Ladies and gentlemen, thank you for standing by, and welcome to Charter Hall Social Infrastructure REIT 2024 full year results briefing. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to queue for a question, you will need to press star one one on your telephone keypad and wait for your name to be announced. Please note that this conference is being recorded today, Wednesday, the 14th, August 2024. I would now like to hand the conference over to your host today, Mr. Travis Butcher, Fund Manager. Thank you, sir. Please go ahead. Good morning, everyone, and welcome to CQE's results presentation for the full year ending 30 June 2024. Presenting with me today is Scott Martin, Head of Social Infrastructure REIT Finance. I'd like to commence today's presentation with the acknowledgment of country. Charter Hall acknowledges the traditional custodians of the lands on which we work and gather. We pay our respects to elders, past and present, and recognize their continued care and contribution to country. Turning now to slide 4. Key highlights for the year were as follows: CQE delivered operating earnings of AUD 0.16 per unit for the year. Distributions paid to unit holders during the year were also AUD 0.16 per unit, consistent with the FY 2024 distribution guidance. During the year, we continued with our active portfolio curation, divesting 12 childcare properties for AUD 40 million. Pleasingly, these were completed at a premium of 4.1% to their previous carrying value, an average yield of 4.7%. We also contracted to acquire two childcare centers in Adelaide with Edge Early Learning, having in excess of 50 centers nationally. This transaction, which comprised the acquisition of an existing center and also a fund- through development, amounted to AUD 10.8 million on a 6.1% yield. From a balance sheet perspective, NTA per unit as at 30 June 2024 was AUD 3.82 per unit, which is down 5.4% on the NTA, as at 30 June 2023, of AUD 4.04. Primarily reflecting the revaluation decrement across the property portfolio in the year. In January 2024, CQE successfully refinanced its debt, moving to an unsecured platform, and also extended its debt maturities, resulting in the fund's debt maturity sitting at a healthy 3.9 years as at 30 June 2024. The fund is also well hedged, with current hedging in place for 86% of the current drawn debt. CQE's portfolio is very well positioned in this current environment, with a strong WALE of 12.4 years, 99.8% occupancy, and achieving a weighted average rent review of 3.4% for the last 12-month period. Moving to slide 5, and the social infrastructure market which CQE invests in. Social infrastructure is a growing asset class in Australia, with significant future growth opportunities for CQE. Key thematics driving this are both a growing and aging population in Australia, with estimated population growth of 3.9 million people or 15% over the next 10 years. This growth will require significant investment in social infrastructure in the future. As you can see on the graph on the right of this page, CQE has existing investments in a number of social infrastructure subsectors. These are our key areas of focus, where we will see further opportunities for growth and tenant diversification. Due to the essential nature of the services provided from these properties, the tenants are either government-backed or operating in government-supported sectors. We are particularly focused on sector-leading and well-capitalized tenants, improving CQE's overall tenant covenant quality. Due to the need to be close to the end users of the services, these assets are situated in strategic locations, which result in long leases and high tenant retention due to the specialized nature of these assets and limited alternative locations. In terms of government support for childcare, the federal government has recently announced they will fund 15% wage increases to childcare workers over the next two years, totaling AUD 3.6 billion. This is in addition to the existing annual government funding, which is expected to grow to AUD 16 billion in FY 2027. And finally, due to the stable and resilient nature of these assets, with long leases, annual rental increases, and provision of essential services, social infrastructure assets have lower correlation to economic cycles than other property classes. These factors also drive private investor demand for these assets, providing ongoing liquidity. Turning to slide 6, and the factors driving returns. CQE has a diversified portfolio of 355 properties across Australia, with an average property value of AUD 6.1 million. Providing essential services to the community, the location of CQE's portfolio is heavily weighted to the metropolitan locations, amounting to 83% of CQE's income. CQE has high underlying landholdings, totaling 108 hectares. 62% of this is residentially zoned, giving CQE the benefit of an additional alternative use value driver as population density increases in Australian metropolitan cities. 