Good day and welcome to the GDI annual result teleconference. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stephen Burns. Please go ahead, sir.
Welcome everybody to GDI's annual results. I'm just gonna start off with the leasing market in Perth. We're not as progressive as we'd like to be, but however, the borders only opened in late March. Since then, we've done over 8,000 square meters of leasing deals, and we have significant amount of proposals out, and we're on shortlists, and we're certainly seeing significant levels of inquiry from the larger tenants and remain very confident in the short to medium-term outlook of that Perth office market. You know, with the significant amount of projects and growth, You know, since the borders have opened, we have done significant leasing, and we're very confident in that market in the short-term, short to medium-term.
Operational highlights, our WS2 building is progressing very well. There's been a fair bit of rain and whatever, so it's probably a little bit delayed, a month or two. However, we have done a lot of work in relation to the environmental benefits of this building. It's only at 20% of the normal carbon of any building built. It's of a steel and timber construction. We've got numerous inquiries from full building and multi-floor and single floor tenants. We're very confident that this building will virtually be carbon neutral when it's finished and tenants are in there.
We're very excited about that, and it's very popular, and it's a very sensitive thing in the market at the moment, and tenants are guiding towards these type of buildings in the future. We settled on Cavill Avenue. We purchased that for AUD 48 million in 2016, and it was sold for AUD 113.5 million. That was certainly a good acquisition and sale. We've purchased two car parks in Perth, prime CBD car parks. We bought them below their average trading levels and they were trading well, but then we hit COVID over there, and they decreased the occupancy. However, the June and July numbers have been very, very good. When I was over there last week, the car parks were virtually 80% occupancy.
We'll see some significant rise in those. They're in great locations. I will hand you over to David Williams to talk about the financials.
Afternoon, all. I hope that we've heard there's a few people had a bit of trouble getting on. Obviously, everyone on the line didn't. NTA up AUD 0.02 on the year. It started 1 July 2021 at AUD 1.25. It was AUD 1.28 in December, so it's gone down AUD 0.01 since December. We only revalued in June the dealerships that we own 47% of. They were up over AUD 30 million in total. We revalued Mill Green. We didn't revalue West Australia Square. We have to do that on practical completion, which will be in the next six months. We anticipate quite a big uplift from both WS1 and WS2 on that. FFO for the period was AUD 0.0529. It's basically the same as it was in 2021.
Obviously, there's a dilutive impact of selling Cavill. It generated over AUD 7 million worth of FFO for us, and we only held it for two months in the FY 2022. Offsetting that was higher occupancy and therefore a lot higher rent coming from Westralia Square and also the car parks, which we owned for six months. The distribution of AUD 0.0775 will be paid at the end of the month, the second half of it. When you look at our business, we've generated a 13% total return calculated off our opening NTA when we IPOed of AUD 0.91 plus the distributions. That's a per annum return, which we're actually pretty proud of, really. Our LVR is 26% on our Westpac facility only.
In the numerator, we have the cost of the debt that we've used to construct WS2, but none of the value is in the denominator yet. The LVR, that's sort of over-inflating, and it'll come down as we value the asset on practical completion and get something into the denominator. Our gearing is 23%, which is including the consolidated funds. On debt and swaps, during the year, we shuffled our debt around a bit. We obviously settled Cavill, repaid a bit of debt, put a facility in place to construct WS2, and then subsequently bought the car parks. Where it sits now, on the principal facility, the main one, we've got AUD 318.5 million facility, it's drawn to AUD 206 million.
There's 106 of undrawn debt. Obviously, there's a chunk of that still to go with WS2, but we still have quite a bit of capacity. The big thing that we did post balance sheet, we had two swaps, two AUD 25 million swaps that we put on in May 2020. One of them was a 3-year expiring in May next year, and the other one was a 5-year expiring in May 2025. They had a value of AUD 2.5 million, which we terminated and bought essentially 150 million of cap protection at 3% BBSY. That's 100 million till 31 December 2023, and then another 50 million all the way through to 31 December 2024.
We are 100% floating now, but we have that AUD 150 million cap at 3% BBSY. I'd just like to touch, as Steve talked about before, on what we call carbon strategy. We could go on about ESG, but this is really about E and looking at the E side of it only. We feel as though we've been short-selling ourselves on what we do. We've been very reliant on NABERS . I know a lot of investors are asking for ESG reports. With our annual report that we'll release at the end of September, we are releasing our third ESG report. Just really focusing on the E element, more attention is being paid to embodied carbon. Look, our traditional business is buy well-located buildings for below replacement.
We upgrade services, we upgrade lifts, HVAC, LED lighting. We make them as efficient as they can be to basically reduce outgoings. We can substantiate more net rent, but it also has an enormous environmental benefit of reducing the actual emissions of the building. We take them as far as they can go. We're conserving the carbon that's sitting there. I don't think enough focus has been on the fact that we're not knocking down these things to build new ones. We're investing in old buildings to make them hum as well as they can. We are talking to our tenants about buying green power. Green power is about 70% of the emissions.
