Thank you for standing by, and welcome to the Growthpoint Properties Australia, Growthpoint's first half 2024 results call. 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, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Timothy Collyer, Managing Director. Please go ahead.
Good morning, and welcome to Growthpoint Properties Australia's first half financial year 2024 results. My name is Timothy Collyer, Managing Director of Growthpoint. Joining me this morning are Michael Green, Chief Investment Officer, and Dion Andrews, Chief Financial Officer. I'll start this morning with a brief overview of our results and strategy. Michael will then provide an update on our property portfolio, followed by Dion, who will give a more detailed review of our financials. And finally, I'll provide a summary and the outlook. We will then be happy to answer any questions you may have. Turning to slide four, our goal remains to provide security holders with sustainable income returns and capital appreciation over the longer term. Despite challenging property markets, we managed to achieve some great office leasing deals, which increased our office occupancy, a really strong endorsement in the quality of our office portfolio.
We were very pleased to sell an industrial property well above book value. We also divested an office asset in Sydney by our funds management business on favorable terms for investors, and extended the term of several other externally managed funds. Our disciplined approach to capital management is reflected in our active hedging program and the prudent management of the group's interest rate risk. Turning to slide five and the first half overview. Our WALE remains very strong, and we have seen an uptick in portfolio occupancy, driven by our leasing success. FFO is lower, predominantly driven by property divestments and lower lease surrender payments received relative to the first half in financial year 2023.
As a result of higher interest rates and the consequential impact on capitalization and discount rates, the group's property portfolio value decreased by around 4% on a like-for-like basis from the thirtieth of June, two thousand and twenty-three. This was a primary driver of the lower NTA. Turning to slide 6. Site quality is a key theme across all office markets. Occupiers want their people back in the office, collaborating and innovating, so they are seeking flexible, amenity-rich, quality workspaces. It remains a relatively tight labor market, so the competition to attract and retain quality people is real. They also want to meet their ESG requirements due to both regulatory demands and the social expectations of their clients, customers, and people.
This is exemplified in our ability to attract high caliber government tenants across the portfolio over recent years, where the ESG benchmark for their occupancy is very high. Over many years, our strategy has been to acquire and hold the best assets in the right markets with the strongest ESG credentials. As a result of this strategy, our A-grade assets continue to outperform lower grade assets across all markets in terms of net absorption and vacancy. Turning to supply on slide 7. Over the next few years, we believe new office completions will moderate as higher cap rates and elevated construction costs impact development feasibilities. We've already seen several major A-REITs defer new office developments until the next cycle, and we are also likely to see the withdrawal of older buildings as they are repurposed for residential or other uses.
This is consistent with previous cycles, as the, as current vacancy rates are not conducive to new development. In those markets, there is less supply forecasted versus other markets, and in particular, some of our larger markets, like the Brisbane Fringe, have very little supply coming on stream over the next two to three years. This is all positive for office vacancy rates over the medium term. Turning to the industrial sector on slide eight. The strong rent growth in the industrial markets continued in the first half, but at a slower rate. There still remains a shortage of modern warehouses across all markets, and e-commerce continues to grow. Large-scale speculative development is expected to trend down, reflecting developers' lower appetite for risk. Population growth remains a key driver of industrial space requirements and will underpin growth going forward.
The national vacancy rate is still very low, at 1.1%, and well below equilibrium. Moving to slide 9 on funds management, a long-term growth platform for the group. We are actively bidding on countercyclical and income-focused assets, and anticipate the transaction market to improve throughout 2024. We completed the sale of Taylors House in Waterloo for AUD 87 million in January 2024, as the fund came to the end of its term. The fund achieved a good IRR of around 11% per annum over the seven-year term. We also extended the term of several funds, representing around 25% of total funds. We will continue to target sustainable and accretive growth in funds through the cycle. I'll now hand over to Michael for an update on the portfolio.
