Thank you for standing by, and welcome to the Abacus Group FY 2023 results presentation. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. I would now like to hand the conference over to Mr. Steven Sewell, Managing Director. Please go ahead.
Good morning, ladies and gentlemen, and welcome to the full year results presentation for Abacus Group for FY 2023. Apologies for the slight delay in getting going. At the outset, I'd like to acknowledge the traditional owners of the land on which we gather, the Gadigal people of the Eora nation, and pay our respects to those elders past, present, and emerging. I'm joined here today in Sydney by Group CFO, Evan Goodridge, and ASK Fund Manager and Group General Manager of Self Storage, Nikki Lawson, as well as Lucy Spenceley and Cynthia Rouse, Chris McKegg, from our Corporate Comms and Investor Relations team. Well, what a year of pleasing results and achievements for the group.
Most notably, post-balance date, Abacus Group successfully completed the de-staple of our self-storage operating platform and a $3 billion trust of investments, which now trades as a separate standalone entity, referred to as Abacus Storage King, under the ASX ticker ASK. The group now is a commercial portfolio, plus near 20% stake in ASK and the management rights of ASK, and trades under the new stock ticker of ABG on the ASX. The result you'll see today, to 30 June, is a little academic, and we will discuss today, refer to the statutory property accounts at 30 June before the d e-stapling effect. We will also make reference to a range of pro forma FY 2023 metrics for each of the two groups, Abacus Group and Abacus Storage King, within the presentation. Turning to the platform metrics.
Abacus reported FFO for the year 2023 of AUD 0.196 per security, in line with our full year guidance, driven by the strong asset-backed trust with sizable and quality investment portfolio in both commercial real estate and self-storage sectors. Pleasingly, for the full year, we were able to raise our distribution to AUD 0.184 per security, which reflects the payout ratio of 94%. Statutory profit for the year, AUD 25.5 million, was down versus the prior year as a result of the decrease in the fair value of our particularly commercial investment property portfolio, as the capitalization rates applicable across the broader market expanded, as well as a reduction in the fair value gains that we experienced in our self-storage investment portfolio.
Our core earnings metric, FFO, was strong in FY 2023, up 8.8% versus 2022 to $175 million. Looking to the near and medium term, out of the de-stapling transaction, we've been able to position the balance sheet position of both Abacus and Storage King by the equity raise in Abacus Storage King and the conversion of the intercompany loan that previously existed between the two entities. This results in the balance sheets of both vehicles with gearing post de-stapling, comfortably within the board's target gearing limits for each vehicle, and presents each vehicle with ample capacity to fund the various asset management and growth initiatives that are underway.
In the wider economic environment, we remain focused and disciplined on directing our capital towards assets that provide potential for enhanced income growth to generate increased total returns and create medium to long-term value. Turning to the highlights for FY 2023. What is most pleasing was that the operating businesses, both in commercial and self-storage, continued to achieve their goals and planned outcomes for the year. At all times throughout the financial year, we kept the market updated on our proposal to de-staple Abacus Storage King from the existing business, with the eventual transaction taking effect on August 1 after the extraordinary general meeting held on July 27th to vote on the proposal, which saw almost a sector-leading, high positive vote of 99.97% of shareholders voting in favor of the de-stapling. Never before seen.
We were delighted to reach this important milestone in the evolution of Abacus, and after deploying so much equity into self-storage assets over the last five years, we were pleased with the resounding security holder support and approval for separating the storage business into its own capital structure. With an eye on future capital re-utilization opportunities, at the time, as I said, we completed a fully underwritten equity raise in Abacus Storage King, raising $225 million of fresh equity, again, well supported by new and existing investors.
In the commercial portfolio, we continued our theme from recent periods of consolidation of our active investment management of mature and stable portfolios, disposing of several smaller scale assets, reviewing and finessing the operational plans and future asset strategies, as well as strategic and portfolio complementary acquisitions of asset with the 0.5 interest of our building up in Brisbane acquired and several assets in the self-storage business completed during the period. In self-storage, we remain excited and motivated to deliver on the investment opportunities embedded in the development pipeline. What is most stunning in the maturation of our self-storage investments is the like-for-like contribution from our stabilized store portfolio. To think that a business' net operating income would be up over 40% today compared with pre-COVID levels is quite amazing.
Our stores, our established stores on a like-for-like basis in Queensland, up 65%, and over in Western Australia, a lazy 77% increase. Our commercial portfolio as well remains incredibly resilient, achieving occupancy growth of 10 basis points to reach 95.1%, which was pleasing in a challenged operating environment. Testament, we believe, to the portfolio's diversification by market, asset grade, and customer profile. The smaller non-core assets were disposed within 5% of their December 2022 valuations, and as I mentioned, the only asset acquired was from our partner, the remaining 50% interest of 324 Queen Street up in Brisbane. With our highly motivated and capable team, most importantly, we continue to enact active asset plans in both sectors, commercial and self-storage, which underpin strong and growing income streams.