Some of our tenants, particularly, you know, WS2 will buy green power, and we'll discuss whether they want to eliminate scope one and three emissions through carbon credits. On our assets like WS1 and One Nine Seven, some of the more multi-tenanted ones, the tenants are talking to us about green power so we can move towards that, closer to a net zero across some of our assets. The thing that Steve mentioned with WS2, it's being built on a concrete structure, so you're conserving the concrete there. There's no concrete in it's steel and timber, so it's 80% more efficient on an embodied carbon basis. You're of course putting in new technology, so it's also gonna operate more efficiently than an older product. We're pretty excited about that.
We think that this strategy is unique. I'll give. We think we're doing a bloody good job of it and haven't been selling ourselves enough. Hand back to Steve.
Let me talk about the Perth office site, the Perth market. Look, things have been harnessed. We've sort of thought we were in the box seat February, sort of, 2020. We've sort of lost two years with closures and border closures and various things with COVID. Now the green light's there. You know, the forecast GDP growth, forecast very strong population growth. There's probably about AUD 60-70 billion of new hydrogen projects being announced. There's about AUD 150 million or AUD 140 million of other project, which is gas, the Scarborough Energy Project. Numerous other lithium, iron ore, various expansions over there, and they need huge amount of additional employment.
The state government has put a big emphasis on that to bring people to WA to fill those positions, which will add to huge population growth and we believe office growth as well. It's already happening with the inquiry rate we've got. We feel the net absorption will pick up this half now the borders are open. It already, we hear, there's been. We've done a number of leasing deals and in the market there's a number of leasing deals there. We've got strong inquiry. Again, the office vacancy will fall, therefore, net effective rent, we believe, will grow.
Westralia Square, we've got four floors remaining, the four top floors, and we've got strong inquiry for those floors and, you know, we're hoping to have that fully leased in the very short term. The 197, we've got a little bit of vacancy there from Wood coming out. Already, we believe we're close to a heads of agreement for 2,000 sq m. Of that, the space is well fitted out, ideally in the Perth market, and we've got strong inquiry. We've actually done a leasing deal to a school on the ground floor, which would have its own separate entrance, and that's the first school done in Perth in the CBD, and we believe there'll be significant inquiry for educational type of tenants in the future.
Probably not our buildings, but other buildings which will take up a fair bit of vacant space with the Edith Cowan University, 2,500 students, as well as you know for English schools and various things there. 5 Mill Street. Look, it's been very popular. We've got one full floor which hasn't been subdivided, and we've got some inquiry on that, and we hope to have that virtually fully leased shortly. 1 Mill Street, we've kept it vacant. Now, with construction costs increased by about 30-odd% in Australia and certainly in Perth, in WA. We've reconfigured the DA, which will be lodged in about a week, to put again the wood and steel structure above the existing building, which will significantly reduce the building cost.
There's no demolition, and the building has the capacity to support that building, and we believe we'll be able to have about the same construction cost even with the huge uplift in construction costs in Perth. Remember, these construction costs have taken a lot of other potential sites out of the market because you're gonna have to, for pre-commitments and various things, have to have about AUD 150 a square meter additional rent, whereas we can keep around the same rent that we had before. Again, the popularity of these environmentally friendly buildings is certainly coming in the market. 180 Hay Street, we've got a couple of big government inquiries on that, although we've decided to pop it on the market to see for an owner-occupier.
That will hit the market, and we hope to make a profit on that building. The dealerships, we've had a nice uplift in valuation to AUD 136 million. They're trading their heads off over there. They're in fantastic locations, suburban locations, and we're very happy with that acquisition and the uplift on those and believe they'll continue. That will continue in the future. Stanley Street, again, we've touted and people going up there. We've got strong government inquiry for the vacancy, but that's just taking time to run through. With the vacancy we've got, we hope to fill that building within the next 12 months. Our funds business, IKEA have exercised their option, which is great news, and that's trading very well.
GDI 38, we're looking to rezone that the Broadmeadow building. We've been working with GDL to expand their facility in the Perth facility, and we believe significant uplift for our investors there. 111 Adelaide Terrace has been vacant. However, we've got strong inquiry now for the two top floors and hope to wrap that up shortly and pop that on the market, and we've leased over 2,000 square meters in that building, and we're re-leasing and various things there. With the inquiry we've got, we're feeling very encouraged in relation to that building. Dave? I'll hand you over to David Williams.
Guidance, we haven't provided any. We have an ambition of paying a distribution of at least AUD 0.0775, which as I've shown in the chart there, we've managed to do, even though we've gone by buildings like 180 Hay that are empty. We fund them through asset recycling, through a very conservative balance sheet, and through cash. We would like to continue to do so. We need to see strong leasing and/or capital transactions, all of which are the plan for FY23.
Okay. Well, we'll talk now in relation to the funds business. Look, we haven't launched any new funds. There's significant inbuilt performance fees and various fees in the funds that we have. You know, we're confident. I'll just talk to you about the Wellington Street car park. We're looking to put a DA on that to put an additional 25,000 square meters on top and convert the car park into 60 residential units with significant uplift in value. We believe there's a couple of big government inquiries which hit the market, and unfortunately, with the construction costs going up, they couldn't be filled. However, we believe that we have a solution with this. We've achieved the type of building.
