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Edited Transcript of AVN.AX earnings conference call or presentation 21-Aug-19 12:30am GMT

Full Year 2019 Aventus Retail Property Fund Earnings Call

SYDNEY Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Aventus Retail Property Fund earnings conference call or presentation Wednesday, August 21, 2019 at 12:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Darren Holland

Aventus Group - CEO & Executive Director

* Lawrence Wong

Aventus Group - CFO & Company Secretary

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Conference Call Participants

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* Darren Leung

Macquarie Research - Analyst

* Edward Day

Moelis Australia Securities Pty Ltd, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Aventus Group June 2019 Full Year Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mr. Darren Holland, Chief Executive Officer.

Thank you. Please go ahead.

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Darren Holland, Aventus Group - CEO & Executive Director [2]

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Thank you very much, and good morning, ladies and gentlemen, and welcome to the Aventus June '19 Full Year Results Presentation. I'm Darren Holland, CEO of Aventus; and with me this morning is Lawrence Wong, our CFO.

As some of you may know, I've worked in the large-format retail sector for my entire career of more than 25 years. The largest part of that time has been at Aventus, which Brett Blundy and I proudly founded 15 years ago. This October marks the fourth anniversary of Aventus' ASX listing, and I would like to turn now to Slide 3 of our investor presentation to share our performance, since the ASX listing.

This slide encapsulates everything that I want to say about the last 4 years. We have achieved impressive growth in this business, particularly for our investors; however, what I'm most proud of and what we've been developing is a winning culture based on continuous improvement, humility, ownership, teamwork and a driving sense of urgency.

My talented team love large-format retail, and many have been involved with Aventus or in large-format for long periods of their career and we have deep expertise in leasing, development, planning, transactions, marketing, [center] management operations or finance.

We have Australia's biggest dedicated large-format management platform comprising of 70 property professionals with one focus, and that is delivering the best large-format retail in the market for our retailers, our shoppers and importantly, to provide strong returns for our investors.

We've further strengthened our team this year with the appointment of Jason James, our Head of Leasing, who joins us as a 20-year veteran from Westfield and also Michael Tye, our Head of Development, who comes with deep retail experience from ALDI.

Our team have brought together an irreplaceable and high-quality portfolio of 20 large-format retail centers, valued at approximately $2 billion. We have consistently grown earnings and distributions and that's been driven by achieving strong growth in net operating income from the underlying portfolio.

Firstly, in the top right of Slide 3, I want to draw your attention to the portfolio's like-for-like net operating income growth, which for FY '19 is a record 3.5%. We have repeatedly driven organic growth from the portfolio, achievable through our expertise and track record, and because of the affordability and the sustainability of our rents, and the underlying trading position and health of our tenants, even though sales growth in some categories like Furniture and Bedding, has moderated, given the decline in housing sales.

This is the first time we've included all 20 centers in the portfolio in this metric. We're reflecting the poor performance of the entire portfolio.

Relative to our listed peers, this net operating income growth is extremely strong results. It comes from having deep retailer relationships from paying close attention to all aspects of leasing, high occupancy, positive spreads, low incentives, optimizing tenancy mix, achieving fixed annual increases on leases as well as cost control and synergies at the asset at center management level.

We believe net operating income growth and our occupancy rates are the 2 most telling measures of what is really happening in our portfolio.

Secondly, as a result of this portfolio performance, we've grown distributions per security by more than 5% per year, on average, since listing. What does this measure mean? Aventus offers a sector-leading distribution yield with quarterly distributions and a tax-deferred component of more than 40%, which is very attractive to investors. These distributions have also been consistently 100% cash covered.

Turning now to Slide 4, we'll talk about strategy. This slide shows the 4 key pillars of the Aventus strategy, which you are all familiar with. As you know, they are the blueprint for our business, and we focus on them every day of the week. It is simple, but you cannot deny that we drive real income growth and value creation through these pillars and are confident this will continue to be the case.

We'll touch on many of these achievements throughout this presentation. However, one area I'd like to highlight on this slide is the progress we've made in consolidating in what is a fragmented sector. Aventus has the largest market share nationally of dominant LFR centers with 22% of centers greater than 25,000 square meters. We proudly completed $720 million of capital transactions since listings, including 8 acquisitions and 2 divestments and the portfolio now has the benefit of 43% of Sydney catchment coverage area with 5 quality centers in Sydney Metro, including Castle Hill, Bell Roads, Cranbourne, Marsden Park and McGraths Hill. More broadly, 92% of the advantaged portfolio is located on the East Coast and 74% in metropolitan locations.