Turning to the balance sheet allocation, a useful slide we've utilized in recent years, which post-de-stapling will take on a slightly different look once the two groups' results are presented separately from the first half of FY 2024. As you can see, self-storage on a Abacus Group basis at 30 June represented 55% of total assets, versus commercial at 45%. We will touch later on in the presentation on the holding valuation of all investments, something that we are closely monitoring as the current macro environment and factors remain uncertain and will more than likely impact our valuations going forward. Put simply, ASK now is focused purely on self-storage. Abacus Group is focused on commercial real estate, with a track record of and history of investment and partnering with select groups for mutual benefit, where we see best long-term value and income growth opportunities.
It's also important to note that Abacus Group will retain self-storage exposure by way of its 19.9% holding in Abacus Storage King, as well as the fees for management of that external REIT vehicle. ESG and sustainable practices and enhancements continue to be embedded in how we conduct our business. Post-balance date and consistent with our ambition for continuous improvement across all our settings, standards, and activities, we're pleased to report that we've brought forward our commitments to achieve net zero in Scope 1 and 2 emissions from our previous target of 2050 to now 2030. We're confident that this commitment will better position the Group's ESG credentials and meet the increasing expectations of our investors and customer tenants.
Key areas of focus underpinning our commitment include eliminating Scope 1 emissions through driving efficiencies and capital upgrades, annually investing in emissions offsets where needed, and pursuing Climate Active carbon neutral certification for individual assets by 2030, to name just a few initiatives. The group continues to improve its degree of sustainability in FY 2023, most notably seeing a 34% reduction in those Scope 1 and 2 greenhouse gas emissions intensity versus our baseline of FY 2019. Excuse me. As mentioned previously, our reduction in emissions is being predominantly driven by capital upgrades through the portfolio and a very modest investment in carbon offsets. Pleasingly, we've maintained a 4.7 star NABERS energy rating across the portfolio and 4.5 star NABERS water rating. Turning to the de-staple.
A lot has been said and written on the de-stapling, but fundamentally what we've done is a simplification of the corporate structure of Abacus, providing the two listed REITs in the market with asset sector specialization. In the case of ASK, the de-staple delivers on our key objective of providing investors the opportunity and option to invest in Abacus Storage King, one of Australia's most recognized, longest trading brands in self-storage, and now with now the asset backing of a trust of trading stores plus development assets, as well as other sector-specific investments. On an Abacus perspective, nothing changes.
Abacus Group will remain a strong asset-backed, annuity-style business model, where capital is directed towards assets that provide potential for enhanced income growth and ultimately create value, where our people, market insight, and repositioning capability, together with strategic partnering, are the key enablers of our strategy. What has changed from an Abacus Group perspective is the investment profile has altered with the addition of the 19.9% ownership interest in ASK. This stake is considered very strategic in nature. In addition, the group will provide strategic management services to ASK, which I'll address more on the next slide. With solid feedback from investors, we've devised and set in place structures and processes that we believe set Abacus Storage King on a path for successful execution of their corporate growth objectives.
As the manager of Abacus Storage King, Abacus will receive a base management fee of 40 basis points of the gross assets, for corporate strategy, operational oversight, and investment expertise, particularly when it comes to real estate. The only other fees incurred will be for the development. As a result of the above-illustrated structure, we expect Abacus Group's FY 2024 FFO to be weighted over 20% for storage-related income streams. Through this structure and our significant investment holding in ASK, Abacus is fundamentally aligned to continue to drive the strategic and operational performance of the Storage King business, both here and in New Zealand, in Australia and in New Zealand. With a goal to become the undisputed leader by being the most respective, respected, responsive, and recognized self-storage owner, operator, and manager.
I'll now hand over to Evan Goodridge, our CFO, to discuss the key financial metrics for FY 2023.
Thanks, Stephen. Good morning. We will start off by reviewing the earnings of the combined group, followed by a detailed look, breaking down the performance of the two new list of vehicles, Abacus Group and Abacus Storage King. As Stephen mentioned, the results for the combined group showed an 8.8% increase in funds from operations for the year to AUD 175 million, equating to AUD 0.196 per security. In line with guidance, the combined group was able to pay a distribution per security of AUD 0.184, equating to a 94% payout ratio. The statutory net profit for the year was AUD 25.5 million, reflecting a softening in valuations for commercial properties as the market responded to the higher cost of capital environment. Turning to our segment performance.
This year, we have represented the segment earnings to reflect the two newly listed A-REITs of Abacus Group and Abacus Storage King. Hopefully, you'll find this helpful in understanding each of the now separately trading vehicles. For Abacus Group, our diversified portfolio's net rental income grew strongly for the year, up 13%. The drivers for this were the full-year ownership of 77 Castlereagh Street, Sydney, and 324 Queen Street, Brisbane. The recent development completions of Industry Lanes, Richmond, and Johnson Street, Abbotsford, as well as the team's effort in maintaining high occupancy levels and income growth on our existing portfolio, despite the current challenging operating market.
The group achieved AUD 4.4 million of income and fees from our third-party joint ventures and co-investments for the year. This will substantially increase in FY 2024 as the group starts to receive fees as the manager of the ASK REIT. The share of profit from equity accounting investments of AUD 7.1 million for ABG will also materially increase in FY 2024 to reflect the group's 19.9% strategic ownership stake in ASK. The combined group's weighted average interest rate for the year was 2.8%. As part of the de-stapling, the group's fixed hedge profile has been more evenly allocated between the two entities. I will touch on the future outlook of our cost of debt for both vehicles a little later. The Abacus Storage King.
