Elanor Investors Group

ASX:ENN

Earnings Call Transcript 2020-Q4

[Operator]

Hello, ladies and gentlemen, thank you for standing by, and welcome to the Elanor Investors Group investor conference call. [Operator Instructions] Today's conference call is being recorded for replay purposes. And I will now turn the call over to your first speaker for today, Mr. Glenn Willis, CEO. Please go ahead, Glenn.

[Glenn Norman Willis, MD, CEO & Director]

Thank you. Good afternoon, and welcome to the investor presentation for Elanor Investors Group for the year ended June 2020. I'd like to introduce you to my executive team that I have with me on the call today. We have Symon Simmons, CFO; Marianne Ossovani, Head of Hotels, Tourism and Leisure; Paul Siviour, COO; Michael Baliva, Joint Head of Real Estate; and David Burgess, who's Joint Head of Real Estate. Also, at the end of this presentation, we'll be happy to take questions. Again, thank you for your interest in the group and attending this presentation. So if we reflect upon the year that has been, it clearly was a -- as it was, as has been for most people, a year of 2 halves. The first half was a year where we achieved strong growth in funds under management; and in the second half, a very pleasing half insofar as we continued to achieve growth in Funds Management, notwithstanding the fact that establishing funds and that realizing on investments over the half was obviously more challenging. But it was a half where the strength of our asset management capabilities has come to the fore. The asset performance across the sectors has been very, very strong, as evidenced in the operating performance of our assets, over what has been a very, very challenging market conditions and broader commercial environment and also, as has been evidenced in the valuations of the group's assets across the funds. And I'll talk about that shortly. But over the course of the year, we're pleased with our funds under management growing by 22%. We're particularly pleased with the growth in our Funds Management income, increasing by 43% over the year, which includes a 27.4% increase in the annualized recurring Funds Management fees. Obviously, those of you who know about our business, that is a key focus of the group. Our core earnings for the year of $15.4 million represented a 12% decrease year-on-year. And as I mentioned before, establishing new funds over the second half and realizing on investments over the second half was clearly a lot more challenging. And also, the distributions and co-investments over the half were lower as well. As we've informed the market, the Board has made the decision to suspend the dividend for the half in response to the uncertain economic conditions that we continue to find ourselves in. So whilst the last half has been a challenging environment to operate in for most businesses, we are delighted with the performance of our assets over the half. And indeed, it's a testament to the quality of our assets, to our approach to investing and to our ability to operate those assets. And I look forward to talk more about that shortly. So we turn to Page 6 in the presentation pack. As I've stated, the -- we're very confident in our investment management approach. We consider our investment and management approach to be one of a -- what we call a risk-first investment management approach, where we get very, very focused on the income-generating capabilities of all of our assets, regardless of the sector in which they operate in, the sustainability of the income and also what are the value-add opportunities in the assets in which we acquired. That approach to investing, that risk-first approach to investing, has been proven, if you like, in terms of performance. When we look at the aggregate revaluation of the group's many funds growing by, albeit marginally, by 0.2% from 31 December to just 30 June. And that we are positive with that performance. And we see it as a direct reflection of our disciplined approach to investing. We look at the sectors in which we invest in to evidence that investment approach. In the retail real estate investment sector, clearly, we have a focus, an acute focus on investing in nondiscretionary retail assets. They're assets that have performed, we believe, and certainly has been -- has proven to be the case in difficult times. And that has been the case with -- not just in our listed retail fund but also in the broader retail assets across the group. Similarly, in the commercial office sector, investing in assets that have strong, sustainable cash flows, that have differentiated positions in the operating -- competitive positions in their respective markets. And as you will have seen in the announcement of our ECF results this morning, those assets and that fund has performed very, very well. In the Hotels, Tourism and Leisure sector, again, investing in assets that are competitively positioned. Specifically, that means, for us, a focus that has been on investing in regional assets that have a competitive position in the marketplace and also in well-positioned luxury assets, and we can talk more about the performance of our hotel assets. It would have been a difficult sector prima facie, but I'm delighted with the performance of our assets in those -- that sector and as evidenced by the valuations that have been achieved for those businesses. A new sector that we've established over the course of the half has been the commercial health care real estate sector, again, evidencing our approach in investing by acquiring assets that have strong sustainable cash flows, that have competitive positions within their respective markets. And as far as health care is concerned, it's investing in assets that are strategically located in health precincts. So in summary, a key achievement for the group over the half has been the performance of our assets in our managed funds over