Charter Hall Group Aktie

Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Group 2026 Full Year Results Briefing.

[Operator Instructions]

Please note that this conference is being recorded today, Friday, the 21st August 2026. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group Chief Executive Officer. Thank you. Sir, please go ahead.

Good morning, and thank you for attending FY '26 results call, which our Group CFO, Anastasia Clarke, will present with myself.

Turning to the group's earnings on Slide 4. FY '26 has seen CHC delivered operating earnings of $488.1 million, translating to $1.032 per security, representing 26.8% growth over FY '25. Today, we're also providing FY '27 guidance of approximately $1.14 per security, representing a further 10.5% growth over FY '26, which delivers a 3-year growth of 40% of FY '24 to '27, noting that the FY '24 result of $0.184 and was an inflection year as I have called out several times. The group's return on contributed equity increased to 26.4% post-tax, reflecting strong earnings growth, equity inflows and disciplined capital deployment.

We continue our long-standing track record of distribution growth, increasing DPS by 6% to $0.507 per security and guiding for a further 6% growth in FY '27. Group FUM increased $10 billion or 12% from $84.3 million to $94.3 billion, whilst Property FUM increased nearly 14% from $66.8 billion to $76 billion. Net acquisitions, developments and equity flows accelerated during the year as we have continued to curate our existing and new portfolios. Whilst Group FUM grew approximately 12%, operating earnings per security grew almost 27%, demonstrating the strength of our platform and earnings diversification.

Our balance sheet remains well positioned with 14% gearing and approximately $1 billion of balance sheet investment capacity and total group investment capacity of $6.4 billion across the platform.

Turning to Slide 5 and our strategic pillars. Our strategy remains unchanged. We continue to access capital from listed, institutional and retail investors deploy capital into attractive investment opportunities generate -- funds management, asset and property management, expand our development with and our uncommitted pipelines and invest alongside our capital partners. We continue to execute on this strategy of accessing deploying, managing and investing capital on behalf of our investor customers as we had for the last 15 years. On this slide, we talk to various milestones achieved over various time periods.

Given my 22 years leading CHC, I tend to focus on the longer term. And it is pleasing to see that over the last decade, we've closed close to $60 billion in acquisitions, completed $14 billion of developments and existing asset improvements while securing $37 billion in gross equity inflows into our funds management business. I also note that our balance sheet property investment portfolio or PI, has tripled in size over the last decade from $1.1 billion to $3.2 billion. PI forms the Property Investment segment of CHC and its growth without raising new equity for over 12 years shows the power of our self-funding business model. The PI portfolio's growth not only enhanced our PI EBITDA, but it also supports the growth of our Property Funds Management business and enhances our flexibility and optionality in opportunistically taking advantage of specific asset opportunities and dislocation events in markets.

As shown on Slide 6, we've delivered FY '26 operating earnings of $1.032 and as mentioned, provide guidance for '27 operating earnings for OEPS of $1.14, continuing a long track record of earnings and distribution growth. Over the last decade, operating earnings growth has exceeded 12% per annum. Our FY '26 earnings release today and our earnings guidance for FY '27 excludes any performance fee revenue. This reflects strongly on the sustainability of growth in our core earnings drivers across both funds management and property investment portfolios. Group FUM increased by $10 billion, as I mentioned, to $94.3 million, as outlined on Slide 8.

Our platform remains highly diversified by both capital sources and sector. Institutional Wholesale investors account for nearly 80% of the Group FUM and 70% of Property FUM. We also have another 15% represented by our managed REITs, whilst the remainder is in our direct business. FY '26 marks the first year Charter Hall has exceeded $90 billion in Group FUM, and we expect continued growth to drive Group FUM beyond $100 billion during FY '27. Property FUM increased by 13.8% as I mentioned, from $66.8 billion to $76 billion.

Growth during the year was driven by $11.9 billion of acquisitions, $2.1 billion of positive valuation movements and $1 billion of net development CapEx, partially offset by $5.8 billion of divestments as we curate our portfolios continuously. The majority of Property FUM growth in 2016 was acquisition-driven. And transaction-led in addition to the valuation movements mentioned. This outcome reflects the breadth of our capital sources, product development capabilities and transaction origination platform. Divestment activity was elevated this year as we took advantage of market conditions to curate portfolios across all 3 listed REITs, CQR, CLW and CQE in addition to actively managing our portfolios across the unlisted funds and partnerships.

Turning to Slide 10. The platform continues to manage the largest diversified property portfolio in Australia. We own and manage over 12 million square meters of lettable area, diversified across 1,620 individual properties FY '26 has seen us grow the rent that we collect across that portfolio to over $4 billion. The Institutional Wholesale platform contributed 70% of the property platform and we are pleased to see many existing investors lift their allocations to property with us during the year and also the onboarding of multiple new institutional clients, allocating long-term capital within Australia from domestic investors and into Australia from our wide variety of offshore capital partners.

Slide 11 and equity flows. We secured a record $6.7 billion of equity inflows during FY '26. The breadth of the inflows across multiple institutional clients from many different countries allocating to Australia is particularly encouraging. We also benefit from new Australian mandate wins and increased allocations to existing investments from existing clients and diversification across charter or funds as existing clients broaden our exposure to our multiple funds and partnerships. The majority of inflows originated from Institutional Wholesale investors, reflecting growing conviction in the Australian commercial real estate market from a growing global retirement savings industry.

We also saw Charter Hall Direct, our retail and SMSF, an adviser Investor Network grow its platform. where we've seen equity flows by -- increased by nearly 60% compared to FY '25. Momentum of equity flows is increasing indirect and the pace at which new product launches are being oversubscribed early is pleasing to see. As outlined in our market update prior to results, we also secured new partnership capital for the second 50% acquisition of the O'Connell Street Precinct, 1 O'Connell and the surrounding properties. And we have also announced previously the $445 million acquisition of the Sonic Life Science asset on a 20-year triple net lease to a fantastic corporate customer.

All of these latter inflows and acquisitions will be recorded in FY '27. Our office platform now manages close to $28 billion in total assets, the largest office portfolio in the country, which spans over 2.3 million square meters with occupancy of 95% and compared with the national average of 83%, we continue to materially outperform broader market conditions with notably low vacancies compared to market in all submarkets including what will surprise many, a 3.6% vacancy at the Paris end of Melbourne CBD. During the year, we closed on close to 300,000 square meters of leasing deals across 250 individual transactions. The average WALE of secured new leases on this re-leasing was 6.8 years. 92% of these leasing transactions involve tenant customers maintaining or expanding their office footprint.

We are seeing improved office market fundamentals this year with growth in net effective rents, outpacing investor expectations. And combined with the ongoing limited supply or new supply due to the high economic cost of building new buildings. We expect to see pressure -- upward pressure on office rents in virtually every submarket that we are represented. Like-for-like income growth across the entire portfolio, including new leases and existing rent reviews was strong at 6.97%. I would like to highlight some important points on our office market position. as the largest office owner in Australia. We've close to 300,000 square meters of office leasing deals across 250 individual leases and with the aforementioned 92% of tenants either maintaining or expanding the space, we have high conviction on the positive trajectory of office fundamentals.

Slide 13 and Industrial & Logistics. Our I&L platform manages close to $25 billion in assets across 6.7 million square meters of lettable area and about 20 million square meters of land. Our development pipeline is close to $7.1 billion in completion value. The portfolio is 99% occupied with a WALE of 8.7 years. Over the year, we closed over 600,000 square meters of leasing activity across 70 individual transactions. 90% of our leasing activity was with repeat tenant customers. At lease term expiry, we recorded very high tenant retention with over 90% of tenants renewing their leases with an average market rent review or leasing spread of 19% relative to prior passing rents.

The portfolio remains materially under-rented which is a tailwind well into the future, supporting future rental growth. While supply is increasing in some markets in specific locations, the sector remains constrained by ongoing planning constraints, lack of available land lack of available power and encouragement of residential use into both greenfield and brownfield logistics regions. The biggest impediment to new supply is the cost of development. And whilst we've seen construction costs stabilize, the economic rent and in fact, the economic value of new developments still well exceeds the average investment value of our existing portfolio. The sector continues to benefit from multiple demand drivers requiring significant construction on new supply. And with the current market constraints to supply in many locations, we do forecast attractive rent growth over the medium term.

Slide 14, Convenience Retail. And as I say to Ben Ellis, the new lucky seat. Convenience retail platform now exceeds $18.3 billion in assets with $6.9 billion invested in convenience shopping centers and $11.4 billion invested in net lease retail. The portfolio overall comprises over 2.5 million square meters of lettable area and, in many cases, double that in land area, and it is 99% occupied. We closed over 447 lease transactions during the year over a total of 90,000 square meters of lettable area. Obviously, in the shopping centers, given that we've got no vacancy in net lease.

Our shopping centers across the nation recorded high tenant retention and a healthy 4.1% average leasing spread with new leases recording leasing spreads of just under 5%. Our net lease retail portfolio is at 100% occupancy with strong exposure to annual rent increases linked to inflation which will further drive rental growth into FY '27. We have a large proportion of our net lease retail benefiting from a CPI print in September, which will drive December quarter rent increases. The launch of the Charter Hall Convenience Retail Fund, or CCRF, represented a significant strategic milestone for the group. CCRF which was $3.3 billion in size at reporting date, creates a significant opportunity for the group where Charter Hall already has market leadership in both ownership and transaction origination with a further $1.5 billion of growth capacity likely to be realized shortly.

2/3 of that is likely to be realized before December. The social infrastructure platform has $4.4 billion in funds under management with close to 100% occupancy and an 11.4 year WALE. We are pleased to announce the acquisition of the Sonic Brisbane 20-year triple net lease asset with CPI-linked rent reviews during the year and look forward to growing the social infrastructure platform further we've selected government-leased and high-quality corporate tenant customer covenants underpinning the resilience and securities income generated by these assets.

Turning to Slide 16. Today, our platform services more than 5,700 leases across a highly diversified tenant base. Our top 20 tenants account for approximately 52% of platform income providing excellent covenant quality and visibility of earnings. During '26, we transacted with 10 of our top 20 tenant customers, demonstrating the depth of relationships across the platform and multiple leasing and acquisition transactions. One of the key differentiators for Charter Hall continues to be the breadth of relationships we maintain with major corporate government and institutional occupiers. We also commissioned independent surveys of both tenant and investor customers, and many of our fund and headstock chairs directly interview major customers to ensure the group is serving their needs appropriately.

These relationships create a recurring pipeline of leasing, acquisition, divestment and sale and leaseback opportunities that are often difficult to access off market.

Turning to the transaction Slide 17, which highlights 26 represented a record year for transaction activity, with $17 billion of property transaction activity across the platform equivalent to approximately 2.8x FY '25 levels. Acquisitions totaled $11.7 billion, divestments $5.4 billion, resulting in net transaction activity of $6.3 million. Importantly, activity was not concentrated within a single sector. We saw transaction activity elevated across office, industrial, convenience, retail and social infrastructure, reflecting a broad-based investor demand from our investor customers and the market generally.

