Good morning and welcome to the Charter Hall Group full year results for financial year 2025. Presenting with me today is Sean McMahon, our CIO, and Anastasia Clarke, our Chief Financial Officer. Turning now to the Group's earnings, operating earnings for the full year was $385 million, which translates to a full year OEPS of $0.814 per security, growth of 7.3% over the prior year and consistent with the growth trajectory accelerating with today's FY2026 guidance of $0.90 per security, which represents 10.6% growth over 2025. The Group's return on contributed equity continues the multi-year 20% plus rate at 20.8% on a post-tax basis, further accelerating with today's FY2026 guidance. We've also continued 14 years of 6% DPS growth in FY2025 and have guided for a further 6% in FY2026.
Group funds under management over the year rose from $80.9 billion- $84.3 billion, and property farm has risen from $65.5 billion- $66.8 billion at 30 June. Acquisitions and development activity more than offset divestments with stable net valuation movements across the platform. During recovery cycles, we typically see asset value growth first driven by rental growth, then amplified by cap rate compression typical in falling interest rate cycles. Our balance sheet remains in a strong position with 6% net gearing, which I note is based on tangible assets, a $2.7 billion property investment portfolio that is well diversified by sector, tenant, WALE, rent growth diversification, and tenant credit covenant quality. Something becoming more topical with corporate delinquencies throughout some parts of the alternative property sectors.
We retain dry powder both on balance sheet and $5.9 billion throughout the platform to take advantage of healthy vintage buying that will drive earnings growth across our three earnings segments. Growth in our wholesale investment management platform has been pleasing during the year with the $1.3 billion in equity raised for our Prime Industrial Fund CPIF, the CCRF $2.5 billion growth capacity launch announced in August, and our appointment to manage Challenger Life's $2.1 billion direct Australian property portfolio. This year we celebrated Charter Hall Group's 20 year history as a listed AREIT. During this evolution we have moved into the ASX 100, getting close to top 50 by market cap, being included in the important Global Property REIT index.
We've grown our funds from a billion dollars at IPO in 2005 to $86 billion but most pleasingly we have driven earnings per share significantly from IPO to what is today's FY 2026 guidance of $0.90 per security. As one would expect, the EPS growth has driven growth in our market cap from $264 million at the 2005 IPO to $10.5 billion today. Over this period CHC shareholders have enjoyed a 15.2% per annum total shareholder return, almost 2 times the TSR of the whole ASX 200 and more than 2.7x the TSR of the ASX 200 AREIT index of which CHC has been a long term constituent.
We're proud of this track record, delivering the highest TSR in the AREIT index over the last two decades while sitting within the top 10 TSRs within the whole ASX 200 across all industries within the cohort of the ASX 200 companies listed during that 20 year period. Australia's population is growing at double that of the OECD average. Supply of new development in all of the sectors we operate in is below long term averages and new supply is contracting as a percentage of existing supply in every sector as demand continues to grow through economic expansion. This bodes well for strong rental growth for existing assets, particularly as many are independently valued well below their replacement cost. FY 2025 was clearly the inflection point.
We're now seeing transaction levels rising, property cap rates stabilizing after a period of expansion and market benchmarks returns in aggregate returning to positive capital valuation increases. The investment management business secured $3.4 billion of gross equity inflows for the financial year which is more than double the total gross equity raised for the 12 months in FY 2024 whilst in the first six weeks of FY 2026 we have already secured gross inflows equal to the whole of 2025. Gross transactions for the year were $6 billion or $6.1 billion, with $2.9 billion in acquisitions and $3.2 billion in divestments. Acquisitions and development more than offset divestments and moving forward into FY 2026 we anticipate acquisitions to materially outpace residual divestments.
We've delivered strong EPS growth over the last 10 years as I mentioned earlier, and we continue to drive consistent distribution growth which have averaged 10.4% per annum over the last 10 years. We continue to retain approximately half of our annual post-tax operating earnings, which we reinvest into growth in property and development investments, providing us with capital to originate, warehouse, and co-invest alongside our external capital partners to drive total returns for CHC and its capital partners, which also drives growth in property funds management earnings. This self-funding growth model has avoided the need for us to raise new CHC equity for a decade. Slide 10 provides an overview of the diversity of our equity sources. We retain a total $84.3 billion in funds management, with 75% of equity sourced from the wholesale or unlisted institutional sector, close to 15% from our three listed managed REITs.