the half, a direct result, one, of our disciplined investment approach; but 2, of our highly capable asset management skills across the sectors, to be able to generate the returns and the performance of those assets. Overall, it has been an incredibly challenging period for the vast majority. If we turn to Page 7. We talk about competitively positioned assets a lot, and it's a key investment criteria for us. When we buy assets, when we're looking to buy assets, when we're looking to invest, we want the assets to have a point of difference and be competitively positioned in their respective marketplace. That doesn't matter whether it's a retail repositioning asset, a luxury hotel, an office or a health care asset. For us, it's about what is its point of difference, what is its competitive position, and how will it generate sustained cash flows throughout the cycle. And clearly, this is not a cyclical half that we've been through. But the performance of our assets over the period has wonderfully demonstrated our risk-first approach. Turning to Page 8. This is a slide that we put -- we table every year. And concerning the -- again, the second half investment climate, having achieved a 24% year-on-year growth in assets under management across the group is a pleasing result. And we are, I should add at this juncture, pleased about the growth prospects for investment opportunities as we're now in place. So we clearly are expecting continued growth for the business. And we're very positive about our growth prospects, which we'll -- I'll talk a bit about shortly. Turning to Page 9. This is a table that illustrates our multi-sector real estate Funds Management platform. The addition of the health care -- commercial health care segment is a new segment that was established in March, as I mentioned. And that becomes the fourth plank to our sectors. Again, positive about the opportunities in all the sectors that we operate in and the prospects for establishing new sectors as well. Again, on Page 10 of the pack, we seek to reiterate this every half and certainly, indeed, every year, that the key business objective for the -- for Elanor Investors Group is to grow Funds Management income from our growth in funds under management. And the 43% year-on-year growth in Funds Management income is particularly pleasing. And again, as I mentioned before, the 27% increase in recurring Funds Management income is also very pleasing. Turning to Page 11. So this, I guess, describes our business. Most funds management businesses get -- I guess, are viewed from all the Ps, as we speak about. And certainly, within our business, we firmly believe we have a scalable platform. Why is it scalable? It's scalable because we have high-caliber people. We have a very clear investment process, a differentiated investment process that we believe in the real estate investment management sector, one that very much focuses on investing in assets through that risk-first lens that we spoke about. And we have the platform, therefore, to be able to grow our group. And critically, you don't grow without strong performance. And the performance of the group has been very, very strong since we listed in 2014, having achieved an average 20% IRR on our realized funds over the period. But that return and investment performance, again, positions us well for growth. Turning to Page 13. We -- again, as I've endeavored to expound before, our key business objective is to grow funds under management and Funds Management income as a pure-play real estate funds manager. That is our mission, as I've described over many, many halves and over the years, and it remains our clear objective. Again, we believe we are very well positioned for growth because of, as I reiterate, our capabilities across the real estate sectors and clearly, our scalable investment management platform, that we are confident that we have. Page 14, we talk about, again -- for those of you who have followed our business for a good period of time, this is what we table to, again, describe our business. And whilst we say our growth in funds under management is a primary objective, it is -- it doesn't come at the expense of seeking performance. So delivering strong returns for our capital partners, our investment partners, is forefront in our minds. That's evidenced by the returns we've generated on our funds since we've listed, very, very strong returns. That strong performance, again, goes hand in hand with growing our funds under management. And clearly, we continue to seek to grow the business in a capital-light Funds Management approach, which I'll talk about at our balance sheet capital shortly in regard to that being an enabler to our growth. If we turn to Page 16. Again, this has been a slide that we've tabled over the years and one that illustrates the funds that we have under our management, but also the investment portfolio that we have on our balance sheet. So before I hand it over to Paul Siviour to discuss the financial results, turning to Page 17. The group has significant capital available for growth to enable us to grow. Clearly, the capital on our balance sheet is capital that we are actively working on to recycle, and we're very positive about the prospects to recycle our balance sheet capital to enable us to facilitate further growth. I mentioned before, we have a capital-light approach to building our Funds Management business. And at times, we will hold assets on balance sheet to facilitate new funds, to seed new funds. And indeed, that is the situation at the moment. We have capital invested in funds on our balance sheet that we're actively working on at this point in time, where the recycling opportunities are positive. I won't say more about that, but suffice to say that the growth capital that we have to grow our business is very significant. I'll hand it over to Paul to talk about the financial results.

