Thank you for standing by. Welcome to the GDI half-year results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference call is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, Mr. Steve Gillard. Thank you. Please go ahead.
Welcome to everyone. I'm also joined by David Williams, our CFO. Just the first half snapshot. We'll just sort of talk through, you know, sort of briefly. The NTA increased to AUD 1.28 per security. We had Westralia Square revalued and also Hay Street. We've also had the profit on 50 Cavill Avenue. Obviously, that was only AUD 7.8 million, but obviously, we bought that a lot cheaper, but it was revalued, so there was a AUD 7.8 million increase there. Since our last results, the FFO is higher than the previous corresponding period, and that is notwithstanding the discretionary impact of the sale of 50 Cavill Avenue. We are maintain the distribution at the prior year levels and intend to pay a further AUD 0.03875 for the second half.
We're very happy with the sale of Cavill Avenue. We purchased it for AUD 48.8 million in February 2016, which was 49.3 after settlement adjustments. We spent approximately AUD 18.4 million, and we sold it for AUD 113 million or AUD 109 million after settlement adjustments. We also, during the period, purchased two absolute prime CBD car parks for AUD 68.5 million. Those car parks are in prime locations, and they have further development potential. We bought them on a 5% cash yield. We've already got significant savings on running costs. We'll be, there's very little CapEx, and there's obviously very little maintenance CapEx on those. We expect higher occupancy there. We just, we've worked with Wilson Parking to fine-tune the car parks.
There's also significant. We've bought them basically, you know, near land value, and there is development potential, particularly in the Wellington Street property, which adjoins the Perth Hospital. We've already put a sketch of a scheme together on that, maintaining some of the car park, and we can build a significant amount of office space. We believe that the government will be looking for something in that area. So we'll be ready for that when that directive comes out. We're well on the way to building the WS 2, which will be Perth's first environmentally friendly premium grade office building, about 9,500 sq m.
While there has been supply issues worldwide and fortunately we locked in the costs because costs they're saying in Perth, the construction around 30% higher. We've locked in those costs and we're very excited about that project, and we've already had significant interest from tenants there. We're on track, on time, on budget, and it really is looking a great project. We're hoping to integrate a fit out early on. We've got some strong tenant demand there, and we believe that it will be a building which will be in high demand. Obviously, you know, the increased development costs and increased building costs will hinder a lot of other projects coming through, which, you know, have been teetering on whether they're profitable or not.
During the period, we've done a couple of floors in Westralia Square. We have strong demand for that building. We've leased level 7, which now they lease 14,600 sq m. We've also executed a lease on Benington Cove . We only have 5 floors remaining, and we believe on the current inquiry, we expect the building to be fully committed by calendar year 2022. There's a lot of inquiry in the Perth market, and you know, we're confident. Now the borders are open, we're very excited that we believe that tenants will not have that as a hindrance to actually committing and signing heads of agreement. In relation to the WS 2 building, we've delayed the leasing campaign.
I think the reality is building they'll come, and we want to sort of see more out of the ground. We've got strong demand. We're going out with a major marketing campaign shortly. I think now that it's coming out of the ground and people can actually see what we're doing, that we'll be able to show them and we'll be able to, you know, capitalize on that interest. It has, you know, in relation to, you know, the objectives of tenants in anywhere around Australia, they're looking for environmentally friendly buildings. We'll be able to have very attractive outgoings. We'll be able to lower the outgoings, and we'll be able to offer a new building at the current levels of premium buildings. We're very excited on that.
Look, based on the current inquiry, we're looking to have well over 50% committed by calendar year 2022. We're willing to put our, really put our name on that now. The borders are open and, you know, there's freeing up and we're getting back to normal levels. We've got a couple of heads of agreement in 197, and some leasing deals on a couple of other floors. We're repositioning a number of floors in there. We're negotiating with Wood Group who will probably move out. Be a bit of vacancy, but I think that will be perfectly timed for the uptick in demand in Perth. You know, we're seeing, you know, obviously, you know, the CPI was about 5.11% December to December.
We're seeing a lot of demand, a lot of tenants just sort of ready to go, who've shown strong interest but are unable to actually commit in the heads of agreement because of the, you know, the uncertainty with COVID in Australia and worldwide. Now I think we've got a bit of a, you know, a green light while Perth and WA is still building their COVID cases. I think shortly you'll have, you know, some green light of businesses to go forward. You know, we're, you know, really confident now, and it really is a big relief for us because, you know, now we can see the green light and the blue sky ahead. We've done significant work on the Hay Street property. We've done the lobby. We've done the upper floor.
We've got interest for the whole building, part thereof. Look, the good thing is not only is there strong interest in the CBD, in the core CBD, there's now strong interest in that Perth market. You know, it's working well for us. I'll just hand you over to Dave Williams to talk about the numbers.
I'll just backtrack a little bit on what Steve said, because he flipped a page on the market.
