Vicinity Centres Aktie

All right. It sounds as though we have a microphone on, which is part 1 for the day. I'd just like to welcome everyone this morning to the beautiful Chadstone Hotel. Thank you for those that have come from Melbourne and also those that have come from far afield. Since I've been with the company, this is the second time we've held a capability showcase. The first time was around 2022, where we presented to a very similar group in the same venue, and it was essentially to forward forecast what our development capability would be and our plans for executing developments. A lot of that development showcase was on retail development and quite a fair bit of it was on mixed-use development. I would say we had a very good pass mark on the retail development and the mixed-use development is still a bit of a work in progress, but we're going to take everyone through this today.

Part of the purpose for today is also a lot of the people in this room hear from myself and hear from Adrian multiple times a year through various results and roadshows and et cetera. But it's also to really understand the depth of the talent that we have in the business and those that are actually delivering the investment outcomes for our asset portfolio. And so our investor constituents can really understand a bit more depth of what occurs within the Vicinity Group. So let's see this works. So for today, for the first few hours of today, we are going through just an overview of the Vicinity strategy. And then we get into more in-depth case studies. So the case studies that we're doing today are a little bit around our acquisitions, also around an in-detailed scenario around the Chadstone development and both the retail and the office development, which we completed here really only in January of this year and also Chatswood Chase, which is still a few shops to open, but essentially, it's a live project.

More importantly, as I mentioned to many of you through the results, we're going to give you a more in-depth analysis in terms of value buildup and also stabilization and how that is different for each of those particular developments, take the lessons learned from that and how we're applying those into our current developments being Morley Galleria in Perth, which is opening very shortly, November 4 and also how we're gearing up for Uptown. So that's the intent of the first session. There's various breaks during the day, and there's various sections that we've got set aside for Q&A. But don't be shy, put up your hand if there's a pressing question before Q&A, and we'll try and tackle it at that point or refer to when it may come up later in the presentation.

At just around about 3:30 or so, we'll be breaking and then we are going to divide the group up into 2 or 3 groups, and then we're going to go through Chadstone, the development being the fresh food development and also the One Middle Road, the office development there. For those that may have got here a bit early and have had to run through Chadstone, we're not in development at the moment, but you'll see the $60 million worth of work that's going on in Chadstone, which includes tripling the size of MECCA, quadrupling the size of Hermes, almost doubling the size of Louis Vuitton, almost doubling the size of Dior, Fendi, Celine, Balenciaga. These are all under construction for new enlarged tenancies that will open from the end of -- from Black Friday really over the next 18 months. And so we're going to give this group an insight behind the hoarding and the logistics of operating the largest shopping center in the country and what that means in terms of the work that is undertaken there. So at the moment, we're on what we call Stage 59 of Chadstone. So -- and it does go sequentially.

And then tomorrow, for those that can make Sydney tomorrow, thank you. For those from Sydney, hopefully, you can make Chatswood as well. We're repeating the process. We'll go through Chatswood in the sort of the theoretical view of Chatswood today. But tomorrow, we have the Chatswood team waiting to also go through a nuts and bolts session around how we delivered the development and a walk through the Chatswood site as well as the -- we're really excited about the residential opportunity that we have at Chatswood, which we've spoken to many of you about. I think it's worth being on site, in my view, brings these type of opportunities to life in terms of an understanding in a much greater detail. So that is really the intent of Chatswood tomorrow.

Just some introductions. Most of you know Adrian and myself, but I'm going to go to my right. I'm going to get you to stand up. Matt? So first, Matt Parker is our Head of Leasing or Head of Sales, if you're not overly familiar with what leasing is in the property industry. Matt's been with us for about 9 years. A lot of our leasing team have come from both sides of the fence. So Matt's had quite a long career in retail, primarily UNIQLO, which is probably the most productive retailer outside of luxury in the country at the moment as well as QIC before coming across to our team and running the leasing side of our business. To his right, Ross Siciliano has been with us about 10 years. Ross, Matt and myself work closely together, particularly the luxury retailers.

Ross is GM of Leasing in our premium and luxury space. We run an account management structure for our most key retailers. Ross -- I always joke, Ross travels globally to France -- to Milan and Paris and all these great spots, but also Singapore, Hong Kong. And we're going to go in detail what it takes to basically be a partner of choice for these luxury retailers and the effort that goes in there and the complexity around that, and Ross will take you through that today.

Michael Whitehead, Michael Whitehead has been with us about 9 years. Michael is our GM of Property Management. So we have 48 properties. Michael has the largest team in the business. He runs management and operations essentially of all those 48 properties around the country. And Michael also is previously with the Chadstone management team and prior to that has a long career in hospitality, amongst other things, and again, bringing that customer service and real value proposition for customers into our business. And quasi, his partner in crime, Amy Wotton. Amy has, again, similar to Michael, been with the company about 9 to 10 years. And similarly to Matt, Amy brings both retail experience from HUGO BOSS and others as well as property experience. Amy runs our GM of Marketing, also our digital insights and research areas will roll into Amy.

[ Je ], I think a lot of people in this room know [ Je ]. Been with us 3 years. [ Je ] runs our development team, Group Director of Development and our Government Relations team. Been with us, as I mentioned, about 3 years, previously global expertise, which we're going to go into why we choose particular executives for particular projects. [ Je ]'s had significant global expertise primarily through Lendlease, also with Mirvac domestically and very happy to have him on board for leading our development activities in the last 3 years. And [ Revan ], right at the back. We didn't place him here because he's only been here for about 2 years. He could have been closer up to the front. Trevor runs our residential business, GM of residential reporting into [ Je ]. Collectively together, we're going to give you a lot more insight into how we're putting particularly Chatswood Chase together from a residential point of view, but a little bit around other opportunities that we're seeing, and I would stress in the midterm across the country.

So the people on that slide are those that are really speaking to this group today. So to kick off maybe today in more detail. I can't read that at all. But this is our investment proposition really laid out in a different context. But essentially, starting from left to right, what we're trying to do, obviously, is get a very high-quality and differentiated retail portfolio for the market. We've mentioned many times to this group, there's a shortage of supply coming into the industry. And what we're trying to really position ourselves for is a real focus on the particular portfolio that is high in demand and that has higher barriers to entry. So for us, that shortage of supply is an industry tailwind. But for us, concentrating on assets such as Chadstone, our premium CBD portfolio, particularly Melbourne, Sydney and Brisbane, part of the reason why we've purchased 100% of Uptown and developing into that, and as well our DFO portfolio, which has particular characteristics around zoning that are quite restrictive. Those 3 categories give us a particular competitive advantage in an industry that already has tailwinds as we've essentially divested out of almost all of our, say, neighborhoods and a fair bit of our subregionals. We see any growth coming into the space in the short term that is additional GLA primarily being in those categories.

On top of that, a focused development pipeline. Now today, we're going to spend quite a fair bit of time with [ Je ] and Adrian taking through why we select particular developments and the financial analysis of those developments versus the nearest best next use of that capital to be deployed. And that's also a discussion around why we've invested in particular acquisitions over development and what our thesis is moving forward for those particular areas. Secondly, on this, for us, partnerships is everything. It's essential for us to have a sustainable retailer base. Australia, my experience has been globally a lot over the last decade. And then coming back to Australia, which is a much smaller market, it's a long way for international retailers to come. And when international retailers come, we want them to partner with us, and then we want them to partner and scale with us. With that, they typically land at Chadstone.

So when we walk through Chadstone later today, as I mentioned, we're not in development at Chadstone at the moment, but we have $60 million worth of work undertaking with those global or domestic retailers or new-to-market retailer that has entered Chadstone and they'll expand.

And then we take -- typically take retailers from Chadstone and use people like Ross to then scale them across the rest of our portfolio. Typically starts with something like a Chatswood with the luxury CBDs, and Matt may go into a little bit more detail, bringing, say, Alo or On or Arc'teryx to the country. They opened 3 or 4 stores. And for 2 of those retailers, they've just signed leases to go into 2 of our top outlet portfolios. So we're able to deal with those partnerships where a retailer wants to come to the country and they need a life cycle. They need a CBD. They need Chadstone, they need a CBD, but they need somewhere for their sustainable approach for discounting products at the end so that they can complete their transactions across the various customer bases.

So that's very important for us. We spend a lot of time overseas, Matt and his team in procuring new retail, which I'm sure he'll talk about in more detail. Our focus at the moment has been Europe with luxury or Asia with new brands landing into the country. I mentioned luxury, which Ross will go into in more detail, but those partnerships with luxury retailers are essential for us. Chatswood was no picnic in terms of being able to conclude that particular project. And again, the team will go into more detail in terms of the complexity of how that was achieved during a period of time when luxury sales have not been tremendous within Australia.

It doesn't happen unless we have disciplined capital management. And again, this group is very familiar with our balance sheet policy. We clearly did an equity raise during the middle of COVID that helped us reset our balance sheet. And then we've been very disciplined in how we fund the business moving forward. A lot of that has occurred through our divestment strategy, which we'll talk through today. And a lot of it has occurred through disciplined long-term debt capture and hedging policies. And we've also recently in the last 18 months, turned on a DRP, which has also assisted in terms of our capital deployment and keeping a healthy balance sheet. And we embrace obviously, the ratings agencies to ensure that our access to capital at reasonable prices is what we think is at least market-leading within our property REIT areas.

And then finally, a purposeful enablement of business or ESG program. Our focus is really to ensure sustainability is adopted through our operating business and our developments. We've recently released our sustainability report associated with compliance requirements. And -- but more importantly, we're really focused on emissions reductions. So that's about a 45% emissions reduction since we started measuring it in 2016.

I mentioned we're a global -- we're -- I should say, national portfolio. That's important for us. Our key focus now is on East Coast. About 85%. So we have 48 shopping centers, about 85% by value of our portfolio is Melbourne, Sydney and Brisbane. Our focus at the moment is really to grow in Greater Sydney and Greater Brisbane areas, and we'll go through where we've laid some bets in those areas more recently. We're obviously domiciled in Victoria and almost 50% of our assets is held in this state. And you're sitting in an asset that's worth about $3.2 billion, which is essentially 23%, 24% of the value of our total business. From a Victorian point of view, we've been in many meetings at peers and particularly across the industry where there's been some significant negative sentiment associated with Victoria. From our point of view, we haven't seen it necessarily in the retail capital transaction space.

There's still been significant activity across all ranges in Victoria, particularly up to around that $450 million bracket in terms of retail transactions. We haven't seen that dissimilar to any other state. From a retail sales point of view from Victoria, we've seen that off probably about -- up to about 100 basis points in comp growth versus our average. And some of that is across the regional portfolio. But again, it's not hugely material in terms of comparing Victoria to the rest of the country. So whilst our investment focus is really on other states, particularly at the moment in terms of Greater Sydney, Greater Brisbane, the home base for us is Victoria. The assets that we have here are super important. The investment that we have here has created really good returns. And we are mindful that there will be some adjustments in Victoria that will be opportunistically based if the right opportunities come to us in Victoria in the future, including small, medium and large-scale developments should they arise in the medium term.

That said, Greater Sydney. We're in market looking for opportunities. Eastern Creek acquisition, which is about to be rebranded to DFO Eastern Creek, so we can operate it under a single brand with a single operating unit. And what we're doing at Uptown in Brisbane to set ourselves with our retail partners for the Olympics is super important for us. I should say just across here, if you've got packs in front of you, if you look into this in more detail, we're not a fund manager per se. We have $9 billion worth of really important partnership funds under management. We're a vertically integrated equity manager and operator. We have a number of joint venture partners. That is a significant strategic advantage moving forward. We need our partners. They typically are with us at a 50%, 50% equity. And hopefully, they value our management capabilities in terms of driving growth not only for themselves, but also for the asset moving forward. You'll see that in the hollow circles on the plan there.

Again, a lot of people have seen this graph before. We've slightly updated it. So this is our investment strategy, particularly on a page as it relates to properties. So our tagline is to own and operate premium and differentiated retail asset portfolio, and it's really about delivering superior and sustainable returns over time. I was sitting at the AFR Summit last Monday. It was great that a lot of the panelists were calling their asset portfolios premiumization. So I think we'll put some copyright on that word moving forward. That has been our strategy. We've taken advantage of a material liquidity within the market in the capital transaction space. Liquidity to be quite frank, I've been in this industry for 27 years. And I have not seen the amount of liquidity in the space. And now that liquidity is up into assets that are at the $900 million mark, mainly through noninstitutional investors with institutional investors coming back into that space about 2 years ago.

And then I think Scentre Group has done some great transactions lately with institutional investors coming into part shares of Chermside and Mt Gravatt and Westfield Sydney. So for us, we're taking advantage of that opportunity over the last 4 years and probably one of the first REITs to look at ensuring that we can maximize sale price. There's a slide later on, which I'll go into more detail to fund our growth opportunities.

So from a -- we've secured -- it's about $1.5 billion worth of divestment to invest about $2.5 billion into either development activities over the last 4 years or acquisitions.

We've timelined these presentations from June 2022. Part of the reason for that was primarily -- I mean, it's when I essentially came into the role, and it's when it was a bit of a change of strategy. James just handed me the exact same presentation, which I can't read here, but thank you, Jane, anyway. I do. Thank you. And the purpose of that is really on the right-hand side. So we've moved from essentially what we subjectively define as our core portfolio is 51% of our asset base being in the core portfolio, 51% of value, and we've moved that to 67% of value within 4 years. The reasons why we're trying to move towards a more premium portfolio outside of what I've said previously is from a numeric point of view, since 2022, we've been able to grow comp NPI growth on that premium portfolio by 5.8%, been able to grow leasing spreads on that premium portfolio by 5.4%.

And fundamentally, it's all about the next number. It's really about driving productivity. And productivity at over 17,000 a square meter quite fundamentally means that you can drive higher OCRs from our retailer network. Retailers were able to obviously have that productivity, the incremental cost to generate those sales are less than their fixed cost, so to speak, to generate price sales. So ultimately, they're able to make additional profit they need to be at these premium centers, whether it's Chadstone, whether it's Emporium in the city, whether it's the DFO South Wharf in Melbourne to place themselves for that growth. And we're able to -- and those are typically the centers that are predominantly at that 99.6% occupancy. So we're able to have some competitive leverage within that space to be able to drive leasing spreads. And overall, that's led to a 43% increase in the value of those centers, those premium centers over the last 4 years.

This is just -- we're going to get into some of these in more detail. But the key callouts on the investment strategy, Lakeside Joondalup, which is a $420 million transaction only about 15 months ago. It was transacted at a 6.25% cap rate. At that particular point in time, there was only 3 bidders in that transaction. A mere 6, 7 months later on Erina Fair, which I don't think is anywhere near the quality of Lakeside Joondalup, there were over a dozen people that made the second round of the list. That was the change in the acquisition space for when we started to acquire whether it was Harbour Town Gold Coast, Lakeside Joondalup, DFO University Hill, the other half at Chatswood Chase, there was minimal institutional or syndicator money in that space and the market changed very quickly in 12 months for institutional capital coming back into that space, unless it's an off-market transaction.

Obviously, the Lakeside Joondalup was recently connected to a transaction with Cbus Property taking out APPFR's interest in the residual of the assets that are managed on behalf of Lendlease, and we welcome Cbus Property into Lakeside Joondalup. There were -- and that was a hand-in-hand discussion with Cbus Property over the last 6 months, ensuring that importantly, that when we bring a partner into an asset that we share the same vision before the partner comes into the asset, like so Joondalup has essentially 28 hectares of land. It's a really great trading center. It has the second busiest train station outside of the Perth CBD. It's a massive growth area. We see midterm growth opportunities for development in that space, and we need to have an aligned partner, which we're confident we have with Cbus Property.

Moving on to Chatswood Chase. Again, we'll get into more detail on these. It was a $307 million transaction of GIC. They had a 49% interest in that. Without going to a huge amount of details of only in there a short period of time. They are a very good partner of ours, GIC. They're a partner of ours of Emporium in Melbourne. They had a change of investment mandate when we were very close to commencing the project, including significant commitments with the international luxury retailers, about to sign a construction contract, change of investment mandate globally. And so we worked hand-in-hand in terms of what an outcome for an exit of GIC would look like, which ultimately resulted in our exercising our first right of refusal to purchase them out at that price.

With DFO Eastern Creek, again, our focus, growing that outlet portfolio. We have 9 outlets across the country, 4 in Melbourne. We have 1 in Sydney. Our one in Sydney is the highest productive outlet portfolio. We'll talk to this in a little more detail, the rationale around DFO Eastern Creek, connected to the M2 M7, connected to the M4 into residential growth area, newly built limited capital expenditure to be spent on it, built using all of our consultants that we use to build DFOs. Unfortunately, Moral Rights stays with the architects and not with the people who put DFOs on the ground and leased by the people that were previously really high-value executives in our business that know DFOs well and have leased that up. So we had high confidence in that asset.

And Uptown, most recent acquisition, we're super confident in Uptown. We'll talk about that in a little more detail through Q&A. We're in a position now where it's still subject to Board approval, working very closely with our retailer network that we've done a lot of work with at Chadstone, Chatswood and now moving into Uptown, using the same capability, whether it's development or our leasing team to pick up that intellectual property and relationships and now move it into Uptown from a pre-leasing point of view and from a development point of view, using that same capability with some additional team members that are locally based to replicate the lessons that we've learned over the last basically 7 years I've been with the company, what [ Je ]'s learned from the last 3 years, he's been with the company and replicate that into risk management as we approach the execution of a design and construction contract for Uptown.

Retail is capital hungry. So what we've done over the last 8 years, and this slide is specific for the last 4 years, is we have 48 assets under management. We have 47 assets soon to be as we've just transacted on Taigum to exit at 100% Taigum in a couple of months. Of those 47 assets in the last 4 years, we've invested in small, medium or large developments or interventions, as we call them, in 20 of those assets. So in 20 of those assets, there were 34 individual projects at 100%, $2.5 billion of investment at 100%. So that includes our joint venture partners. So our share, $1.9-ish billion of monies invested over the last 4 years.

And prior to that, we had invested -- that doesn't include the significant investment in Warriewood in 2017, in Mandurah in 2019, in The Glen in 2019. These are all fully large-scale developments. If I squint, I can read this. Under $25 million. So these are investments above typical leasing capital reconfigurations, which is sort of larger sort of when we're bringing 2 or 3 tenancies together as one or operational capital. So these are purposeful investments in what we call ambience upgrades, which are aesthetic improvements to take hypothetically, not actually an old central asset and bring it into a contemporary condition today.

It is large -- it is medium-scale expansions or importantly, it's our version of what we call experiential retail. So a lot of these in the $25 million to $100 million range includes assets such as Bankstown, Box Hill, Southland, Nepean, where experiential retail for us starts with fresh food, sit-down food and dining and entertainment. And one of the things that we noticed early on is a reason why people get off the couch and come to shopping centers rather than order online is to ensure that we -- our precincting is right and set for the market, slightly aspirational so that they can stretch into that, a huge increase in the proportion of GLA associated with food into our areas, but making sure the placemaking around fresh food or food and entertainment is conducive to dwell time, to experience and to socializing meeting family and friends within our shopping centers.

That was clearly missed. If I look at Chadstone, which is in the 5 above $100 million, in 2019, we just opened a hotel, but we didn't have an entertainment precinct of any sort of scale. And our fresh food precinct was very much substandard, essentially a 1990s precinct. So the focus was to put Chadstone -- and we benchmarked Chadstone on a global scale, which we'll go through in this pack in more detail. But for Chadstone to maintain its relevance on a global scale to continue ensuring that our existing retail partners at Chadstone could benefit from a wide variety of precincts, we focused on what we call the social quarter, which we'll walk you through later today. This is a large extension of an entertainment and dining precinct and then a huge focus on fresh food precinct.

And the guys will take you through the references in terms of the global learnings that we took from those precincts overseas to bring into Chadstone. The point of this, though, is we're always investing, $2.5 billion, greater than squiggling line circa 7% return, but greater than 7% return from a stabilized yield point of view. And then from an IRR point of view, greater than 12%. So from our point of view, we broadly use -- we're not broad, we use a WACC around 7.75%. So we measure risk-adjusted returns to essentially what our base case return requirement actually is and look to obviously create value associated with that. The higher the riskier the development or the more money spent, the higher the return that we expected. Obviously, Chadstone has a different discount rate, and we'll go through that in more detail and how we're creating value on Chadstone.

So this slide is what Adrian and I focus on once a year formally. So what we do -- what we have done when we had 59 assets and now 47 assets. And when we had 69 assets, in fact, is we run a forward forecast of an IRR of every single asset in our portfolio, and we compare it to our WACC and we compare it to the discount rate. And so on here, to protect the unison, we've taken all the names of the assets underneath here. But on the left-hand side of the scale is IRR. The top one is an unlevered IRR of 18%. The bottom one is an unlevered IRR of 1.5%. And the yellow-ish ones are our long-term hold.

At the top end of our portfolio is typically our DFO portfolio. Some of that, of course, they're on leasehold title. They don't have major retailers, and they're kicking out essentially around 6% comp NPI growth over the last few years. The orange are our 100% divested assets, and they're measured at the sale rate. So I'll take an example. I won't name the asset, but the 1.5% one was essentially on our books at about $20 million. It was a small asset and sold for essentially $34 million. So when we compare a forward forecast of that asset of 10-year cash flows and then put in the sale rate, it kicks out that it's a very low growth asset for us moving forward. So you'll see the strategic plan we had in place ultimately has been enhanced with a 10% -- actually, I'll go back one step.

We purposely 4 years ago as well decided not to present to the market the value of our assets below $125 million. Now we did talk to a few investors before we made that move just -- and the logic being we didn't want to have a reference point in the market, knowing that the market had significant capital transaction activity in the market. And we would -- I think Tony McCormack, can you stand up for a second? So Tony McCormack heads our capital transactions team, also heads our commercial leasing team. And Tony and I made a decision with Adrian that basically said there's too much of a reference point.

Tony was getting a phone call every day saying, XYZ asset, I can see it in your books. It's at this price, I'll pay for it at that price. We knew there was competitive tension. Arguably, we could have been conservative in terms of how we value. But we've -- it's like most things in real estate, you just need 2 people to bid, and we didn't want to have a reference price. That led to essentially a 10% increase in our book value on assets that we've sold. That price then reflected in the forward-looking IRR for those bottom part of those dark orange assets that we've sold.

The 2 in the middle, the blue are joint ventures. So we look for some capital in what we call good assets that are regionally based, we had a very good joint venture partner, happens to be in the room. And we look to grow a partnership that started with one asset that now -- with a family office that now has 4 assets that are very similar. They are assets that are basically around that 6.5% yield, kicking out about 2% to 2.5% growth. And the pricing has been very similar on those assets through cycles. And so for us, that was also an opportunity to unlock some equity to invest in our development portfolio to bring an aligned partner in who valued our management expertise and be 50-50 as we look to grow the next phase of growth for those regional assets around 60,000 square meters. In this case, one was in South Australia and one was in Melbourne.

And you may ask why did we sell the asset that's closer at the top end? That was Karratha. Nothing wrong with Karratha. But it was in our books, it was $50 million. It was on a low OCR. What we find in these regional areas is it is the cost of doing business for retailers in these particular areas require them to be on a very low OCR cost. Otherwise, it's very difficult to attract these retailers, particularly national retailers to move into these areas. And so for us, it was in joint venture. Joint venture probably doesn't make sense for us when the 100% of the asset was $100 million. That typically assets will own at 100%, probably up to around that $250 million mark. Above that, that's when it makes sense for both parties that that joint venture can actually work for both.

So basically, over the last 4 years, again -- or I'm going to have to use glasses on this one. Okay. So we've taken the -- so ultimately, from a strategic point of view, we wanted to move to larger assets, higher barriers to entry, able to drive sustainable growth, premiumization, growing NPIs at much greater than the average, able to grow leasing spreads, drive competitive tensions. And so what has that actually done? So the total value of our portfolio -- well, actually, the total assets have been reduced from 59% to 47%. But the value of our portfolio has grown from $14.5 billion to $16.5 billion, and that's with cap rates actually expanding from 5.3% to about 5.5% -- if you use the constant cap rate, and I know that's sort of irrelevant using we mark-to-market.

But if you use the constant cap rate, that 16.5% goes to close to $17.5 billion in terms of the total value of the portfolio. As I mentioned, average asset size in terms of total dollars has increased by 43%, selling small assets and buying bigger assets. It's an obvious one, but that was the strategy because those larger assets with a very strong filter of ensuring that we buy the right assets give us that confidence that we can grow income through those assets. Clearly, '22, we're still coming out of COVID. The team has done an exceptional job in growing occupancy, not only growing occupancy, but growing it with the right tenants. And as I mentioned, we've got a particular focus in landing new-to-market retailers, whether they're domestic offers or whether they're international brands and then scaling particularly through the premium assets. And then with certain retailers, ensuring that they have the appetite to then scale through our core portfolio, and there's numerous examples of that.

And then the specialty OCRs, they have risen over the last year. We've been able to grow rents greater than sales have been able to grow. And I've mentioned to many in the room, that compares to a pre-COVID OCR of 15%, but it's not a true like-for-like because the quality of our portfolio has actually increased markedly since pre-COVID and able to drive higher OCRs. But our general rule of thumb it's a very tricky environment, not helped by government. But as a general rule of thumb is if we're able to grow sales by 3% on a comp basis, we should be able to grow leasing spreads by 3% moving forward based on the metrics of the portfolio at the moment and grow in lease annual increases at closer to that 5% as we have done.

The key metrics that we use in terms of how we're able to drive the performance. The one that is the key KPI for us is the unemployment rate. It has been rising, but ultimately, through population increases and the unemployment being very solid for Australia on a comparative basis from a global perspective and the unemployment rate remaining at below the 20-year average and traditionally very low. That is the key KPI in terms of the resilient consumer that leads into us being able to continue to drive revenue growth. Obviously, we're very cautious in terms of interest rate -- potential interest rate increases next week and then for the rest of the year and potentially what the next 12 months actually looks like.

We're in a good position. We have very low vacancy, very low leases on holdover, but things like Cue and Veronika Maine going into administration owned by lenders of last choice like Hilco for us are a watchful point for us moving forward. We're starting to see even before that, a kickup in administrations in the portfolio, nowhere near to the degree of pre-COVID levels. But for the team, for Matt, for Michael, these are elements around our retailer health list, the level of our retailer debt and our OCRs by asset across our portfolio. For us, we typically will always do the best deals we can in the market at that time, and we're more about best cash running through the portfolio.

We won't hold vacancy back because we think it can be leased 2 years' time at a greater rate. For us, it's really about cash generation through the business. Secondly, household savings. Obviously, it's come off since the pre-COVID burn, but really back to around the 20-year average in terms of household savings. Obviously, it's a motherhood statement that rolls up. We're not -- there is clearly a bifurcated households and bifurcated consumers, which we see play out through the portfolio, but it's also another key metric, not only aggregate, but as we look by region and as we look by center trade area.

We've shown this group, the 2 bottom slides quite frequently. And so this is the industry thematic around the difficulty is to put new growth into the marketplace. So on the left-hand side is the forecast GLA expansion through retail property versus, again, the horizontal dotted line being the average over the last, I think, here, 10 years. From our perspective and a lot of what we have done is not additional GLA. What we're doing and the guys will take you through in a lot more detail is highly complex brownfield live development where we're taking an existing asset, sometimes a really intensive intervention such as Uptown, Galleria or Chatswood, some of it is defensive to ensure that we're maintaining value.

And all of it, we try and obviously do as value accretion. But they're not adding a huge amount of GLA, but they're doing significant works to repurpose the asset, to reset it for the marketplace. Chatswood, to do that, we had to double the rent. To double the rents had to reposition the market and reposition the asset with a very different retailer network that could drive the productivity to pay the rents to ensure that we achieved a 6.7% stabilized return and a close to 12% unlevered IRR.

If I focus back to the chart on the bar chart on the left, what we're focused on is the blue. So again, the orange thing of neighborhood shopping centers. I mentioned there's a tailwind within the industry. Construction costs are super expensive still. We're seeing some green shoots in particular areas. But if you can purchase an asset, you're still purchasing the asset well below replacement cost, even though there's a lot more capital transaction activity in the market. Regulation in terms of being able to gain approvals and being able to execute on those approvals is time cost and money, which leads into the inability to make some of these projects feasible. I will put out a qualifier.

We are having a really great success at the moment with both the Queensland State and the Brisbane City Council in terms of Uptown that are really looking to be pro-development pre the 2032 Olympics. And so in the blue, to give you a sense, these are DAs that have been approved. So the blue includes assets such as Booragoon and includes assets such as Rouse Hill. Now Rouse Hill and Chris Barnett and the guys at GPT are doing a great job. That's an expansion of a shopping center in a growth area. It's a fantastic asset. I think it will be really well received by the marketplace. The leasing activity looks as though it's great. That is increased GLA into the market area, and that would be included in the blue. Booragoon is a tough market. It's a great asset. It's a great trade area. It's a tough market, and construction is super expensive in that space at the moment as a huge intervention into what needs to be done. That's probably a question mark of whether that's actually going to be achieved in that particular time frame. We have nothing in the blue at the moment.

And so from our point of view, CBDs large-scale super regional assets, outlet portfolios, there'll be very little in the forward forecast that adds GLA, which then you turn to the right-hand side on the bar chart is retail -- total retail expenditure growth, primarily, I would say, driven by 2 things: immigration and inflation. It's not necessarily driven by units. And on the line graph on that is the GLA per capita. So we've got an increasing capacity, obviously, for retail expenditure that's growing at a greater rate on a comparative basis than developed Western countries, and we've got limited supply coming on board at GLA per capita. And that's across all retail is going down to essentially very low levels over the last 30 to 40 years. And in our space, we're trying to compete, it creates even more of a competitive advantage. All right. I've talked enough. I'm going to pass to Adrian. There's about 4 or 5 more slides, and then we'll open up for questions.

Great. Thanks, Peter, and good morning, all. It's good to see you all in the room. I'm going to spend a little bit of time on our philosophy around capital allocation, capital management, in particular as well. And then as Peter said, we'll get to Q&A. But this slide here is a nice summary, if you like, of the investment opportunities and how we think about investment opportunities, our investment hurdle rates, but also a summary of how we -- our philosophy on capital management. So if I take you to maybe the investment opportunities element, Peter has been, I think, very consistent and we all have, I think, over the last 4 years around this investment strategy, which is very concentrated and specific around premium assets.

And so as Peter spoke about, we have been very deliberate around our expansion into that premium portfolio around premium malls, CBDs and outlet centers. And in some ways, it does constrain the opportunity set. We aren't a vehicle that will invest across the spectrum. We do have assets that are across the spectrum, but our real focus is how do we premiumize that portfolio. And so when we think about investment opportunities, it really is on that subset of premium assets that we're really focused on.

In relation to our returns, on the right-hand side, you can see we actually have a different, I guess, split of returns and return requirements for acquisitions and developments, and that's really to reflect the level of inherent risk in those investment opportunities. For acquisitions, we are targeting a yield of greater than 5.5%. That does reflect the type of assets that we're going after, which are the more premium assets. And our philosophy is we do want to generally try to hit above cost of debt yields and definitely above cap rates for the assets that we're buying. And if you look at Eastern Creek and if you look at Uptown and if you look at Lakeside Joondalup, where we're doing yields greater than 6%, that's certainly meeting that target yield requirement.

When we look at our target unlevered IRRs, we are for acquisitions looking at greater than 8%. Peter spoke about our weighted average cost of capital, which is around 7.75%. We do take a through-cycle view of our weighted average cost of capital. We know, obviously, with bond rates at 5.4% this morning, the bond rate does move around. We want to be investing for through cycle, long-term kind of investment horizons. And so when we typically look at our weighted average cost of capital, we typically look at what is kind of more a 10-year average for a 10-year bond rate, what is more a 5- or 10-year average in relation to cost of debt.

And when we look at betas, et cetera, we do look at what the market is looking at won't be a 3- and 5-year weekly type data set. And so all that goes into our weighted average cost of capital. And it means that when we do think about our acquisitions, we are looking at that 8-plus return. WACC is one part of it. The other part, which we talked about is our discount rate for the assets that we're buying. We certainly want to be acquiring greater than the discount rate of the asset. Otherwise, it really doesn't show that we're adding any value. And so we are looking to achieve greater than that through those target IRRs.

From a development perspective, we are targeting something greater to recognize the level of risk for the developments that were undertaken. And when we think about developments, it's not just bigger means more risk. It does go into risk factors such as the level of underwrite -- sorry, the level of pre-leasing that goes into those developments. It goes into the location of those developments and ultimately, how confident we feel we can manage the risks. The team will talk about how we manage the developers -- sorry, the contractors and our risk around that. And all those types of things go into risk management on developments.

But ultimately, where it ends up is we are targeting a target yield of greater than 6% on a stabilized basis. And then from an unlevered IRR perspective, we are looking at 10-plus percent returns on our developments. When it comes to then how we then fund our investment opportunities, I'll spend a little bit more time on this in the next couple of slides. But ultimately, what we're trying to do is use the broadest amount of options to fund investment opportunities because we never want to be able to constrain ourselves to invest in an opportunity if it comes up. Because of that very narrow opportunity set around premium assets, we know that these assets are scarce. Every investor wants high-quality assets.

And so we need to be ready. I think ECQ was a great example of us being ready at the right time. Tony and the team did a great job to get in front of that transaction to be able to execute as quickly as possible, but we could only do that because we've got the sources of capital to be able to fund that. So the fact that we've sold the assets that we sold prior to that gave us the capacity then to invest in that acquisition opportunity. So when I think about the sources of capital, it's not just about selling assets. It's also having debt capacity. We're sitting at the lower end of our target range. So there is significant headroom there from a debt capacity perspective to act quickly.

And then as Peter touched on earlier, we have activated the dividend reinvestment plan over the past 24 months now, which has been able to raise about $300 million of equity capital pretty efficiently in the market at around NTA. So if I think about the DRP, if I think about the debt book and I can think about asset sales, they are probably the primary ways that we're looking to raise capital to fund these investment opportunities.

If I go to the next slide, and this is our balance sheet, and many of you have already seen this, I guess, through our results presentations. I do want to maybe get -- Di Crossley in the room to stand up. Di Crossley is our GM Treasury. She is highly experienced on all things debt, DCM and has a great relationship with some of the banks who are represented in this room as well. She is critical to how we manage the balance sheet, and she's done a great job over the past couple of years since she's joined us to really ensure that we have a really robust balance sheet, and I'll talk to that in a little bit more detail. So thanks, Di.

If I look at this slide, I did touch on gearing at 26.1% at the lower end of our target range. On a pro forma basis, when you look at the Uptown acquisition, the ECQ acquisition and the Taigum sale, that sits at 26.5%. So still at the bottom end of our range. Ultimately, that gives us plenty of capacity to be putting that into new investment opportunities. We do like to probably stay sub-30% in this market. We do see that there may be an opportunity at some point in the future where we might go above 30%, but generally, we like to be below 30%. If you look at the cash flow metrics, we're very healthy from a cash flow metrics perspective relative to our credit rating thresholds. And then one of the big focuses over the past 12 months has been increasing that weighted average maturity. So that 5.1 years that you can see in the middle there, we probably had a pretty significant expiry of some sterling bonds last year that really shortened up our weighted average maturity.

Once we got past that, plus we then did a couple of $500 million DCM, AMTN transactions over the past couple of years has really enabled us to push that weighted average maturity to 5.1 years. We do like to target between 4 and 5 years generally. And so there was a pretty heavy lift to get that to 5.1 years over the past 12 months. Peter touched on the credit rating, A stable and A2 stable. It is a really important philosophy for us to have that credit rating. I think the Australian debt market -- if you look over the last 15, 20 years, there have been times where it has been difficult to access markets. I mean the global financial crisis is probably a key example of that.