CLW now virtually trading at its last stated NTA, CQR and CQE, both of which are well on their way to a similar milestone. Whilst 10% of property funds management sits within our Charter Hall Direct business, with over 20,000 retail and high net worth clients and the largest footprint of unlisted real estate funds from this segment of investors. Nationally, property funds under management grew from $65.5 billion- $66.8 billion during the year. Acquisitions and development more than offset divestments, with valuations remaining stable. Since 30 June, our property FUM has risen further by approximately 5% to $69.4 billion. The launch of CCRF provides a further $1.5 billion of capacity to increase its initial scale of $1.3 billion, while subsequent closes for CCRF will likely grow equity inflows and hence further capacity to grow the convenience retail fund portfolio via judicious acquisitions.
Our appointment to manage Challenger Life's $2.1 billion Australian direct real estate portfolio is another important growth in our institutional investor roster, which now exceeds 125 institutional or wholesale investors in our unlisted wholesale property platform. Slide 12 displays our property funds under management platform in more detail. As you can see, wholesale investors provide about 70% of the entire platform's equity. The investment management business manages over 1,600 properties with 98% occupancy and a WALE of just under eight years. We're Australia's largest manager in the office sector, largest third-party industrial asset manager, and now also the largest in the convenience retail sector with $16 billion in total. It's also noteworthy that our social infrastructure platform has grown to about $4 billion in size, or just under 6% of our total.
Turning to equity flows within our funds management business on Slide 13, with asset values below replacement value, sorry, independent valuations below replacement value, severely constrained supply, and a growing population. Forecast returns are attractive across all of the sectors we operate within. We are seeing a reassessment by many of our clients of the risk reward available in many so-called alternative sectors, including private credit, meaning we have witnessed a growing appreciation of the attractive current vintage returns available in traditional well-managed core sectors in which we operate. We see an acceleration of this demand as interest rates fall and the sobering returns in some alternatives bring capital back to property core sectors.
This trend is evidenced by the $3.4 billion of gross equity inflow we attracted in the whole of FY25, doubling FY24, and then further equity flows in the first six weeks of FY 2026 of circa $3.2 billion. During FY 2025, we secured 14 new wholesale institutional investors and have seen 41 existing wholesale investors invest further equity into the platform. We raised over $11 billion in gross equity inflows in 2023, 2024, 2025, and the six weeks of FY 2026. Slide 20, slide, sorry, slide 14 summarizes our current industrial platform with 7.2 million square meters of lettable area and about $26 billion in funds under management, Australia's largest third-party managed industrial portfolio. Scale matters in most sectors, but particularly industrial, where major customers want to have multiple asset and multiple state relationships with their landlords. The platform is in excellent shape with a modern, highly occupied, long WALE portfolio.
Leases renewed over the financial year recorded an average 21% increase in passing rents. Our development pipeline remains exceptionally strong at over $6.9 billion, with an accelerating land bank of planning-approved sites that are yet to be committed. The recent $1.3 billion of equity flows into CPIF is indicative of continued investor demand for, slide 15 summarizes our office platform. We own and manage Australia's largest office portfolio at $24 billion and a whopping 2 million square meters of lettable area. To give you some context, that's the whole of the Brisbane CBD. During the year, we had strong leasing momentum with 227,000 square meters of lease deals across just over 200 transactions. Effective rents outpace face rents with the platform retaining 95% of its tenant customers in their existing or expanded footprints. Our portfolio remains modern with a high occupancy of 96%, well ahead of market and many peers.
Weighted average rent growth on leasing deals closed continues to be a healthy 3.6% per annum. Charter Hall will retain significant capital each year and this provides opportunity for our balance sheet property investment portfolio to take advantage of market conditions and acquire assets for long term ownership and future capital. Partnering with our funds and partners, the credit quality of our office portfolio is second to none with 36% leased to government and a third of 50% approximately leased to high credit quality customers ranging from all the major domestic and global banks, five or six industry super funds and major corporates such as Amazon, BHP, Telstra, Suncorp, Amex, Shell, Endeavour and even our friends at Centuria. Sitting at the top of Chifley, turning to slide 16, we provide a snapshot of our convenience retail platform.
This platform manages $12.4 billion in shopping centers and net lease retail assets or $16 billion if you include our long WALE fundings portfolio. We're pleased to announce the launch of the Charter Hall Convenience Retail Fund recently with $1.8 billion in equity commitments which gives it $2.5 billion of asset capacity of which $1.3 billion is already secured and note that several investors are in advanced due diligence for further commitments this calendar year. The convenience retail sector is an immense opportunity for Charter Hall. Whilst we are the largest owner, it is very fragmented from shopping center ownership through to net lease assets such as servos, pubs, Bunnings and the like. We have recently secured another $290 million long WALE portfolio on a sale and leaseback from Bunnings which has grown our overall Bunnings portfolio to approximately $4 billion.
