Waypoint REIT (WPR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for joining us today at Waypoint REIT's 2023 Annual General Meeting, comprising the Annual General Meeting of the shareholders of Waypoint REIT Limited and the General Meeting of Unitholders in Waypoint REIT Trust. It is just after 10 a.m., and I am informed by the company's Secretary that a quorum is present. I declare the meeting properly constituted and open. Please take a moment to ensure your mobile phones have been switched to silent. My name is Laurence Brindle, and I'm the Chair of Waypoint REIT. Joining me today are my fellow directors, Georgina Lynch, Susan MacDonald, Stephen Newton, along with Waypoint REIT's Managing Director and CEO, Hadyn Stephens; our CFO, Aditya Asawa; and our General Counsel and Company Secretary, Tina Mitas, who are all present today with me in Sydney. Finally, please welcome our auditor, Jamie Wills from PricewaterhouseCoopers; and our returning Officer; Regi Harbron, from our registry provider, Link Market Services, who are also present here in Sydney. We are holding this general meeting today as a hybrid meeting. And before we begin, I'll quickly run through some procedural matters. Voting on the items of business today will be carried out by way of a poll. Securityholders had the option of casting their vote before the meeting or appointing a proxy to do so on their behalf. If you have not already done so, you can vote at today's meeting online or in person. You can do so at any time during the meeting starting from now as the polls are open now for voting. Voting will close shortly after the end of the meeting. If you need assistance with voting, please see the returning officer if you're attending in person or if you're participating online, please refer to the instructions in the Virtual Online User Guide available with your Notice of Meeting. [Operator Instructions] The Notice of Meeting was distributed on the 17th of April 2023 and will be taken as read. The formal part of the meeting comprises the presentation of the financial or directors' report and auditors' report for the year ended 31 December 2022 as detailed in the 2022 annual report, along with resolutions relating to the adoption of the remuneration report; the reelection of your Georgina Lynches Director and the grant of performance rights to the Managing Director and CEO, Hadyn Stephens. Before we move to the formal business of the meeting, I will provide a short overview of Waypoint REIT's performance for the 2022 financial year before handing over to our Managing Director, Hadyn Stephens, to provide a brief business update. As was the case in 2021, Waypoint REIT's key priorities in 2022 were portfolio management and capital management with 31 assets sold during the year for $146.8 million, and approximately 50 million securities or 7% Waypoint REIT's equity base bought back for a total outlay of $129.4 million at an average discount of 14% to the December '22 NTA. Since the commencement of its noncore asset sale program in December 2020, Waypoint REIT has now sold 71 assets or 15% of its portfolio for a combined sale price of $284 million, representing an average premium of 5% to book value. The disposal program has concentrated on smaller, less profitable sites with shorter lease terms in regional locations and has delivered a more resilient investment portfolio with lower risk. Over the same period, Waypoint REIT has now returned $303 million to securityholders via a combination of capital return and security buybacks. The continuation of Waypoint REIT's active capital management program in financial year '22, more than offset the dilution from noncore asset sales during the year. And Waypoint REIT was able to exceed earnings guidance with distributable earnings per security of $0.1648 delivered, representing 4.25% growth on 2021. Debt and interest rate hedging were another key focus for Waypoint REIT in 2022, with $275 million of debt refinanced in August and a number of interest rate hedging transactions completed throughout the year. As at 31 December 2022, Waypoint REIT is well positioned with gearing of 30.7%, which is at the lower end of our 30% to 40% target range; a weighted average debt maturity of 4.4 years; and 94% of our debt is hedged. Waypoint REIT has no debt facilities expiring until 2025. As at 31 December 2020 (sic) [ 2022 ], Waypoint REIT's investment portfolio consisted of 402 properties with a combined book value of $2.9 billion. The weighted average cap rate on these 402 assets increased by 16 basis points in 2022, to 5.28%, with 11 basis points of compression in the first half and 27 basis points of cap rate expansion since June. The recent softening in transaction markets and cap rate supports Waypoint REIT's decision to sell noncore assets at attractive pricing and returned capital to investors over the last 2 years. Finally, I would like just to highlight Waypoint REIT's relative total return performance in 2022, with Waypoint REIT outperforming the S&P/ASX REIT 300 Index by 23.7% over the calendar year. I would like to extend my thanks to the Board and the management team for their continued commitment to the success of Waypoint REIT. And to our investors, we thank you for your continued support. I'd now like to invite Hadyn Stephens to address the meeting.