[Paul Siviour, Chief Operating Officer]

Thank you, Glenn. I'm referring to Page 19 of the investor presentation. The group achieved core earnings of $15.4 million for the year, and that incorporated a result -- a core earnings result of $3 million in the second half, obviously impacted by the COVID-19 pandemic. Importantly, Funds Management income grew significantly during the year, 43% increase on the prior year. And I refer you for perhaps your reference at a future point in time to the breakdown of that Funds Management income on Page 10 of the pack. In summary, our Funds Management income from regular management fees increased by 54% during the year. Acquisition fee funds management income was relatively flat on the prior year, as were performance fees, and that reflects what Glenn referred to as more difficult market environments in respect of growing Funds Management and realizing on investments during the second half. So certainly, an impact on our ability to grow those fee streams during the second half of the year. Our co-investment earnings of $5.8 million reflects a significant decline on the prior year, and this is the area that has been most impacted by the COVID-19 pandemic. You'll be aware that the fund co-invests in managed funds that we manage. And in respect of our 2 hotel funds, our listed retail property fund and 2 of our unlisted funds, distributions were suspended in those funds for the second half of the year as a result of the difficult operating and market conditions as a result of COVID-19. To provide a little further guidance for you there, our co-investments in the funds that did not pay a distribution are approximately $140 million. And you can see that typically, we would expect distribution yields of circa 6% to 7% on our co-investments. And so the impact in the second half of this year is circa $5 million on our core earnings. Nonetheless, that was important, that funds were able to, therefore, manage through the COVID-19 pandemic under their own resources and with their own liquidity, and that continues to be the case. Balance sheet investment earnings has declined. This reflects the fact that the group effectively holds no investments on balance sheets -- on balance sheet now other than co-investments in our managed fund. That the $2 million of earnings there reflects the earnings for the period that the group held the Featherdale Wildlife Park fund asset on balance sheet through to the end of November. Turning to our balance sheet on Page 20. The group had strong cash reserves of $17 million. It has net assets of $155 million. And our primary asset is, of course, our investment in our managed funds of some $198 million. The group maintains modest gearing at 29.7%. And to provide just a little more commentary on the group's debt, we have a unsecured corporate note facility of $60 million that does not mature until October '22. And the group has a $30 million revolving secured facility, which does not mature until April '22. I'll hand back to Glenn to conclude with some final remarks.