And our philosophy is having that A rating gives us the maximum opportunity to access debt at any point in the cycle. It's not to say that it's easy at all times and the GFC was difficult, but the fact that we had that rating was really important for us to just be able to access capital. And so holding that A rating is really important. We see that -- in that, not just in the A band, but the A rating is really important for us to maintain. If I flip over to this slide, this is really looking in a little bit more detail around our debt maturity profile. On the top right, you can see in that pie chart, we do have a very diversified source of debt capital that goes from our AMTN program, our EMTN program, some USPP and more recently, we've done some additional Hong Kong private placements using the EMTN program. We tend to have a 35% to 65% split of bank debt to DCM, so roughly 1/3, 2/3. What that does is it allows us to achieve that kind of 5-year weighted average maturity to have a greater proportion in that kind of DCM space. But we do like to have those multiple sources.

And so ultimately, we do want to be efficient. So we want to pick the market that's the most efficient. Over the past, say, 12, 18 months, it has been the AMTN market, which has been the most efficient. And obviously, the bank debt market has been really liquid as well. So we're really focused on that. But we are looking at diversifying or keeping our diversity as well across those debt sources. So we are looking at different options as well at the moment.

If you look at the -- maybe the debt maturity profile, we pride ourselves on having a well-staggered profile. You can see that the more recent issuances of the 10-year AMTN towards the kind of back end 2026 -- sorry, 2036 and 2037. And that's where we had some of the PP as well. But we do like to have that well-staggered profile. There's very little in FY '27, $200 million. It's already, I guess, catered for with the undrawn facilities of $800 million that we've got at the moment. So we think we kind of manage that profile pretty well on the left-hand side.

And on the right-hand side is our hedging profile. Now we've been pretty transparent around our hedging profile over many years. We've always had this slide in the annexure of our investment presentation. But really, what it shows is we do like to be heavily hedged in the first 2 years. It's really important for us to be -- to give certainty for our investors around what FY '27 and ultimately, what FY '28 looks like. I know, obviously, the rates have been moving around a lot, and it's almost a certain lock, I think, for next week that rates will go up.

But if you think about FY '27, given we're 87% hedged, a 25 basis point movement in the floating rate is about a $1.3 million impact to earnings. So we've got the hedging to a level where it doesn't materially impact earnings, which is what we're aiming for, for FY '27, particularly in FY '28 with 76% already. So they're really important. But it doesn't just drop off a cliff. We do have a philosophy of averaging in. Obviously, the hedging at the back end isn't the same as the front end, but we do have a philosophy of averaging in over time, so we never really get caught out in any one time in the market.

If you look at the dots on the page, you can see what our weighted average fixed hedge rate is. And it's -- at the moment, we've got the benefit of some longer-term hedging that we did 5, 6 years ago, where we're looking at 3% weighted average cost of -- sorry, weighted hedge rate, which enables us to have that 5% weighted average cost of debt at the moment. Now we obviously appreciate, given where bond rates are at the moment that, that's going to tick up. But that will tick up over time, and we will have time to adjust. At this stage, we're not in a hurry to get into putting additional hedges in there. We're happy to be patient. Given where the hedging levels are, I think it gives us a bit more time to be patient to think about what we want to lock in.

And I think the last point I'd like to make on this is when all those hedges are either fixed-term bonds or as part of the fixed-term bonds that we've raised or they are separate fixed rate vanilla hedges. We don't have any exotic step-up swaps or anything like that in our hedge book or callables, et cetera. It is all plain vanilla hedges. The only thing we play around with is potentially some forward starts where we might just look to start a hedge in 6 months' time or 12 months' time as that hedging profile rolls off.

And the last slide, I think, before Q&A is really reflecting on our investment performance. And I think this is a great representation, I think, of everything that Peter has talked about over the past 4 years around how we've executed the strategy, but being able to see that through the investment returns. So these investment returns, we're kind of the orangey brown color. The blue color is the PCA/MSCI property index returns, if you like. I should say that the retail assets -- it's the PCA/MSCI Retail Property Index -- the assets in the blue are basically all the wholesale fund retail assets in Australia.

Probably the big exception it doesn't include is Scentre Group assets. They don't submit to that index, and so we can't really get their data. But it has basically all other retail outside of Scentre Group in more the public domain. And you can see there across 1, 3 and 5 years that we have outperformed those -- that index. And I think what this is, is really a validation and a fruition of this premiumization strategy that's enabled us to achieve those returns over time. So I think with that, I think we might open it to Q&A. And then after Q&A, I think we're off to the morning tea. So if you do have a question, raise your hand and I will come around with a microphone, and we'll get that going.

I'd just be interested in your comments around your cost of capital. You talk about how you look at the 10-year average of the 10-year bond when you sort of set those hurdle rates. Does the recent spike in yields though kind of make you more cautious around committing capital or buffering that -- the assumptions in your feasibilities when you commit capital?

Yes. It's a good question. And we are -- I mean, we do look at every 6 months what that weighted average cost of capital is. And I think if we do -- based on what that bond rate looks like at the moment, we do think about does that mean that we do take a higher risk-free rate into our WACC assumptions. And so we do, every 6 months, look at that. So at the moment, we're kind of sitting close to 7.75%. In 6 months' time, if rates stay the way they are, my sense is they'll probably close -- tick close to 8%.

So yes, we do have that appreciation for it. And as it relates to, I think, your question around what does that mean for then our investment decisions today, we will be looking at -- Uptown is probably the main one where we'll make that investment decision. I think that goes to Board either back end of this year or early next year. And so at that point in time, we will assess what that looks like and make that decision accordingly.

Great. And then the other one I had was, I think you talked about CapEx and returns on CapEx. And you mentioned some of it's defensive whereas some of it's sort of more additive or forward investment. Just wanted to understand how you think about returns on that more defensive CapEx. Do you still think you're getting a 7% yield on cost for that? Or are you looking at it in aggregate? So you have projects that are below that level?

So the defense -- so that was rolled up all those projects into that circa 7% return. The defensive ones, if they're smaller, more defensive ones, then we tend to look at the 10-year unlevered IRR of returning the asset to growth of in excess of 10%. There is no projects that we've done that haven't had both the defensive and offensive projects. So I'll give you an example. Some of the commentary has come up from others of, say, Morley Galleria. So that we're about to launch Morley Galleria at the moment. It had a high trademark of a much higher value than it has today.

It had some vacancy, had some short-term expiries on majors and the valuation reduced materially. As a result, the defensive nature of that is to essentially stop the valuation decline and the accretion nature of that is to invest by doing that, investing circa $250 million at 100%. And then of the additional $250 million that's been invested, it's creating a stabilized return of at this point in time, greater than 6.25%. So we can break it out project by project, but ultimately, we've aggregated it up. But there's definitely -- we definitely had assets where we had to inject capital to ensure that we readdress a value decline. It's typically done by development where we've reset it to establish growth.

So it's fair to think you'll be getting a yield on cost on pretty much all your spend then?

Yes, that's right.

David Pobucky from Macquarie. Just the first one on gearing pro forma 26.5%. And perhaps if you could talk about the opportunity and ability to execute on larger scale transactions. I mean you both mentioned premium assets are scarce. The market is competitive on pricing. And Peter, for example, you said that on the Erina Fair opportunity, there are a dozen parties in round 2. So is competitive, kind of, tension and pricing kind of too high to be able to participate in those transactions broadly?

Thanks for the question, David. The larger the asset, the less competitive tension. So the competitive pool on, just say, an asset that's closer to $1 billion comes to the market. Yes, whilst Erina Fair was close to that number, our current view of the world is that with interest rate rising, the syndicator market of those very large assets can't have the appetite to bid to that particular number anymore. They're typically bidding under a mandate as well. So that then leaves institutional capital. So you'll naturally have less institutional -- less competitive tension in those assets, which is good for us.

So if something like that came available and it met our filter set, ideally Greater Sydney, Greater Melbourne, super regional shopping center, dominant trade area, high demand from major retailers and specialty retailers, ability to have future growth through development, able to pick it up at a reasonable price. So most type of assets, there's never a reasonable price, but it's all relative -- able to get growth, then we would still be -- we would still absolutely look to participate where we can add value.

How will we fund it? It could be a combination of increased debt. It could be further asset sales. It could be bring a partner along the journey with us. The other side of your bank always knocks on our door for equity raising as long as there's a story behind it. All options at that particular point in time or a combination of them all may be on the table. Obviously, there's 2 focuses, making sure the assets are aligned to our strategy and aligned to our partner growth and we see growth in the asset and making sure that investment is more accretive than the funding options that we -- than the options that we're potentially giving up to participate in that asset, if that makes sense. That's how we do it.

And just a follow-up on how you think about the risk reward between acquisitions and developments. You had the slide up there around the return hurdles for both. So should capital be increasingly skewed to development at this point in the cycle? How do you think about that?

Look, it's a good question. And I hope maybe at the end of tomorrow for those that are seeing both days that you get a degree of comfort that we've built that core capability in the development team that it helps in that risk management exercise of what the premium would need to be. From our point of view, 2 years ago, it's not one or the other. So we have been doing a combination of both, and it's asset-by-asset opportunity and the return-by-return opportunity on that asset.

On aggregate, I would say 2 years ago, the return was far better on an acquisition point of view than a development point of view. We'll go through Lakeside Joondalup, where you can purchase an asset that has a running yield of in excess of 6% with growth rates at no risk, then that clearly is a fantastic opportunity to get an unlevered IRR in excess of 9% straight off the bat with development potential. But as I mentioned, in 12 months' time, that the pricing of that increased by more than 10% and therefore, you swing back to if there's an opportunity on development that could create an unlevered IRR of much greater than 10% with some risk, that potentially becomes the better adjustment of capital.

What we try and do -- so for example, the next one for us will be an approval for Uptown. So part of that approval for Uptown will be to the prior point, regardless of our WACC, what's the current environment? What's the future forecast for interest rates? What is the appropriate premium to our WACC that we need to require for Uptown in the current market, given that, regardless of the development capability that we're going to hopefully prove out to you guys this afternoon and tomorrow, what is the appropriate risk-adjusted return that we need to actually deliver above WACC.

So from -- that will be the next test. And part of that test will be, okay, if that is circa $350 million, what's the next best option of allocating that $350 million versus Uptown and what's the returns on that? There will be some scenario analysis that we'll undertake with our own internal approvals to ensure that we're making the right investment decision. I'm 99% comfortable that we will progress with Uptown, but that's the analysis that we've done to date.

David, I think to Peter's point, I don't think we've had to choose one or the other. And my hope is that we don't have to choose one or the other going forward. I think having a balance sheet and options around capital funding to enable us to do both when the opportunity arises is probably how we're trying to manage our capital, I guess, our capital settings. So theoretically, you could prefer one or the other. Ultimately, we've set hurdles to say we could do both at the same time. And I think that's what we've been able to do over the past few years.

It's Howard here from Citi. I just wanted to ask a question. You might have a whole section on this. But just thinking about that stabilization at Chatswood Chase and that negotiation with the tenants. The question I have is, how do you think about the negotiation with that tenant? And when does the actual stabilization from your point of view come in? Is it -- even if we're seeing maybe footfall still stabilizing from an economic point of view, stabilization is in place from the lease. Can you just chat through that a little bit?

Yes, we will. And we are stepping as part of the case studies, this group through stabilization in more detail. And probably one of the key points is stabilization is different for every asset. So in terms of Chatswood, we took 75% of the asset offline. We completely repositioned it to the market with a completely different mix. People change their shopping habits. Part of the reason why we did the food first is to ensure that the primary trade area didn't change shopping habits. They were able to continue to associate with the asset versus Chadstone, where we only took 10% of the asset offline. And so that we'll go through that in a lot more detail.

In terms of stabilization more generally, it's -- in normal circumstances, it's determined after the fact. In Chatswood, part of it is because it was a staged opening because luxury came later, it was meant to be a 1-stage opening. It ends up being a 2-stage opening because luxury came later. There were some step rents within the Chatswood deals for those that opened, particularly on Level 2 in the first stage and the differential we -- it forms part of stabilization. But fundamentally, it comes after we understand the initial performance. In terms of our marketing strategy for stabilization, that's determined upfront. So we know that we put in incremental marketing funds in terms of Chatswood, just for FY '27, it's circa around $1.25 million, and that is to really -- that is above and beyond a typical fund. So it's set upfront with a designated program, which Amy will talk through in more detail in the Chatswood presentation.

Simon Chan from Morgan Stanley. Pete, I know you said GIC had a change of mandate that's prior to the Chatswood Chase redevelopment. But the fact of the matter is you -- to kick off that project, you bought out your partner. If I think about Uptown, you've bought out your partner. As much as there's a bit of all the rage with retail, et cetera, is there no demand for retail development or taking that sort of risk? Because I'm looking at 6% yield, 10% IRR. Is that good enough for you, but maybe not good enough for external capital? Or is it so good that you don't want to share it? Like can you give us some thoughts on that?

That's actually a really great question, Simon. We're finding that there is plenty of capacity for demand for retail assets, but there's limited capacity to take development risk. And that's clear in the syndicators as well that are in the market, even institutional capital. And you look at our peers, there's not many that are actually leaning into development activity. So again, hopefully, part of the next 1.5 days, we can prove our development capability to this room.

But definitely, that's part of it. We obviously, as a CEO that's a developer, we're subject to all the appropriate controls around financial returns. We're always -- I have a strong conviction that these assets need to always have some sort of small, medium or large interventions by development. It's not the case across the industry. What we find if you leave the assets for too long, then you get to the prior question of defensive capital by nature where you have to invest defensive capital just to hold the valuation. But yes, there's limited -- there's a far smaller pool of investors that want to take retail development risk, particularly in live environments, brownfield developments in live environments are a lot more tricky to actually execute.

From GIC's point of view, it wasn't necessarily the development risk because they are obviously active passive partners, if that makes sense, in lots of development activity across the region, Netherland across the world. It was more the mandate had changed around pure retail at that particular point in time, which was circa 4 years ago now. I would -- and the -- I'd anticipate that mandate changes every couple of years for them that wouldn't surprise me. They've invested into neighborhood shopping centers under various partnerships even with Region. It's just they'll be looking at their normal practices of where to invest over the next 2 years, and I'm sure retail will scan pretty highly.

And if my memory serves me correctly, at the point when you kicked off Chatswood Chase on your own, you mentioned that perhaps down the track, you will consider divesting part of it upon finalization of the project. Is that still on the agenda?

Look, it's an option. It probably goes back to David's question is if something significant came up into the marketplace, one of the investment options once it's stabilized and trading well, we take a view Chatswood Chase is worth a minimum of $1.5 billion. We have a joint venture partner model. And in the event that the opportunity that we are looking at, at that particular point in time can create greater returns than potentially a 50% transaction of equity to bring in a partner on Chatswood, that's definitely an option as QueensPlaza would be as Uptown will be -- might be at the end of its development. We still have some 100% assets that could open up more strategic opportunities from an M&A point of view.

Next question.

Dye is telling me that's time. So if you've got other questions, please hold them, write them down. We're happy to answer questions all the way through today.

15 minutes for morning tea.

Sorry, Dye. If we can maybe get back by quarter to 11, and then we'll kick into acquisitions and then we'll kick into the development case studies, and we'll open up for questions all the way through that. Thanks.

[Break]

Alright, we might kick off again if that's okay? Okay. So this little diagram has been termed Vicinity Infinity. So Jane is trying to take a trademark on this one as well. But essentially, again, if I explain this, it goes back to that vertically integrated model. Some of the questions that were raised before, I mean Simon raised a question around development capital, and I was having a chat to actually Craig outside. And part of the answer to that question, and Jane and I were talking about it just before I came up on stage, part of it is not all the development capital wants to take risk and particularly in funds management.

Part of the answer is also with the Uptown story where we have a good partner in terms of ISPT. They're obviously merged with IFM, but we have different views in terms of how that asset should be developed. It's probably fair enough to say our view is more expansive in terms of what needed to be done. And so some of the reasons why we made a decision on Chatswood and Uptown was to take full control. And it's to take full control so we can execute the Vicinity Infinity as you see on the screen here.

And in terms of Uptown, which the guys will get into in a little more detail at the end of the day, we have a short construction window. We really are working with a designated Tier 1 contractor up there. We would be secured in terms of pricing with that contractor by the end of the year for a Board approval in February, but we need to be out of there before and have that asset opened by Christmas 2028. Otherwise, we hit peak period for infrastructure development for the Olympics. And for that, having an approval process that is purely within Vicinity allowed us to move very quickly and move into that program.

How we do that is pretty much that diagram on the page. So again, equity manager developers, whether a joint venture partner or whether it's at 100%, we typically can move quickly and with control versus, say, someone who has minimal equity within an asset and a fund manager that has to essentially get approvals from multiple constituent investors and debt before they can move forward and do anything of significance from a retail development point of view. From our -- so in terms of -- for us, a development-led company, that's across all divisions.

So development is not just leading all the rest of the teams, but his team is essentially setting the strategy in conjunction with the first part of this, lots of data and insights around market areas, lots of market experience from expertise that's either within the company or we bought into the company, which we'll discuss in a little more detail through the case studies and really understanding the second part, partnering with the key retailers across the portfolio, whether it's in our core portfolio, whether it's in an outlet portfolio, CBDs or our super regionals and understanding what their growth plans are and where they're looking to grow.

I mentioned previously, it's all about productivity. It's about how do you maximize market share by category, by trade area and how do you bring new precincts into these markets to ensure that they're aspirational for the market and give people a reason to shop physically outside of just shopping online. And typically, through that, we're developing early-stage development briefs on 10-year strategic plans for our assets about -- what we would typically like to do is phase development. It's not necessarily our preference to take an entire asset offline.

Take the income downside, which has been very topical over the last few years with this room. It's -- our preference is to have constant interventions that are more similar to Chadstone, where we might take -- even though Chadstone is expensive on rent everywhere, we might take 10% of the asset offline to reinvest rather than a significant component. And that -- obviously, that data and insights through those partnerships through a long-term strat plan with close liaison, obviously, with government and through our development team then unlocks that development value. What we find is having an equity manager developer with vertically integrated development allows that to unlock it in-house.

So first case studies, we thought we would just give you a bit of -- too many insights -- a few insights into acquisitions. So the first one was Lakeside Joondalup. I mentioned previously, just for context and maybe a little bit more detail. We take our Board and really invested parties within our business on asset tours around the country. Before we purchased Lakeside Joondalup 18 months before, we took our Board through WA. We met the then manager or General Manager of Lakeside Joondalup, who works for us today, has been on that asset for close to 20 years, seen multiple iterations in terms of development of that asset. But we socialized our strategic plan for the Greater Perth and South of Perth is called Peel. So the greater Perth and Peel area.

We did a lot of economic investment around infrastructure investment, employment investment, retail sales growth, where competitors were developing, where the future residential growth areas were, where transport was, through our investment management team. And we then had a determination of the future opportunity for us in Perth with fewer but larger assets and the development of Morley Galleria. We took our Board to -- as I mentioned to Joondalup well before a Joondalup transaction came on board to socialize that strategy. And we always find where operators kick -- go out and kick the tires, you get to really understand trade areas and digesting what we're trying to accomplish far greater outside of the boardroom and in these assets.

The transaction itself, as I mentioned previously, was a market transaction that essentially had 3 bidders. That transaction in Erina 12 months later had a dozen. With the 3 bidders in terms of Lakeside Joondalup, we were the successful bidder. I won't go through trials and tribulations of how that actually occurred. Tony will be embarrassed by it. But ultimately, we ended up transacting at a 6.25% yield. The transaction was 50% share of Future Fund. And APPFR via Lendlease had the management rights and the other 50%. When we transacted the Future Fund, they had basically a provision in their lease that forced a sale in the event that the owners couldn't agree on the future outcome in terms of Joondalup. That is quite a rare provision within the ownership agreements.

We used that as leverage to essentially negotiate with Lendlease around the property management agreements. So at the same time, we bought the passive interest in the asset. We did a quick transaction -- it wasn't a quick, but it took about -- it took longer to negotiate the management rights than it did to negotiate the equity interest, and we bought them both together. Now again, having that vertically integrated core capability within the team that could quickly put together a 10-year strategic plan, case studies in terms of why we would be a better proposition for APPFR versus Lendlease in managing that asset. And it all amounted to a few things that we'll go through in this slide.

Part of it was our scale in terms of being able to -- those relationships with retailers and being able to drive increased income and scale on the cost side of the P&L, our scale allowed us to drive material cost savings versus what was in the P&L at that point in time. Lendlease were great, 2 months of negotiation, they were great. And then they recommended to APPFR of the change in management for a relatively small fee. So we pulled that transaction together and then partnered with APPFR. Part of that reason is because APPFR believes -- we always knew that there would be a short-term relationship. We always knew that particularly with the funds management play on that vehicle that occurred last year that eventually the underlying investors would seek their liquidity. We knew there was a liquidity window. We knew that there was a demand for liquidity coming out of that particular fund.

And from APPFR, they had confidence that we would be able to generate more income from that asset. They're their incumbent investment or property manager. And that when they exit, they would be able to get a better return for their underlying investors. That happened to be the case. That's a transaction that has just been complete, which transacted at about a 10% premium to the purchase price that we paid 12 months earlier.

How do we fund that transaction? Well, we had numerous properties within Greater Perth and Greater Peel. It's a long skinny corridor straight down the middle, dominated left and right off a major highway that pretty much splits straight down Greater Perth. Joondalup is our most northern asset in a great growth corridor, large asset, as I mentioned, 28 hectares on a huge development block. Part of that transaction also facilitated what we would anticipate to be future master planning for that particular asset that Jay and the team and Trevor will start to get their mind around after we've enacted our first management plans in terms of that asset.

We then start from Joondalup, move to Ellenbrook, which is in a growth area. The other component of the strat plan was the development of Galleria, which I've mentioned already this morning a few times, which opens in about 2 months' time, moved down to DFO Perth, which is a great performing asset, particularly since Costco has opened coadjacent to it, moved then outside of Perth into Rockingham and then into Mandurah. How did we fund Joondalup and the development of Galleria, 50% interest in Galleria development with the parent group. We sold Karratha, which we mentioned. We sold Halls Head. We sold Maddington. We sold Dianella, and we sold something else, Tony -- Victoria Park. And we sold a vacant block of land. And so all that collectively together in simple terms was the strategic reinvestment based on all the data and analytics that we did to say that this was the next 10 years moving forward for the greater Perth and Greater Peel area.

It's not too dissimilar to what we're thinking about in terms of how we will approach Greater Sydney or how we approach Greater Brisbane. In terms of the outcomes from Joondalup since it's gone under our management, so essentially the 3 people at the end of the podium here, the valuation gain, as mentioned, is up 10%. We've had NPI growth in the first year of 8%. Part of that's driven by significant ancillary income growth of 21%. And a lot of that is our media business. And so again, for our business, a lot of you guys hear about our income from our leases and development gains. We have a large media business. We have a large control car parking business. We have a large embedded network business and solar business.

We have quite a large casual mall leasing business. All these elements when we purchased Joondalup or Harbour Town Gold Coast or DFO University Hill, which have come from other managers, we've been able to maximize those ancillary income opportunities. The specialty sales growth has increased by 11%. Occupancy, which was far too low for an asset of this quality, has been increased over that course of period of time by 200 basis points, and that's really led by the introduction of 40 new retailers.

There's a lot of activity occurring in that asset at the moment. And it's what we call rightsizing or reconfigurations of retailers. So at the moment, Matt and his team have just concluded a -- just concluded, I was about to say, large-format health and beauty wellness cosmetic operator, MECCA deal there. [indiscernible] So this is their current store. Now just -- I mean, this is probably a bit too much detail. When we walked into Joondalup, Joondalup, like many centers in WA, went crazy when the GLA caps were removed in the early last decade. And so a lot of centers actually went double-story and built out beyond 80,000 square meters because every asset over there was capped at 80,000 square meters on principal activity centers, but people don't like shopping upstairs. It's just -- it is a fact -- and so we always -- all these assets, including Galleria, typically are much softer trading upstairs, and we have to be very particular about precincting and the offer that we put upstairs.

In this particular asset, Mecca is at the end of the corridor next to a second story Myer. And the deal was previously done at highly expensive rate to pick up and move that Mecca deal at a significant cost somewhere else, and they had three other deals that are very similar. What Matt and the team did, and that would have weakened the mall at the top end of this space. It was part of our due diligence where we looked at all the -- we looked at 10 years, but we particularly looked at an entire leasing plan for the first 3 years of Joondalup. And one of them was renew in situ and then expand in situ, which is essentially the Mecca deal, which allows that top level to have a destinational retail that's more destination than the second level of Myer and then allowed then directly opposite for retailers like UNIQLO to also expand to that space that then stabilizes that top floor, knowing that all the ground floor trades particularly well in this space.

So 40 new retailers have been introduced. And about a dozen of these strategic decisions about rightsizing the key retailers across the country and in this market have been made and are in the process over the next 12 months of being enacted. And then what we'll find to comment previously, in a certain way, this is definitely accretive capital. But if we didn't do it, it would be -- we would have some defensive capital we would need to put into place. So we take some income offline to rightsize these retailers to then reposition them in the market and they'll grow -- that not only will they grow a lot faster, but we can then build the right retailer precincts around them in softer areas of the mall. And along that, as a result of the increased occupancy and the increased quality of retailers that we've introduced, the NPS score of the asset has gone up materially. That's the customer scores, so customers coming into our assets. And [indiscernible] the Center SAT, which is essentially the retail appreciation of the asset has also grown by circa 49%. So that's Joondalup.

So I was just talking in the break as well, just around capital or maintenance capital allocation. One of the things which we've done on the back of that and his team's really great work in terms of leasing is also look at what we can do from a maintenance CapEx. So that might mean increasing the -- or refurbishing the amenities that might be more furniture, that need be all those things. Which start to, kind of, give a holistic customer view for this. So not only do they come for the new Mecca, but they also adjacent to have the new amenities, the new furniture, the new -- all those things, which actually drive that NPS across the board. So it's just -- I was just talking literally in the break around how we, kind of, go about allocating some of the maintenance CapEx and making sure we do it in an appropriate way in line with our leasing colleagues and making sure that as a whole of asset team, we're deploying that capital.

Good point, Michael. And maybe just another point for Michael, just on Joondalup, you can see on this slide. But for Joondalup is Michael and his team who were about to appoint a cleaning contractor stopped and that cleaning contract then went across the national contract. We renegotiated the electricity contract. We just appointed the security contract. These are all nationwide contracts that drive material savings growth around the cost item of the P&L.

So this is the DFO portfolio. So specifically, as mentioned, we -- it was before my time, but this is the original acquisition was actually acquired out of administration in 2010, and it had 4 assets. The 4 assets, the occupancy of the assets at that particular point in time was about 96%. Sales productivity was $7,200 a square meter and OCRs are about 8.2% and quite a high cap rate. Again, majority of these assets, they typically are not on -- so land planning was basically at a state-owned level. And typically, most states do not like the usage of a discount outlet on their land. So typically, a lot of these assets sit on airport land, which is federal land, and federal controls their own policy regardless of state's intervention. And the majority of these assets with the exception of one at that particular time was on federal land.

Over the course, particularly over the last few years, last 10 or not even last 8, we've grown this portfolio. It started with DFO Perth, which is a new build, again, on federal land, you can ignore state planning controls and then moved into the acquisition of DFO University Hill. For those that don't know Melbourne that well, it's in the Northeast in a place called Bundoora about 20 or 30 k's from where we sit here. That was in partnership with the guys at MAB and also includes some extra land in terms of that acquisition. And then the significant acquisition and the only one that's not branded was a market process for the purchase of Harbour Town Gold Coast. That is a fantastic asset. It's -- the productivity of that asset, the demand for retailers of that asset is second to none outside in the DFO space. And ultimately, it's a hybrid asset. And this is a model that we're really interested in exploring in the future. So it has a combination of convenience. So you have a supermarket, pharmacy, fresh food, and local services. It has entertainment.

It's a great restaurant precinct with a cinema and leisure and entertainment offer such as iPlay in there. And the majority of the asset is a premium off-price asset. It's outdoors. Gold Coast is a beautiful place to live. You wouldn't do it in Melbourne, all due respect to Melburnians. And together, and it has land around the outside. Our partner there is Lewis Land, and they're building residential around the outside. And we've worked on master planning to have it all interconnected together. Now the reason why I harp a little bit on that asset, it was the first time as a company and the first time for me personally being Westfield and Vicinity where we compromised.

The only way we could get the asset was to share the rights around management, leasing, and development, and that was -- so in that transaction, we purchased 50% of Lendlease again or APFR managed by Lendlease. But importantly, for us, everything is important for us that in a compromised situation, leasing, being able to use those national and international relationships and drive incremental income was super important for us, being able to land retailers that we partner with at Chadstone, Chatswood, CBDs, DFO South Wharf, and land them in Gold Coast was super important for us, and development. So the future opportunity for development on that land were the two things where we could materially show value creation for our new joint venture partner and drive income and value growth.

So that's the only asset in our portfolio where we've done that. And we did that because we -- in our screening of our strat plan, we valued that asset so much that, that was the opportunity. In that particular one, I think the values since we purchased it 3 or 4 years ago has increased about $80 million on a $350 million purchase. Since I mentioned, occupancy has grown significantly. The key for this portfolio is when we started with this portfolio, the traditional OCRs were around 8% to 8.5%, and we've grown them to close to 13% now. You can only grow them by growing that productivity amount. So that's a material growth of 64% in productivity to around $12,000 a square meter. And we would anticipate, obviously, which we're about to jump into Eastern Creek, once we have our management systems in place and Matt and his team have full control of leasing that we'll see similar type of outcomes that we've seen when we've taken over assets from other managers.

Pete, do you want to maybe talk to -- when you look at that and you see that enormous growth, you might think, well, how does that occur? And the challenge for us from a leasing point of view is to make sure that we've got the right mix of tenants in these assets. So traditionally in the outlets, we had domestic brands that were just using them as clearance houses. They still do that, but they are now starting to engineer product specifically for the outlet centers. And what we've also been able to do is bring in international brands into the outlets. And they have a very specific model. They engineer their product. They use it very, very leanly from a clearance point of view, and their margins are higher. So that's how we've been able to really drive the sales, drive the occupancy costs, increased sales, increased margins, which is a much, much better model.

Maybe just to expand on that just a little bit -- so the international retailers he's referring to are Calvin, Tommy, Hugo, Ralph. They are also Nike, Adidas, Puma, Reebok. So we're creating in all of our outlets now, there's very distinctive precincts of premium bridge fashion. In Homebush it's luxury and South Wharf, we've got what we call Tier 2 luxury going into those outlets, and they've got major sporting precincts. And then some of these retailers, their most profitable stores in the country are the outlets. That allows us -- when we've gone through these results, we've said that our average store size has increased, which has led to increase in occupancy. I think the number is around 20% is the average store size since COVID to now. A lot of that is driven by outlets with these stores all going to mini major above 400 square meter stores in the outlets and spending real money on kit to create a better experience when they're going into outlet centers.

So outlets, obviously part of the strategic plan, high barriers to entry. We're reasonably well weighted in Victoria or that there will be moves in Victoria in terms of our positioning on outlets. And then we're underweight. We were underweight in Perth. We built DFO Perth. We're underweight in Brisbane. We bought 50% and took quite a fair bit of the control of Harbour Town Gold Coast, which is the only outlet that doesn't run under the DFO brand strategy. And Homebush -- DFO Homebush is a tremendous asset for us. So when DFO Eastern Creek came on the market, I would say we were the biggest objectors to DFO Eastern Creek. So everyone up here knows it's a competitive business. You've got to fight hard for your market share, and we monitor all DAs across the country. And when we think they have a material impact or not representative on traffic noise, car parking or the principal activity centers policy, we're not afraid to ensure that we fight for the market share and our rights of our assets and for our future growth.

In terms of Eastern Creek, just for context and for history, we were significant objectors. The case of that and how it got approved outside of government intervention was broadly was they said they would do a turnover of around $100 million. We assume that, that would be on completion closer to $200 million. And needless to say, it's much -- it's even greater than our number. And so then it was concluded. It was completed in 3 different phases. It was completed as a convenience center, a large-format retail center, and the outlet center. The convenience center and the outlet center is integrated and has an entertainment precinct. We go back to the Harbour Town Gold Coast example where that hybrid center is a really good model, particularly with some outdoor space for the future. And then for us, we're underweight. We want to increase outlets. We want to increase greater CBD.

We want to connect it to great infrastructure. It's connected to the M2, which connects to the M7, connects to the M4. So it's right at the intersection. And it's in a major growth area of Western Sydney from a residential point of view. It ticked a hell of a lot of boxes. It was built by Frasers who are tremendous quality builders and used our consultants from design, landscaping, civil construction and architecture to actually build an exact replica in the outlet center of what DFO Perth was. And it was leased by one of our former high-valued executives that's now a gun for hire for outlets trying to lease across the country. And in New Zealand, she also leased Auckland Airport that was also used all of our consultants to build it. And so when it came to market, when we knew it was coming to market, we, again, ticked all the boxes. And to be quite frank, we don't like competitors in this space. We think we've got a really good model. We're trusted by our retail partners in this model, and we're looking to expand in this space.

It was a full market competitive process for the outlet. There was 32 bidders that was not sold in line. So essentially, you had a separate title for the outlet, separate title for the convenience, separate title for the large-format retail, and you could bid individually or you could bid in line. So the 32 bidders, some were not interested in all in line, but we at least had -- to David's questions before, we at least had in this size, around $400 million newly built to Simon's question, no development risk, fully capitalized, a lot in the syndicated sweet spot in institutional capital sweet spot, we had a lot of bidders within here.

On this particular one, this is, again, Adrian mentioned this point previously, the Vicinity Infinity model, we had to move at speed. So whilst it was a competitive process, we had met with the owners prior to the process completing. We had provided a heads of agreement to the owners that over the course of the next 48 hours was nonexclusively accepted. It required KPIs on us to deliver by certain time frames, which we did. We essentially concluded the due diligence and exchanged an unconditional contract within 3.5 weeks. And it was -- while the other 31 bidders were still in the due diligence room trying to bid.

So the credit to Frasers was fantastic. The owners took the commitment that was made a month before with the condition precedents that were in place, the time frame that we did this and the more important thing, we purchased the entire center for $400 million. but we had a nomination provision for the LFR. We would have taken the LFR, but we want to be strict to the strategy that we're not large-format retailer operators. About 3 years prior, we had an LFR actually at Broadmeadows, and we sold that to the market at 100%. And whilst we still have some LFR, DFO Essendon, it was -- it's a historic sort of component. We're reasonably good at it. I think we get great margins at it, but we want to be highly focused on CBDs, outlets and development opportunities that bring non-retail uses to our space, but not necessarily LFR.

We concluded the transaction at the end of June in terms of DFO Eastern Creek. The nomination gave us an opportunity to extend and put someone into the outlet by the end of October. We had to exchange by the 1st of September, 2nd of September, and we exchanged unconditionally on moving someone into that nomination provision that would take the outlet, which sits on a separate title and completely separate from the center. If you look at that picture on the screen, the first one that's at the bottom left of that picture and by the 29th, 30th of August, which is MA Financial.

If you look at the -- if you look at the two bottom numbers since we purchased DFO University Hill, we've grown NPI at 10.2% per annum. And then on Harbour Town Gold Coast, we've grown NPI at 6.5% per annum with a lot of remixing in both of those assets to rightsize retailers, bring new product in, make sure the precincting is right. From DFO Eastern Creek, Frasers are essentially a build-to-sell developer. They required a lot of risk management associated with that outlet before it was actually built. So they did a lot of pre-leasing into a marketplace where there was a lot of question marks from retailers at the particular time of pre-leasing. So it's circa around 30% pre-leased into it.

That is -- we do pre-leasing as part of our developments, but not near that level of number. And Ross will take the Chatswood example through. We'd like to build a small amount of pre-leasing to give it a point of difference and then build leasing tension by not overbuilding these assets to drive incremental growth. So, for context, specialty dollar per square meter rate for rent at Eastern Creek is just shy of $1,000 a square meter. 20 minutes down the road on a freeway, the M4 is Homebush, which is at $2,500 a square meter.

So in our mind, we buy these assets based on the estimated running yield at the time with a view to if we put our operating platform in place and it performs, what is the 5-year forecast, what's the 10-year forecast, what's the unlevered IRR. We want to buy, obviously, to Adrian's point previously, in this particular instance, it's around a 6% cap, but we can see the growth in there, and it's already got a preapproved expansion right by government for 8,500 square meters, which at some point in time, we would expect would end up in our development pipeline to be executed by Jay and the team.