Another item you'll notice on Slide 4 is that we've highlighted capital management. When we first listed, we only had 2 $200 million debt facilities. In the last 4 years, we've become more sophisticated in the way we've financed this business to balance our low-cost of debt with tenor, diversity of sources and interest rate volatility and it's made a material difference to the returns to investors. That's why we've raised the profile of capital management to allow us to continue sharing progress on this fundamental aspect of the business and Lawrence Wong will share more of these initiatives in his section later today.

Now let's turn to Slide 5, which provides an overview of the 4 key characteristics which highlight why dominant centers are important to our shoppers, tenants and investors. Critical mass counts in large-format retail. You may have heard me say this many times before, and it's our strong belief that this will be very important going forward as consumer expectations for variety, choice and convenience continue to increase.

Simply put, our ability to offer busy families in Australia the ease of comparison shopping when making their purchasing decisions is more difficult to achieve in smaller centers. The average of Aventus centers is now valued almost $100 million with around 27,000 square meters of gross livable area and over 30 tenants per center. So our tenants also benefit from this comparison shopping.

For instance, most of our centers, given their size, have at least 3 bidding retailers, which means a customer can cross-shop and make a purchasing decision at our center without having to leave the center, and our focus on food continues to drive linger time and allow retailers to make that important decision.

Size does matter, and we had 3 centers at Castle Hill, Cranbourne and Kotara that each have a gross lettable area of over 50,000 square meters and importantly, dominant centers drive additional foot traffic and energy with our average center across the portfolio now, attracting more than 2 million visitors per year.

These are busy, energized centers. Finally, these centers have been established and trading in each of their catchments for an average of 17 years, cementing their position with each of their communities they serve and this is very important for new retailers coming into our centers, given the strong, established trading platform -- patterns.

Now let's turn to Slide 6, which highlights the key achievements for FY '19. I want to talk today about 2 specific key performance metrics. Firstly, our funds from operations of $96 million has increased by 8.2%, driven by strong underlying rental growth. Secondly, we recorded $85 million of valuation uplift during the period. It should be noted that the portfolio cap rate has remained consistent for the full 2 years, so these valuation gains are wholly attributable to income growth and developments. Its valuation growth contributes to the increased net asset value of $2.42 you can see on the bottom right-hand side.

Now let's turn to Slide 8 and take a closer look at the portfolio highlights. For me, the stand out metric on Slide 8 is the record number of leasing deals negotiated during the year. It underlines strong demand from the tenants and the capability of our leasing team to manage a high level of volume and activity. Tenants are attracted to our centers for a variety of reasons that are expanding and we're continuing to see the rollout of listed retailers like Baby Bunting, [Adias], Supercheap Auto and JB Hi-Fi throughout our portfolio.

Also, our centers are the beneficiaries of the migration of everyday needs tenants, particularly in services, health and well-being, away from other traditional shopping centers, seeking affordable rents and the convenience of [on-running] car parking that Aventus centers offer.

To put this into context, 141 leasing deals across 108,000 square meters of area negotiated during the year is more than 40% higher than the 109 leasing deals across 77,000 square meters completed during the prior year.

That level of leasing is equivalent to 20% of our entire -- of our portfolio's entire area. We have consistently delivered positive leasing spreads, well above CPI and low incentives, less than 5% in FY '19, and we've achieved this again over more than 1/5 of the portfolio's area. This is an achievement which is consistent since listing almost 4 years ago.

Secondly, let's consider the large land bank and [contend] the site coverage ratio in our portfolio. As I mentioned earlier, we built a portfolio centers over the last 15 years, situated on an enormous and valuable land bank of over 1.2 million square meters, which, for the rugby fans on the call, is the equivalent of 176 rugby ovals, side-by-side, with 11 kilometers of highway frontage.