[Glenn Norman Willis, MD, CEO & Director]

Thanks, Paul. So over the year but particularly over the half, the -- we have, like most businesses, encountered challenging market conditions, that should go without saying. Having said that, I'm very pleased with the performance of our assets across the sectors, notwithstanding the challenging market conditions that we've encountered. In the commercial office sector, there's been strong outperformance of our assets in that sector and, again, due to our investment approach and the nature of the assets and the credit quality of our tenants and the well of those assets. In the hotel sector, there's been strong performance across many of our hotel assets. Many of our hotel assets are actually performing, in a profitability sense, better than they were same time last year, particularly in our luxury assets. When we think about luxury assets, our Cradle Mountain asset is performing better than it was same time last year. And that's in an environment where the borders are well and truly closed. Our significant investment in our luxury asset in Adelaide, we have a major asset operating at about 2/3 profitability as it was same time last year, which is a very good result, again, given the border closure [ in recent past ]. And in our regional assets, some of the assets are trading significantly better than they were at the same time last year, again, due to the growth in regional tourism over the very recent period. Some of our assets like our Canberra assets have had more challenges because of the -- those assets have been underpinned by a very strong sustainable demand over a good period of time, which substantially is made up of the school excursion market, where clearly, that has stopped over the last half. But nonetheless, across our regional hotels, we're very, very pleased with the performance. And we're particularly delighted with the fitness of those assets that we've been able to effect over this COVID-19 period. So we believe our hotels are very, very well positioned, and we're very excited about the performance of those assets given the operational fitness that they have and that we've been able to effect over the last 6 months. In our retail, our nondiscretionary-focused strategy in retail has been one that has stood us in very good stead. That's -- the assets have performed very well against any comparison in the marketplace. Our assets are well and truly stand-up. In fact, I'd go as far to say we're out front in terms of our rental collections with our retail portfolio. Similarly, with the strength of our asset management and value-add asset management in retail repositioning, we've achieved great, great progress over the half, notwithstanding the market. And our new health care assets -- I apologize for the interference, not too sure where it's coming from. Our new health care assets at the fund that was established in March, as expected, that's performed very, very well, resilient assets and have performed again, very, very well, being assets that are strategically positioned in health precincts. So I guess the key messages that I want to get across are the performance of our assets and particularly due to, one, our risk-first investment approach coming to the fore and I guess has been proven through what has been a challenging period. The -- that is evidenced by the valuations for the assets across the group. And also, the assets, I believe and we believe, are now very, very well positioned for improved performance as we trust times to improve. Against that background, we're not -- we actually aren't running our business and managing our business for improved time. But I think you've got to manage this business for all times to remain uncertain for the foreseeable future. And indeed, we're managing our business and managing our assets through that lens. But at some stage, who knows when things will improve. But for the foreseeable future, we're not kind of seeing that. So again, I'm very, very positive about the investment management platform, the Funds Management platform that we have to grow funds under management, to grow our Funds Management income, to achieve our strategic objective. And I'm very, very pleased with the performance of our teams across the business to have the assets perform as they have been, again, in this challenging time, and to deliver the operating performance, as evidenced by the valuations of our assets. In terms of the outlook, we have an active pipeline, as we state here, across all our real estate sectors. Over recent weeks, there are some exciting investment opportunities emerging, and we're very, very positive about that. And in fact, as an investor, that's a value investor. And whilst the -- being a deep value investor has meant that over the last half dozen years, we haven't grown as competitively, if you like, or grown as much as our peers have because we've -- of our investment approach. These times present fantastic opportunities for investors like us that have an investment approach that's all about focusing on the risk first, all about measuring the risk, the sustainability of the income, the volatility of the income and also what are the value-add opportunities. So we're very positive about the -- our pipeline and products in these times. Also, we continue to pursue new sectors. As I said, we've established 1 new sector in the last half being the commercial health care real estate sector. We continue to pursue new sectors. And this -- we continue to pursue interesting strategic opportunities, as I say here, to deliver on our growth objectives. So thank you for your time. We look forward to taking questions now should there be any.

[Operator]

[Operator Instructions] Our first question comes from the line of Edward Day from Moelis Australia.

[Edward Day, Research Analyst]

Just a couple of quick ones from me. Firstly, just on Slide 10, with your -- where you break out your management -- Funds Management income. Could you just talk through the step-up in the management fees to $15.5 million, given, I think, at the half year result, that number was about $5 million or $5.7 million. So there's quite a significant step-up in the second half. Could you just talk through what's driving that?