We -- they are our 2 most recent acquisitions. So we thought we'd just give you a bit more of a granular view of the logic behind those acquisitions, why we purchased them, where we see opportunities of growth and what the next few years may look like for those. With that, we'll kick into development and our case studies.

Hi, everyone. Good to see you all. What we thought we'd do before we did a deep dive into the case studies around our major development here at Chadstone and Chatswood was just provide an overview of the operating context to give you a sense of what we're seeing in the market, what are the risks that we saw, how we manage those risks, what are the emerging risks that we're currently seeing for our development pipeline. And probably the one thematic that we touched on this morning, which really impacts our thinking around these developments, is that thematic around limited retail supply. So we saw that chart earlier in this morning. And in Australia, it's about 0.65 square meters of GLA per capita, and we continue to have population growth at the moment through that migration.

That retail floor space per capita here in Australia is half what it is in the U.K., and it's about 1/3 of what it is in the U.S. And there's a whole bunch of other reasons why that's the case. And Peter touched on it, I think Peter's effectiveness in objecting to DAs in the past has contributed to that. There's very restrictive planning controls. And probably the other thematic that is suppressing new retail supply is that retail development typically isn't highest and best use. So if you just use very simple benchmarks, when you develop a new retail asset, about 60% of that floor space is economically productive just because of the extent of common malls and back of house areas. for residential development is typically about 80% to 85% economic productivity and for office is closer to 90%. So, from a feasibility perspective, you rarely get a highest and best use outcome from a retail development perspective. But before I launch into development and construction, I might just ask Matthew to maybe just talk about some of the thematics in the leasing space.

Yes. Thanks, Jay. To be honest, we've been pleasantly surprised with where things are sitting from a retail point of view. We probably entered this year thinking there might be a bit of softness in the market. And there were some patchy sales in the first quarter of the year, but sales have actually been quite good. And I think that's really showing us that there's still some pent-up savings from shoppers. Australians do like to shop. And that's meant that there's been some good momentum. Now we probably foresee the next 12 months that it will continue with where it is. It might be a bit bumpier or a bit patchy -- but there's 2 things that really stand out. Firstly, Jay was talking about it just before, and Peter has spoken about it.

The occupancy in our shopping centers is extremely high at the moment, like we've never been as high as occupancy levels as what we have now. And so that's holding us in really good stead. The other thing that's sort of playing out is, yes, online sales are increasing. But whenever we go and sit down with a retailer, the first thing that they say to us is we're pure omnichannel. We need to have our marketing, our online sales platform, and our physical stores all speaking towards each other. And so we need to really create the right brand heritage, the right marketing experience. But our physical stores are more important than ever. They're more important than ever, and that's because the shoppers today, and particularly a young shopper, are really wanting that experience with their physical stores. So I think we're in really good shape. Australia is a pretty narrow market from a retail perspective, and Peter spoke a lot about our assets and our premium assets and trying to drive in international or first-to-market brands, which I'll talk about a bit later, but that's a real priority for our leasing team.

So we can get some freshness and newness in the market through these brands and expand them across our portfolio. Our portfolio is very unique in that we have Chadstone, which stands alone as a shopping center. We have really key CBD assets that we can also roll out these international brands into. We have strong regional shopping centers. And then our DFOs, which Peter just spoke about, gives us a platform with these internationals to be able to either clear product or have their operating models coming through the DFO platform. So overall, I'd say we're in pretty good shape from a retailer point of view and a leasing point of view.

The flip side of that is from a development and construction perspective, it's probably not as positive. So if you think about that, I guess, those tailwinds from the limited supply and the benefit that is for institutional owners of investment-grade retail assets and the pricing tension that Matt's team can create to be price makers and not price takers. It's interesting when you look at that lack of supply thematic in the development sector. What happened since the GFC is that there's been a limited supply of consistent retail developments. And so most of that sort of generational capability that really built the first wave of shopping centers in this country, we exported that capability offshore over the last 20 years.

I know from my own personal experience is that I went to the U.K. and Europe to chase projects because there was an absence of those scale of projects here in Australia. And again, when you think about the men and women, mainly Aussies, who went to markets like the U.K., delivered Bluewater, delivered Norwich, Solihull, Dundee, and then went on to deliver Westfield Stratford and Westfield London. There was another generation of retail developers that went to the U.S., did the World Trade Center, did Century City. We have those people in our business as well. And more recently, you look at these large-scale super regional retail developments in Asia like Paya Lebar. And that was at the expense of the local market.

So, we lost all this capability. We had a generation coming through that were unpracticed in retail development. And then similarly, in the construction market, there's been a lot of focus on the impact of COVID on the construction market, the impact of 40% cost escalation, global supply chain disruptions, the productivity impacts of unions. But when you look at -- take a step back and look at the impact of a lack of retail development and construction supply in the construction sector, what happened was that a lot of construction businesses that had dedicated construction business units for retail development prior to the GFC disbanded. There wasn't that regularity of velocity and flow of projects. So, what that has resulted in is a capability gap in the market.

So, Peter and I over the last 3 years have been spending a lot of time thinking about how those forces fundamentally changed our approach to our operating model, our resource strategy, and our capability building. So, we started a strategy 3 years ago of leveraging our personal relationships and networks. And we created a recruitment strategy, which was quite aged. It was biased towards age, wisdom, and experience. And we -- if you look at our resourcing model, we have a bit of an hourglass resourcing model. We have a lot of capability that are in their late 50s, early 60s. So that generation that left Australia 20 years ago and started developing and delivering retail assets around the country.

We have quite a thin layer of managers in their 40s and 50s. And below that, we have a really strong cohort of young, bright, energetic talent. So whilst this resource strategy is much about risk mitigation, and ensuring the certainty of execution delivery. We also feel that we have an obligation to try and develop and mentor the next generation of developers. We were all the beneficiary of these great men and women who coached and mentored us, and we think that not just for the sustainability of our business, not just for the sustainability of the industry, but probably just generally for the productivity of the country, it's important that we think about the strategic resourcing to try and train up the next generation. Construction and development is really tough at the moment, and it is getting tougher. So we've really had to think about our risk management principles, enhancement of our governance frameworks. And for the last cycle, where there were developments, there was real growth in revenues versus costs.

So I think that instilled a degree of complacency in the industry. There was an outsourcing of management to third-party project managers and design managers and other capabilities. There was quite a complacent attitude to measuring and valuing risk. We're all taking percentage contingency approaches. We've fundamentally changed that. What we do now is we do a bottom-up risk analysis of every asset and every development proposition we're about to embark on. We invest capital before we develop to understand the latent conditions in an asset. We do bottom-up risk analysis. And ultimately, we also think about how -- when we execute these developments, in addition to leveraging that capability we have, we are very, very mindful about how we support and train the next generation if we want to have a sustainable development business into the future.

If you go to the next slide, please. Before I hand over to Michael, if you go to the next slide, please. Just Michael is just going to touch on the history of this extraordinary asset. But I thought it would just be appropriate just to acknowledge the singular contribution that John Gandel has made to this asset. We acquired this asset back in 1983 for $37 million. And sitting here today, it's roughly a $7.2 billion asset. We've learned a lot from John. I think we've learned that to create these incredible generational assets, you need to have vision, you need to have conviction, you need to have access to capital, but ultimately, you need capability. And look, we're incredibly proud of our partnership with the Gandel Group. We're incredibly proud to be the manager and developer of this asset. And I also think from a people engagement perspective, it's a lot of privilege to work on this asset and to learn from this asset and to make a small incremental contribution to this asset. And that certainly instills some discretionary effort from our people. Michael, do you want to maybe just touch on the history of the asset?

Sure. No worries. I've had the privilege of working on this asset for almost 10 years, and we talk about the legacy that people who work on this asset are able to leave. This ability for us to drive past when we're a lot older than what we are and say I was part of that or I was part of that is something that will be really special for all the people that get to work on this amazing asset. There is this continued evolution that happens at Chadstone. As I said, I've been here for almost 10 years, and this asset has always been under some form of development right from when I arrived, the stabilization of Stage 40 right the way through to the latest development, which is the Market Pavilion. And it's this evolution of Chadstone that makes Chadstone so special.

Back in 1960, the asset first opened by And was opened by the Myer family. It was a supermarket at one end and Myer Emporium at the other [indiscernible] in between on the American model. And really, this evolution kind of carried through right away until, as Jay said, 1983 when Mr. Gandel bought the property. And the analysts in the room are probably madly doing the sums on what sort of investment return he's got over this period of time. So -- but let's say, it's been pretty good. And I'll echo what Jay has said, we really value the partnership we have with the Gandel Group and Vicinity really driving this asset forward.

Chaddy as it's known, is well loved. It's funny to me about, sort of, this idea in Australia. We always shorten things. If you shorten things, you know you're well loved. So whether that be the G or in our case, Chaddy. But it is absolutely a well-loved asset and people continue to flock in their droves and is certainly the #1 asset from an Australian context perspective.

I think as Peter mentioned earlier, we've had 59 stages of development, which goes to this continual growth and reinvestment, which really talks about this dynamic that happens within the retail environment, whether it be customer-led or retailer-led, as Matt said, or really from a market or opportunity-led perspective, Chadstone's continued evolution has made it what it is today. Chadstone has evolved from being a shopping center into now really a world-class retail-led mixed-use destination. If we just go to the next slide, please.

So I will hand over to Amy in a second, but you'll see here on the left-hand side, this is really the trade area, and it goes to show the dominance of this asset within the Melbourne context. If you think about really, this is half of Melbourne, all the way down Mornington Peninsula up to, sort of, north, including Doncaster and then across into the inner West shows the dominance of our main trade area for Chadstone. But I might hand over to Amy to talk a bit about the customer segments.

Thanks, Michael. I hope you're all taking a minute to look at that map because it's pretty impressive. And really, that's the strength or the foundation of this asset. It's that really loyal local customer base with destination appeal. And so we're looking at 2.4 million people in that trade area. I think a couple of things I'd be keen to call out is really when we think about this center, what sits beyond the catchment is 24% of center sales generated from customers that don't live in that area. And there's really, kind of, 3 key groups: intrastate tourists, interstate tourists, and a highly, highly valuable international tourist. Currently, we're seeing circa 400,000 international tourists per annum, and they're spending on average close to $1,000 each. So the my crude marketing accounting is about $400 million.

There's been a very deliberate and long-term acquisition strategy for this customer group. Chadstone enjoys a dedicated business development executive just for tourism. We also have trade representation in both China and India, and that's largely to procure large tourist groups. There's also what we refer to as tourism product supplied at the center. So I think our fabulous shuttle bus that runs free and daily multiple times between Chadstone and the CBD, the tourism lounge, the digital passport, which, of course, communicates offers and current events that are on scale. So I think that's going to be an important customer, and we're very keen to grow it.

More so, I think it's also interesting to think about how the offices, the hotel, and other complementary uses have expanded the customer base beyond traditional shoppers, and they're helping us drive the visitation throughout the week. More than 11,000 people work across this precinct. So that's a combination of retail workers and office workers. And they really give us a really significant built-in weekday customer base.

I love to quote Bernard Salt, who, I'm sure you know is a well-regarded demographer and social commentator. Post COVID, he talked about people no longer -- let's see whether I get this right. People no longer work to live. They like to live at work. So the idea that when they come here, they can do all those functional things as well as, kind of, providing for their livelihood is a really great and attractive quality that this center offers. When we think about Chadstone's future, it's actually not just that 2.43 million people in the trade area. It's actually the customer base that we're going to drive through that retail-led mixed-use model. So the combination of retail, commercial, accommodation, and complementary uses working together to drive the visitation spend and the long-term growth. I think I'm handing over to you, Jay.

Yes. Thanks, Amy. So look, this slide behind me is a summary of the major developments that we delivered over the last 10 years at this asset. And it provides some strategic context around the why of the last stage of development that we delivered. I'd probably summarize what's happened. There's been $1.5 billion of continuous investment in this asset over the last decade. And in addition to enhancements to the retail offer, last decade really was an inflection point on the evolution of this asset towards a more of a retail-led mixed-use precinct.

We're also just about to embark on a global master planning competition. So there was quite a pivotal moment about 18 months ago when the Victorian state government announced this activity center program. And Chadstone was one of the first 10 principal activity centers. So the Victorian government in terms of -- there's been a lot of chatter about the housing crisis. But in terms of strategic planning in the state, the Victorian government has a model around more distributed medium density housing in the city. And that's in stark contrast to the strategic planning of the New South Wales government, where they have this strategic objective of evolving Sydney into a more polycentric city where they're gifting more concentrated height and density around major transport nodes. And we'll unpack that this afternoon with our Chatswood residential opportunity. But about 18 months ago, the land around Chadstone was rezoned for medium density residential.

That forced us to strategically pause and think with our joint venture partner about whether our current master plan and our current vision for Chadstone is right. So we collectively agreed that Chadstone in our view, is without peer domestically. So again, we tapped into our international network, and we have kicked off the process to master plan the future of Chadstone with regard for that forthcoming residential densification. We don't necessarily want to be constrained by the planning controls of the day. So we're thinking about what that vision and what that opportunity could be for 2050. But if you do reflect in the last 10 years, we've gone from retail to the development and delivery of office development.

There's about 51,000 square meters of office in this precinct. Again, we'll unpack the reasons why in due course. But interestingly, in a market where there's 20% office vacancy, so 1 in every 5 square meters of office space in this market is vacant, we have virtually zero vacancy. And I think it's -- there's a whole bunch of reasons, which, again, we'll unpack, but there is some natural strategic advantages to having office adjacent to a premium retail asset. We call it the halo effect. But as we focus on the premiumization of our income from our retail assets, a secondary benefit is that it has created a premiumization of our non-retail assets that we deliver at these centers.

If you go to the next slide, please. So as we embark on this global master planning process, and again, if you reflect on the evolution and the history of this asset, really, the inspirations for this asset have been beyond local comparables and benchmarks. So we as a team are constantly challenging ourselves to think about what are those global and international comparables that can influence our thinking in relation to this asset. And I'd probably just summarize what we see out there in the global market around the complementary nature of mixed-use and retail and probably also just the power of retail to be that connective tissue between investment-grade retail and other uses.

So again, when you look at other jurisdictions, particularly the U.K. and Asia, this emergence, and I think Amy just touched on this convergence of work, live, play and shop. So we know that from a retail perspective, as Matt touched on, our customers are getting much more demanding around experiential retail, but they're also much more demanding around experiences within the precinct. And when you reflect on the evolution of residential and office in these global precincts, these precincts from say, an office perspective for office workers who have been liberated by digital technology, the retail has become an extension of the modern workplace.

So when you walk around the Market Pavilion at Chadstone this afternoon, you'll make -- it will be quite difficult to decipher those who are in the precinct who work in the precinct and those who are just visiting. And equally from residential high-density development around retail, what we see in other jurisdictions is that with high-density living, the retail becomes an extension of high-density living. So we think about our retail assets and how they effectively become an extension of the apartment. So how they can be the kitchen, the living room, the dining room of high-density residential. So these are the thematics that are, sort of, weaving into our thinking around the future of Chadstone. I'm sure you've got a few points you'd like to make as well.

Look, just on this point. And a lot of the questions we always get, particularly -- I mean, Jay worked in Europe, I've worked in America, obviously, we're both Australian, is particularly global investors or investors that are in American REITs, why is Australia so different from a shopping center point of view than the U.S. or Europe? And it's really on the bottom right-hand corner of the page. So this is that integration of fresh food and really, obviously, the assets overseas have sit-down food and entertainment, but that fresh food precinct and that daily shop is so important and such a differentiator of Australia versus anywhere else in the world.

So as we're looking for inspiration over the last 7 years, and I mentioned this at the start, what was missing on Chadstone, great sit-down food and entertainment, had to create a precinct. You'll see that this afternoon, if you haven't already. And the latest one, great fresh food and how to integrate, which Matt will talk about more, fresh food into either pick and take home, pick and cook and sit down, that type of concept. And there's some exemplars up there on that bottom right, either through Europe. My favorite one is that West Side Market of Cleveland, which is just a perfect example. So imitation is a form of flattery.

How do we pick up these concepts from around the world? How do we then tailor it for an Australian culture? How do we then tailor it for a local market area? And how do we sell it with -- how do we then partner with retailers that can bring that sort of vision to life. So, that's on the bottom right-hand side. Then you'll see things like NorthPark at Dallas. It's just a superb family-owned, not too dissimilar to John's 50% here, luxury asset. Yorkdale in Canada is superb. And then obviously, the Middle East assets are just on steroids. They're absolutely enormous. But we've also taken inspiration more recently from what's occurred in Asia, particularly through Thailand at the moment, Marina Bay Sands, the new one in Bangkok, across the River ICONSIAM. They're fantastic opportunities just to pick the good elements out of that and how does that translate into the retail master plan and to Jay's point, whereas how do specifically some of the Middle East and Asian assets translate to building vertical non-retail uses outside of the retail core.

Back over to me. So Chadstone, as we've heard, is absolutely without peer in the Australian market. Just to give you some context around that, it's about $2.7 billion worth of sales. You need to put the second and the third together to get to the $2.7 billion, so Westfield Chermside and Highpoint, so absolutely without peer. And that position, as we heard before, has really been built because of this continual renewal that we've had. And it's not the single development that kind of does that. It's the culmination of the developments over the years that keeps on, sort of, adding on to this halo effect that we see.

In addition, it's the additional work that we do every day, whether it be the level of cleanliness, the landscaping that we do, the whole experience that we create and the services that we layer into this asset, create this very special place that, as I said before, is without peer in an Australian context, and we take a lot of the cues from the international kind of areas. As Jay said before, we've invested about $1.5 billion over the last little while. And with an asset now worth about $7.2 billion, more than 400 retailers, 38 luxury, which Ross will no doubt talk to a little bit later in terms of how we've leveraged the luxury relationships here at Chadstone into Chatswood as well, 4 office towers and obviously, this beautiful hotel, 250-room hotel, which is now performing well above 70%. Just a note for any of you looking to build a hotel, probably don't do it just before a global pandemic, but now is well and truly stabilized. I'm going to hand over to Amy to talk a little bit about some of the other asset metrics.

Thanks, Michael. I think the phrase without peer or aside, I think, has talked about unrivaled performance really, kind of, sums up where we're sitting today. 22 million customer visits annually, the $2.7 billion in MAT sales, the results are absolutely extraordinary. In terms of exceptional retail productivity, we generate $28,000 per square meter across specialty retail and the $75,000 per square meter across luxury retail. This continued mixed-use evolution of Chadstone, which I touched on before is just going to strengthen these fundamentals, office tower, hotel and complementary uses are broadening this customer base. And so our aspiration is the figures.

These kind of really lead us to these wonderful results in terms of a highly productive and resilient asset. Matt talked to earlier, 99.6% occupancy, strong leasing momentum and nil leasing incentives. Often when I'm at a barbecue, people talk to me around what do we give away at Chadstone, you must be giving away something. And I really love being able to tell them that we don't do anything. I think sometimes people think I'm fibbing, but if they could see the numbers that you're looking at today, I'm sure that they would have a greater understanding of why I can assure them we're telling the truth.

Okay. We've spoken about Chadstone and its positioning and that we -- everything that we do at Chadstone needs to be best-in-class. And we're no different from a leasing point of view. Yes, we want to have first-to-market retailers that come into the shopping center, and we've done that a lot. But we always want to make sure that we have best-in-class retail categories, and I'll talk about that in a minute. But just a story that we have a lot of the international brands coming out here and particularly the luxury brands. To a tee, we take them down in the center, and to a tee, they say to us, we've never seen a shopping center like this internationally. The malls have really good width to them. The roof structure is fantastic.

It brings in a lot of natural light. The malls are really clean, but your retail mix is absolutely outstanding. And that isn't credit to the team that is working on it now. It's credit to generations who have come up with strategy, retail plans to make sure that we deliver the best retailers that we possibly can. Yes, it includes first to market, and you can see some of the names up on the slide here. But it's making sure that we've got best-in-class categories. And sometimes we can't have first to market. And I'll give you a good example of that. We wanted to bring -- all into the market. They were desperate to come into Chadstone, and we couldn't get them in here first. But what we can do because we've got such a premium portfolio is open them in Chatswood Chase in Sydney in our development there.

And then we, at the same time, did a deal, a five-way deal where it expanded them across our CBD assets, and they will come in to Chadstone early next year. We wanted to make sure that we got the right box for them, so they want to have 600 square meters, and we just could not deliver that at the right time for them. We also have had a great response from our luxury tenants. Peter spoke earlier about the expansion of Hermes, LV and Dior as key tenants in that luxury category. What we do to make sure that we've got best-in-class in shopping centers is have the right sizes so that they can then do the maximum amount of sales and then we can obviously in return, make sure that we're getting the best possible rents that we can get. So luxury has been really important for us. The premium international brands are really important to us. We're seeing a lot of expansion in that category at the moment. I mentioned Alo, On running. We also did a deal with them at Chadstone. They're coming in early next year. We'll show you this as we're walking around the center later. We've done three deals with them, one in the outlet -- one of the outlets at Homebush, we've done Emporium and also at Chadstone. We were the first Gentle Monster store that came into Australia. Ross did that deal some time ago. Gentle Monster is a Korean eyewear brand. It's enormous overseas, and it does extremely well at Chadstone. Again, we'll show you this store, but we couldn't expand them outside of Chadstone. We went and met them -- with them over in Korea, and we -- they've got a license partner over here. We actually unlocked three other deals with them. We've done two of those, and we'll expand them across our portfolio. So yes, Chadstone retailers want to be first in market. For us, it's first into to market but it's also making sure that we rightsize them to maximize their sales to ultimately maximize their rents.

Thanks, Matt. With the theme of best-in-class, I think it's important to note that a key point of differentiation for Chaddy is its ability to deliver experiences at scale that really very few destinations in Australia can match. And I probably want to preference these are not traditional center activations. They're large-scale cultural entertainment and brand experiences, and they generate significant customer interest, visitation and media attention. If you're looking at the screen left to right, we've featured some of the recent examples. From left to right, Cj Hendry's immersive experience; the Hello Kitty exhibition; RONE, The Making of Home, which featured in Chadstone's very recent Light to Night Festival; and on the right-hand side, something that we delivered with an important brand partner, Louis Vuitton, which was time capsule.

These experienced a large scale, exclusive merch, as installations, immersive experiences and they draw customers from well beyond the traditional trade area and reinforce our position as a destination people actively choose to visit. I think what's interesting is we're working through at Chadstone different customer audiences at the moment. And so when you're looking at RONE, The Making of Home at life, that was specifically targeted at a much younger audience that we than we normally see. And that's about our aspiration to make sure that we're growing with different generations, not just the ones that we enjoy patronage from now.

I think it's also really important to call out the strong relationships we have with our partners. I think one of our best examples is the Louis Vuitton time capsule. This was a globally touring exhibition that Chadstone brought to Australia. We were one of only 15 countries that hosted this exhibition worldwide. It was a free exhibition, which showcased Louis Vuitton's archival pieces, craftsmanship demonstrations and really immersive storytelling but it also complemented a dedicated event space for Louis Vuitton and an exclusive Salon Privé, which is an offering for their private client engagement. I think it's really important when we think about our relationship with our partners and how we build our profile together, and this really enabled us to deepen customer engagement, our brand presence, Louis Vuitton's brand presence, and it gives people a reason to visit us beyond shopping alone. Also, the great things that I love to talk about as a marketer, earned media, social engagement and word of mouth. Chaddy does an excellent job in driving that advocacy through those channels.

And then finally, the best-in-class guest service. I alluded to them earlier when I talked around the tourism product. So the shuttle service, the tourism lounge, but it's really around the broader hospitality and guest experience offer including the hotel, personal styling or butler service et cetera. Together, we think these experiences strengthen Chaddy's position and as a destination, people actively choose to visit. And I think sometimes in its simplest form, really the job here is to give people a reason to visit or a reason to stay. So all of these extra additional offers that we provide are the one-percenters that add to the total great result we're delivering.

I'll just add to that slightly. Just to bring it back to the kind of commercial. If I think about some of these activations or experiences that we have really drives that asset performance, so if you think about RONE or Light to Night the festival, that setting, we had about 100,000 people come to that. And we think that it generated somewhere around about $16 million worth of incremental sales for that. Or if I think about the valet service and adding the hands-free opportunity there, what we know is that people who have used the hands-free service, which is basically you can go and shop wherever you like and then people come and collect your bags and put them mini car for you. You see this incremental sales growth that happens because people don't have to carry around bags. And in fact, when we first introduced that, we had some people who came from -- two ladies that came from Bendigo and they arrived back at their car and they literally had to pile the shopping up on their laps because they actually had filled the car so much during their time and they didn't kind of realize. But it's those things that whilst it's a layer of services or experience that we're creating, which makes Chadstone so special, it also has a really significant commercial driver for the asset at the same time.

Back to me. So let's talk about the Market Pavilion, and we're moving into the actual case study now around the Market Pavilion. And I guess the first question that everybody is going to ask is, why did you do the Market Pavilion, and Peter talked about it a bit before. But the reality was is that Chadstone was leading the way in terms of all its retail categories with the exception of food. And our fresh food proposition was nowhere near the level that we saw in terms of the quality or outcomes that we were seeking from a Chadstone perspective.

But also what we knew is that we were -- there was about a 50% gap in terms of our market share across our fresh food, and we were about 35% down on comparable centers in terms of our fresh food. Really, what we had was a kind of convenience-based shop, people using baskets, they were coming for other reasons. They were coming to Chadstone to do their retail shop, their apparel, et cetera, and going, I'll just duck in and go and grab the milk or bread or those sorts of things. Or I was an office worker here and I kind of just ducked in and grabbing something. And whilst they are still important customers, what we weren't driving was a destinational audience. The people who are our customers, people that were coming here on a regular basis, didn't want to come and shop our fresh food proposition. They were going to places like Melbourne Central, they were going to Queen Victoria Market, Prahran Market, South Melbourne markets, et cetera, because the proposition that we delivered on the ground just wasn't what they actually wanted. And so we needed to really fundamentally change the way that we dealt with fresh food across the board and delivered something which was more to what our customers kind of needed. So I'm going to hand over to Matt, who's going to talk about some of the inspiration that we took for Market Pavilion.

Thank you. I might just stand up if it's okay. In leasing, we can't sit down for more than about 30 minutes or we lose concentration. I've got a GM of Leasing, who says to me all the time, Matt, this is where we create the magic. This is where we create the magic. And if you have a look at the slide up there, it's really attractive. It's appealing. But a lot of hard work went into our strategy behind the marketplace. And Michael is right, we just had a precinct that was not commensurate with the rest of Chadstone. So for us, we had to do the research behind that. And it wasn't so much about going overseas and looking through these precincts and replicating. It was to get a really deep understanding of what made these precincts or these marketplaces really hum.

And if you look at -- Peter spoke a little bit about America, these are slides of -- or photos of what was going on in Europe. So we went to Barras Market. Has anyone been Barras Market over in London in the U.K.? That place absolutely hums. It's under a railway line. It's got little holes-in-the-wall, but it's a unique experience of food. It's not a traditional marketplace as such with fruit and veg and fish operators. It's more an eating experience, but it absolutely hums. And a lot of that is about the artisan operators that are in those precincts or in that precinct that really create a buzz. And it's likewise if you go through the East End of London through Shoreditch in those areas where there's food trucks, again, on the weekend, absolutely hum. We also went to Brick Lane. So I'm sure some of you have been to Brick Lane. There's a bagel bake shop there that just does bagels. It's really, really simple, but it's an operator who's passionate about their business. It's an artisan operator. They've got one shop, that's all.

So these were the things that we went around and we learned. We went to La Boqueria in Barcelona. It's probably the best market in the world. A lot of those photos come from La Boqueria. And they're, again, artisan operators, but they are passionate about what they do. Their displays are extraordinary. Their food displays are amazing, and we learned a lot from that. We went to Paris, and we had a look at Le Bon Marché, Marché des Enfants Rouges, which are really unique markets, and we've learned a lot from those. We went to Galeries, Lafayette, again, very different perspective, but we learned from that, too. We went to Eataly in New York and Rome and in Paris, there's also one, and we learned from Eataly and the little concessions that they have and what makes them really tick. So all of these experiences added up, and we learned a lot from them, which I'll explain those learnings, and brought back ideas that we could replicate into a modern Melbourne marketplace because that's what we wanted to create here, something that was uniquely Chadstone, uniquely Melbourne and something that hadn't been replicated in a shopping center, definitely in Australia, but I haven't seen it anywhere else in the world.

So we might just go to the next slide, please. So what did we learn? We learned that we needed best-in-class operators. So we needed artisans, so mom-and-dad operators who are really passionate about what they did. They're the ones who are successful in marketplaces in the strips of Melbourne. We learned that we needed to surprise and delight our customers, so Michael spoke about our shoppers who were going to other shopping centers because we had something that was pretty standard, run of the mill. You could find it in other regional shopping centers. So that surprise and delight element was really important to us. When you go to a market, you're constantly thinking, well, what's around the corner? What can I see around the corner? Is that really good? And if you go to the really good markets around the world, it's that surprise and delight.

It's the authenticity of the market was really important to us. We need to make it authentic and we need the operators to be authentic and buy into what our vision was. And what we wanted to do is overlay all of that with our operational skills. So if you think about a marketplace around the world, it's usually a bit messy. Parking is a bit of an issue, loading and storage is an issue for the retailers. We wanted to make sure that we could solve that. And that's what we do in our operations, in our day-to-day centers that we do have ease of parking. We have a lot of it here at Chadstone. We created off-site storage for them because you'll see later today when we walk through the Market Pavilions that they don't really have storage in their pavilions or in their kiosks, the spaces that we've created for them. And we needed to make sure that they understood that we trade 7 days a week. If you think of a traditional marketplace, they don't trade 7 days a week. So that they understood and bought into the vision of what we were trying to create, which was super important to us.

So you can see up on that slide, best-in-class operators destination and convenience. And the last one is the market atmosphere. So I said that we wanted to create a modern Melbourne marketplace that was really important to us. It needed to fit into a shopping center environment. We needed to get the designs right. We need to get the operations right. We've got beautiful high ceilings, barrel-vaulted ceilings, which I think Jeheon will talk to a little bit later. We've got nice width of the malls, et cetera, which helped us really create this marketplace experience. Jane, do we have a laser beam at all? We don't have one. All right. This slide really talks about, on the left-hand side, the old market or the old fresh food precinct. So if you have a look at it, it's a really straight mall. If you look at the arrow that goes from south to north next to Woolworths, that was effectively our fresh food precinct, so it was a narrow mall. There was a bit of natural light. But because it was in a straight line, you really couldn't see. The sight lines were, to the actual tenancies, were not really cognizant with what a marketplace should be.

We had Woolworths that faced out towards the car park. So for us, we're really missing a customer who's going in and out of Woolworths and leaving. It's much better to have the supermarkets facing internally into these precincts. We really had a vanilla mall. In the middle slide, I don't think we have the laser, so this is going to be a bit awkward, but if you have a look at the middle plan, you can see how we've really opened up the precincts in front of Coles, and that's where these Market Pavilion sit. So what we wanted to do is open up, have better sight lines. This was going to be the market heart where all these artisan unique to Melbourne retailers are housed. And on the outside fringes of that, in the dark blue is where we would have a street or a replication of a high street. And on the other side of that, in the brown, we would have more your traditional fresh food, seafood operator, an Asian grocer of fruit and veg, et cetera.

Woolworths, you can see has turned around. So you enter it from the internal mall. And we have a dining precinct that sits in the darker, sort of orangey color at the southern end of that precinct. And that's an Asian street dining offer that we've created here. And we created it because there was huge demand from a dining point of view, and we knew that because the restaurants that were there initially were actually trading extremely well. We just needed to grow that. So we filled in the external entry to Woolworths with a financial precinct. We moved them along because we wanted to create a pathway between the marketplace and our entry, which you'll see later where Ralph Lauren is. And we've filled that in with Mecca, which we're building at the moment. We've got a 2,500 square meter Mecca flagship coming into the shopping center. And this is all about making sure that we create the best possible environment we can for our shoppers.

On the right-hand side, you'll see the pavilions. It's a modern style of marketplace pavilion, if you like. We created the structure ourselves and then the retailers come in and they fit out their tenancies. Something else was really important to us is that we wanted to attract high street operators. So if you -- I'll go through some of them later, but the high street operators really need a lot of help in terms of coming into a shopping center, usually with all of them by one, it was their first shopping center experience. And what we wanted to do is make sure that it was a pretty seamless transition for them.

So we have a food concierge, we have a demonstration kitchen, which I'll get Amy to speak about in a minute. We made sure that the pavilions had the right amount of seating. Some of them have it internally, some of them it's communal, but we wanted to make sure that our customer could sit down and eat. If you think about a lot of marketplaces, you just can't get a seat to be able to eat. So we want to make sure that the experience was seamless for the customers. And we had activation zones where, whether it be on a Thursday or Friday night or on a weekend, we could activate these zones and have different offers. Now it might be an offer from one of the existing retailers or it might be a new to the center offer that we could also house.

And if you have a look at the gray area on the right-hand side, that's all the storage area that we made sure they have convenient storage that were located right by their tenancy, so they could make sure that the back of house was away from the pavilions. So Amy, I might just get you, if it's okay, just to talk through some of our thinking behind particularly the food concierge and demonstration kitchen.

I think what's important, and you've already alluded to it, Matt, is that the experiences were considered and embedded from the outset of this journey, so it's not just a marketing campaign that we layered on top of the finished development. It was very considered as we went into it. We wanted to make sure that we could kind of deliver that art form of the market, chef demonstrations, master classes, tastings. And so the space was really flexible and it felt very vibrant. We currently have an annual calendar of programming activity. And as I said, it's not just about marketing. It's about how we kind of showcase the wonderful retail offer that we have there. So we have a series of seasonal events. You can see food concierge on the screen now. If I go down and I'm busy, I can say to food concierge, quick, grab my stuff store it, refrigerate it, I'll send you a text and I'll come back later. Also, as I tend to do, I never know what to cook or how to put it together. They can kind of organize a quick recipe for me, do the shopping for me and then I can come back later on. So it's really designed to have that art form of a market, but at the same time, be quite modern in how it shows up to the visitors to that precinct.

So I'll hand over to Jeheon in just a moment, but this is our thinking behind the planning of the precinct. And then we'll come back and talk about the execution, how we actually deliver the retail mix within the precinct.

Hello. So as part of the last major development, we delivered an office tower, what we call One Middle Road, a 20,000 square meter A-grade office building, which is tenanted by Kmart and Adairs. So Kmart occupy about 18,000 square meters of the 20,000 square meter building. And the chart that you see behind me is just the relationship between visitation from the office worker into our asset and visitation in the ordinary course of retail -- sorry, customers. And what you can see is that we talked about it earlier, the complementary benefit of having office workers in our precinct is about 6,500. And the fact that they continue to spend and utilize our asset in the early part of the week.

What I find interesting on this chart is that on a Friday, we have a pretty strong work-from-home culture here in Melbourne. And obviously, office attendancy drops dramatically on the Friday. But inversely, when you walk around, particularly the Market Pavilion on a Friday, this is just anecdotal, but you see a lot of men and women of productive working age in our asset. They are not working nor are they at home. But again, it just talks to that -- but it is ultimately a net benefit for our retail asset.

If we go to the next slide, please. If you take a step back, the success of One Middle Road, again, a fully occupied A-grade office building in a market where there's 20% vacancy, sits in this broader, very deliberate strategy that we embarked on 10 years ago around growing our office footprint on this asset. So we've got about, like I mentioned, about 51,000 square meters of office space spread across multiple buildings in addition to this hotel. And we spent a lot of time thinking about whether we got the strategy right, what we've learned and what the power of Chadstone truly is. If you go to the next slide, please. As I mentioned, the 6,500 office workers, I don't know if there's anything you want to touch on here in terms of the impact on the retail asset.

I'll speak loudly. Of the 11,000 workers I touched on earlier, 6,500 are actually office workers, and they contribute circa $79 million in annual expenditure across retail, dining and services. And whilst we know that's not the full -- sorry, I'll start again. We don't view that $79 million as full incremental spending, but we think that real value is that office precinct brings customers in on different days of week. So they're kind of few earlier in the week where it might be quieter in terms of customers or tourists. And so it supports a really balanced trading profile across the week.

