First Property Group (LSE:FPO) — AGM Proceedings 2022

0:01 Good afternoon, ladies and gentlemen, and welcome to the FIRST PROPERTY GROUP PLC AGM. The screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives today. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. I'd now like to hand over to Chairman, Alastair Locke. Good afternoon.

0:29 Thank you very much, and thank you everybody for joining the meeting and, participating. We're going to run the, formal part of the meeting initially, and go through the the the various resolutions. I will then make an AGM statement, and then we'll be happy to move on to question and answers thereafter. So without further ado, I'd like to welcome everybody here for the AGM of the company and all the shareholders who are watching via the live presentation. I'm Alice Alok. I'm the group's chairman. I'll be chairing the meeting, and I will introduce you to my colleagues. Peter Moon on my right, your left, as you look at it, is my fellow nonexecutive director.

1:15 Ben Habib is the chief executive. Laura James, our financial director. Jill Aubrey, who you may just be able to see as our company secretary, and Jeremy Barkis, our business development officer. So the formal matters at this meeting relate to the report and accounts for the year to the thirty first of March twenty twenty twenty two. And with the consent of those shareholders present, I would like to take the notice of the meeting as set out on pages 77 to 78 of the report and accounts as read. Thank you. I will now ask that I take the report of Haynes Watts as set out on pages 36 to 41 of the report and accounts as read also. Thank you. The company shareholders have been able to submit questions in advance of this meeting, and they'll also you'll also have the opportunity to submit questions during the meeting via the live presentation, and we'll deal with those at the end of the formal business.

2:12 I declare that the quorum required by the articles of association of the company's present and that the meeting is therefore properly constituted. And on your seed screens, you should now see hopefully, the ordinary and special resolutions being proposed. And after there has been a show of hands on each resolution, I'll advise you the proxy count. So resolution one.

2:37 I now propose that the report of the directors and the audited accounts for the year ending 03/31/2022, now submitted to this meeting, be approved and adopted. I'll ask mister Peter Moon to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. Those in favor?

2:57 Those against?

2:59 The resolution has been carried. The proxy vote was 42,200,098 shares in favor, 1,910 against 19,395 abstentions. Resolution two is to declare and approve a final dividend of 0.25p per ordinary share for the financial year ending 03/31/2022. And I'll ask mister Peter Moon again to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. I put it to the meeting. Those in favor?

3:33 Those against?

3:35 I declare the resolution carried. The proxy vote was 42,202,008 in favor. No shares against 19,395 abstentions. Resolution three. I now propose,

3:56 resolution number three whereby mister Poon mister Peter Boone be reappointed as a director of the company. And I will ask mister Jeremy Marcus to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. I put it to the meeting. Those in favor, those against. I declare the resolution carried. Proxy vote was 30,963,932 in favor, 28,719 against, and eleven million two hundred and twenty eight seven hundred and fifty two abstentions.

4:31 I now propose resolution number four whereby mister Ben Habib be reappointed as a director of the company. And I will again ask mister Jeremy Barker to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. I put it to the meeting. Those in favor? Those against?

4:48 I declare the resolution carried. The proxy vote was 42,000,000 a 173,289 in favor, 28,719 against, 19,395 abstentions. I now pro propose resolution number five, whereby the directors be authorized to reappoint Haines Watts as auditors of the company to hold office from the conclusion of the meeting until the conclusion of the next general meeting of the company at which accounts are made.

5:20 I will ask mister Peter Moon to second the proposal. I have much pleasure in seconding the proposal. Those in favor? Those against?

5:30 I declare the resolution carried. The proxy vote was 42,201,508 in favor, 500 against 19,395 abstentions. Resolution number six. I now propose resolution number six whereby the directors are authorized to fix the remuneration of the auditors, and I will ask mister Peter Moon to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. Those in favor?