75% of CQE's leases are triple net leases, where the tenant is responsible for the payment of all property outgoings, including rates and taxes, insurance, and all repairs and maintenance of the properties. This ensures for these properties there is no cash flow leakage over the lease term. Income growth is predictable, with 79% of lease income subject to an average of 3% annual fixed escalators. Finally, the leases contain periodic market reviews, which provide an opportunity for CQE to capture any rental reversions throughout the lease term. Income subject to market reviews amounts to 48% over the next 5 years, which will provide future rental growth for CQE due to the current under-renting across the portfolio. Moving to slide 7 and CQE strategy. CQE's strategy remains unchanged, which is to provide investors with secure income and capital growth through exposure to a diversified social infrastructure portfolio. We do this by focusing on enhancing income sustainability and resilience of the assets we own, targeting ongoing capital growth, and undertaking continual portfolio curation. As discussed, we see the attributes of social infrastructure assets, such as strategic locations, long leases, predictable income growth, and government-supported industries, all critical components to CQE delivering on its strategy. Turning now to slide 8 and ESG. We remain focused on implementing sustainability initiatives across our portfolio, and consider ESG as a driver of long-term value for the fund. Key points to focus on from a CQE perspective are: firstly, the continued solar rollout in partnership with our tenant customers. During FY 2024, we installed 945 kW of solar across 51 childcare centers, bringing CQE's total solar installed across the portfolio to 1.5 MW. This will assist CQE to better understand and measure tenant operational performance through information sharing, which is currently not available under existing lease arrangements. Secondly, the strength of our tenant customer partnerships continues to improve, with an external party survey showing an NPS score of + 81, up from 52 in the previous year, and a very strong customer engagement score of 92. Finally, we're really pleased to be able to extend our partnership for a further 2 years with major tenant customer, Goodstart, and their Early Learning Fund, that provides families and children facing hardship with fee relief for early learning and care. I would now like to hand over to Scott to provide an overview of the financial performance of CQE. Thanks, Travis, and good morning to everyone on the call. A summary of CQE's earnings for the year can be found on Slide 10. Net property income has increased by 5.8% compared to the prior period, and has been driven by like-for-like growth of 3.4%, with a balance generated from property acquisitions, development, and disposal activity. Finance costs have continued to increase, driven by a 0.4% increase in CQE's weighted average cost of debt, from 4.1% in FY 2023 to 4.5% in FY 2024. This has resulted in CQE delivering operating earnings of AUD 59.5 million, a 0.5% increase on the prior corresponding period. This equates to earnings per unit of AUD 0.16. Distributions paid for the year also amounted to AUD 0.16 per unit. Turning to slide 11, which provides a summary of CQE's balance sheet position at 30 June 2024. During the year, CQE has divested AUD 44.1 million of childcare properties, which have settled at or above prevailing book values. CQE independently revalued 100% of the portfolio during the year, with a net property valuation decrement of AUD 65.8 million recognized as at 30 June 2024. The net property valuation movement has been the main driver of the movement in NTA, which has decreased by 5.4% from AUD 4.04 per unit at 30 June 2023 to AUD 3.82 per unit at 30 June 2024. Turning to slide 12, which provides a summary of CQE's capital management initiatives. In January 2024, CQE completed a full refinance of its debt facilities of AUD 850 million, which included moving the facilities to a new unsecured platform. The new unsecured debt platform provides CQE with increased operational efficiency and flexibility, and provides it with the opportunity to access a wider variety of debt capital markets moving forward. As a result of the resilient nature of CQE's property portfolio, there has been no material movement in gearing metrics, with CQE's balance sheet gearing sitting at 33%, which remain within CQE's target gearing range of 30%-40%, and provides considerable headroom to gearing covenants. CQE has diversified funding sources with no debt maturity until July 2027, and a weighted average debt maturity of 3.9 years. CQE's current weighted average cost of debt is now 5.1%, following the execution of a zero-cost swap restructure. The restructure has increased the average FY 2025 hedge rate from 2.7%- 3.1%, while reducing the average hedge rate in FY 2026 from 3.6%- 3%. CQE now has a market cost of debt, which better positions it to sustainable future growth. CQE has average hedging of 81% in place for FY 2025, at an average rate of 3.1%, providing near-term protection against current volatility in interest rate markets and headroom to ICR covenants. There has also been no change to hedging levels in place for FY 2026 and FY 2027, which remain at 56% and 28%, respectively. I will now pass back to Travis to continue with the presentation. Thanks, Scott. On slide 14, we summarize CQE's portfolio. CQE's portfolio metrics remain strong, with the portfolio at 99.8% occupancy, with the WALE sitting at a very healthy 12.4 years, and a passing yield of 5.2%. From a tenant customer perspective, CQE's tenants now include both federal and state governments and sector-leading corporate tenants providing essential services. The credit metrics of the tenants are of particular importance to ensure the ability to pay rent over long lease terms. We've set out in the graph on the bottom right of this page, CQE's rent review profile for the next 5 years, which highlights a stable and predictable income growth profile. As you can see, for FY 2025, 67% of income is subject to fixed reviews, which average 3%. 