If you don't mind going to the next slide, I want to touch on that point around the depth of thinking around why Chadstone has been successful beyond just retail. If you look at the collection of office tenants that we have in this precinct, and we've been very, very deliberate about the type of office tenants that we want to occupy the space here. There's probably two competitive advantages that we see. One is this concept of intrinsic amenity. So when you develop an office precinct, you often think hard about ground plane retail activation, but that retail activation typically doesn't have a critical mass, whereas we have this incredible amenity, this diversity of retail offerings that can serve our office workers.

And the second one is probably around this concept of purpose. What we're seeing now is a clustering of retail-centric organizations that want to be close to their most productive retail stores, and importantly, they want their people to be close to their core business. So when I reflect on our business, so we moved into Tower 1 just behind me about 10 years ago, and I reflect on the benefit of our people walking out of the lobby of this office and walking into Chadstone and that direct correlation between our purpose and our business strategy and what we do and what our people see and feel every day. And I reflect that if we had made the decision to move into an ivory tower on the Paris end of Collins Street, would we get the same outcomes in this asset? Would we get the same outcomes as our business if our people were disconnected from their core business? And in my personal view, I don't think we would have. And again, when you look at global benchmarks and you look at those despite all the structural dislocations in the office sector, you look at those office precincts that have endured and have sustained their value. It's those office precincts where there has been intrinsic amenity and there's been a purpose to people being in the precinct. Matt?

If you just had a look at that slide that Jeheon had, we had Amer Sports on there. So Amer Sports, really important retailer with us. They are the owner of Arc'teryx, who were just on a flagship store with them here. Wilson, which is their first Australian store came into Chadstone not too long ago and also Solomon, who had their first store in Chadstone in Australia. We've got a great relationship with them. And off the back of that, they're now doing a 3,000 square meter office with us that directly links into the shopping center, so that's how some of our retailers come to be tenants of ours.

In terms of the execution, I spoke about the research that we did on the Market Pavilions. This is really the delivery of it, and we curated the right team to be able to deliver that. And that was really important that we had a number of our leasing team who had retailer experiences because if you think about the tenants we're trying to bring into the Market Pavilions, it was first to shopping center retailers, and it was those who I'll talk about in a minute, but were on the streets in Melbourne or in marketplaces. So our traditional approach of just leasing tenancies would not work here. We needed to curate the right mix and make sure that they all bought into the precinct. So our first discussions were not about here's a space or here are the commercial terms. It was about us getting a really deep understanding for their businesses, so we could then relate it back to the marketplace and what we were doing here. And it was kind of the reverse of what we can traditionally do from a leasing point of view.

We had to reframe the perception of shopping centers. So I think the biggest challenge that we had was these retailers were so anti-shopping centers, like if you think about Brunetti's, Mörk Chocolate Shop, Gewürzhaus, et cetera, a lot of these guys were on streets traditionally, not in shopping centers, and they were -- they're artisan operators that, that's the last thing that they would want to do is go into a traditional shopping center. So what we had to do is get an understanding of their business, show them what we were doing that this is unlike anything that anyone's done and that if we can get enough critical mass within these artisan operators, we can deliver this precinct. So a big catch for us was getting Brunetti's. So those of you who are from Melbourne would know Brunetti's. They started in the 1950s, a guy that came out from Rome and bought a business called Brunetti's in East Q. And it started from there. They then went into Carlton, I think in late -- in the early 1990s. It's now been taken over by the two sons. They've got a flagship store in Flinders Lane, so they've got Flinders Lane, they've got Carlton. And then when we spoke to them about coming here, he was really resistant. Once he understood what we were trying to do, he was really on board, and he helped us lease this precinct.

So we got such a good name amongst the marketeers and amongst cafes and operators for marketplaces in Melbourne, but he really helped us lease the precinct. There's some great stories in this precinct about some of the retailers that were bought in. Mörk Chocolate Shop came in later in the piece or a recommendation through another retailer of ours who we've done a deal within the precinct. They're a really unique concept. I term it bean to bar. So they go and buy their beans from overseas, the cocoa beans. They come back. They've got this beautiful traditional cast iron press where they make the chocolate from, and they do it all from behind the cafe in Errol Street in North Melbourne. So again, really artisan operator, something really different. You go in there, they've got a chocolate called The Campfire. So it's a chocolate. It effectively blows smoke through the chocolate and then it's got a toasted marshmallow on the side. They're always doing tasting samples. So these were the types of operators that are traditionally great in markets that we can bring into the shopping center.

This is a slide that shows some of the retails. We'll go down and talk more about it. Flowers Vasette, a lady who's in Brunswick Street in Fitzroy. She started basically doing a small florist off the back of her parents' green grocer, and she's developed that concept into one of the most luxurious flower shops in Australia. She's well known. She does a lot of the flowers for all our luxury brands. So there's synergy within the shopping center. I won't go through all of these, but some -- probably another theme that came through was utilization of our existing tenants throughout this market precinct. So the lady who does the champagne and oyster bar is really well known to us. She started Sushi Sushi ironically in Melbourne. She's done -- she's what I would term a trader. She knows how to trade. She knows retail like the back of her hand. And she did this oyster bar, oyster and champagne bar, really hard to do in a shopping center. A lot of them you'll find in luxury precincts that just don't have the traffic volume. So we thought in a marketplace, this can work, and she's traded it extremely well.

But it's those relationships that we've had over a long time. There's another guy who -- David, who did -- he's got over 30 restaurants with us, and we got to do three of the dining restaurants with us in the Asian street dining precinct. He's a great operator. He does enormous sales, and he's very, very humble. He has activated three of these restaurants. They have queues on Thursday, Friday, Saturday, Sundays of 30 to 40 people. So these are the artisan operators that can give us a uniqueness, point of difference that really make this whole precinct hum and are really successful. A couple of other quick ones up there. Just Vic's Meats on the right-hand side. We did a deal with him. He's Victor Churchill. So he's a Sydney operator. We've done a deal with him in Chatswood Chase, which we'll touch on later. We then expanded him into the center. So a really good get for us. Okay, Jeheon, I might hand it over to you.

So look, just very quickly, this is a summary of what was delivered in our last major development. So we deployed a little over $500 million. We delivered the Market Pavilion. We delivered this 20,000 square meter office tower, the One Middle Road. We also delivered a logistics hub, which basically a piece of infrastructure that improves placemaking, customer experience and future-proofs the asset operationally. And we also added two additional levels of the car park to Car Park C while we maintain the operations of that car park.

If you go to the next slide, please. Look, this project was not without its challenges. We had a Tier 1 builder, and we probably learned some lessons around avoiding unnecessary complexities on retail development. Now as Peter mentioned, we had about 10% of the floor space that was taken offline. But there was probably some inherent complexities that caused some problems for the builder who is a Tier 1 builder. So we -- the office tower, the Market Pavilion was structurally integrated with the logistics hub below. So they were all structurally integrated but functionally autonomous. We put two levels of the car park -- the two additional levels on to Car Park C, we end up triggering earthquake compliance while we're trying to keep that car park operational. And suffice to say that John Holland, despite their credentials as a Tier 1 builder, they made some fundamental mistakes around construction sequencing, staging and delivery.

At one point in the project, we were faced with a crucial decision. And typically, when projects face these challenges, you do have two decisions to make, do you enforce the full weight of the contract? Or do you push the contract aside and try and come up with a reasonable and pragmatic commercial decision or outcome? We had a lot of debates internally, and we ultimately decided that the latter was the best course of action because our view in this market is that if a builder, even a Tier 1 builder gets into trouble, what we're seeing is an emerging pattern of builders either walking away or trying to protect their financial interest by either not paying subcontractors or slowing down the project. And our view is that even -- I mean, if you look at the contract that we have with John Holland, it was effectively a pre-COVID conventional fixed price D&C contract. But our emerging view is that these contracts are less enforceable than they used to be.

So we took a very pragmatic view. Again, as I touched on at the beginning of this session, we leveraged our internal networks, and we built up a shadow construction team. We took a view that our builder was in trouble, but ultimately, we were carrying the residual risk, so we think we took what was a rational decision, and we partnered with the builder to try and solve some of these fundamental construction issues with our own team. We brought in a construction director. We brought in Peter Miller, who's the former Chief Operating Officer of Westfield in the U.K. and Europe, who ran their construction business. We brought in in-house design managers, project managers, cost planners and other construction experts. And jointly with John Holland and to their credit, we navigated these issues and delivered the project successfully.

Now we were ultimately made financially whole, but we did have seven different commercial agreements that were constantly changed with John Holland. We gave them the opportunity to remedy the situation. We were very fair and reasonable about the commercial package that we offered them. And in each instance, they failed to achieve the revised objectives that we gave them. They suffered pretty significant losses on this project. But to their absolute credit, they didn't abandon us. They stayed the course, and they delivered an incredible product, and they delivered a product with minimal defects and something that we're all very, very happy and proud of. So throughout those trials and tribulations, it was an extraordinary outcome in the end. But again, we learned some valuable lessons, which we transferred into Chatswood and into the remainder of our portfolio, which I'll talk to in due course.

Thanks, Jeheon. It's probably one of the key points in building in live environments. And I mentioned previously that a lot of the work that's going to come forward into the future is building while keeping the shopping center up and operational in live environments. And that's -- we mentioned previously, that's where the skill of the industry and the outsourcing part of the industry has disappeared. And that's essentially why we're building shadow teams to make sure that we're controlling even when we're outsourcing this building work to ensuring mitigating risk. So on something like Chadstone, having that project, that section delayed for a further 6 to 12 months would have been materially more impactful than us partnering with the builder, providing a huge amount of expertise and our knowledge of the asset and moving forward. This is what we've applied. I probably put the challenge out there for the audience to have to think about that as you're looking at other construction sites in retail or nonretail when they're building in fixed environments and what measures they've got in place in terms of how they're successfully delivering it.

Thanks you, Peter. Whilst we only disrupted only 23,000 square meters or 10% of our space, it was highly disruptive from an asset point of view. If you think about we closed our #1 entry door, which is the one near Woolworths, which Matt showed you a little bit earlier, and we severely disrupted the Coles door or the other main door of Car Park C, I think we were basically building between Car Park C and the entry way of the center at a particular point in time, so created things like tunnels and those things. We also closed down Middle Road, which was another entrance way into another major car park of ours at the same time.

So that sort of that area of Middle Road was really significantly impacted in terms of our main traffic flow. Before that, and you may have seen before when Jeheon was talking about some of the construction that we've done previous to this, we added extra layers into what we call Car Park A, which is the one over, David Jones is just over here. And what we actively did was we promoted to our customers and retail partners around shifting the focus of where people come into the center. So making sure people came in over the standing on road side of the asset because we knew it was going to be so highly disrupted on the other side of the center.

And obviously, during the construction period, we managed all things from dust to noise to access to egress to traffic management and all of those things. And whilst it's absolutely expected that we reduced our numbers of people coming through by about 300,000 people per month, obviously, on the back of closing three majors, Coles, Woolies and Aldi at a particular point in time, the rest of the center remained largely whole. So what we would call the racetrack when you see it a little bit later on, the main part of the retail center, remained at 99% occupied. The traffic numbers whilst declined across the rest of the center remained really solid. Our sales remained really solid and continue to maintain #1 position across the Australian context. So we're really proud of where that landed. And really moving into the -- when we opened the center, we moved into being now -- moving post-development into 1.9 million people coming through the center, which rebounded post our predevelopment number.

The image that you see behind me, and I won't go into too much detail here, is just about -- and Matt touched on it, it's about our design philosophy to create an environment that is the antithesis of a typical shopping center. And you'll really see it when you -- for those who are going to see our Chatswood Chase asset tomorrow. So it's about -- on the left-hand side of the screen, you can see the previous '80s food court, pretty uninspiring, no natural light, soulless. And then on the right-hand side, when you walk into the Market Pavilion, Matt talked about the theater of the Market Pavilion. But if you look up, we've got the beautiful barrel-vault roof, they introduced natural light. And in terms of the environment that we've created, it's not -- it's atypical of the shopping center, so it's naturally ventilated. We don't rely on conditioned air. So that gives you, I guess, a deeper sense of the natural market environment.

Go to the next slide, please. Look, this again, is just a similar thematic. I won't dwell on this. Next slide, please. We put the asset management through hell on this project. And there was a period of 6 months, frankly, where the builder didn't have a plan in place to finish the execution of this project. And I think that speaks to the power of our integrated model that we had this team that was working side by side with the builder and ourselves to work out how to keep this asset operational. And when I go back to that point around the power of our people being here at the asset, if we didn't have the eyeballs and the weight of this business watching this asset, managing it through that quite disruptive change, I don't think we would have got the positive outcome that we had unless we were here.

Now this image just shows you, I guess, from an operational and a placemaking perspective, the transformation you'll see when you walk out into the asset this afternoon. On the top left-hand side is the before image. So we had on-grade loading areas. It caused a safety issue for our customers and for pedestrians. We built that logistics hub, which you won't even notice, but it's an underground super logistics infrastructure that really liberated the ground plane and improved the experience for our customers. And then on the right-hand side is the office tower, what we call the multi-category building, but there's also a port, so it's the first time that we've constructed a formal entrance into the asset. And then this is just some images that show you a very elevated, premium A-grade office building that we have delivered. Amy, do you want to just quickly talk about the launch strategy?

I might go first. So practical completion was kind of only one real milestone once we got handed over to the builder. What was interesting here is that we really started thinking about the operational handover from the development team to the management team a good 12-plus months earlier. We developed an operational tracker, which went through everything from what we're going to do from a marketing perspective, our security levels, our cleaning levels, how we're going to take hand over from a building operations perspective, you name it, we kind of had it on this tracker. And the good news about that is we've then used that thinking now across the Chatswood Chase and now into Galleria developments to make sure we get this really seamless handover from a development zone into now an operating center.

Matt talked about earlier, we also made sure that we are focused with our retailers, making sure that we took them through the design, tenancy delivery and then onboarding process. Many of these people hadn't been in shopping centers before, so they didn't even know how we kind of all operated, how the loading dock operated, how you -- waste management, all those things kind of operate at the same point in time. So it was really working really closely together, and Jeheon pointed out before, this combined asset team between leasing, development, management, marketing, et cetera, working closely together to transition us into the opening of the development.

Thanks, Michael. Launch and stabilization, and it's kind of easy to sit here now retrospectively and say we've done it. But at the time, that presented a unique opportunity for us. We didn't want our customers to behave in the same way that they had predevelopment. We were seeing residents from our primary trade area twice a month, which, as you would well know, we need to see them a bit more often than that. Also, because of the investment we've made and the changes, we were looking for a much higher delivery of repeat visitation from residents within our primary and secondary trade areas because this for us is largely a main trade area play.

A couple of the elements we considered for the launch was really how we're going to position this new precinct to Chadstone, has its own name, has its own brand. And we talked a lot around food, dining and social destination. Success really relied on, I call it, three elements coming together simultaneously: center readiness; retailer readiness; and a coordinated market introduction. Shoppers in shopping centers like to follow ant trail. And Chadstone is actually no different. So Michael has alluded to the fact that we closed our two busiest entrances, and then we wanted to welcome back to those two new entrances with a new car park, new wayfinding and a new precinct. So a lot of time and effort went into the surrounding how are we going to get those customers in and out and more frequently.

Also retail readiness. Retail engagement is so important to us. We have to make sure that operators are prepared to deliver a really consistent and high customer experience. Both Matt and Michael have talked to the fact a number of our key tenants weren't shopping centers. So there was a large education piece to get them there and work out how we're going to work together successfully. I can talk ad nauseam about the wonderful marketing campaign. But what I did want to say is really it's about the ongoing programming events and customer experience that have helped us embed the Market Pavilion into customers' regular visitation patterns. We don't believe that successful development delivery is just about creating a great physical space. We think we need to successfully introduce that space into the market so people understand how we want them to use the space. Michael has alluded to the fact that there's been some really valuable learnings from us from the Market Pavilion, largely delivering a development whilst we own only 10% into an operating environment, but we've taken those learnings certainly into Chatswood Chase, where we did a stage delivery, and again into Galleria, which we look forward to bringing you on November 5.

All right. Look, I'm going to transition from my role of clicker to -- no, it's all right, I can do that. I know we're horribly over time, so I'll try to be quick and efficient. I think everything that the team has talked about is incredibly important for us to deliver the asset that you'll see today. But ultimately, it has to come back to returns as well and how do we ensure that we've got the level of return on investment, and I'll just talk on a couple of slides.

Firstly, there's been a lot of talk about stabilization. And the way we think about stabilization is probably in two areas, one is how do the retail sales ultimately stabilize? And then highly correlated to that is how then do the returns then stabilize over the course of the development post-opening? So I might just touch on this slide, which is really sales related. So what you can see here is the bottom chart shows the sales progression over the first 3 months of opening, the market in April '25. And you can see we do go into these projects, particularly where they are large and complex projects with a bit of a ramp-up profile on retail sales. It is a first-to-market offer. It does mean that retailers have to find this new offer. They have to -- it has to resonate with them. And we do put a lot of marketing activity into kind of making this center feel familiar and make it feel like the center that we want to create.

But it does take time. And so we do typically say in the first year, we're kind of 90% of retail sales that we expect. In the second year, we're at 95%. And in the third year, we fully stabilized at 100%. For the first 3 months of Market Pavilion, it was an extremely successful opening, and we were well above that 90% threshold. And for year 1, which is basically FY '26, we got to 93% of our target in terms of total sales for that precinct. This year, we're close to -- we're kind of 85%, but we're kind of aiming closer to 100% for this year, FY '27. So we are expecting that stabilization path for this Market Pavilion product, given how well it's resonated with the market to really get close to that 100% by the end of this year.

If I go to the next slide, which is really the stabilization as it relates to income. Now you can see there is some correlation here between sales and income, but there are also some unique factors that have influenced this project. And the first major one is in year 1 and FY '26 was the part opening of the Kmart or part commencement, if you like, of the Kmart office lease. which is, in dollar terms, about $3 million of rent that was for 6 months that didn't come in for FY '26. And so that plus a few late-stage openings on some restaurants impacted that year 1 yield of about 3%. That's obviously risen pretty significantly to 5% and then 5.6% that we're forecasting in FY '28 once it's fully stabilized.

When you think about kind of what's in that stabilization, as I've talked about, sometimes it's part year openings of some tenants, whether that be office in this case, but sometimes on the retail side. As I said, some of the restaurants, the hotpot, Yum Cha and a few other Asian restaurants did open a bit later, and that contributed to some of that ramp-up profile. But it also is some marketing activation that Amy and the team do put in place to ensure that it does resonate with the market. When you look at overall returns and if you look at the table on the right, you can see our original underwrite assumptions was around 6% yield on cost and about a -- and what we realized was 5.6%. Now the key differential there wasn't really on the retail side and the income side was actually totally fine. The biggest issue there for us was really the office market. The incentive levels for the office for One Middle Road was higher than expected. We probably expected somewhere in the mid-35% level for incentives. We ended up closer to kind of early 40s in terms of incentives. And that did have an impact on total return and that yield as well, more from a cost perspective as opposed to income perspective.

Ultimately, we think we have an amazing tenant with Kmart and Adairs in that office building, and we signed a 12-year lease with fixed step increases, with a great credit on that lease as well. But it did come with additional costs, which did impact that yield. From a project IRR perspective, there's probably two things. One is, yes, a little bit more incentive, but that in and of itself wouldn't have impacted the IRR that significantly. We'd still be expecting about a 10.9% IRR. The impact there was more on cap rate. So during the construction period, cap rates for office like it did in the broader market increased by 100 basis points. And for the retail itself, that increased by 37 basis points. And so what we've tried to do here is almost show what the project IRR was with and without the cap rate impact. So basically, 11% without any cap rate impact, but ultimately, 9.4% once you build in that cap rate expansion.

Adrian, sorry, just to jump in here. But on that Kmart outcome in terms of the impact on stabilization, when you reflect on those numbers around incentives, the underwrite was based on a pre-COVID incentive assumption of 35%. The ultimate outcome we got with Kmart arguably is significantly below market compared to what they were being offered by other landlords in the Docklands and in the CBD. And I think, again, that speaks to just how much they want to be in this precinct.

Yes. Thanks, Jeheon. That's a great point. And then finally, I think this is the last slide before lunch. One of the things that we do reflect on and we've talked about a lot here is just the scale and the value of Chadstone. And what we tried to do here is paint a picture of what the Chadstone valuation was predevelopment and what it was post. And if I just work from left to right, you've got a starting valuation in June of $6.3 billion. The underlying income growth of the asset over that 4-year period is about $1 billion, and that's basically 4% NPI growth capped up at 3.875% cap rate during that period. We then have the Market Pavilion spend or Market Pavilion and One Middle Road spend of circa $540 million and a notional development profit of $85 million on a cap rate constant basis. And so we'd like to think that by the end of it, we would have got closer to somewhere in the -- close to $8 billion valuation. When you build in that 38 basis point cap rate expansion through that period, we get to what the current valuation is, which is just around $7.3 billion.

So another way to look at this is once you look at your organic growth, it does still offset -- and the development profit, it does still offset any impact from cap rate expansion, but cap rate expansion did certainly have an impact during that period. And it goes to, I think, our point that we do invest in these projects for the long term. There are going to be periods where cap rates do move during the cycle. We can't mitigate that all the time. But what we can do is have a long-term view on these assets. And ultimately, we believe that what we've done at One Middle Road and what we've done at the Market Pavilion will be enduring value-accretive projects for Chadstone for the years to come. And I think we'll go out and see some more of what's happening at Chadstone at the moment with Mecca, with LVMH, with Dior, with Mecca -- I've touched on Mecca. But there is so much activity that's happening at the moment, and we feel confident that this valuation will continue to grow as well as that income growth contributing to that valuation as well.

So with that, I think we'll move to the Q&A. We'll still do Q&A. So yes, I'll throw it out there, those who have questions, please raise.

David Pobucky from Macquarie. Could I please just go back to DFO Eastern Creek and DFO Homebush? So they're 20 minutes away from one another. How do you think about the competition between the two? Or are there ways that can complement one another through things like tenant mix?

You've been hanging on that question for 1.5 hours. Feel free, David, just throw up your hand during the middle of it. Look, ultimately, when DFO Eastern Creek -- what we would now call DFO Eastern Creek came on, there will be some sort of impact in terms of Homebush. And we've seen probably around about that 5% traffic downturn. Sales are still okay, but 5% traffic downturn going into that asset. That's 20 minutes by car so obviously a lot longer than that. How we're positioned the assets moving forward and part of the reason why we also wanted outside of the market share and preventing a competitor coming in, we think we've got an operating platform is our view is that Homebush will really be positioned to the city, the East, the South, Southeast. So lower, upper North Shore all the way down to the Shire, the CBD coming out to Homebush, easily accessible. It has a higher product in terms of pitch to the market, includes a luxury precinct. It has the only Nike that does incredible sales there for an outlet center, and Nike is hugely a traffic drawer for an outlet center. And DFO Eastern Creek is really the proposition that we will pitch to the market purposely into the Southwest, the West and predominantly the Northwest of Sydney. So having control of both allows us to appropriately target the right market areas and minimize any sort of cannibalization effects associated with it, David.

And just the second one on Chadstone. Obviously, it's operating at a higher base already. So on a go-forward basis, what are kind of one or some of the biggest opportunities for the asset? And you also kind of mentioned the impact that the rezoning may have had. What has that kind of impact been on your prior or the prior plans for the asset?

All right. So the opportunities moving forward is obviously, what we're doing at the moment, which is really a significant program over the next couple of years of luxury rightsizing for the market. That is -- for us, they're going to be limited in terms of where they're going to expand. It prevents them expanding from anywhere else. Chadstone's as important, if not more important than Collins Street in Melbourne in terms of their positioning. It's highly accretive development in terms of our partnering with them for them and for us. And our focus has been on that.

In terms of future opportunities, I would anticipate in the late short term, middle term, you will see things such as One Middle Road Towers replicate in the next One Middle Road tower, next office tower or potentially residential outside of the Ring Road. For this audience, we own approximately 70 properties in Chadstone outside the Ring Road. So between Dandenong Road, Warrigal Road, and it's really, again, about control, ensuring what occurs around Chadstone is complementary in terms of the development and future customer base will all be residential supporting into Chadstone, and it's about logistics, ensuring that we can create the right road accesses into Chadstone into the future, which forms part of the master plan brief.

In terms of your question around rezoning, at the moment, David, we have a very good relationship with the Department of Planning. We have a less good relationship with the Victorian Treasury. And so it's a timing process. When you rezone land, you potentially go immediately put yourself into an increased taxation issue. So ultimately, what we're -- under the Principal Activity Center, what we'll get is significantly increased height and FSR on this site. But once you actually enact that, then your unimproved land value increases and gives the opportunity for a revenue taxation increase.

So the timing of that is extremely important for us. What we're trying to get in place, and Jan mentioned this, is there's a global master plan. We're about to shortlist 3 to go into a final competition process. There will be a period over the next 12 months where we enact what the future master planning of this will be. That will then go into a renegotiation with an existing or new state government.

And then that will then -- there's the intent of this master planning process is to also ensure that it leads to a prioritization of future projects so that we can immediately capitalize in the effort that we put into a master plan. So there's probably a very long answer, but there's a timing scenario to ensure that when we get the approvals, we know exactly what they're for. We know what the next 20 years looks like, and we're not overpaying tax early.

Craig Williams here from HESTA. Sort of last 7 or 8 years, you've sold off a bunch of noncore assets, 16 or so, I think, by count. And that's sort of helped fund deals like Joondalup and the resetting of the portfolio. You talked about premiumization sort of narrowing the opportunity set though.

As we sort of think about the rate and source of growth over, let's say, the next 7 to 10 years, can you sort of give us a feel for the balance between assets like Joondalup that you sort of got running a file on that sort of add to things? Does the mix of opportunity sort of shift more de novo like Harbour Town instead sort of non-retail expansion and adjacencies like resi and office and hotels and then sort of development or expansion of retail space within the existing portfolio.

All right. Lunch is delayed by 30 minutes now. We're a retail company at heart. All right. So first and foremost, no matter what we do on a non-retail sense, -- it's going to complement retail. Whatever we do in the middle term will still be a small fraction of the value of our company related to retail.

The growth of our -- and when we look at assets like commercial or dare I say, BTR residential, we still see the growth in retail in terms of revenue growth at this particular point in the market, exceeding the revenue growth of those particular asset classes on a net effective basis based on the capital coming in.

So moving forward, we generally are targeting around that 4% comp NPI growth subject to all things being normal in the market as in conditions outside of our control. And then over the next few years, as we've identified to the market, that has some alpha associated to it as we've unwound the taking income offline for assets like Chadstone, Chatswood, Galleria and there will be an extra kit for Uptown as well.

So our focus will still be on retail development after Uptown, we don't have another significant major retail development plans, but it doesn't mean we're not investing in small, medium, and I'm sure there will be some larger opportunities that come to us, such as potentially DFO Eastern Creek, which already has an 8,500 square meter approval for an expansion.

Our next focus is really on capturing the tailwinds of the opportunity for residential housing on our portfolio. Now clearly, BTR is -- has some challenges. We are in discussions on 2 assets, in particular, which have rezoning approvals already in place. One of them has a DA approval already in place for BTR opportunities. But our major focus at the moment is Chatswood Chase, which we'll talk about later this afternoon.

What we found -- and we're trying to exhibit development capability here. But what we found is working on multiple fronts at any particular point in time in this market is super challenging. And we -- I'm proud that the team absolutely know what they're doing. And so we've been tackling our development activities sequentially, not concurrently. One, because they're typically higher risk. We need to have -- they involve, as they mentioned previously, the state of competency in the market at the moment, we're essentially executive matching the external development execution capability with our internal team.

So there's a lot more resources associated with it. And we want to make sure that we're not disappointing ourselves or our investors or the market when we're delivering these returns. So it's a slower burn. I don't think you'll see us putting a shovel in the ground on a residential development for at least 2 years.

Our focus is on getting the planning approvals in place from our point of view, in my experience, the rezoning and the planning approvals where you create the value, executing it at the wrong time with the wrong strategy is where you start diluting that value. So at the moment, we're getting the entitlements in place.

Okay. We're right on 1:00. We're only half an hour late anyway. How about -- how long -- can we have lunch outside? And if we could maybe readjourn at 1:30, we'll then kick into Chatswood. Don't be David, if there's any questions all the way through this day, please put up your hand even if it backtracks us back to the early session this morning. And then Chatswood, we're going to run through the retail development first from start to finish, and then we'll move into the residential in a lot more detail. And then we'll go for the site tour at Chadstone after that. Thank you.

[Break]

All right. Post lunch, welcome back. Just firstly, you may notice on your seats, there's a little gift bag. Please take that home. Part of the rationale of the little gift bag is Adrian and I just finished results, and some investors turned up with GPT merch into the results session. So we both thought you needed to be upgraded with some additional gifts. So please feel free to turn up to GPT's meeting with VCX next time.

All right. Moving on to Chatswood. So just highlights of Chatswood. Actually, I'm going to start on a different slide, and I'll come back to it. So essentially, the Gandel Group, Colonial First State, Novion and now Vicinity has had a long history. Chatswood has been a long hold for the company through its various incarnations. The last development that occurred there was 2009. And I would say, and Gill will go into this in a little more detail, it wasn't the ideal outcome from a development phase, even though it traded particularly well.

Typically, in these larger assets, the time frame is every 15 years. You have to have some sort of reasonably material intervention to ensure the asset maintains its relevance to the marketplace. In terms of Chatswood itself, in 2013, we bought some additional land adjacent to Chatswood. One just happens -- that we will see tomorrow happens to be the infamous gardener Don Burke's office and which ended up being the -- essentially the site office for the development.

We then essentially moving from 2013, we then did an asset swap with GIC, which was a discussion this morning. So we essentially sold half of Chatswood, and that opened up the opportunity for us in an asset swap to take a 50% interest plus the management rights of Queen Victoria Building, The Strand and The Galeries in Sydney CBD, which has been a really good asset transaction for us and great assets that we can manage and leverage across the rest of the portfolio.

And then in -- just before COVID, we had a much larger scheme at Chatswood. It was essentially an in excess of $1 billion scheme for Chatswood actually design and construction contract executed with Multiplex. And that contract, like all of our contracts that we put into place in governance now has what we call a parachute provision. So parachute -- so basically, the easiest way I describe this, and I apologize in advance, you're typically pregnant on these developments a lot earlier than when you actually get your approvals.

And so the parachute provision takes into account commitment from your contractor that they're committed to you through all the preconstruction stages. But in the event you have a force majeure issue like a COVID, you can exit with a smallish payment. During that period of time, as we mentioned this morning, we then rightsized the project for the particular time. We weren't quite sure what was going to occur post COVID.

And we also took an internal view that building incremental GLA rather than improving the existing asset and generating tension, generating productivity and generating leasing spreads on renewals for greater IRRs over the period of time was the better outcome. And it also referenced our discussions at that point in time with the very select target market that we were looking towards.

As such, GIC exited with purchased amount as we discussed this morning, but it freed up these 2 particular blocks of land, which Trevor will talk about later in this presentation for alternate opportunities that we were going to be incorporated into a larger scheme, and those alternate opportunities is residential.

So in terms of Chatswood itself, our investments through the development itself and the acquisition of the other 50% circa $930 million. From our point of view, we're anticipating, in my view, because I'm always the optimist, it's a minimum $1.5 billion stabilized valuation, not including the residential, which generates around about a minimum $250 million development gain in terms of that asset. Now who knows what we can predict in the future in terms of economic conditions and so forth. But all things being equal, that's where we're targeting in on.

We're using a 5% cap rate. Now that's the cap rate we assumed from a couple of years ago. It's been carried through our valuations. Today, I think that cap rate is appropriate. And I would have many reference assets on the stabilization that would be lower than that cap rate today, but we've just held that through the entire predevelopment period.

We're 99.7% occupied at the moment or occupancy. We still have about half a dozen stores that are still to open. And essentially, it's 1 kiosk and 1 shop to lease, 67,000 square meters and since opening, which is the important components, 15% traffic increase. And particularly as the luxury has started to open, which the guys will go through in more detail, it's basically a 26% comp store growth in terms of when -- sorry, 39% comp store growth since the last 6 months since the luxury precinct has increased -- has opened. In my view, 67,000 square meters is my new perfect size for a shopping center. The Chadstones are very unique in the market.

But ultimately, you don't really, in my view, want to be stuck with double department stores, triple DDSs, triple supermarkets and 350 stores unless you're Chadstone because retail is changing, you always will then have to do -- Matt and his team and Ross will have to do business with retailers that -- to fill space, rather than focusing on the key retailers that will make a difference that will ensure that our assets are fully occupied and that we can really drive productivity with leasing tension, particularly in our premium assets to drive that leasing spread on renewal. So Chatswood is around that 60,000 to 70,000 square meters for us is a good-sized shopping center with a single department store, single DDS, single supermarket that allows competitive tension even on the majors renewals.

I won't go into this in a huge amount of detail. Part of the benefit in terms of Chatswood is -- and we mentioned this for Chadstone as well, but it was really the connectivity. And Chatswood for us was supercharged with the metro connection from -- not only from the CBD out into Chatswood, but primarily in the Northwest. So you take an area like the Castle Hills area, very affluent people who have grown up there but choose to continue to live out there, families, great schools, all those type of things that create really good living out there is now a very short rapid driverless tram stop [ are too away ] from Chatswood. So it's really opened up those areas. And for those that are from Sydney, the harbor -- the Sydney Harbor is beautiful, but it's also a natural barrier. So we also took a lot of views that the lower and upper North Shore will shop the lower and upper North Shore and stay there 7 days a week in the event that they have the right offer that we shop to. We did a lot of research with the luxury partners. We did 2 pop-ups during COVID with LVMH to really test collectively in a dated asset during COVID, what the customer attraction would be outside of all the quantitative research that we did. That qualitative research became our confidence. And with Ross, LV then became one of the sales agents of us as they were one of the referral agents with Ross and myself and others to ensure that their brand brothers and sisters came along the journey with us, and Ross will go through that in a little more detail.

The catchment in terms of Chatswood is second to none. Many would think that the Eastern suburbs is the highest demographic from an income perspective, catchment in Australia is actually Chatswood by some margin around that lower and upper North Shore area. And this was the -- essentially the demographics that we went to market to convince the global luxury retailers first. Purposely ensured that we selected and secured them before we went to market with any other pre-leasing or leasing into Chadstone so that we could drive that market proposition and price intention, which Ross will go through in more detail.

We mentioned this for Chadstone. So in terms of here, we wanted to create something very unique in Australia, something that's not really seen out of CBDs. And arguably, Westfield Sydney is really the only asset that would be comparison when you have a beautiful heritage,, David Jones building that's different ownership, but then connects into sort of the luxury precinct with reasonably good food on the higher levels there that then connects underground into a Myer. That's essentially what I would see to be a luxury proposition within Australia. It was done 20 -- it was conceived more than 20 years ago and executed 15 years ago. And really, there's been nothing like that in Australia since the -- because we had also the residential ambition for Chatswood, I'll just refer to -- so just for context, I've lived in Brazil for a period of time, and it's a huge shopping Mecca. And it also has massive security issues. So people live, work and play basically in the same issue and traffic is a nightmare and security is a bit of a nightmare. So you create these precincts. So the one on the bottom right is an asset called Cidade Jardim, which is in Sao Paulo, Brazil. And it's essentially a dozen luxury condominium towers over the top of a luxury premium brand and luxury brand shopping precinct, everything digitally connected. So essentially, you can order product from your luxury apartment and get it delivered straight up. You can order a seat from your luxury apartment in the restaurant, come down and have dinner and then straight back up or they can make dinner for you and just shoot it up the elevator straight to you. So there's some really, really interesting stuff around the world. Cidade Jardim is on the right. At the top is Landmark, which is in Hong Kong, which doesn't have the residential component. I think it's quite a ugly building. But ultimately, the retail themselves are spending a huge amount of money there. In the middle is [ Zotakar ] or K Iguatemi, same. Sao Paulo, similar. It's a fairly new asset. It's less than 10 years old, luxury proposition, great on food. For those, again, don't know Brazil, you go to church in the morning, you then go to soccer and then the entire family gets together in major restaurants or in shopping centers, and they have 6 hours there and spend a fortune. So these are experiential destination dwell times there.