We've accelerated growth in pubs via the successful non-HPI board recommended takeover of Hotel Property Investments which has delivered strong net uplift in value and rents for Charter Hall Retail REIT and Hostplus. We continue to grow the convenience shopping center portfolio with recent acquisitions including the triple supermarket anchored Chiloro Marketplace Shopping Centre, Waverley Gardens and Mernda Shopping Centres in Melbourne. Whilst we are well advanced on other acquisitions, the sector provides a higher initial income yield than other sectors combined with attractive rental growth prospects, and given the constrained future supply with most major supermarket anchors at all-time lows of new store rollouts, we see natural population growth and constrained supply providing really healthy returns going forward in this sector.
Convenience retail within inner and middle metro locations in our major cities is becoming incredibly difficult to replicate given the depth of available land with acceptable zoning size and main road frontages required for a typical shopping center to succeed. The living or build to sell portfolio that we are cultivating and have secured significant planning approvals on several projects will further source convenience shopping center opportunities within these projects on slide 17. As Australia's population continues to grow, the need for all types of essential services is only going to rise. Our social infra portfolio has been quietly growing in recent years and now totals approximately $4 billion in scale, which is just under 6% of our total fund. We have 100% occupancy within our assets on long WALEs, and the majority of our leases are triple or double net leases.
Our listed REIT CQE recently reported very strong uplifts on its market rent reviews of over 10%, and we are pleased to see its strong RE rate in the market over the last 12 months, joining CLW and CQR as top quartile TSR performers during 2025. Slide 18 covers our cross-sector tenant relationships. The top 20 tenants of our platform represent 55% of the total platform income. Today we have over 4,500 tenants collecting over $3.3 billion in net rent per annum. We were very active during FY25 across a range of customer-centric strategies with our tenants. We've been busy renewing leases, expanding leases, expanding our tenant relationships across sectors, and as always, we are in constant dialogue on sale and leaseback opportunities which continue to bear fruit for Charter Hall Group.
With the increased national focus on productivity and improving company profitability, we anticipate sale and leaseback activity to accelerate as corporates drive their balance sheets harder to deliver growth for their shareholders. Maybe the same will happen with governments at all levels. Charter Hall has both the focus and capacity to be absolutely the provider of choice to our tenant customers and as a solution provider, not just a landlord. With our insights, cross sector scale, and platform footprint, being able to enhance the productivity of our tenants through built form real estate strategies, we provide an attractive partnering opportunity for such customers, both existing and prospective. Partnering with our tenants on a long term basis is a core pillar of our strategy. I won't dwell on slide 19 in the transaction slide other than to say it was another busy year with $6.1 billion in transactions.
As I've indicated earlier, I don't expect this level of activity to slow down. On slide 21, we provide a snapshot of our property investment portfolio. Our $2.7 billion portfolio retains exposure to over 1,500 properties with a high 97% occupancy, a WALE of 7.6 years, and a weighted average rent review of 3.2% on average locked into our leases. Cap rates remain broadly neutral over the year, with the weighted average discount rate now sitting at a relatively high 7%. We're very confident with our office platform and in fact have taken the opportunity to secure some high quality long WALE, fantastic vintage acquisitions over the course of the last 12 months, which we are confident we will be able to then attract capital partners for shortly.
I'd also like to remind the audience that we use our balance sheet for both property investments, which may be a warehousing or short term investment until we bring in capital partners. We also use it for development investments to create DI earnings. Most importantly, the vast majority of our portfolio over our 20 years as a listed group has been there to co-invest alongside our fund investors and partnership investors and in the REITs and in the direct platform to show strong alignment so that we're not competing with our fund investors. I'll now hand over to Sean to continue the presentation.
Thanks David and good morning to everyone on the call. Our development pipeline now totals $17 billion. Our development capability and track record has been a key strength of the group for over 30 years. Developed to own next generational assets are highly accretive to long term returns for our investor customers. Development activity continues to drive modern asset creation, providing property solutions for our tenant customers and enhancing returns whilst attracting capital to our funds and partnerships that deliver on strategic objectives. Development completions totaled $0.9 billion in the last 12 months, and notwithstanding completions, the pipeline continues to be restocked and is currently $17 billion, a $3.7 billion increase over the half. There are currently $5.3 billion in committed developments with 79% of committed office developments pre-leased and 94% of committed industrial and logistics developments pre-leased.
