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Edited Transcript of CQR.AX earnings conference call or presentation 14-Feb-21 10:00pm GMT

·28 min read

Half Year 2021 Charter Hall Retail REIT Earnings Call Sydney, New South Wales Feb 15, 2021 (Thomson StreetEvents) -- Edited Transcript of Charter Hall Retail REIT earnings conference call or presentation Sunday, February 14, 2021 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Christine Kelly Charter Hall Retail Real Estate Investment Trust - Head of Retail Finance & Deputy Fund Manager * Gregory Chubb Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited ================================================================================ Conference Call Participants ================================================================================ * Adrian Dark Citigroup Inc., Research Division - Director & Analyst * Richard Barry Jones JPMorgan Chase & Co, Research Division - VP * Stuart McLean Macquarie Research - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Retail REIT 2021 Half Year Briefing. (Operator Instructions) Please note that this conference is being recorded today, Monday, 15th of February. I would now like to hand the conference over to your host today, Mr. Greg Chubb, Retail CEO. Thank you, sir. Please go ahead. -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [2] -------------------------------------------------------------------------------- Good morning, and welcome to the Charter Hall Retail REIT half year results presentation for the period ending December 31, 2020. My name is Greg Chubb, and I'm the Retail CEO for Charter Hall, and an Executive Director of CQR. Joining me this morning is Christine Kelly, our Head of Retail Finance and the Deputy Fund Manager for CQR, and we'll start this morning on Slide 4 and our portfolio highlights. I'm pleased to report that CQR's portfolio continues to demonstrate its resilience. The operating performance of our portfolio was strong in the first half of FY '21. Supermarkets, which are the foundation of our portfolio, achieved moving annual turnover or MAT growth of 8.2%, and that's up from 5.2% at June 2020. The percentage of supermarkets in turnover increased to 65%, and that's up from 61% at June and is a record for the portfolio. Total comparable MAT growth across the portfolio, when including specialty sales, was 7.1%, and that's up from 3.9% at June. Over the period, we saw leasing conditions normalize, and this has resulted in us completing a record 224 specialty leases, delivering positive leasing spreads of 2.5%. This activity also translated into improved portfolio occupancy, with the convenience retail portfolio occupancy lifting to 97.8%, up from 97.3% at June. During the period, we also expanded our partnership with bp with the acquisition of an interest in 70 long WALE convenience retail properties across New Zealand. Pleasingly, this has lifted the contribution from our major tenants to 54.1% of portfolio income, delivering greater income stability and securing future growth in earnings in a capital-efficient manner. This all translated into operating earnings of $75.2 million for the half, up 7.1% on the prior comparable period. Operating earnings per unit were $0.1317, down 17%, reflecting the impact of the April equity raise. The total portfolio value increased 8.6%, reflecting the impact of acquisitions and valuation gains across the portfolio. Distributions for the period were $0.107 per unit and distribution growth is 7% and on the second half of FY '20 distribution of $0.10 per unit. I'm also pleased to provide operating earnings guidance for the full year of FY '21 to be no less than $0.273 per unit and distribution guidance for the second half of this financial year of no less than $0.127 per unit. Now we'll turn to Slide 5 and the REIT strategy. I would like to take some time over the next few slides to reiterate the CQR convenience strategy. Our strategy is on being the leading owner of property for convenience retailers, and we continue to achieve this through active asset management, enhancing asset quality and maintaining a prudent capital position. The result of our strategy is that we deliver a resilient and growing income stream for our investors. And moving to Slide 6. At its core, the CQR portfolio of convenience assets are the dominant in their respective catchments and provide essential everyday goods and services to the communities in which we operate. We proactively enable our major convenience retailers with the facilitation of omnichannel servicing throughout last-mile home delivery, click and collect and more recently, contactless pickup. Through the partnership with bp, we've added another market-leading convenience retailer to the portfolio and expanded our reach to include a strong network of 295 fuel and convenience locations across Australia and New Zealand. Convenience comes in many forms, and this segment of the market continues to evolve and grow as a channel for essential goods and services. We also expanded our partnership with Coles to include the South Australian