Thank you, Laurie, and welcome to everyone attending in person or virtually this morning. Before we turn to the formal AGM agenda, I just wanted to provide you with a quick business update and an overview of our priorities for the rest of 2023. The key recent developments of interest for Waypoint REIT investors have occurred at our major tenant, Viva Energy Australia, which accounts for approximately 96% of Waypoint REIT's total rent income. In September last year, Viva Energy announced the proposed acquisition of Coles Express from Coles Group for a headline consideration of $300 million, and this transaction settled earlier this month. The acquisition of Coles Express brings to a conclusion the Alliance arrangements between Viva and Coles, creating Australia's largest fuel and convenience network under a single operator with more than 700 sites and substantially diversifying the earnings profile of Viva's Convenience and Mobility division, with convenience now expected to comprise around 30% of total earnings in this business segment. Last month, Viva Energy also announced the proposed acquisition of OTR from Peregrine Corporation for $1.15 billion, with completion anticipated to occur in the second half of the year, subject to regulatory approvals. OTR is a leading independent convenience retailer generating more than $3 billion of revenue annually, with nonfuel earnings accounting for more than 70% of OTR's annual gross profit. OTR has a network of 174 integrated fuel and convenience stores, primarily in South Australia, and the proposed acquisition supports Viva Energy's vision to be Australia's leading convenience retailer, with approximately 900 company-controlled stores across Australia and a pathway to more 1,000 stores via the OTR development pipeline. The acquisition will also further improve Viva Energy's earnings diversification with nonfuel earnings of Viva Energy's Convenience and Mobility division expected to increase to around 50%. Waypoint REIT believes that these acquisitions are very encouraging for the long-term future of our key tenant, and we expect to see significant redevelopment and upgrading of the Coles Express network by Viva Energy over the near-to-medium term, once the OTR transaction settles. Although it remains early days and Waypoint REIT does not currently expect any significant upgrades to occur this year, there is an opportunity for Waypoint REIT to be involved as a funding partner for this redevelopment program moving forward, subject to Viva Energy's funding requirements and agreement on mutually acceptable commercial terms. We will update the margin further progress on this front as appropriate. Turning to the management of Waypoint REIT's investment portfolio, as communicated in our full-year results in February, the transaction market for fuel and convenience real estate remains subdued, with transaction volumes currently trending in line with the second half of last year. We've seen a strong shift back towards metropolitan properties over regional properties, with metropolitan transactions comprising around 80% by number and 9% by value of transactions completed year-to-date. To date, cap rates generally appear to be holding up relatively well based on a small number of transactions completed, particularly for metro assets. However, we estimate that about half of all sales campaigns initiated in the first quarter of this year remain on the market today, and the slow clearance rate, particularly on regional assets, remains a watch point for cap rates moving forward. Waypoint REIT is not assuming any further noncore disposals in 2023 due to current market conditions. However, as previously disclosed, approximately 5% of the sites in our portfolio are currently considered noncore over the medium term, and we will continue to monitor market conditions for opportunities to sell some of these assets in the second half of the year. We're also looking closely at our South Australian sites leased to Viva to identify any that will be -- potentially be impacted by [ ACCC ] considerations of the OTR transaction, and to assess risks and options from Waypoint REIT if Viva was required to relinquish control of any of these sites. We also continue to monitor the market for high-quality acquisition opportunities that will improve the overall quality of Waypoint REIT's portfolio, noting that we are not as yet seeing opportunities that meet our acquisition and return criteria. This may change in coming months as the impact of the higher interest rate environment potentially flows through into pricing. However, to date, we have seen pricing and values hold up reasonably well for the highest quality assets, and we're not currently anticipating any acquisitions in 2023. As we look forward to the rest of the year, we do expect to see some further softening of cap rates for commercial property, including fuel and convenience. However, the extent and timing of this remains uncertain at this point. And the impact on Waypoint REIT's investment property valuations will be at least partially offset by rental reviews, with 93% of the portfolio reviews captured in the first half valuation cycle, providing approximately 16 basis points of cap rate insulation for the overall portfolio. Finally, I'm pleased to be able to confirm Waypoint REIT's guidance of $0.1648 for FY '23, which is in line with the result delivered in the last year. Key assumptions underpinning this guidance are listed on Page 9 of the presentation. Once again, thank you to everyone for attending today, and I'll now hand back to Laurie for the formal proceedings.