This financial year we have generated a $3.9 billion pipeline with living and mixed use projects that have now obtained strategic planning approvals, optimizing existing holdings and providing optionality to grow in the living sector. Noting David's previous comments on Australia's strong forecast population growth, we expect that the creation of new investment stock and opportunities for our investment management platform will continue to feature prominently. Turning to slide 25, over financial year 2025 our industrial platform completed $879 million of developments with a WALE of nine years. Two major new sites were acquired over the financial year, one in Brisbane, one in Melbourne. The combined completion value of these sites is over $740 million to be completed over the next few years on a staged basis. We currently have $2.4 billion industrial development projects committed and underway.
Our total pipeline of future industrial investment grade stock now sits at a material $6.9 billion. Charter Hall has one of the largest industrial footprints in the nation, comprising over 20 million square meters of land, and we are focusing our efforts to maximize value for our investor customers from the land we own. Given the scale and diversity of our land holdings, there are multiple key data centre sites existing within this industrial land bank. There are a number of data centre sites in focus that are located within availability zones. We are in the process of unlocking significant power supply and associated planning approvals over the next few years. Importantly, we retain optionality to sell as powered land at a material premium to industrial land values or negotiate long-term ground leases with hyperscalers as we've done before, or alternatively develop powered data centre shells on a selective basis.
The Group has been active in the digital infrastructure space over the last five or so years and currently has $1.9 billion of funding, primarily comprising a portfolio of 37 Telstra data exchanges and other data centres along the Eastern Seaboard. Notably, our digital infrastructure portfolio of assets are 100% land value to capital improved value. This is very different to new generational data centre assets in the broader market that have a land value of 5%- 10% of capital improved value, which naturally have significantly more terminal risk unlike our existing digital infrastructure assets. Now turning to slide 26, today we call out our largest iconic development underway, Chifley Square in Sydney, alongside other major office projects at 360 Queen Street Brisbane and 15 Sydney Avenue Barton.
The Chifley Precinct, which includes the existing North Tower and the South Tower where construction is progressing well, will eventually hold a value of approximately $4 billion. The project is Sydney's premier office address and will be Charter Hall Group's largest asset with a combined nettable area of 110,000 square metres. This project is scheduled to complete in mid-2027 and is owned by various Charter Hall managed wholesale investment vehicles who are participating in the investment with the objective of long-term retention of this iconic asset. As you can see, the Group has been busy delivering new high-quality office developments across Australia anchored by government and tier one tenant covenants.
Turning to slide 27, we continue to drive our industry leadership across all facets of ESG, demonstrated by recent GRESB global and regional awards with 18 of the Group's funds in the top quartile and our listed entities achieving an A ranking under the GRESB Public Disclosure Rating and a AA MSCI rating. Pleasingly, we have now installed 86 megawatts of solar power across our platform and this equates to sufficient power for approximately 20,000 homes, and our green loans now exceed $8 billion from July 25. Our whole platform operates as net zero through existing on-site solar and renewable electricity contracts. I'll now hand over to Anastasia Clarke to discuss the financial result in more detail.
Thank you, Sean, and good morning. Before commencing on the actual results, I would like to update everyone to a statutory accounting change this period due to the Group adopting the new accounting standard AASB 18, which will mandatorily apply in Australia from 2027. The standard introduces a new statutory operating profit measure and improves our statutory financial results disclosure by separating income from our co-investments, which are fund distributions, from net fair value movements, which are primarily property revaluations. Charter Hall's segment operating earnings in the Group's earnings summary on Slide 29 is not at all impacted by adoption of the new accounting standard. With application of AASB 18, the fair value of our listed co-investments in CLW, CQR, and CQE are now carried at their listed closing trading price at balance date compared to each fund's underlying NTA prior year.
Results in both the annual report and our presentation have been restated accordingly at 30 June 2025. The overall statutory impact to the Group is a lower reported NTA of $5.26 compared to what otherwise would have been $0.21 per security higher at $5.47, reflecting the trading prices discount to each fund's NTA back at 30 June 2025. Operating earnings post tax of $385 million reflects strong growth on the comparable prior period of $358.7 million, particularly given the headwind of reduced funds under management at commencement of the financial year driven by negative revaluations and asset divestments. We have been able to hold top line FMEDA earnings flat despite some revenue reduction through expense savings from disciplined cost control measures taken in 2024. PI EBITDA contributed $292 million, growing 7.8%, and DIE EBITDAR grew 11.5% to just over $40 million.
Net finance cost has increased modestly to $114.6 million due to property investment deployment increasing net debt, offset by a lower weighted average cost of debt resulting from RBA interest rate cuts. Tax expense has reduced by $6.4 million because of capital efficiency initiatives, including the cross staple capital reallocation of $400 million during the year and the high proportion of the fully franked dividend of the distributions paid. Top line Group EBITDA growth coupled with net flat depreciation, finance, and tax costs has contributed to the strong operating earnings growth in FY 2025 of 7.3%. FY 2025 has seen the turning of the revaluation cycle with negative revaluations turning to a slight positive, resulting in Charter Hall reporting a statutory profit of $327.7 million compared to the prior year statutory loss of $217 million.
