31%, as I mentioned, on the prior corresponding period. And the other key takeout for me there is the total assets, a bit over $1.8 billion now, which is a 53% increase on the prior corresponding period and reflects not only the uplift in the valuations but also the sizable acquisition that we undertook.

If you move to Page 5, our stated strategy remains the same with good, strong progress across all areas here. If you look at -- initially with our Living Well strategy, we're still very focused on our Attitude of Living Well care model as per the stats, which I just gave in relation to our 4-year certifications and occupancy. We think it's really working well and it really underpins the core of our business.

Building Well is starting to change, of course, as we bring on our construction teams. Very pleased with the way in which that's going both in Tauranga and in Queenstown.

Buying Well of course that still remains a valid strategy to us, and it was great to see the support that we received from the investment community for the Sanderson transaction recently. We remain confident there are other opportunities available to us, although at this point in time, we're not looking at anything specifically.

And Engaging Well, our fourth plank, which we added a couple of years ago, is starting to gain some traction, and we look forward to talking more about that in the future. But in Christchurch at Park Lane, a new community center is starting to come out of the ground. I think we're underway with earthworks now and looking forward to being able to discuss that more in the future. And of course, our concept, which we have communicated to the community in Richmond for our Waimea Plains development has gone particularly well. We've now completed 38 units down there with very strong sales, I think around the 20 mark. We just opened it last week, and really pleased with the way things are going and how our model which focuses on integration with the greater community has been accepted by retirees in Richmond was great to see.

We've probably covered most of the operational highlights there on Page 6, but it's worth pointing out that we've had a very good incident-free health and safety progress across the period, with only some minor incidents that we have addressed. A recent audit across our construction sites has also confirmed that we're in a very good space in relation to health and safety, which is a very important aspect for us as we move into that construction space more fully.

If you move over the next couple of slides, you'll see some pictures there of Bethlehem Shores, Bethlehem Country Club and Queenstown Country Club. As you can see there the genuinely quality assets. The Samson Group is renowned in New Zealand to produce those top-end assets, and we're very pleased to be able to bring them into the portfolio and maintain that level of quality going forward.

If you go across the page to Slide 9, we have a table there of our portfolio. I think importantly, it highlights that we are still care-focused with around 60% of our portfolio still needs-based, which is important to us from a -- both the cash flow perspective and ensuring that we are more resilient to those movements in the property market.

And our total portfolio now sits at a bit over 4,000 units across 32 villages, plus 1 greenfield site up in Kerikeri, which is a -- we're very pleased that getting close to our milestones 5 year since IPO, where we've been able to grow at such a rapid rate and can reflect the fact that we now have 32 villages across the country.

And then we move across into the development stage. Development in progress and planned is now really strong. We've got nearly 1,700 units in our development pipeline. That's a big move in the last 6 months, bringing in those 500 new units to be built in the recent acquisition.

As I said earlier, we are still targeting 200 units to be delivered over the period and 250 in the following 12-month period. So really strong growth there from us, and we're really pleased to see the quality of the product coming out and how it's being received by the market.

There's some slides there, firstly of the 12 new villas that we completed at Lauriston Park at Cambridge. They all sold prior to completion, which was terrific to see. Bethlehem Country Club, there's another 6 to be delivered here this year. And Bethlehem Shores, we have some considerable development in front of us there, plus a new care facility for both Bethlehem villages. And we're rolling on with our new Cherry Acre development site at Mary Doyle and Havelock North, which has performed particularly well since the acquisition.

Village at the Park in Wellington saw the delivery of 24 apartments, 21 of those were settled, and we're really pleased with the way in which that went, very strong support there from the local community. St. Albans in Christchurch, we're working well on the new apartment block there, as you can see in the photo, it looks pretty well complete. Of course, in Queenstown, we've got those fabulous units there with that picture and backdrop of the remarkable ranges. It's quite an extraordinary site. If you're down there, it's worth having it to look at.

And of course, Waimea Plains in the top right-hand corner, 38 villas and townhouses now completed, as I said. We were down there last week at the opening, and we're absolutely thrilled with the way in which it's been accepted by the local community down there. And for our first greenfield site, we couldn't be happier with the way in which the local community has embraced our concept of community integration, and we're looking forward to moving on with the Clubhouse early in the new year and then moving on to stage 2 of our villas. And of course, then looking at how the community integration piece is going to develop at the front there, which is probably the most exciting aspect for both us and for the residents that have bought in there.