5:58 Those against? I declare the resolution carried. The proxy vote was 42,202,008 shares in favor. No shares against. 19,395 abstentions. I now propose resolution number seven set out in full on page 77, which is an ordinary resolution and requires authority to authorize the directors to allot shares and grant rights to subscribe for or to convert any security into shares.

6:30 I now propose that the directors be authorized to allot shares and or grant rights to subscribe for or to convert securities in accordance with the terms of resolution number seven, and I'd ask mister Jeremy Barks to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. I put it to the meeting. Those in favor?

6:49 Those against? I declare the resolution carried. The proxy vote was 30,750,066 in favor, 11,451,942 against, with 19,395 abstentions. Now resolution number eight. I believe that the result of the vote on resolution number eight will be different if I call a poll. And I'm going to demand a poll to be taken as I'm entitled to do so under article 74.1 of the company's articles of association. I will mention that the proxy vote was 30,684,442 shares in favor, 11,500,000 11,514,666 shares against with 22,295 abstentions.

7:44 It will take some time to complete the PROPERT procedure, and the final results of the voting on resolution number eight will be announced through our regulatory information service soon as reasonably practical. Each shareholder proxy and corporate representative will be issued with a poll card. If there's anyone who thinks they should have a poll card but doesn't have one, please raise your hand.

8:06 I should mention for the those shareholders who have already lost a proxy, they do not, of course, need to chain to complete a poll card unless they want to change their vote. You have three options for each resolution. You can vote for the resolution, against the resolution, or you may withhold your vote. A vote withheld is not a vote in law and will not be counted in the calculation of the proportion of the votes for against a resolution

8:31 or against. Will you please complete your poll card by ticking the appropriate box depending on how you wish to cast your vote?

8:39 Please then sign the poll card and indicate you've done so by raising your hand. The company secretary will then come around and collect your completed poll card. I now propose resolution number eight as set out in full on page 77.

9:21 Is a special resolution that requires authority to authorize the directors to disapply statutory preemption rights in respect of new allotments of shares and the sale of treasury shares. I now propose that the directors be authorized in accordance with the terms of resolution number eight, and I'd ask mister Jeremy Barker to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. Can you please vote now?

9:58 I declare the poll closed. I now propose resolution number nine as set out in full on page 78, which is a special resolution and requires authority authority to authorize the directors to purchase on behalf of the company its own shares in accordance with the terms of resolution number nine. I'd ask mister Jeremy Barks to second the proposal. Mister chairman, I have much pleasure in seconding the proposal. I put it to the meeting. Those in favor? Those against? I declare the resolution carried. The proxy vote was 42,030,532 in favor, a 168,576 against, and 22,295 abstentions.

10:45 So, ladies and gentlemen, that now concludes the formal part of the business of this meeting. And I will now like to read a statement which was released on the regulatory news service this morning. FIRST PROPERTY GROUP PLC, the property fund manager and investor with operations in The United Kingdom and Central Europe, will hold its annual general meeting today at twelve noon. The AGM is being held online by our investor meet company and at the company's head office in London. The meeting will be chaired by Alastair Locke, chairman of the board. And at this meeting, I will make the following statement. Since its financial year end on the 03/31/2022, the group has leased additional space at its office building in Gdanje, Poland, increased its share in Bluetar Warsaw by 32 to 80%, and sold a property owned directly by the group in Turini, Romania.

11:44 Total funds under management at the 08/31/2022, including properties owned directly by the group, amounted to £547,500,000 compared to £558,700,000 at 03/31/2022. The reduction of £11,200,000 from the financial year end is due to the sale of three properties properties in The United Kingdom for 21,100,000 by funds managed by FIRST PROPERTY ASSET MANAGE LIMITED Management Limited and the sale of the group's directly owned warehouse in Cereni, Romania for £3,050,000,000. These sales were offset by inter aliar, purchase by the group of a further 32% of Blue Tar Warsaw for £7,200,000.