Self-storage's net rental income growth engine continued to fire on all fronts, up 19% year-on-year. Throughout the period, we saw net income growth of over 40% in both our acquisition and stabilizing portfolios, and 10% organic growth across our established portfolio. Pleasingly, the group maintained its overall operating margin of 64%. As strong revenue growth, as well as cost efficiencies, such as the rollout of our solar panel program, have reduced the impact of increased expenses, in particular, rising statutory costs, insurance premiums, and wage inflation. Post-year end, we are still seeing income growth, albeit at a more normalized pace compared to the record highs achieved during the previous COVID-affected years. ASK's Fund Manager, Nikki Lawson, will talk to the current operating conditions of self-storage in more detail.
The other income achieved for the year of AUD 23.7 million had a positive skew towards the second half and includes approximately 50% of recurring dividends and 50% from transactional gains associated with ASK's investment in another listed vehicle. In relation to admin expenses, the AUD 43 million for the year comprised AUD 38 million of store staff costs for both ASK-owned and third-party managed stores. Going forward, this item will also include the 40 basis points of fund management fees payable to Abacus Group. As part of the de-stapling, we included detailed key financial metric forecast for ASK in the transaction booklet, released to the market on 19 June. The performance of ASK continues to track in line with our estimates, and as such, we are happy to reaffirm these forecasts today.
The next two slides provide the capital management overview for Abacus Group and Abacus Storage King on a pro forma FY 2023 basis. The de-stapling enables the optimization of Abacus Group's capital structure with an initial NTA of AUD 2.11 per security. As a result of the split, Abacus Group's AUD 2.9 billion of assets is well diversified, with over 40% invested today in ASK, retail, or other assets. The group's balance sheet remains prudently geared post de-stapling at 28%, well below our maximum target of 35%. This balance sheet capacity not only provides ample headroom to our debt covenants, but also allows the group to fund both our commitment to be net zero by 2030, as well as undertake opportunistic acquisition and/or development initiatives to best create long-term value and income growth for our investors.
We remain well supported by our lenders, with a weighted average debt maturity of four years. This debt has significant hedge cover over the next five years, providing material protection against interest rate movements over the medium term. In FY 2024, we will be 70% hedged, with an estimated all-in cost of debt of 4.7%. Post the AUD 225 million equity raising, Abacus Storage King now stands on its own two feet, with an NTA of AUD 1.56 per security. ASK will commence with AUD 3.1 billion in total assets, including AUD 1 billion of the higher growth acquisition and stabilizing portfolios. We continue to grow our self-storage footprint across Australia, with a further 20% of lettable area to be added in the short to medium term.
Year-end will commence at 26%, providing significant investment runway to acquire high quality located sites within our identified network, and fund our development pipeline to build tomorrow's best-in-class self-storage facilities. ASK has no current debt maturities, and we are currently in discussions with our lenders to increase existing available lines. The vehicle will have a year one fixed debt position of 69% hedging and an attractive FY 2024 forecast cost of debt of 3.6%. Based on the current curve, the cost of debt is forecast to increase over the medium term, but this will be more than offset by the income growth we will achieve from the anticipated 117,000 square meters of additional area coming online.
Looking at ABG's investment portfolio, the group comprises a AUD 1.7 billion office portfolio with 15 assets diversified by market, asset grade, asset life cycle, customer industry, and customer profile, and a further AUD 800 million mixed use portfolio comprising two non-discretionary retail sites, two grocery-anchored shopping centers, and two development sites underpinned by mixed use fundamentals. Over the year, 100% of the portfolio was independently valued, which resulted in a decrease in value of 10.5%. The movement in valuation was primarily driven by the expansion of cap rates, increasing by 38 basis points over the past 12 months. The group's weighted average cap rate now sits at 5.71% across 21 assets.
ASK, our AUD 3.1 billion self-storage portfolio now comprises 111 trading stores and 20 development sites, with two-thirds of our properties located in the top three significant urban areas. The components of this portfolio included AUD 1.7 billion of established stores, AUD 378 million of stores acquired in the past 24 months, and AUD 608 million of stabilizing assets. Over the period, ASK's weighted average cap rate expanded by 12 basis points to 5.57%. Despite the rising rate environment, we still saw a 6.1% or AUD 150 million increase in the overall portfolio value, driven by the strong income growth achieved over the period. I'll now hand over to Nikki to talk further about the strong operating performance of Abacus Storage King.
Thanks, Evan. It's a real privilege to share where we've got to as a result of the significant investment made into the self-storage portfolio and platform while under the Abacus umbrella. Steven spoke earlier to the AUD 3.1 billion value of the portfolio. Just five short years ago, this figure was AUD 666 million. Granted, additional investments have been made into the portfolio, but over just the last two years, AUD 450 million of value has been created for investors, despite recent cap rate expansion, a testament to the quality of the portfolio and platform we have. Generating that value are these three different groups of stores that we split the portfolio into: established, acquisitions, and stabilizing.