This land bank gives us optionality and flexibility for future uses, particularly given its low site coverage ratio of 45%. It's worth pointing out that 15 of our 20 centers are single-level, and on that measure, the site cover ratio is lower than 39% for the majority of our centers. This allows us, as we have done last year, to add 3 free-standing buildings for food in our carparks across the portfolio that enhance excellent returns because of the low development risk and, notably, 0 land cost.

With population growth and the potential for flexible zoning, a range of higher and better future uses is possible for a number of our centers, and we're continuing to masterplan those properties to enhance their long-term value.

Now let's look at the diverse tenancy mix on Slide 9. Our portfolio services a number of tenants with 87% national tenants, the majority of which are publicly listed. We believe a diversified portfolio has many advantages and accordingly, the top 10 brands account for less than 30% of our income, and no brand contributes more than 5%.

Our largest single category is the Everyday-Needs category. These tenants have grown to account for 38% of our total income, well above the industry average and at 293 tenancies, they comprise 50% of the portfolio by number of tenancies. In our experience, Everyday-Need tenants drive recurring weekday traffic, boost linger time and are complementary, but not correlated, to household goods retailing. Pleasingly, more than half of our new leasing deals completed during the last 18 months were in this category, demonstrating our focus on Everyday-Needs. Additionally, in our portfolio, these tenants generally pay higher rates per square meter.

Furthermore, we proudly introduced 33 new tenants to our portfolio this year and 24 of those or more than 70% are in the Everyday-Needs category, including Sketchers Superstore, Katmandu, Toymate and Oporto.

As I said previously, not all retail is created equal. Unlike mainstream retail, large-format retail does not include department stores or discount department stores, and our portfolio has less than 2% exposure to fashion and apparel and therefore we are not highly exposed to these categories that are often susceptible to online and international retailers.

In the hardware category, our largest single exposure across the portfolio, by brand, is to Bunnings, which had 4% of our income. During FY '19, we proudly negotiated the extension of 2 Bunnings leases, bringing our Bunnings-specific weighted average lease expiry to about 8 years across their big boxes in our portfolio.

On sales trends, while we collect limited sales data for under 50% of our portfolio, we're seeing good sales growth in Manchester and from our Everyday-Needs category, specifically pets, food and beverage, leisure and sports. The categories that have been flat-to-slightly negative are furniture, bedding and home appliances. For retailers in these categories, post-election catalysts for growth, such as interest rate cuts and tax refunds, are expected to be helpful in the coming 12 months.

On traffic. Total center traffic increased again this year to 41 million people and despite commentary suggesting retail activity is moderating, as a result of our active tenant remixing and additional food services and leisure, we continue to achieve, on average, modest low single-digit traffic growth across our portfolio with the highest growth this year from our centers at Marsden Park, Tuggerah and Cranbourne.

Now let's look at our leasing income -- our leasing outcomes on Slide 10. A few key takeaways here. Firstly, we've actively staggered and smoothed the lease expiry profile, which averages around 11% of leases expiring each year over the next 4 years, which compared to 20% we negotiated this year, it's very manageable.

On the bottom left-hand side of the page, you can see that since listing, we've increased the percentages of leases with fixed rent reviews of between 3% to 5%, from 50% up to 65%. We've also reduced our exposure to low-growth, CPI-linked reviews in our leases from 28% down to only 21%. These fixed and CPI increases now represents 86% of our leases and underpin consistent and compounding rental growth and solid recurring rental income which supports future distribution growth. Unlike mainstream leases and shopping centers, there are no turnover rent clauses in our portfolio that allow the base rent to go backwards during the lease term.

A brief snapshot of some of our most recent leasing activity at one of our centers. Since the acquisition of Bankstown Home and Metro Sydney in 2016, we have remixed the extended and renewed leases on more than 74% of the center's GLA. This includes the introduction of national tenants, Baby Bunting and Toymate. They replaced Toys “R” Us with double-digit positive leasing spreads.

We completed our first drive-through coffee shop, called Zarraffa's, to further enhance the amenity for our customers and also introduced other traffic-driving tenants, including Fun with Fitness and Sheridan. The center's WALE increased from 2.5 years to acquisition to 4.4 years and the traffic and value are both up more than 20%.