So as I mentioned, our development pipeline now sits at close to 1,700 units. That has been through our ability to bolt-on those 2 new greenfield sites, one of which was Waimea Plains, which has developed so rapidly. And also our ability to bring in brownfield development, which really bolsters our ability to find those new development sites.

So that's it for me, and I'll hand over to Jeremy now to cover up on the financials.

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [3]

--------------------------------------------------------------------------------

Good morning, everybody. So on Page 16. Overall, profit for the half was $45 million after-tax. What we've seen in comparison to the prior corresponding period, the contribution from the new villages for 2 months, some of the key movements there, obviously, the deferred management fee was up 24% on the prior period, of that $1.4 million related to the new acquisitions and the balance relating to an increase in the number of units through the development pipeline.

We saw a very strong increase in the value of our retirement village assets over the 6 months, particularly from the new acquisitions, which contributed nearly half of the total increase. We also saw some increases in the operating expenditure, again, some down to the acquired villages, but we're also seeing higher nursing costs coming through. We've also had the inbuilt increases and the caregiver wages as well as seeing things on the property side of things like rates and insurance costs increasing.

From a head office cost perspective, we've been relatively stable and the total expense has gone through the P&L. We have seen, obviously, with the new accounting standard the rent for our support offices and one lease care facility comes out of the property line, but you'll also note the capitalized wages in relation to the development team has increased significantly as we have bolstered not only the development team, but also the construction team over the period.

In terms of new sales on Page 17, we saw 44 units sell at a development margin of 19%. Again, nearly half of those units were at the Village at the Park property and the balance is spread across the portfolio. We currently have about 3% of our total ORA stock available as new units, so that's about 70 units. We also have around about 60 units contracted, which are either ones that we've delivered or we're about to deliver in the following 6 months' time.

In terms of resales, on Page 18, we saw an increase to 148 resales over the period. Of those, only 3 related to the Sanderson villages. So there was a nice increase on the corresponding period from the existing portfolio, and we've also seen that resale margin increase from 22% to 24%. Probably the best number on that page is that those resales that we settled during the first 6 months were on average 3% above the unit pricing that was assumed by the independent valuers at 31 March 2019. So we are still seeing an increase in pricing, and we expect that to continue through the second half of the year and also be reflected in our year-end valuations.

On Page 19, total underlying profit for the year was up $23.4 million. And again, key contributor was increase in the number of sales, the pricing and the margin contributions. On a cents per share basis, we're $0.05 of earnings per share, up 16% on the same period last year. So with a material capital raising during the period, that's an excellent result. And in the waterfall chart, you can see the contribution from the new acquisitions of about $2.5 million and also a very strong result from the existing portfolio, which was up just over $3 million.

In terms of the balance sheet on Page 20. As Bill said, we've now current $1.8 billion worth of assets and obviously the main contributor of that was the new acquisitions during the period. Embedded value was up $108 million over the 6 months, of that $88 million related to the embedded value we bought through the Sanderson transaction and the remaining $20 million through our ongoing existing villages.

In terms of our capital structure on Page 21, our gearing is at 27% on a net debt over net debt plus equity basis and just under 31% for a bank covenant perspective. With the transaction, we did introduced a third tranche of bank debt facility of $125 million. So we now have expiries of 3 tranches, each of $125 million in June '21, June '22 and June '23.

In terms of the cash flow, so operating cash flow increased 17% on the prior periods. Obviously, there was a lot of activity in that investing activity space with the acquisition of the new villages and also through the financing activities with the capital raising itself. Over the period, we've seen about $57 million on our development work in progress, which makes up the main component of our capital expenditure.

Moving to the dividend. So the dividend for the second quarter is in line with the dividend declared for the first quarter, $0.015 per share, so we're up 12% on the same period last year dividend that we paid on the 11th of December, and that dividend is sustainable for the balance of the financial year.