On the left-hand side, the bottom left corner is Bal Harbour. And again, coming out of America for the last 10 years, Bal Harbour is really my reference point for how we originally conceived the development brief for Chatswood, beautiful area, huge income, high density, smaller asset, 2 luxury department stores and luxury retail throughout and the top ones in the recent development in Bangkok. To do something like Chatswood, I'm just going to spend a bit of time of this [ of the ] people that are not up on stage. and Jeheon mentioned this in his initial commentary around Chadstone is we're trying to do something that hadn't been done in Australia for at least 20 years. And if I took Westfield Sydney as an example, obviously, it's an [ ex Westfield ] person. The person who did the leasing of Westfield Sydney is a guy called David Raddick. He worked with me in Brazil and U.K. and now in America. And so he was the Head of Leasing. The guy who did the development, there was a senior and junior leader of development, One's retired, one now works for us. And so that type of skill is something very unique in premium retail development, to Jeheon's point, has been exported or retired. What you say? A bunch of old guys like ourselves, right? So in here, I'm just -- you know myself and Jeheon. And so for here, it was important for us to bring global expertise that has actually delivered products overseas, either from a development or from a leasing capability. So next to Matt Parker here is a gentleman by the name of Peter Miller. Peter has worked with us since I've come back. Peter is the ex-head of Westfield Europe, and Peter is the person who delivered Westfield London, Westfield Stratford and has obviously amongst many other projects and has very much a DD&C capability. So he works across all the teams within our organization to ensure that we're striving to global best practice.

Next to him is a gentleman by the name of John Marshall. John worked with me in the States for 10 years. John was the lead developer of Century City. and also took over World Trade Center. Again, it's got that experience in terms of highly complicated developments with complicated authorities, Port Authority being the utmost complicated authority, New York State government and able to bring something that's delivered -- that's contemporary to what we're trying to aspire to Century City into Chatswood. The guy on the bottom left is a gentleman by the name of Ben Mah-Chut, another Westfield global veteran, [ Lenleash, GPT ], significant experience in China. Ben delivers to us a couple of things. He delivers design management and design coordination and fire life safety and really detailed compliance management. Compliance in this country has gone to a second level. Ben provides us looking between the architect and the builder performance solutions to ensure that we're compliant, but at minimal time and at the most effective cost and has a very commercial outcome. We discussed Ross, obviously, previously in terms of his role around luxury and the global networks that he needs to establish to ensure that we're successful in this front. Jayne Richardson brings really significant construction delivery expertise that Jeheon was mentioning previously. Laura MacRae, Jeheon mentioned, we signed a [ D&C ] agreement with the contractor. It's never the last agreement. To the point, we're always negotiating through the job to pragmatically get to the end result. And between Jeheon and Laura and the teams, that's how we accomplish that.

And the last person up here is Simon Nicholas, again, a 20-year-plus Westfield. Simon [indiscernible], Simon, I worked with 25 years ago. He delivers all of our shop design and delivery. So when you walk through something we're about to go at Chadstone Place, so Simon is in charge of 6,000 shops we have in our portfolio. And particularly in the development, he worked in Australia with me, then he worked in delivered Stratford in London, then we took him to the U.S. to do World Trade Center and then he did Century City, UTC, which is in San Diego and Westfield Valley Fair, which is in Silicon Valley. These are the major global projects that Westfield did. So there is a lot of Lendlease and Westfield global retail expertise that are essentially working in our company, and we needed to pull that together in late -- very early 2020 to ensure that we can deliver not only Chadstone but Chatswood, and then we're picking up this expertise, and they've been working on Galleria and now they're working on Uptown.

Thanks, Peter. From a vision point of view, Chatswood was fairly simple, and it was simple because of what Peter has just discussed about the trade area and the demographics and the leakage of the luxury through to the CBD in Sydney. This is a luxury-led development, which is quite unusual in Australia, but it was luxury-led, and I'll get Ross to speak to that rather than stealing too much of his thunder. We had a very clearly defined leasing strategy. And the definition of it was, yes, it was luxury-led, but every other level, including the food needed to complement the luxury. The lower ground level, which we did first, we did that for a reason, and that was part of our strategy. We wanted to execute that so we didn't lose a regular customer. So if you think about who's going to purchase food in shopping centers, it's those office workers and customers who are doing it on a regular basis. We didn't want the lower level shut down while we were constructing the main part of the development. So we kept the lower ground level food under a very tricky construction program open throughout the main development. We didn't build a lot of extra space at Chatswood Chase. So we built just under 4,000 square meters of extra space. So what that meant is that we needed to get the most productive retailers that we could possibly get to ensure that we hit all our metrics. So it was really important in the selection of all the tenants, whether they be luxury, premium international brands or domestic that they were really productive retailers. And then if you look at our total food strategy throughout the center, we just wanted to make sure that, yes, we had the lower level as our food and convenience precinct, but we have to have really good food offers that were complementary with each level of the center. So whether it be our premium international brands, our luxury or our domestic, we need to get the right food retailers. We had a guy who was specifically [ leasing ] just the food on the 3 levels of the main project, and he did a hyper work going around Sydney, making sure that we got the right offers in terms of a food point of view. So it was a simple strategy, not easy to execute. It hadn't really been done in the shopping center before. It's a boutique environment, and it's highly competitive. And I'll let Ross talk about the execution. But Jeheon, did you want to add anything to the plan?

That's [indiscernible]. I think you've covered everything.

Everybody. I hope you're finding today valuable. I'm sure you are. My -- there'll be 2 very common themes that you're going to hear across a lot of what I'll mention in my few slides ahead, and a lot of those relate to relationships and strategic alignment. There are probably 2 themes that have carried all the way through with these global brands and groups at all levels of their organization, both locally all the way through to internationally. And I think what that's done over a very long period of time is it's built a level of trust and partnership that has meant that we can get right under the hood in terms of really understanding where they need to be in the local market and how we can obviously find a solution to help them with that, that makes sense for them and for us. Those relationships are not always easy. They are obviously highly complex. So as much as we do have very strong relationships, they do come with very challenging discussions and very challenging meetings from time to time and particularly when you're looking to deliver a very large-scale project in many cases for some of these brands in what was a brand-new market. Ultimately, for us, that track record that we've very successfully built all the way through from our recent successes, but even those before us with Chadstone, providing a very strong platform over at least the last 15 to 20 years of delivering something in terms of the Australian landscape to be the best-in-class shopping center luxury destination set us in really good stead. And off the back of that, we were able to deliver on Queens Plaza in Brisbane, which at the moment is seen as a third city, but certainly catching up in terms of its importance from the point of view of how these groups and brands invest in the Australian market. And essentially, what that meant was that when it came time to really talk about Chatswood in great detail, we weren't just pitching or selling a product to these groups and brands, but we were essentially collaborating with them to understand what their strategic drivers were and what their strategic plans are for not only Australia, but in particularly Sydney being a key market for all of these brands. And as touched on by Peter before, one of the missing pieces for a lot of these groups was to have that true second door in Sydney. The Sydney CBD has always been very powerful. It's only become even more powerful over the course of the last 5 to 6 years. But that true second door, which is very similar to what Chadstone provides here in Melbourne outside of that CBD setting was something that wasn't quite there, and we were able to thankfully find that solution for them and partner in that regard.

The relationships that we form further extend beyond, obviously, what I do and we do in our leasing team and our day-to-day operations. It's part of an overall integrated offer where we do have that capability stretched across tenancy design and delivery, which work very closely with these brands and groups once the delivery of the deal is executed and we take it into execution mode to bring these things to life. We have that running through our legal capability, finance, development, et cetera. So it's something that these brands and groups value heavily in terms of being able to operate with us in a very efficient manner and have a sort of account-based model that essentially means they've got a single point of contact to resolve all of their challenges and issues that we can then [ farm off ] to find the right answers for them. And then -- and then I think -- all in all, sorry, I just lost there. All in all, then we sort of bleed into the more specific nature of what Chatswood Chase became when we took it to market. And I think before we look at what has been delivered on the floor today, which hopefully many of you will see tomorrow if you haven't already, there was quite a bit of history with that because we had a global pandemic that sat right in the middle of it all. So there was a lot of prework that was delivered prior to what we started to build and have now delivered. Essentially, negotiations and agreement had been reached with a vast majority of those brands that were setting us off in a particular direction. But at that point, we worked very closely as a group, obviously, led by Peter to start to really refine the overall size and scale of the project and really optimize the overall outcome of how large the mall needs to be, but also how we optimize the individual sizes of each of those retailer brands and through that, we were able to make some really significant adjustments to the overall layout of the scheme that has unlocked further opportunity, which we'll talk to a bit later on in terms of the residential component.

The key part, and I might turn to the next slide, Peter, if that's possible. This is a slide that probably looks a little bit innocuous now in terms of how it's laid out. But through the forming up of this presentation, there was many versions of this, which looked a whole lot more complicated. And I guess, in part, that's because it is. Peter has asked us to put together what the sort of web of all of these activities and interactions look like with these groups because they are quite complex and I think in the process of doing so, he's helped me sort of form a bit of PTSD and having to relive the whole experience. But I think what we've got now is a bit more digestible for you all. But ultimately, what it's trying to show is that through the entire category, there's a sort of hierarchy of how it works. There's a hierarchy both in terms of the groups themselves. And then from within the groups, there's a hierarchy of brands that sit within those groups. And then from there, even amongst the whole industry and competing groups, they all share in swap notes and actually work together in terms of trying to jockey the best position for themselves, but also understand sort of where they will sit in the pecking order to land a logical result to where it ultimately needs to land. And through each of those, and if I was to look at the first one, which -- but from a Chatswood rather perspective, LVMH Group was essentially the key partner that helped us bring this to market and more importantly, add the level of credibility that we needed on the scheme to be able to take the rest of the project to market. When you look at that, that's a small selection of the global scale of brands. I mean, as a total group, they've got somewhere in the range of 70-plus brands across multiple categories. In terms of what we were operating in for what we needed to deliver, there was probably about 20-odd brands that sit mainly in the watch and jewelry and hard luxury space along with fashion and leather goods and accessories, which is what they are obviously superior at. So when you consider that there is essentially at any one point in time with that one group, possibly 20 negotiations happening at the one time, we then have within each of those brands themselves of that one group, multiple layers of negotiation checkpoints and approvals. So you have a local level where you're dealing literally locally at an Australian market level and Australia and New Zealand, generally speaking. That then moves into a regional structure, which takes you through Asia. And then ultimately, you end up at the global level, which, in this case, required final approvals and many adjustments along the way. Through that process, there's also a real estate coordinator, if you like, for one of a better term that essentially sits across all of the brands that essentially plays a coordinating role where the complexity gets to a point that you're trying to reach agreements with each of them, all of them wanting essentially the same thing and not being able to have the same thing and then helping to sort of land the plane in terms of where they all ultimately need to sit on a plan and commercially in terms of making those agreements work. And that's all sitting within the one group. Sitting outside of all of that, you've got the lead brand. In this case, it was obviously LV that was the catalyst brand, if you like, as we call it, that essentially once resolved and was more broadly known in the market amongst this particular industry, gave the whole project essentially the credibility that we needed to be able to take the rest of the project to market. If you then replicate that across all of the other major luxury groups, and there's probably 2 other major groups that we dealt with at a multi-brand scale. You have the Kering Group and then the Richemont group that are there. That's replicated once again in terms of the overall structuring and layering of the way you need to approach and deal with all of these groups and brands. And then outside of that, you have the ones to the right there that are the individual groups or individually owned brands. I mean the larger of all of those that everyone would be aware of clearly would be the likes of Chanel and Hermès. And then to the side of that, you have all of the other sort of more secondary independently owned brands like your Monclers and your Burberry, et cetera, which can again amount up to another 15 or 20 brands that we were dealing with. So all in all, trying to simplify something that's quite a complicated process. It's sort of trying to highlight that there's multiple discussions all happening at the same time, not only with the one brand, but within the same groups, all trying to achieve the same thing, but at the same time, also trying to understand exactly where each of those agreements are placed, how they can possibly get a better position on the floor and who's actually secured and who's not. A highly complex component of all of these agreements is also what we call a cotenancy requirement. The whole ecosystem of how these precincts works is integral in their success. And a lot of the brands that are wanting to take part in these and wanting to be involved in all the conversations and are talking amongst themselves even outside of their own group, essentially rely on commitments and obligations from us -- for us to meet the brands that they expect and need to see on the floor, so the whole operating environment works are committed as well. So those are very sort of sensitive discussions throughout all of the agreements, but also ongoing throughout the project that we need to sort of manage very carefully because they do also change as we change our brand mix and ultimate end execution.

Certainly, I understand that. Really -- so luxury is the only retailers across our portfolio that we give co-tenancy provisions to. So cotenancy quite simply means even if they have a signed lease, they have an opt-out provision unless other luxury retailers also have a signed lease and are committed to the project. So this -- that prior page all ended up being -- and particularly the luxury retailers are set up to compete against each other internally within the same business. And so that's why there's multiple approvals at Australian office, regional office, global office and then they can be the biggest proponents for you to bring other luxury retailers along, but they'll also get together to kill projects. So they determine which luxury projects will proceed. The fact that we want to build a luxury precinct is aspirational. It's the right approach. But unless they supported us, they would kill the project.

And probably a key extension to that is as well, it's a very incestuous industry like most of them are. And almost 9 out of 10 operators that you're dealing with have ultimately worked at some point in their career with all the other groups. So the relationships that are formed and the networks that they have to be able to quickly pick up the phone and ask questions and figure out where things are at is quite easy. So you're constantly dealing with a game of chess in the background while you're trying to sort of safely land the outcome, which makes it fun.

In terms of the outcome overall, I think -- I mean, obviously, there, we've showcased a series of brand logos that will be familiar to everybody in the room. When you look at this in terms of an overall result, particularly in the context of delivering it in one development phase, it's quite an achievement that we're all very proud of. On a global scale, this puts us right up there in terms of some of the best malls in the world. So when you look at the overall brand mix that offers this scale of brand mix under the one roof from a Chatswood Chase point of view, we're sitting at about 18th globally on overall size in terms of GLA. And in terms of number of brands of this magnitude under the one roof, we're sitting at around 14th in the world. So normally, those things take quite some time to build over a period of time, and Chadstone is a great example of that. It's taken a couple of lease cycles to develop what it is today, and we're obviously going again, which you'll see very shortly when we go on our walk. So to deliver this in the first round has been, I guess, nothing short of exceptional, but also more importantly, showing the strong belief in the market from the groups and highlights that the importance of that very initial early engagement with those brands to make sure that we're strategically aligning with their plans for the country.

The leasing sequencing is probably the key focus of this. I mean we talked about the importance of the multiple discussions happening all at the same time. I think when you look at the sort of order of execution of deals, it's one of those ones where it sounds counterintuitive, but it's almost the deals that you don't do that are the most valuable depending on which given point in time you're at in the nature of the lease-up phase. And a lot of that is essentially determined off, again, that brand hierarchy within the groups, but also the brands that then even those outside of the group want to sit along and against and up close to in the [ Mallscape ]. So to be able to to navigate all of those negotiations at the same time and find commitments with the right brands first in the right locations and helps you really form and build the ultimate mix and the sort of optimal outcome in terms of where all the brands need to be positioned on the floor. And that's where the sequencing of when you commit to those negotiations and close those deals out becomes really critical. So you could be having every negotiation happening at the same time, but you have to really stage when you actually conclude those relative to other areas where you might be able to pivot and add further value depending on other outcomes that might take place first. So it's quite sort of sequenced and quite strategic and probably quite frustrating sometimes for our business because we want to get in there and just close the deals out and get that done, but sometimes waiting often delivers the better outcome long term, and we just need to really hold our nerve and be patient to ultimately land the best possible result. And I think a great example of that is the last deal that we've concluded on the floor, which is now Chanel, as you can see on the slide. And in the context of what that's meant to complete and put the cherry on top of what we've delivered on a global scale, that's exactly what the project needed, and that would not have been possible had we not have taken our time and carefully thought that through.

This slide probably concludes my section, but it sort of talks to what brings these precincts to life in the end. I mean we can talk about the strategy all day and how hard and complex it is, and you can talk about the agreements, the commercial nature of them all. But this is what puts life into it, and this is what essentially brings everything that we've talked about to life. it's a combination in the end of our ability to curate the built form that the development team build and curate so well that is quite specific to each product. Obviously, we're talking about luxury here, but it's no different to what Matt talked about with the market Pavans before with a very bespoke offer with fresh food, that's not really ever been done before in shopping centers. This is a similar thing where the premium nature of the space that was built, the open malls, the natural light that was introduced, the execution of natural light to the edges of the building, which previously would have turned their backs on the surrounding streets and community that are now active edges with restaurants that are highly successful are all sort of key components to sort of coming together with what the retailers and do what they do really well to deliver their beautiful fit out. So all in all, it's a small part of what comes together as a major sort of delivery at the end.

Thanks, Ross. Look, Ross was just picking up on a couple of the points that Ross has made. Just on the screen on the left-hand side was the original floor plan for the ground floor of the asset. And on the right-hand side is what we ultimately delivered. And it might be hard to tell from this diagram that basically, the 30-year-old asset had really awkward malls. It didn't have intuitive wayfinding, didn't have access to natural light. On that point around active edges, we had precast facades that were solid. And for those who are going to visit the asset tomorrow, you'll get a real sense of the interventions that we implemented. And it was probably -- in terms of our development strategy, it was probably peak intervention in terms of the material structural changes that we made. We tried to create permeability and porosity by creating -- opening up the Victoria Avenue entrance to the asset, which is really the formal entrance to the asset. When you walk in, the wayfinding is way more intuitive now. You've got clear sight lines down to the lower ground floor and to the ground floor. We created direct sight lines across through the Diagonal mall down through the main mall. We spent $626 million on this development. And we touched on it earlier around our relationship with GIC and the decision-making process that we went -- we made to go alone because we had conviction in the asset. We had conviction in the development strategy. But it also enable speed and nimbleness because when we originally started the development, we actually had a 10,000 square meter office development on the roof of the asset. And we also were going to add 3 levels of car park to the multi-deck car park on the top right-hand side of the floor plan. And then based on our experiences here at Chadstone with some of the challenges that we had on car park C, and we thought deeply about whether Chatswood with a circa 67,000 square meters of GLA would provide that same level of intrinsic amenity that Chadstone did for our office component here. And we concluded that there wasn't enough critical mass at Chadstwood. So after we started and after we had signed the [ D&C ] contract, we actually removed that office component. And the fact that we didn't have a partner allowed us to act swiftly and nimbly. And we also deleted the additional 3 levels of car park in that multi-deck car park because to Peter's point around overregulation and compliance, it triggered earthquake seismic compliance, which meant that there was a whole bunch of additional structural reinforcements that we had to add that added time, cost and complexity. So we think we made a very rational and nimble decision.

This slide here just speaks to -- and again, I don't want to inject negative energy in the room after all the fantastic achievements of the leasing team. But this project was delivered well through the construction process, but we did have our challenges. So we signed a D&C contract with Multiplex, a Tier 1 builder in October of 2023. And if you cast your mind back to that period of time, it was just as that volatility in the construction market was starting to unwind. And there were question marks over Multiplex's balance sheet and viability. And whilst Multiplex did not have the same challenges that John Holland had, we based on our experiences here at Chadstone, decided to take that same approach in terms of the shadow construction team to shadow the Multiplex team. And whilst we didn't have to intervene as much as we did here at Chadstone, we did form a really strong working relationship with Multiplex and the insights that we provided, the capability we provided ultimately helped with their productivity and efficiency, which protected their margin. On the point of the concerns that we had about their balance sheet, there was obviously publicly released a few months ago that they were -- that Brookfield sold the multiplex business to Obayashi, the Japanese. So prior to that point in time, because of that uncertainty, myself and Adrian decided that we wanted some certainty on the financial strength of that organization. So we insisted on a quarterly net asset test. which was to the value of the contract sum. We insisted on quarterly statutory declarations by directors just to ensure that we had that look through on their financial viability. Probably the other significant learning from this process was -- and Peter touched on it earlier in the day that prior to our acquisition of this asset, this asset didn't have the necessary capital deployed to maintain the asset. And prior to the pandemic, construction companies were more willing to take unknown risks, what we call [ lading ] conditions, if there is a latent defect in the asset. But since the pandemic, builders categorically do not take that risk anymore. And as we started the construction, we encountered some pretty significant [ laning ] conditions. There were some fundamental structural defects. And interestingly as well, because there was a basement car park, we actually found lead contaminated dust, which was an issue that was politicized by the unions. And again, when I reflect on the relationship that we forged with Multiplex, it wasn't adversarial. It was a partnership. There were moments where we didn't resort to the contract. And that collaboration and that partnership allowed us to jointly navigate issues that really could have been deal breakers for the project. And fast forward to where we are now and leveraging the incredible outcomes from the leasing team, despite all those challenges, this project was delivered on time and on budget. And again, I think that is a vindication of this very active management, this risk management focus that we take to all our construction projects, whether they be a $500 million capital project or a $500 million project. And again, credit to the people that Peter mentioned earlier that the senior executives who have run construction projects, run construction businesses, if not for their focus, their experiences, the generosity of their knowledge sharing, I don't think that we would be in a position where we are right now where we have those debates about whether we deploy capital for an acquisition or a development, we have that confidence that if we are going to go and step into a development that we've got the capabilities, the risk management processes, the experiences, the battle hardness to actually execute on these developments and achieve our financial outcomes.

Matt, do you want to maybe just quickly just touch on the product? Or do you think this has been suitably covered by Ross?

I think it's been suitably covered unless anyone's got any questions about any of the brands or product mix.

Michael?

Thanks. So I think as before, Peter mentioned, most of our developments, major developments are brownfield sites and Chatswood Chase obviously was no different. I guess what was different between Chadstone and Chatswood was that Chadstone, we impacted, let's call it, 10% of the asset. Here at Chatswood, we pretty much did the entire asset, about 75% of the asset. Also, the complexity around doing it in kind of multiple layers. So obviously, we did the lower ground first, then we launched the ground at Level 2 and then finally, the luxury Level on Level 1. And that meant from operating point of view. Similarly, we talked about the optimization, that's a terrible word, the handover from the development team into the operating team. We used the same tools we developed at Chadstone for this asset. But what was different was really this changing dynamic that we had, particularly around the first stage where we had the lower ground area that was still operational, whilst we had above it construction that was happening throughout the Stage 1 and 2 developments. And that meant that there was a huge amount of change that happened on a regular basis for our teams. So there was a really strong focus between the operating team, the marketing team, the development team, the leasing team, making sure that we understood what the customer flow was, how to change that customer flow, change a whole of signage every second week, it felt like, but also just making sure that we were ready to go from a development as we kind of moved from development phase and into the operating phase, particularly Phase 1 and then obviously Phase 2. But I'll get Amy to talk a little bit about the marketing.

Thanks, Michael. The launch strategy for Chatswood Chase was deliberately phased to support the 3-stage delivery of the development program. So we started with the food offer on lower ground. Towards the end of last year, we worked on ground and Level 2. And then more recently, we have kicked off our launch program for the luxury precinct. It's allowed our customers, I think, to discover the center in stages and build momentum over time. We've done the extraordinary amount of what I would kind of term customer engagement activities and those were relevant to each phase and then to align with each phase. So just to kind of give you a bit of a flavor, that includes brand awareness campaigns, spend to receive activity, luxury gifting, level-specific awards, valet services. And whilst it might not sound super interesting and fabulous, but ticketless parking because when you think about giving people a reason to visit, that was really designed to encourage visitation and trial across the redeveloped center. Of course, retailers are very central to that relaunch strategy. We've worked very, very closely on opening events, collaborative activations and ongoing support programs. And it's really about us working with those retailers to convert curiosity into visitation and trading performance. I think it's important to call out that customer behaviors, visitation patterns and retailer performance take time to mature and stabilize. Peter mentioned this morning that we've actually committed $1.5 million in stabilization marketing in FY '27. And I think it's also important to call out that's over and above the funding that we already have for the center. We're very deliberate in the way we show up to that funding. It's not responsive. It's not reactive. It's planned months in advance, and it's very considered. That program includes premium customer experiences such as self-expression matters, which is currently live, which is a fashion campaign we're running, Black Friday and Christmas, which is almost upon us, Lunar New Year and the [ dining ] [indiscernible]. It's also important to note we have a huge paid media campaign. It's not just about the trade area for the center. We're also looking to scoop up a few extra visits outside of that trade area, particularly to support that new luxury precinct. And I think on a more granular level, I'd love to share with you, I guess, some of the smaller campaigns that we're working on. We currently have a dedicated focus on midweek visitation and retail performance. We want to make sure that every single retail day is productive for our retailers. So that's kind of the granular level of marketing activity that we're doing at the moment. We measure ourselves, of course, on growth, sales momentum and stabilization progress. And so at the moment, we're just continuing to work very, very closely with leasing and asset management. And every day, I think Michael alluded to it. Sometimes we feel like our signage changes every second week. I'd maybe say every 2 or 3 days. But it's just very important for us that the messaging and the cons around that [ newly developed ] center is on point.

A lot of the topic has been around stabilization. So I'll kick off just on this slide just to give it a bit of explanation and then Adrian will take you through the financial outcomes of Chatswood and how stabilization works through. So in the market, we know there's a lot of commentary around what does stabilization actually mean. It's quite a simple context, but what we're essentially saying is in our underwrite from day 1, you're just not going to hit your end underwrite from day 1. So we're essentially running a running yield for the first 3 years to get to a stabilized period. And then we measure that stabilized yield and then we measure a 10-year unlevered IRR. All that said, Chatswood and Chadstone were very different developments. So Jeheon has talked about and we'll talk about after this, the lessons learned from both of them, particularly around operating in live environments, operating around construction, being able to match the construction activity on site, the leasing execution in terms of strategy, define mix, go to the market with that defined mix, generate tension, then drive the rest of the outcome. But ultimately, the key difference is in Chatswood, we essentially rebuilt the food first and then closed 75% of the shopping center down. But we always knew that shopping habits would change as a result of that versus Chadstone, whilst it was a lot of activity to keep the shopping center running as we added 2 levels of a car park and close the fresh food area and to keep bridges and tunnels and signage and all those type of things going and keep retailers happy, fundamentally, the shopping center did not materially change. So its sales were impacted by less than 1%, whereas for Chatswood, it's sales were impacted by 65%. And so really, the result is when Michael and Amy think about stabilization of a Chatswood versus a Chadstone, the dollar value for Chatswood in total dollar value, not as a percentage of total revenue is more for a Chatswood than it would be for a Chadstone. And that's probably the first time I've ever said that because typically, the dollar value of Chadstone is always more. But so -- and we do think that the stabilization period will be around about an extra year. There's no magic science behind it. We typically put in 3 years of provisions. They typically end up around 10% of incremental specialty rent for year 1, 5% for year 2 and 2.5% for year 3. But how it's applied is really a little bit of art and science. We put the provisions within the P&L that runs through our forecast in FY '27. We don't provide guidance for '28, but you've got a general view, and we've given some thought in terms of how you can potentially model it through these pages here. And then we track it pretty much on a weekly basis from a traffic point of view and on a monthly basis from a trade point of view. And then we make appropriate adjustments, particularly to areas like marketing policy. As Amy said, we have planned policy ahead. But if there's any adjustments that we need to make to particular categories or particular areas, we adjust. From a Chadson's point of view, it surprises on the upside. We have high hopes always for Chadstone. But when this area hit the ground, outside of the running yield with the Kmart arriving in January rather than 6 months earlier, pretty much the assets stabilize within that first 12 months. So we have additional distributions versus our internal forecast that will run through into earnings over the next couple of years. But Chatswood, Adrian will go through, but it's such a larger intervention. We are trying to recapture not only the existing customer base, but a much broader trade area with the luxury proposition. And to be quite frank, we're capturing a lot of the luxury that would go to the city, potentially go a little east of the city and definitely north, northwest of the city as well. So there's a meaningful program over the next couple of years to ensure that, that stabilizes. We'll go through the trade to date. And as we mentioned during the results page, it's pretty much at our expectations, but each level is a little different. Lower levels trading extremely well on the food, ground level is trading at our expectations. Luxury is too early to know. They're down. They're trying not to cannibalize their city stores. The opening of Hermès and soon to be opening of Chanel, we've seen material uplift through May, June, July, and we've just rolled up August's numbers as well. And Level 2 is really our focus area, and that's where some of the marketing interventions and some of the retail support is targeted for Chatswood, we're confident it will work strongly. I'll just pick up one point before I pass to Adrian, which backtracks a little bit. Again, if we go back to the aspiration of our our original brief for Chatswood, it's the clearest opportunity we can get an asset that trades in really high-impact cities, Sao Paulo, Hong Kong, Singapore, New York. These are cities that trade well into the night as does Chatswood is a very similar demographic. If you go through there -- at a nighttime basis in food, whether it's in our asset or through the city, it's actually -- the streets become the living room, so to speak. That's why -- that's part of the reason why we put the after-hours trade right to the facade. So it opens up the facades on both sides to get great food underneath, that's accessed until midnight and all the way up through the facade, and we can lock down the rest of the mall to ensure that activation occurs well into the night. That's also part of ensuring the asset stabilizes really well. One of the huge pleasing upsides is how well the food in all categories has gone at Chatswood, and that's a big credit to Matt and Ross and the team in terms of the selection being quite unique for the market there.

All right. I think Peter has already spoken to this slide. But I might just touch on one of the key points that maybe he didn't go into, which is the asset running yield. So I think one of the key features of our development pipeline over the past couple of years, they have been -- whether it's Chatswood or Chadstone, they have taken rent offline. And particularly for Chatswood here, you can see what we've done is provide that total asset yield. So it's the percentages under that chart on the right-hand side to really show going into Chatswood, we had an asset which was yielding circa 5.5% NPI yield going into it. During construction, we've talked a lot about loss of rent through our investor presentations over the years. And for that period during construction, because you've got so much rent offline, it does impact that asset yield by 4 percentage points. And so we were traveling at 1.5% yield through that construction period when you consider the development spend that we're putting through that and the income coming offline. But hopefully, what you can see now, though, is in FY '27, we're back to a total yield once you take into account the construction spend of 5.4% total asset. And then that increases as we continue to stabilize the asset to 5.9% and then 6.5%, which we're forecasting on a fully stabilized basis in FY '29. Now if you compare that, say, 6.5% to the cap rate on completion cap rate for Chatswood, which is 5% Yes, there's some timing differences. But ultimately, that's what drives that $250 million development profit that we're calling out as that key development profit for Chatswood ultimately that we're going to realize on completion. So there is an income impact through the period, but we do see a much stronger yield and growth profile post development, which is ultimately what we're trying to do is create longer-term growth and longer-term value creation for the asset.

If I now turn to the next slide, and this is kind of translating it to a development yield. I would say there is a bit of a typo on this slide just in terms of the dates. Those dates probably should be pushed 1 year out. So really, it's FY '29 that we see that 6.7% development yield on a fully stabilized basis. And that is the basis in which we've given guidance to the market that really we are looking at on stabilization, we had an underwrite of prbably 6%. Our forecast for this is 6.7%. Really what's driving that 6.7% is all income growth. As Jeheon mentioned earlier, although the conversation with Multiplex were extremely collaborative, but also we have to work through our issues. Ultimately, there was no issue on cost or timing. It was more about income that enabled us to basically push that yield at the 70 basis point premium compared to where we started the underwrite.

And then from a project IRR perspective, that project IRR, we're forecasting 11%. Again, that's part of that differential in yield that 70 basis points translating to that project IRR. That IRR doesn't include any benefit from residential, which we're about to go to with Trevan. It is purely the benefit of that increased income that Ross and Matt have delivered and a fixed cost that Jeheon and his team has been able to deliver as well.

Maybe just a point on just that stabilization profile and kind of what's included in that buildup. There's probably a couple of key things to point out. Firstly, there is the phased opening of luxury retailers that do -- that have opened progressively through the center. We still have about 4-odd retailers still to open, [ Gucci ], Saint Laurent. I think we've got Chanel as well in their more permanent store a bit later and the gym that's opening up. And so there is a [ letup ] profile that does impact income through that. And the second element of it is there is a lot of marketing activity, as Peter mentioned, with Amy and the team to really drive that foot traffic back. I mean we can't underestimate, I think, the impact of a center being shut down for the best part of 2 to 3 years and trying to bring a brand-new offer does require significant marketing spend to bring that customer back. And that is part of that ramp-up profile that feeds into that progressive yield.

If I go to the next slide, this is really the value creation story. And if you take this asset way back to -- not way back, but to June '23, when we owned 51% of the asset, we then bought that GIC stake out at a small discount to book value. But ultimately, we didn't buy it because it was a discount to book value. We bought it for the development opportunity. And that $623 million, combined with $307 million of acquisition, ultimately meant we spent almost $1 billion of capital. So it was a pretty big bet on this asset to basically realize what we think is an extremely healthy development profit of $250 million. Now of that $250 million, about $110 million have been delivered to date. The rest of that will be delivered over the next couple of years as we unwind all of our profit and risk allowance, some of the stabilization allowance and a bit of asset growth to go into that. And so by FY '29, our current expectation is we'll be at $1.5 billion for that asset.

Adrian, just to expand on this issue or the point around value creation. If you look at that $250 million of development profit and to pick up a question that Simon asked earlier in the day about the why, and this -- and the journey we went on with GIC, if you think about the context of the residential, which we're about to talk to and the potential value creation opportunity off the back of that, it's a pretty extraordinary outcome in terms of value creation for one asset because we had conviction and we were prepared to manage the risk and ultimately achieve an outcome.

Yes, absolutely.

I think we're about to move to the residential side, but I think we'll open up for questions because I'm sure there'll be retail-specific questions.

Tom?

Tom Bodor from Jarden. Just be interested in that stabilized yield, does that include incentives? Or is that looking pre-incentive?

No, it includes incentives. So we're a full cost in. So the first yield that was shown there, just to be super clear, is the total asset yield. So it included the lower level as well. And the last one at 6 -- that was 6.5%, stabilized. And the last one at 6.7% is just the development only, which includes -- and both include all incentives, all capital.

Perhaps just on luxury market conditions, if I could, they've moderated globally. So just curious to know what evidence you're seeing from those retailers around or that supports your confidence in the asset at the moment?

Yes, good question. Look, it hasn't been good the last 12 months for luxury. So we're essentially -- our luxury sales across the portfolio on a comparable basis are slightly negative for the last 12 months. So if I picked a perfect time for opening a luxury precinct at Chatswood, probably would have been around late 2021, early 2022, just after COVID when everyone is locked down and my teenagers were out with JobKeeper going buying luxury T-shirts. So that essentially was their peak period of time.

That said, they're still doing the productivity. They're not doing $80,000 a square meter as they were doing. They're doing something less than that. They're still working off significant net EBITDAs and the key ones in the 30%. So our focus, particularly on Chatswood, and Ross mentioned this, we were focused on LVMH, but fundamentally, we're focused on Louis Vuitton, Herm�s, Dior, CHANEL, Cartier, Rolex, Tiffany. They were the key. They're the key also in Chadstone. You get them, and they're the ones that are sort of can ride through cycles a lot easier than the rest. That was our focus from -- they've all got a little bit of mixed trade. Those that don't have significant representation in Sydney CBD are trading particularly well at Chatswood.

So -- but again, they've only been open a quarter. We will take all the way through to the end of Chinese New Year in February. And then we'll reassess continuously but have a full first reassessment at that period of time, which will be around our midyear results, just in terms of whether we've got the right level too little too much in terms of our interventions, whether it's marketing in particular, in terms of that.

What we've said in terms of FY '25 forecast, there's about $4.8 million in there in terms of additional stabilization for $1.5 million of that is marketing. There is lease-up of those that haven't opened and some rent assistance in there, which are predominantly to the Level 2 retailers at this particular point in time, not to luxury. As we said, we'll come back to it in February. At this stage, we're comfortable with where the total level of trade actually is across the entire asset.