Turning now to our Property Investment portfolio. The portfolio increased from $2.7 billion to $3.2 billion during FY '26. The driven by both valuation increase, retained earnings driven reinvestment into growing the PI portfolio. Occupancy increased to 97.8% across the whole group platform WALE increased to 8.7 years and rent growth metrics remain strong across the portfolio. One of the features of the platform is that it is diversified by geography, tenant and sector whilst maintaining a strong focus on high-quality assets and tenant covenants.

Slide 20 illustrates the diversification of the Property Investment earnings segment across all sectors of the platform. No single asset contributes more than 6% of Portfolio Investments and approximately 26% of portfolio income is derived from government-related tenants. The key investment theme continues to be income quality. The portfolio benefits from long lease durations, strong government and blue-chip tenant exposure and built-in rental growth mechanisms.

Turning to our development pipeline. The group's development pipeline increased to approximately $20 billion, making it one of the largest institutional development pipelines in Australia. Development completions totaled approximately $1.4 billion during '26 while maintaining a substantial committed and future project pipeline. The ability to create next-generation institutional investment stock remains one of Charter Hall's competitive advantages.

Slide 23 highlights our industrial development pipeline, which is now at $7 billion, includes approximately 202 hectares of strategic land holdings nationally. We completed approximately $700 million of industrial developments during '26 and currently have $2.5 billion of committed developments underway. The scale of our industrial land bank is becoming increasingly valuable as planning constraints and infrastructure available become more important barriers to entry.

We've also recently taken advantage of DC demand by the sale of industrial land at material premiums to cost and book values to data center buyers, which drives growth for our fund investors in both NTA, IRR and the capacity to recycle cash delivered at premiums to cost into other industrial and logistics developments and acquisitions.

Slide 24 on office development. The office pipelines total sits at $7.8 million, which chiefly South continuing to be the centerpiece of the platform, which is on track for completion in mid '27. Preleasing has reached 70%, leasing momentum remains encouraging and we continue to target maximizing rents and occupancy as the project nears completion. A successful completion and leasing of the 55,000 meter 360 Queen Street, Brisbane, project in the core of Brisbane CBD with virtually 95%-plus precommitments of PC and 100% 15-year government pre-leased asset for the new headquarters of the ATO in Barton, Canberra, demonstrates continued customer demand for premium sustainable office assets.

We're steadily working towards the commencement of our next project in Brisbane CBD 60 Queen Street and the addition of the 1 O'Connell Street precinct in Sydney has added considerable optionality to our future Sydney core CBD pipeline.

Turning to sustainability, '26 was a significant year for Charter Hall sustainability strategy. Platform achieved Net Zero Scope 1 and 2 emissions from 1 July 25, supported through renewable electricity procurement, on-site solar generation and approved offset programs. installed solar capacity increased to 96 megawatts, while sustainable finance facilities increased $8.2 billion.

I'll now hand to Anastasia to run through the financials.

Thank you, David, and good morning to everyone on the call. Starting with the financial results on Slide 27. The group delivered another strong result in FY '26 with operating earnings post tax increasing 26.8% to $488.1 million, being $1.32 per security. Importantly, all 3 segments contributed to this growth. Property Investment EBITDA increased 17% to $341.6 million. Development investment EBITDA increased to $61.5 million, up $20.9 million on the prior period and Funds Management EBITDA increased 8% to $293.1 million. The group reported statutory earnings after tax of $427.9 million, an increase of 30% while distributions increased 6% to $0.507 per security.

Property Investment earnings are underpinned by like-for-like income growth of 5.6% on our co-investments in funds. Together with a material contribution from the incremental deployment of $450 million throughout FY '26, plus the annualized income from the prior year's net equity investment of $196 million. In addition, we have continued to actively curate the portfolio, generating a positive yield spread and earnings accretion through capital allocation. Development investment earnings growth was driven by a 50% increase in development volume, reflecting both project completions and the subsequent realization of profits from asset sales.

I'll return to Funds Management segment when we move to the next slide. Net finance costs have increased on the balance sheet, in line with higher drawn debt and higher undrawn debt capacity, underpinning our increased activity in property investment. Offsetting this is lower look-through interest expense from our co-investments in funds due to downweighting higher geared investments and reinvesting in lower geared investments compared to the prior period. Overall, net interest expense increased modestly by 2.3%. Tax expense is lower by 15% at $81.9 million from capital allocation efficiency implemented across the staple between CHP, the trust and CHL, the company. Importantly, these benefits are durable and have permanently reduced the group's effective tax rate by approximately 5 percentage points.

The group has maintained its long-term distribution growth policy of 6% providing reliable income growth to security holders while retaining earnings to support future investment in earnings accretive opportunities.

Turning to Funds Management earnings. Funds Management base fee revenue grew 8% and transaction and performance fee revenue grew 40.3%, evidencing the typical pattern of strong equity inflows, underpinning deployment and transaction fees, in this financial result for FY '26, ahead of the annualized benefit of base fees in the subsequent FY '27 financial year. Property Services revenue declined 2.9% primarily reflecting elevated leasing activity in the prior year. Operating expenses increased by 6%, of which 3.1% is for the one-off FY '26 STI outperformance. The remaining 2.9% growth in underlying operating expenses is a result of the annual wage increase and inflation in nonemployee costs.

Turning to the Charter Hall balance sheet. The PI DI investment portfolio grew to $3.3 billion, up from $2.8 billion over the course of FY '26, led by net investment of $450 million into property investments throughout the year. NTA increased to $5.95 per security, led by retained earnings. Head stock investment capacity increased to $1 billion following the addition of new bank facilities and the successful debt capital markets issuance of AUD 250 million medium-term note 7-year bond at the end of the third quarter. Gearing increased to 14.2%, reflecting the higher level of capital deployed into property and development investments throughout the year.

Return on contributed equity increased to 26.4% post tax highlighting the strong returns delivered by the group during the year. Our focus remains on growing return on contributed equity through generating income and capital growth organically for the benefit of security holders.

Turning to platform debt, Slide 30. Across the platform, we have continued to proactively source new loans and refinance existing debt to increase financial covenant headroom and lower credit margins for $22.6 billion of total debt facilities of $35.3 billion across 66 portfolios with debt in our funds management platform. These initiatives reduced credit margins on average by 20 basis points, helping offset the higher RBA cash rate and market floating rates, which we expect to moderate lower in calendar 2027.

Credit market conditions remain highly supportive with strong appetites from both domestic and international banks and debt capital market investors. Before handing back to David, in summary, the group delivered a strong earnings result for the year ended 30 June 2026. The combination of elevated equity inflows and investment capacity on the balance sheet and in our funds platform underpins organic FUM growth and sustained future earnings growth.

With that, I'll hand to David to discuss earnings guidance.

Thank you, Anastasia. Now turning to our FY '27 guidance. Based on no material change in market conditions, Charter Hall expects FY '27 post-tax operating earnings of approximately $1.14 per security, representing 10.5% growth over FY '26, which we note once again has no performance fee revenue within that forecast. Distribution guidance is for $0.537, an per security, representing our 16th consecutive year of 6% EPS growth.

We're now happy to take your questions.

[Operator Instructions]

Our first question comes from the line of Simon Chan with Morgan Stanley.

David, can you walk us through what was on your mind, when you made the comment during your prepared remarks about expecting to drive Group FUM grew from beyond $100 billion in FY '27. I guess in what do you -- how do you think you're going to do that? Is it going to be acquisitions, revals, development, like in your give us some insights there.

Well, it's pretty simple. You've been following us for a long time. We've always got dry powder in terms of equity inflows, both a lot of and committed but yet to be allotted, we have the largest transaction team in the country across all the sectors. So we've got quite high conviction around net acquisitions continuing. I think I called out that we've got confidence in valuation growth driven solely by income. And in addition to that, you've got a fairly large committed development pipeline that will continue to grow beyond $1 billion a year of completion. So it's a pretty simple math and that sort of drives the expectation.

If I were to be a bit critical for your result today, right, I would say that the first half inflows was pretty good, but very good. And then the second half inflows in comparison was quite weak. Is that just the nature of the game? Or do you think because of what's happening in the world out there that we probably should expect a period of slower inflows in FY '27?

Well, there's a few comments I'll make about that. First of all, we have committed and not allotted inflows in various funds, and that will get a lot of as we grow portfolios. CCR a good example. I called out, we've got $1.5 billion of dry powder, and that's before new inflows that we're expecting shortly. When I think about in the first 6 weeks of FY '27, we've got net inflows well in excess of $600 million already. And with the line of sight, I've got further inflows coming just in the first half of this year, I'm pretty comfortable with last year's run rate occurring.

Part of the reason why it's not healthy for people to be doing quarterly balance sheet update is that it's never linear. So we might have a quarter where we have materially higher inflows than an average for the year. So all I'd say to you is there's certainly no expectation from our side that inflows again to slow down.

The other thing I'd say is when we use our balance sheet to warehouses -- sorry, warehouse investments like the Sonic 20-year triple net lease, we will use our balance sheet and sell that down. So we put $160 million of net equity into that prior to 30 June, and I'll have it all out before the end of September. So -- when you guys sort of look at $160 million to $500 million in net debt, you can pretty well work out why 14% goes below 10% pretty quickly. So I'm not concerned around the granular analysis of 1 quarter over another, we'll just stand by our long-term trajectory of growing our net inflows as outlined in the presentation.

Great. I just got 1 more. It might sound like a wet question to Anastasia. What denominator did you use when you came up with $1.14 per share guidance?

What do you mean by denominator?

Outstanding security.

Just our shares on issue, Simon?

Just 473?

Yes, that's right.

We won't be changing the number of shares on issue, Simon.

Our next question comes from the line of Andrew Dodds with Jefferies.

Just thinking about underlying growth in '27. I mean, it was a very active year in '26 despite all the macro challenges, flows and transactional activity, both at record levels and you're still calling out plenty of dry powder. I guess if we just think about -- if we assume no further deployment or fund formation, just what the sort of annualized benefit from '26 appointment would look like on earnings into next year?

Look, I'll tell you what I've been saying for the last 20 years. We always have a bow wave of annualized revenue impact from strong equity flow years. So as you could see from both our half and full year results, equity flows come in, that then creates net asset growth that doesn't give you an annualized revenue impact until the following year. The same thing will happen in '28 over '27 and '29 over '28. So when we look at net FUM growth, as I outlined before, there's 3 or 4 drivers. It's net acquisitions, there's valuation growth. There's development CapEx, completions. And obviously, as we continue to drive net inflows that accelerates the growth in fee or revenue-generating assets under management. It's pretty simple. .