Thank you, Tim, and good morning, all. Before I speak to the slides, I just wanted to acknowledge that this is expected to be the last set of results that you'll be presenting, and to thank you from me and the team for your leadership and guidance over the last 14 years. You've been instrumental in driving the growth and success of Growthpoint, from what was initially five people running a AUD 650 million industrial fund, to today, where Growthpoint is a diversified business, managing AUD 6.3 billion of funds under management, and with offices in Melbourne, Sydney, and Brisbane. Your unflappable style and positive leadership have left an indelible mark on this business, and I wish you all the best for what lies ahead. Moving on to the portfolio leasing over the half.
Our office leasing has been very positive, and we've had excellent demand for our assets, particularly in the Brisbane market, where we've undertaken 60% of our leasing for the half. Underpinned by the quality of our assets and the continued dedication of our asset management team, we've actively leased over 6% of our office portfolio by income, representing 23,000 square meters of space leased. Of the 23 leasing deals signed, seven were renewals and 16 were new leases. Over 50% of the leasing deals signed during the period were with government tenants, and as can be seen on the slide above, tenants are committing to long-term leases at our properties, with the average lease term of our leasing over the half of 7.4 years.
In 2024, we've continued this positive momentum and have signed leases or signed heads of agreements from an additional 1.5% of total portfolio income. Turning to a snapshot of our portfolio on slide 12. Our balance sheet portfolio comprises a high-quality, modern office portfolio, which represents approximately two-thirds of our assets. The remaining third of our portfolio is our high caliber industrial logistics portfolio, where our near-term lease expiries are 15% underrented against our most recent market valuation rent. As flagged on the previous slide, we've worked hard across the lease, across the portfolio, increasing occupancy to 95%, up from 93% six months prior. A key transactional highlight during the period was the sale of 1-3 Pope Court, Beverley, South Australia, to an entity associated with one of the sitting tenants.
Group achieved a sale price of AUD 35 million, approximately 15% above the 30 June 2023 book value, and well above the original 2015 acquisition price of AUD 20.8 million. Proceeds from the sale have been used to repay debt. On slide 13, we highlight the key office and industrial portfolio metrics. Increased interest rates and elevated long-term bond yields have resulted in continued low levels of transaction activity and have negatively impacted the Group's valuations at the half. We've witnessed approximately 30 basis points of cap rate expansion exhibited across the portfolio. The portfolio's value decreased by AUD 182.1 million over the half. The majority of the decline was contained within the office portfolio, while we saw a slight decline in the industrial portfolio valuation, with the 30 basis points of yield expansion being largely offset by strong market rental growth.
It is important to address the peak to now movement in valuations through the current cycle. Since June 2022, which was the peak of the current market valuation cycle, the value of the group's portfolio has decreased by 10% on a like-for-like basis. The group's office portfolio has borne the brunt of this movement, decreasing by 14.2%, while our industrial portfolio valuation has proved more resilient, decreasing by 1.9%, with the 100 basis points of yield expansion being predominantly offset by market rental growth. On slide 14, our portfolio is exemplified by secure, high-quality tenants with long leases and positive industry fundamentals. 40% of our office portfolio income is derived from government tenants. Our high-quality, energy-efficient buildings are attractive to government tenants, with this cohort having a long 9.6-year weighted average lease term.
Our industrial portfolio is supported by major high-quality Australian corporates such as Woolworths, Australia Post, and Linfox. The defensive characteristics of the group's portfolio are illustrated again on slide 15. The portfolio WALE remains healthy at 5.8 years, with our recent leasing discussed earlier, helping to offset the effluxion of time. We retain one of the longest office weighted average lease expiries in the REIT sector at 6.2 years. GOZ is positively exposed to industrial rent reversion over the short to medium term. 40% of our industrial leases are expiring between financial years 2024 and 2026, and these leases are currently 15% under rent versus our valuation market rents. Our asset management team has had a strong track record in outperforming these expectations.