[Paul Siviour, Chief Operating Officer]

Yes. Thanks, Ed. Happy to. There's 2 drivers to it. One, of course, the fact that those fees just increased naturally in accordance with the funds under management that underpin them. But what has been a contributor to those fees in the second half has been our leasing and development fees. The group has in-house capability in respect of developments and then lease-up of our repositioning projects. And as you're familiar, all of our retail assets are acquired now on the basis of the value-add opportunities they present from repositioning. That is now managed in-house. And in the second half, that was a contributor of $1.8 million to that fee stream. Secondly, we also received that fee stream for the refurbishment of our hotel projects. And importantly, in the second half, a very high-end refurbishment of Cradle Mountain Lodge was completed by Marianne and her team, which also generated development fees for us. That's a fee stream that we expect to continue and grow.

[Edward Day, Research Analyst]

Okay. And then just on the performance fees, could you -- are you able to split that out, the $1.7 million?

[Paul Siviour, Chief Operating Officer]

Yes, we can. The performance fee comprises the performance fee in relation to the Elanor Retail Property Fund and also a more -- a smaller performance fee in respect of the sale of Cradle Mountain Lodge to the Luxury Hotel Fund during the year.

[Edward Day, Research Analyst]

Okay. Great. And then just finally, just wondering if you could talk through the assets within the Luxury Hotel Fund. You called out Cradle Mountain Lodge is performing ahead of last year. Perhaps just focusing in on the Adelaide assets and some of the measures that have been taken to sort of, I guess, slim down operations throughout the COVID period and how you're actively going about that now?

[Glenn Norman Willis, MD, CEO & Director]

Yes. I'll hand over to Marianne, Ed. But just to state that we invested in that asset substantially for the operating efficiencies that we knew that we could effect at that hotel. And Marianne and the team have done a tremendous job in achieving that over the period. And indeed, the period has given us the opportunity to fit in that asset quicker than we would have otherwise anticipated. Marianne?

[Marianne Ossovani, Head of Hotels, Tourism & Leisure]

And we've been looking at that across the portfolio really and really leveraging our entire portfolio. But some of the initiatives, and there are many, it's just looking at centralization, consolidation, just operational efficiencies in that hotel. We have 4 assets in South Australia now, so working those assets together and really looking quite closely at all the manning, all of the cost structure. So there's a number of -- there's considerable value in that asset, which we're continuing to unlock as we guide. But we're certainly able to do that very quickly after we completed the acquisition late last year. And that was certainly -- I suppose it was accelerated through that COVID period, where we were able to work a lot more quickly and really deep dive into the business and find more opportunities in there.

[Operator]

Our next question comes from Jason Korchinski from Ord Minnett.

[Jason Korchinski, Research Associate]

Just a few from me, if that's okay. Are you able to give me an idea on the timing of any upcoming independent revaluations?

[Paul Siviour, Chief Operating Officer]

Jason, I'm sorry, did you say -- could you repeat the question?

[Jason Korchinski, Research Associate]

Yes. No problems. Is there a bit of an echo going through?

[Unknown Executive]

The line is not as clear as it should be, but please go ahead.

[Jason Korchinski, Research Associate]

Okay. I just want to get an idea of any upcoming independent revaluations and the timing surrounding this?

[Paul Siviour, Chief Operating Officer]

Yes. Well, certainly, as part of our year-end process and year-end results, many of our assets were independently valued to establish the carrying value at 30th of June. In terms of -- if you're referring -- are you -- does that answer your question, Jason? We're not planning and -- we're not planning for any further independent valuations of the assets. There's -- nothing's required in that regard other than our year-end results.

[Jason Korchinski, Research Associate]

Okay. So nothing out of cycle. Okay. No problems. And just another one for me, if that's okay. Do you see the potential possibility for any income-derived gains on sale over the next 12 months?