The Group's operating earnings post tax grew 7.3% to $0.814 per security, distributions grew 6% to $0.478 per security, and when you add franking credits both from the ordinary dividends paid and the non-cash special dividend, security holders earned a gross DPS yield of 8.2% for the year despite the Group maintaining a modest earnings payout ratio of 59%. Turning now to funds management earnings on slide 30, investment management revenue has reduced this year due to lower funds under management at the commencement of the year and nil performance fees in FY 2025 compared to FY 2024. Property services revenue has grown 15% primarily due to increased leasing volumes and associated capital works, which drive leasing fees and facilities management and project management fees, and an overall increase in property management base fees.
The benefits of the cost discipline initiatives undertaken in FY 2024 are fully realized in FY 2025, delivering net savings of nearly $20 million and a reduction on prior year net operating expenses of 13%. The lower funds management revenue offset by the operating expense savings have together delivered funds management earnings EBITDA of $271.5 million in line with prior year. Now for some remarks on the balance sheet and return metrics. The Group's balance sheet has grown as a result of net deployment into property investment during the year, which was funded from retained earnings and a reduction in cash held. The additional property investment and lower cash has resulted in a modest increase in gearing to 6%. The Group maintains a strong financial position as reaffirmed by Moody's of the Group's credit rating Baa1 stable outlook.
Available liquidity of $700 million provides substantial headstock investment capacity for further deployment into property investments. Return on contributed equity has increased to 20.8% in line with operating earnings growth and a continuing focus by Charter Hall to maintain a capital light balance sheet. Growing returns is fundamental to ensuring the business deploys our own and our partners' capital optimally. The Group's disciplined focus on return on capital outcomes ultimately generates long term value for our investors. Turning to the overall funds platform debt profile on slide 32 to provide an update on liquidity and investment capacity across the funds, the Group maintains $5.9 billion in cash and undrawn liquidity, which alongside committed equity is available for deployment into investment opportunities in each fund. The Group has had a record year with our treasury team refinancing and sourcing new debt of over $13 billion of the $30 billion debt platform.
This important activity continues to fund growth in the platform alongside equity capital deployment, and has also been astutely focused on widening loan covenant headroom, extending loan maturity dates, and driving lower all-in margins and fees. Our lending partners, including both domestic and international banks, continue to increase their credit appetite to lend to the Charter Hall platform. The strength of the Group has driven increased credit volumes with margins tightening by approximately 15- 20 basis points. The combination of lower margins, expiry of historic low rate hedges, active targeting of market conditions to add competitively low rate hedging, and RBA rate cuts have together resulted in containing the cost of debt to 4.5%. We expect our targeted activity and further RBA rate cuts to drive a lower WACD over time, becoming a tailwind to earnings growth in our funds.
The Group retains eight investment grade credit ratings with either Standard and Poor's or Moody's, with platform average leverage stable at 36.9% and all balance sheets continuing to be prudently managed. In summary, the Group has delivered a robust earnings result for FY 2025 and is positioned well to continue its earnings growth trajectory across all business lines whilst remaining focused on maintaining strong balance sheets and investment capacity. I will now hand back to David to provide earnings guidance for the Group.
Thank you, Anastasia. Turning now to Slide 34 and our outlook statement. I'm pleased to advise that due to strong performance within our investment and property service business, today we have announced strong EPS guidance growth based on no material adverse change in current market conditions. FY 2026 earnings guidance is for post-tax operating earnings per security of approximately $0.90, which represents 10.6% growth over FY 2025 earnings. I'd also note that this earnings guidance is without any expectation for performance fee revenue. FY 2026 distribution per security guidance is for 6% growth over 2025, continuing a 14-year history of consistent 6% annualized DPS growth. That now ends the prepared remarks and I invite any of your questions.
Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone keypad, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q and A roster. Our first question comes from the line of David Pobucky with Macquarie Group. Your line is open.
Good morning David, Anastasia, and team. Thanks for taking my questions. Just the first one around the comments about the optionality to grow into the living sector. If you could please just expand on that a bit and the opportunities that you're seeing in the space. Thank you.