I did talk briefly about a couple of the sector challenges. We've talked about nurse pay, again, there is a disparity between what nurses get paid in the public sector versus aged care sector. So we are working through that with the government agencies. We have seen some improvement in the immigration status for our key workers. And one of the other key challenges for us is just the size of the funding pie going forwards. It was the EY report and review on how that pie is cut up into further levels of care as we look forward to those being implemented in the near future. But the key thing for us is how do we get that pie of funding increased.

The construction sector is still tight and there is still pressure there with construction pricing and timings, but we do have a very strong development pipeline coming through and the growth that we're seeing, 200 units this year, 250 next year, and our ability to now, with an expanded development and construction teams, to deliver those is looking very good. So we look forward to being able to deliver a higher number of units going forward in delivering more growth.

We have seen house markets sort of stabilize over the past period and with interest rates expected to be lower for longer. Again, we can see some good price growth on the horizon. We still believe that there are other opportunities for us in leveraging our IP through what we do in the villages and the care facilities to deliver services into the wider community. So that will be a key thing for us to be looking at going forwards.

So that brings the close to the presentation. I'll now pass back to the operator, and he'll open up for Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question today comes from the line of Andrew Steele from Jarden.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [2]

--------------------------------------------------------------------------------

First one for me is just on aged care profitability. I mean you've highlighted the pressures that you're facing and the industry more broadly on this part of the business. And just looking at your EBITDA year-on-year, excluding gains and fair value movements, it looks like this has gone down a touch. Can you provide a bit of color as to what you're seeing I guess at the EBITDA per bed level versus the pcp? And a sense that the underlying cost inflation and your expectation for that in aged care for the second half?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [3]

--------------------------------------------------------------------------------

Okay. So there are a couple of points there. During the period, we did close the Wendover facility in Christchurch that had 40 to 50 rest home beds. That property had been severely damaged through the earthquake, and we reached a decision point where the facility needed to be closed. So we have seen a reduction in rest home fees as a result. We're also in the process of redeveloping our Aria Bay care facility, so we've seen a reduction in rest home beds at that facility, too. So we are down slightly on the number of beds, which has had an impact on the revenue line.

In terms of costs, as of 1 July, there was the inbuilt increases in aged care wages, also the rise in the minimum wage. To a large degree, those increases in costs were offset by the increase in funding from the DHB. What we have seen that's probably not funded is the high cost that we are required to pay to registered nurses. As I mentioned before, that disparity between what they can achieve in the public sector environment versus the aged care environment, does have an impact. So we have seen those nurses wages go up. Currently, we employ about 300 nurses throughout the country.

And then again, we're seeing things like insurance premiums increase, rents are going up. So there are a number of headwinds for the sector. On the positive side, we've maintained a strong occupancy of 95%, and we've seen a slight increase in premium charging over the prior corresponding period as well. So there is definitely a margin squeeze in the aged care sector. And so our key action in there is making sure that we're working with the NZACA in terms of the funding review. The stratification of the different care levels will certainly be of assistance to us. There is a big gap between some of the rest home level care and the fees that they can earn versus the hospital level care. So if we can get some more levels and progress people through, that will definitely be a benefit to us. So we do expect that the overall costs of running care will continue to increase. But the key thing for us is just making sure that we do get funding to support it from the government sources. Obviously, going forward, we are building care suite facilities, when we're building new care, first one off the ground will be Copper Crest in Tauranga, followed shortly by Aria Bay in Auckland. Then we've got other projects to complete in Tauranga, Cambridge and Queenstown. So we will be doing some care suite facilities going forward on our new builds. Generally, those will be in the areas where you can achieve good levels of entry payments. Does that answer your question, Andrew?

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [4]

--------------------------------------------------------------------------------

Yes, that's very comprehensive. And just one point of clarification on that. Would you be able to call out the EBITDA impact from the decommissioning, so we get a sense of sort of the underlying change year-on-year?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [5]

--------------------------------------------------------------------------------

Yes. So it's about 60 care beds, just over 60 rest home beds. So the earnings on that would be 60x $50,000.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [6]

--------------------------------------------------------------------------------

Sorry, do you say $15,000?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [7]

--------------------------------------------------------------------------------

$50,000 of revenue. And the earnings -- total earnings on that might be between 15% to 20% of the revenue.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [8]

--------------------------------------------------------------------------------

That's great. You've highlighted in your outlook statement, the stabilization in the housing sector, and I think you made a comment as to the improving price momentum. I was wondering if you could highlight what you're seeing in terms of the -- any sort of change in underlying sales momentum whether that is sort of grassroots level interest in your new sales development and days to settlement and days to sale metrics if that's possible?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [9]

--------------------------------------------------------------------------------

We're seeing really good interest. We do have a more regional portfolio, which I think has been beneficial for us in the last couple of years. Auckland remains relatively soft, but places like Havelock North, Mary Doyle, you're seeing continued strong interest in both our new stock that we're delivering, plus also the resale stock. There's probably about a large number of ORA units on it and really, really strong demand there.