[Glenn Norman Willis, MD, CEO & Director]

Yes. So Jason, there is always the possibility very much so. As we stated in the last half, the market conditions weren't conducive to, one, establishing new funds; and secondly, realizing on investments. But we'll be surprised if we don't have gains over the next 12 months.

[Jason Korchinski, Research Associate]

Okay. And are you seeing any sort of opportunities for any distressed assets that you could take over and potentially rework?

[Glenn Norman Willis, MD, CEO & Director]

Yes. Look, it depends on what you define -- how one defines distressed. We're certainly seeing, as I said before, over the recent weeks particularly, we're seeing opportunities emerge across all the sectors in which we participate. We're seeing quality opportunities in retail value-adds, in the hotel sector, but also across all the sectors. So we wouldn't call them distressed opportunities, but one could describe them as deep value, maybe deep value/stressed. But most importantly, opportunities that we believe present great value that are incorporated in our pipeline at present.

[Operator]

Our next question comes from the line of Mark Skocic from Kinetic Investment.

[Mark Skocic, Portfolio Manager]

Can you hear me okay?

[Glenn Norman Willis, MD, CEO & Director]

We can.

[Mark Skocic, Portfolio Manager]

I've got a few questions. I guess, Glenn, I'll start off with yourself first. What do you think that the third-party fundraising environment is like at the moment, given all the uncertainty? And I guess specifically, are you seeing any differences between the various subsectors that you guys are likely to focus on?

[Glenn Norman Willis, MD, CEO & Director]

Look, the -- to summarize, the prospects for capital partners and investors for our funds, we think about it in, I guess, in private wholesale capital, we think about it in institutional -- particularly offshore institutional capital, the institutional capital, and we also think about it in public market capital. Certainly, there's a public market capital for strongly yielding, strong income assets, and we'll leave it at that. But that's the -- that's kind of the DNA of our business, acquiring assets that provide strong sustainable cash flows and clearly also where they have value-add opportunities as well. We see significant demand in particularly offshore institutional capital for, I guess, value opportunities. And that means opportunities to invest in assets that probably are going to generate total returns in the teens. And in terms of our private capital investors, in the short term, we plan to -- it hasn't been completed yet. So I'll put that caveat on to bring up our first, for want of a better term, post-COVID investment to the market, and that's -- substantially, you have product capital. And again, that's an asset that generates very strong cash flows and additionally provides a strong IRR. So look, I guess, in short, I'm surprised about the -- if you'd asked the question 3 months ago as to what we'd expect for the capital demand for investments now, we would have been a lot more circumspect. But we are positive in regard to the prospects to -- for capital partnership, institutional capital partnerships and also demand from our growing private wholesale capital base for new funds.

[Mark Skocic, Portfolio Manager]

Good answer. That's good, actually. And maybe one for you, Paul. Could you maybe just share us some thoughts on where you expect, and probably to sort of dovetail to some of the stuff Glenn was saying, where you expect cap rates to go? I'm sort of -- I guess the consensus in the market, people expect cap rates to start rising out. But if there is a lot of demand for good quality assets, maybe that's not necessarily the case. Just appreciate your thoughts.

[Paul Siviour, Chief Operating Officer]

Yes. I'll only comment briefly. We've got the benefit of Marianne Ossovani in respect of the hotels and tourism sector; David Burgess in respect of office, including health care office; and Michael Baliva in respect of retail, and they'll comment. We're seeing, in summary, not significant changes in cap rates. And I think that reflects -- and I'm talking about assets that can demonstrate strong cash flows that are also showing relatively sustainable levels of cash flows during a COVID-impacted period. That would be my comment. But I'd hand over to Marianne and David and Michael for anything further.