Okay. Thank you, Hadyn. I'll now move to the formal part of the meeting. Before we consider each item, there are a few procedural matters I would like to run through first. Firstly, this is a securityholder meeting and only securityholders, proxies, power of attorneys or authorized company representatives are entitled to vote or to speak at this meeting. Eligible securityholders or their duly appointed proxy or corporate representatives are entitled to vote and have been issued with a yellow voting card at the reception desk. Blue cards are for those entitled to speak but not vote. Visitors holding a red card are not eligible to speak or vote but are most welcome to listen. If you believe you do not have the correct card, please see the staff at the registration desk now. Before voting on each resolution, the results of proxy voting received at the close of voting at 10 a.m. on Tuesday, the 16th of May 2023, will be shown on the screen behind me. When you complete your card, please indicate the manner in which the votes are to be cast by placing a mark in the for, against or abstain box for each resolution. I advise the meeting that I intend to vote all discretionary votes given to me in favor of the resolutions in the polls. When the floor is open for questions, if you have a question, please make your way to the stationary microphones set up in the room. When called upon, please give your name, and if appropriate, who you represent and present your yellow or blue admission card. Please place your completed voting card inside the ballot boxes held by the share registry staff located near the exit of the room before closure of the poll. We will now move on to the items of business for this meeting as set out in the Notice of Meeting. The minutes from the previous AGM were approved by the Board and signed by myself as Chair. Copies are available should any member wish to see them. There are 4 items of business. Details of each item were set out in the Notice of Meeting.