supply chain facility. This is essential infrastructure, central to servicing their supermarkets. And now I'll move on to Slide 7. We first proposed changes to the CQR portfolio back in financial years '15 and '16. At that time, the portfolio consisted of 74 centers, including 76 supermarkets, and only 30% of the portfolio was located in metropolitan markets. As we've progressed through to financial year '21, we've continued this evolution and the number of centers is now reduced to 50. Despite the reduction in centers, our 69 supermarkets in the portfolio have grown significantly and are now achieving over $3.4 billion in annual sales, and this represents some 2/3 of our total portfolio sales. Through the addition of the bp portfolio and the Coles demerger from Wesfarmers, CQR now has exposure to 5 major market-leading convenience retailers, further enhancing the resilience and security of income. The bp portfolio has also seen us broaden our convenience focus to encompass the large and evolving fuel and convenience market. Guiding this portfolio curation and evolution has been a result of strategically partnering with leading convenience retailers to further meet their property needs. Now turning to Slide 8. The fuel and convenience retail sector is a large and evolving market. Several years ago, we identified that this was an important and growing convenience retail segment and began looking to partner with a leading operator in this space. In December 2019, we made our first investment, acquiring an initial interest in the bp portfolio across Australia. Importantly, this established our partnership with bp, an industry leader in this sector, and an important new major retail partner for CQR. Then in February 2020, we increased our interest in that portfolio. Then in December last year, we further expanded our partnership with bp to acquire an interest in a portfolio of convenience retail properties across New Zealand. Today, the combined $572 million investment in the bp portfolio consists of 295 assets and represents 12.3% of CQR's portfolio income. It's a long leased, highly capital-efficient triple net lease investment that provides security of rental growth with CPI-linked annual rent reviews. Additionally, in bp, we have a partner who is a global leader in fuel alternative investments and in the provision of fast-charging infrastructure for electric vehicles. I'll now hand over to Christine to run through the financial results for the period, and then I'll return to discuss the operational performance in more detail. Thanks, Christine. -------------------------------------------------------------------------------- Christine Kelly, Charter Hall Retail Real Estate Investment Trust - Head of Retail Finance & Deputy Fund Manager [3] -------------------------------------------------------------------------------- Thanks, Greg. Now turning to Slide 10 and the financial impact from COVID-19. I'm pleased to report that the financial impacts of COVID-19 on CQR's financial performance continue to diminish. The level of tenant support we have provided has progressively reduced as the government trading restrictions have eased and sales have improved. During the first half of FY '21, CQR provided $5.8 million or 4% rent for the period as tenant support. Of this $5.8 million, $4.4 million was in the form of rent-free incentives and the remaining $1.4 million as rent deferrals. This was significantly down from the $10.7 million or 15% we provided in the last quarter of FY '20. Importantly, as you can see in the chart at the bottom of the page, tenant support continued to trend lower as time has progressed, with the second quarter of FY '21 being an improvement on the first quarter. Total rent collected in the period has also trended positively. When we provided our September quarterly update, rent collected for the first quarter was 92%. For the first half, this has improved to 94% of rent or $133 million. At the end of the period, rent outstanding for collection was only 2% or $2.5 million. As of today, this is now less than 1%. Our expected credit loss provision in June last year reflected we had significantly progressed much of our tenant support negotiations, already agreed terms on a large portion of our leases and had strong cash collections. As at the end of December, we remain comfortable with our expected credit loss provision, and this remains largely unchanged at $1.7 million. As a result, there are no expected credit loss provision write-backs in the first half earnings. Our operating earnings and distributions can be found on Slide 11. We delivered operating earnings of $75.2 million or $0.131 per unit and distributions of $61.1 million or $0.107 per unit for the 6 months to 31 December. This represents an operating earnings payout ratio of 81.2% for the half year and more than 100% operational cash flow coverage of our distributions. Distribution growth is 7% on the second half of FY '20 distribution of $0.10 per unit. Total net income from our combined convenience retail and long WALE convenience retail assets has risen 4.3% to $93.8 million. This income growth has been driven by our new investments in long WALE convenience retail properties and offset by the divestment of 10 convenience retail properties. Annexure 3 provides more details of the impact of these movements on the total portfolio composition. Finance costs have reduced just as a result of the deleveraging from the April 2020 equity raise and a continuation of the lower interest rate environment. Other expenses have increased, reflecting the net portfolio growth and a corresponding increase in management fees. Consistent with the June 20 reporting period, our operating earnings include recognition of income from those tenants that were provided COVID-19 tenant support. The $4.4 million of rent-free incentives agreed or expected to be agreed are included in operating earnings as they have either been capitalized or expensed as a nonoperating cost. The $1.4 million of rent deferrals have been included in operating earnings as they are recognized in property income. The $1.7 million of expected credit loss provisioning in our operating earnings remains largely unchanged from 30 June. The strong operational performance has also led to the positive timing of cash movements in the 6 months. As a result, operating earnings and operational cash flow are aligned for the period, and the $61.1 million distribution is more than 100% covered by operational cash flow. For the period, the main impact to change in statutory profit is due to the positive valuation movements. A reconciliation of stat profit to operating earnings and distributions can be found in Annexure 1 of this presentation. Turning now to Slide 12 and the balance sheet. Our total property portfolio increased by $252 million over the 6-month period. This is a result of acquisitions exceeding divestments by $207 million and positive valuation movement of $45 million. Similar to the impact on income, the reduction in wholly owned investment properties, primarily due to divestments, has been offset by the investment into long WALE convenience assets in our joint ventures. Borrowings have increased $111 million, primarily due to the investment into the bp New Zealand portfolio and capital spend. This was offset by capital returns received from RP1 following the divestment of Pemulwuy and West Ryde Marketplace. The cash of $80 million decreased following the acquisition of the Coles Adelaide distribution facility in July. The primary impact on other assets and other liabilities is the movement in derivatives. And the growth in NTA from $3.75 to $3.77 predominantly reflects valuation gains. Our key valuation metrics are shown on Slide 13. For the period ending 31 December 2020, we revalued 59% of our portfolio externally by value. Over the 6 months, the portfolio valuation increased to $3.5 billion, with portfolio cap rate at 31 December of 6.03% remaining unchanged. Our shopping center portfolio valuation increased 1.2% or $34 million, including $30 million of capital investment, with the cap rate expanding 2 basis points. The long WALE convenience retail investments of bp and CDC increased 2.4% or $11 million. The cap rate expanded 28 basis points to 5.28% due to the acquisitions in the period. The valuation impact on the first half FY '21 of these movements was an increase of $45 million or 1.4%. The revaluation movement for 31 December reflects the quality and the resilience of our portfolio, our ongoing asset management strategy and continued portfolio curation. And Slide 14 shows key highlights of our capital management. Our liquidity sits at $304 million, placing the REIT in a strong position to manage any future uncertainties, plus execute on strategic opportunities should they arise. The weighted average debt cost over the first half FY '21 was 2.8%, consistent FY '20, which we expect to continue into FY '21 whilst the current interest rate environment endures. We continue to have no debt maturing until 2022, and the recent refinancings have reduced the debt maturing in FY '22 to only $95 million, and the weighted average maturity maintained at 3.8 years. Our hedging levels at 69.2% and average tenor of 4.2 years reflected the increased drawn debt following acquisitions. And following the settlement of bp New Zealand, look-through gearing is in the middle of the 30% to 40% range at 34.6%, with balance sheet gearing of 27%. We are comfortably within our gearing and ICR covenants. And during the period, Moody's reaffirmed our Baa1 issuer rating with a stable outlook. Now back to Greg to present the operational performance of the fund and our outlook. -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [4] -------------------------------------------------------------------------------- Thanks, Christine. If we can now turn to Slide 16 to look at the operational impacts from COVID-19. Our continued priority during the pandemic is on the safeguarding the health and well-being of our team, our shoppers and our tenant customers whilst ensuring shoppers continually have access to essential goods and services, which are core to our convenience-based