[Glenn Norman Willis, MD, CEO & Director]

I'll wade in here first. It's Glenn here, Mark. Look, these periods typically have the focus on the volatility of cash flows, and that's kind of the core DNA of how we invest. As we look at the volatility of cash flows, what's the risk of the asset? And in the last sort of half dozen years, particularly in the real estate asset class, we haven't seen evidence of that. But having said that, there's been a good reason why people should just have bought them and given that cap rates have contracted so much over the last half dozen years. But our view is that the cap rates of assets that have strong sustainable cash flows will hold regardless of the sector, and that will be where the focus is in terms of -- to the sector and the subsector of the real estate asset class. Dave?

[David Burgess, Co]

Yes. Mark, it's been an interesting time in the fact that we're going back to where we -- what we should be doing in property, where it's really sector-by-sector, submarket-by-submarket and asset-by-asset. So it's hard to put a blanket -- make a blanket call on cap rate. There's some parts of the market where it appears that there may be some cap rate compression and, therefore, core assets with limited or no risk to cash flows in the short to medium term because the funding of those assets are at very attractive spreads. So -- and there's certainly a very good capital demand for those type of assets. So in that part of the market, we would expect to see some cap rate compression. Where we're seeing capital values move are obviously the short-term earnings risk, and that's intuitive. And the fact that if you look at the office space, there'll be, in some markets, greater incentives to secure tenants, there'll be longer downtime, and that goes straight to value. But at this point in time, we have not seen cap rates move out.

[Michael Baliva, Co]

Yes. I -- clearly, it's all about the sustainability of cash flow. And in our portfolio, in the retail portfolio, you are seeing some regionals flow out in our assets. But the defensive quality of assets with strong performance in those markets with a nondiscretionary focus, in our view, will have heightened attention given their defensive qualities. And we're seeing cap rates there hold for now. And in time, as we get through this, I think we would expect that they would even start to potentially firm given the spread to the risk rerate.

[Glenn Norman Willis, MD, CEO & Director]

Marianne?

[Marianne Ossovani, Head of Hotels, Tourism & Leisure]

And so -- yes, consistent with the comments made just now, we're really not seeing a change. So cap rates are holding. And in a couple of the markets, we're actually seeing them start to contract. So particularly in those regional areas, we don't have any exposure -- we don't have any investments, rather, in sort of Sydney, Melbourne CBD. Having said that, broadly across the market, we're not seeing a major change or a major shift and potentially not going to see that, not in a material way.

[Mark Skocic, Portfolio Manager]

And Marianne, just while you've got the time. Just curious, within your tourism and hospitality exposure, what sort of dependence do you think you've actually got in international tourists and I guess specifically Kiwis, given the potential for trans-Tasman bubbles. It's probably closer than rest of world.

[Marianne Ossovani, Head of Hotels, Tourism & Leisure]

We actually don't have very much at all, and I think that's certainly one of the strengths of our portfolio. Across the board, the international segment has always been quite low. And we haven't been reliant on -- for any one single asset. So it's -- with our CBD locations such as the Mayfair in Adelaide, there was certainly -- that was certainly part of one of the segments in that hotel. But it wasn't large, and we've been able to work around that with that and certainly not reliant on it going forward in the future. Domestic visitation is very strong, and it will continue to grow, we believe, with all the initiatives that are in place just across the board through tourism bodies, governments, et cetera.

[Glenn Norman Willis, MD, CEO & Director]

Yes. The asset that's most affected within that portfolio by inbound tourism is our Featherdale asset within the Wildlife Park Fund. That -- half of that business was dependent upon on what would we have, inbound tourism that constituted the visitation. Within the fund, there's 2 assets. The Mogo Wildlife Park asset has performed incredibly well, which is not reliant upon inbound tourism. So that's been a significant positive for that fund. Clearly, the inbound tourism, the loss of inbound tourism at Featherdale has affected that fund. But with other initiatives in that fund, we are positive, notwithstanding the effect that -- on Featherdale from the closed international borders. As far as international border is generally, in terms of -- I mean, as Marianne informed, we're a net importer of about $30 billion to $40 billion of tourism. So closing the borders theoretically -- well, not theoretically, is positive for the country. And as far as the Australia and New Zealand bubble, we'd prefer it just to be Australia because there's more people who go to New Zealand than coming our way.