Looking at this split, you'll see how this self-storage portfolio truly represents equal measures of stable returns found in the 76 established group of stores, and future upside found in the combination of the 55 stores and sites in the acquisitions and stabilizing groups of stores. At half year results, I spent some time on the importance of our substantial base of established stores, which provide the immediate, stable, annualized yields to the business. This quality group of stores continues to have industry-leading RevPAM of AUD 319 a square meter, and it grew this RevPAM 9.2% in the financial year. Attributes to the combination of quality locations, strong brand, and operating expertise. As of today, most of these stores have also received our brand refresh, and we continue to look for opportunities to further enhance their growth and efficiency.
This group of stores will increase to 85 stores in the 2024 financial year. Today, I'd like to focus you more specifically on the 55 stores sitting in the acquisitions and stabilizing groups, which represent our incremental growth opportunity. 20 of these are development sites, as Evan mentioned earlier, located in attractive network gaps like Granville and Leppington. While they create drag on our overall yields today, they provide our runway for purpose-built, high-quality stores with superior growth in the future. The type of growth we're currently seeing from the rest of the 35 trading stores in the acquisitions and stabilizing groups. As Steven mentioned earlier, the income from these 35 stores grew over 40% this last year, making this group contribute more than half our rental income growth this year, and they will continue to outperform the rest of the portfolio as they move to stabilization.
The balance of this strength today and growth upside tomorrow, is what makes the self-storage business so strong. Adding this strong business to the attractive Australian self-storage sector, compounds the opportunity we see for the business. This is a sector that has a combination of resilience due to the granularity of its customer base and their varying needs, and long-term macroeconomic tailwinds that drive it. Short term, we are seeing both headwinds and tailwinds against the key demand drivers. Population growth is back up. Discretionary spend has been hit by inflation. House sales are down. Our inquiries from displaced renters are up. Housing densification, e-commerce continue their rise. One long-term windfall is that COVID really helped move self-storage up the maturity curve, educating a whole new group of consumers on the benefits of this sector.
This group of consumers remains sticky, as many continue to work from home, at least part-time. These are the customers that are more likely to return in the future now that they appreciate the category. This year, inquiries remain strong and occupancy remains strong, but customers are shopping around and our teams are needing to work a lot harder to convert, putting pressure on rental rate increases for new customers and making us cautious on increases with existing valuable customers. In aggregate, the tailwinds continue to outweigh the headwinds, and while the heady COVID highs are behind us, we continue to see healthy demand in the sector. Optimizing the rates at which we are able to convert by store, by unit type, by customer, is our focus in this environment. Moving to our growth engine, acquisitions and developments.
We continue to expand our portfolio in 2023, with acquisitions sourced from on-market campaigns, as well as successfully completing various off-market transactions, both through industry relationships and the Storage King third-party licensee network. In total, for the year, the group invested AUD 159.1 million, including an additional 12 self-storage sites in high-quality locations and network gaps like Mulgrave, Leppington and Campbelltown. Three of these sites are trading stores, as we have found that quality trading store activity has been more muted, with macro economic uncertainty, which seems to have driven a wedge between buyer and seller expectations, bringing less stock to the market. In this more challenged economic environment, we remain focused and disciplined on directing capital towards assets that provide potential for enhanced income growth to generate increased total returns and create medium to long-term value.
This has meant that even with low overall activity, we have walked away from some deals that have showed tighter returns and not been core to our network strategy. Greenfield sites, on the other hand, have been far more active, presenting us with good deals as developers are faced with rising building costs and the need to prioritize development opportunities. Not included in these figures is our acquisition of a 4,000 square meter site at Mitchell in the ACT. This site is situated across the road from our existing Mitchell site and has been incorporated as a satellite to our existing Mitchell store under the same store manager.
In doing this, it not only presented us with the upside opportunity we get from all acquisitions to contemporize the store and capture the rate upside, but it also allowed us to leverage a large part of our cost base across two stores, making the anticipated returns on this satellite acquisition particularly attractive. We've invested a further AUD 37.5 million across five assets exchanged and due to settle in FY 2024. On the development front, FY 2023 has been a record year of NLA additions. Our four purpose-built stores of Epping, Prestons, Gregory Hills, and Deagon have seen good occupancy growth, and all four stores achieved break even within six months of opening. An additional 3,000 sq m of expansions at Acacia Ridge and North Wollongong completed the additional NLA to achieve a total of 27,000 sq m completed this year.
In addition, 84% of our important Brand Refresh Program has now been delivered with another 14% underway. The program was designed to improve exposure, customer experience, and our store managers' experience, and included modernizing the facilities, improving the branding, technology upgrades, and sustainability enhancements, ranging from LED lighting and sensors to solar panels, all elements that are now standard to our new builds. Looking ahead, our development opportunity is strong, and converting these opportunities quickly and profitably, central to our agenda. We will continue to recycle this pipeline as projects roll off and new greenfield and brownfield opportunities are sourced. We expect to deliver 18 development properties in the short to medium term, which will add 117,000 square meters to the portfolio.
While we navigate increased local council involvement and expectations on new developments and longer time frames, the majority of the development pipeline is expected to come online by FY 2026. From a cost perspective, we've not been immune to inflation in the building industry over these last four years, but building supply chain challenges are moderating, and as new projects by developers slow, we are seeing some stabilization of costs. On this page, you will see the strong metropolitan, suburban, and inner urban skew of this strategically curated portfolio of 136 assets, made up of 113 trading stores, two still to settle, and 23 development sites, three still to settle.