assets. As the charts on this slide show, the portfolio has demonstrated resilience throughout the half. All our supermarkets remained opened and traded very strongly throughout the government-mandated closure periods and trading restrictions. Specialty retailers, however, were impacted by mandated closures and trading restrictions, in particular for food catering and retail services categories, and this saw a specialty MAT down 1.5% as at December. Now importantly, specialty sales have progressively improved, with 3.9% growth for the half year to December, 6.7% for the December quarter and 9.2% for the month of December. Our centers continue to benefit from being the dominant convenience retail centers in their respective catchments, and shoppers continue to shop closer to home for their everyday needs. Now we'll move to Slide 17 and the portfolio summary. The CQR portfolio continues to deliver defensive and dependable performance. As previously mentioned, we expanded our partnerships with bp and Coles during the period, further increasing the exposure to long WALE assets within the fund. We also divested West Ryde Marketplace, which has delivered a property IRR of 11.3% since its acquisition. Improved leasing conditions saw a shopping center occupancy increase from 97.3% at June to 97.8% at December, and total MAT growth across the portfolio grew to 7.1%, and that's up from 3.9% at June. Portfolio WALE also increased from 7.2 years to 7.7 years during the period and majors WALE increased to 11.6 years. If we can move to Slide 18. The defining characteristic of our portfolio is our ongoing focus on leading nondiscretionary convenience retailers. During the half, we've been able to increase the proportion of portfolio rental income from our major tenants, up from 51% to 54%. Following the acquisition of the Coles Adelaide distribution center, Coles are now the equal largest portfolio tenant customer alongside Woolworths at 16.6% of portfolio income. The expansion of the bp partnership [placed] them as our third largest tenant customer at 12.3% of rental income. We continue to grow our partnership with Aldi, and they are now the fifth largest tenant customer with 11 stores across the portfolio. Importantly, when we look at our exposure to any one specialty retailer, it remains limited, and we retain a clear bias towards everyday needs, convenience-based retail, food and services. Now moving to Slide 19 and looking at our supermarkets in further detail. As I stated at the beginning of the presentation, supermarkets remain the foundation of our convenience-based retail portfolio. And supermarkets continue to demonstrate their resilience, delivering 8.2% MAT growth as at December. Demonstrating the quality of our portfolio, the number of supermarkets in turnover increased to a record 65%, with a further 17% of our supermarkets within 10% of their respective turnover and thresholds. During the period, we completed 5 supermarket new leases and extensions, whilst Coles and Woolworths refurbished 6 stores across our portfolio. Aldi was also active, expanding and refurbishing 2 stores during the period. Click and collect installations are now complete at 44 Coles and Woolworths supermarkets with a further 6 planned. Additionally, we've partnered with the supermarkets in sustainability initiatives. Coles and Woolworths, under roof license agreements with us, have now installed 16 solar PV systems, generating 2.8 megawatts of solar. Now moving to Slide 20 and our specialty tenants. Our specialty tenants continue to be the most impacted part of the portfolio due to mandated store closures and trading restrictions. And this has been particularly evident with the food catering and retail services categories. This saw specialty MAT decline of 1.5% as at the 31st of December. Importantly, though, specialty sales progressively improved with 3.9% growth for the half year to December, 6.7% for the December quarter and 9.2% for the month of December. While the first half of FY '21 has not been without its impacts for our specialty tenants, the period has been marked by a general normalization in leasing activity and a catch-up on previously delayed leasing transactions. We completed a record 224 specialty leases during the period, with an average leasing spread positive at 2.5%. Of that, 105 new leases were signed with positive leasing spreads of 5.9% and incentives for those new leases remained stable at 13 months. We also renewed 119 existing tenancies at positive leasing spread of 0.6 of 1%, and this saw our retention rate lift to 82% and that's more in line with historic averages. Now moving to Slide 21 and our asset enhancement projects. As we've previously discussed, we've proactively looked to align our capital works programs alongside our major tenants as they invest in their existing store networks, delivering the latest store formats. Our capital has been spent on common area upgrades and improving the customer amenity of our centers. These capital investments alongside our major tenant customers has delivered lease extensions, expanded stores and improved