Before we move to the formal items of business, we've received some questions that were general in nature that I will address now. The first question is, did Viva Energy Australia exercised its right to acquire any of the properties sold by Waypoint REIT last financial year? And the answer is no. The second question is why were so many properties sold by Waypoint REIT last year? Why weren't any properties acquired by Waypoint REIT in the last financial year? And is Waypoint REIT in wind up mode? It appears to be the case, judging by the purchases and sales for the last financial year. The answer is no, Waypoint REIT is not in wind up mode. Like many other commercial real estate asset classes, the market for fuel and convenience properties was particularly strong in 2021 and 2022 financial years. Strong pricing made it difficult for Waypoint REIT to acquire assets that met its sale of returns. And the decision was made to take advantage of that strong market conditions to dispose of noncore assets that we believe were relatively high risk in terms of tenant retention or negative rental reversions at the expiry of the relevant lease term. As I noted earlier in my opening remarks, Waypoint REIT sold approximately 15% of its portfolio over this period at an average premium of circa 5% to book value, with the sale proceeds effectively returned to Waypoint REIT investors by buybacks and capital returns. We believe this decision has been we indicated by the softer market conditions since these sales were completed, when interest -- rising interest rates resulted in a marked reduction in transaction volumes and higher capitalization rates across the sector. Effective portfolio management is a critical tool for real estate managers to maximize long-term returns for investors. And being willing to both buy and sell is particularly important in an asset class like field of opinion, where not all sites will survive the inevitable industry changes that will flow from the energy transition over time. Accordingly, Waypoint REIT will continue to acquire fuel and convenience assets moving forward, but only when we're able to buy high-quality assets at pricing that we believe will deliver acceptable long-term return. And we will continue to divest assets that we deem noncore to the portfolio when market conditions allow us to do so. The next question was why has Waypoint REIT installed an EV charging points in its properties? And will it be doing so? Well, first of all, Waypoint REIT is not the operator of the sites in its portfolio. We typically own the land, buildings and fuel infrastructure on each side and then lease the entirety of the site to the operators on a long-term triple net leases with quiet enjoyment rights. Accordingly, we do not have the ability to unilaterally install EV chargers on sites that we own, with the opportunity to do so sitting with the relevant operator. However, we do note the following 5 sites across our portfolio currently have EV charging infrastructure with Viva Energy having installed fast charges in partnership with an independent operator EV networks. We will continue to encourage and support our tenants in the installation of EV charging across our portfolio with installation typically requiring landlord approval for development consents and electricity easements. We are currently in discussions with an EV operator regarding a potential license arrangement on 1 property where we do own surplus land, which could see 16 fast chargers installed on that particular site. The next question is, does Waypoint REIT intend to establish or purchase any stand-alone EV charging stations? If so, will ever Viva Energy operate Coles Express on the sites? Well, we are not aware of any fuel and convenience sites in Australia that only offer EV charging, and even in more advanced markets such as Norway, sites typically still offer both EV charging and traditional fuels. Waypoint REIT is not a developer but if the opportunity arose in the future to acquire a site that offered purely EV charging, we would certainly consider it provided that it met our broader acquisition criteria, including the tenant covenant and noting that we're not restricted only owning sites leased by Viva Energy. The final general question before we consider resolutions for today's meeting is from the Australian Shareholders Association, which has asked, nonfuel tenants are a small component of Waypoint REIT's overall tenant mix. However, most of them seem to have their leases expiring over the next 5 years. Who are the nonfuel tenants? And are they expected to renew their leases? Waypoint REIT -- and the answer is Waypoint REIT currently has 14 nonfuel tenants primarily cafes, car washes and fast-food operators such as Hungry Jack's, Subway, Red Rooster and Domino's. It is typical in the industry for those nonfuel tenancies to have shorter lease terms than the fuel tenants that operate on the sites. Initial terms of 5 to 10 years usually followed by option terms of 3 to 5 years. The weighted average lease term on Waypoint REIT's nonfuel tenants was 3.3 years as at December '22, with nonfuel tenants comprising only 0.9% of Waypoint REIT's rental income. We are currently in discussions with 3 nonfuel tenants whose leases are expiring in 2023. And we are reasonably confident that these options will be exercised by the tenants. Beyond 2023, it's too early to speculate on the intentions of other tenants. However, we note that all nonfuel tenants have 5-year options at the end of their current lease. So let's move on to the first item, which is ordinary business, which is the consideration of the combined annual financial report for the company and the trust, including the directors' report and financial statements for the year ended 31 December 2022, together with the independent auditor's report, which was sent out to securityholders on the 30th of March 2023. A copy is also on our company's website. As mentioned earlier, Jamie Wills from PricewaterhouseCoopers, our auditor for the 2022 year, is in attendance. Please direct any questions that you have of our auditor through me. As you will notice from your polling cards, there will be no vote on this item. It is a discussion item only. Securityholders can ask questions and make comments about the reports and the management of the company. We received the following question from the Australian Shareholders' Association. Distributable earnings is a complicated measure that relies to some extent on judgment. It is used as a measure for the short-term incentive remuneration. Who calculates distributable earnings for the company, management or the Board? And why is this measure not audited? The answer is Waypoint REIT reports its statutory net profit on a 6 monthly basis to the ASX. Statutory profit forms part of the financial reports of Waypoint REIT and is audited by our independent auditor, PwC, in accordance with Australian accounting standards. Distributable earnings is a nonstatutory measure of profit and starts with the statutory net profit, which is then adjusted to remove transaction costs, specific nonrecurring items and noncash items. The Board views distributable earnings as being more reflective of the underlying recurring cash-backed earnings of Waypoint REIT. Items that are adjusted include noncash items such as the straight lining of rental income, the fair value adjustment to investment properties and derivatives as well as long-term incentive expenses. Specific nonrecurring items may also be adjusted. A full reconciliation between statutory profit and distributable earnings is provided on Page 18 of the 2022 annual report and in Note 1 of the financial statements on Page 46 of the annual report. In connection with their audit of the financial report, PwC's opinion also includes a review of other information in the financial reports, including distributable earnings to determine if it is materially inconsistent with the financial report or their knowledge obtained in the audit or otherwise appears to be materially misstated. PwC also audits the adjustments made to statutory net profit to provide at the distributable earnings. It's important to note that these adjustments are not unique to Waypoint REIT and are, in fact, common across the REIT sector. Distributable earnings is consistent with how the Board views the underlying performance of Waypoint REIT and are the basis for determining distributions to securityholders, which we want to ensure our source from recurring cash earnings of the group. Waypoint REIT has been consistent in using the triple earnings as its key measure for underlying performance since IPO. We also believe it's important and appropriate to align management KPIs to measure -- to this measure of performance. Are there any other questions? Is there anything online questions?