You'll notice on the graph on the top right-hand side, we've maintained the weighted average lease expiry of about 4 years since listing, while delivering consistent rental growth over time. Our experience leads us to believe that a low-to-medium WALE is an opportunity rather than a risk. It allows us to rapidly reposition, remix and create value and ultimately, deliver a better shopping experience for our customers. Assets for the longer WALE, for example, over 7 years, often don't offer us much opportunity to add value and for this reason, they're not as attractive to Aventus.

On the topic of value-adding, we're pleased to announce our asset -- our annual asset tour is coming up on Friday, the 18th of October and we will visit Cranbourne and Mornington in Melbourne. These 2 centers are worth more than $230 million with a combined area of 89,000 square meters, on a massive site area of almost 280,000 square meters. Cranbourne was our first center and still is our largest, by GLA and by side area.

We'll get under the hood of these centers and share our strategies for continuous improvement in leasing, extracting value from development and are running tight operations. There'll also be an opportunity for Q&A and insights to our team. So look out for your invite this week and if you don't receive one and would like to join us, please reach out and let us know.

And on a side note, Lawrence, our CFO, won't be driving the bus, so we'll arrive safe and on time this year.

Moving on, we are really proud of Slide 11. Aventus continues to stand apart from the national sector average in achieving high occupancy and therefore, low vacancy rates. Achieved averaging 370 basis points higher occupancy than the national average over the past 11 years. Importantly, holdovers are less than 1%, excluding tenants held for development.

As you can see the graph below, we've maintained strong occupancy levels through multiple cycles and during this period, vacancy across the portfolio has gone up marginally and this is because we include development centers in the calculation, enduring developments. Centers are typically underoccupied, while we reposition and remix. For example, MacGregor in Brisbane has been underoccupied while we complete the repositioning projects and I'm pleased to say, we've just opened the Good Guys as a major tenant in this center.

You'll note the rent benchmarks the comparison between retail subsectors on the top right. I like this graph as it demonstrates what we say internally: Big box, low cost. It highlights the great disparity between large-format retail and other retail categories in terms of value and affordability. Also our tenants use the space in our centers for a variety of purposes: Showrooms warehouses, click-and-collect, administration and distribution points. Large-format retail space is flexible space with high clearance and reloading. It is also very convenient, has low -- relatively low ongoing CapEx requirements and at less than half of our next closest subsectors rent at an average of only $311 a square meter gross, it's more affordable and sustainable than traditional retail space.

As a proportion of tenants disclose sales, Aventus rents represent, on average, approximately 10% to 11% of occupancy costs. This further underpins our confidence that Aventus is well-positioned to absorb the impact of any further deterioration in retail conditions.

Now turning to Slide 12. This demonstrates the change in the value of the portfolio which increased to more than $1.9 billion through a combination of increased valuations and developments. Valuations resulted in a net increase of $85 million and it should be noted that the weighted average cap rate of 6.7% has remained unchanged for the past 24 months.

This means that almost all of the $200 million of valuation gains during the past 24 months is attributable to Aventus driving income growth and delivering on developments rather than relying on external market conditions, such as cap rates.

In terms of valuation benchmarks, there's only been 3 transactions in our sector in this calendar year with smaller centers selling at Campbelltown, Maribyrnong and geelong valuing -- valued at a total of about $120 million and a weighted average cap rate of about 6.6%, which supports the Aventus portfolio weighted average cap rate.

On this next slide, you'll see the areas that we've been able to achieve non-rental income growth in our centers. Non-rental income supplements the traditional portfolio income from our 591 tenancies. Our mantra is the 3 S's : Solar, Storage and Digital Signage. With these 3 income areas are incremental in nature, they indicate avenues for future growth for Aventus.

Finally, before I hand over to Lawrence, I'd like to discuss the development projects that we have delivered and touch on the pipeline.

On Slide 14, reviewing the body of development work completed since listing. Our team have been very busy and active and have invested more than $85 million in the portfolio across more than 17 individual projects. That investment has generated a healthy return of 9% cash unlevered on the additional GLA and it's enhanced more than 54,000 square meters of area through right-sizing, carving and creating new tenancies across the portfolio. We're not shifting tenants in and out, simply. These projects can be completed quickly with attractive returns and be revenue-generating immediately after completion. In FY '19, we invested $30 million in developments and we've completed 6 projects.