With more than 66% of the properties located in the top three significant urban areas of Sydney, Melbourne, and Brisbane, we believe the strength of these locations positions the business for attractive and importantly, resilient returns over the medium to longer term. Furthermore, the locations represent a significant metro land bank with over 1.1 million square meters of appreciating real estate. This large footprint is located within easy reach of the vast majority of the Australian population and underpins the asset backing of the business. Moving on to operating trends, what a few years it's been. Our entire group of like-for-like stores, apart from four, showed rental income growth again in prior year. Examining the drivers of our RevPAM growth more closely, you can see rental yield has continued to grow this year.
Standout markets across the full year being South Australia and WA, growing over 20%, Queensland at 16%, and New South Wales at 12%. The last six months have been more challenging, with a moderation in growth compared to the last two years, Queensland and Victoria being the most affected. The choppiness you can see in the graphs in recent months is driven by a three-month promotional activity that was booked in February and June 2023. We've seen rental rates in the first six weeks of the new year more than reverse the June promotional dip, giving up very little of the June occupancy gains that we saw. ACT rental yield is largely affected by the satellite store that I mentioned earlier, which was running at circa 50% discount rate to its mother store and has been incorporated into these figures since February 2023.
The exceptional gains we have been making in this region is making rollovers tough for FY 2024. Counter to the rental yield trend, we are seeing some strengthening of occupancy since December 2022, driven by the return of that promotional activity and a renewed focus on this growth lever in the business. New Zealand received a boost from the weather event in Auckland earlier this year and is holding up well in the face of high interest rates. Despite the more challenging macroeconomic environment, rental rates across the business are 40% above pre-COVID levels. We believe this is reflective of the quality relocations of our portfolio and the strong brand, which continue to grow our inquiries at an elevated level.
The judicious use of promotional levers on specific unit types across specific stores will continue into this coming year as market conditions and consumer circumstances require us to. These business achievements are only possible because of the continual improvements of our quality operating platform, the benefits of which are shared with our important licensee partners. Together with these partners, the Storage King brand spans 196 operating stores, and the business manages the returns of over 90,000 storage units. Looking at the circa 49,000 customers of the owned stores, you can see just how granular the storage customer base is. No single customer represents a material effect by either moving in or out to the business.
Under the leadership of Michael Tate, this has been a year of doubling down on our strengths, improving our people capability and culture, increased discipline around our operating process, honing our sales process, and elevating our brand. We've also invested heavily in improving governance and risk in the business, walking the balance of retaining its entrepreneurial spirit while ensuring a rigor that we believe our investors would expect of the business. Moving to the year ahead, our priority is to further improve on the platform's expertise, systems, and processes. A key enabler to this will be the successful implementation of a robust data and analytics platform, the first phase of which commenced this month. It is clear we are heading into a tougher environment, but what is equally clear to me is that our people leading our stores and at the group support center are up for it.
With that, I will hand back to Steven to take you through the operating performance of the commercial business.
Thanks, Nikki. Our commercial portfolio, as I mentioned, continues to perform in line with expectations and provides a strong asset backing and income stream for investors. I'll touch on some of the operating metrics later in the presentation, but suffice to say, we have a multitude of leasing and investment strategies, management strategies in play across the portfolio. As I mentioned, our valuations are being impacted as we continue to monitor market trends on comparable transactions for supply and demand drivers, particularly in the major markets of Melbourne, Sydney, and Brisbane. Looking at the office leasing metrics, pleasingly for the full year and continuing into this financial year, we're seeing growing momentum and willingness from tenants to commit on their workplace requirements. With new leasing activities across most markets, economically, we see good, sustainable rent levels. Incentives remain stable, albeit range across different markets in which we operate.
Despite a meaningful step up in our average net face rents due to both portfolio composition and increasing rents, we highlight the overall modest average net face rents that exist in our buildings relative to market. We believe our buildings offer a superior occupier value proposition of location, amenity, and occupancy costs, and that's certainly reflected in the discussions and negotiations that we've been able to conclude and are currently having with our new and existing tenant partners.
The leasing profile for the group is similar to what we've reported at the first half result, with nothing particular notable to highlight, other than in the next financial year, we have a tenant vacating a building here at 77 Castlereagh Street, which gives us further opportunity to upgrade and modernize the fit out of those, that space, like we have done here on level 13 in our new corporate office. With active leasing campaigns are currently addressing all the vacancies and remain positive at the outlook. By virtue of the location and nature of our key assets, as detailed on the next slide, our tenant partners tend to be small to medium-sized enterprises. The Abacus Property Group commercial portfolio has been largely reset, with nearly all non-core assets divested, although we do have a small number of small value assets still under consideration.