I think for some time we've been saying that we've got quite a large captive portfolio of potential residential projects. As we have done for years, we add to our development pipeline uncommitted projects when planning approvals are secured. We have secured planning approvals for a few different projects. The various outcomes of those will either be we introduce capital partners and do what are predominantly build to sell projects, some of them mixed use that might have shopping centers sitting below residential. The other part of the strategy is to add value to assets that sit within the platform. If those residential approvals provide an opportunity for us to bring in capital partners that are prepared to fund major residential projects, that's basically the way we're going to exploit it. At all times we're looking to add value to the assets that sit in the various funds.
We've also got a pretty strong conviction around lack of supply. It's no secret Australia's in a housing crisis with a shortage of supply. Quite often one of the reasons we have a competitive advantage is we have income producing brownfields land that doesn't need its head off while you're going through the planning process. That's basically how we're going to prosecute it on various assets in the right markets nationally.
Thank you. Just my second question around FY 2026 guidance not including performance fees. I want to ask what's testing in the following year and what's accrued and performance fee paying territory. Thank you.
We have for years provided a schedule of the dates that particular partnerships or funds have performance fee testing. I'd just guide you to that.
Thank you. Please stand by for our next question. Our next question comes from the line of Simon Chan with Morgan Stanley. Your line is open.
Hi, good morning everyone. Hey David, you just did the CCRF fund quite successful. Can you talk to us about, you know, inflows and I guess interest from offshore investors into not just Australia but onto your platform? Like how are we viewed as a destination at the moment, and do you feel that, you know, interest from offshore is actually going to pick up and drive growth further over the next few years?
Thanks, Simon. Look, the Charter Hall Convenience Retail Fund's no different to the other raisings that we've done over the last 12 months. We've completed a lot of inflow into our Charter Hall Prime Industrial Fund, CPIF. As a rough rule of thumb, 50%- 60% of those equity commitments are domestic and obviously sort of 40%- 50% are offshore. As I said on the call, we're finding both our existing customers and new investors, both offshore and domestically, are seeing the same thing. We're seeing Australia screens on a risk return basis as one of the best markets in the world to invest in to good commercial core real estate. I think that appetite is going to accelerate.
What has happened in the last few years, the denominator effect has meant for most pension funds, sovereign funds, their listed equities portfolios have risen, their real estate allocation has come down as a result of that denominator effect. We're also seeing quite a lot of our clients tell us that they're underweight office and universally, both domestic and offshore investors are telling us that they are massively underweight where they want to get to in convenience retail. For three decades, most institutional investors are sort of invested at the large end of the mall space, you know, call it the discretionary retail space. There's been an awakening over the last decade as to the outperformance of convenience retail versus the large malls.
You only have to look at the MSCI index where our convenience retail portfolios have doubled the TSR or IRR of the large mall funds in that MSCI index. I think we're going to see an acceleration. We have some peculiar positive attributes about convenience retail in this country compared to many other major markets. I think that's going to continue to attract foreign capital. As I said, I think there's a very large, if you like, movement of particularly domestic capital moving down the food chain from the sort of discretionary end to what I would call safer, non-discretionary convenience retail space. Yes, we're happy with the first close on CCRF as we do with all of our wholesale funds. There'll be progressive equity closes.
I think that will grow in scale both in terms of total equity invested and when we introduce modest gearing up to 30% in that fund, I think it will continue to evolve and will become one of our larger funds.
David, in previous conversations you've mentioned about also different product diversified funds. Is that on the back burner, or is there no interest for that type of product at the moment?
No, I think there is interest. To be honest, I'd get knocked over in the rush if I had an unlisted wholesale version of CLW. Our concept of a diversified fund is obviously playing to our strengths. There'd be a lot of triple net convenience retail. Clearly, we're the largest player in prime office and third party industrial in the country. Yes, we've got the capacity to create that. I think we chose to go with the Convenience Retail Fund first. A diversified wholesale offering is definitely on the cards and going to be attractive. Investors want choice. The MSCI index has shrunk from three diversified funds to two. I think investors are wanting more choice in that MSCI index, which is why we're sort of hopeful of CCRF getting included in it.
We've already done some diversified partnerships, DVP1 and DVP2, and I do think there's going to be demand for what I call a Charter Hall style diversified wholesale fund. That's something we'll continue to work o n.
P otentially in FY 2026 David?
that's like asking me about compositional guidance. Simon, you know better.
Yeah, good one. Hey, just my final question for Anastasia. A fair bit of cost outs obviously achieved this year. You got flagged out at the half year too. Is this the new base now for you to grow off or is there further cost outs, like how do we think about that for 2020?
Yeah, it is, Simon. The 2024 savings are fully reflected in the 2025 figure. It is a good base number for you to work from on a go forward. Obviously, you've got to apply certain levels of inflation assumptions to the non-employee costs as well as wage growth to employees. We're doing a little bit of modest investing in our front end of our business. We've also been able to pass on inflation and wage increases through recoveries to our tenant customers. We'd expect to continue on that basis.