Okay. And then maybe just on transaction fee revenues of $43.8 million this year. They do feel kind of a bit light on just against $17 billion of transactional activity. I guess the blended sort of margin is about 26 basis points. So sort of well below that sort of 50 to 100 bps you make on acquisitions and disposals. So what was the kind of key driver in this lower number, in '27?

You've got to look at the net transaction numbers. So obviously, during the year, it's well publicized that transferred assets into CCRF and took an equity investment in CCRF. So we're not going to charge fees on those sort of transactions -- the -- it's always dangerous just to do what you've just done is look at total transactions and divide them and try to get up to 1 basis point. If you sort of look at our results presentations over many years, the actual dollar number of our transaction fees hasn't changed, but there will be occasions where we're not going to charge fees on related party transactions. So that's simple.

I can add to that. Obviously, we won some pretty key mandates, which was fantastic through the year and the mandates in winning them, you don't actually get a transaction fee, they're transferring their assets to us. And the balance sheet itself has obviously contributed a lot of growth in property investment income, and that's $1.5 billion of the transactions that obviously, we don't charge ourself fees.

Our next question comes from the line of Adam Calvetti with Bank of America.

Just 1 on tax. I mean, that decreased materially. How do we think about that into FY '27. I mean the effective tax rate that was in FY '26. Is that expected to continue increase, decrease? Just any color on that.

Thanks, Adam. Yes, the effective tax rate has reduced. We've been putting in effort for a couple of years now around getting the cash on the trust side and the right capital allocation across the staple. That's now complete. And so we've now got a locked in net effective tax rate that's about 5 percentage points below what it used to be before those efficiency drivers. So that will continue at that lower effective tax rate ongoing.

Just to be clear, the effective tax rate for '26 will remain the same into '27?

We don't give compositional guidance. It is somewhat dependent on how much of the growth in the earnings in '27 is made up of taxable income like your funds management earnings and development profits versus what's in property investment income, nontaxable. But broadly, no reason to say it won't pattern over time similar to what you're seeing. .

Okay. Great. And on performance fees, you've got 5 or 6 funds they're up for assessment this year. Can you just talk to whether those are in the money, maybe embedded performance fees and how you're thinking about their contribution to FY '27?

Look, I'll answer that. Every year, we've provided guidance. We don't include estimates of performance fee revenue, unless they're so materially in the money. I think we've all learned that volatility in interest rates and therefore, cap rates makes it a pretty fickle game, trying to do forecasts on valuations at June 30 next year. And at the end of the day, I'm not going to get drawn on whether they're in the money or not. The reality is we've provided guidance that doesn't have any performance fee revenue in it, and we'll see how things emerge during the year.

Okay. Great. One more, if I may. Just on investments, they ticked up about $0.5 billion over the year. Can we expect to see Charter Hall contributing a larger portion into new funds going forward, expected to tick up over '27 as well.

No. I would say our average percentage of equity under management will continue to decline as it has for 20 years. If I look at what we have coinvested in, say, CCRF our latest commingled fund, we've got $100 million out of $3 billion plus. As has happened with every other major open-ended fund, we might start at a certain dollar number that is a certain percentage and our percentage gets diluted over time. Our business model is not to try to keep pace with our super funds or pension funds or sovereign wealth funds or insurance companies have got much bigger balance sheets than Charter Hall.

And I think the scale of our business and our track record of performing for our investors would suggest that we don't need to be co-investing at the sort of percentages that perhaps we did 20 years ago.

Just to be clear, David, that co-investment as a percentage has ticked up, your ownership stake has ticked up over the last 5 years.

It depends on -- that's not actually correct. If you split the funds by their type, whether it's institutional or pooled funds, our percentage stakes have been coming down materially over the last 20 years. I started at 20% or 25% stakes in CPOF and CPIF pre-GFC and we're down to very small percentages of them. Some of our partnerships where we might have a 10% stake and an LP has 90%. They do stay at those levels. But across the board, our percentage of equity under management has been trending down for a very long time. And I actually don't see that changing as we get bigger.

Our next question comes from the line of Tom Bodor with Jarden.

I'd just like to ask a question around equity flows. If I look at the difference between the gross and net equity flows from first half into second half, it does appear that the redemptions might have picked up a bit in the second half. Is that the right interpretation? I think sort of from circa $900 million first half to about $1.2 billion in second half?

They're not redemptions. So if in the case of CCRF, which we've articulated, if CQR sells assets into CCRF and takes equity, there's an in and out. If we have equity that is being bought by incoming LPs that buy equity from outgoing LPs, that's an in and out. So I don't think it's right to categorize that redemptions have lifted. And if I look at the pooled fund history of this business, over the last 22 years, we've cleared every redemption queue that emerged at sort of 7 yearly liquidity reviews in funds like CPOF and CPIF within a very short period of time.

And then even in the direct business, we've cleared the redemption queues that existed in the 2 office funds, PFA and DOF. So it's -- once again, it depends on the timing of liquidity events in those various entities or various funds. So -- but it's absolutely not right to say that we have redemption queues. Like right now, we have no redemption queue in any of the direct funds, any of the pooled funds. So I'll just want to make it very clear. We're not currently facing redemption queues.

Yes. That's very clear. And then if I look at the growth transaction, it's a bit of a stellar breakout year this year, I think you went from $6.1 billion in $25 billion to $17 billion in '26. So a massive effort. Just would be interested as we look into '27, what level of transactions are broadly assumed in your guidance?

Well, we're not going to, as Anastasia said, give you sort of composition or indications. What I'll tell you is that we'll be buying a lot more assets than we're selling as a ratio to what you've seen in '26. And that's a function of what I just said about a lack of redemption queues and a function of what I'd indicated will be a continued strong run rate in net inflows.

Excellent. And just a final small question on Southern Cross Tower. I think the government has indicated that they may vacate that asset around 77,000 square meters per lease not for a while before that lease ends. Just be interested in any comments around leasing that space?

It's not actually accurate. There's 2 leases in that building and only 20,000 meters was the subject to the lease that expires in FY '28 and the government hasn't exercised their option on that tranche. The reality is that the other tranches into FY '29. We have already fielded strong corporate tenant interest for the 20,000 meters we have to lease in FY '28. And I'm pretty confident that that's not going to add to what I previously indicated as a very low 3.6% vacancy rate for the Paris end of Melbourne.

Our next question comes from the line of David Pobucky with Macquarie Group.

Just to follow up 1 on flows. Can you talk to investor demand from listed product? And how expect demand from wholesale into retail channels to evolve over '27, like, for example, direct funds, fund flows picked up in '26. Are you seeing a broadening number of global in stores allocating to Australian properties. Just any comments on that, please?

Yes. So we've got over 10 institutional LPs across our platform. Obviously, from a total equity under management, that's majority domestic, but we've got an accelerating volume of new domestic investors and foreign investors I would say we're seeing continued strong demand from offshore capital wanting to invest in Australia, broad-based from Japanese institutional investors, European based and other LPs around the world. We have obviously announced a couple of mandates. We've challenger and care during the last financial year, which are additional domestic inflows. And as a general statement, I think the PE multiples in international equities at 1 or 2 standard deviations over historic norms is giving cause for our domestic and global investors to look more seriously at driving allocations into direct property because of the denominator effect, most of our clients are underweight their strategic allocation to property, both domestic and offshore combined with a view whether the markets got this view or not.

The vast majority of our clients have a view that we've hit peak rates and therefore, the vintage to invest in commercial property at positive gearing. I think the recent federal government changes have turned negative gearing into a dirty word, and we're seeing capital wanting to invest in positively geared long-lease commercial assets across retail, industrial, office, social infrastructure from all ends of the spectrum, from amended retail to high net worth to financial adviser clients, through to the institutional end of our sources. And with respect to listed, you guys understand that sector better than unlisted. The REIT sector is still trading at discount to NTA and at PE multiples that don't compete with the unlisted equity market. So until that changes, I don't see much equity being raised in listed REITs.

And just my second question on CCRF, please. Convenience Retail, you posted, I think, to be over $8 billion of gross transactions in the year. How much further acquisition and aggregation opportunity remains in the space? And what's the intent scale and ownership structure of CCRF, please?

I'll give you a stat. So we're the largest owner of convenience retail in this country at $18 billion, and we're barely 5% of the investable universe when you think about neighborhood and smaller regional shopping centers, Bunnings, triple net leased pub service stations. So we think the universe of continuing to selectively acquire assets we like, particularly in shopping centers is very strong. There wouldn't be a week in Charter Hall goes by without us making offers or going to due diligence on further acquisitions right across the platform.

So yes, we're pretty confident of our ability to keep acquiring assets. And in that space, particularly in the neighborhood and subregional space, the vast majority of the people we're buying from a closed end retail syndications that have to sell privates. Quite often, it's a family planning issue. Quite often, it's simply they've got to a point where a lot of the privates we're buying off or getting to an age where they don't really want to be actively involved in managing shopping center assets. And virtually in every case, our management team under Ben can extract NOI growth from better management of these shopping centers, driving rental growth. So yes, we see that as a big opportunity.

And look, that equally applies in the other sectors that we operate in. So we sort of feel like we've got a relatively modest percentage of the investable universe in all of the sectors we operate in, and therefore, the growth capacity for us to acquire and develop the core in those sectors is still quite significant.

Our next question comes from the line of Ben Brayshaw with Barrenjoey.

I would just like to clarify my understanding of the onetime STI expense. Could you talk about how that's been allocated into the Funds Management business?

Yes...

Sorry. You're talking about the STI expense.

The onetime STI expense.

Well, it's not an STI. Are you talking about the retention rates?

I'm just referring to the 3.9% increase in operating expenses for the Funds Management business included in the 6% increase on the PCP.

So Ben, we obviously outperformed in all 3 segments. And each of the outperformance has been proportionately allocated to each of those segments according to their outperformance. And so not all of it is in funds management. Some is in development. Obviously, that grew by only 50% in earnings and some of it is in PI that also had significant earnings growth.

Are you able to say approximately the quantum that is in dollar millions.

In Funds Management segment, it's $9.2 million.

And just like to get your feedback on how you're looking to position the balance sheet in relation to the to the gearing ratio? And just some color on debt issuance in the second 6 months for the balance sheet, which seems to have increased the undrawn liquidity and the facility limit.

So look, Ben, it's really simple for me. We have no qualms about setting 10% to 15% balance sheet gearing. If you listened to my remarks earlier, simply selling down our equity that we've warehoused for the Sonic transaction takes us below 10% balance sheet gearing. So as I'm sure you're aware, we have unsecured debt platform because of the capacity of us to bring down gearing and then reinvest to warehouse further assets for further capital partnering right across the spectrum, it's going to ebb and flow. There might be 1 reporting date we're in the mid single digits and then another reporting date like now, we're at 14%, but it moves around quite a lot because it's a very modest level of drawn net debt for the business and the cash flows we generate. So that's the best answer I can give you.