Yeah. No, I'll talk about the market. Sorry, I apologize for that. You know, two-sided pages. Look, we've had the vacancy level fall to about 15%. You know, I think it was clear and stated in writing by JLL that about 4% of that market is unleaseable. You know, the vacancy levels at a very good level for us. Premiums around about 4% or 5%. There's a fair bit of A- and B-grade available, but I think our buildings in prime locations are the ones that tenants want. You've had about 50,000 sq m of demand in the last 12 to 6 months, and we're confident we're gonna get some nice net effective rental growth.
Look, there's a lot of tenants just sort of standing on the outside who are ready to pounce once the green light and once we get back to normal conditions. Dave, you want to add anything on that Perth market?
Oh, no. Look, things like sublet vacancy is as low as they've been in 10 years. Leasing inquiry levels, you talk to any of the agents and anyone on the line, please, if you know any of the leasing agents in Perth, they're all
Yeah. Just for example, we had a tenant like Apadana who renewed their lease and took about 2,000 sq m less. They've already taken that space back, and they're now looking for more space. You know, I think conditions and things are happening over there, which is great. Look, you know, we've been on the starting blocks and we've been ready to go for a long time, and we're in the pole position, we believe. Now we've got the green light, and I think now the border's open, and now we've got the ability for, you know, major tenants to make decisions on big leasing where they see that we're getting sort of back to normal. You know, getting back to normal, which is a great sign for us.
Dave, maybe if you could just talk about the numbers for us, please.
Yeah. Over to page 8 for those following the presentation. For those that know us, we realize we're not really a consistent FFO stock. We buy empty buildings and then therefore we sell them. It's hard to compare FFO from one period to the next. We do, notwithstanding the accretive impact of selling Cavill and only holding it for two months, FFO was up compared to the previous period. That's largely because of higher leasing at Westralia Square and higher average occupancy at Mill Green. Mill Green was quite a large contributor compared to the prior period. We've always said that we would have gone close to cash covering the distribution from FFO if we had held Cavill for the year.
You can see that our operating earnings were over AUD 15 million without Cavill and our DB is 20, so we would have gone close for that 6-month period. The funds management FFO was steady. We didn't do any transactional deals in the funds business for the 6 months. A big contributor of that is the distributions we received on the 2 co-investment stakes. Our interest expense was lower, and that's because of the reduced debt for most of the period following Cavill. The debt level is coincidentally almost back to where it was following the acquisition of the 2 car parks. Our corporate expenses ticked up for the 6 months. There's some permanents like insurance, which is out of control. We employed a head of development given the activities in Perth.
That came with a few just new employment costs as a one-off. Dave Ockenden, who's been with us for a long time as a consultant, but became an employee once we signed the built contract. It's better to have him in the house than semi in the house. The costs include an accrual for bonuses for FY 2022. The balance sheet is still very rock solid, gearing of 20% on the principal facility, which is the Westpac one. I swing over to page 10 to talk about that. Drawn debt of AUD 166.7 million and undrawn debt of AUD 146 million. That's in two tranches. There's sort of essentially a working capital tranche of AUD 2 million, and there's another 75 million to fund the completion of Western Australia Square 2, and that includes potential incentives.
We've got a lot of working capital there. The debt for the Townsville building, that office fund, comes up in July. It's only geared to 20%, so there's not going to be any renewal issues there. We do have 2 swaps. It's the first time that we've had swaps, that they're actually in the money. We haven't got swaps right a lot. They're now an asset as opposed to a liability. One comes up in May 2023 and the other May 2025. The rest of our debt we roll monthly, and at the moment, that is only costing us less than 10 basis points currently on a monthly basis.
Just quickly flip through to the property portfolio, and I'll get Steve to talk around these a bit more if or take some Q&A on any of them. We did get, as Steve said, two asset revalues, West Australia Square and 180 Hay. The cap rates on them didn't change. West Australia Square valuation, on page 12, you can see, is a combination of West Australia Square one and the land that West Australia Square two sits on, and the cost spent to date on West Australia Square two from the valuer's point of view. That's AUD 385.2 million. He's carrying the land at about AUD 9 million, and we've paid bills for about AUD 12 million. Same cap rate as 12 months ago.
We think that's pretty conservative and we will likely with the leasing demand that's there, if a couple of those come off, we'll probably get that done again in June.
Yeah. Look, we've leased that building bottom up. You'll note that we've increased the term of the lease on WAPOL to FY 2029. We've got all the upper floors, which are the best floors to lease, and we've got solid demand for those floors. Also, you know, Western Australia too, the value is value. The, I mean, the land value, you know. Look, we think they're quite conservative, but look, it's not time to sort of push the envelope or sort of, you know, we need to really now walk the talk and get some leasing done now that the border's open and, you know, occupiers can actually make a commitment. In relation to 197, we've got some solid leasing demand.