At 30 June, it's a well-diversified portfolio by market, customer, and industries. As previously mentioned, we believe it has a unique offering, with quality A-grade buildings predominantly, relatively affordable rents, given their prime locations in each of the major markets of Sydney, Melbourne, and Brisbane. As we've discussed in prior results, we believe as part of the transition of contemporary workplaces, we should accommodate a fully flexible in order to accommodate a fully flexible and mobile workforce, it's incumbent of owners on buildings, appropriately located buildings, to include a component of flexible workplace. We've now six fully functional abacus Flex locations, with our established locations at Level 7 of 14 Martin Place over at 99 Walker Street, trading at near 80% capacity occupancy.
We launched an additional four locations during the second half, with some of the tangible benefits we see coming from this flex offer is increased customers, a pathway to traditional leasing, and supporting customers through various business growth adaptations and flexibility. We strongly believe that having an open mind to multiple leasing structures well and truly increases our customer pool and industry diversification. Turning to developments. Abacus does not have a single commercial development project in progress or planned in the near term. We've completed our two major development projects in the commercial portfolio during the year, both in Melbourne's Inner Eastern Fringe. Church Street in Richmond, which comprises a brand new office building and ground floor retail on the retail plane, and 452 Johnson Street, Abbotsford, which was a major reconfiguration of an existing building and also includes one of our new flex, abacus Flex locations.
Church Street has strong occupancy, now at nearly 98%, and occupancy at Johnson Street, tracking up close to 80%. Asset management strategies have been enacted, investment in maintenance and operating capital closely reviewed across all buildings. From a capital transaction perspective, during the period, as I mentioned, we've disposed of three non-core assets and only acquired the remaining 50% interest of 324 Queen Street. Looking forward in terms of capital transactions in the commercial portfolio, we remain focused and disciplined on directing our capital towards assets that provide potential for enhanced income growth, to generate total returns, and create medium to long-term value. Our retail portfolio remains a relatively minor but very solid component and contributor to the commercial portfolio. The composition remains as it was, with three retail centers, a minority investment in the Myer headquarters down in the Melbourne CBD.
I'll now turn to our outlook and guidance for FY 2024. We reiterate that despite the economic conditions for the next 12 months, we are extremely confident that each entity is positioned to leverage the key enablers and deliver recurring income and value creation over the medium to longer term. We are super excited to now have each business in its own capital structure as a sector specialist. Each balance sheet is strong, incomes are proving very resilient, and the future outlook trajectory for each of commercial and self-storage, and especially self-storage, is compelling in our opinion. Pleasingly, we affirm today that we expect distributions for the full year to be at least AUD 0.085 per share for Abacus Group and AUD 0.06 per share for Abacus Storage King. Thank you for listening today.
That ends the formal remarks for the result, and I look forward now to fielding any questions you may have or alternatively, with you in person in the weeks to come.
Thank you. If you wish to ask a question via the phones, you will need to press the star key, followed by one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. Your first question comes from Caleb Wheatley from Macquarie Group. Please go ahead.
Good morning, Steven and team. Thank you for taking my questions. My first question is just on the office portfolio. Just be keen to understand and get a bit more detail on how you're thinking about the leasing strategy there, just given what is quite a challenging market at the moment, limited leases in the short term, but came to hear how you thinking about the circa 11% of expires in FY 2024, and the circa 16 in FY 2025, please.
Okay, Caleb, I think, you know, much, much the same as what we've done in the last few years. I think for us, it's about value, the value offer that the buildings present. What we find is that, you know, spec fit outs of suites, being able to present a seamless proposition to tenants is what delivers the best outcomes. We have very few multi-floor tenants that are up for expiry, and as I mentioned, one of the biggest vacancies or leasing opportunities we've got ahead of us exists in this building in Castlereagh Street, where we've got a very low net effective rent in place, in between AUD 700-AUD 800 a meter.
We think that that's a great opportunity to showcase the building in a modern, contemporary fit out, as we've done on the entire floor of level 13 of 77 Castlereagh, where our new corporate office is. It is more of the same. It is, it is a tougher market. You've got to be creative, I think by virtue of the location and the amenity of each of the buildings, that is what attracts customers to the, to the locations.
That's clear. Thank you. Then just as a follow-up on the office front, re-leasing spreads of +7%, seems quite strong despite your comments there on what's happening in the market. Can you speak to any particular drivers of that? I imagine that the value proposition is part of it, but any additional detail in terms of what was driving that trend?
I think the important point to make, Caleb, is that we're quite a small portfolio by, by comparison to some of our peers. When we have lease deals that are done, across a six-month period, 12-month period, like, the, the percentage movement can be skewed by one or two particular lease deals. You know, we had one lease deal, a significant lease deal done at one of our buildings at a 40% growth on, on what the prior lease result was. I think the average can look a bit skewed by virtue of the small nature of the portfolio and number of deals that are being done.
Great. No, that's, that's really helpful. Thank you. My final question, just on self-storage development. Just keen to get your thoughts on what you're seeing in terms of the moving pieces there, construction costs and, and any offset coming through on the RevPAM front. And, and if you're able to discuss what you're thinking in terms of potential returns that might come out of that development pipeline as well, in terms of a yield on cost or, or an IRR, if possible.