19% is linked to CPI, with the remaining 14% subject to market reviews. Weighted average rental growth for the 12 months to 30 June 2024 was 3.4%. During the year, CQE has contracted to dispose of 12 childcare assets for total consideration of AUD 40 million at an average yield of 4.7% and a 4.1% premium to previous carrying values, demonstrating the higher quality of CQE's portfolio. It's also worth calling out that the average yield after deducting non-recoverable multiple holding land tax was 4.4%. The disposal rationale for each varied, but was a combination of smaller centers with average places of 72, shorter WALE, averaging 5.6 years, and centers with higher non-recoverable property outgoings. Post 30 June, we've also contracted for disposal a further three properties in Sydney and Adelaide, for total proceeds of AUD 27.9 million, representing a 4.8% premium to the 30 June 2024 valuations and a weighted average passing yield of 4.5%. As previously mentioned, we've also contracted to acquire two childcare centers with Edge Early Learning, a tier 1 childcare operator with greater than 50 centers nationally. This transaction adds two properties with 15-year triple net leases on a 6.1% yield to the portfolio. It should also lead to additional childcare growth opportunities for CQE in the future. Both properties are expected to settle in the coming months, with the fund- through development also generating a coupon return throughout construction. Moving to slide 15. Lease expiries in the next 5 years remain low, at 2.4% of CQE's total lease income, highlighting the importance of the property and lease terms of the tenant's operations, and also the option notice period required on the leases, which typically ranges between 3 and 5 years. It's also worth noting that only 0.6% of lease income is true expiries, where there are no tenant options. Turning to slide 16, which provides further detail on the strong rental growth potential of CQE's portfolio. Over the next 5 years, 48% of CQE's rental income is subject to market reviews. These reviews are all childcare properties and will allow CQE to capture rental growth from under- renting across the portfolio. As you can see in the graph, market rents have grown at 3.9% per year for the last 10 years. By contrast, CQE's portfolio, on a like-for-like basis, has grown at a rate of 2.9%. In the last 12 months alone, market rents have grown at above 8% to an average market rent per place of over AUD 3,900. This compares to CQE, with average rents of AUD 2,859 per place. When setting market rents, it is common practice to take into consideration the operator's fees, which have historically seen strong growth, and based on our tenant data to March 2024, grew by 9.5% year-on-year. As part of the valuation process, CBRE assessed CQE's portfolio as approximately 15% below open market rents. This is supported by CQE's net rent to revenue calculation, which currently sits at 10% and is clearly below market parameters. CQE's ability to strike full market rents is partially restricted by a 7.5% cap in the majority of market rent reviews. However, these reviews occur every 5 years, providing regular opportunities to capture this under- renting. In terms of timing of the market reviews, 14% of income or 74 leases are subject to market reviews in FY 2025. 78% of the reviews in FY 2025 occur in April and June, so the full year impact of these reviews will not benefit CQE until FY 2026. During the current year, four market reviews were completed, with an average 5.8% increase achieved across these properties. Turning to slide 17, which provides a summary of portfolio valuations. During the year, CQE independently revalued 100% of the portfolio. The portfolio saw a like-for-like valuation decrease of 2.2% or AUD 48.5 million, with the average passing yield of these properties increasing from 5% at June 2023 to 5.2% at June 2024. The valuation decline has been driven by a mild cap rate expansion across the portfolio, partially offset by portfolio rental growth during the year. As at 30 June 2024, CQE's long WALE social infrastructure assets are valued on an average cap rate of 5.7% and have been impacted to a greater extent during this valuation cycle. At 30 June 2023, the cap rate on these assets was 4.9%. As can be seen from the graph on the right, the value of direct market childcare transactions recorded in the twelve months totaled AUD 565 million, which is up on FY 2023. Transaction yields have slightly increased from 5.2% in FY 2023 to 5.4% in the current year. As has been proven in previous property cycles, due to the asset size of