We added bank lines, and we issued a medium-term note. So we have taken the outstanding debt drawn with that medium-term note higher in the second half and the rest of the loans we added bank loans are undrawn, and they've increased the capacity, just to answer your question.

Our next question comes from the line of Richard Jones with JPMorgan.

David, you started last year with original guidance, I think you upgraded at 3 times. As we start '27, you've obviously got pretty good flow on impacts from your FUM growth into largely recurring earnings in the funds business next year that should be around where you've guided. I'm just interested to -- in your comments, you've kind of pointed to similar equity inflow and a high level of transaction activity doesn't just seem consistent with where earnings are guided. I would have thought, both in your commentary, you'd be expecting a much stronger result than the original guidance you're providing today?

Well, I'll just remind you, Richard, the Street, according to consensus had FY '27 estimates for EPS at $0.97, we've just guided at $1.14, which is 18% above where the Street was in August last year. I love all the notes on 1% misses in reality, we've been providing, as we have for most years for the last 21 years, a momentum story I'm never going to come out and predict equity flows and therefore, put them into a guidance because I've never missed guidance and I will not go out and provide guidance with any risk of downside. So all I'd say to you is as is the case in every other year, we look at what's in front of us.

I don't know what could happen in the world, whether it's geopolitics, bond markets, et cetera. So we'll factor in what we have high conviction on forecasting. And as some of the things I alluded to emerge, including inflows driving growth, we'll look at our reforecast during the year. But I -- having just delivered 27% growth and 10.5% guidance growth for this year, I'm not sure anything has changed around the characterization of this business being able to organically continue to grow and deliver earnings momentum for its shareholders.

Just a second question on you flagged some transactions through the course of the year. Are you able to just provide a bit more detail on that and then also outline whether there's any balance sheet owned land or assets that you're potentially looking at data center exits as well?

So the first answer is we've had a couple of site divestments, not on balance sheet here in our large industrial funds, CPIF, one, I bought for $60 million and sold $190 million. I was pretty happy with that result. And there's probably others that may also generate premiums to cost and current book values that we realize I think I've made it pretty clear, we're not going to be a built-form data center developer owner. I think there's too many other experts out there that have got a longer track record and greater aspirations to be in that space. And in terms of the balance sheet, no, we don't have any incubated opportunities that would necessarily be just targeting power banks to then on sell to data centers. I think when we have used our balance sheet to warehouse opportunities there generally to produce pre-leased product that might be suitable for our core funds in whatever sector, whether it's industrial, office, et cetera. So no.

I certainly wouldn't want you to be thinking we've got some big development profit coming on balance sheet from being able to sell at premiums to data center buyers.

Our next question comes from the line of James Druce with CLSA.

Yes. One big picture question for you on office demand. And you talked about sort of looking long term and you've obviously seen a few cycles. If you look at the PCA data since 1990 and just look at the absorption numbers for every 6 months, '24 to '26 is only doing 50,000 each 6 months. If you go back to 2015 to 2019, that was doing more like 100,000 each 6 months. And if you go back to '04, '08, it was almost 200,000, 300,000 square meters of demand each 6 months for the all the CBDs in Australia. So there's been a sort of structural decline over a long period of time. And I get that there's work density issues there, I get there's work from home as well. But we should have cycled work from home by now, I would have thought I'm just curious as to sort of how you think about demand over the next 10 years.

Unfortunately, I started this industry before 1990. So yes, I've been through a few cycles. If you look at -- I think you've got to look at office markets in almost 3 tiers. There's prime premium A-grade there's lower grades, and then there's almost absolute grades that will have to be and have been over many cycles converted to predominantly residential and hotels. When I think about demand, I look at it in the context of future supply because every cycle I've been through major tenants, both government and corporate always want to move out of older buildings into the latest and greatest new complexes.

We're seeing it right now. I think both Camel and I have called out for some time the bifurcation of tenant demand. So when I look at virtually every submarket we're in, and 60% to 70% of the vacancy sits in 30% of the buildings that generally are the sort of buildings that we don't own, you're seeing quite a shift of -- structural shift of long-term structural vacancy in older stock, and I would argue in suburban markets. And I increasing demand for good modern product. We're actually seeing this in industrial as well. The reason why most of us had got a capable of doing industrial pre-leased developments is that the demand is moving out of old sheds into the very latest because the amount of automation that warehouse users now want to invest inside their sheds means that the older stock is just not fit for purpose. And the same applies in office.

So if I look at the last 10 office projects, we've completed nationally, virtually all of them were either pre-leased 100% prior to completion or somewhere between 90% and 100%. And we've just delivered another 1 in FY '26 in Brisbane called 360 Queen Street. So your stats are right, but you need to look at the categories within each of the submarkets. So for example, on Chifley, we precommitment on the new Chifley Tower. I am in no hurry when I see double-digit net effective rental growth in the core of Sydney to lease up the rest of the building. and my team get annoyed because every 3 months, I decide, let's put the rents up. And we've got similar conviction in Brisbane.

I think it's a very tight market, and we're also seeing huge tenant demand wanting to move out of virtually 85% of Sydney's -- sorry, Brisbane's CBD is in 30-, 40-, 50-year-old boiler buildings that are just not going to retain their tenants. So tenant demand is shifting to modern buildings. Now modern could be something that's 10, 20 years old or it could be a new building like we've just delivered on 360 Queen and what we we'll be delivering on our new project up there, 60 Queen. So that's the way I see office markets. Yes, we all know that had elevated incentives compared to other sectors but incentives are coming down at a rate of knots and net effective rental growth is happening, which is obviously good for the NOI line, but it's also good for your terminal value estimates that the valuers put on their 10-year DCS because people are looking at putting lower incentives in the terminal values than what our existing incentive levels.

So that's why we're sort of high conviction on a segment of the office market that is not represented by PCA figures because PCA figures quite the whole of the supply. And the other thing I'd say is there's a lot of, obviously, political discussion now about net migration. People forget net migration and population growth drives a motor applier effect for demand in both industrial, retail and office. Everyone understands retail and industrial, and they always sort of forget about office. So -- and to your earlier point, every week, you're getting another organization finally saying that this whole work from home thing is not working. So I think one organization this week has come out and mandated 5 days a week.

I think we will move, and we're not quite there, but we will continue to move back to prepandemic attitudes around a flexible policy for our people. And I think the other thing that's going to accelerate demand for office and, in my opinion, an acceleration of people getting back into the office or not working from home is AI could be quite a disruptor for companies who can't get the productivity out of the human workforce. They have -- and they'll go down the path of using robots like I've seen it for 20 years in warehousing where automation is being put into warehouses, and that's their payback is basically a reduction in labor force costs inside the warehouses. That's the only way you can actually justify the CapEx investment. So yes, I'm pretty bullish about the right sort of office and the right submarkets for all those reasons.

Our next question comes from the line of Suraj Nebhani with Citi.

Just a couple of quick questions. Firstly, Anastasia, on that, just clarifying that overheads comment, I'm looking at the employee costs in the, I guess, statutory income statement. They've risen by almost $50 million year-on-year from $185 million to $235 million. Can you just talk to that overall number? How much is the I guess, expense there? And what do you expect heading into 2027?

Yes. So obviously, we did have a very, very good year with 3 earnings upgrade, underpinning some size growth of sharing of the outperformance between employees and shareholders. And that's resulted in an extra $30 million of cost in the group for FY '26...

Sorry. I also stated is actually in the rem report shows 186% average STI award, which I think justifiable given we just grew earnings 27% over '25.

So I think that 187% is 100% space pool, and you will have that expense in FY '27. And the 87% is the outperformance pool that is not at all in the guidance or expected in FY '27. Offsetting that, though, you do have an annual wage increase and we do have some inflation coming through our nonemployee costs, and that's also on top of last year's wage increase. So I would expect you'll get about a half saving of that STI outperformance in FY '27 on FY '26. So about a $15 million decrease in FY '27.

And that comes through across various lines, right? I think you were saying $9 million in the fund management line and then sort of spreads across together?

That's right. But you should -- that will all just drop out of the -- it will be in the FY '26 prior period. But going forward in FY '27, if there's no outperformance, it's just all in FM.

Understood. And while we're talking about the REM report, I guess, just a quick question on -- I was trying to find with the retention ownership plan, there up and any I just wanted to clarify, firstly, what was the final outcome there in the 5-year plan?

It's all in the REM report. It's an 80% award of the retention plan 80% vesting.

Understood. And I guess a lot of focus on performance fees. I understand you're not giving guidance. I guess people are just trying to assess what does the earnings outlook look like? There's some strong performance coming through, it seems on some of the funds. But if I focus on the office side, can you talk to Chifley. And when exactly does it complete -- and I would have thought there should be decent outperformance there or any expectation, I guess, that you can give on Chifley, particularly?

Well, it's going to be a fantastic outperformer. But when I look around the ownership of Chifley between a large LP partner that was the original owner that we bought 50% from. And 2 of our funds, it's just 1 asset in those funds. So -- and look, as I said before, we -- when we guide and say, the guidance has no performance fee revenue. That doesn't mean that there may not be a realization. But I'm not going to come out and do a forecast of seen too many cycles before on whether or not we may or may not generate performance fees. So I think the way you should look at it is that's our guidance without performance fee revenue. And they materialize during the year, well, it's upside.

Final point on, I guess, the -- you mentioned listed pricing at a discount to NTA. Any any sort of appetite for M&A activity near term?

I've done 9 take private. So I've always got appetite, but I'm not going to talk about it today.

Ladies and gentlemen, at this time, I would like to turn the call back over to David Harrison for closing remarks.

Thanks, everyone. And I'm sure over the coming days, weeks, we'll get to made at the various lunches and one-on-ones. And importantly, a big shout out to the whole of the Charter Hall family for the contribution over the last 12 months. It's had its challenges, but I think the teams performed exceptionally well for our investors and our tenant customers. And at the end of the day, you can't run a business of this scale without it being a big team effort. So I just wanted to thank our team. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Group 2026 Half Year Results Briefing. [Operator Instructions] Please note that this conference is being recorded today, Thursday, the 19th February 2026. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group Chief Executive Officer. Thank you. Sir, please go ahead.

Good morning, and welcome to Charter Hall Group's First Half FY '26 Results. Joining me today are Sean McMahon, our Chief Investment Officer; and Anastasia Clarke, our Chief Financial Officer. Today, I will provide an overview of the highlights of a very active last 6 months and then cover the usual funds under management, equity flows, valuations, operating environment and finish with our property investment balance sheet portfolio.

Sean then will take you through development activity and our sustainability initiatives, followed by Anastasia with the financial highlights. We'll conclude with our outlook and Q&A. Turning to the group's highlights. Operating earnings for the half were $239 million or $0.505 per security, reflecting continued momentum across every segment of the business. This strong performance underpins today's upgrade to FY '26 guidance to $1.00 per security, representing 23% growth over FY '25.