We've, we've had, this is an emerging and increasing driver of our growth, as Nikki mentioned. I think holistically, we're seeing a stabilization in the cost pressures that existed through 2021 and 2021 and into early 2022. A lot of the supply side pressures are coming off, and I think that is reflective of other development projects in other sectors potentially being postponed or canceled. And we're seeing subcontractors and suppliers, you know, coming to us to say, you know, "Is there any work? Can they find work?" That's a really pleasing aspect of it. I think from What gives us the confidence to put the resources at play in our development pipeline, is the unbelievably good outcomes that we're getting from the completed developments over the last year or two.
We have seen some of the quickest lease-up at higher rents than we've ever seen in any development projects. We think a large driver of that is the geographic location of the stores and the targeted investment in geographic locations that we make. More importantly, as Nikki alluded to, the strength of the national brand and the marketing power that comes from having such a trusted and tried brand in the market that's been around for over 25 years. We've seen it with stores that we buy from outside the network, that we convert to Storage King, and we absolutely see it when we open brand new contemporary stores. We see the customer base literally flooding in the doors, and that's what gives us the confidence to keep the pipeline invested in.
When we roll off projects that are completed, we replace those completed projects with sites that will be completed in the years to come.
Are you able to quantify in any way some of the, the returns you're getting, whether it be a, a development margin, or a yield on cost or, or some other measure?
Yeah. You, you'll be aware that there's a stabilization period of sort of two years, three to four years, depending on the location. I think for us, we, we work on a 6%-7% stabilized. Sorry, on a, on a development yield. I think from an overall valuation perspective, what we're seeing with cap rates and valuations, we, we often see, you know, 20%+ valuation uplift on completion of developments. That is the slightly nuanced situation with developments in self-storage. Because of the lease-up, where you don't have any tenant, you have zero tenant pre-commits at completion of developments. However, you do get the valuation uplift, with the majority of the valuation put in place as at completion of the development.
It is a little bit strange relative to many other sectors, and we believe that's what also helps by having a very large national footprint, where you can have the range of across the spectrum of stores, be they 20-year-old established stores, be they developments that have been completed in the last four or five years, or the developments that we'll complete this year and continue to develop and complete in the years to come.
That's really helpful. Thank you. That's all from me this morning.
Thank you. Your next question comes from Richard Jones, from JPMorgan. Please go ahead.
Good morning, Steve and Nikki. I was just wondering, Nikki, if I could just get you to clarify just the comments you made just in relation to the promotional activity in the storage portfolio in June. Can you just clarify what impact that had on occupancy and rate through June? Follow that up with how those numbers have moved in the six weeks post.
Yeah. In June, because it starts with a one-month free promotion, we saw about 5,000 square meters of NLA uplift in that month, and in the few months following it, we've seen very little change in that NLA uplift. The rate impact obviously all comes through in that 1 month. It wasn't as significant as you saw the rate impact in February because we did a far more targeted promotion on specific unit types in specific stores. You can see in the graphs a little dip in the rate. As I said, July is above May. If that gives you the context, we've got a full month of July through now.
Okay. Can you talk to what current move-in rates are and how they compare with move-out rates?
Oh, our move-in rates, because our occupancy is looking fairly stable, it's actually been really good in the last few months. After seeing significant increase in move-outs towards the end of last year, we've seen move-outs stabilize, and we've seen move-ins grow. They, they're neck and neck at the moment in, in terms of what we're seeing. I, I think the real key, as I mentioned earlier, is more the rate at which we are getting the move-ins, and making sure we can optimize that. We've got plenty of inquiries to get the move-ins. We, we're just walking the fine line and making sure that we get those move-ins at the right rates.
Sorry, just to clarify that, I'm talking about the rate that new customers are coming in at, comparing that-
Yeah.
-with the, the rate that expiring customers are coming out at. That, that's broadly similar, is that what you're saying?
Yes. Sorry. Yes. Unlike during COVID, where every move-out was an opportunity to increase the rate.
Mm-hmm.
we're now seeing move-in customers slightly below the rate of the move-out customers. Sorry, I, I thought you meant the quantity, not the-
Yeah, yeah.
entry rate.
Okay. I mean, that's, that's normalized. We've obviously, you get them in, and then obviously, you, you, you, you jack the rates up, as, as they say in rent. Okay. Steve, just a, just a question. I know you touched on, the, the moving on of some, some non-core assets within what is now ABG. Just wondering, if you, if you, if you fast-forward 12 or 24 months. How do you think the portfolio composition may change?
it won't be materially changed, Richard. I think the three or four non-core assets like Brisbane Club, up in Adelaide Street in Brisbane, the Virginia Park Business Park that we own in partnership down in Melbourne. you know, you're talking perhaps, high, close to AUD 200 million total. I think the, the composition won't move around much at all, with the other elements being the retail piece will be there longer term, and the, you know, bigger nature of some of our quality office assets, like 77 Castlereagh, 99 Walker, the bigger, the bigger dollar value assets that are performing well. For example, I put in, put in that category is the Oasis Shopping Centre up in Brisbane, up on the Gold Coast, which is, you know, circa AUD 200 million odd.
It's seeing some of the strongest leasing results, performance, retailer performance, demand for space, demand for retail space, demand for office space that it's ever seen in its history. You know, I don't think the composition will change much at all.
where may those proceeds be deployed, do you think?