And just a second question on construction. Adrian, you spoke about this a couple of hours ago, and I mean I'm glad you spoke about it again in this section, so I can ask.

There obviously has been some challenges in construction and the complexity of construction. And obviously, there have been a number of instances where builders face significant losses because of fixed price contracts and volatility in raw material prices, et cetera. So I'm just curious to know how you think about the industry and how it should navigate those challenges from a risk reward sharing perspective going forward?

We've thought deeply about risk profile and risk allocation. I touched on it earlier today, but one of the key risks of working within a live asset is the fact that we are relying on the performance of that asset structurally and from a base building services perspective. And I mentioned -- I touched on some of the issues that we had on Chatswood. And so as a business and as part of our standard operating procedures, from a risk perspective, what we do is we did this on Galleria, and we're midway through it on Uptown.

We actually invest significant amounts of capital before we sign a D&C contract. We did 200 site and asset investigation reports on Galleria. So we go back into the asset with the builder, we test and probe every part of the asset. And it's this principle that it's unreasonable now to put unknown risks on the builder. Frankly, even if they did accept it, they'll probably walk away from that risk if something transpires. So our fundamental operating model is based on investing in identifying the risk, measuring the risk and valuing the risk before we go into contract.

We also -- if you kind of reflect on where we were from a design development perspective on Chadstone, typically, the industry pre-COVID because it relied on real growth in revenues over construction costs, got complacent about not resolving their brief, not resolving their design and not exposing unknown risks. We do the absolute opposite now. We take design to beyond 80%, which was historically typical for the construction industry. We are highly prescriptive about our brief. We have really robust change management processes because retail is highly dynamic and retailers change things, but we have a very defined process. And I touched on it earlier before.

We no longer rely on rules of thumb for project contingency. We do a full-blown bottom-up risk analysis of every risk that we think can transpire. We apply a probabilistic factor, and then we go back to Peter and Adrian and say, this is our view on the risk profile of the project. This is a contingency that we need. He tells us never come back and don't ask any more capital during the life of the project. And then we go away and then try and rely on our expertise to try and manage those risks. And I go back to this capability point, we brought people in who have managed construction projects.

I spent my first part of my career in construction. So we ensure that we are trying to create end-to-end developers. Just focusing on value isn't good enough anymore. You need people who understand the value proposition that can mitigate risk through the delivery process. So I'd summarize by saying we've just fundamentally changed how we do business.

I'll just add one more point to that, David. We changed in Chatswood, Galleria and now Uptown on these larger projects. We actually pay the builder preconstruction to actually ensure that we both know what the risks are. Typically, builders are looking at this and they'll estimate, they'll have carve-outs that they don't necessarily get paid, but we make sure that key persons are employed. We know who they are. Those key people are working with us preconstruction. We're paying them and those same key people are then exported into the final D&C contract.

Howard made sure you almost got all the way back to the microphone before he put up his hand.

Sorry about that. Just you made the point and when you put up the team on the slide, you've got an impressive team, but it's also probably a costly team, a highly skilled costly team. And a lot of those costs are getting capitalized to the projects and moving on. Is this -- you probably want to retain a great team like that. And does that incentivize you to just keep going and building? How do you guys think about that?

No, it's a really good question, Howard. You get what you pay for. The team is a highly experienced team. They are experts, global experts. They bring unique skills that are not existing in this country, in my view. And part of this is what you mentioned previously is how do we get that generational knowledge transfer to the next generation of our team. And we're just simple property guys. The easiest way we do that is actually on the job, mentorship, pairing people up, ensuring we have appropriate leadership and culture. Some of these guys are a bit old school, but it's about ensuring that, that knowledge transfer has occurred.

For the foreseeable future, we're still going to get through Uptown. That's another 2 years away. I'm sure there will be other projects. Some of this generational knowledge will assist us absolutely already are in our residential ambitions, working with Trevor and the team. So at this point in time, it's not a worry. Our key is to build a competitive advantage by ensuring that this capability has been maintained with us for 7 years now and will continue to be maintained with us through the short to medium term. And back to the age question, at some point in time, they want to go play golf and go surfing and travel. The key is to ensure that, that knowledge has been transferred to the younger, higher-performing people within our team.

I'm then looking forward to retirement myself. I think probably the one thing we've learned is that historically, developers started outsourcing their development management and project management to third-party external consultants. And you often pay a premium for that. And what we found is that by bringing people in-house that from a net overhead perspective, it was actually quite neutral. But what we were doing is we were retaining IP, corporate and asset knowledge.

And also, if we're not going to act irrationally just because we've got capability, there's also the opportunity to deploy some of these people on the smaller capital projects to help with the maintenance of our assets. And they've got deep and wide capabilities. The utility in the organization is actually quite varied. So we have to think creatively about how we deploy them.

All right. Maybe just to shift the pace and talk about something a little bit more fun than construction challenges and just continuing the thematic of value creation. So Peter touched on it earlier, but 10 years ago, we acquired 2 separate freehold sites directly adjacent to our Chatswood Chase shopping center for the purpose of expanding our retail asset when we had a much more larger and much more expansionary ambition for the retail asset. A lot has changed over the last decade.

And myself and Peter had a conversation about 2.5 years ago where through our strong relationship with the local council and state government, we started seeing this emerging state government strategic planning policy around transport-orientated developments. Again, I touched on it earlier today here in Victoria, the state government's strategic planning policy really is about more medium-rise distributed density throughout the city. The New South Wales state government strategy is very different. It's about concentrated height and density around main transport nodes and Chatswood is one of those beneficiaries.

Probably the other thing that I just want to touch on is the fact that unlike other residential developers, we did not acquire these sites as residential development sites. So we didn't pay improved land value on the assumption that we were going to develop residential. We bought these 10 years ago as retail development sites. I mentioned earlier today, retail is typically not highest and best use. So we acquired really, really well and have a very, very low underlying land value.

Trevor will talk about the details of the residential proposition, but we are going through a formal accelerated rezoning process at the moment. Now there are 2 limits to our strategy. The first one is creating value through entitlements or planning approvals. So we are formally in the New South Wales government's housing delivery authority process. So we are going through an accelerated concurrent rezoning and development application process. So we were granted a ministerial motion approval last year to participate in this process.

The state government is giving us as developers and landowners 9 months to pull together a rezoning and development application, and they're making a commitment to accelerate the rezoning and the concurrent development application approvals in 9 months, which is extraordinarily extraordinary because historically, these kind of processes took 5 to 7 years, if at all, because your prospects of rezoning were always very, very low.

And I make that point around -- and sorry, the second point of the value creation story is how we crystallize that value. Now because we have a low underlying land value, we are not compelled to develop if we're not ready. We don't have to act irrationally because we don't have a tightly wound underwriting our residential feasibility. We don't have a high improved land value that we need to protect. So we can be strategic and we can be rational around when we act on that rezoning to crystallize the value.

Just excuse me for a second. It's been a long afternoon. So this slide here just explains why we were designated as a state significant development site by the New South Wales government. They identified a couple of strategic areas in Sydney, Chatswood being one of them. Peter touched on the strategic benefits of that Sydney Metro investment. So a $20 billion automated rapid mass transit system. And again, we touched on all these global precedents that we see.

And typically, what is a common theme amongst those retail-led mixed-use precincts is that when we see significant and successful public transport infrastructure investment, you typically see a structural uplift in real estate values that follow. And as a continuation on that thematic that Peter touched on around the demographics of our trade area for the retail asset, if you zone in on the Chatswood CBD, there's 10,500 residents in the Chatswood CBD. 99% of those residents live in apartments.

The demographics, when you look at the numbers, they're absolutely fascinating. 73% of that community was born overseas. 49% have a Chinese ancestry and the balance is a mixture of Korean, Taiwanese, highly educated, high average household incomes. But when you look beyond the numbers around why residential development is so successful in Chatswood, basic land economics, the revenues are about roughly double construction costs. So the margins are significant.

But when you look at those -- when you look at the cultural nuances of the demographic, yes, their condition of living in high-rise apartments. One of the successes of our retail strategy was really around that complementary food and beverage. But when you look at the broader precinct, there's 170 food and beverage offerings. But those food and beverage offerings basically cater for every Asian regional cuisine that you can get. So you've got a demographic that's used to high-density living.

The city becomes an extension of high-rise living, so their kitchen, their living room is catered for by the city. They used -- they have a tendency towards multigenerational living, often within the same apartment block. And also in terms of cultural nuances, the existing infrastructure within the city of the CBD, the banks, the civic institutions, most of the people who work in Chatswood are multilingual.

So you kind of have this demographic that are culturally familiar. They like the security of an apartment. So these, I guess, are all strategic drivers why we think there is a significant advantage to our mixed-use opportunity here at Chatswood versus other opportunities in our portfolio.

Do you want to maybe just talk to the opportunity, Trevor?

Okay. So the 2 residential towers. Now what's great is that in 3 weeks' time, 3, 4 weeks' time, these will all be on public exhibition. So we are 3 to 4 weeks away from actually lodging development application. And a lot of these images are all very fresh and new and we're at a really great stage of our actual design process.

So at the moment, you can see you got 2 towers there, 5-7 Havilah the outbound spec yard site. So that's a 44 floor 157 -- 150-meter tall tower with 200 apartments in it, around about 18,000 square meters of NSA or NUA depending on which state you're in. And then on the other side, you've got 12 to 14 Malvern, taller tower, more apartments, 280. It's a bigger block. It's basically double the size of Havilah, I think it might have been mentioned earlier today. And again, it's outstanding proposition, and that's closer to the 20 -- all up is can be here 26,000 square meters of NSA in [indiscernible].

The view shots are real, those are drone we put up earlier in the year. So the views are outstanding all the way up to the northeast, south and in the west to get CBD in Chatswood CBD view. So outstanding value proposition and a lot of attraction from the market even in these early days. So we've been doing community engagement and we're also doing community engagement and specifically seeing the people complaining you're not. The groups of people coming up to you, who are actually interested and wanting to buy the apartment. They're excited. Like that and really, really excited.

And what was more interesting is the people coming up to people who are already bought an apartment close by put their mom or dad in Chatswood Chase because they want to be love Chatswood Chase. So this is going to be very, very [indiscernible] sold after product. They are so close to the metros, it so, convenient for us to [indiscernible] Chatswood Chase to us to visit the site. So 11 minutes on the metro.

So the other positive part by this development is the parking. You'll see that [indiscernible] podium parking that means no basements. So if your familiar with development basements are expensive, so we'll be able to do a podium car parking is very cost effective.

Now also as I've said before, we're at great stage from design point of view because we've actually completed [indiscernible] design excellence process and that's critical because you'll hear a lot of people putting a lot of applications and say things at the media or soon to apply, but then they get to design excellence process and they don't they get things happen to them prior to building get [indiscernible] they get changed or park lands get bigger and things like that.

So when your looking at our competitors, also keep your eyes always out [indiscernible] they gone through design excellence because you can't submit your development application, so you gone through design excellence process. So it's a pretty critical stage. fortunately for us, we will receive that official letter saying that we will achieve design excellence upon submission, so we're in a really great point, which we are focus. Next slide.

Yes. So we've built our team already, we're at the planning [indiscernible] stage. So I've got the first or second week of October lined up. We're just going through our Environmental Impact Statement Report. And also positive in the background that we're in confidential but nonexclusive discussions with the capital partner. They're also very excited by the opportunity remain. For those of you in the Galleria and Chatswoodn residential is highly, highly sold asset. It's like a lot [indiscernible] profitable development for residential. So if you do your own research, you look at the sellable area rates versus the cost rates, and that's why developers are all scrambling to try and give development in this site. So that's where we are sitting at the moment. We're doing quite a lot of work there.

And as Ji said, we're hoping to get a planning approval 9 months is supposed to be what the planning department says. We're always factoring in a little bit more than that. It might take a little bit longer because as much as government has these ambitious targets, sometimes can take a little bit longer just because of applications in the pipeline. But the positive part is -- sorry, Ji, do you want to say...

I was going to say one thing about the planning outcome that you and the team achieved. So we've got about 150 to 160 meters of height. We've got predominantly all residential floor space and the rezoning we ask for. And when you reflect on that outcome, and again, it's the theme we touched on this morning is that we actually had the support of the local council, Willoughby City Council, who historically have been very, very antidevelopment.

And when again, when you -- for those who see our Chatswood Chase asset tomorrow, we invested in a British architect Make, who's not a traditional retail architect. We invested $626 million of capital. We made a whole bunch of commitments to the local council when we started that development, including building infrastructure to deal with storm water issues and other amenity that we delivered.

And what we ultimately did was we outperformed and underpromised and overdelivered. And as a result of that, when we went to the state government to seek this rezoning, highly unusually, the local council were publicly supportive of the Vicinity's proposition because in their view, because they deem us to be a quality developer of repute, they want to use us as a benchmark for the rest of Chatswood.

And so again, when you look at this value creation process that Trevor and the team have gone through, we've been surprised on the outcome around this rezoning process. And if you look at the details of the rezoning, it's significantly superior to what other developers have achieved in the same Chatswood market because of the confidence of the state government, local council of the Vicinity's ability to deliver.

Yes, right. Our competitors are quite envious of our HDA outcome and our progress to date.

This is actually a great slide because it captures a bit of the lessons learned, but also talks to value. The lessons learned is around the connections of residential into retail centers. If we look at the The Glen that's an example of evolution of residential being built integrated with retail center and the policy of the day back then was from a residential perspective you want your residential front door to face away from the center it was sort of there, but it wasn't really. And so but then [indiscernible] residential itself you start seeing the patterns of behavior of course [indiscernible] residential you want to come down you stretch through your lift and straight out into the center of the [indiscernible] forgot. That whole thinking and that something we saw at [indiscernible] we actually saw [indiscernible] residents having to say digital [indiscernible] for it's to get into the center.

So then you grab that sort of noise and you then also look at what's happening elsewhere in the world and in the sense of connections and residential where they are doing [indiscernible] few more [indiscernible] in us, connecting the residential into the retail center you're actually getting a much superior outcome and the wonderful part about this site is both of these sites are they're adjacent but they're not impacting the retail development. So we can develop these 2 towers and it won't impact, you won't have any center disruption impacts and things like that.

[indiscernible] perfect opportunity on both sites to connect in, so the residents can come down in their lift and connect back into the center. When we go through for those who also coming to Chatswood tomorrow we'll show you sort of that connecting piece to have a lot [indiscernible] is beautiful lines up right on our switchback on our escalator switchback and then the Melbourne development [indiscernible] at our [indiscernible] thank you.

So we'll do something on our [indiscernible] Vale level to improve that experience. So but also then creates us selling proposition back to the resident too to -- when we're selling those apartments to say, your friends and relatives are going to come and park at Vale and get a Vale treatment into your apartment. So there is a lot of value on and on.

The other part I really want to emphasize so is I actually said at the start of this -- 10 years ago these are all commercial -- these were commercial sites, you couldn't build a retail -- sorry, you couldn't build a residential in this precinct, so it was basically for leasing for it generating leases. So the land was valued at that sort of low level. And then took a progression of the [indiscernible] development program and residential being allowed to [indiscernible] and these sites were [indiscernible] in value.

You then take Chatswood Chase development what we just delivered and the sites got in value again, because of [indiscernible] always people who actually want to connect [indiscernible] right the site with enhance value proposition. It is like there is a premium that you'd be able to leverage of the center as a residential developer as well. And then we can foresee, of course, those 1,000 residents creating that value back on against the center again. So you've got this wonderful compounding effect, which really then just tells us, I mean, this is the gold standard, but we want to be able to replicate this across our portfolio, which is probably a good time to transition back.

Look, this slide is just a summary of where we are with our other residential and mixed-use portfolio opportunities across the country, particularly on the East Coast. And whilst Chatswood has those infrastructure planning and economic tailwinds, which is why it is a short-term value creation opportunity, we just want to share with you where we are with our broader portfolio. So on the top right hand is an image of Bankstown Central, which we got rezoned about 18 months ago through the New South Wales government's transport-orientated development process. That master plan can yield 17 to 19 towers, 350,000 square meters of GFA. So those entitlements are in place now.

The next image down is here in Melbourne. It's in Richmond. It's Victoria Gardens. We have a JV partnership with Salta through the Victorian government's development facilitation process, roughly around the same time as Bankstown, where we got that land rezone and planning permitted for about 827 built-to-rent apartments. And on the bottom of the page, there's Buranda Village, which is about 3 or 4 kilometers south of Brisbane, again, planning approved for about 7 towers.

These are all opportunities on paper. I guess our summary is that when you talk about all the issues around cost inflation, construction costs. Our view is that these are more medium- to long-term value creation opportunities. The economics around residential revenue just isn't there. So we're probably no different to our competitors in that we are land rich. There's low underlying land value for these sites.

We've leveraged our relationships with the government to accelerate planning approvals, entitlements and rezonings, but they are much more medium term because the economics aren't there. So we are primarily focusing our attention on Chatswood just because of that compelling value creation opportunity. I might just pause there. Is there any questions in relation to our residential opportunities?

It's Connor from JPMorgan. I was just wondering if you could put some more numbers around Chatswood just in terms of sales rate expectations and maybe what build costs are there?

Yes. So I mean, all public information. So if you looked at like a CKC [indiscernible], you'd see that Chatswood from a residential perspective in apartments, you can target that there's a band between up to $28,000 to $30,000 a square meter, which might sound high for some people in this room, but it's actually quite normal in that area. It's the most affluent market we've already spoken about. So that's from a selling point of view.

From a cost point of view, you then got to deliver a product that's commensurate with that sales rate. So you're looking at around $11,000 a square meter in construction and then you then got to apply your development costs on top of that. So that should help give you a guidance as to how we get to our profitability estimates. But yes, it's -- yes, it's all market dependent.

And how much do you think the proximity to the center actually helps that premium?

Definitely, that's -- we're seeing it in our competitors and in our conversations with our sales agent team. So they are -- we are positioning ourselves or we are setting our expectations at our competition, but we know from the conversations we're having both directly with the public in those REIT committee sessions, but also then with our sales agent that we expect to have a premium on top of our competitors' stock because just no one has got the same location where they've got park land surrounding them and uninterrupted views. Others are all built out. The rest are along the Pacific Highway.

So these are -- when you look at that $28,000 to $30,000 a square meter, you're looking at product which is along the Pacific Highway. It's all compressed together. It's not as good, like it's definitely not as good. So it's already at that sort of value. And then you take the Chatswood Chase factor into it, it's -- yes, we're pretty confident.

Obviously, we're pretty watchful of government policy change, which was not helpful in May. It's 2 different projects. So again, if we talk about sequential developments that we've been doing, the fact that they're not connected that we can start on one project, the build-to-sell projects, so it's not recurring income necessarily for us. Any profit and across both projects, we're talking close to $1 billion in a buildup of cost. That's why we're talking about partnerships in terms of that. It's -- we brought in some expertise, but we want to ensure that we complement ourselves with additional expertise that comes with capital.

And again, we probably have another 9 months to 12 months of getting through the entitlement process. And then from the program that we put on the screen, there's a minimum of 12 months in best case before we're ready to commence on site through design development through the construction documentation, execution, et cetera. So we've got a bit of time to work out what is -- when it is best to actually execute it one tower at a time with a partner.

Sorry, I might just add, I think, Peter, you might have gone there -- we're going there as well. But just in terms of how we capture profit on this project, although we haven't given specific numbers, we do see this as a very significant opportunity in terms of value capture. But as it relates to how it flows into P&L and balance sheet, ultimately, we are not a residential developer. That is not our game. We are very much retail-led. And so the focus for us will be take that development profit.

However, we realize it through a land sale earlier to a partner plus some further development profit, for example, that will ultimately repay debt. We'll obviously get an interest benefit from that, which will be ongoing and some development fees, depending on the development arrangement that we have through the project will also come to P&L. But there won't be a crystallization, if you like, that will flow through FFO.

Another question for Ji. You kept talking about how well the company purchased the 2 blocks of land. Can you give me an indication as to the current market value of the land zone that's resi versus what you -- what the company may have paid back then or what it is like on your books?

We're holding the land at a value, say, between circa $35 million to $40 million. But if you think about that value and you think about the fact that, that's not based on improved rezoned land for residential. So to the point that Peter and Adrian made, if this impact of government budget policy settings continues to materially impact the residential market, we don't have an aggressive residential development underwrite to protect.

We'll just sit back and wait for the market conditions to normalize and then deliver into -- when the market conditions are right. And that's -- and to expand on the point that Adrian just made, we're not banking on trading profits from this development. So we can just sit back, act rationally and wait for the market to return.

I guess -- the residual land value, even on what we're contemplating today is 2 to 2.5x underlying book value.

2.5x the $30 million to $40 million.

2 to 2.5x, depending on what happens with the residential market over the next 12 months.

Just a question on your approach and thinking around the resi opportunity. So -- sorry, Tom from Green Street. So just in terms of a question around the high and best use for that opportunity itself, have you put any thought into alternatives such as ground leases, other ways to play the BTR opportunity such as that or selling the air rights or anything else in terms of ancillary ways to play that opportunity set?

Yes, we've -- first of all, we started with a -- I mean, this was a number of years ago, how do we create recurring income because we're -- everyone in this room will value us more from recurring income than just taking a one-off sugar hit in terms of a development profit or a land transaction to Adrian's point, that goes against value.

I think the -- moving forward, whilst a lot of our approvals, unlike this one, are shaped up more to be majority BTR with some BTS, the analysis that we did, whether it's a ground lease, whether it's BTR, whether it's BTS, whether it's long-stay opportunity, it all came back down to subject to what happens post May, that the BTS was by far and away the highest profitable returning opportunity for us.

There'll be some more analysis that we'll do between now and actually moving towards any sort of predevelopment commencement based on the metrics in the market at the time, but it was a clear outstanding one for this particular project. We would probably say it's a combination of something different, say, for example, for a Bankstown.

David Pobucky from Macquarie again. Just a question on the capital partners side of it with discussions that are already underway there. What characteristics are important when selecting a partner? And how do you think about the potential ownership structure as well?

Yes, David, without maybe releasing -- I mean, similar to how we select a partner for a retail. We're not just after money coming into the partnership, although that's obviously very helpful. You've got to have an alignment of strategy moving forward. We're looking for a partner that not only obviously adds money, adds alignment to the strategy, but also has a strong voice at the table and brings expertise in this particular instance, brings global expertise.

And it helps us over the next period of time to develop the right product to ensure that we hit the market at the right time and that we can maximize the opportunity. Without naming too much, it's obviously someone that has significant credibility within the space, and that's what we were targeting.

And probably just to add to that, a partner who's going to understand the strategic marriage value behind the type of residential product that we want to deliver, the type of residential customer we want in the building who can amplify the value of our $1.5 billion retail asset. So someone who's very knowing sophisticated and not just driven by short-term profits.

We're working through a couple of options in terms of what the structure of that entity would actually look like for execution of the development. We've moved the land to tax effective land because obviously, we're a REIT. So it will run through our corporate. And so any development profit, we just pay taxes at the corporate level. And all that's still flowing through in terms of the final structuring of the deal.

All right. We're on the home stretch. Look, we just want to just do a quick summary of some of the guiding principles, lessons learned just to reflect on some of the issues that we've touched on today. And I'll just go by exception. But just in terms of our development strategy and our approach to development, probably just touch on the fact that we've clearly learned a lot over the last 3 years. We've done some things well. We've made some mistakes, but we are constantly trying to iterate, learn and just be nimble and respond to changing market conditions. I think it's called into question the role of the development team aligned to Vicinity strategy, but also just fundamentally, the role of a development capability within a listed REIT structure.

So we know historically, development businesses have been very focused on an addiction to development profit or development fees. We're not that. We are an equity owner, manager and developer. So we understand our fundamental role in the strategy, which is to be a developer that ultimately contributes to the delivery of our strategy around enhancing our investment portfolio. And we're trying to create a new breed of institutional developer that has more of an investment mindset.

And look, I touched on just all the challenges that we had over the last couple of years with our delivery projects, particularly because of that capability drain in the retail development sector and obviously, all the issues around construction. Myself and my leadership team, we probably spend 89% of our day just in granular operational meetings just to make sure we are protecting our interest through development.

Before I joined Vicinity, I didn't have to use just the men or use role game. It's been a very stressful couple of years, but it's just a necessary reflection of where the market is at. Probably also just going back to capability, we can't be an island. We've got this incredible capability. We touched on it with the leasing team and with the asset management team. So it really is about the whole is greater than sum of the parts.

So we've gone through a bit of a cultural change as a team to work out what is our role, what is the complementary capabilities that we have in the team and ultimately, how do we align the strategy and how do we align everyone else around us to strategy. I don't know if there's anything else that you guys want to add.

I think you covered it pretty well.

Okay.

I mean, obviously, this is the latest baby about to enter life, second time around, I suppose. So as mentioned, this is a 2-phase opening all within the same month. $130 million at our equity value. It's a $250 million, $260 million development at Galleria. Essentially, it's 86 shops. But at the same -- the interesting one on this, at the same time of doing this, we built momentum before this development, and we built momentum after this.

To Tom's question earlier, this was -- the value was trying to capture a falling knife as they say. It was very much a decreasing value. And at the same time as preparing for predevelopment on this asset in a very complicated state. We've also renewed every single major retailer, and we have a very strong relationship with Hoyts and something that's quite rare is actually change in cinema operators. So we have Hoyts going in replacing Event. We've got Myer that's closed, and it's unusual redeveloping from the ground up rather than just take a floor away, new department stores.

So in Chatswood, it was David Jones. In Galleria, it's Myer with a brand-new full closure, 6 months refurbishment of department store, 86 shops. There's a food terrace, which opens a few days before Black Friday this year, about a week. And then the primary retail opens on November 5. I get it one more to you guys November 4. Okay. So November 5. It's a perfect size. It's around 70,000 square meters. It's got 1 department store. It's got 2 DDSs and it has 2 supermarkets and about -- all in all, about 130 shops. So in that particular market, it's very good, and it's master planned for medium-term opportunity for growth, which is predominantly going to be non-retail growth into the future.

So Multiplex is the -- Multiplex is the developer here, is the construction D&C contractor here, lessons learned, as Ji mentioned, coming out of Chatswood, moving into this particular project. [indiscernible], the Head of Multiplex, the Global Head of Multiplex guy called John Flecker his first project was the project manager in early -- in the mid-80s building this particular project. So you never go far away from your past is what I typically say.

And David, just your earlier point about contract forms. This is on face value, a D&C contract, but it's a much more balanced risk allocation. So I'd probably describe it as a bit of a hybrid between a management contract and a D&C contract.

So the phase opening is very short. So it's not like Chatswood. We will have more than 90% of the shops opened by opening day. There will be a couple of stragglers that will go out until early next year. We have closed the majority of the shopping centers. So it's similar to Chatswood, just a stabilization number. It's a much smaller number, but it will go for 3 years. Amy has a plan. Michael has a plan in place, and we monitor that plan on a quarterly basis just to make sure that we're hitting our targets.

At this stage, I'd like to say conservatively around 6.25% stabilized yield in excess of 11% IRR. We've -- and that's based on an MAT or a sales assumption of just recapturing the market -- the market share that we had prior to COVID. Now we expect to capture more. And we do believe there will be then capacity, that will smile at me in the leasing rates to be in a position that come that 5-year anniversary, there should be some upside that hopefully triggers a little bit more growth in the unlevered IRR than what we had forecast here.

And that leads us into -- I mean, this is a super exciting project for us. We had 25% of it for history here. We were a 50-50 partner due to the quirk of the Vicinity merger, we were essentially negotiated out of a change of control situation and offered an additional 25% to our joint venture partner at the time.

And then fast forward the clock 12 years, and we've -- and they've worked with them, and we've exercised our first right of refusal after a market process to buy the other 75% back. We have a view that this is a contemporary version of what the Melbourne Emporium. But the retailers that we've been significantly discussing projects like Chatswood with or opening with us at Chatswood is the pre-leasing targets that we put into this particular project. The formal -- we are working with Queensland's -- one of Queensland's prominent Tier 1 builders. I think we've mentioned it, Scott Hutchinson, before. He has deep, deep subcontractor relationships through multiple generations.

And so for here, what's important for us in Queensland is certainty. We know the price will not be cheap. We already know what the price is, but we know what the window we need to complete in and that partnership with retailers who are trying to set themselves for that Olympics plus all the activity that's occurring around the Queensland CBD, including rail infrastructure, bus infrastructure, events -- event areas, universities moving into town, student accommodation moving into town, downsizers moving into luxury apartments around South Bank, Fortitude Valley and the rest of the city. We see this with the capability that has been built within the team that's been now transferred to this job as a massive opportunity for the next stage of development.

What you see here, the perspective on the left is from Queen Street Mall. We're at the top end of the mall. The bottom end of the mall, Ross was mentioning, we own QueensPlaza, which is the luxury proposition, not dissimilar to sort of like a Westfield Chatswood in a much better version and a Chatswood Chase. We expect quite a fair bit of cross-shopping between these 2 assets. Thankfully, we own both of them.

And the image on the right-hand side is essentially directly across the road from that is the terminus of the Cross River Rail connection, which is sort of 70,000 people a day get out through there and just basically a short distance from there, there's a brand-new commercial tower being built straight over the top of that.

So it does in these modern cities where we employ the same. We can't do it with QVB because we have objectives, but we look to bring in new technology, digital screens for -- not only for the asset, but also for revenue creation, which is essentially that image on the right. These will be part of the DA proposal, which is lodged next month.

Timing is commenced construction formally in March. To Ji's point, we're doing a huge amount of early works in the asset at the moment to really uncover the risk. We'll have pre-leasing commitments on this particular project for a February Board approval. That's the timing at this particular point in time, subject to anything that occurs crazy around the world. And returns, we've said similar to our baseline returns here, but where we're sitting at the moment, we're more confident in terms of being able to nudge that up somewhat.

I might worry about [indiscernible] there. This is pretty -- I'll go to this, and I'll come back to Q&A, and then we'll wrap up and then do a tour of Chadstone. I think Ji has mentioned quite a fair bit of this. So I'm just going to comment on a few key things that I think are essential. And hopefully, we've got the message across today.

Retail assets are capital sensitive, capital intensive by their very nature, whether that's small, medium or large injections. We believe that essentially, obviously, we need to create value from capital, but that constant reinvestment in the assets is important in a measured way. And to do that, you really need to build capability across your development leasing management teams to be able to execute on that.

I'm proud of the team that we've been able to develop. And I think now we've got track record on that allows that team to continue to invest, particularly in those medium to large developments and then also being able to exhibit that expertise going down into some of those smaller developments.

I've said this to this group many times, as an owner-operator and not a fund manager or as an owner-operator with a joint venture partner that's equally aligned, we can just move at pace, and we can make the right decisions for the asset without getting compromised in terms of the right outcome or the right timing to execute that outcome. And we can't do that unless we have really strong trusted retailer relationships, both domestically and globally.

Matt's team has an account management function that has a few very senior people, including Ross, that basically manage the top 50 retailers that we do business with in Australia that occupy 3/4 of the space that we have in Australia. So it is a very concentrated, what you call, incestuous market. From -- I have to say, from CEO down, we have to have strong relationships with our retailers. We need to understand their business viability and their strategic plans for their business. We need to understand their ownership models, and we need to understand, more importantly, where they're looking to place their bets to expand. And I think we've done a reasonably good job associated with that.

Capital recycling is key. And I mentioned at the start of this, being able to take advantage of a capital transaction market where we believe those assets have been good for us to a point in time, but ultimately don't meet the strategy moving forward, predominantly because we see better returns in a very strict selection of assets is something that we still see is fit for purpose for our strategy moving forward, plus the addition of select non-retail developments such as Chatswood Chase as we just went through. And the reason why we can do that is really by a strong balance sheet.

I don't think you'll see us having anything but pushing for those credit ratings that remain where they are and at the lower end of that 25% to 35% gearing and ensuring that we continue with high hedging profile despite the temptation of not doing so right at the moment as interest rates are going up, averaging in has worked for us over a reasonable period of time, and it just removes uncertainty from an earnings growth profile.

And the strategy, probably the key point is when we invest in something like Chadstone, which is a huge investment, but a minor component of the asset like the fresh food that you're about to see, it has a positive implication across the rest of the retailers in the entire asset. So ultimately, we're creating precincts that were not there in the past that generally increases the trade area. I think Amy said it in the past, already Chadstone, we define a huge trade area and already 24% of the turnover from Chadstone comes from outside of that trade area, comes internationally, comes domestically, comes from regional Victoria as a real shopping mecca.

The intent for us with Chatswood in particular, is to create Chadstone's -- create a version of Chadstone in other areas around the country where we see that real population growth, infrastructure investment, employment growth, et cetera.

And it's all about capability. So at the end of the day, we can have the best strategy in place. But ultimately, for us, it's about developing a culture where people are excited about what we do as a business and ensuring that we have retention of those key people that we can replicate some of the more successful outcomes that we've done, not only in the development space, but across the entire business for a sustainable period of time.

With that, you're not getting a break. So just before we go to Q&A, we -- unless they're already here, a couple of our management team from Chadstone will come and join us in this room. We're going to break the group up into -- Jane put 2 fingers up and said 5 and said 2, just to be a little bit more manageable so that everyone -- all the Q&A can actually be heard, and then we'll tour through Chadstone itself. At the end of the tour, there's Michael [indiscernible], we end up in a place called -- it's a microbrewery that's at Chadstone. It's called Urban Alley. That's where we'll have a couple -- for those that can stay on, we're having a few drinks. And for those that can stay on even further, we've also got a dinner plan for the night as well.

I'll open up for questions if there is any.

All right. So we've answered all the questions, have been as comprehensive as we can today. I'm sure I'll say this over dinner as well, but I do want to -- it's super -- there's a lot of effort that goes into organizing these days, and a huge thank you to our team for putting this together.

Duy, who's organizing our host to come in through the door, Jane and her broader team, including Ji, Adrian, Matt, Ross, all the teams put in a huge effort. But we do it because we really embrace our relationships with our partners, whether it's debt, equity or joint venture partners that are attending today and also tomorrow. So a big thank you for you guys.

Hopefully, you've got something out of today. We will bug you with follow-ups in terms of what you thought was good, bad or indifferent. These things we don't do every year. But when we do them, we want to make sure that they add value, and it's worth your time turning up and listening to what we have to say.

Thank you for standing by and welcome to Vicinity Centres' FY '26 Annual Results Briefing. [Operator Instructions]

I would now like to hand the conference over to Mr. Peter Huddle, CEO and Managing Director. Please go ahead.

Good morning and thank you for joining us for Vicinity Centres' results call for the 12 months ended 30th of June 2026. Joining me on today's call is Adrian Chye, our Chief Financial Officer.

I will start today's presentation on Slide 5. FY '26 was another year of important progress for Vicinity with disciplined investment, capital allocation and operational execution reflected in our financial results, portfolio metrics and strengthened balance sheet. Our strategy remains clear to own and operate premium and differentiated retail portfolio capable of delivering superior income and value growth through cycles. The structural conditions underpinning this strategy remain in place. Retail supply per capita continues to contract and leading discretionary retailers are prioritizing high quality productive assets.

In this context, we completed the $625 million transformation of Chatswood Chase with the asset now home to the largest and most compelling luxury offer in New South Wales outside Sydney CBD. We have secured full ownership of Uptown having acquired the remaining 75% interest for $212 million. Uptown is a landmark Brisbane CBD asset with significant growth potential. We acquired DFO Eastern Creek, increasing our exposure to Western Sydney's residential growth corridor and strengthening our established outlet operating platform. And we continue to recycle capital into assets with stronger growth prospects and clearer strategic relevance.

Having entered into binding agreements for the divestment of Taigum Square for $120 million only late last week, total assets divested in FY '26 and FY '27 to date comprise $447 million. Adrian and I will cover the details shortly, but in summary. Statutory net profit after tax was $1.39 billion, up by nearly $400 million. Funds from operation increased to $700.1 million and on a per security basis reached $0.1521, which was at the top end of our guidance range of $0.15 to $0.152 per security. The Board declared a final distribution of $0.062 per security, bringing the FY '26 distribution to $0.124 per security and representing a payout ratio of 95.5% of adjusted FFO.