Turning now to Slide 15, our development pipeline for FY '20 was more than $40 million and key projects will mainly be in our Sydney Metro centers at Caringbah and Castle Hill plus the completion of MacGregor and Logan in Brisbane.

Our key focus for the development team during FY '20 will be the complete transformation of our Caringbah supercenter, due to commence later this year. This project includes a total investment of more than $30 million with a forecast IRR in excess of 10%, capitalizing on the opportunity to refresh and enhance this 23-year-old asset. The center is anchored by Harvey Norman, who just extended their lease as well as JB Hi-Fi and Freedom and it targets an affluent catchment in Metro Sydney with a very high LFR spend forecast to increase to $1.6 billion by 2026.

On the next slide, on the aerial, you'll notice that our neighbor, Bunnings, has just doubled the size of their store and it's recently reopened, which drives increased awareness and extra traffic to our center and creates a very busy hub of large-format and critical mass.

Lawrence will now take you through the key financials. Thank you, Lawrence.

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Lawrence Wong, Aventus Group - CFO & Company Secretary [3]

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Thank you, Darren, and good morning, everyone.

The FY '19 financial results reflects 2 key focuses: Firstly, it is the implementation of the internalization, which was completed in October 2018. Therefore, for these FY '19 results, 9 months reflects ABN as an internalized vehicle in 3 months as an externally-managed vehicle.

As a result of this transition, management fees previously paid to an external manager are now eliminated post-internalization. For the entirety of the prior corresponding period in FY '18, ABN was externally managed.

Secondly, we continue to make significant progress on our loan book. We extended our debt facilities to obtain an additional $200 million of debt a few months ago, which, and along with extensions announced early in the year, has resulted in the ABN refitting over 3/4 of our loan book. The outcome is that ABN has no debt expiring before May 2022 and has a weighted average debt expiry of 4.1 years.

Furthermore, our proactive hedging policy means that the cost of debt for FY '20 will be significantly lower than the FY '19 cost of debt of 3.5%. I will elaborate on this further in this presentation.

Now looking at Slide 17, I want to discuss some of the key financial metrics shown here. Looking at the funds from operations or FFO, the group made its guidance with its FFO per security of $0.184. This is 1.7% higher than last year. In addition, the FY '18 results include rental contributions from 2 divestments. Therefore, the growth of FFO from the core portfolio represents solid income growth in FY '19.

Moving now to Slide 18. Let's look at the income statement. This slide shows a summarized income statement. The group recorded a statutory profit of $110 million for FY '19. This profit is $25 million lower than last year and this is due to lower valuation gains recorded during the year. Other profit or loss items to note include net operating income. This is our rental income, net property expenses, and is impacted by a few one-off items when compared to the prior year. These include elimination of property management fees following the internalization and $1.6 million of legal expenses in relation to the former masters tenancy at Cranbourne.

Furthermore, we also received unusually high surrender fees of $0.7 million in our income, which are nonrecurring. Adjusting for these items, the FFO per security was closer to $0.185.

Moving now to finance costs. Finance costs includes a $40 million loss from the mark-to-market of interest rate swaps. There were also high interest expense as a result of increase in borrowings to fund the internalization and the development pipeline.

Looking now at the cost of debt -- looking now at transaction costs. Transaction cost of $5 million were incurred during the year and they relate to the internalization. In the prior year, transaction cost, predominantly related to the acquisition of Castle Hill and Marsden Park.

Moving to Slide 19. There is a reconciliation on net profit to FFO, which would give you a better insight into the underlying performance of the group.

Beginning with a profit of $110 million and adjusting for noncash and nonrecurring items, the most significant of which is valuation gains, the group delivered an FFO of $96 million or $0.184 per security. Based on this result, the group declared distributions of $87 million or $0.166 per security. This distribution is 1.8% higher than the prior year. The payout ratio of 90% of FFO is within the group's distribution policy of paying out 90% to 100%. Deducting capital -- maintenance capital expenditure and leasing costs on the FFO, the adjusted FFO is $87 million. This means that distribution were cash covered on a AFFO basis for the year. This is consistent with our sustainable distribution policy and has been the case since listing nearly 4 years ago.

Moving now to Slide 20 is a summarized balance sheet. On this slide, you can clearly see the changes brought about by the internalization. The first thing you would notice is the intangible of $144 million which comprises goodwill and management rights acquired through acquisition of the management entity.