That's great. Thanks very much, guys. Cheers.
Thank you. Please stand by for our next question. Our next question comes from the line of Tom Bodor with UBS. Your line is open.
Morning, David. Just was interested in the, just touching on the equity flows again. Fantastic to see good progress across the CCRF this year. I'd be interested in when you think listed and direct business flows will pick up.
Look, in my career it almost always happens that the direct flows accelerate as interest rates fall. If you look at the open ended funds we've got in the direct business, if you invest in those, you know, some of them are providing 8%- 9% distribution yields. That's attractive. The direct business has got a number of new fund offerings out in the marketplace which we expect will attract capital and then the listed REIT space. I don't think it matters in any cycle. I don't think REITs internalized, externalized, whatever you want to call it, can raise equity unless they're using that capital to drive earnings accretion for the investors. As interest rates and the weighted average cost of debt keeps falling, we're seeing quite a wide spread between the yields you can buy on assets and the all up cost of debt.
As the cost of capital for the REITs improves, I think the REIT sector generally will see equity raisings over the next 12 to 18 months, but it's going to need to be for accretive acquisitions, otherwise there's not going to be support for them. I won't sort of comment on our own REITs, but I think as a general comment, I think the REIT sector will move back into a phase over the next 18 months where those with a cost of capital that can use it and grow accretively through acquisitions will get support from their investors.
That makes sense. Thanks very much. Just a follow up on the wholesale fund space. We've seen some pretty well publicized press around potential changes in management rights at fairly sharp fees. I'm just interested in whether you're seeing any pressure across your own platform in the context of those fees being proposed by other managers looking to take management rights from competitors.
The first comment I'd make is that if you've grown your funds and delivered outperformance for your investors, you're not going to be on the same fee pressure that you're on if you're a bruised manager and you've not performed or you've had a lack of high quality governance. When you're out there trying to buy funds under management, the investors are going to be expecting you to accept lower fees because you haven't spent 20 years creating the portfolios in the first place. I don't think those of us that are in the space where we don't have reputational issues or we have grown organically wholesale platforms and delivered for our investors have the same pressures that other, what I call, bruised managers may have. There's a lot of talk in the market around this leading to fee pressure.
I just like to look at it as there's haves and have nots, and those that have delivered for their investors are going to be under less pressure. We're certainly not interested in trying to buy business by doing it at cost recovery type fees. I think we've got a franchise that can attract capital at a reasonable level of fees, and ultimately all the beneficiaries of pension funds get tested on total performance, net of fees. If you can perform and outperform your peers, then I think you're going to get equity support from investors.
Thanks very much.
Thank you. Please stand by for our next question. Our next question comes from the line of Richard Jones with JP Morgan. Your line is open.
Hi, David. Just in relation to CCRF, obviously you've had lots of equity committed so far. Just wondering if you have a rough guide as to how much DD still being done and how big that equity inflow could be with the existing investors still doing the work there.
Look, it doesn't matter whether it's CCRF or CPIF or CPOF. We've got prospective investors and existing investors doing DD all the time. In relation to CCRF, obviously we had a first close. Not all of the interested investors could meet that timing. As happened on every fund we've launched in the last 20 years, some people come in at second or third closes and that's what's happening at the moment. As I said earlier, I think both domestic and offshore investors are accelerating their interest. There are going to be some investors, as I also said earlier, who are going to wait to liquidate investments they've got in other funds, not ours, but other funds. As they get that redemption capital, they'll be looking to put it into convenience retail funds. I think there's a big demand shift to get set in the convenience retail space.
As Ben Ellis outlined on CQR's results, operating metrics are as good as we've seen in decades in that part of the shopping center space. We obviously are very big believers in net lease retail, being the biggest player in the country. CCRF will have a sort of 80% target towards convenience shopping centers and up to 20% in net lease retail. I think that's an attractive proposition. I suspect I'll be sitting here in a year answering the same questions, saying, yep, we've got ongoing people doing due diligence on the fund.
In terms of the opportunities for deployment, you've called out $2.5 billion as the current capacity at 30% gearing. How quickly can you put that to work?
As we announced previously via both CQR and CHC announcements, we've picked up another three shopping centers recently, a $290 million Bunnings leaseback portfolio. It'd be very rare in Charter Hall for us not to be doing due diligence on something every week of the 52 weeks a year. I'm pretty confident of deploying judiciously. We've got the largest transaction team across all sectors in the country. Lots of opportunities and I would say, unlike the larger end of the mall space, in the convenience retail space in shopping centers, it's a very fragmented market. There's a lot of syndicate and private ownership. If you look at, we bought Chullora off a private family office. Waverly Gardens and Mernda were off syndicators and a lot of the syndicators have closed end funds and they have to sell at the end of their five year period or six year period.