Supported by occupancy of 99.6%, positive leasing spreads of 4.2% and disciplined property management, comparable NPI grew 4.2%. Our balance sheet strengthened further in FY '26 with both headline and pro forma gearing remaining at the lower end of our target range. Meanwhile, $2 billion of debt transactions were executed during the year, the outcomes of which materially increased our weighted average debt maturity from 3.8 to 5.1 years and preserved our weighted average cost of debt at 5%. Of particular note, NTA increased by $0.19 or 7.7% to $2.59 per security and by extension, we are pleased to report a total return of 12.8% for the year.

Today's result represents the cumulative benefit of a portfolio we have been deliberately reshaping over several years supported by favorable sector fundamentals. We have recycled capital from smaller, lower growth and less strategically aligned assets and redeployed it into premium assets via targeted acquisitions and major developments. Premium assets comprise 67% of portfolio value, up from 51% in June 2022. The proof points that underpin our strategy remain. At 5.1% and positive 7.7%, comparable NPI growth and leasing spreads delivered by our premium assets remain well above the relevant portfolio averages. And specialty sales productivity of more than $17,000 per square meter was more than 25% above the portfolio average.

The combination of several years of superior portfolio metrics is showcased by the NPI growth of 5.8% per annum delivered by our premium assets since June 2022 on a like-for-like basis. And by extension, income has been the major impetus underpinning the 41% uplift in average asset values over the same period. Our strategy is fit for purpose and our conviction remains anchored by the financial outcomes it is delivering. In this context in a market where opportunities to add outlet exposure are limited, the acquisition of DFO Eastern Creek strengthens our outlet portfolio and increases our exposure to Western Sydney's growth corridor.

While subject to receiving confirmation for the assignment of the ground lease, we will utilize our nomination provision to onsell the large format retail component on a pass-through basis for $49 million and by extension, the acquisition of DFO Eastern Creek settled on June 30, 2026, for $351 million. DFO Eastern Creek combines everyday convenience with destinational outlet retail and with its distinct catchment and customer profile, the acquisition complements DFO Homebush. Outlet retail is a format we know well and we have a proven capability of acquiring, repositioning and growing income over time.

Since acquiring our 50% interest in DFO University Hill in 2020 and Harbour Town Gold Coast in late 2021, these assets have delivered NPI growth of 10.2% and 6.5% per annum, respectively. At DFO Eastern Creek, we see clear scope to lift performance over time by targeted leasing, improved customer experiences and operational efficiencies. What's more, in the more medium term, there is an additional 8,500 square meters of approved outlet expansion, which allows us to contemplate greater growth potential into the future.

Turning now to retail sales, which remain resilient. Over the year, more than 380 million customer visits to our assets underpinned annual portfolio sales of approximately $18.4 billion representing MAT growth of 3.3% at June 2026, which was 50 basis points higher than June 2025. Specialty mini major sales increased by 4% with all retail categories finishing the year in growth. While growth rates moderated, sales in the second half of FY '26 were above the same period last year despite the vastly different operating environment.

While luxury sales moderated as cost of living pressures impacted the aspirational customer, the category continues to enjoy exceptional productivity levels at around $61,000 per square meter. Excluding luxury, specialty mini major sales grew 3.5% in the second half. And finally, for the seventh consecutive 6-month period, we delivered growth in specialty sales productivity reaching $13,512 per square meter in FY '26. Sales productivity is ultimately the output of strategic leasing, curating the right brands, formats and customer offer across each asset and the leasing outcomes this year show the strength of that execution.

In this context, occupancy strengthened to 99.6% representing less than 1 vacancy per center on average across our portfolio. Leasing spreads for the year were a positive 4.2%, our strongest annual result to date. Adding to this, average annual escalators were maintained at 4.8% and reflecting retailer demand for space. In an increasingly supply constrained environment, average tenure on new deals completed increased to 4.6 years. At 14.4%, our specialty occupancy cost ratio remains healthy and continues to provide capacity for future rental growth where sales and retailer profitability support it.

The proportion of income on holdover reduced to a record low of 1.5% or just 92 stores excluding sites strategically held for development. Together, these metrics point to a healthier, more productive asset portfolio and to the value created when retailers use Vicinity's portfolio to enter, grow and scale in Australia. That pathway often starts at Chadstone, then extends for our premium assets and over time into strong regional centers. This is especially evidenced by the proliferation of the number of mini major stores, both across and within our portfolio in recent years.

Since June 2019, average store sizes across the portfolio have increased by 19%. In some cases, high performing specialty retailers expand into larger format stores to maximize sales potential. In other cases, both new to market and established retailers are using mini major stores to scale into additional assets. Athleisure, beauty and lifestyle brands have led this shift, seeking larger formats to showcase broader ranges and immersive brand experiences.

The leasing outcomes are compelling with mini major leasing spreads at 6.5% in FY '26. This is not a 1-year aberration. Leasing spreads for mini majors have tracked above the portfolio average for the last 6 consecutive 6-month periods. And with mini major sales growth tracking at 7.5% per annum since June 2019, the current and future upside potential is sustainable.

I'll hand the call to Adrian.

Thanks, Peter, and good morning. I'll start on Slide 12. Statutory net profit after tax for the year was $1.391 billion with $700 million derived from FFO and $691 million from statutory noncash and other items largely reflecting net property valuation gains. FFO increased 3.9% to $700 million. And at $0.1521, FFO per security was at the top end of our guidance range. Adjusting for one-off items and lower development-related loss of rent, FFO per security increased 4.1%. Reported NPI increased by 2.2% with strong comparable NPI growth and development income partly offset by transaction impacts.

On a comparable basis, NPI increased by 4.2% reflecting an improvement in occupancy, positive leasing spreads and fixed annual escalators of 4.8% for specialty and mini major tenants. Our ongoing focus on cost management resulted in net corporate overheads increasing by only 1.6%. Net interest expense reduced by 3.8% primarily due to net proceeds from asset sales and the distribution reinvestment plan. This was partly offset by lower capitalized interest. Maintenance CapEx and leasing incentives at approximately $100 million was consistent with recent years.

Turning now to valuations on Slide 13. The portfolio delivered a net valuation gain of $293 million or 1.8% for the 6 months to 30 June 2026, marking the fifth consecutive half of positive valuation growth. Income growth was the key driver underpinned by enhanced portfolio quality and strong operating metrics. Outlets were the strongest contributors to income growth led by DFO South Wharf and DFO Homebush. Overall, the weighted average capitalization rate tightened modestly by 2 basis points supported by favorable retail sector fundamentals together with sustained investor appetite for retail assets, providing transaction evidence across the full spectrum of retail asset segments.

Positive valuation growth supported an increase in net tangible assets per security, up 2.8% in the second half of FY '26 to $2.59. On a full-year basis, the net portfolio valuation gains were $700 million contributing to a $0.19 or 7.7% increase in NTA. Looking ahead, Vicinity's enhanced portfolio quality, resilient income growth and supportive sector fundamentals provide a strong platform for continued positive valuation outcomes.

Turning now to capital management. Maintaining a conservative and disciplined approach to capital management while preserving the flexibility to invest through the cycle remains central to Vicinity's strategy. We continue to actively manage our capital, deploying approximately $900 million of capital into development projects and strategic acquisitions and divesting $447 million of assets and raising $192 million via the DRP. At 30 June, our gearing was 26.1%. Adjusting for the settlement of the Uptown acquisition and Taigum Square sale, pro forma gearing is 26.5% and remains at the lower end of our 25% to 35% target range providing ongoing flexibility for future investment opportunities.

We also maintained our investment-grade credit ratings of A stable from S&P and A2 stable from Moody's. During the year, we capitalized on supportive credit market conditions, raising $732 million through 10-year debt capital markets transactions. This included a $500 million 10-year AMTN as well as Hong Kong dollar private placements. Pricing was favorable and investor appetite for longer tenors supported a meaningful extension in weighted average debt maturity to 5.1 years from 3.8 years at June 2025.

We also extended and repriced $1.2 billion of bank facilities, reducing interest cost and further strengthening the debt maturity profile. Our weighted average cost of debt was 4.98% and the average portion of hedged debt over FY '26 was around 90% and our forecast for FY '27 is 87%. With $800 million of undrawn debt facilities, we retain sufficient liquidity to cover all FY '27 funding requirements. The DRP will remain active for the FY '26 final distribution supporting continued capital flexibility.

Thank you. I'll now hand back to Peter.

Thanks, Adrian. Turning to our developments. FY '26 marked a defining milestone for Chatswood Chase with the completion of the $625 million transformation, including the opening of the luxury precinct from 30th of April. The project has repositioned Chatswood Chase as Northern Sydney's preeminent retail destination, bringing together global luxury maisons, international icons, premium Australian designers, elevated dining, fresh food and bespoke customer services.

Following the successful opening of the luxury precinct, Chatswood Chase has since welcomed Tiffany, Dolce & Gabbana, Hermes, Rolex and Cartier; further endorsing the asset's luxury repositioning and reinforcing its position as home to the largest and most compelling luxury offer in New South Wales outside of the Sydney CBD. While it's still early days, performance has been encouraging with the quality of the new offer resonating with customers and retailers.

From an investment perspective, we're especially pleased to share that expected returns from the project have increased. The stabilized yield is now expected to be around 6.7%, up by approximately 70 basis points with an unlevered IRR of around 11%, up by approximately 100 basis points. Upon stabilization, Chatswood Chase should be valued at approximately $1.5 billion translating to an estimated development profit of more than $250 million.

With Chatswood Chase now complete, the next major milestone in our development pipeline is Galleria, which is entering its final stages ahead of opening in November in time for the important Black Friday and Christmas trading period. The project will elevate Galleria's role as a leading retail, dining and entertainment destination in Perth's North-Eastern Growth Corridor with a revitalized mall, new leisure and dining precinct, state-of-the-art cinema and enhanced customer experience. And with 98% of leases instructed, we're pleased to announce the retailer lineup, which comprises a strong mix of national and international brands.

Alongside long-standing partners, including a refurbished Coles and Myer stores; Galleria will welcome Hoyts, Mecca, JD Sports, JB Hi-Fi, Oroton and Victoria's Secret. Like Chatswood Chase, this project is expected to exceed original return expectations with a stabilized yield of around 6.25% and an unlevered IRR of approximately 11.5%. And as Galleria nears completion, our preparation for the redevelopment of Uptown accelerate. With full control of this landmark Brisbane CBD asset now secured, the opportunity is to create a complete full-line retail asset.

Our plans for Uptown will address a clear gap in Brisbane's CBD retail offer and will naturally complement our luxury proposition at QueensPlaza. Our plans include a major repositioning of the retail asset, upgraded services, contemporary ambience and improved customer amenity, which is appropriately adjacent to major infrastructure upgrades in the Brisbane CBD. We are progressing authority approvals presently and we anticipate a project cost of between $350 million and $400 million. And our expected project returns remain unchanged with a stabilized yield of greater than 6% and an unlevered IRR of greater than 10%.

From a delivery perspective, the project is well advanced with dedicated organizational capability deployed, positive engagement with local and state governments and Hutchinson Builders engaged through a preconstruction process. Chadstone continues to evolve as Australia's leading retail destination and one of the country's most compelling retail-led mixed-use precincts. With more than 22 million customer visits each year, Chadstone provides an unmatched stage for leading brands to invest in flagship experiences, showcase their best concepts and connect with customers at scale.

The luxury precinct is now entering its next phase of development with Louis Vuitton, Dior, Hermes and Fendi investing in larger formats to showcase broader ranges and deliver more immersive brand experiences. Together, these maisons will occupy around 3,000 square meters of space at Chadstone, an increase of approximately 80%. As we maintain continuous trade for these retailers and their clients, construction is underway with openings planned from mid-2027. And beauty and well-being powerhouse, Mecca, is also investing in a new 2,400 square meter next-generational store, almost tripling its current footprint.

Opening in time for Christmas; the store will showcase more than 200 brands, offer over 50 bookable beauty services and bring Mecca's latest beauty and well-being concepts to Chadstone. Importantly, our development approach is not limited to large scale transformations or premium assets. Building on recent examples this fiscal year, including the repurposing of the former David Jones space at Mandurah Forum and the new Uniqlo flagship at Emporium Melbourne, are important projects at Grand Plaza in Queensland and Castle Plaza in South Australia.

At Grand Plaza, we are repurposing the former cinema space to introduce a new Rebel alongside an upgraded food and dining offer with completion expected in the fourth quarter of FY '27. At Castle Plaza, we are replacing the former IGA tenancy with a new full-line Woolworths supermarket together with a number of new specialty stores. We expect to complete the works in the third quarter of this fiscal year. Taken together, these projects demonstrate the breadth and discipline of our development program from major transformations at Chatswood Chase and Galleria to the next phase of investments at Chadstone and Uptown and targeted projects at Grand Plaza and Castle Plaza, our focus is consistent.

We are allocating capital to assets where we see a pathway to stronger income, improved market position and long-term value creation. That also means upgrading the customer proposition, supporting the expansion of plans of leading retailers and enhancing asset quality in a way that delivers compounding returns over time. We look forward to sharing more detail on our development pipeline at our capability showcase in mid-September.

Turning now to mixed-use. As we've said before, Chatswood Chase represents our most compelling near-term mixed-use opportunity. As a reminder, the opportunity comprises 480 luxury apartments and represents a compelling value creation opportunity, leveraging the strength of the recently transformed retail asset and the quality of its surrounding catchment. Since our interim result announced in February, we have secured revised HDA approval for residential tower height and residential connectivity into Chatswood Chase.

We have received confirmation from the design review panel that the project demonstrates the potential to achieve design excellence, which is a major milestone. Community engagement was recently completed and by extension, our development application documentation is advancing with current time lines indicating authority approval being received in 2027. We continue to retain full strategic optionality as we evaluate funding and delivery structures that balance the realization of attractive returns with disciplined balance sheet management.

Turning now to FY '27 earnings guidance. FY '27 represents a meaningful inflection point for Vicinity as the benefits of our portfolio repositioning, disciplined capital allocation and recent investment activity are expected to translate into a step change in our earnings growth profile. In this context, we expect FY '27 FFO per security to be in the range of $0.16 to $0.162 and AFFO per security to be in the range of $0.139 to $0.141. This implies FFO per security growth of between 5.3% and 6.6%. The key assumptions underlying guidance are set out on this slide and as always, our guidance remains subject to unforeseen circumstances and material changes in operating conditions.

In closing, our FY '26 results demonstrates that our investment strategy is clear, fit for purpose and delivering tangible outcomes. Vicinity is a stronger business than it was 4 years ago with a more productive, more clearly differentiated portfolio, clearer earnings growth pathways and the balance sheet strength to support ongoing investment. As we look to FY '27, we are confident in the elements we can control.

Not only does a stronger-than-expected FY '26 provide a stronger underlying earnings base in FY '27; but Chadstone enters FY '27 fully stabilized, Chatswood Chase contributes a full year of income, Galleria opens in November and Uptown and DFO Eastern Creek provide income and future value potential. Meanwhile, the structural conditions underpinning our strategy also remain in place with retail supply per capita continuing to contract and retailer demand prioritizing resilient and more productive assets.

That said, we remain mindful of geopolitical uncertainty, potential shifts in household and financial conditions and broader market volatility and we continue to manage the business and allocate capital accordingly. Taken together, our outlook for FY '27 is one of cautious confidence. Before I hand the call to Q&A, I extend our thanks to our investors, our retail and joint venture partners, our customers, of course the Vicinity team and indeed, everyone associated with the company for your support and contribution.

Thank you. We'll open the call to questions.

[Operator Instructions] Today's first question comes from Solomon Zhang with UBS.

Just wanted to ask about the lift in yield on cost assumption on Chatswood to 6.7%, clearly pleasing to see. Was that more on the cost side or income? What drove that? And have you revised your 2-year stabilization period to that stabilized yield on cost?

Simon, it's Peter here. Fundamentally, it's all based on income in the lift -- in that uplift, which is a pleasing result from us. That's how we would like to see it. And then obviously that income then compounds into the future at a much higher rate. In terms of the stabilization, we're still holding -- it's still very early days with Chatswood. So we're still holding our stabilized assumptions the same, which is essentially a higher level of stabilization for FY '27, about half that amount for FY '28 and a fraction of that amount going into FY '29 as there's still about 4 luxury retailers to open over the course of the next 12 months and then obviously reestablishing the market area for them.

Just second question, maybe a broader one just on I guess the macro and how that's influencing your leasing decisions. I guess in an environment just intuitively when sales are decelerating, you would have expected that maybe spreads have moderated. But just looking at your apparel and footwear spreads, they were 6% versus sales growth at 1%. Just trying to reconcile that. And maybe just touching on how you think the sales actually influences that re-leasing spread and whether you think 4% is actually sustainable heading into '27 as well.

Yes. Solomon, it's Peter here. It's probably fair enough to say there has been moderation in sales. And within our FY '27 guidance, we essentially have put within that guidance a leasing spread forecast of around 3%. So we have taken some reduction in terms of the performance of this year into the guidance for next year. So we do take that into account. That said, we're at 99.6% occupancy of our assets. We had very strong leasing demand, particularly in the last 2 months of the fiscal year and we are churning about 26% of our tenants.

So that's fundamentally on purpose to ensure we have the right brands that are more productive within that space. And over the last few years, that's really how we -- that active curation management is really how we've been able to drive better performance in that leasing spread. We would hope that continues throughout FY '27. We're obviously mindful of where sales are. I would say they have been quite resilient sales. They have come off in the last 6 months. We've just printed July sales as well, which were slightly better than the last quarter.

And our next question today comes from Connor Eldridge at JPMorgan.

Just a follow on from that last comment around the assumption of 3% spreads in the '27 guide. How does that compare to the spreads that you achieved in the fourth quarter? It looks like they might have stepped down a fair bit just based on the full year average of 4.2%.

Connor, it's Peter here. Probably the fourth quarter, the leasing spreads were around that 2% mark. Again what we're -- obviously, look, it's not untypical for that to occur. For whatever reason, we normally have stronger spreads in the first half of the fiscal year and then have slightly weaker spreads coming into the second half. Every month the spread remained positive. But yes, it was around 2% to 2.5% for the last quarter.

And just on the Chatswood resi opportunity, you mentioned optionality across delivery and funding structures. Could you maybe just expand on I suppose what your current preference would be based on just where you see the market today?

Our preference has always been to partner on that project at least with, as a minimum, a capital partner and someone who also may bring expertise into that venture. So our focus really at the moment is to secure the rezoning and the development approvals. That really entrenches the value into the land. We're obviously really mindful of the residential market and particularly since the federal government's changes in taxation policy that has had an impact around residential. But we're circa around best case 2 years from construction commencement of that. So again, kind of we're focused on getting the approvals in place over the course of the next short period of time. We would hope to then inform the market of the execution strategy ideally through this fiscal year.

And our next question today comes from Carl Braganza with Jarden.

A few questions from me. The first one was on Uptown. I think the total cost range has increased by $50 million versus what you flagged at the first half. What's driven that change?

Carl, it's Peter. Probably a couple of things. We spent the last 6 months in really detailed due diligence hand-in-hand with Hutchinson Builders who we've employed in the preconstruction phase. And it's a brownfield development so there is some additional costs associated with plant and equipment replacements around compliance. That's one component of it. The second component is as we've gone through design development, there's some income accretive opportunities that require some capital to go into the project that we've included within the scope and will be included shortly within the development approvals with the Brisbane City Council.

We've talked them through those enhancements as well. They fundamentally represent the 2 major items that have led to the revision in that cost range. I would say the return range remains the same and we'd be hopeful similar to the projects we've just delivered that they could also improve. We would update the market fully. We would expect to be pretty much completed ready to commence by the time of the fiscal half year.

And then final one for me was what was the yield on the Taigum Square asset?

The passing yield on sales is essentially around the 6%.

And our next question today comes from David Pobucky with Macquarie Group.

Just the first one on capital recycling. You spent the last number of years upgrading portfolio quality through Uptown, Chatswood Chase, Eastern Creek, et cetera, as well as recycling regional assets. So just curious to understand how much more portfolio repositioning and recycling is required and what might kind of that look like in terms of acquisitions and disposals going forward?

David, it's Peter. It's probably fair enough to say we've broken the back of it, David. I think we've sold 16 assets in the last 3 years and the funding of that -- that has really been our main source of funding for acquisition and development activity. It's also led to a meaningful upgrade of our portfolio quality. We have Box Hill North on the market presently at the moment and that's one that we haven't transacted at this particular point in time, but it's been publicly marketed.

There might be 1 or 2 other assets that's subject to opportunity, the opportunity being obviously to further increase the quality of our portfolio and subject to it being value accretive that we could trade either at 100% or potentially bring in a joint venture partner. But I would suggest that we're materially through the asset divestment program that we had envisaged in the core of our portfolio.

And just the second one around consumer and retail trends. I mean sales have remained relatively resilient. So just any kind of feedback or commentary you can provide on trading post the end of the fiscal year? Have you observed any increase in retailer requests for rent relief or lease renegotiations, et cetera, any kind of anecdotes that you can share?

David, look, typically July is a fairly quiet period in terms of lease transaction conclusions. In context, it probably represents only about 25% of the activity of June, which is a very active year. In terms of rent relief, no material uplift in either determinations or requests. From a retail sales point of view, it might be helpful for those on the call. We essentially finished July at around about a 3% positive comp growth. And importantly, particularly across many majors and specialties, that was around 4%. So that was an uptick versus both May and particularly June. So we still feel as though --whilst sales in this half of the year or in 2026 aren't as strong as the back half of 2025, we still feel as though they're quite resilient albeit probably a little choppy through the year. They're hard to predict.

And our next question today comes from James Druce at CLSA.

Just on the sales in July, do you think there's any World Cup effects coming through there or is that just a general pickup?

That's an interesting one, James. I'm not sure if it's the World Cup. But what we are seeing, which is an interesting trend in these particular times, is things such as food catering so people going out to restaurants, jewelry, cinemas. So they're sort of simple luxuries. They've all actually been trading above the average. Probably some sort of more moderate sales are more within our major retailers; department stores, supermarkets and discount department stores. We've only just rolled out July, James, so I probably haven't got the fine detail of whether there's any World Cup influence on that or not.

Okay. And one more, if I may, just on -- actually 2 more. In catchments where house prices are falling more aggressively than where you have centers, are you seeing that impact come through or is it largely sort of pretty immune at the moment?

James, I think we need to have a -- we're typically 2 to 4 weeks behind in terms of culminating our sales data. So we'll probably need to have a solid period of about 6 months to determine if there is any impact associated with that. We're clearly conscious of the fact that value within house prices has a positive correlation with consumer confidence and then there is obviously a correlation to consumer expenditure from there and that's something that we're mindful of and that we'll watch through. At this particular point in time, sales are fairly consistent across the portfolio. We're seeing really strong sales in our CBDs, which is great to see, even Melbourne CBD despite the sort of rhetoric around Melbourne CBD and other property classifications. Probably where we're seeing it is Victoria more generally slightly down in terms of sales productivity versus the rest of the country.

Okay. That's clear. And one more, if I may. I think at the start of the year, you were guiding to around $400 million of CapEx for '26, I think you came in at $350 million. Just wondering what sort of gave you that little boost to spend less by the end of the year.

Yes. This is Adrian here. We ended up about $330 million all out for the year. Some of that is probably just some delayed starts on a couple of the projects, particularly around incentives for Chatswood. We probably just -- it's a very timing-specific kind of impact where some of the incentive spend for Chatswood actually goes into FY '27. So it's really just around the edges on incentives and pushing some CapEx into FY '27.

And our next question today comes from Howard Penny with Citi.

Congrats on the results. Just a first question, it's just thinking about ideas in the market and one of the things we've seen is some of the bigger shopping center owners selling down some significant stakes in their core assets and effectively earning some fees and increasing the return on equity on the investment. Is that something that's on the desk of Vicinity and potential for you?

Howard, it's Peter. So we have done that over the last 4 years in our core assets. The Nikos Group, which is a strong joint venture partner of ours, a private family business has transacted across 3 50% shares of our core regional assets; 2 in South Australia and 2 in Victoria; over the last 3 years so that we sit side by side as a 50% partnership and we do earn fees from that in terms of our management rights. That still remains our preferred model.

We're different than others in the market. We're probably more similar to Westfield where we'd like to put our capital at play from a balance sheet and particularly on our premium assets where they have higher growth. We prefer to have our capital also achieving that higher growth and then earn fees on top. We're not a fund manager per se.

And then just another question. The portfolio is post the development producing great sort of organic growth and leasing up. But just thinking back to those inorganic strategies and putting more capital beyond the Uptown development, et cetera. Are there new developments and extensions beyond that that you're getting closer to pressing the button on or acquisitions? How are you thinking about those inorganic activities over the next 2 years?

It's Peter again, Howard. We're obviously acquisitive. Essentially we bought 6 assets in 6 years, roughly about 1 per year. We're highly selective in terms of them and hence, things such as Uptown and DFO Eastern Creek really had to meet quite a select criteria in terms of meeting the requirements for the portfolio quality we want to have moving forward. There are a number of assets that are in the market that would be attractive for us either today in their existing form or today in their existing form and with development opportunities.

In terms of our development pipeline itself, we're sequentially moving through them. So we obviously moved from Chadstone into Chatswood, moving into now the opening of Galleria. When that opens, we'll then move into the start of Uptown. We're doing little projects at Chadstone at the moment with luxury at Castle Plaza and Grand Plaza.

So I suppose what I'm getting at, Howard, it's a capital-intensive industry and we like to invest capital as long as there's the appropriate return and as long as that capital is selectively allocated to make sure it makes its best return and then make those assets more contemporary for not only the communities that they serve, but also for the key leading retailers that we do business with. So I would anticipate moving forward into the future. At this particular point in time, we don't have another significant development planned at this point in time. But we'll always have those $20 million to sort of $60 million interventions into assets as long as they're making the appropriate returns.

Thank you, Peter, and congrats once again.

And our next question today comes from Simon Chan at Morgan Stanley.

I know it's early days, but the center has been trading for a number of months now. On Chatswood Chase, what do you reckon is the occupancy cost run rating at the moment, spec occupancy cost?

Simon, right at the moment it's probably around the 15% to 16% I would say. We typically run luxury retailers on a lower occupancy cost and that's traditional across anywhere, to be honest. So they typically run sub-10%. I would anticipate some of the nonfood retailers are probably running around that 18% to 20% occupancy. That's the reason why we have stabilization in there as well to make sure that we establish its market area through marketing and we do provide a little bit of a rental assistance to some areas of new developments to ensure that they hit their mark. And then the food is trading extremely well. So that's probably how I'd summarize Chatswood at the moment. It's still very early days. We only opened Hermes 5 or 6 weeks ago and that was a key retailer to really start driving traffic through there.

I've been there already, Pete, just FYI. The 15% to 16%, is that what was in the fees. So based on your comments though like once it's fully stabilized in, say, 18 months, 24 months' time; in theory it should be below 15% to 16%. Is that fair?

Yes, probably because food will trade slightly below that and the luxury will trade probably sub-10%. So if you exclude luxury out of it, it should be around that 17% to 19% OCR mark.

Okay. Cool. And just to clarify, so eventually, the stabilized yield has gone from 6% to 6.7%. What sort of yield have you factored in for FY '27?

So for '27, we're essentially around 5%. On the running yield, it generally gets to 5% for '27, a bit over 6% for '28 and it will hit the stabilized yield ideally at the start of FY '29. Maybe helpful as well. I mean the target from a sales point of view, we basically have that around about $850 million. And we're trading -- we won't know that until we have a good run rate of 6 months to see how close we are to that number.

And our next question today comes from Thomas Ryan at Green Street.

Just a question on obviously you've done a lot of work already in terms of the portfolio curation. And I just wanted to ask looking at the revaluations that you've posted in your results, are you comfortable with the current sort of lens in terms of that breakdown of course ex Chadstone, but in terms of how you've curated the portfolio into greater exposure to outlets and less into regional, subregional assets? And how can we sort of see that profile over the next 12 months in terms of how you're thinking about revaluations and where you're pushing the income the most?

That is a very good question. I'm not sure if I have a very good answer. We are happy with the portfolio composition. So we're clearly focused on CBDs. We're clearly focused on outlets. And we're clearly focused on assets such as Chadstone, Chatswood and Lakeside Joondalup, which we purchased. We see that typically the growth rates on those assets have been closer to 6% from a comp NPI growth versus the standard portfolio, which is closer to 3%. We do foresee subject to all things being equal that that will continue to occur in those assets.

And hence, that's the reason when opportunities do present themselves in the market where we see we can add value, they typically align with those premium outlets or assets such as Lakeside Joondalup, which we've purchased 50% of. We don't have a breakdown number of exactly what FY '27 is going to look like on values for those assets, but we would anticipate that it would be similar to what's occurred in the last 12 months.

And just to follow up on Carl's earlier question on that 1 asset that you're about to settle on in terms of that divestment in Queensland. Obviously it was -- I think in the notes it sort of mentioned there it was on the book value from 30 June last year. I was just wondering if you had it marked as June this year in terms of where that landed relative to that number if you did have it valued in June.

Yes. The number in our June accounts reflects that $120 million sale value.

And as there are no further questions at this time, I'll now hand back to Mr. Huddle for closing remarks.

Thank you, operator. And look, just on behalf of myself and Adrian and the broader Vicinity team, I'd just like to thank the analysts for their interest in our company and we look forward to catching up with you independently over the next day or so and answer any further questions in more detail. Thank you again.

Thank you for standing by, and welcome to Vicinity Centres FY '26 Interim Results. [Operator Instructions]

I'd now like to hand the conference over to Mr. Peter Huddle, CEO and Managing Director.

Good morning, and thank you for joining us for Vicinity Centres results call for the 6 months ended 31st of December 2025. Joining me on today's call is Adrian Chye, our Chief Financial Officer.

Before we begin, I'd like to acknowledge the traditional custodians on the land on which we meet today and pay my respects to their elders past and present, I extend that respect to the Aboriginal and Torres Strait Islander peoples on the call today. I will start today's presentation on Slide 5, owing to the continued success of our strategic execution, disciplined focus on delivering our immediate, medium and long-term growth priorities and emit a supportive retail property sector fundamentals, I'm pleased to report that we have had a strong start to FY '26.

Touching on the results themselves. Vicinity delivered a net profit after tax of $805.6 million for the 6 months, up by more than 60%, reflecting growth from funds from operation, or FFO, and a meaningful uplift in portfolio valuations. At 3.7%, comparable net property income growth reflects the continued strength of our portfolio metrics having increased portfolio occupancy and achieved a leasing spread of positive 4.6%, representing the highest leasing spread reported since Vicinity's inception in 2015. And of note, strong cash flows generated by our retail assets were augmented by a lowering of cap rates, which resulted in a $407 million or 2.6% net valuation uplift. And consequently, our net tangible asset per security increased to $2.52, up 4.8% in the half. I'm particularly pleased to announce that we have irrevocably accepted IFM's offer to sell the residual 75% interest in Uptown to us for $212 million. I'll share more on why we believe this is an exciting, strategically aligned and compelling business decision shortly.

We also exchanged contracts to sell Whitsunday Plaza and Gympie Central in Queensland, Armidale Central and New South Wales, Victoria Park Central in Western Australia and several ancillary land parcels. Totaling $327 million, these most recent divestments were executed at a blended 18.2% premium to June 2025 book values.

We completed and opened successfully the first stage of the reimagined Chatswood Chase on October 23 with the unveiling of this truly unique retail asset. Adding to this, just last month, we were delighted to welcome Kmart's headquarters to the One Middle Road office tower at Chadstone. Having joined Adairs' head office team at One Middle Road, Chadstone is now home to an additional 2,000 office workers in weekday trading.

Our investment strategy is clear. We are confident it remains fit for purpose, and we are executing it with precision consistency and importantly, with discipline. Showcased by our strategic and financial highlights today, we continue to actively reposition our asset mix, curating a more resilient and higher-growth portfolio that is well positioned to deliver sustained income and value growth today and for the long term. We are driving this by accretive acquisitions, important developments at our premium assets and by divesting nonstrategic assets at attractive pricing, where we are maintaining, if not strengthening our strong balance sheet and preserving our sector-leading credit ratings. What's more, we are executing this strategy in an environment of favorable retail sector fundamentals. As we've highlighted for some time now, population growth and increased household spending together with limited incremental retail floor space are collectively driving a growing shortage of quality retail gross lettable area per capita. This is increasing the fight for space in the best-performing retail assets that are owned and managed by retail property experts, which is, in turn, creating greater price tension and opportunity for superior rent growth.

At 3.8%, comparable NPI growth delivered by our premium asset portfolio was modestly above the portfolio average but was disproportionately impacted by burdensome taxes and levies on a like-for-like basis, our premium asset portfolio delivered an impressive 4.6% NPI growth.

At a solid 9.7% premium leasing spreads achieved were more than double the portfolio average. Our outlets were a standout, achieving a 14% leasing spread as retailers continue to expand their stores and increase sales productivity. The appeal of our outlet assets is reinforced by occupancy at 99.8%. We're near full capacity and retailer demand is creating strong leasing tension. And perhaps of most significance, our premium assets are now generating retail sales of around $17,000 per square meter, 26% higher than the portfolio average, once again reinforcing our view that we can sustain positive leasing spreads and rent growth.

Since embarking on this strategy in late 2022, our focus on delivering leasing outcomes that drive real income growth from a more premium, high-growth asset portfolio has underpinned a $1.8 billion uplift in total value of our assets. Noting the uplift incorporates our developments on a stabilized basis. And this is despite a net reduction of 12 assets and a 20 basis point expansion in capitalization rates and as a strategically located CBD asset with immense growth potential, the acquisition of Uptown is strongly aligned with this investment strategy.

Located on Queen Street Mall in Brisbane striving CBD, Uptown is a landmark retail asset with a long history and deep connection with Brisbane's retail identity. Today, Uptown acts as a primary gateway to the Queen Street bus interchange, Adding to this, the asset is expected to be a major beneficiary of sizable state-led infrastructure projects intended to enhance the connectivity of Brisbane CBD, notably in preparation for the 2032 Olympics. What's more? Brisbane CBD sits in a large and growing total trade area but currently lacks a large-scale full-line retail offering. We are confident we have the blueprint to fill this gap, securing full ownership enables us to mobilize and leverage our core competencies across development execution and project leasing and accelerate the rejuvenation of the asset and importantly, unlock its latent value.

Our vision for Uptown is to introduce a retail, dining and entertainment offer that in many aspects is akin to Emporium in Melbourne CBD. Naturally, this vision would complement the luxury offer we have curated at Queens Plaza also located on Queen Street Mall. Commencing in calendar year 2027, we are anticipating a total project spend of between $300 million and $350 million. Funded by a mix of asset sales and debt, development returns are expected to be in line with our hurdle rate being a stabilized yield on cost of greater than 6% and an unlevered internal rate of return of greater than 10%. Furthermore, the net impact of the acquisition of Uptown and the asset sales announced today is largely neutral to FY '26 FFO. The acquisition bolsters Vicinity's already unrivaled CBD retail portfolio and allows us to deploy our proven playbook, delivering superior and sustained asset performance and an outstanding retail destination for the broader Brisbane catchment.

And speaking of asset performance, on an annual basis, our assets welcome more than 384 million visitors and generated in excess of $18 billion in annual sales. After a strong second half of FY '25, where portfolio sales were up 3.8%, we are pleased to observe a continuation of shopper confidence and capacity to spend in our centers with total sales up 4.2% in the first half of FY '26.

Specialty and mini majors delivered 5.1% sales growth for the half, reflecting both solid growth in specialty sales as well as the value created by remixing strong-performing specialties into larger format flagship stores, notably across our premium assets.

Our portfolio-wide approach to ensuring the retail offering each center is contemporary and satisfies ever-evolving shopper needs is showcased by the positive sales growth delivered by both our premium and core asset portfolios up 5.3% and 4.9%, respectively. The combination of which strengthened specialty sales productivity to over $13,400 per square meter. Every retail category and every state enjoyed positive sales growth for the half. Jewelery outperformed, growing an impressive 11% on the prior period spanning all price points. Jewelery was closely followed by leisure at 10.3% growth, which was driven by the popular athleisure category recording growth of 10.8% as shoppers continue to show a strong and enduring affinity for on-brand retailers in these segments.