Our current vacancy profile and upcoming lease expiries in financial year 2024 and 2025 are predominantly in markets that have experienced positive net absorption in 2023, or in markets with lower levels of vacancy. This provides us with a high degree of confidence in leasing up this space expeditiously. Our largest office vacancy at 5 Murray Rose Avenue, Sydney Olympic Park, is receiving good interest, and we have leased around 15% of this space to date. Growthpoint continues to focus heavily on managing leasing expiries, and we're confident in our ability to navigate the current challenges within the office market. Switching now to sustainability on Slide 16. Our portfolio continues to achieve a high average NABERS Energy rating of 5.2 stars, and pleasingly, we have increased our GRESB score by 3 points to 84, and remain a sector leader in our space.
We continue to increase our on-site solar rollout, with six additional installations progressing over the half. 20% of our office assets are fully electric, and we're exploring electrification pathways for the balance of the office portfolio. I'll now hand over to Dion for the financial overview.
Thanks, Michael. Starting on Slide 18, a review of our financial results for the half. As forecast, FFO reduced compared to the same period last year. On the revenue line, net property income was impacted by lower surrender fees received in the first half of 2024 relative to the prior half year, where material surrender fees were received. If we exclude surrender fees, like for like net property income was flat. The divestment of an office property at 333 Ann Street in Queensland back at the start of calendar 2023, and Pope Court during this half, also reduced NPI. Increased operating expenses include the cost of operating the funds management business for a full half, along with general cost inflation.
Higher finance costs were impacted by the rising cost of debt, which now appears to be stabilizing based on the market expectation that the cash rate has peaked. On Slide 19, we break down the components of the movements in FFO and NTA from the comparative periods. Regarding FFO, one can clearly see that it is the relative reduction in surrender fees that is the key driver of the result, with increased borrowing costs the other factor. Increases in borrowing costs are anticipated to subside in the future, as the market currently no longer forecasts increases in the cash rate, and cheaper fixed debt rolling off makes up a smaller portion of overall debt costs going forward. Turning to Slide 20, gearing increased from 37.2% at 30 June to 38.4%, remaining below the midpoint of the group's target range.
The increase in the last half primarily relates to changes in portfolio valuations, offset by the sale of Pope Court. We also have ample headroom to our bank covenants of LVR of 60% and ICR greater than 1.6x . Unlike many others, we have no development pipeline to fund, thereby reducing external funding requirements. It also means we have little pressure to dispose of assets unless we see good value for security holders in doing so. On Slide 21, our capital position remains solid, with higher levels of hedging. Our weighted average cost of debt as of 31 December was 4.7% versus 4.3% at the same time last year, and reflects the rapid increase in the cash rate since May 2022.
The group entered into a total amount of AUD 200 billion of interest rate hedging during the half, with a weighted average term to expiry of 3.6 years. We have no debt maturing until March 2025, and retain ample undrawn facilities of around AUD 300 million to cover FY 2025 maturities. In December, we extended AUD 150 million of facilities from two lenders, from December 2024 out to February 2028 on comparable margins. Post 31 December, we also extended two lots of AUD 50 million tranches due to mature in FY 2025 and FY 2027, out to now mature in FY 2032 on similar margins. This displays the stronger relationship we maintain with our lending group and the faith they have in our operating model.
Finally, I'd like to take this chance to echo Michael's words regarding Tim and his wonderful stewardship of Growthpoint over many years. You've been a fantastic leader for our business, and I've personally learned a lot working alongside you over the journey. With that, I'll hand back to you to wrap up.