Places like Wellington with Village at the Park, we opened those 24 apartments in mid-August and the last unit settled on the 31st of October. So 2.5 months to sell and settle that. The Park block was pretty outstanding. Other sort of anecdotal evidence I guess we're seeing at places like Waimea Plains, we've got really, really strong interests in that new development. So Auckland is still soft, Christchurch, new stock a bit soft, but everywhere else is going very well.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [10]

--------------------------------------------------------------------------------

And then I guess given a slightly greater weighting of development deliveries in the second half, what's sort of skew like within the second half for those deliveries, just to try and get a sense for expectations around...

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [11]

--------------------------------------------------------------------------------

Those numbers. Yes. So the biggest contributor to the second half pipeline is the new building at Park Lane, which has got 49 apartments. That will be really for occupation towards the end of March. So the biggest contributor to that 106 will be right at the end of the period. The balance of what you're seeing there -- sorry, the next biggest one at St. Albans, that would be ready around Christmas time. Then following that, the biggest is Glenbrae, so that would be really in the next 2 months. And on the balance, they're just sort of spread evenly over the 6 months period. So there will be a little bit of a skew towards delivery towards the end of the financial year with that Park Lane being the biggest.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [12]

--------------------------------------------------------------------------------

And I guess based on that skew, your expectation on that combined with current 1,000 queries would be that most of those 2 key larger projects, which in the second half fall into the FY '21 year?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [13]

--------------------------------------------------------------------------------

It's the sales. That's right.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [14]

--------------------------------------------------------------------------------

Yes, that's great. And just given the amount of development that you have going on at the moment, I was hoping that you'd be able to provide sort of some steer on your expectation for CapEx on the full year basis and the net debt at full year as well if that's possible.

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [15]

--------------------------------------------------------------------------------

The CapEx will just follow on the same trajectory as the first half of the year. So roughly double it is a good steer on that. What was the second part of the question?

--------------------------------------------------------------------------------

William Adam McDonald, Arvida Group Limited - CEO [16]

--------------------------------------------------------------------------------

Net debt.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [17]

--------------------------------------------------------------------------------

Yes. Net debt.

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [18]

--------------------------------------------------------------------------------

Yes. So we've got some good sales contracted and backed up. So you will see net debt increase slightly. It would probably be a touch over $300 million by the end of the financial year.

--------------------------------------------------------------------------------

Andrew Steele, Jarden Limited, Research Division - VP of Equity Research [19]

--------------------------------------------------------------------------------

That's great. And then just one final one for me. You've highlighted the tightness in the construction sector and the impact that's having on margins and time frames. What are you seeing as you're sort of engaging with your construction partners in your projects in terms of construction cost inflation? And what they're seeing in terms of availability in sub-trades?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [20]

--------------------------------------------------------------------------------

Availability is okay. So all of our work that we've got planned, we have got crews in place for. We are looking to expand our in-house construction teams, particularly in Queenstown and Tauranga. We will look at how we expand the construction -- direct construction across other projects in the near future as well. We have recently hired a new national head of construction with a vast amount of experience that will be assisting us with the management of those direct construction teams.

In terms of price inflation, we still are seeing some price inflation, particularly in the materials component, but there is going to be a little bit more competition for work out there so -- as some of that does get offset through the competition phase.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Your next question comes from the line of Jeremy Simpson from Forsyth Barr.