So that's, you know, we, we think that there will be opportunities that arise in the next six to 12 months. You know, we're, we're very conscious that we've had a fairly major corporate restructure that's seen, you know, some nervousness around the unit price of both vehicles. Of course, we continue to monitor how they're tracking, how they track relative to the asset backing, and what is the the best use and available sources of that capital. As and when required, both, you know, looking at those non-core asset sales, they'll continue to be enacted. You know, we will continue to monitor the balance sheet for where we can best place that equity.
We think that now is a time to be quite conservative in our balance sheet, in that sort of 25%-30%, we think is a prudent level of gearing, gives us a very high, elevated level of acquisition capacity. As you'd be aware, both vehicles now have a quite liquid, valuable stake in another listed vehicle, which in the medium to longer term, is also a source of value for us.
Thanks, Steve.
Thank you. Your next question comes from Alex Prineas from Morningstar. Please go ahead.
Thank you, and thanks for the presentation. Just following up on the, the comments around the, and the questions around the office, leasing and, you know, the rents being. You commented that the rents are relatively affordable for, you know, well-located A-grade property. Are you able to sort of, go a bit further and say whether that, whether the, the current rents are sort of over-rented or under-rented in your assessment versus, versus market?
Well, I think, you know, if I can point to a real example, where we sit here today at 77 Castlereagh Street, you know, what we've done in the last 12 months is re-lease our own floor here, and we took our rental from about AUD 760 a meter net face rent to just over AUD 1,000 a meter. Now, that obviously came with an incentive of about between 30% and 35%, but we think that that opportunity exists, for example, in this building, across multiple other floors that have had leases in place, in some situations for up to 20 or 30 years. Across most of our buildings, and this is why we own most of our buildings, is because when we look lease by lease, building by building, we can see that there's a clear path to income growth.
You know, we do not dictate cap rates that apply to assets and valuations. What we have control over and drive for is sustainable income growth. I would say, on average, our assets have the opportunity for upside income growth from a rent perspective, rather than, as you allude to, over-renting. That's certainly what's been demonstrated in the deals that we've done for the last six or 12 months, whether they be renewals of existing tenants or attracting new tenants to buildings. Certainly with the plans that we've got in place at each of the buildings, and it's only a handful of buildings, but, you know, we're confident in that income growth trajectory at each location.
Thanks very much. No, that's quite, quite clear. Thank you. Just one more on construction costs. There were some comments on the call around construction costs, cost inflation stabilizing. Is it also that the, the construction costs are now more predictable, or are you still having to factor in wide ranges of possible outcomes into, into your development feasibility studies?
No, they're, they're quite predictable. Alex, just to be clear, you know, the projects that we're undertaking, the self-storage projects with a construction, it could be a contract cost element of between AUD 5 million and AUD 15 million. We are not talking hundreds of millions of AUD of spend. Therefore, you know, that gives us the ability to interrogate and get very comfortable with the individual subcontracts, with the individual inputs, cost inputs. We've also had multiple projects running for each of the last four or five years. We have trusted construction partners. They know, and we know what we're trying to achieve. To the contrary, I'd say that we actually have a lot more granular knowledge now and comfort when we embark on a project, that we will hit the numbers that we have locked into.
I think that's what we're seeing now, is that certainty compared to what we saw with the, the upwards trajectory that was starting to creep in, you know, when COVID first hit and with the various, particularly, input costs, steel and concrete and so on, which of those, those factors have really come out of the equation as far as what we can see with the small-scale projects that we're talking about.
Thank you very much. That's, that's it from me.
Thanks, Alex.
Thank you. There are no further phone questions at this time. I'll now head back for webcast questions.
Yeah, I think one, one question that we've been asked is about our major investment in 201 Elizabeth Street. You'd be aware that we have, and we've spoken to this before, that we have paused our development plan there, which was to add significant lettable area on the ground floor or the lower floors of the building. In contrast, we'll continue to enact the upgrade plans for that building, which is across the entire building for 100%, and we only own 32% of it. I think it's in the range of AUD 80 million-AUD 90 million. So that's something that it's all income producing CapEx.
It's related to tenant incentives for attracting new tenants on those lower floors. They're floors that we had held in suspense, in some cases vacant, pending the commencement of that development, which we have now paused for the medium term. I think that is all we have on the web questions that we would tackle. A question about storage tenants vacating because of affordability and cost of living pressures. In individual store locations, that is a factor, but I, I would just draw your attention to the fact that the portfolio, as we sit, has 90,000 storage units across the 196 locations. The peculiar nature of storage versus most other, in fact, every other asset class, is that, in essence, every storage unit, every month has the potential to change price.
That can be done because people are leaving, that can be done because people are entering the location, or that could be done because there is a maturity or an anniversary of their storage transaction. Yes, I think what we're seeing, as Nikki alluded to, we are seeing people being more value conscious and shopping around, and we see that as actually driving an elevated level of inquiry through our website. We think it also points to the nature, the strength of the brand, having that national coverage and also, you know, responsive, respected and considered value for money. It is a factor. It's not in any way causing us any distress. In fact, in some cases, we see that as an opportunity. That's all the questions that we'll tackle on the web. That concludes the presentation for today.
We thank you for your time, and, we look forward to speaking with you in coming weeks. Good morning.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.