Thank you, Dion, and thank you, Michael. Turning to Slide 23 and the macro environment. Inflation, while still high and outside the RBA's 2%-3% target range, has moderated, and this is reflected in interest rates, which appear to have peaked. Lower interest rate forecast by the market will be positive for A-REITs and GOZ alike, by a lower cost of debt and lower discount rates supporting A-REITs and direct property valuations. Population growth remains strong and is underpinning continued growth in the Australian economy, which is a positive for industrial, office, and retail real estate. Turning to the current security price discount to NTA on slide 24. Although we've seen a bounce in A-REIT prices recently, there still remains a large discount to NTA, especially for those REITs with office exposure.
From the 30th of June, 2022, to the 31st of December, 2023, our property portfolio has declined about 10%. The majority of this decrease has come from the office portfolio, which has fallen by around 14%, which Michael highlighted. The discount to NTA at the 31st of December, 2023, implies a further 23% reduction in the Growthpoint portfolio. We believe that the defensive characteristics of the office portfolio, being long WALE, strong occupancy and high quality tenants, and a positive industrial property market with growing rents, are being overlooked, and the risk/reward proposition is compelling. Turning to the market outlook on slide 25. The macro environment has stabilized, but physical markets are yet to follow. However, there are signs that things may turn during 2024.
As a result, we expect to see our interest rate expense stabilize and increased opportunities to grow fund. Population growth remains a key driver of the Australian economy, which is good for our assets. Office construction activity is slowing, but we may not see the impacts of lower supply immediately. However, the current vacancy rates, coupled with higher construction and finance costs, are deterring new construction activity, which should bode well for future office vacancy rates. In the last half and into 2024, we have seen positive leasing inquiry within our office portfolio. We also see the flight to quality in tenants' leasing decisions and expect secondary office assets to struggle in a competitive environment.
Growthpoint's is positively exposed to industrial rent reversion over the medium term, with 40% of industrial leases by income expiring between financial year 2024 and financial year 2026, with current rental under-renting, sorry, of around 15%. Turning to financial year 2024 guidance on slide 26. Today, we reaffirm our FFO and distribution guidance. At current pricing, the financial year 2024 distribution yield is over 8%. We are pleased where the portfolio and business is positioned as we move through the cycle. Thank you very much for your participation today and to the Growthpoint team for their hard work and dedication in the first half of 2024.
As this is my last results presentation, I would like to take the opportunity to thank the Growthpoint team and board, market participants, and all of Growthpoint stakeholders for their support of myself and the business over the last 14 years. It has been a great honor and privilege for me to lead the company. We'll now open up the lines, and they're ready to take questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Our first question is from Caleb Wheatley with Macquarie. Please proceed.
Good morning, Tim, Michael, and Dion. Tim, congratulations on your tenure at Growthpoint. All the best with the future. Couple questions from me. First one's just on the FFO guidance as we look into the second half. It seems like you're entering this period with a higher occupancy across the portfolio, and you're circa 80% hedged, from an interest expense point of view, still pointing to a 12% decline in FFO, half on half. How should we think about some of the other moving pieces as we go into second half, please?
Yeah, thanks, Caleb. It's Dion here. I'll take that one. Look, really, the key difference between first half and second half is in the first half, we have had, as we announced in December, a surrender at one of our properties in South Australia. And then there is a new lease that starts at that property in 1 July. So it's been fully covered, but the surrender is covering us for that second half loss of income. So that's one of the real main skews. There is still some leasing up to do in the second half, of course, as well, and we're always looking at interest rates. The main difference between the halves is that surrender versus the new lease.
Okay, that's helpful. Thank you. Second question, maybe just digging into the office expiry profile a little bit more. So it doesn't look like there was any expiry over the first half, and circa 5% to come in the second half. Can you just speak to if there are any material expiries in that 5% and sort of an update on leasing discussions on that space, please?
Yeah. Thanks, Caleb. It's Michael here. So the most prominent lease expiry is towards the back end of the half. So one of them is falling on the final day of the half, being Peabody Energy. We're at our building in South Brisbane, so we'll be vacating the property, and we are actively entertaining inquiry for that 5,600 meters at the moment, and we've, yeah, got some positive momentum there. That, that's the majority of the sort of major expiries. There's a couple of other ones which are single floors, but that, that's the most prominent one, and as I said, it puts right at the end of the arm.