Looking at investment properties, the changes here reflect capital expenditure on the development pipeline as well as valuation gains. The increase in borrowings were undertaken to fund internalization as well as the development pipeline and following the internalization and including the valuation gains, net tangible asset per security is $2.15 and net asset value per security is $2.42.

Moving to Slide 21, you can see more detail on our capital management activities. As I flagged earlier, capital management was a major focus for us in FY '19, so I would like to spend a few minutes on this slide. With respect to the loan book, we announced an extension of $200 million of one of our debt tranches in March this year and together with a bit negotiate -- debt extensions negotiated in July last year has effectively reset over 3/4 of the loan book.

As a result of this management, the group has no debt expiring before May 2022, and the weighted average debt expiry has lengthened to 4.1 years.

Looking now at the cost of debt. The group's weighted average cost of debt was 3.5% for FY '19, which is consistent with our previous guidance. Despite the increased cost of debt in FY '19 associated with lengthening the debt expiries. The interest cover ratio is a healthy 4.7x, which is significantly higher than the covenant requirement of 2x. Looking forward to FY '20, we expect the weighted average cost of debt to naturally fall to 3.3% due to our hedging policy that allows us to capture a declining interest rate curve.

The group's gearing was slightly lower at 38.7% than at the end of December 2018. Furthermore, we have underwritten the June '19 quarterly distribution if we were to raise by further $22.5 million in equity.

When this settles later this month, gearing will fall approximately 1% on a pro forma basis to 37.6%. Although gearing of the group is towards the upper end of our preferred gearing band, the strength of the portfolio, the strong debt serviceability and no near-term debt expiries, means we are comfortable at the current level. We will continue to examine deleveraging opportunities, but we are not under any pressure to make changes to the portfolio, or to raise equity solely for this purpose. Our focus, as always, is on preserving shareholder value.

That concludes the review of the financial results, and I'll pass it back to Darren to present the outlook and guidance.

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Darren Holland, Aventus Group - CEO & Executive Director [4]

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Thank you, Lawrence. I'll -- Thank you very much. In the final section, as Lawrence said I'll take you through the outlook and the guidance. So we're now on Slide 22.

That has been and continues to be considerable media commentary on retail headwinds, including Amazon, online shopping, cap rate expansion, reduced consumer confidence and housing sales information.

In our interaction with tenants, we're still seeing solid demand for space in our centers, and we're seeing retailers and other tenants expanding and growing their businesses as well as steady levels of activity and traffic in our centers.

Across retail subsectors in Australia, outside of large-format, there are clearly variable levels of demand but we think that Aventus is well positioned for FY '20.

In conclusion, our core strategy of delivering organic growth through intensive asset management is simple and clear and importantly, drives real results in the near term.

The pillars of the Aventus strategy are unchanged. And as a result, based on the continued momentum in the business and the current operating environment, the FY '20 guidance of FFO per security is expected to grow by 3% to 4%, which equates to 19 -- to $0.192 per security.

I'd now like to invite any questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Darren Leung from Macquarie.

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Darren Leung, Macquarie Research - Analyst [2]

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Darren, you mentioned Furniture and Bedding has seen a moderation, just given residential market conditions.

Is it possible to have some numbers or even just sort of directional comments around this after what's been achieved?

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Darren Holland, Aventus Group - CEO & Executive Director [3]

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Darren, thank you for the quality question, as always.

As I said on the call, we get less than 50% sales disclosure. So it's a limited pool of evidence that we actually get.

We don't give specific numbers as to whether they're up or down. But as I said, they're generally moderating to slightly negative.

And there's obviously a discrepancy between the listed furniture retailers and the private furniture retailers.

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Darren Leung, Macquarie Research - Analyst [4]

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Okay. So when you say moderate or slightly negative, you're saying somewhere within the range of negative 3 to positive 8?

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Darren Holland, Aventus Group - CEO & Executive Director [5]

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In that broad range, yes.

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Darren Leung, Macquarie Research - Analyst [6]

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Okay. Understand. And then, perhaps in terms of the other categories, whether quantitative or qualitative, so electrical or otherwise?

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Darren Holland, Aventus Group - CEO & Executive Director [7]

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So again, in a similar category to what you mentioned.