12:32 Third party funds under management as of 08/31/2022 amounted to £499,400,000 compared to £516,500,000 at the March 31. Group cash as at 09/21/2022 amounted to £6,340,000. At the 03/31/2022, this figure was 6,420,000. This equates to 5.75p per share as per compared to 5.81 per share at the March 31. That is the end of our AGM statement. And so we are now happy to answer any questions that have been submitted in advance or during the meeting.

13:23 And I would also like to direct all of those present either here or online to our preliminary results presentation, which is available via the investor meet company platform or on our website. And we will now answer your questions. Thank you very much, Alastair. Our prelims were back in June, and I think just before I answer questions, perhaps it would be helpful for shareholders to have a brief synopsis of of the group and our prospects of, you know, since since June when we last reported. The principal changes in the group, as Alisa mentioned, include the sale of the warehouse in Tureni, which we sold for €3,600,000, having bought it for €2,000,000 back in the depths of the credit crunch.

14:15 So that produced a healthy profit after cost of about €1,300,000, just over a million quid, I think. We also bought another 32% of Blue Tower, which equated to 7,000 square meters of the building. 2,000 square meters of the 7,000 we bought was leased was leased back to the vendor, a bank called PIKO Bank, a local Polish bank, and the remaining 5,000 square meters is vacant, requires a new ventilation system and a complete upgrade before we can lease it. And we are now going through the process of that refit so that the property can be leased. The Warsaw office market, surprisingly, perhaps given all the negative news in The United Kingdom, is quite buoyant.

15:08 The Polish economy is buoyant. Inflation is up, but with high inflation has come virtually a complete stop to new development of offices in Warsaw, which has meant that you've got constrained supply with reasonably buoyant demand. And we're already beginning to see rates firm up in in in Warsaw in Warsaw. And if things continue as we expect them to, I would I would hope that the new investment we've made in Blue Tower would pay off extremely well. It's worth also bearing in mind that the purchase price that we paid of just over £7,000,000 is phased in seven payments over six years. So the property should, from a internal rate of return perspective, throw off a very good return for the group anyway just as a result of that of that, of that phasing.

16:03 But we now own 80% of Blue Tower. It's our biggest asset in the group. Any shareholders who know Warsaw will know that it is a prime location. And after the works that we've done to the building so far and will continue to do to the space we just bought, it will be a first class building. So I think, with a fair wind and without the you know, as long as the economy doesn't implode, we should exit that property eventually extremely elegantly and satisfactorily. The other change since the since I last spoke to shareholders really revolves around refinancings that we've done in the group. So we refinanced a property in Cluj, which we only have a minority interest in, but that released some free cash, to the group.

16:56 We also are in the process of refinancing three other properties in Poland, which should free up another €2,500,000 of capital for the group. And, of course, we leased up a significant amount of space, as Alastair mentioned I think you mentioned Alastair, in our vacant property in Gdynia, which is now 4,000 square meters or just over 40% of that building is now leased. It's 13,350 square meter building, and we have continued healthy demand for office space in it. So with the Polish economy doing relatively well, I would expect the Gdynia property to continue that trajectory of being let up and hopefully be fully leased in the next year, year and a half.

17:49 It is a sizable amount of space that we still have, nine nine thousand square meters. The big the big upside to the group does, in fact, come from the leasing of vacant space that we already have in the group. The 5,000 square meters that we just bought in Blue Tower, the 9,000 square meters remaining in Gdynia. We also have a 23% interest in a company called Phoenix Limited, which owns a an office park in Krakow where 40,000 square meters of offices is vacant. And as we lease this these properties up, we will naturally see first property groups profits rising. And on the back of our profits rising, obviously, our cash reserves growing as well.

18:34 Though having said that, in order to lease up property, they're often and more often than not, you've got to do fit out for the tenants. So there will be some fit there will be some fit out capital expenditure, which precedes the income generation that would then follow. Notwithstanding all the negativity in the press about the economy and so on, I'm act I remain bullish about Poland. Poland has done really very well when you think that it sits next door to Ukraine and, you know, given what's been happening in Ukraine. It's taken an influx of 2,400,000, refugees from Ukraine. It's rehashed them extremely effectively. They've become part of the Polish working force, these refugees, really almost seamlessly.