We think the opportunities to grow in that universe are very strong. When I look at our $16 billion in convenience retail nationally, I reckon we're still less than 5% of the total universe of investable assets. It's a big growth market. Yes, I expect that we'll be continuing to pick up assets from syndicators, private investors and if you look at the history over the last 15 years, we've also done a lot of work on selling leaseback with major retailers and I think we'll continue to buy off other institutions. I think it's a multifaceted approach to selecting assets. As we've done in the evolution of all of our wholesale platform, just because we've got the capacity doesn't mean we're going to spend it stupidly. We're pretty disciplined on what fits our criteria and the sort of pricing we're prepared to pay. I don't think anything's really changed.
Thanks for the color there, David. Sorry, just one more quick one. You gave some details around what you might do around the Living center pipeline. Just interested in potential timing of deployment. We've seen obviously a number of listed real estate companies talk a lot about their resi pipeline but probably not progress it all that much. Just interested in how prospective your pipeline is.
Richard
I'd prefer to just tell everyone when we've done it and we've started construction than, you know, speculate when we're going to do it. I think I articulated how we're looking at it, so I'm not really going to provide any guidance on volumes and completions. I'd prefer to be doing it in the rear mirror rather than sort of providing future guidance on volume of and timing of residential projects.
Okay, thanks.
Okay, thank you. Our next question comes from the line of James Druce with CLSA. Your line is open.
Yeah, hi, good morning David and Tim. I'll be quick because we're coming up on the hour. Just one for Anastasia. In your guidance, is the pre-tax EPS growth this year going to be in line with the post-tax EPS or you're still getting more tax savings coming through?
Nothing to call out, James. On the taxation line itself, we're going to continuously try and focus on discipline to contain the growth in it so that we're getting a positive jaws effect across all of operating earnings and therefore having EBITDA outgrow our cost base. Nothing to call out on tax there.
All right, thank you. David, just on divestments this year, is there anything to call out in terms of how we should be thinking about that line item compared to last year?
I tell you what I tell all my investors. I think it's a great vintage to be buying assets, and I think it's equally bloody crazy to be selling assets. You know, there potentially will be some divestments, but I don't think it'll be anything like the volume you've seen in the last couple of years.
Yeah, okay, that's great. Thank you.
Thank you. Our next question comes from the line of Suraj Nebhani with Citi. Your line is open.
Thank you. Just a couple of quick ones. Firstly, David, on the Living pipeline, is it possible to identify which sites have been included? I know press has noted Elizabeth Street site, you know, going in potentially. Is it possible to just provide a bit more clarity there and what's to come? I guess.
It's obviously public knowledge because we did a media release on the stage two approval on 201 Elizabeth Street. It's also public knowledge we've got a planning approval on a large scale project in Brisbane, next to Bowen Hills Station and walking distance to all the Olympic infrastructure that's going to be invested up there. There's a few other sites. We've got a planning approved project at Westmead, which is the third stage of a three stage joint venture development that we've done for years with Western Sydney University, and there's a whole range of other things that are not in that number that are not yet planning approved, that will get planning approved progressively over the next 12 months. That's the sort of color I can give you.
Okay, maybe just one quick one for Anastasia. There was a big skew in property investment earnings, half on half. Can you just help explain that, Anastasia?
We did have more divestment, if you like, in property investment in the first half, and we've actually today announced that we've exited our incubation debt strategy around private credit. That was exited early, and the deployment of PI over the period was actually much more weighted to December onwards. That's why you're seeing that skew of PI earnings increasing in the second half.
Okay, for 2026, would you say second half is a reasonable kind of starting point?
It's very much opportunity led. That's a better question for David.
Look, Suraj, as I've just said, I'm pretty high conviction on the cycle going forward. We will be increasing our balance sheet deployment and driving PI earnings accordingly. Virtually everything we've ever done eventually then brings in external capital and it gets recycled and it gives us further capital to further invest. I would be expecting that to accelerate.
Thank you, David.
Thank you, ladies and gentlemen. I'm showing no further questions in the queue. I would now like to turn the call back over to Mr. David Harrison for closing remarks.
Okay, first of all, thank you to all of our team here at Charter Hall. It's always so much fun doing results, particularly when you've got four listed REITs. Thanks to the team, and obviously we look forward to catching up face to face with investors over the next couple of weeks. We will undoubtedly talk again then. Thank you.