amenity, all of which has been captured in increased asset valuations. Through pad site developments, we're unlocking additional value and introducing new usages. As part of this program, we currently have 2 childcare facilities under construction in Western Australia and 2 drive-thru food offerings underway in Victoria. Looking forward, we've identified a pipeline of potential pad site developments, and subject to development approvals and leasing demand, we believe there are between 10 to 20 future development opportunities in this space. In addition, we've also applied capital towards sustainability initiatives. Our sustainability investments have been directed towards reducing our carbon emissions and initiatives that reduce operating costs and outgoings. Importantly, these asset enhancement projects are low risk and deliver a positive total return on investment and incremental earnings, whilst ensuring our centers remain the dominant convenience retail centers within their respective catchments. Now turning to Slide 22. Charter Hall has made a commitment to net zero emissions by 2030 across the managed portfolios. Pleasingly, I can report that CQR is well advanced on this journey. And since the beginning of financial year '19, we've invested $11.4 million on energy, water and waste management initiatives. In the solar space, our partnerships with Clean Peak Energy and Solgen has minimized our capital investments whilst rolling out solar infrastructure across 27 centers and will deliver 19.8 megawatt of solar across the portfolio. It's also leveraged the technical expertise of our partners to accelerate the rollout program and ultimately provided a higher level of cost certainty in a volatile energy market. This result is that 64% of CQR's electricity use as at December 2020 was being generated by on-site solar. Now moving to Slide 23. In addition to our progress on our solar rollout and other sustainability investments, I'm pleased to report further improvement in our average NABERS Energy and Water ratings during the period. Additionally, this has been recognized with improved GRESB ratings. But sustainability consists of more than our environmental progress. It also involves recognizing the role our centers have within their respective communities. And on community initiatives, we partnered with author Sylvia Lockyer and 40 local primary schools for our first NAIDOC community story, delivering 21 local community initiatives, giving back to those in need and continued our partnership with Two Good Co, supporting our frontline workers and recognizing their incredible contributions during the pandemic. Now finally to Slide 25 for our summary and outlook. Our focus on partnering with market-leading convenience-based retailers will continue to deliver long-term resilient and sustainable growth in earnings for our investors. It's our expectation that supermarket and convenience retail sales will continue to be strong, driven by customers' preferences to shop closer to home and focus on everyday needs. We've seen visitations normalize in most regions, highlighting the essential need associated with convenience retail. Going forward, we will continue to focus on improving the income resilience and growth of CQR through our portfolio curation and partnering with the leading nondiscretionary convenience retailers. This is central to our strategy. Barring any unforeseen circumstances or further extended COVID-19 lockdowns and government-mandated restrictions, CQR provides FY '21 operating earnings guidance no less than $0.273 per unit and expects the second half financial year '21 distribution to be no less than $0.127 per unit. Now that ends the formal remarks. And with that, I'll invite any questions. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Richard Jones of JPMorgan. -------------------------------------------------------------------------------- Richard Barry Jones, JPMorgan Chase & Co, Research Division - VP [2] -------------------------------------------------------------------------------- Greg, just the second half guidance implying 90% payout and -- I guess we can assume that's a stabilized earnings number. Is that how you think about it? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [3] -------------------------------------------------------------------------------- Yes. Richard, yes, in essence, that's a fair comment. -------------------------------------------------------------------------------- Richard Barry Jones, JPMorgan Chase & Co, Research Division - VP [4] -------------------------------------------------------------------------------- Okay. And just on the specialty leasing, is there any change in terms that you're seeing? Obviously, the spreads were a strong set of numbers. Is duration or fixed bump, is that changing? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [5] -------------------------------------------------------------------------------- The only thing that -- and we've called it out over the last few reporting periods, and given a lot of our activity is leasing to food and service-related uses. In some instances, we are seeing the longer terms from those operators. But in essence, no changes to fixed terms nor the annual rent review provisions in our specialty leasing. -------------------------------------------------------------------------------- Richard Barry Jones, JPMorgan Chase & Co, Research Division - VP [6] -------------------------------------------------------------------------------- Okay. Good. And just on RP6, you're obviously still at 20%. Any kind of updates on where that investment may change? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [7] -------------------------------------------------------------------------------- Not at this stage. We will look to potentially grow our investments in that fund, and that may well be via acquisition. But pleasingly, the performance of the 2 assets in that partnership is very, very strong, and we've seen some asset enhancement projects on both of those assets largely complete over the period very successfully. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from Stuart McLean of Macquarie. -------------------------------------------------------------------------------- Stuart McLean, Macquarie Research - Research Analyst [9] -------------------------------------------------------------------------------- Just a follow-up on the leasing side of things. It looks like it's about just over 30% of specialty and mini-majors expiring over the next 18 months. We did over 20% or around 20% next year alone. Can you just talk through expectations here and ability to derisk that maybe ahead of expiry? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [10] -------------------------------------------------------------------------------- Yes. So a good proportion of that, Stuart, relates to our target country expiries, and we are well advanced in that process. So we did have 10 targets across the portfolio. We've already recomposed 2 of those to become Kmarts, and we're well advanced with the conversion on a number of others. And by the end of that process, we think we'll end up with 2 target stores out of the previous 10, so there are 2 supermarket conversions that we're well advanced on. And for general retail conversions, we're very well advanced on. So that's the major activity there. -------------------------------------------------------------------------------- Stuart McLean, Macquarie Research - Research Analyst [11] -------------------------------------------------------------------------------- Okay. And would that account for 1/3 -- maybe 10% of that 30-odd percent expiry? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [12] -------------------------------------------------------------------------------- Yes. It's -- look, the -- our income from Target is about 1.8% of portfolio income. But there's no other activity in that cohort that you mentioned that causes us any concern. -------------------------------------------------------------------------------- Stuart McLean, Macquarie Research - Research Analyst [13] -------------------------------------------------------------------------------- Okay. No worries. Okay. And then just on the -- one on guidance as well. Is it possible just to get an idea of what you're looking at in terms of the cost of debt into the second half? Are there any further tailwinds coming through there? -------------------------------------------------------------------------------- Christine Kelly, Charter Hall Retail Real Estate Investment Trust - Head of Retail Finance & Deputy Fund Manager [14] -------------------------------------------------------------------------------- Stuart, it's Christine. Cost of debt, we're expecting to be consistent. Obviously, any marginal cost of debt will be a lot lower. But at this point, we're looking at about 2.8% for the remainder of the year. -------------------------------------------------------------------------------- Stuart McLean, Macquarie Research - Research Analyst [15] -------------------------------------------------------------------------------- Okay. And just a final one, just on just the portfolio kind of recycling improvement. So are we expecting to see much of that over the coming 6 to 12 months? Were you getting relatively happy now after a couple of years of portfolio refinement? Appreciate there's always a tail that will be looked at, but are we expecting any major recycling initiatives over the next 6 to 12 months? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [16] -------------------------------------------------------------------------------- No, not at this stage. So we'll always continue to look at the portfolio. As you mentioned, we'll always be looking at the bottom part of the portfolio. But as we've said previously, we've acted on the assets that we needed to divest out of the fund. So we're in a pretty good position. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from Adrian Dark of Citi. -------------------------------------------------------------------------------- Adrian Dark, Citigroup Inc., Research Division - Director & Analyst [18] -------------------------------------------------------------------------------- Could you perhaps comment on any changes that you've made to the portfolio mix over the last 6 months or any that you would anticipate making going forward, please? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [19] -------------------------------------------------------------------------------- Look, main changes, Adrian, over the last 6 months is the expansion of the bp portfolio, with a further 70 properties coming into the portfolio and the Coles Adelaide DC. And on the divestment side of things, we divested at West Ryde Marketplace out of the RP1 joint venture. At this point in time, we're not in any active negotiations on any other acquisitions nor divestments. So the portfolio at this point in time is stable. -------------------------------------------------------------------------------- Adrian Dark, Citigroup Inc., Research Division - Director & Analyst [20] -------------------------------------------------------------------------------- Could you maybe comment in relation to any changes in tenancy mix that you might be thinking of making? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [21] -------------------------------------------------------------------------------- Yes. I mean I've touched on, with Stuart's question, our progress on the recomposition of the Target portfolio, and that's progressing very well. The only other thing that I would call out in the specialty leasing space is that we continue to replace apparel tenants primarily with food and services-related tenancies, and we've seen a fairly significant amount of activity in the composition of this half. So they are the 2 things that I'd call out. -------------------------------------------------------------------------------- Adrian Dark, Citigroup Inc., Research Division - Director & Analyst [22] -------------------------------------------------------------------------------- Okay. One of your peers has called out parts of food and services as somewhat challenging in the current environment. Is that something that you're seeing? Or not necessarily? -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [23] -------------------------------------------------------------------------------- I think the challenges that we faced in that space is just with the government-related restrictions with social distancing, so that has impacted the performance of some of the food and service-related tenancies. But certainly, from a leasing perspective, the demand from those categories remains very, very strong. So it's a balancing act, but we've seen a lot of activity from those categories over the last half and a lot of forward activity for the next half as well. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- (Operator Instructions) There are no further phone questions at this time. I'll now hand back to Mr. Chubb for webcast questions. -------------------------------------------------------------------------------- Gregory Chubb, Charter Hall Retail Real Estate Investment Trust - CEO of Retail, Fund Manager & Executive Director of Charter Hall Retail Management Limited [25] -------------------------------------------------------------------------------- Thank you, moderator. We have one webcast question from Peter Davidson at Pendal. And Peter has asked if we can highlight which of our centers did best. Also the history of leasing spreads over longer periods. I might just talk to the leasing spreads question first. And we always include an annexure in our presentation material. So in this period, it's Annexure 9, which looks at our core operating stats over an extended period of time, including our leasing activity. And you'll note, from the information in this annex, that our leasing spreads for this period are at record levels. So they're highest they have been for 5 years. It is a fairly bumpy series, but pleasingly, we've seen on aggregate that 2.5% leasing spread is a record for the last 5 years or so. One other point that I will make is that leasing spreads for CQR have never gone negative, which I think is a very important point to make. And then with regards to the performance of the centers, whether it be in metro or out of regional locations. We have seen a fairly significant bounce back in some of our regional locations over this period, which I think really relates to the breaking of the drought. So there's been some good expenditure patterns in rural Australia, but also our Convenience Plus assets that trade in the shadow of major regional assets have performed exceptionally strongly as people shop for convenience and shop for their essential goods and services closer to home. So hopefully, that answers your question, Peter. Now there's no other webcast questions that we've received. So on that basis, I'll call and end to our discussions this morning. Thank you for joining us, and we look forward to one-on-ones with you over the next week. If you haven't scheduled a meeting and would like to do so, please reach out to Phil or Virly at Investor Relations. Thank you, and good morning.