And obviously, Manchester on the positive. That's growing in of excess of 5%; foods, in excess of 4% for instance, and other strong growth coming out of Everyday-Needs category, particularly health and well-being and Sports & Leisure.

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Darren Leung, Macquarie Research - Analyst [8]

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Okay. Just a second question on Bunnings. You mentioned you negotiate 2 leases in the WALE now at 8 years. And my understanding was Bunnings average lease -- sorry, average new leases sort of the 15-year type number. Has there been a change in their portfolio strategy?

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Darren Holland, Aventus Group - CEO & Executive Director [9]

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There hasn't been, no. So we've got 4 within our portfolio. So we negotiated 2 of those.

One was based on the 5-year lease extension, which is simply an option. And the other one was based on a new 10-year lease. The other leases that are on foot, sort of 12 to 15 years in tenure with a variety of expiry dates.

So no change in strategy for Bunnings. But the 8 years is really just an average of the WALE of the 4 Bunnings big boxes.

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Darren Leung, Macquarie Research - Analyst [10]

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Understand. And perhaps, just a final question. There's a bit of, I suppose, feedback in the market within Home Co. Can you please remind us what the policies of your portfolio versus Home Co.?

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Darren Holland, Aventus Group - CEO & Executive Director [11]

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So again, a good question, Darren. Was expecting it.

Not going to go into, I guess, their performance because investors will ultimately determine that.

I think if they are successful in doing an IPO, it's a net positive for our vendors. We have been the sole voice, the sole educator in the listed market for large-format retail for the last 4 to 5 years.

So anyone that comes in like a Home Co. or someone else that actually educates the market and provides more exposure to the strength of the industry and the strength of the underlying earnings is a net positive for Aventus.

They are -- even though they're in large-format retail but centers are very different. Our centers are dominant centers, as I said before on that earlier slide, Slide #5. Our average centers worth $109 million probably in comparison to $30 million to $40 million for a Home Co. site. Our average center has 27,000 square meters, I'm assuming the masters, ex boxes, are probably 10,000 to 12,000 square meters. And we've got in excess of 30 tenants per center. So critical mass in comparison shopping makes a big difference for large-format retail.

And in addition to that, our centers -- that have established trading patterns of over 17 years and we're attracting about 2 million visitors per annum for each of the centers. But we think it's a net positive if they are successful in their leasing -- I mean listings.

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Darren Leung, Macquarie Research - Analyst [12]

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Understand. And you mentioned a number of positives there, which is good.

What do you think is the one-off, if you -- comparative edges that they have or where is room for improvement for you guys?

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Darren Holland, Aventus Group - CEO & Executive Director [13]

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Again, you're best to ask them that question. We haven't certain any information memorandum.

There's only -- there's very little overlap between their centers and our centers. In fact, there's only 5 within a 5-kilometer radius of our portfolio, and they have been leased and open for probably 12 months to 2.5 years and we've seen absolutely no impact on the performance, the occupancy or the leasing spreads in our centers.

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Operator [14]

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(Operator Instructions) Your next question comes from the line of Edward Day from Moelis.

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Edward Day, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [15]

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I'm just wondering if you can talk about the leasing spreads, with a bit more detailed -- maybe break it up into renewals and new leases?

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Darren Holland, Aventus Group - CEO & Executive Director [16]

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It's a good question, and we don't specifically break it up into renewals or new leases.

But what I can say is we do the 141 leasing deals. 98% of those were positive leasing spreads. And from an incentive point of view, they're well under 5%, both -- mainly for new and development sites and we don't offer any incentives for renewed tenants.

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Edward Day, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [17]

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Okay. And do you have any capital occupancy cost deals within the portfolio?

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Darren Leung, Macquarie Research - Analyst [18]

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No, we don't. Just like the (inaudible) reports, we've got 591 leases and we don't have any of those.

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Operator [19]

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(Operator Instructions)

(Operator Instructions) There's no more questions at this time. I'd now like to turn the conference back to today's presenter. Please continue.

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Darren Holland, Aventus Group - CEO & Executive Director [20]

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Thank you, and I would really like to thank you for attending and your quality questions. Have a great day, and I look forward to seeing you in the next month at our investor meetings or in October, for our Melbourne asset tour. Thank you.

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Operator [21]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.