Yes, we've got a bit of vacancy, but I think in relation to the vacancy falling in Perth and the demand we believe will come in the next six months from now, you know, everyone freeing up, we think it's a perfect place to capitalize on, you know, strong tenant demand. You know, 5 Mill Street is, you know, 83% occupied, and tenants are really wanting to go into that location. We're, you know, doing some very strong leasing deals, and we'll get that Mill Green building revalued as of 30 June. In relation to 1 Mill Street, look, we said to everyone we were looking for a partner and looking to kick that off. It's very hard to market something where people can't actually access and get into Perth.
Now that the borders are free, we'll be marketing that and looking for a, you know, certainly a result in that regard. We've had strong interest, but obviously, you know, you can't do something unless people can actually visit the site. Hay Street, we've got significant interest from government, from private, whole building tenants. You know, there's gonna be strong demand from education and various things, and we're very confident of leasing that building. It really has come up really well, and it's a great building with plenty of car parking. The car park portfolio is trading its head off. We're obviously we bought that building at 8% net yield. We've got, you know, a long while.
If you look at all comparables, the service stations and various things and, you know, the car yard portfolio, we believe there'll be significant upside in the valuation of 30 June as well. In relation to Stanley Place, with the borders open in Queensland, we've got a strong federal government inquiry to take the majority of the building other than a bit of a half floor, and we're working through that as well. Now, look, really, we've got a bit of a green light and there's, you know, some, you know, certainly looking forward, we're, you know, first thing, you know, as soon as the borders open, we're heading to Perth.
The team was like, "You know, we've got 92% of our assets in Perth, and I haven't been able to get there." We'll be able to really push and meet with government, meet with major tenants and do things and really, you know, add significant value to our portfolio by actually being across there and actually east coast businesses and various things to visit their operations in Perth. There's a couple of the smaller country agent business properties which are sort of going along. In relation to 36, we've got, we've leased all the level 1, the lower floors, and we've got strong interest in both level 6 and 7 there.
In regard to the 38 Diversified Trust, we've got potentially expansion potential from one tenant, which could add significant value to tenants, to investors, and the Broadmeadow property is really traveling along quite nicely. As I talked about the council property, the IKEA property, it's trading its head off and we're confident of them as a minimum exercising their option, but we've put some other thoughts to them about expanding the store, doing some other things there to add value to our, you know, to our investors. I spoke about the KR's, but really, you know, they've been a tremendous acquisition, and we've got 40-odd% on the balance sheet, and we see significant uplift there.
Dave, just talk us through the profit and loss.
Really there's not that much to say about the P&L. The valuation gain and the value on interest rate swaps, the below-the-line stuff that's not included in NLA, which is quite lumpy for us, of course, plays around with what the P&L looks like. AUD 40.1 million for the year. That does include the outside equity interest, so it's AUD 37.8 million of income for the six months. Versus only AUD 5.8 million in the prior corresponding period. Why don't we hand it over for any questions?
Any questions? Yes. We'd be delighted to hear from everyone for some questions.
Ladies and gentlemen, as a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Once again, to ask a question, it's star one on your telephone keypad. Thank you. The first question comes from the line of Edward from MA Financial. Please go ahead. Thank you.
Afternoon, Steve and Dave. I just wonder if you can drill into the inquiry you're getting, particularly for Westralia Square. I think you said that given the inquiry you've got at the moment, that would see Westralia Square fully committed by the end of the year. Do you see them going as full floors, the remaining four floors? And also just what works are still remaining in terms of sort of base fit-out works on those floors?
Look, all the floors have been fully renovated to base build. We may put in a, you know, a demonstration suite. But look, we've been inquiring to take the lot. We've got a couple of inquiries to take whole floors. If we get two or three floors, whole floors, we may split a floor, maybe the top level or something. But on the current inquiry, we're very confident. It's a premium grade building and great location. I think what you're gonna find is the inquiry is really gonna heat up a bit now that the borders are open and now people can actually do things. We've looked and we've spent a lot of time on the expiry profile of other tenants around the markets.
With the not only with the current inquiry, but future inquiries, we're very confident on both that and WA 2. The building now is fully renovated. The only works to be spent on Western Australia Square is the building of Western Australia 2 and a bit of the surrounding areas with canopies, et cetera. You know, we're ready to go. We're ready to go, and we're in a great position there.
Thanks, Dave.
Thank you. Once again, ladies and gentlemen, to ask a question, please press star one on telephone keypad. Thank you. Once again, to ask a question, it's star one on your telephone keypad. Once again, to ask a question, please press star one on your telephone. Thank you.
If anyone's a bit shy on asking a question, maybe you can call us, either Dave Williams or myself directly. I'm very happy to answer and talk through, you know, our results and, you know, where we're going from here. You know, well, look, thank you so much. Unless there's any other questions, we appreciate you all joining the call and, we look forward to some really good times ahead for GDI.