Yes. We've got 4 online questions in relation to this general business. First question is, how much did we spend on remediating disused petrol station sites in 2022? And is this spend likely to rise in future years? In terms of the overall cost sharing for the cleaning up of contaminated disused sites, please comment on the current split between landlords, tenants and governments and whether any system design changes are warranted, particularly in relation to the levying of environmental bonds to future -- to fund future remediation.

So that's the first question?

Yes.

So Hadyn, you should answer that.

Sure. So we didn't spend any -- there is no cost for remediation in 2022, and we've had no remediation costs since IPO in 2016. So the way it generally works other than the concept of polluter pays as we had contractual arrangement with Viva Energy Australia, whereby they -- at the end of lease terms, if they choose to leave, they're responsible for remediating sites to a certain level, which is consistent with service station usage. And then from there, any further remediation costs at Waypoint's expense. So the overall cost really depends on the level of remediation that's required and the alternate use of that site moving forward. So there's no rule of thumb or sort of industry averages or anything like that, that we can point to in terms of the cost on those sites. It would be very much site-specific based on what's happened on that side and the cost that's required to remediate consistent with the alternate use for that site. So I think our remediation costs will rise in the future. We don't have -- we don't know what that will be and when those costs will start kicking in. But with our major lease expiries not occurring until 2026, it's 3 or 4 years until we're going to start seeing those remediation costs come through for Waypoint. And I think there was another part of the question there around government policy. I don't think that's for us to sort of speculate on, David, to be honest. I'm just trying to follow the question. So that's the answer of the question, Laurence.

Okay. Thanks, Hadyn. Tina any other questions?

Our next question, is 7-Eleven Australia is reportedly for sale? How is their business structured in terms of the land ownership, business operations, use of local franchisees and the Japanese parent company? Have we registered an interest in participation in any aspects of the sale? And what industry implications could arise from any 7-Eleven sale?

In terms of the transaction itself, we understand it's purely the business operations of 7-Eleven, there's very little any real estate involved in that transaction. So as a REIT, we're obviously only interested in owning the real estate. So we don't have any particular interest in that transaction, and we haven't registered any interest in terms of consequences for the industry that would have been on who ultimately buys the operations. We've also speculation around the Japanese-based 7-Eleven looking at that business, but I'm sure there'll be plenty of international operators and domestic operators interested in that particular transaction. So we'll see how that plays out over the coming months.

The next question is, are auditor, PwC, has been in the news for all the wrong reasons recently. How long is their current contract to audit Waypoint REIT? And has the Board considered a change of auditor or bringing forward the next proposed tender process in light of the revelations about leaks of confidential federal government tax information to global clients to reduce tax? What is the history of Waypoint's relationship with PwC? Does it go back to the Shell relationship with PwC, which audited the global oil and gas [ giant ] from 2004 until 2017.