childcare properties, there is still liquidity in the market, as purchasers are often not reliant on borrowings to make property purchases. It's worth noting the importance of the quality of the underlying tenant and location of the center in relation to sales yields achieved. For example, our analysis has shown that sales of properties leased by tier 1 operators, who own greater than 50 centers, transact at circa 40 basis points tighter yields when compared to other properties leased to smaller tier 3 operators. Investors continue to be attracted to properties in essential sectors, which typically have long leases and operators having favorable demographic and government funding tailwinds. The demand for these assets has continued post 30 June 2024, as evidenced by our recent three childcare divestments, transacting at an average yield of 4.5%. Moving to slide 19 and the outlook and guidance. We'll continue to execute CQE's strategy to actively manage the diversified social infrastructure portfolio, which it delivers essential community services. We continue to see social infrastructure as a growing asset class, with long-term opportunities for future investment for CQE. Key thematics driving this are both a growing and aging population, which will require significant social infrastructure investment. As outlined earlier in the presentation, CQE has restructured its FY 25 and FY 2026 hedging, which has resulted in a lower FY 2025 distribution than would have been otherwise. However, this has now reset CQE's cost of debt closer to the current spot market, providing the opportunity for sustainable growth moving forward. Today, we confirm that based on information currently available and barring any unforeseen events, the FY 2025 forecast distribution guidance is AUD 0.15 per unit. We're also announcing today the temporary suspension of the distribution reinvestment plan. That concludes the formal component of our presentation. I'll now hand back to the operator and open the line for your questions. Thank you. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone and then wait to hear your name announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Steven Tjia with Barrenjoey. Your line is open. Morning, Travis, and Scott. Could you just talk about your expectations for FY 2025 leasing spreads? And your portfolio is what, 16% under rented, but you got a 5.8% spread in 2024. Yeah, Steve, it's just, I suppose with the four we got this year, each of those leases have individual circumstances, so those ones had they were only 5 years into their lease term, so had been reset a lot closer to market. In terms of the 14% we've got in 2025, a lot of those relate back to properties that have been the lease commencement was in sort of 2000s. So we expect, and as we sort of detailed through a number of metrics on, in terms of the under renting, 10% rent to revenue, the CBRE assessment being 14%. Like, the other thing I suppose to note is the restriction with the caps, but we'd expect on average to get pretty close to the caps, 7.5 on most of those leases. Obviously, subject to negotiation, but I think as we've sort of detailed, in the presentation, there's quite a lot of evidence to say the portfolio is under rented. Thanks. And, just thinking about your hedge restructure, can you just talk about what your FY 2025 guidance would have been if you hadn't restructured? And I guess just some of the key drivers as to the decision to, kind of, look to smooth out your earnings from years? Yes. Thanks, Steve. Look, we're not providing earnings guidance today. Obviously, we've set DPU at AUD 0.15. I think I called out on the in the call, what the levers that we've moved, so that fixed rate's gone up circa 40 basis points in FY 2025, over an average of AUD 600 million of hedged debt. Okay, thanks. And just one quick one just on that. You talked about moving to an unsecured debt platform. What kind of costs are you saving there? I think when we flagged, we flagged when we moved to that unsecured platform at the half year, that there was circa a 5-10 basis points increase in the average margin, that we're paying there. But, we would have been paying an additional margin with a new secured platform, so it's probably an extra 10 basis points. Okay. Thanks, Scott. Thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Solomon Zhang with J.P. Morgan. Your line is open. Morning, Travis and Scott. Just on the DRP suspension, could you just elaborate on your thinking there? You've had it on for a while. Why suspend it now? And you call out, it being temporary. So what would cause you to flick it back on? Oh, Solomon, yeah, we've, we see the value in the DRP that the retail investors place on it, so we were reluctant to suspend it. Obviously, CQE has traded at a discount to NTA for a considerable period now, so that was sort of the key decision around suspending that discount to NTA. Obviously, we're hopeful that that will, that gap will close over time, and then at that point, we'd look to turn it back on. But I think it's a valuable tool, and retail investors really value it. So we're reluctant to do it, but just that discount to NTA was sort of the key decision. Yep, so I guess you'd turn it on when that narrows a