The luxury category delivered positive sales growth for 4 of the 6 months with luxury jewelry the standout performer, growing at 8.1%. The Black Friday sales event, which we increasingly consider as Black November, was strong as retailer participation of promotional event grows and as shoppers increasingly take advantage of pre-Christmas discounts. As such, we are increasingly of the view that November and December trading should be assessed together. On a blended basis, November and December achieved 4.5% sales growth in the first half of FY '26, which compares to 4.9% growth reported in the first half of FY '25.

As we look ahead, we maintain a cautiously optimistic outlook for the retail sector, premised on persistent strong employment but somewhat tempered by the recent shift in the RBA's monetary policy settings on lifting interest rates and the ongoing prevalence of geopolitical uncertainty.

Turning now to leasing, where our portfolio metrics showcase our disciplined approach to negotiating new leases where the structure, tenure and value of rent written strengthens our current and future income growth profile. We finished the half with occupancy at 99.6%, representing a 10 basis point improvement on June 2025. And at 76%, we maintained strong tenant retention, and we lengthened the average tenure on deals completed to 4.6 years, all of which reinforces the sustained demand for our quality assets in a market where retail floor space continues to tighten.

We also achieved the strongest leasing spread since Vicinity's inception in 2015 at positive 4.6%, driven by exceptional performance across the premium asset portfolio.

Also supporting income growth, we maintained the average annual escalators on deals completed at a healthy 4.7%. And the confluence of our strategic leasing activity, maintaining occupancy and delivering positive leasing spreads amid a robust retail sales environment has enabled us to grow rent while maintaining our specialty occupancy cost ratio. At 14.1%, our OCR continues to provide sufficient headroom for further rent growth.

With that, I'll hand the call to Adrian to talk through the financial results in more detail.

Thanks, Peter, and good morning. I'll begin on Slide 11. Statutory net profit for the half was $806 million. This comprised $351 million of FFO and $455 million of statutory and other items, of which the net property valuation gain was the largest contributor. While FFO per security was up 1.3% when adjusted for lower loss of rent from developments as well as one-off items, FFO per security was up 4.1%. Underpinning this robust result was comparable NPI growth of 3.7%. And excluding new and increased taxes and levies, comparable NPI was up 4.1%.

Moving to external management fees. Due to the transition of a third-party leasing mandate and the divestment of co-owned assets, management fee income was $2.5 million below the prior year. That said, our disciplined approach to cost management provided a partial offset, delivering a $1.4 million or 3.3% reduction in net corporate overheads. Our net interest expense reduced by $2.7 million, largely driven by lower debt volume arising from asset sales and proceeds from the DRP.

Turning now to valuations on Slide 12. The net portfolio valuation growth was $407 million or 2.6% for the 6-month period. This represented the fourth consecutive half year period our portfolio realized net valuation gains. Pleasingly, the net valuation gain was supported by both income growth and a meaningful compression in capitalization rates.

Income growth was again a key driver of valuation growth, particularly for Chadstone, the outlet centers and the CBD portfolio. Cap rate tightening was a main contributor to valuation growth in the core portfolio on the back of heightened demand for higher-yielding retail assets. Overall, the weighted average portfolio cap rate tightened by 11 basis points to 5.5% in the period. Looking forward, we continue to expect that with resilient income growth Vicinity's portfolio will continue to be well positioned for future growth.

Turning to capital management. Preserving our strong balance sheet and sector-leading credit ratings remains a guiding principle for Vicinity when managing and deploying capital. In a period of elevated development expenditure, the combination of asset valuation growth and proceeds from the DRP have ensured gearing remained at the lower end of our 25% to 35% target range at 26.3%. When adjusted for the acquisition of the residual 75% interest in Uptown for $212 million and the $327 million of proceeds from asset sales announced today, pro forma gearing sits at a healthy 25.8%. We maintained our investment-grade credit ratings of A stable and A2 stable with S&P and Moody's, respectively, and we continue to actively manage our funding risk.

Our debt book is well diversified with a mix of debt sources and maturities. And with undrawn bank facilities of $1 billion, we have sufficient liquidity to fund all debt expires this calendar year and committed developments and acquisitions.

Our debt maturities for FY '27 of $300 million is relatively modest. That said, we are always monitoring debt capital markets for opportunities that support a lengthening of our weighted average maturity profile and a lowering of our weighted average cost of debt.

Consistent with our disciplined capital management approach, our average hedge ratio on drawn debt is expected to be 89% for FY '26 and 85% for FY '27. Consequently, we are able to maintain our previous guidance of a 5% weighted average cost of debt for FY '26. Our balance sheet remains a source of competitive advantage and strength and is a crucial enabler of our current and potential growth agenda.

Thank you. I'll now hand back to Peter.

Thanks, Adrian. FY '26 is an important year for development projects, both completions and new commencements. We have always held the view that investing in our assets is a critical driver of sustained earnings and value accretion. And we have consistently demonstrated our willingness to invest in accretive developments both large and small. In fact, since 2019, we have actively allocated strategic investment capital to reposition assets through large, medium and smaller projects across 70% of our assets. We have embedded this discipline, committed our own balance sheet and successfully delivered development projects in arguably one of the most challenged construction sectors in memory. We have achieved this because we have the requisite organizational capability where our expertise in development leasing and development property management integrate with our purposely assembled team of development specialists and deliver real income and valuation upside. This is not easily replicated, which brings me to our major transformation of Chatswood Chase. The opening of Stage 1 in October last year marked the beginning of a new era for this landmark asset.

Stage 1 introduced 65 new retailers spanning leading local and international brands across fashion, beauty, lifestyle and dining. Among the prize list of retailers who have opened are David Jones newest department store, flagship Apple, Mecca and Sephoras as well as an Australian designer fashion precinct featuring Zimmerman, Camilla and Scanlan and Theodore, alongside international brands such as Ralph Lauren, Hugo Boss, Armani Exchange and Max Mara.

Our Level 2 precinct features on-trend athleisure brands such as Nike, LSKD and 2XU, which are complemented by Australian fashion staples, the likes of a Country Road, Seed, Witchery and RM Williams.

Between the opening of Stage 1 on the 23rd of October and December, Chatswood welcomed 2.4 million visitors who in the December quarter, spent a total of $119 million and on a same-store basis, delivered 34% sales growth. The success of Stage 1 provides a powerful foundation for the highly anticipated launch of the second stage opening, being now eagerly-anticipated luxury precinct which I'm pleased to report remains on track to open from the fourth quarter of FY '26.

Anchored by over 20 luxury brands, the Stage 2 opening will see us complete the retail reimagination of Chatswood Chase and solidify the asset status as the most prominent, compelling and differentiated retail destination on Sydney's affluent North Shore. And at $625 million, our investment in this project remains unchanged, and the return profile also remains compelling with a stabilized yield of greater than 6% and an unlevered internal rate of return of circa 10%.

As I'll come to shortly, our vision for Chatswood Chase extends beyond the completion of this project as we progress our plans to augment the asset's patronage with the construction of 2 highly bespoke luxury residential towers on separate sites adjacent but connected to this iconic asset, much like what we have done at Chadstone.

Since 2019, we have progressively enhanced Chadstone's patronage and therefore, sales and income growth potential with the construction of more than 50,000 square meters of A-grade office space now home to more than 6,500 office workers as well as a 250-bedroom 5-star hotel that welcomes close to 110,000 visitors a year.

What's more? With the likes of Kmart, adders and Officeworks selecting Chadstone as the location for their new headquarters, the caliber of office tenants the asset is attracting is testament to both the quality of the office space and the overall appeal of Chadstone as a highly sought-after one-of-a-kind retail-led mixed-use destination.

Together with the retail offer that places Chadstone amongst the world's best, Chadstone continues its evolution as a city within a center where people come to shop, stay, work, dine and be entertain. In partnership with our co-owner, Gandel Group, close to $900 million has been invested in the current and future growth potential of Chadstone, spanning the opening of the hotel Chadstone in 2019, the construction and opening of the Social Quarter in 2023 and the refurbishment and opening of Chadstone Place office tower in 2024, now home to Officeworks headquarters and the construction of the One Middle Road office tower opened in 2025 and now home to headquarters of Adairs and Kmart and which seamlessly integrates into a first-of-its-kind, truly unique fresh food and dining precinct, the market pavilion as well as a significantly elevated and bespoke laneway dining offer. In fact, every development, both large and small, has reinforced Chadstone as an all-day, everyday retail-led destination. And while we are never done, our multiyear strategic investments has consistently added to the scale, significance and leadership of this remarkable asset.

Turning now to the redevelopment of Galleria in Morley, Western Australia, comprising a new and immersive entertainment, leisure and dining precinct as well as a significantly elevated and contemporary fashion offer. This important redevelopment will deliver a completely refreshed customer experience for Galleria's large and loyal customer base in and around Central Perth. Importantly, construction and leasing are progressing well and we remain on track to complete the project in time for Christmas this year and deliver on our previously stated project costs and development return targets.

While the larger, more transformational developments continue to shape our retail destinations, I've always believed that what's inside the box creates the most enduring value. In this context, we have maintained our commitment to consistently refreshing and contemporizing our retail offers across all of our assets and in doing so, creating growth opportunities for our highest-performing retail partners. At Emporia in Melbourne, we recently expanded, refurbished and opened UNIQLO's flagship store at more than 4,500 square meters and having opened in November 2025, this store has reclaimed its position as the most productive UNIQLO's store in their Australian stable. And at Mandurah Forum, we've recently refurbished a former David Jones department store space with the introduction of Rebel and Timezone.

Opening in September 2025, the combined 3,300 square meter Rebel and Timezone introduced 2 market-leading sporting and family entertainment offers to the center and a new and exciting proposition for the trade area. This reconfiguration of former major space has delivered a 20% uplift in sales productivity across the October to December quarter with enormous equivalent level of rental uplift, thereby demonstrating the value that can be unlocked when retail space is strategically repositioned. While only 2 examples of many, UNIQLO and Emporium and Timezone and Rebel at Mandurah provide a powerful example of the mutual value that can be delivered when we invest in and cultivate strategic long-term partnerships with retail category leaders in Australia.

Turning now to a brief update on our mixed-use development opportunities. As we have shared previously, we continue to advance our mixed-use strategy with a particular focus on residential opportunities that are strongly aligned with state government housing priorities that importantly have the potential to deliver meaningful long-term value creation for Vicinity. 2 opportunities are now firmly in the spotlight. Chatswood Chase and Bankstown Central. Both assets have been identified as ideal sites for higher-density residential development. And both assets have secured support of an accelerated state planning pathway by the New South Wales Housing Development Authority, which is ultimately intended to streamline and expedite approval processes.

Our early plans for Chatswood Chase contemplate around 480 luxury apartments across 2 separate towers. Relative to Bankstown Central and other assets in our portfolio earmarked for potential mixed-use development at this stage, Chatswood Chase likely represents the most near-term opportunity for us.

And just on Bankstown in Sydney's West, our initial plans envision more than 1,500 apartments across 7 towers on a sizable 23,700 square meter site immediately adjacent to the retail center. Of significant benefit is that Bankstown Central sits in the heart of the city of Bankstown directly connected to the new metro station and proximate to major tertiary and medical precincts.

As I've said before, while approvals create the potential to unlock significant value at our assets, we will continue to retain complete optionality in terms of how and when value is unlocked.

Before I provide an update to our FY '26 earnings guidance, let me reinforce that delivering predictable and growing income for our security holders while simultaneously driving capital growth over time remain at the core of our business decisions and investments. For the past 3 years, we have been focused on increasing the momentum of execution across the organization and ensuring that every action we take supports earnings resilience and sustain value accretion over time. And I think our results to date demonstrate our investment strategy is working as intended, closing now with a positive update on FY '26 earnings guidance. As Adrian and I have outlined in some detail, we've had a stronger-than-anticipated start to FY '26. And pleasingly, the upside to our expectations is entirely driven by the continued strength of our leasing outcomes and portfolio metrics, including an increase in percentage rent. The confluence of which underpin an uplift in our expectation for FY '26 comparable NPI growth to 3.5%, which has, in turn, enabled us to guide two, around the top end of our FFO and AFFO per security guidance ranges of $0.15 to $0.152 and $0.128 to $0.13, respectively. Meanwhile, we continue to expect our full year distribution payout ratio to be within the target range of 95% to 100% of adjusted FFO.

And finally, I know I speak on behalf of Adrian, our Board and our executive leadership team when I say that it is a privilege to lead the team at Vicinity and to share our strategic operational and financial progress with the market. We'd like to acknowledge and thank everyone who works for, partners with and is associated with Vicinity for their ongoing contribution and support.

Thank you. Operator, I'll hand the call over for Q&A.

[Operator Instructions] Your first question comes from Solomon Zhang from UBS.

First question was just on Chatswood just wanted to hit on the 725 passing [indiscernible] maybe just the proportion of the asset that's income generating at this point in time? And maybe just an update on the expected path to get to the 6% stabilized on cost, please.

Solomon, Peter here. Yes, if I got the three questions, right, there's just a bit of noise coming over the top. So yes, the stabilized yield is about is 6%. What we do is we run that stabilized yield over a 3-year period. So essentially, by the end of FY '26, we anticipate around about roughly about a 4% return that leads into a 5% return next year, then stabilizes in early FY '28. That all depends, Solomon, really on how much potential assistance that we may need to provide or also in terms of the lease-up.

In terms of the lease-up by June of this year, we'll be 95% opened and operating in terms of Chatswood. So we mentioned in these results that will commence opening the second stage, which is really the luxury opening from the start of FY '26, and we expect that to be majority complete by the time we have a chat again in August. So again, around 95% of it will be open.

In terms of income, it represents broadly about the same amount of income by the end of this fiscal year. So I might have missed another question.

Second question is just on your premium portfolio, obviously, printing very strong productivity numbers circa 20% higher than the rest of the portfolio. But just looking at Slide 26, when you look at the occupancy costs, the only margin on your [indiscernible] portfolio average. So I mean is that the appropriate spend, do you think? Or what sort of, I guess, occupancy cost, you think is appropriate given the productivity of that premium portfolio?

Yes, Simon, we can potentially provide you a number that separates it out. The key differential is we put all of our outlet business in the premium portfolio, that typically works on an occupancy cost of around 12%. So just the nature of that business model, the retailers operate on a lower occupancy cost ratio. We're driving significant dollar per square meter sales through that. And in terms of revenue, we've driven revenue through that outlet business substantially higher in the last 5 years, but the occupancy cost ratio for that business right now is around about 12.8%. If you exit that out, the occupancy cost ratio for the premiums would be higher than our average.

And do you see, I guess, headwind to getting back to your pre-COVID occupancy costs?

Look, we're confident we've been -- the pleasing thing, I would say, Simon, is we've been growing our leasing spreads and growing our NPI through the course of the last few years, and the occupancy cost ratio has also been maintaining broadly similar. So ultimately, that essentially means that retailers have had sustainable growth through that period of time as well. All but we don't know their current profits through their current reporting season. So ultimately, it gives us confidence where we're able to continue to grow our revenues through the portfolio.

Your next question comes from Daniel Lee from [indiscernible].

Just a question on your Uptown development. I appreciate it doesn't start until 2027, but construction costs remain pretty elevated in Queensland. Just wondering how you're getting comfortable on your underwrite there and if you have any provisions within that underwrite.

Yes, Daniel, it's Peter here. It's a fairly broad range that we gave at $300 million to $350 million. We've obviously in the process of concluding that transaction to have 100% ownership, not too dissimilar to what we did at Chatswood, to be honest. In terms of the underwrite, we've spent a lot of time with at least 3 of the key contractors within the Brisbane market to really understand the capacity within that market in the trade in the subcontracts or the trades that we need to execute that job. In the next update, we will provide even further comfort to the market in terms of how we've derisked that project and give them confidence within that range. We've done a lot of work on this project previously as well. So at this particular point in time, there's a window that we want to hit. That's what we've guided to here is really to commence that project in calendar year 2027, finish it before the end of 2028. And at this point in time, we're comfortable with the ranges that we provide to the market.

And just on corporate overhead, it looks like they were down 3.3%. Maybe if you could just give us some guidance as to what the drivers were there and how you want us to think about corporate or growth moving forward?

Yes. Thanks, Daniel, Adrian here. Yes, corporate overheads, a key driver of that was probably some cost discipline that we have tried to stay focused on in the business. We also do have the benefit of some capitalized costs or capitalized overheads in relation to development personnel given the elevated development expenditure at this point in time. We do expect the second half to increase a little bit. So I guess from an overall full year perspective, we're probably expecting corporate overheads to be in the high 80s. And into next year, as we continue to reduce our development spend in FY '27, we probably expect a little bit of an unwind into FY '27 as well. Of course, we'll continue to maintain our cost discipline. So hopefully, there shouldn't be a significant increase into FY '27.

Your next question comes from Simon Chan from Morgan Stanley.

Adrian, it looks like Chatswood Chase resi has jumped the queue in terms of mixed use. I think over the last few years, you've been promoting Bankstown branded stuff. In your prepared remarks, Pete, you talked about how you want to leave optionality and et cetera. Can you just talk to what's the realistic timing for Chatswood Chase resi? And if it's not imminent, what are some of the things that actually need to happen for it to take effect?

Simon, Peter here. I know it's a dear to you being a local to Chatswood as well. So the likely -- so we are in the government facilitation process by the what acronym is a HDA process, which is a fast track process for rezoning and to be DA to be then shovel ready. our expectation, even going through a fast-track facilitation process. From where we are today, we anticipate that it's still towards the end of next calendar year for our DA to be actually approved through that process. And then you have, even on best case in our scenario, predevelopment activity around design documentation to get you ready for construction. So the best case to know from our point of view is 2 to 2.5 years away from being an ability to shove a shovel in the ground, so to speak. That said, we still think it's a tremendous opportunity.

Why did a jump ahead of others? primarily, and we haven't fully baked this out. But on our numbers today, just given the level of potential sales that can be achieved through a suburb Chatswood, it's the most valuable opportunity that we're looking at across our fleet of residential projects. But again, it's a couple of years away from commencing and that's why we're giving ourselves time to ensure the approvals that we get add the most value. And I think I've mentioned before, Simon, we will be looking for partners to execute our residential platform as well.

That's very clear. I just got one more. Chatswood Chase the yield. I think in your answer to one of the previous Chaps question, if 264% next year and 6% the year after. It is effectively fully leased anyway, and you start collecting rent from day 1. I get it. You also said it depends on how much potential assistance you may need to provide, right? So that's why there's a glide path. But Level 1 is essentially open now. Do you have a better picture of how much potential assistance you actually need to hand out? Or the other way the word my question is, is your 4% going to 5% going to 6% over 3 years, a little bit too conservative?

I'd like to think so, Simon. We all -- and same with Chadstone. So we always put a stabilization number in. There's not a huge amount of science that go around that stabilization number. It's a provision that's a percentage of total specialty rent that is a decline in percentage over a number of years. But in terms of Chatswood, yes, the ground -- lower levels open, ground levels, open, Level 2 is open. There is some step rent in those openings until the Level 1 opens, which is the luxury precinct. And there's also annualization of the rents that have opened through FY '26. So to your point, we're confident we're happy with the way that Chatswood's performing at the moment, particularly since our opening on October 23. And if luxury hits the market like we think it's going to, we'd expect to have less stabilization moving into FY '27 and in particular FY '28.

I don't have those specific numbers for you. I mean, if required, we can catch up and give you a bit of a heads up what they may be, but I don't have them off the top of my head here.

That's right. But have you had to provide a lot of assistance to the tenants that have opened so far in Level 2 or ground level, et cetera? Or it's actually tracking okay?

No, it's tracking as per our expectation. We always knew Level 2 there because the Level 1 is still to open. There would be some assistance, whether it's to the tenants or additional marketing activities and we're very, very comfortable with the lower level and the ground level trading very well.

Your next question comes from Howard Penney from Citi.

Just understanding the earnings impact of commencing upon and finalizing the developments have just completed. Could you just give some detail on potential loss of rents in Uptown and of course, the capitalized interest and capitalized other costs as far as possible. I know that's more a next year story. But just giving us a feel for that loss of rent versus the capitalized costs that will be reduced off the current income statement?

Howard, Adrian here. I think with Uptown, I think as we mentioned, it's probably going to be really a calendar year FY '27 development story by the time we, I guess, get our plans in place, and we kick off the development and where loss of rent would impact. At this stage, we're very confident around our FY '27 guidance for loss of rent, which is $15 million. We don't see that changing with commencing up down in calendar year '27. We'll probably have more to say in August around what that future loss event profile looks like beyond that. Probably one thing to, I guess, emphasize with Uptown is we do have a very strong performing car park, which delivers actually most of the income to that asset today. We're not expecting as part of the development that a large part of that income from the car park is going to be disrupted. So probably unlike Chadstone or Chatswood, the loss of rent impact from uptown is expected to be a lot less than those developments. So and that's probably just one thing to keep in mind. In relation to overheads capitalized overheads, capitalized interest, we'll probably give more an update as we get closer to firming up those development plans.

I'll just add a bit to that, Howard. I mean you know our business very well. we're not giving guidance, obviously, into FY '27 at this particular point. But clearly, we've concluded Chadstone, Kmart, moved into their office in January. Chatswood will be 95% opening by June. They were the key developments that had significant loss of rent as we conclude those developments. You will see an uptick in revenues going into FY '27. And then the smaller even though there's still important developments, you'll start to see Galleria then start to annualize going into FY '27, FY '28 and then Uptown will then follow into that. So if it's helpful, we'll provide you a bit more insight into that. But our anticipation, you'll start to see some real strong revenue growth.

And then just talking a little bit about residential and you make a good point to say that you are at this stage, it's the optionality that you've unlocked. But do you have any sense on whether you would fund this through third-party funds or development partners or any -- do you have any views on how best you would develop those residential opportunities?

Look, we'll look at each residential opportunity on a side-by-side basis as well as other options. But Howard, our plan is to be capital light in terms of those opportunities. We're not known in the market as a residential developer. Our core capability and skills is retail development, leasing management and all things associated with that. We like to ensure that we control master planning in terms of our sites. But in terms of execution and capital, we'd be looking for other partnerships to come in to help us execute and unlock the value of those.

Your next question comes from Andrew Dodds from Jefferies.

Just a couple of quick ones. Firstly, just around some of the comments you made in the guidance and the assumptions, comp NPI growth expectations have been upgraded from, I think, 3% to 3.5% half. Just interested to hear what sort of drove this movement.

It's Peter, Andrew. I'll be as simple as I can. We've got increased rent, increased occupancy, hence, less vacancy and increased percentage rent. So it's all business fundamentals heading in the right direction.

All right. That's clear. And then just picking up on some of the comments around the Uptown development. Is it fair to assume that the or I guess, the underwriter is sort of assuming that it's got a similar stabilization period to that of Chatswood. So maybe 4% trading to 6% over the 3-year period.

No, good question. If I back track when I first came to the company, we never used stabilization. So typically, we do now, we think and across all of our projects, we are typically conservative and hopefully, it trades better than our stabilization assumptions. In terms of Uptown, it will be a different style of development than what Chatswood or what Chatswood is, is it's planned to be a phased development. So we're not intending to shut the shopping center broadly down and then reopen it. It will be phased over a period of 18 months to 2 years. But yes, there will be stabilization. If you're looking for a modeling type of scenario as a working assumption, I'd put in the assumptions that you suggested, 4, 5 and 6 as working assumptions, we would hope that in the essence of doing what we're doing for Uptown, that would be a conservative assumption.

All right. And then just finally, on retail sales. I mean, the momentum heading into December is clearly very strong. I'd just be interested into if you can sort of speak to any anecdotes or sort of sales data that you've already picked up on throughout January and early Feb post BI rate hikes?

Yes. Andrew, we don't have any roll up of January and part of our technology doesn't give real-time sales updates. In discussion with some of the retailers, and we're obviously very keen on seeing their results. It is a little choppy from in terms of January moving into February. And part of January and February will need to seasonalize because Lunar New Year, which is such an important sales period was in January in '25 was last this week, essentially for February.

So at this point, we are as keen as you are to really understand what the trend is post the direction that the RBA went in terms of interest rates at this point in time. All I could say is traffic still remains strong at our centers. So we'll see how that converts into sales over January and February, and we'll come back and report that in the Q3 update.

Your next question comes from James Druce from CLSA.

One very quick one. What was the yield on the $327 million of divested assets?

Slightly over 6%.

Okay. And can you just talk to the NTA growth was pretty pleasing at almost 5% for the 6 months. Part of that I think is coming from the subregional portfolio, but can you just talk through the contributions of sort of market rents versus day assumptions and sort of the different movements across the categories, please?

I'll kick off, and I'm sure Adrian will -- so of the 2.6% growth, about 68% of that was really in cap rate compression. The rest of it was in income growth. Some of it was related to we the assets that we're selling. We mentioned that they were 18% below our June book valves. So we've rebooked at the sales price as part of market validity of those sales price. That also led to market evidence for the values for similar type of assets within the portfolio.

Probably the only thing I'd add is, typically, what we do for development is well as the project goes through development will change the valuation methodology to a as complete basis, and we'll put a profit and risk allowance. For Chatswood, we released $50 million of that profit and risk allowance. There's still over $100 million of profit and risk to come through in the next period. So that should aid further valuation growth in NTA growth in the future, but that was a contributing factor as well to the 2.6% gain.

Okay, fantastic. And just on the tax drag from profit expenses, does that is that sort of stabilized in the second half or not?

We'll have -- it will be annualized. It will stabilize in FY '27. So to be specific, the taxes are predominantly congestion levies that have occurred in Victoria. It's the fire services levy, which was transferred from insurance to property taxes. I don't mean to beat them up, but again in Victoria. And some incremental taxes associated with our land leases on airports that are in our premium property. So they will get back to normal growth from to the decay that we can control them in FY '27.

Thank you. Your next question comes from David Pobucky from Macquarie Group.

Just around the balance sheet gearing sits towards the low end of that range. potentially more divestments to come, are you seeing any further opportunities to acquire in this market? Or is the focus now on development around Uptown and the resi opportunity?

David, it's Peter, and thank you for the question. Look, we're acquisitive at the moment. We have a very strict plan across the country. We know we're underweight in Greater Sydney, and we know we're underweight in greater Brisbane that led to our decision around the acquisition and then subsequent development of Uptown. So if good opportunities come on to the marketplace, and we do anticipate some that will come on to the marketplace, then we'll assess them on their merits and see if we can add value to those as long as they are at attractive pricing.

Similar to that, we constantly review our own portfolio. And whilst we don't disclose divestments, it's not as if that we already have them, we typically use assets that are not carrying their weight within our portfolio or don't have a strategic benefit for us to divest those assets to fund our growth opportunities. And that divestment may be at 100% or 50%. It also helps us moving up the premium scale of our portfolio, which generally, for us, moving into the larger more fortified such big assets allows us to deliver greater growth, which we've tried to highlight in the presentation as well.

Maybe one for Adrian, just around debt. I know you're monitoring a couple of market opportunities. You just talked to any kind of refinancing that you've undertaken or expected to undertake and the margin improvement there? And where does your weighted average margins sit at the moment?

Yes. Thanks, David, for the question. Weighted average margin for us is about 155 basis points. Bank debt margins around 115. So we've actually done quite a lot of renegotiation of bank debt and cancellations as well as we've been selling assets to bring that weighted average margin down on bank debt.

With the DCM margin, it's probably closer to 170, 180. Some of that is with some of the nearer-term expiries. So you'll notice there's a GBP 655 that's expiring in April this year. That does provide us an opportunity to look at reducing our margin. We are looking at a very liquid debt capital markets at the moment. And based on some of the secondary trading of our previous bonds and also looking at the market comps, we think that there's very attractive margins out there as well. So in terms of opportunities in the future, we are looking probably in that market, refinancing some of the expiring DCM to reduce our margins.

As we said, we're pretty highly hedged in the future. So we shouldn't expect too much from a floating rate impact. So hopefully, we'll just get some margin compression going forward.

Your next question comes from Richard Jones from JPMorgan.

Just wondering if you could tell us what the estimated values of the luxury retail that Chatswood Chase?

Just the luxury, the end value, Richard?

Yes.

I'm not yes, Rich, not quite sure of the question. But ultimately, luxury represents about in broad numbers, it's about 25% of the income of Chatswood Chase. So we'll have to come -- we'll come back to you and let you know what component of the valuation that luxury may represent in terms of that, but that's basically what it is.

Sorry. So my question was in relation to the luxury residential, sorry.

Residential. Sorry. Yes. We're just we're finalizing the numbers as we speak. And I know that's like I push your question down the road, but let's where we're in the process of commencing the presales with appointment of agents, we're just validating what they anticipate to be the income levels on a BTS, which is likely to be Chatswood. And then it will depend on the final yield coming from the development approvals that we're achieving through the housing development authority process. So a little bit too early. We anticipate it to be a reasonable amount of residual land value coming from the 2 sites from Chatswood, but we're not releasing a number until we have those two things just locked in, Rich.

Okay. That's fine. Just in terms of, I guess, your strategic thinking around acquiring full stakes in assets and undertaking major developments. You've obviously done a Chatswood Chase selling at Uptown. Do you think these are a long-term 100% hold assets? Or will you look to introduce capital post hopefully extracting value out of the projects?

Well, we're happy to keep it 100% at this point in time and take a situation like Chatswood, Rich. We want to prove the full cash flow potential of that asset to really realize the valuation that we think it should be, which is not the valuation that's in our numbers today because we still hold profit and risk in that valuation until we deliver and. At that point in time, if there were opportunities, and if we needed the capital and if Chatswood, for example, was an opportunity for us to transact in the market then it's probably, I would say, it's an attractive one to bring in a partner at that particular point in time. But with the balance sheet currently at 25.8% on a pro forma basis, there's no pressing need for us to bring partners into either of those assets. And if they perform above, they deliver better returns above well above the portfolio average, then why not just hold on to about 100%.

Your next question comes from Adam Calvey from Bank of America.

Look, first 1 on NPI growth is 3.7% first half regarding the 3.5 full year I mean. Occupancy is at the highest on record. Leasing spreads are strong. What's going to be dragging it down in the second half?

Adam, there's a couple of things that are in there. We are putting some additional security provisions into our assets. We've been planning on this for a significant period of time. And clearly, it's clearly a consequence of the nature of what's occurring across the country, highly publicized by the Bondi coronial inquiry. So we have upped our security provisions and they haven't been annualized at this particular point in time. There might be a point associated with that. And then there's also annualization of the glories congestion levies that were implemented by the Victorian government and a few other items, which are essentially just second half items, to be honest, that are coming in. They would be the main things.

We are anticipating that -- for context, we're still rolling into a full year leasing spread of around about 3%, hitting the first half at 4.6%. If we do better than that, then there will be some upside.

Okay. That makes sense. Just sticking with leasing spreads, I mean, I think Andrew touched on this, just a pathway back to p pre-COVID occupancy levels, I mean, the 7% expiring, probably to really drive rents in some of these assets. There's really no supply coming online. They're quality assets. I appreciate you're going to manage our relationship with the tenants. But I mean, I don't know how much power they have they really push back.

Yes, Adam, look, for us, it's got to be sustainable growth as well. Ultimately, Australia is still a fairly small market in terms of the number of retailers. That's getting consolidated as well. It's got to be a sustainable relationship with all of us. If you look at our premium asset portfolio, you're essentially driving spreads at 9.7%, and you've got the outlets growing at double digits, and that's been the last few reporting periods. So for us, it's about managing appropriate growth through the course of the cycle, not only on income growth, but also on capital value. And if -- and what -- the other thing that we've done, you'll see that there's a 76% retention rate Obviously, there's a 24% retention rate, which is essentially introducing new product or new tenants into our portfolio, which also helps to drive rents. I get your question, but we're actually quite happy that we have the capacity to grow rents. Based on where the fundamentals of the portfolio are on OCR, we just have to do it in a very managed way.

Maybe just really quickly following on how many more options to tenants usually have in terms of boxes and other sites to go into when they're looking at either renewing or moving on.

Well, it's another good question. I mean, it's part of the reason why we're really focused on the premiumization of our portfolio, CBD's outlets, the Chadstone, Chatswood Joondalups of the world is because they are assets that tenants need to be in period in our view. So there are other options there, of course, but there's more limited options for those assets than there would be in the neighborhood, subregional or even the regional space.

Your next question comes from Glen McHugh from Grand Street.

Just a quick one on Uptown ion costs. Appreciating your IRR framework too. So Brisbane's firing on all cylinders, is the 6% yield on cost more of a sort of a bear-case scenario? Just when I run some of the numbers at the top end at the $350 million and just look at relative rent, it just seems like even a mid to sort of high 6% is still a conservative estimate. Just wondering how you're thinking about the underwriting there.

Claire, and you come in and speak to our leasing team they would love that. It's an early stage. We've done an early stage sort of feasibility associated with it. There's still some work to do between now and probably year-end. At that particular point in time, we would hope that were formalized in terms of the development approval that we would have lodged with the city. We know the city is very supportive, fantastic there and -- but we also know that there's heightened construction costs within that marketplace. Now we found a window and we understand the construction capacity, but you're still building into quite a heated construction market at the moment. So we're leaving contingency associated with the construction cost side as well.

We understand that there is no full line, full scale, full line priced offer within the Brisbane CBD. For us, being prominent in Sydney CBD, Melbourne CBD and Brisbane CBD is essential, and we see -- to your point, we see that the demand for the space will be strong.

Yes. No, I take your point on construction costs. I understand with union activity, productivity of construction workers is low international content. But anyway, in terms of just generally speaking, just touching on underwriting hurdles. So clearly, real interest rates are edging up, which is weighing on cost of debt, but your cost of equity capital has improved and growth is stronger. So I'm just curious as to in your internal IT committee meetings how you're evaluating your underwriting hurdles? How have they changed over the last 6 months against that backdrop?

Adrian here. You're right. Obviously, in the last few periods, there has been a slight increase in expectation around interest rates. What we try to do is take a 3-cycle longer-term view on our hurdle rates. We are conscious that sentiment changes around interest rates and cost of capital, so we try to look over a 5- to 10-year period to say what is our underlying weighted average cost of capital. We've therefore then said, well, how do we also compensate for risk, particularly on developments, less so for acquisitions where you've got known cash flows. And typically, that drives that yield on cost of 6% threshold and the greater than 10% unlevered IRR. So I wouldn't say that's materially changed in the last 6 months, given that we've taken that through cycle approach. Obviously, if volatility would increase significantly or rates were to rise in a more material way, then we would look at changing those. But we do review them every 6 months as a matter, of course.

Okay. And that's helpful. And then maybe just a final one, if I can bring it in. Just in terms of sources of capital. So is it fair to assume that this will the capital rotation will remain front of mind in terms of disposing noncore assets? Or I know the DRP is on -- your cost of equity now is now pretty solid. How are you thinking about your various sources of capital to fund the development?

Yes, Claire, in terms of whether it's acquisition or development activity in the future, probably still revolves around some divestment strategy. That said, we've been very active and leading into that space, to be honest, over the last 3 years, and so the portfolio that we have at the moment is we're quite happy with. But ultimately, there's other opportunities that come along, whether it's the Uptown development or an acquisition that on a risk-adjusted basis delivers as higher returns, there is a small section of the portfolio that we potentially may unlock some value and might even be bringing in a joint venture partner to fund those developments. That's something that we assess basically biannually just in terms of the forward return of each asset within our portfolio, just making sure that they're pulling their weight.

The DRP, as you mentioned, it provides us just with an extra funding source opportunities, an extra lever to look for opportunities. And in terms of gearing at the moment, we're obviously very comfortable with where we sit, particularly on a pro forma basis.

Okay. I don't think there's any further questions. So look, on behalf of Adrian and myself, a big thank you, firstly, to the Vicinity team for putting these results together or delivering these results to be quite frank. And then secondly, to all the analysts and investors on the call today. Look, a big thank you for your interest in our company, and we will continue to do our best to continue with positive performance for you and for us, to be honest, into the future. I look forward to having a chat to you as a follow-up from this results call. Thank you again.