Return on contributed equity continues our multiyear trend of generating above 20% returns, which has increased to 23.1% post-tax and over 28% pretax. FY '26 also marks the 15th anniversary of consistent dividend growth. Over that period, dividends have grown at 7.8% CAGR, well ahead of historic inflation in the REIT peer group. Group FUM increased from $84.3 billion to $92.2 billion on a pro forma basis, which includes additional FUM created post 31 December, while property FUM rose from $66.8 billion to $73.6 billion.

During the first half, we had a very active total transaction volume of $9.8 billion. Acquisitions and development activity more than offset divestments, supported by positive net valuations, largely driven by rental growth as economic growth and increased tenant demand met with a severely reduced supply across all of the markets we operate in. Our balance sheet remains exceptionally strong with balance sheet gearing of just 7.7% and $1 billion of dry powder providing for accretive acquisition capacity, which contributes to the more than $7.8 billion of total platform deployment capacity.

Importantly, we also recorded the strongest level of gross equity flows in our funds management business in our 3.5 decade history. On Slide 5, the Investment Management business secured $4.8 billion of gross equity inflows during the half. Inflows over the past 6 months have accelerated materially exceeding the prior full 12-month period. We also are pleased to report average annual inflows over both the last 5- and 10-year period at close to $4 billion annually, highlighting our consistent capacity to attract inflows through cycles. Total transactions were $9.8 billion, comprising $6.6 billion of acquisitions and $3.2 billion of divestments. Acquisitions, development completions and valuation growth, as I said earlier, comfortably outweighed divestments.

Turning to Slide 6 and our strong earnings growth history. Operating EPS has tripled over the past decade, delivering a 12.6% CAGR while distributions have grown at over 10% per annum. Around half of our post-tax earnings are reinvested back into the business, funding growth in property and development investments. This enables us to invest alongside capital partners, expand our funds management earnings and generate strong return for security holders without the need to issue new public market equity to grow.

This is a key competitive advantage we retain, and we will continue to organically grow the business through the retention of earnings via our payout ratio policy. Given our capital-light business model, this is a powerful and sustainable driver of organic earnings growth.

Slide 7 highlights the long-term strength of our distribution profile. Over the past 16 years, Charter Hall has delivered consistent dividend growth higher than the growth rate of U.S. REITs currently included in the U.S. S&P 500 Dividend Aristocrats Index. Slide 9 provides a deeper look at our property funds management platform. Institutional investors contribute over 76% of total platform equity, while more than 82% of our property funds under management is across the unlisted wholesale and direct channels.

Investor demand for unlisted property remains strong, reflecting the safe haven characteristics of Australian real estate and the diversification benefits unlisted assets provide amid a heightened listed/liquid asset class market volatility.

Turning to Slide 10. Property FUM increased from $66.8 billion to $73.6 billion on a post balance date acquisition-adjusted basis, driven by acquisitions, development completions, positive valuation movements and of course, our previously announced Challenger mandate, which was secured during the half. Growth was led by the wholesale unlisted platform. This reflects early signs of valuation recovery and the benefits of disciplined portfolio curation across all 3 of our listed REITs, which has helped deliver meaningful earnings and NTA value growth for those REITs.

Property FUM has now surpassed the peak achieved in June '23 before the devaluation cycle the market experienced. With $7.8 billion of available investment capacity, we expect further growth through acquisitions, valuations and ongoing develop-to-hold strategies over the remainder of FY '26.

Our property platform, as highlighted on Slide 11, comprises over 1,600 assets, spanning 11.5 million square meters of lettable area with 97% occupancy and a market-leading 7.5-year WALE, or weighted average lease expiry. Our integrated property management team secured more than $3.6 billion in net rent each year, a critical metric as rental income underpins everything we do. I&L or industrial and logistics is our largest sector exposure at 37% of the platform, whilst convenience retail continues to grow and now represents over 20% of the platform.

Our office platform at over $26 billion is the largest in the country. We are seeing encouraging early signs of recovery and are actively planning increased development and deployment in high-quality CBD asset locations, whilst we're also repositioning opportunities such as the recent acquisition of 1 O'Connell Street and the adjoining assets in the core of Sydney CBD, which on a combined site area basis of approximately 6,800 square meters is one of the largest site consolidations in Sydney CBD alongside our 7,500-meter Chifley site. which, as you're all aware, we're well progressed on developing a second Chifley Tower, which on a combined basis will generate over 110,000 square meters of lettable space in 2 adjoining premium-grade towers.

Turning to equity flows. During the half, Funds Management secured $4.8 billion of equity inflows, a record for a 6-month period across the history of the group. Inflows were broad-based, spanning all 3 wholesale pooled funds, CPOF, our office fund, CP Industrial Fund and of course, our recently launched CCRF or convenience retail fund. Partnerships have also been a strong contributor, including the Challenger mandate I mentioned, and we have seen a notable uplift in fund or equity flows for Charter Hall Direct, which in 6 months has exceeded all the flows generated in the whole of FY '25.

Slide 13 summarizes our industrial platform. We manage over 7.2 million square meters of lettable area, representing $27 billion of funds under management and importantly, close to a 20 million square meter land bank across that portfolio, making this the largest third-party industrial platform in Australia. The portfolio is modern, most of which has been developed by Charter Hall, attracting a high occupancy and is underpinned by Long WALE, strong leasing renewals during -- achieved during the half.

And importantly, we still believe the portfolio has got a 17% discount to market rents, providing positive rental reversions over the course of coming years. Our development pipeline sits at $6.5 billion in industrial. This is underpinned by a significant land bank of over 223 hectares. And I also note our recent media announcement on a new 20-year lease on a 100,000 square meter facility to ALDI at one of our largest states in Melbourne as an example of the ongoing pre-committed development activity we are completing within the industrial platform.

Slide 14 outlines our office platform. Clearly, Australia's largest at $26 billion with 2.1 million square meters of lettable area. Leasing momentum was strong with 124,000 square meters leased across 134 transactions during the half. Net effective rents outpaced face rent growth and 93% of tenants were retained in their existing or expanded footprints. Occupancy remains high at 95% relative to peers and clearly relative to the market, well ahead of our broader aspirations for occupancy.

And I also note that in a strongly improving net effective rental market, it's also helpful to have a bit of vacancy so you can capture those positive market rental growth reversions. I anticipate that you'll be hearing a lot more from us on various office activity as we move forward. We are positive on the outlook for our assets and also deployment as this market is clearly at least for quality CBD holdings in the early phase of what could turn out to be a sustained and attractive recovery for office landlords.

Our convenience retail platform on Slide 15 manages around $15 billion of assets or over $17 billion, including our Long WALE Bunnings assets. The sector represents a significant long-term opportunity given limited institutional ownership and the increasing difficulty of replicating well-located assets in inner and middle ring metropolitan markets. Last year's successful take private of HPI was just another example of us expanding our Long WALE convenience retail platform, and recent acquisitions of Bunnings portfolios such as the $290 million sale leaseback acquisition we closed with Bunnings in the last half is further evidence of our conviction to grow into the convenience net lease retail sector with the market-leading tenants in each of those sectors.

When we think about barriers to entry in this submarket, including land availability, zoning, scale and capital, we do believe that Charter Hall has a durable competitive advantage in securing further growth for our investors. More importantly, it's also providing another string to our bow when we talk to our tenant customers around curating their existing lease portfolios, but also being able to fund sale and leaseback transactions if that suits these major retail customers.

Slide 16 and social infrastructure remains a core strategic focus. These assets provide essential services, exhibit low correlation to economic cycles and are among the lowest risk property sectors. With Australia's growing population, demand for these services will only increase, and Charter Hall is well positioned to play a leading role across all aspects of social infrastructure from government leased essential service assets through to childcare. The portfolio is 100% occupied, supported by Long WALE and predominantly triple and double net leases.

Now just looking at our tenant relationships on Slide 17. Our top 20 tenants contribute 53% of platform income. We manage over 5,300 leases, collecting more than $3.6 billion in net annual rent. Over 69% of tenants hold multiple leases, enabling deep long-term relationships across assets, locations, states and sectors. During the half, we were highly active with renewals, expansions and sale and leaseback transactions virtually across every one of the sectors that we operate in. Long-term tenant partnerships remain a cornerstone of our broader strategy.

Slide 18 and our transactions. As mentioned earlier, we completed close to $10 billion during the half with net activity up strongly. Office and convenience retail were the largest contributors to acquisition growth during that 6-month period, whilst we continue to actively curate our industrial portfolio. Slide 20 provides an overview of our property investment portfolio, which those of you who are not familiar with the terminology represents the Charter Hall on-balance sheet investment portfolio.

The $2.8 billion portfolio spans over 1,500 properties, 97% occupancy and an 8.2 year WALE and a 3.3% weighted average rent review. That is reflective of our co-investments predominantly in all of the funds and partnerships we manage. In addition to that, we also have curated property investments on balance sheet generally for warehousing to provide assets that will attract further external capital.

Cap rates compressed by 10 basis points over the half with the weighted average discount rate now at 7%. Geographically, New South Wales or Sydney represents close to 40% of our exposure. Brisbane, predominantly Brisbane or Southeast Queensland and Victoria, each around 20%. Our balance sheet exposure to office is deliberate. We believe these assets offer most attractive prospective IRRs, will attract external capital and provide income uplift potential across the platform over the next 3 to 5 years. With that, I'll now hand over to Sean to cover development activity and sustainability.

Thanks, David, and good morning to everyone on the call. Our development pipeline now totals $17.9 billion. Our development capability and track record has been a significant key strength of the group for over 30 years. Developed to own next-generational assets are highly accretive to long-term returns for our investor customers. Development activity continues to drive modern asset creation, providing property solutions for our tenant customers and enhancing returns whilst attracting new capital to our funds and partnerships to deliver on strategic objectives.

Development completions totaled $1.3 billion in the last 12 months. Notwithstanding completions, the pipeline continues to be restocked and is currently $17.9 billion. There are currently $4.8 billion in committed developments with 74% of committed office developments pre-leased and 94% of committed industrial and logistics developments pre-leased, providing derisked adjusted accretive returns for our funds. We have generated a $5.5 billion pipeline with living and mixed-use projects that have now obtained strategic planning approvals, optimizing existing holdings and providing optionality to grow in the living sector.

The successful said planning approval of Gordon Shopping Center that potentially delivers a mixed-use multistage project of $1.6 billion in value was the material addition to the pipeline in the first half. Noting David's previous comments on Australia's strong forecast population growth, we expect that the creation of new developed investment stock and opportunities for investment management platform will continue to feature prominently.

Now turning to Slide 24. Over the first half, our industrial platform completed $515 million of developments for the WALE of 10 years. We currently have $2.3 billion in industrial development projects committed and underway. Our total pipeline of future industrial investment-grade stock now sits at a material $6.5 billion. There are 3 major projects driving the pipeline growth pre-committed by Australia's major supermarket retailers, Coles, Woolworths and ALDI that have a combined completion value of $1.5 billion.