--------------------------------------------------------------------------------

Jeremy Andrew Simpson, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of New Zealand Equities [22]

--------------------------------------------------------------------------------

Good result. The -- just some minor things from me. The uncontracted new stock of about 70, I assume the bulk of that sort of Waimea Plains, and it sounds like they have reasonable presales or contracted -- contraction -- contracts in place. I'm just wondering how you're -- are you feeling relaxed about that sort of -- that volume of new sales?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [23]

--------------------------------------------------------------------------------

Yes. So you're right. Probably the bulk of that Waimea Plains of the 38 in the first stage, the total of the sold and settled and contracted is about 24. So we're feeling pretty comfortable there. We've got some new stock at Rhodes, which we just started marketing, so that will be a big focus for us. I mean generally, it's just -- this involves throughout the rest of the development units that we've delivered. So nothing of major concern now.

--------------------------------------------------------------------------------

Jeremy Andrew Simpson, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of New Zealand Equities [24]

--------------------------------------------------------------------------------

And what's the timing of the community facilities at Waimea Plains.

--------------------------------------------------------------------------------

William Adam McDonald, Arvida Group Limited - CEO [25]

--------------------------------------------------------------------------------

I guess the first part for us, Jeremy, is the village center there. So we're going to kick that off in the first half of next calendar year. So in the new year, the residents can look forward to seeing that coming out of the ground. As far as the facilities at the entrance to Waimea Plains go, we're probably a couple of years away from getting that underway. I think we need to get our scale of residents in the village before we embark on that. So we've got 38 units completed now. So second stage will give us well over 60 or 70 units, and then we'll probably get underway with our first part there, which will comprise some retail and food and beverage offerings to all, both our residents and the community. And then after that, we'll get on with the more community health and wellness-focused piece, which will also be at the entranceway to Waimea. So pretty exciting plans there at Waimea, but we're probably not looking at seeing those coming out of the ground for a year or 2 yet.

--------------------------------------------------------------------------------

Jeremy Andrew Simpson, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of New Zealand Equities [26]

--------------------------------------------------------------------------------

Great. And it sounds like you're getting pretty advanced in terms of your upcoming approvals at Kerikeri and what's the goal here going forward in terms of greenfield sites. I know you've got a massive portfolio of brownfield, but you're still talking to maybe one greenfield site a year type sort of expansion, is that?

--------------------------------------------------------------------------------

William Adam McDonald, Arvida Group Limited - CEO [27]

--------------------------------------------------------------------------------

Yes. We're -- it's a little slow for us at Kerikeri, but we're just on the cusp of getting our consent through now. We believe that's been a bit of a journey, but it's going to be a great village up there and certainly an excellent location where we're at. So pleased with those first 2 greenfield sites being Waimea initially and Kerikeri. And as far as bolting on new greenfield sites to be able to continue with our expected development pipeline, we're looking at picking up at least one, probably 2 greenfield sites a year. So we're looking -- there's a bit more land coming to the market over the last few months, which is pleasing to see, and we're certainly keeping a look at and looking at a few properties here and there at the moment. But we are keen to try and increase our footprint in the Auckland area. So that's a bit of a focus for us.

--------------------------------------------------------------------------------

Jeremy Andrew Simpson, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of New Zealand Equities [28]

--------------------------------------------------------------------------------

Great. And just lastly, the build rate target of 250 plus for FY '21, that's the number we should be thinking about as kind of a sustainable medium-term number?

--------------------------------------------------------------------------------

William Adam McDonald, Arvida Group Limited - CEO [29]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Your next question comes from the line of Shane Solly from Harbour Asset Management.

--------------------------------------------------------------------------------

Shane Solly, Harbour Asset Management Limited - Director & Portfolio Manager [31]

--------------------------------------------------------------------------------

A quick question. You called out the 1,700 lots or 1,700 development sites that you've got in the portfolio at the moment. Can you talk about over what time period you would expect to actually develop those? Or what's the conditions behind determining that development pipe?

--------------------------------------------------------------------------------

Jeremy Nicoll, Arvida Group Limited - CFO [32]

--------------------------------------------------------------------------------

We expect that, that will be within the next 5 to 7 years. Obviously, there's various stages that we need to go through internally to get ready to push the button on those. So hopefully, we'd get a lot done within the next 7 years. The conditions have to be continual favorable demand for the products. We need to be able to make it stick from a numbers perspective on the development costs and the sales revenue and just working through those IRR hurdles with the Board before we start pushing buttons.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

Ladies and gentlemen, as there are no further questions, this will conclude today's conference call. Thank you for participating. You may now disconnect.