Okay, great. And then just on the incentives as well in office. So it'd be good to get occupancy up over the first half, but it does look like the incentives provided have increased from 24% FY 2023 to 34% in first half. Just wondering if what the particular drivers of that were?
I mean, principally, it's just doing market level incentives in the markets you're in. So there's a slide later in our presentation where you look at where incentives sit across most markets in the office sector, and, you know, our, our average incentive across 34% is considerably less than those market level incentives, but still increased on what it was in the prior period.
Yeah, sure. Do you have a sense on a net effective basis where the office portfolio is relative to market?
I mean, I've got a sense of where it sits versus market rents. Overall, it's about 5% over let at the moment. Yeah.
Okay, great. That's all from me. Thank you, and congratulations again, Tim.
Thank you, Caleb.
Our next question is from Howard Penny with Citi. Please proceed.
Thank you. Congratulations, Tim, on a great tenure, and good luck with the next exciting adventures I'm sure you're looking at. In terms of buybacks, so Growthpoint Australia looked at buybacks last year with the large discount to NTA. Is it something that you'd consider again in the next sort of one or two years, potentially to unlock some of that value that you highlight at the end of the presentation?
Thanks, Howard. Yeah, look, we announced that buyback for 2.5% of securities, we completed that buyback, in March last year. We haven't announced another buyback since then. The thinking behind that, really, where we're looking at, you know, do we see, pricing as well below NTA? Certainly. Could that be attractive? Yes. But we also keep one eye on, a gearing and also liquidity, given that, we have a major shareholder that owns over 63% of the securities. So those were the reasons we limited it to 2.5% at the time. It's never saying further, but we don't have one active at the moment.
Absolutely. And just as a second question from me, just looking at your current weighted average cost of debt versus your marginal cost of debt, and a note is highlighted that you are predominantly hedged in the next year. But would you maybe just point out how that will evolve over the next two years or so?
Yeah, thanks, Howard. Look, we do see, well, we think cash rates for a start are peaking and most analysts out there or market commentators have them starting to reduce into the end of calendar year 2024. When and by how much? Well, that's a million-dollar question. I'll leave that to the forecasters. So, you know, our floating rate debt, yeah, should start to at least plateau or reduce as the year goes on. In terms of fixed debts rolling off, there are some cheaper fixed debt rolling off in FY 2025, not really any more in 2024. One small, very small hit rolled off. That will bring up overall cost of debt, but it becomes a smaller and smaller impact to our overall proportion now.
And then the debt costs beyond that are really swaps that we've entered into at market value, so beyond that, we really see it plateauing. So, a slight uptick in FY 2025, most likely, depending on how much the cash rate may fall, but after that, very stable. So we very much see it as peaking.
Perfect. Thanks a lot. And just, I know you have commented on this already, but just your confidence in re-leasing that 1-year lease expiry profile and maybe recovering some of the current vacancy?
Yeah, I mean, we're very confident. We've got really strong momentum, as we mentioned a number of times during the presentation. I think what's important to sort of recognize is the building momentum that we've seen across our portfolio over the last four halves. And really, we've increased our sort of leasing volumes in the office space from 9,000 sq m back, you know, four periods ago to 13,000 sq m to 19,000 sq m and now to 23,000 sq m. So there's positive momentum, and I'd say, looking across our portfolio and the levels of inquiry we've got in the office space, since December last year, we've seen, you know, more inquiry than we've seen in the prior sort of 18 months.