19:24 And trading companies from Ukraine have also relocated to Poland. And, naturally, there's been an influx of capital into Poland on the back of, NATO extra NATO spend in the region as well as to help Poland with the effects of the Ukrainian war. So the war, if you like, for Poland, has not been an adverse economic event, and part of the buoyancy of the Polish economy, you know, stems back to that. So I see Poland, even though it's suffering from high inflation and interest rates have gone up, as being a continued, not oasis, but certainly a, you know, continued good place to be invested.

20:10 The UK has more challenging time ahead of it. I don't want to get drawn into, you know, what we all think of the budget or what I think in particular because you guys can ask questions, I don't need to answer them. You know, what I think of the budget. But I, you know, I do welcome, I think, the general direction of deregulation and lower taxes. And that is something which in the medium to long term will, I'm sure, pay off for The United Kingdom. That's basically, I think, a reasonable update. Is there anything you'd like to add to that, Laura or Jeremy, that I've missed? Perhaps that we're hoping to raise a new fund to decarbonize commercial property. Yeah. I mean, of of course, raising money at the moment is very challenging.

20:57 The debt markets are closed, and with the closing of the debt markets, the equity markets are obviously also challenged. But we do have, a plan to raise a new fund, which would buy properties that are noncompliant with, government legislation following our commitment to net zero. So government has legislated that by 2027, all commercial buildings in The United Kingdom should be should achieve an energy performance certificate rating of at least c, and it's mooted that by 2030, buildings will have to comply with an EPC rating of b. 80% of UK commercial property stock does not comply with those legislative moves.

21:42 So the plan behind this new fund would be to buy best in class locations, but substandard buildings across The United Kingdom in in secondary cities dominate the location that we buy, upgrade the buildings, and become the de facto go to buildings in those locations, and and benefit naturally from an improvement in value as a result of that exercise. Whether or not we're able to raise the fund, of course, remains to be seen. As I mentioned, it's, you know, extremely challenging times. So having given you that brief update, perhaps we can just go straight to questions. There are a couple of presubmitted questions. The first is how is the current exchange rate affecting the company? Well, the principal exchange rate about which we fuss is the euro sterling exchange rate and the euro PLN exchange rate. If I deal with the latter first, the vast majority of properties in Poland are leased in euros, but, of course, the underlying exposure that tenants have is lotties.

22:48 So the fear, if you like, that we have is that if the zloty weakens dramatically against the euro, we might get tenants defaulting. Even though there's been big inflation in Poland, bigger than in Europe, actually, the zloty has held pretty steady at around 4.7 zlotties to the euro, and I think it's about 4.75 today. So we see no stress in our portfolio as a result of zlottie euro movement. And then as far as the euro sterling exchange rate is concerned, and that's relevant to us because properties in Poland trade in euros, and so we have to convert back to sterling, you know, when we when we consolidate those accounts into our books. There's been a marginal weakening of the pound since last year. So last year on average, this euro sterling exchange rate was 1.17, and this year at the moment, it's 1.12.

23:46 But, you know, these exchange rates can move up and down quite a lot in quite a short period of time. So I wouldn't expect too much of a flattering of our profits coming from the euro sterling exchange rate. The next question is, are there any plans to convert office space into apartments? Well, that is something that we constantly monitor, particularly for UK properties. It's not that easy in Poland to do it. The Polish office buildings we own, it's simply too deep and too big to lend themselves to resi conversion. But we do own a number of buildings in our funds in The UK, which would lend themselves to resi conversion, And that is always an option for exit, but there's nothing there's no building at the moment which we're, you know, considering that particular conversion for.