Yes. I'll answer that. I'm Chair of the Audit Committee. So the -- I'll try to pick up, if I miss anything, please hit me up, I'll go back to the history. The appointment of PwC originally was made premised on their significant experience with Viva and the oil industry generally. So in setting up the IPO, their experience was seem to be absolutely relevant at that time. A few years down the track, and I think it was at the point of internalizing management, we reflected upon who should be our auditor. We felt that the PwC audit team in Sydney had significant REIT experience and was recognized on that basis in the industry. And on that premise, we asked PwC to transfer their audit responsibilities to their Sydney office, and we had discussions with them as to who would the relevant best partners to do that. And as a consequence, we have who we have. We did run a tender for the audit in the '21 year. I think it was -- I'm saying corrected. So we ran a tender among a number of firms. I won't try to name them. And that tender resulted in us reappointing PwC but on reduced fee terms for that year. So that's, I think, the history. I think that answers the history of the question. In terms of the recent media issues surrounding PwC and some of their tax partners, that's really only transpired in the last short number of weeks, end dates. And to that extent, the Board has not met yet to consider that. I would say that we have asked PwC to tell us if any of the people working on our audit have any exposure to the current media questions, and the answer has been that's not the case. We've also asked them, did anybody at the time of the IPO back in 2016, where any of those people, are they currently implicated by the current media attention. We have not yet received that answer to that question because we only literally asked it this morning. So this is live and it's work in progress, and we will get that answer, I'm sure. I would say that at a personal level, I think the people that we have on the audit are some of the best auditors of REITs in Australia. So I'm comfortable with who we have. I think it's fair to say that we haven't yet appointed PwC for '22 -- for '23, and that would transpire in the normal course of events, and that will be considered in the normal course of events. I think that's the answer -- is that all the parts of the question?

The next question is, there was no mention in the formal address of electric vehicles and the global transition away from transitional fuel powered vehicles, a business we are clearly heavily reliant on. How many of our 402 sites currently offer electric vehicle charging and what role do you see for governments in rollout of electric vehicle charging stations?

Well, I'll take the first part, which has already been answered. We answered that question earlier in the meeting. But as for the role of governments and the rollout electric vehicle charging stations, I'll hand that to Hadyn.

I think the rollout of more charging stations is going to be a combination of government and private. Government runs really around funding assistance and incentives to assist private operators with the rollout of charging stations. There has been a pretty significant increase in charging stations across Australia in the last 12 to 18 months, but I think there is a real shortage of appropriately located, fast rapid charges to support transport in Australia at the moment. That's something we do think that will continue to change over time. And as I said, I think the key government role for that is really in providing cheap funding and incentives to profit operators to assist with that rollout.

Okay. Thanks, Tina. Are there any other questions?

There's one last question in relation to general business. And that is our registered offices in Docklands in Melbourne. So why is the physical AGM being held in Sydney today? Are we in Sydney -- or are we a Sydney or Melbourne-based company in terms of the senior executive team? And where do all the directors live?

Okay. Well, at the time of IPO, the entire executive team was resident in Melbourne. Since then with changes of staff, the executive team is now split between Sydney and Melbourne. The CEO and CFO both live in Sydney. The company secretary and legal lives in Melbourne along with several other of the staff. So we effectively maintain 2 offices. That has been quite advantageous for a small team like ours, particularly in relating -- in relation to recruitment and being having that flexibility, providing that flexibility has been beneficial to securityholders, we believe. And so I'll go back to this question in terms of the location of the senior executive team. I've just spell that out. So far as the directors are concerned, 4 of the directors, are Sydney-based and 1, myself, I'm Brisbane-based. It makes sense at the moment for us to hold meetings in Sydney purely because it's more cost effective for us to do so, less travel and so on. So that is why it's currently being held in Sydney. Are there any other questions?

Not for this item of business.

Okay. Are there any other questions on telephone? No?

Chair, I confirm there are no questions on the phone.

