NatGen in 2025, busy times.
As we pass the quarter post of 2025, the NatGen team is intensely focused and fully occupied.
It is now five years since the beginning of the COVID-19 pandemic.
And it is fair to say that this one event has dominated the economic landscape ever since,
perhaps at least until a certain inauguration ceremony
in Washington DC in January this year.
In this five year period,
we have become familiar with almost constant economic change.
Quarter one of 2025 has been no exception.
Whilst this can be challenging at times, the good news is that we at NatGen are accustomed
to constant change within our markets and portfolio.
The outlook suddenly darkens.
With the recent announcement of a broad terrorist regime being implemented by the United States, the general outlook for global economies has been dominated by gloomy  commentary.
Debt markets have responded to this
by factoring in reduced interest rates in the medium term,
consistent with the expectation of reduced global growth.
A comprehensive analysis of the impact of the US tariffs regime is well beyond the scope of this paper.
We can all consume copious analyses over the days and weeks ahead from a broad range of analysts.
My initial reaction, however,
is to feel affirmed that we have stuck to the basics
when it comes to asset allocation
and a concentration on defensive property assets, where the provision of basic goods and services is the focus of our tenants.
I believe that this has shielded us
from some of the price variability
in certain markets over the past five years and is likely to continue to do so in the future.
Of course, anyone invested in the share market currently is familiar with price variability.
The current times provide a salutary contrast between share price variability and the relative stability of property assets
and income production.
We see this as a major benefit
of commercial property  investment.
Debt capital management and interest rate management.
Even prior to the recent tariffs revelations, medium-term market interest rates have been moderating.
As I have mentioned previously to you, NATGEN keeps a constant watch on interest rate projections and market pricing over the terms of our trusts.
This is the basis upon which we formulate a view on the average five-year interest rate over the term of a NATGEN investment trust, as stated in our information memoranda.
As the medium-term rates have modified, we have taken the opportunity to hedge our interest rate positions on a number of trusts, including CO24, QC24,
SP24 and CA25, and also to seek reduced margin arrangements with banks on other trust debt, including GD21, IR22 and GL22.
This activity has produced  meaningful reductions in interest rate costs of virtually all of the trusts mentioned above. The aim of interest rate hedging is to limit the risk posed by interest rate variability on the performance of the trust by fixing the interest cost for a certain term.
In the case of our recent hedging,
we have been focusing on three-year fixed terms, as this provides the best rates along the forward interest rate curve.
Consistent with our current defensive positioning, we will be proposing to maintain current distribution levels and bank any savings for the maintenance
of appropriate capital buffers for the trusts.
Of course, any surplus not distributed now will add to the capital base of the trust when it comes to an end, and trust assets are distributed to unit holders.
The NATGEN response.
Consistent with the NATGEN investment philosophy, we continue to seek assets which provide long-term defensive income and to acquire at prices which reflect solid value in the medium term.
We seek to take advantage of the inefficiencies in the property  market
to target mispriced assets.
Within this context, we continue to set target sectors based on our assessment of value.
The following synopsis of our target areas outlines the value propositions we seek.
Regional convenience retailing.
Well-placed assets within solid regional locations provide steady income consistent with our aims,
but generally at more favorable prices than metropolitan assets.
Historical data indicates that approximately 30% of the nation’s GDP is derived in regional Australia.
This figure underscores the significant economic role of regional Australia, whilst also producing the majority of the nation’s merchandise exports.
Recently, the secret appears to be out, and competition to acquire these assets is increasing.
Examples of NATGEN trusts relying on regional convenience retail include KT-21, GD-21, IR-22, CO-24, and CA-25.
Non-CBD Office.
The CBD office sector was slammed during the pandemic
due to stay-at-home mandates and the like.
Work-from-home protocols emptied city office buildings.
The whole sector has  experienced downward value pressure, leading to value purchasing opportunities.
Concurrently, steep rises in construction costs have made replacement of office stock unviable at current rental levels,
providing existing buildings with a significant competitive rental advantage, especially in tightly held precincts.
NATGEN examples of non-CBD Office assets include GL-22 and QC-24, with another coming soon.
Value-add industrial. Industrial property across the globe has benefited from the stampede to internet shopping during the pandemic and thereafter.
This has focused principally on logistics and fulfillment.
However, much of the traditional industrial stock is focused on manufacturing and its supply chain.
This traditional industrial stock is transitioning to more modern industrial forms, with the attendant uplift in values as the repositioning occurs.
NATGEN remains aware of this trend and vigilant for  opportunities in this market.
We hope to provide you with an example of this type of  investment later in 2025.
Specialist assets.
Specialist assets are identified by their strong income generation attributes and sustainability of these income streams.
Again, we look to certain sectors that offer certainty in times of volatility, such as medical and logistics support.
Tenants in these fields tend to have strong income generation linked to government spend,
essential services, or blue-chip clientele.
And NATGEN example of this is SP24.
NATGEN developments in 2025.
NATGEN is set to deliver five development projects in 2025,
with a total value in excess of $110 million.
In all cases, the developments are being delivered within the initially assessed cost envelopes for each project.
This has been an amazing effort by the NATGEN development team.
The pipeline will continue to grow in 2025, with a NATGEN Development Trust release imminent.
Whilst the sector focus of our development projects will broaden in 2025,
the fundamentals which we seek will remain unchanged.
These include a proven market, good value sales expectations, and strong cost control.
Focusing on the basics.
Beyond acquisition strategy and development delivery,
we at NATGEN remain focused on delivery of the basic fund management and property management services,
upon which our unit holders rely.
Words which we aspire to embrace are care, dependability, innovation, and transparency.
We look forward to providing you with new opportunities in both NATGEN Development Trusts and NATGEN Investment Trusts in the coming weeks.
Thank you for your time, Steven Goakes.