That will deliver state-of-the-art automated facilities to service their respective networks. There is also good momentum at our Western Sydney Airport joint venture site where there are multiple major pre-commitments secured or at advanced stages. Charter Hall has one of the largest industrial footprints in the nation, comprising over 20 million square meters of land, and we are focusing our efforts to maximize for our investor customers from the land we own.

Given the scale and diversity of our land holdings, there are multiple key data center sites existing in with this industrial land bank. There are a number of data center sites in focus in our land banks that are located within availability zones, and we're in the process of unlocking significant power supply and associated planning approvals over the next few years. Importantly, we retain optionality to sell this powered land at a material premium to industrial land values or negotiate long-term ground leases with hyperscalers as we have done before.

Now turning to Slide 25. The Chifley precinct, which includes the existing North Tower and the South Tower where construction is progressing well, will eventually have a precinct value of approximately $4 billion. The project is Sydney's premier office address and will be Charter Hall Group's largest asset with a combined net lettable area of 110,000 square meters. The project is scheduled to complete in mid-'27 and is owned by various Charter Hall managed wholesale investment vehicles. Our wholesale clients are participating in the investment with the objective of long-term retention of this iconic asset. As you can see, the group has been very busy delivering new high-quality office developments across Australia, anchored by government and Tier 1 tenant covenants.

Now turning to Slide 26. We continue to drive our industry leadership across all facets of ESG, demonstrated by recent GRESB global and regional awards with 18 of the group's funds in the top quartile and notably, 5 CHC funds were ranked in the top 10 global funds. Our listed entities achieved an A ranking under the GRESB public disclosure rating and the AA MSCI rating. Pleasingly, we have now installed 89.7 megawatts of solar power across our platform, and this equates to sufficient power for approximately 20,000 homes. And our green loans now exceed $8 billion. From July '25, our whole platform operates as net zero through existing on-site solar and renewable electricity contracts.

I'll now hand over to Anastasia to discuss the financial result in more detail.

Thank you, Sean, and good morning to everyone on the call. The first half of FY '26 delivered strong operating earnings after tax of $238.8 million, representing an increase of 21.6% on the comparable prior period. Top line revenue growth was driven across all 3 segments, comprising property investment income, development investment income and funds management revenue. Growth in property investment income was underpinned by like-for-like funds income growth of 4% on our co-investments, together with a material contribution from the incremental deployment of $290 million net equity investment over the past 18 months.

This results in a full period contribution of the FY '25 investments and partial period contribution from the year-to-date investments to PI EBITDA, all on significantly higher equity PI yields. Development investment EBITDA has increased to $38.1 million, representing approximately 10% of the group's EBITDA, achieved through the successful completion of developments primarily sold down to funds. Funds Management EBITDA remains in line, which follows the usual historic pattern of strong equity inflows in the half, translating to fully annualized funds management fees in the following financial year post a period of deployment.

Underlying FUM growth through valuations and net acquisitions and progressive funding of the $4.8 billion platform committed development pipeline is supporting growth in base fee revenue and transaction fees, offset by higher operating costs. Pleasingly, the group is reporting a healthy statutory profit after tax for the first half of $272.8 million, reflecting the combination of operating earnings and positive property revaluations.

OEPS increased 21.6% to $0.505 per security, whilst DPS continues to grow consistently at 6%. This results in approximately half of the group's earnings being retained for reinvestment, primarily into higher-yielding property investments. As noted earlier, this reinvestment is meaningful in scale, underpins growth in property investment EBITDA and provides a pipeline of assets to create new funds.

Slide 29 provides further details on funds management earnings. Funds management base fees increased by 5.3% in the first half, driven by higher FUM arising from valuation uplifts and net acquisitions. Transaction fees are materially higher at $32 million, reflecting large transaction volumes with net acquisitions supported by high equity inflows across the platform, most notably within CCRF. Property services revenue was lower in the first half due to elevated leasing fees in the prior period.

Notwithstanding this, the group expects a sizable positive skew across all property services revenue in the second half of FY '26. Variable operating costs has increased in first half '26 to $73.5 million, reflecting employee and payroll tax accruals. Overall, this resulted in FM EBITDA of $142.3 million for the first half. Importantly, elevated net equity inflows lead to future deployment resulting in full contribution to funds management fee revenue in the following financial year.

Turning to the balance sheet and total returns on Slide 30. The group's balance sheet investment in the property investment and development investment portfolio has increased to over $2.8 billion. And pro forma adjusted for post balance date deployment, including investments such as the O'Connell precinct in Sydney, exceeds $3 billion. Positive revaluations and retained earnings during the half has driven an increase in NTA to $5.54. Gearing remains low at 7.7%. And subsequent to balance date, the group has added $400 million of new undrawn debt lines, together with existing cash providing investment capacity of $1 billion, positioning the group well to pursue investment growth opportunities.

Further refinancing across existing bank debt lines to extend tenor, combined with new bank lines results in a lower margin and line fee of 22 basis points in the second half. Total returns continue to grow with the group delivering an after-tax annualized return on contributed equity of 23%. Maintaining strong return metrics is fundamental to ensuring optimal deployment of both the group's capital and that of our partners. This continued focus on total return outcomes ultimately generates long-term earnings growth and sustainable value creation for our investors.

On Slide 31, similar to the group's balance sheet, we had a highly productive half year, which continues, raising $10 billion year-to-date of new debt and refinancing existing debt across our funds management platform, supported by favorable credit market conditions. We expect the pace of refinancing to further accelerate in the second half through to 30 June 2026. Credit appetite from our lending partners, including both domestic and international banks remains very strong. This is evidenced not only by the significant new and extended loan volumes completed year-to-date, but also in wider covenant headroom and lower credit margins, averaging savings of 27 basis points.

This debt financing activity has increased investment capacity to $7.8 billion, providing additional flexibility to deploy capital across a range of various real estate strategies and opportunities. Whilst the RBA cash rate and market floating rates remain higher than previously expected, we have progressively implemented hedging throughout the first half across funds, providing protection against earnings volatility in both FY '26 and FY '27.

Overall, the group has achieved a 10 basis points lower WACD across the funds management platform as at 31 December compared to 30 June 2025. Before handing back to David, in summary, the first half of FY '26 represents a strong earnings result. The combination of elevated equity inflows and balance sheet capacity positions the group well to deliver ongoing FUM growth and sustainable future earnings growth.

Thank you, Anastasia. Turning now to Slide 33 and our earnings guidance. I'm pleased to advise that due to strong performance within our investment and property services business, today, we are providing a further upgrade to earnings guidance for FY '26. Based on no material adverse change in current market conditions, FY '26 earnings guidance is for post-tax operating earnings per security of approximately $1.00 per security, which represents 23% growth over FY '25 earnings and an additional $0.05 above the AGM upgraded guidance provided of $0.95. This earnings guidance excludes any expectation for performance fees.

FY '26 distribution per security guidance is for 6% growth over FY '25, continuing a 15-year history of annualized DPS growth. That now ends the prepared remarks, and I now invite your questions.

[Operator Instructions] Our first question comes from the line of Suraj Nebhani with Citi.

Great results, guys. A couple of quick questions from me. Firstly, on the CCRF fund, you called out $2.4 billion of gross equity. Can I just confirm how much of that -- how much of that has been filled in terms of transacted upon? And what capacity does that give you in the second half, please?

Thanks, Suraj. The -- well, the answer is that there's another $1 billion of acquisition capacity over and above what we announced or issued in the media today with another $360 million portfolio acquisition. The other part of that capacity is we're continuing to raise equity in CCRF. So I think that dry powder will accelerate over the next few months with further inflows.

And what typically happens with these open-ended funds is that particularly with the scale and diversity of the LPs that have supported that fund, I think we're going to see an acceleration in both domestic and offshore wholesale investor inflows into that fund. So whilst it might be $1 billion of dry powder now, I'm sort of expecting that to continue to grow even as we deploy further.

So I don't sort of really give guidance on how much I expect to acquire further in the second half, but it's fair to say with today's announcement of $360 million and various other acquisitions, I expect it will be a pretty strong contributor to further FUM growth in the second half.

And maybe just one question for you around your -- you obviously called out a very favorable backdrop and record inflows, yet we have seen 10-year rates move up pretty strongly and even the longer-term rates in the U.S. are up pretty strongly in the last, let's say, few months. Is that having any impact on the discussions you're having with capital partners with respect to property investments?

Well, I think it'd be naive to say that movement in bond yields doesn't have an impact. The only thing I'd say is before we even went into this almost historical view on multiple interest rate rises, there was already a pretty strong gap between bond yields and unlevered IRRs and levered IRRs that we can deliver to our capital, both in core value-add and opportunistic. So I think the demand still exists. I've said it before, even though there's been some corrections in stock markets around the world, the reality is that most of the capital we talk to are underweight, their strategic allocation to property.

A lot of our capital have experimented in various forms of alternatives, some of which have blown up completely, some of which have been highly disappointing in terms of the return you should be getting when you're going into sort of new sectors. So I think there's both absolute underweight pension capital. And I think we're also going to see further reallocation away from some of what I call the alternative experimental investments we've seen in the last few years back to really good quality core, particularly when in all core sectors, office, retail, industrial, you're buying existing buildings way below replacement cost.

And I'll call out things like office where we went through a period of quite elevated rising incentives and incentives are coming down. And so effective rental growth is outpacing face rental growth. So it will become a strong deliverer of good total returns. And as I've said before, because cap rates in office are virtually 150 bps above where they were pre-pandemic, whereas other sectors have more or less got cap rates back to pre-pandemic cap rates. The total return proposition for prime office is pretty strong.

So I think we'll continue to get good demand in convenience retail, logistics. And I think, as I've said on a couple of occasions, I think office might surprise everyone over the next 2 or 3 years. So overall, yes, I don't really see the latest sort of gyration in long-end bonds sort of material having an impact for all the reasons I just outlined.

And if I can just ask one last question from Anastasia, please. Around the costs in the funds management division, the $73 million, that seemed reasonably high compared to first half last year. Is there a skew Anastasia there to the first half this year or maybe expectations for the full year, please?

Thank you, Suraj. Not a particular notable skew to call out. I did say that it's variable costs, employee costs and payroll tax, and it's really associated with the outperformance we've achieved in the business. You've seen 2 earnings upgrades and associated with that outperformance, obviously subject to Board discretion, but there's an accrual there for further short-term incentive and the payroll tax that goes with that.

Our next question comes from the line of Solomon Zhang with UBS.

First question was just, I guess, in relation to the volatility in global capital markets that you referred to in your opening remarks and the result announcement. You've mentioned that, that's increased the institutional demand for Australian property. Just wondering if you've got any data points around this. Are you seeing an uptick in year-to-date inbound inquiry and appetite to deploy on the platform?