Okay. Well, thank you. This concludes our consideration of the financial reports. We now move to the substantive resolutions for the meetings. The next resolution is the adoption of the financial -- of the remuneration report. Under the Corporations Act 2001, listed companies are required to include as part of the director's report, a remuneration report, which includes specified information in respect of directors and key management personnel. The directors have prepared a remuneration report for the year ended 31 December 2022, which is included in Pages 25 to 38 of the annual report. The Corporations Act also requires companies to put to securityholders a nonbinding vote to enable securityholders to voice their opinion on matters included in the remuneration report. The Board will consider the feedback from securityholders when reviewing the company's approach to remuneration going forward. I note that voting exclusions apply to this resolution as set out in the Notice of Meeting. The Board recommends the adoption of the remuneration report. We do have some questions on this item. The Australian Shareholders' Association has asked, the Board chose to award the 2022 short-term incentive payment in full. We query the basis for this decision. For context, the first performance criteria of the STI was to meet the guidance of distributable earnings per share, which was 16.4% -- $0.164 -- $0.1648 was achieved in 2022, which just met this criteria. The second criteria was to exceed guidance, the EPS. The award of this component is based on a sliding scale determined at the board's discretion on the level of outperformance achieved. The actual outperformance achieved in 2022 was 0.2%. That is well below 1%. This is more a rounding error than material outperformance, yet the Board chose at its discretion to award 100% of this component. What was the extent of the sliding scale, which makes 100% payment for a 2% improvement? Can the Board please explain how it justified its discretionary determination? Will the Board undertake to provide more transparency on the second criteria in the future. The earnings-related components, So, the answer to that question -- all before mentioned was the question. My answer is the earnings-related components of the STI are set up so that in order to qualify for the first component, earnings guidance must be met. In order to qualify for the second component, the guidance must be exceeded. Once guidance has been exceeded, the Board can exercise its judgment based on a number of metrics, including the level of outperformance and in particular, the quality of the earnings outcomes that have been delivered and business achievements generally and also the foundations for the future performance that have been laid by the earnings that have been achieved. In 2022, the Board concluded that the delivery of the EPS that exceeded guidance in a challenging and unexpected macroeconomic conditions was also executing on Waypoint REIT's long-term strategy and investment objectives, warranted a full award of the outperformance component -- of this outperformance component of STI. The Board notes the ASA's request for more transparency on the outperformance criteria moving forward, and we'll consider ways in which this might be achieved whilst also retaining a suitable element of Board discretion. Are there any other questions?

And we've got one question on this item. Thank you for disclosing the proxy position to the ASX, along with the formal addresses. There was a 17% protest vote against the remuneration report. Did any of the 5 main proxy advisers ACSI, Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions, and what concerns did they raise about remuneration arrangements? Corporate voting is not a secret in Australia. Have you looked into who voted against and why?

The answer to the question is yes, we have looked into that, and we have engaged with the 2 proxy advisers that elected to vote against this item. They were Ownership Matters and ACSI. And so we naturally enough, have been very interested in how they got to that point. We understand the main concern relates to the treatment of LTI expense and nonrecurring costs, which we have excluded from distributable earnings in FY 2022 and the flow on -- and any flow-on impact that may have had on executive remuneration. Our position is that the treatment of LTI expense being noncash and nonrecurring costs is consistent with Waypoint REIT's definition of distributable earnings, and we do not currently intend to make any changes to the definition. We haven't made a definition up to this point either. And as I mentioned, we have engaged with both of those proxy advisers who voted against us on this report. Any other questions, Tina?

No online -- no further online questions on this item.

Are there any telephone questions, moderator?

Chair, there are no questions on the phone.

Okay. Are there any questions from the floor? Okay. There being no further discussion, I will now move that the remuneration report for the year ended 31 December 2022 be approved by passing an ordinary resolution as set out in the notice of meeting. The resolution and proxy position now on the screen. And I would ask you to please mark your voting card for item #2. [Voting]

We'll now move to Resolution 3 in the notice of meeting, the reelection of Georgina Lynch as a Director of Waypoint REIT Limited. Georgina Lynch is eligible to stand for reelection, and Georgina's biographical details are set out in the Notice of Meeting and in the annual report. The Board, with Georgina Lynch abstaining, recommends Georgina Lynch's reelection. I now move that Georgina Lynch retire by rotation under Clause 18.1(f) of Waypoint REIT's constitution, and being eligible, is reelected as a Director of Waypoint REIT. Are there any questions?