We'll be able to offer the right rents. Again, the government is certainly looking for environmental style of buildings. Look, with everything that's happened over there, we finally got the green light and the barriers removed, and we've done significant amount of leasing deals and are really, you know, excited with the future with the current inquiries. I'll open it up now for questions.
I'll just. There's a schematic of what the development above the Wellington Street car park looks like on page five of the presentation.
We can convert the car park into the residential units by just putting walls around and putting kitchen bathrooms in it at minimal cost. They would have a car bay each and storage right in the heart of the city and not far from the Edith Cowan University, where there's gonna be over 2,000 students there. We think it would be an ideal location. We'll open up for questions, please. Excuse me, operator, could you just inform and help anyone that would like to ask a question and the procedure on doing that, please?
Thank you, sir. If you'd like to ask the question, please signal by pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name and company before posing your question. Again, press star one to ask the question. We'll take our first question. Your line is open. Please go ahead.
Hey, Steve, it's Edward Day from MA Financial. Just on the development proposal for One Mill, what's your estimated construction cost per square meter for that type of steel and timber finish?
Look, the QS is working on it. We've just got a couple of fine points, but around the same construction cost as what the previous concrete building was, even with the 30% uplift in construction cost. It'll be about the same construction cost as the previous DA that we had. You know, the previous DA, you did pre-commitment for around AUD 730, AUD 720 a square meter. Now you would have to do it at about AUD 830 or so for the same profit. We believe that the timber and steel construction will be able to come out at the same, around the same construction cost as the previous concrete, which would be 30% higher. The concrete one would be 30% higher.
It does give us an edge in the market, and there's numerous sites there which are, you know, land-based sites which don't have the benefits of building on top, which would be sort of blown out of the market for pre-commitments.
Sure.
Ed, Dave again. They're also quicker to get up.
, much quicker. .
They're about, you know, if a traditional concrete's three years, this thing's more like two years.
They're also, you know, they hit that environmentally friendly button and the carbon button, which really is a big talking point. I mean, you'll notice on WS2 we've put the state-of-the-art glass in, which is very environmentally friendly. By the time there's a new glass out which has, you know, some solar panel and various things in it which can even add benefits to that. You know, we did in WS2 and WS1, we've put some solar panels on. Mill Street you'd be able to. The one at Wellington Street, you'd virtually be able to put the whole roof of solar panels, and it'd virtually be electricity neutral. We've been working really hard.
We've picked up Arup and some HFM to really get these buildings running, you know, the existing and our buildings environmentally friendly. You'll note that with regard to WS 1 and 2, our outgoings, we believe, will be about AUD 30-AUD 40, even AUD 50 cheaper than any other prime or premium building in Perth. We'll be able to even if we buy green power for, say, AUD 5-AUD 7 a square meter, we'll be certainly able to do that, and we will still be below any of our competitors on an outgoings basis.
Thank you.
Once again, ladies and gentlemen, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for question. We'll take our next question. Your line is open. Please go ahead.
Hi, guys. It's Carlos from Renaissance. Just a quick question on tenant demand. You mentioned that you got a number of inquiries for several of your potential tenancies. Can you sort of elaborate a little bit on the type of industries that are more active and the sort of briefs that might be out in the market?
The type of briefs out there are government for a couple of 20,000 sq m inquiries. You've got some semi-government for a couple of 8,000 sq m inquiries. You've got a big couple of oil and gas-related tenants, you know, around the 10,000 sq m inquiries. You've got engineering groups around 2,000 sq m inquiries. You've got, you know, and various things. There's some really solid inquiries out there. We're seeing, you know, we're really seeing some traction and some, you know, interest in our properties. You know, this is a lot of expansion, you know, some new entrants into the market.
You've got about a couple 2,000 and a 5,000 inquiry from federal government, new entrants into the market. You know, there's a new 12,500 square meter inquiry, which, you know, we believe, you know, these could take their time. We've done a lot of work in relation to all of the registered leases in Perth. We've gone through, and we've got a, we see, you know, with expiries and various things that there's, you know, a lot of these people went in in 2012 or, you know, 2013, where the vacancy was virtually zero in Perth in unsuitable taller buildings. A lot of those are expiring, some of these existing tenants as well.
We're seeing expansion and, you know, strong leasing inquiry.
Great. Thanks.
I mean, just in relation to that, I mean, the style of tenants are tenants which don't really work from home. There's not a lot of data processing, banking, IT type of groups in the Perth market. You'll see, I think the latest figure is about 71% are back in the office, and we believe that's growing. Looking at our car park, the car parks in the last week or two, the occupancies have really lifted quite strongly.
Perth had the highest number of people heading to the office all through for the last couple of years, pretty much.
Again, press star one to ask a question. There are no questions at this time, sir. Please go ahead.
Well, I'd just like to thank everyone for taking the time to listen to our annual results. At any time, give myself or David Williams a call. If you'd like a one-to-one meeting, we'd be certainly delighted to do that. Have a lovely afternoon. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.