bit? That's right. Yeah. And just, there's a decent spread that's opened up between your long-WALE social infra assets and your childcare initial yields. Are you seeing many opportunities to recycle childcare assets into social infra, or is it still pretty hard to acquire some of those social infra assets right now? Yeah, I think on that point, I think where we're seeing. We've been really successful, sort of the AUD 40 million divestments we did in FY 2024, the subsequent AUD 28 million, subsequent to 30 June. At the moment, we're getting some really good accretion, earnings accretion, just through repaying debt and reducing gearing at the moment. So that's working well from sort of financial metrics point of view. Probably your second question around opportunities, I think you've just got to look at current cost of capital, where we are at the moment. It does make it challenging to make acquisitions. So I think at the moment, the sort of portfolio curation or recycling will be just focused on debt reduction and reducing gearing. Yep. So probably still a net seller of childcare assets, at least for the next, you know, short-term period? Yeah, and that's subject to pricing. Like, I think if we can still deliver sub-5% results, which we're pretty happy with, it sort of makes sense to do that, just where current cost of debt is sitting. So I think, yeah, at the moment we are, but it's all subject to pricing, really, on that sell. Yep. Got it. Thanks for your time. Thank you. As a reminder, ladies and gentlemen, that's star one one to ask a question. Please stand by for our next question. Our next question comes from the line of Ben Brayshaw with Barrenjoey. Your line is open. Hi, Travis. I was wondering if you would consider the potential sale of one or more of the social infrastructure assets, because, I guess, just, on the presentation, you've divested a number of childcare assets this period and contracted to settle more in FY 2025. But the contribution to a reduction in group gearing and improvement in overall flexibility would be less than the potential divestment of one of the larger, more so relevant social infrastructure assets. So I was just wondering if you could perhaps comment on that. Yeah, no, thanks, Ben. I think the fortunate thing with childcare is, has been in all property cycles, that liquidity has held up well. I've seen it back to the GFC days, where we're able to sell these assets through those periods, so that's been a consistent theme, and that's really just been price point driven, largely. I think with some of those larger, long-tail social infrastructure assets, just really where the interest rate cycle is at the moment in the property cycle, it's probably not in the best interest for CQE to sell some of those larger ones, just because there's not that buyer demand at this point in time for them. And the price you would get, obviously wouldn't be a great outcome for CQE investors. We always review all of our assets and look at what's the best outcome for CQE. It's certainly we look at them, but I think as we sit here today, the childcare is getting those sub-5% results as it's giving us that better outcome in terms of that portfolio curation. Yeah. I guess what we're just trying to understand is how attractive you might view a potential share buyback, given that, based on your revised NTA, stock's 34% below its stated asset backing, and there is implied value in the share price. Yeah, well, with a buyback, it's something we'll always consider. It's not off the table, but at the moment, as I sort of said previously, I think we're getting our key focuses, using those proceeds of disposals to reduce debt and reduce gearing at the moment, but something we'd consider down the track. Great. Thanks, Travis. Thank you. Please stand by for our next question. Our next question comes from the line of Murray Connellan with Moelis Australia. Your line is open. Morning, Travis. Morning, Scott. I was wondering whether you could just put a bit more color around your comfort levels on as it relates to gearing. You obviously mentioned that you're looking to get gearing a bit lower than where it is now. Where would you like to see that number? And I guess, how do you see that capital management piece playing out over the course of the next two years? Yeah, thanks, Murray. Look, I think our target gearing range is 30%-40%. We're at the low end of that range. I think for every sort of AUD 30 million of divestments we're doing at the moment, that's about 1% reduction in gearing. If we can get that around 30, 30%, that's something we feel very comfortable with, you know, with the strong headroom to covenants. And at the moment, we're getting the added benefit that, you know, the childcare divestments are accretive as a result of using those proceeds to retire debt. But yeah, comfortable at where we are, but probably looking at that 30% is a good position to sort of land on. Thanks. Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Travis for closing remarks. Thanks, everyone, for your participation and questions today. Look forward to seeing a number of you over the coming weeks, and if anyone's got any questions, please feel free to reach out. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.