We think that tenants are generally making their decisions now about where they want to be and for term, and you'll see that in our weighted average for the lease expiry, the new leases that we've done, 7.4 years. So there's it appears that most groups now know how they want to work for the period ahead. They're committing to modern office buildings, so they can attract their people back in, and they want their people back in. So yeah, we're confident. We've got great assets. They're in the right markets. I think the other important feature of our portfolio is we're not exposed to a number of office leasing markets, which are in a really poor state at the moment, whether that be the Docklands and St Kilda Road, North Sydney and others, where you've got high levels of vacancy.
Most of our exposure is into markets where you see strong levels of net absorption at the moment, like Brisbane, Fringe, et cetera. So yeah, we're confident. We've just got to get on with it and do what we do each period and work really hard and get it leased.
Thank you very much, and congrats again, Tim.
Our next question is from Richard Jones with JP Morgan. Please proceed.
Oh, thank you. Got a few questions. Tim, are you in a position to give an update on the CEO search?
Yes, I can. It might be a limited update, but the board are overseeing that process, and it's ongoing. There's been interviews of potential candidates, and I think, you know, the board will be announcing a decision or what have you, in due course. You know, I gave a 12 months notice. The process is going as the board planned, and we'll await an announcement in due course.
Okay. Thank you. So around the payment in the first half, Dion called out, is that in the order of about AUD 5 million, is it?
A little less, closer to AUD 4 million. Yeah, there's about AUD 19.3 million in that prior period. And we're, you know, we're showing net AUD 15 million, so it's about AUD 4 million difference.
Okay. And just in terms of, probably for Michael, just Peabody Energy, just can you call out what the lease, what the current rental is and how that compares to market?
Yeah, it is, it is, we've obviously, they've been in place for now 10 years. I think their standard rent review is 3.5%, so it is a bit over-rented. But you know, as a tenant, they've shrunk quite considerably within the building. They were subleasing space to other groups. You know, and as I said earlier, we've got strong demand on that. It is, it's quite unique in South Brisbane to have a 5,000 square meter standalone office building.
It's one of the few actually in Brisbane, and given where we can pitch our rents for it, you know, close to sort of AUD 700 a meter, versus what it would cost to economic rents to build something for a standalone building, and the ability to build a standalone building of 5,000 meters, we're pretty confident we'll find many groups that are interested in it on either part or whole building basis.
Okay, thank you. Back to Tim, is there any assets that are being actively marketed for sale across the portfolio at the moment?
None at this point, no.
Okay, and just a final one. Just on the funds management business, do you have undrawn equity commitments in the business, or will you need to raise money for the acquisitions that you flag on slide nine?
Yeah, no, there's no uncommitted equity that we could draw upon within the funds. So if we were to find some, you know, quality investments, we'd seek to raise capital from, you know, high net worth individuals or offshore, onshore investors or domestic institutions.
And just any color on, on demand that you're seeing from capital?
Yeah, it's quite strong. I mean, it's strong out there. People are obviously waiting and looking at values and when the cycle will cease, and also interest rates as well. So I think there's a growing appetite. There's certainly capital. There is plenty of capital around. It's a matter of finding the right investment, the right position of that investment in the market, and the attractiveness of return. So I think we see the market freeing up this year. We see a bit more liquidity coming into the market, more properties trading, and you'll see some of that capital move in to buy a property in 2024.
Good stuff. Thanks, Tim. All the best for your future. Cheers.
Thank you.
Our next question is from Edward Day with Moelis Australia. Please proceed.
Morning, Dion, and Tim, congratulations on delivering your last result. Just further on, you commented about sport here. Any sectors in particular that you're focusing on?
Yeah, Ed, I'm happy to take that. So yeah, we're concentrating on three particular sectors at the moment. Industrial, there's a weight of capital there that wants to be placed into industrial real estate, so we're focusing our energy in that, and obviously, we have a high level of expertise in that sector. We're looking at deep value office as well. So from a countercyclical basis, we think there's gonna be some good buying in that space, buying the right offices, institutional-grade buildings, and then making the most out of them and driving the valuation up because we think that there's gonna be some good buying. And then we're also looking at everyday needs retail. So there are the three sort of concentrations for the group, and that's what we're focusing on now.