Look, as a broad statement and every pension fund or super fund is different. But what we're seeing is a reduction in allocations to international listed equities. The -- I'm not sure I'm necessarily seeing an absolute reduction in allocations to domestic equities. If you sort of think about the private markets and most pension funds have people running listed equities, fixed income and private markets. And within private markets, you've got property, infrastructure and private equity.

We are seeing globally a lower new investment into private equity because it's well understood that private equity has materially increased their investment holding periods, and therefore, the cash coming back to investors out of realizations from private equity has severely been reduced. So we think we will be a beneficiary of incremental dollars not going into PE and sort of coming into property. Infra has obviously sort of performed pretty well, but it's often very lumpy, the new deployment opportunities that exist.

So all of that sort of puts it into, I think -- property into a basket that will have demand. And then when you split the world into regions, I'm not sure we're seeing a lot of narrative around incremental CapEx going or investment into U.S. property from global investors who need to make a choice where they want to invest. We're certainly seeing a good acceleration in demand out of European pension funds wanting to sort of invest in Asia Pac.

And the backup in bond yields in Japan is actually helpful because most Asia Pac core capital really doesn't see core markets outside of Japan and Australia. Most of the other options are sort of seen as a little more volatile and higher risk. And with the backup in bond yields in Japan, there's some question marks around whether or not the 30-year yield spread play where there's not a lot of capital growth and/or potential negative capital growth.

Now a lot of people are starting to wonder whether there is going to be negative capital growth with the backup in Japanese bonds. So all of that sort of means we're getting accelerated demand for investment in Australia. And as the biggest player in the country across all the sectors, we're a natural port of call for this capital. And we just don't wait for them to walk into 1 Martin Place. I've got a team traveling the world regularly talking to capital. So I sort of feel that we're in a good position. Australia is generally in a good position.

And I think we're going to see, as I said earlier, both core value-add and opportunistic risk capital wanting to get deployed in Australia.

That's good color. And as a follow-up to that, would you have an estimate of where property allocations might sit versus their strategic asset allocation targets? I know we have good visibility into the Australian super fund data, but less into offshore.

I mean I think even the Australian super fund data is very different, whether it's a defined benefit fund and accumulation fund. But it's a broad cross-section, and this is all available on APRA. I'd say domestic super allocations to property could range anywhere between 6% and 13%. We've found global capital typically would have a higher allocation at the bottom end. And in some cases, I've seen allocations up to 17%, 18%.

But if you want it at a rough rule of thumb, I'd say 9% in domestic and 10% or 11% to 12% for international capital. And then depending on the particular partner, whether European -- whether it's a pension fund or a sovereign wealth fund, some of them are very opaque in their weighting. So it's difficult. But all I care about is do people have incremental appetite and everyone I talk to has got incremental appetite. So that hopefully gives you the color.

Maybe just a final question for Sean. Just on the $5.5 billion living and mixed-use pipeline. Can you just give us some math sort of how you've built up to that amount, i.e., maybe just how many lots rough area of value per square meter? And can you just confirm whether this is assuming -- you assume you hold 100% of the project equity at the end? Or do you assume that you bring in a capital partner for part of that stake?

Yes. Thank you. Look, that's the pipeline completion value on the assumption that we build out the strategic planning approvals we've delivered over the last year or so. So in terms of optimizing our existing assets, which is the real strategy, that's a big accomplishment, which leads to $5.5 billion. And that's more recently, a material addition was Gordon Shopping Center, where we just got a set amendment for a potential $1.6 billion mixed-use project.

So we now have the optionality to bring in new partners to strategically develop these assets out or we can optimize the existing assets as they are and trade them for a premium. I think the main thing is we have optionality now to grow in these sectors, which is a new thematic, if you like, in the living space. But I might add that over the last 5 or 6 years since we've owned Folkestone, we've built out about 6 in global residential subdivisions, which has been very successful.

So it's not a brand-new sector for us, but we're just optimizing the existing assets that gives us optionality to deliver future earnings in different spaces in the future. Do you want to add to that, David?

Yes, I'd just add, over 95% of the gross completion value is build to sell. So one of the reasons why pension capital likes build-to-sell is over the course of a sort of 3- or 4-year project, they know they're going to get their money out plus their profit because that's the nature of build-to-sell and there is absolutely no way we're funding any projects without majority external capital. So I think that answers your question.

I think the other thing I'd say is that we're probably -- when you think about this pipeline, we've added value to assets that we already own in the platform. We're not going out there buying overpriced Sydney land, which has been the case for a lot of people trying to do residential. We're actually cultivating and adding value to our existing owned assets or managed assets. So it's quite a different model. But depending on market cycles and obviously, us attracting external capital when we're ready to go, that's how these things will get developed out.

Our next question comes from the line of Simon Chan with Morgan Stanley.

David, you talked about pretty successful fundraising campaigns over the last 6 months. Just wondering if you think office market now has stabilized to a point where flow of equity could come rushing back into CPOF, because from memory, you're going to kick off a capital raise there, right? Have you got any insights for us?

Yes. No, we already recently raised $0.25 billion in CPOF. I think as I said before, Simon, when I look at like-for-like cap rates for prime office versus the other sectors, they've got the most cap rate compression just to mean revert back to pre-pandemic levels. I think all the hysteria around work from home is dissipating quickly. You only have to look at the occupancies, the vibrancy in both Sydney and Brisbane.

Obviously, Melbourne is going to have a slower recovery, but it also has got very little new supply, and we're starting to see double-digit, unbelievably double-digit net effective rental growth coming through in the Paris end of Melbourne, albeit off high incentive levels. But -- so yes, I think I've been saying for 12 months, I think you might find over a 5-year period, offices are sleeper in terms of inflows.

Do I think that's going to be the next 6 months, 12 months, 18 months? I don't know. I can say we're having a lot of constructive discussion with investors and the smart ones who realize you want to get in early in a recovery cycle, not at the later end of it to maximize your IRRs, having a really good look at jumping in now. If you look at our acquisition of 1 O'Connell Street, that's a pretty big statement about where we think really strong potential growth is going to come in the prime core of Sydney.

And all I can say is that we're looking to play that office recovery across core value-add and opportunistic. And I think there's a bit like I was saying about build to sell on our existing assets, it's pretty hard to go out there and buy a block of land and make things work. So quite often, as we've done with Chifley, we'll cultivate what we've already got. In Melbourne, about 8 years ago, we built another 26,000 meters on an existing 30,000-meter building, effectively didn't know me anything on the land, and I created 2,500 meter floor plates on the bottom 10 levels.

And so I think there's different ways that you can play that market. But yes, I think office will provide sort of outsized go-forward equity IRRs compared to other sectors. And there'll be some that are sort of smart enough to get in early, and then there will be others that wait for a couple of years of solid NTA growth before they sort of jump back in. So that's the sort of landscape we're looking at.

Fair enough. If I think about your guidance, originally, you were guiding to $0.90 for the year and now you're guiding to $1. Essentially, over the course of the last 6 months, David, you found an extra $50 million somewhere, right? That's not -- that's a sizable number. Like what has driven -- I know in your prepared remarks, you kept saying our business is better, but $50 million is a big number. Like did you just completely misread the market back in August? Or like where is the bulk of the $50 million coming from?

Well, first of all, if you think about $4.8 billion of inflows in 6 months, which is probably higher than any full year inflow we've ever had, even with my optimistic outlook, I didn't think we'd sort of raise that amount of capital. And obviously, there's some wins in there that we wouldn't have necessarily anticipated at the start, like the Challenger mandate. There's a few other things that are happening in the second half that we'll eventually announce.

We've also done, I think, a good job in further recycling equity we had, selling it down to capital partners and then redeploying into new investments that has helped drive the PI line. So look, I've said it before, Charter Hall has historically been able to deliver very, very strong and consistent multiyear earnings growth after a correction cycle. If -- you're an analyst, you have a look at the history of Charter Hall's earnings.

So we're in a positive momentum situation, but the last thing I'm never going to do is over guide based on, I might raise $4.8 billion of equity in 6 months. I'd prefer to guide where we have visibility. And if we can deliver upside through further deployment, particularly further equity flows, that's the way we've run the business for 21 years since it was listed.

The other thing I'd say is, and I've called this out before, there's a bow wave or delayed impact on revenue and hence, earnings from strong inflows. If we have $4.8 billion in the first half, you won't see an annualized impact on that until FY '27. So if we can have another strong inflow year in the second half, so we've got an even bigger record of inflows in FY '26. The bow wave effect means you're not going to see a full year annualized revenue and EBIT impact from that until '27.

So this is why we're pretty constructive about the future. And obviously, myself and the rest of the 600 team are out there raising more equity, continuing to do active leasing and grow the business. So hopefully, that gives you the answer that you wanted. Like if you're asking me why I didn't know we'd be at $1 when we guided $0.90, well, that's the answer.

Our next question comes from the line of James Druce with CLSA.

I just wanted to clarify something on [indiscernible] I mean you've done 11.5% return over 10 years. Since inception, it's probably better than that. Is that in performance fee territory for '27?

Mate, I don't give you 1-year forward guidance, let alone 2-year forward guidance on anything. So all I'd say is you'll recall, we generated performance fees out of Charter in FY '19 and FY '20. As you point out, there's another measurement period in '27, what I would say to you is we're going to need a decent level of cap rate compression to get that back to the high watermark because your IRR calculation on all performance fees always goes back to time 0 and has regard for previously paid performance fees. But -- so I wouldn't say it's out of the question, but I certainly wouldn't say it's in the money at the moment.

Okay. All right. And then just second question just on the $5.5 billion mixed-use opportunity. How do we think about the timing of getting further go to market for that? I mean it sounds like you've got all the pieces of the puzzle together, the strong demand in that sector.

You're talking about residential?

Yes.

It's all about market cycles. So some of those have got Stage 2 planning approval like 201 Elizabeth Street and would be ready to go. Similarly, at Westmead, Gordon needs to go through another stage before it's fully ready to go. They're all income-producing brownfields opportunities. So we're in no hurry. So what I call the planets aligning is, a, having vacant possession and planning approval; b, having external capital partners to fund it with us maybe doing a bit of a co-investment and more importantly, our team having conviction that's the right time to go.

Now if you think about build-to-sell, you're not going to start construction on any build-to-sell without a significant level of presales. So if I sort of think about all of that, you need the planets to align, including presales, so you can get nonrecourse project finance to -- like anything, you've got to match the equity funding with the debt funding and presales for you to start construction. So that's how we're going to prosecute those development opportunities.

Whilst residential, particularly luxury REITs such as 201 Elizabeth Street is strong. We think there will be very, very strong demand for something like Gordon. The reality is you've got to make all the planets aligned, including getting fixed price, construction contracts that makes sense. Fortunately, we're starting to see some deflation in construction pricing in industrial, where we've let a lot of building contracts well below what it would have been a year ago.