[Operator]

We will take our next question from the line of [ Hamish Brown ], who is a private investor.

[Unknown Attendee]

Thanks for running through your results and updating the market. Just maybe as a starting point, in terms of the 2021 outlook, could you just confirm, I suppose, firstly, that distributions from co-investments are, at least at this stage, forecast to return to normal? I think Symon spoke of a $5 million loss when -- during the suspension. But is that -- at this stage, is everything back on track?

[Glenn Norman Willis, MD, CEO & Director]

No. We won't be giving guidance in that -- in regard to the specific funds, [ Hamish ]. But suffice to say, we continue to operate the business, as I said, through the lens of challenging market conditions. Juxtaposed on that, we have seen our assets perform very, very well due to the capabilities of the respective teams across the group. And so we -- it's been a challenging market environment, and we've made decisions in a number of the funds to keep capital in those funds given the uncertain times. But we will -- we won't be making guidance in terms of what the outlook is for those funds. And -- but again, I'll reiterate that we're pleased with how our assets have been -- have performed and operated during the last 6 months.

[Unknown Attendee]

Okay. That's fine. Understood. Can you provide some guidance? And I think there was a mention of recurring management fees of around $14.4 million. And this, I suppose, in a sense, ties into Ed's question earlier around the breakdown of that $15 million. Could we just get a sense of what the, if you like, the passive management fee like that's moving away the sort of redevelopment fees, et cetera, that were in the Cradle Mountain, et cetera? So what would the passive management fees look like based on your -- if [ funds ] just stayed BAU as it is now?

[Symon Simmons, CFO & Company Secretary]

Thanks for the question, Hamish. That $14.4 million is our annualized run rate of passive funds management fees as we sit here today. The difference between $14.4 million and what you might add to it is our leasing and development fees, which, for the year, were $1.8 million. So we have not included leasing and development fees in that run rate of recurring income, which is our purely passive monthly run rate of Funds Management income across our managed funds.

[Unknown Attendee]

Okay. That's very clear. So there's obviously -- there's some upside from that based on the level of activity that's required. And just a final one, if I may. I suppose this is a question for Symon around the increase in overheads. I mean, obviously, Elanor is a scalable business. And obviously, everyone understands that there's increasing resources and everything else as you grow. But it looks like a reasonably large increase in FY '20. I mean, this is -- I'm just looking at the corporate overheads and plus see the other expenses line. Could I just get a bit of color on those, please?

[Symon Simmons, CFO & Company Secretary]

[ Hamish ], the corporate overheads have increased as we've really invested ahead of the curve in our Funds Management platform. A lot of the increase relates to investments that we made probably towards the end of last year and early this year. So we continue to invest in our management platform, but it is highly scalable in its current form.

[Unknown Attendee]

Okay. Sure. So I guess just answering the question on guidance, but you would anticipate fairly flattish overheads and expense base in the current year.

[Symon Simmons, CFO & Company Secretary]

I think a modest increase, [ Hamish ].

[Operator]

It looks like we're out of time. So I'll now hand back to today's presenters for closing remarks.

[Glenn Norman Willis, MD, CEO & Director]

Thank you very much for attending this call. We appreciate your interest in the group. A couple of final comments. Firstly, again, I'd like to thank the broader Elanor Investors Group team for the dedication to managing our funds and the assets within our portfolio and also to the broader group and their efforts in all that goes into managing the business through what's been a challenging period. I reiterate that the teams collectively have done a, in my view, a fantastic job in getting assets to perform, getting our assets fitter for improved performance going forward. And that positions us well for performance. So thank you to my team, and thank you for your interest in the group, and we look forward to presenting to you in 6 months' time. Thank you very much.

[Operator]

Thank you. Ladies and gentlemen, that does conclude today's conference call. Thank you for participating. You may all now disconnect.