24:38 I think we should so third third third question from s. I think we should invest in Dubai. There are many upcoming projects. Bizarrely, Dubai is a place we looked at about fourteen years ago. Peter will remember. We considered Dubai. But Dubai is an incredibly volatile market, and it's very boom and bust. And when we looked at it, we were we were encouraged. But, actually, I was delighted we didn't invest because even though the oil price back when we were looking at it was, I think, pushing $200 a barrel, wasn't it? Do you remember? Yeah. It makes today's price look like a walk in the park. And so we thought Dubai would do well on the back of that. But actually, shortly thereafter, the oil price collapsed. Dubai had real issues with its real estate market.

25:27 So I don't think we'll be investing in Dubai in a huge hurry. I don't think there are any other questions That's it. Online. I don't know if there are any questions in the room from my colleagues. This is your opportunity to ask the CEO an impertinent question in the public domain. A net asset value per share. Is there a net asset value? Calculate the net asset value. Value. Yeah. We do, and we publish it as well. Yeah. It's Yeah. It's in the report announced here. We do it on two bases, on on book value, and we hold our properties at the lower value or cost. So our book value NAV, if you like, our published NAV, accounting NAV is conservative in that we don't take revaluations upwards into account. We hold things at the lower of cost or or or market value. And I think our NAV on that basis is 42p a share. Yeah. And on a on a market value basis, it's 47p per share compared to our current share price. What's the current share price? 28.

26:26 27.5 this morning. They're a bargain. On that merit on that metric, they are a bargain. If you're an asset value investor. Yeah. Yeah. They are. And, you know, Nick Naylor of Nomad is sitting on your left. If you've got complaints about the share price, address them to Nick. No problem. I mean, I, frankly, speaking candidly, I'm you know, the stock market is not valuing FIRST PROPERTY GROUP, in my view, adequately. You know, we're a safe pair of hands. We've existed for twenty two years. We've gone through many economic difficult times when the Mhmm. And we've always paid paid a dividend. And we've We but we did pay. We did pay a dividend.

27:16 We did not pay the final. We we cut the final. Yeah. During COVID, and we've reinstated the dividend now. And and we will wish to increase the dividend as we lease up our properties. Thank you. Yeah. Well, thank you. Thank you for that. That's kind of you. Thank you. Just going back to the penultimate question about converting offices to residential. We have done it in the past. We raised a fund for clients of Willis Towers Watson, which generated an IRR net after our fees of 98% for the clients of Willis Towers Watson. Yeah. So a new question's coming. Any update on your exposure in Romania? Well, we used to own an office block warehouse, and then we own own a minority stake in the in another office block in Cluj.

28:03 We sold the warehouse. We still own an office block a 100% ownership in our in our name in Bucharest, which is worth about €4,500,000, and it's on the market to be sold. But we're not going to sell it at any price. It's a it's a fantastic location. Central Bucharest follows the format of, you know, the typical kind of properties we we own. So it's class b, great location, produces a very healthy income of €330,000 net a year roughly. So we're in no hurry to sell it. If we get a bid that we think makes sense, we will. In Cluj, we we own 23% of of an office block. The other 67 77% being owned by our, you know, third party shareholders in the fund.

28:53 And that is an office book that also is fully let doing extremely well. Cluj is one of Romania's first class cities. And we again, we would sell it if we got the right bid, but we're not gonna sell it unless we're satisfied with the price we're offered. And I think that's about it. That's it? Yep. Well, if there's nothing else, thank you all very much for attending, and we look forward to seeing you in the next year. Thank you. That's right. Thank you. Great. May thank the board of FIRST PROPERTY GROUP for your time this afternoon? Can I please ask attendees not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order the board can better understand your views and expectations?

29:38 It's gonna take a few moments to be, completed, but I'm sure it'll be greatly valued by the company. On behalf of the board of FIRST PROPERTY GROUP PLC, we'd like to thank you for attending today's annual general meeting online, and may wish you all a very pleasant afternoon.