But it's still -- it's not easy, as you probably heard from some of the on-balance sheet resi developers. It's not easy to sort of lock down decent pricing on construction. So they're all work in progress. And as I said, for the time being, we're getting good passing yields on those assets in the various funds and partnerships that own them.

Our next question comes from the line of Adam Calvetti with Bank of America.

Just trying to reconcile, I mean, first half, you've done $6.6 billion in acquisitions, transaction revenues, $32 million. I mean last financial year, you did about half the transactions and the same transaction revenue. So I mean, is there some unrealized acquisition fees there? Are they going to fall into the second half? I mean, have you had to give away just the structuring of the different funds, some are having acquisition fees? What's really going on there?

Well, first of all, when CQR put its seed assets into the core retail fund and swapped part of them as an equity investment in that fund, we were not charging CQR divestment fee. So it's a good question. But what I'd guide is that not all of the transactions are generating fees if there's that sort of related party transaction.

The other thing is that there is a bit of a deferment on transaction revenue if something wasn't completely unconditional at 31 December, it will become a second half transaction fee. And of course, as you'd expect, it's hard to charge a client like Challenger gives you a mandate an acquisition fee when they already own the assets. So that's the reason why when you look at those transaction fee revenue numbers versus the volume, it looks a bit different than prior years.

Okay. That's pretty clear. I mean on the $1.9 billion of post [indiscernible] acquisitions, will those be generating any fees?

Yes.

In second half.

In the second half, yes.

Yes, correct. Okay. And then I mean, just thinking -- if you just double first half, you're probably going to see some growth in PI and FM. We're above 100. So what's going to be dragging it down?

This is my 21st year doing this, and you guys always do the same thing. You just double all the first half metrics to get to a full year number. It's not that simple. And there will be various items. But like it's hardly a first half, second half skew at 50.5 versus 49.5. So I wouldn't get too excited about why aren't you doubling everything to get to a higher number.

Okay. That's somewhat clear.

It's about as clear as I'm going to be. But look, what I would say, and I said it earlier, we have an expectation for the second half, which has sort of guided our recommendation to the Board who signed off on the guidance. If like the answer I gave to Chan earlier, if we pull off some miraculously great deals or inflows that drive our revenue and EBIT above our expectations, then we might beat that guidance.

But at this stage, we're pretty comfortable with that guidance. And as I said earlier, I think you guys should be thinking about the bow wave effect and what this sort of equity flow and FUM growth is going to do on an annualized basis into '27 and beyond.

Our next question comes from the line of Ben Brayshaw with Barrenjoey.

David, I just have a question on the operating expenses. Historically, there has been a skew to the second half. How are you and the team seeing the composition for this financial year?

Anastasia?

Yes. As I said earlier, we're not seeing a very significant skew. You should see it as fairly in line in terms of the expenses we've reported in the first half is indicative of second half.

Our next question comes from the line of Tom Bodor with Jarden.

I just was interested in your acquisition of 1 O'Connell post balance date. I noticed that's not in the development pipeline for office. I'd just be interested in your thoughts around that project, the potential to maybe take onboard the other 50% over time and what scheme you think makes sense for the site?

When you buy a site consolidation, that's cost a vendor a lot of money, and we're buying it well below what they accumulated for, I wouldn't necessarily think the highest and best use is bowling over 5 buildings and creating a 100,000 meter tower. So we like that because we effectively think that we've got optionality. The sum of the parts and the realizable value on each of those buildings once Charter Hall adds its active asset management, it may well be a much better outcome than doing a major development, whether it's a 100,000 meter single tower or 250,000 meter towers.

So we and our partners are just looking at that with lots of optionality. Clearly, we have a preemptive right over the other 50% when and if that fund decides to sell. Given what's happening with that series of funds, I'd be surprised if we -- they don't go down a path of looking to sell it. And if they do, well, we've got a preemptive right to look at it at sensible pricing. So because of all of that and because it's a Stage 1 DA, not a Stage 2 planning approval, I wouldn't see any potential development scheme, as I said, whether it's 1 tower or 2 towers sort of coming into our uncommitted development pipeline until we went down that path, if, in fact, we even go down that path.

So I think that's the best way to answer it. But there's no doubt we have a Stage 1 planning approval for 100,000 meter tower that virtually has to be worth $40,000 to $50,000 a meter. By the time it's built, it's $4 billion or $5 billion of built form. So that is the way I sort of look at it. But by the same token, if -- unless it beats an alternative strategy, which is our base case, we won't be doing 100,000 meters of development on that site.

Yes. That's very clear. And then maybe just a follow-on question just around the valuation cycle is clearly troughed, all the REITs have seen positive revals. But if you look in the sort of smaller and mid end of the sector, there's still some pretty significant discounts to NTA. Do you see that -- how do you see that evolving? And what opportunities do you see in the listed sector over the next few years?

Well, as you know, we've been running prop securities money for a long time, ebbs and flows. But if you're sort of roughly -- say we've got roughly $1 billion in our various prop securities funds invested in the REIT sector. I think there's some dogs out there, and I think there's some really cheap buying.

So as an investor in REITs on behalf of the balance sheet and our capital partners, I think there are some good buying. Just if you look at my 3 REITs, just because the market trades them at a discount to NTA, it doesn't mean that me or the rest of the direct buyers in the world don't think that NTA is real. You only have to look at how much money we've raised in our retail fund at NTA to show what the wholesale world thinks.

So we're just going through a normal listed cycle where the listed markets are punitive on good quality portfolios for macro reasons. It doesn't mean I think the listed pricing knows what it's doing. And if you look at the history of this group, when the listed market is not pricing things correctly, we've taken opportunities to take REITs private. So I don't see that being any different over the next 10 years, for the last 15 years. So -- but we're not going to jump into something we don't like.

And as I said before, the sort of planets have to align for that to work. But if listed markets keep mispricing things, well, yes, I think there's -- whether it's us or others, you're going to see a continuation of REIT take private. You've already got NSR on the block. We did HPI last year, a bit like virtually half of the listed infrastructure sector, it's all gone off the boil is because the wholesale capital is prepared to price the assets different to the listed market. So yes, I don't see it being much different, to be honest.

Our next question comes from the line of David Pobucky with Macquarie Group.

Just the first question on Chifley South, if I could, 60% committed. Just curious to know how you're thinking about the pace of the lease-up and any anecdotes on current interest levels that you can provide, please?

I'm in no hurry. All of our internal forecasts suggest to me we're going to be getting well into double-digit net effective rental growth in the core of Sydney CBD, and we're really the only new top of the hill premium quality tower. There is one other, which I call down in Tank Stream is nowhere near the sort of level of what Chifley South is. And to be honest, the achieved face and net effective rents sort of prove that.

So yes, we'll be patient about how we do deals in the rest of the tower. I think we'll probably get -- of the 20,000 still to lease, we'll probably get 10,000 done with sort of multi-floor tenants and the rest of it will be whole floor tenants who literally will have no other choice to go into a whole floor premium grade tower at the top of the hill.

So I think we're going to get a very good result on both the rents and the end value of that new tower. So yes, I'm very relaxed about being where we are with 60%, but it's fair to say I think it will be higher than that in June and then higher again in December. And I'm not too much in a hurry given the strong growth in rents.

Just a couple of quick ones for Anastasia. Just firstly, around tax expense. I think the rate was around 18% versus 23% in the PCP, just the driver of that and how you think about the tax rate going forward?

Yes. We've done some cross-staple capital reallocation, $400 million in the year prior and $200 million recently. And that certainly has particularly the prior one had a result in lowering our effective tax rate on CHL side of the staple by about 5 percentage points is our estimation for FY '26.

And just a second one around where your weighted average debt margin currently sits and how much that's come down by versus last year, please?

For the head stock main balance sheet, it's come down from 1.65 by 22 basis points. I don't necessarily think it will land there. We've got some further plans around refinancing, which actually translates right across the platform. We talked -- we -- the result today was $10 billion of refinancing, and we're accelerating that pace all throughout the second half.

And so across the platform, we reduced margins by 27 basis points, and we expect that to build as a number as we get through that refinancing program just because credit markets are very, very strong. And we're also wanting to lock in the higher covenant headroom that we're achieving across the platform.

[Operator Instructions] Our next question comes from the line of Richard Jones with JPMorgan.

Just interested in your high-level views. So obviously there were market discussion about AI and the potential impacts for office. So just interested in your views and the associated views of capital as to whether that may delay potential office investment.

Look, there's a lot of theories out there. And I think there's an unnecessary focus on white collar employment versus all sectors of the economy. We're seeing a massive acceleration in automation going into warehousing. So whether you want to call it technology or AI driven, like the reality is we're seeing an acceleration of what I've seen for 20 years in terms of blue-collar workers being in warehousing, being replaced with automation.

In terms of the office markets, our view is that if sort of processing type roles are going to be most at risk from AI, we think that's going to have an outsized impact on suburban office markets as opposed to sort of core CBD, which is virtually where most of our assets are. And look, right now, we're continuing to do lots of leasing with both whole floor and multi-floor tenants. And I'm not seeing any planned reduction in floor space when people are signing up on 10-year leases.

So I think that just reflects that the whole corporate world is not quite sure whether headcount is going to be materially impacted or whether there's going to be a reallocation of roles and/or whether AI is simply going to augment productivity rather than replace human labor. So that's sort of how we're playing it and have a very strong view that the very best modern office buildings in the best core markets will prosper.

Right now, who would have thought the net effective rental growth in Brisbane is higher than the Sydney CBD. But that's what's happening. It's tightening up very quickly up there. We're fortunately sort of be in high conviction on Brisbane in core CBD for a long time. So I don't have the answers. I don't think anyone's got the answers. But I think if you're going to shape your portfolio towards the very best locations and keep them as modern and as relevant as possible, you'll do better than a lot of other buildings.

Our team have constantly reminded me that virtually 90% of all vacancy in most markets, but particularly in Sydney, sits in about a dozen buildings. And will be no surprise. Most of them are sort of older buildings that haven't had capital invested in them and aren't necessarily in the sort of absolute core locations. So I think each market will be very bifurcated by the quality of the building and its location, and we'll continue to see sort of, if you like, centralization.

That's why I've never like North Sydney, we're seeing a centralization of relocation, tenants relocating into the city because the new metro basically has taken away the time advantage that used to exist for people to locate in North Sydney. We're also seeing a flight to modern quality. We've secured ING Bank to move from a pretty old boiler in 60 Margaret into a modern 1 Shelley Street building. So I think these are the sort of bifurcation trends we're seeing. And that's why you'll see us continue to have modern buildings in good locations that are going to attract the tenants. So -- and if anyone else can give you a better answer on the future impact of AI, please let me know.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to David for closing remarks.

Okay. Thanks once again for your time. And I'm sure we'll be meeting various people at investor meetings following the results. Thank you.