Okay, thank you. And then, sorry if I missed it, but just in terms of leasing activity at 5 Murray Rose, can you provide a bit of an update there, and also give an indication of how much capital you've injected into that in terms of, you know, whether you've been cutting up floors or the like?
Yeah, sure. So, we've leased 15% so far, so we have one floor for that group. So if we just take ourselves back, obviously, we had tenant in place until April 2024, so we've captured the vast majority of that income, and obviously, that hit our prior periods, but we are now ahead of where we would've been had we left that lease run. We've spent between sort of AUD 3 million and AUD 4 million on the building, which essentially was de-lining the building. We've got a high quality fit out throughout. Looks great. Obviously, a highly energy green credentialed property, six-star NABERS rating. So, and we've got some good inquiry on it.
I think I mentioned on the previous period call, we were quite close to having a one occupier take out the whole thing, but unfortunately, that fell over prior to last results. So we've been concentrating on doing multiple floor and single floor, and half floor deals, and yeah, we've got good momentum in that space.
Thank you. And then just one final one. On your comments around being 15% under-rented, that. I think you said that was the valuer's assessment. Is that in line with your internal assessment?
I think we'd always like to outperform the valuer's assessment. And that's on the next sort of three years, so two and half years out. So about 40% of our industrial portfolio comes up over that period of time. And in fact, even in the next 18 months, we've got a reasonable amount coming up, and that, against valuation rents, is 20% under rented. So there's some, yeah, there's some positive momentum going in there as well, which we're very enthusiastic about.
Fantastic. Thank you for your time.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Our next question is from Carlos Cocaro with Renaissance Asset Management. Please proceed.
Morning, guys, and congratulations, Tim. All the best for the future.
Thank you.
Just, most of my questions have actually been asked, but there's one or two small ones. First of all, in terms of guidance for the second half, are you assuming any further lease up on the current vacancy, including Murray Rose?
Carlos, down there. Yeah, look, there is some leasing. It's not particularly material. It's more weighted towards the back end. It doesn't have a large impact on guidance, but there is some leasing, I'm assuming.
Okay. And the last one is, in terms of gearing, your attitude to gearing, you said. I think, Tim, you said that there's no assets at the moment, being considered for sale, but, you know, like, obviously, you did sell one asset during the half. Are you averse to selling assets at the moment? Or, is it that you want the market to be a little bit better before you do sell assets? What's and, where do you want gearing to land, I guess?
We're not adverse to selling, but if someone's gonna pay us a really high price, such as the 15% premium we got on the last sale.
Yeah.
You know, we're working our properties pretty hard. We think there's upside. We think there's upside in the office leasing up. We think there's upside in the industrial reversions. So, and we think there'll be a better market later in the year as interest rates fall. So, you know, there's probably a propensity to, if we needed to sell, we'd sell later, but we don't need to sell. So, we're really concentrating on maximizing the income of the portfolio rather than selling, selling assets.
When we do, we do review our assets regularly. We have traded probably close to AUD 300 million of assets over the last three years. So it's something that we do consistently. We're, as Tim mentioned, we're not under any pressure to sell. We have a lot of mid-market near run, and we're quite comfortable with that.
Okay. Thank you.
We have reached the end of our question-and-answer session. I would like to turn the conference back over to Mr. Collyer for closing comments.
Thank you very much. I think, as you've seen from our presentation and, our Q&A session, we're pleased, to be positioned where we are. We think the office portfolio has strong leasing momentum. We have good quality properties that are attractive to good quality tenants. And our leasing, is strong in the office sector. The industrial sector is very strong, and we'll see rent reversions coming through. And I believe our funds management business is well poised to take the opportunities that were presented in the market, and we believe there'll be more opportunities in the market this year. So we're confident, confident where the business is placed at this point in time. Okay, thank you.