Thank you. Good morning. My name is Ross Lees, CEO and Managing Director of Growthpoint Properties Australia. I welcome you to our full year 2025 financial results. I'd like to begin by acknowledging the traditional owners of country throughout Australia and their enduring connections to land, sea, and community. Today, I join you from the land of the Wurundjeri people of the Kulin Nation, and I pay my respects to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples joining today. Presenting alongside me is Dion Andrews, our Chief Financial Officer, and Michael Green, our Chief Investment Officer. I'm also joining the room with Jacqueline Jovanovski, our Chief Operating Officer, and Alix Holston, our Head of Investor Relations. Before we move to the results, I would like to provide a short overview of Growthpoint today.
Since 2009, Growthpoint has been investing in high-quality Australian real estate and today has a focused portfolio of AUD 5.4 billion in assets under management across 66 properties in the office, industrial, and retail sectors. This is a combination of AUD 4.1 billion directly held and AUD 1.4 billion managed on behalf of wholesale and institutional investors. For the presentation today, I'll commence with a snapshot of FY25 before passing to Dion to go through the financial results. Michael will provide a portfolio update, and I will conclude with a funds management update and our guidance for FY26. This year, we continue to see volatility and uncertainty define our operating environment. The impact of elections, both in Australia and the U.S., overlaid with geopolitical events in Eastern Europe and the Middle East, weighed on both investor and business confidence.
Pleasingly, we have seen inflation in Australia return to the RBA target range, leading to three interest rate cuts commencing in February 2025, with expectations of more to come. This is an important change in direction as we have navigated the rising rate environment since early 2022. Notwithstanding the volatile backdrop I spoke of, this year, we have delivered on guidance and executed on our refreshed strategic priorities. Growthpoint delivered funds from operations, or FFO, of AUD 23.3 per security above our guidance, and we reduced gearing to 39.7%, down from 40.2% following targeted capital recycling throughout the year. The portfolio is well positioned following solid leasing activity, with an occupancy rate of 94% underpinning our weighted average lease expiry of 5.6 years. Our refreshed strategy has clear strategic pillars, and we delivered measurable progress against all four of these.
The active management of our directly held portfolio delivered like-for-like growth in property FFO of 2% for office and 6% for industrial, as well as significant leasing, which has contributed to high occupancy and consistent weighted average lease expiries. We created momentum growing our funds management business, launching two new funds under the Growthpoint banner, generating AUD 328 million of new assets under management, and raised AUD 170 million of equity in our unlisted funds to support this growth. We generated AUD 335 million of cash proceeds from asset recycling and co-invested AUD 30 million in new unlisted funds, ensuring our alignment with the investors in these funds. Our commitment to sustainable future proofing has continued throughout 2025, and we reached a significant milestone, achieving our net zero target on 1 July , 2025. I'll now pass over to Dion to cover our financial results in more detail.
Thanks, Ross. Given this is the last set of results I'll be presenting for Growthpoint, I'm glad to be finishing with the business in a strong position. There are several key outcomes I'd like to highlight. Property FFO increased 3.2% on a like-for-like basis, which excludes lease surrender payments, which were higher in FY2024, as well as divestments. This is indicative that overall rents are turning positive for the group. Total property FFO decreased, reflecting the impact of property divestments, fewer lease surrender payments, and a reduction of distributions from Dexus industria REIT. The DXI distribution reduction totaled AUD 6.1 million versus the prior corresponding period, although the reduced income from this capital release was offset by lower interest expense as debt was repaid.
The momentum in funds management is now adding to the returns of the group, with revenue increasing by 20% to AUD 9.6 million, driven by the launch of two new funds during the year. Net finance costs reduced, mainly due to the divestment of assets, offset by maturing cheaper fixed interest rate swaps rolling off. Distributions totaled AUD 20.3 per security, which included a one-off distribution of AUD 2.1 to aid investors with paying capital gains tax in relation to the sale of assets into the Growthpoint Australia Logistics Partnership. Excluding the one-off distribution, the payout ratio was 78%, within our target range of 75-85%. Despite declining asset values, we see gearing reduced to 39.7% through capital recycling over the year. Given valuations are now starting to stabilize, their impact on gearing should not be material compared to the past few years.
The reduced gearing was achieved by vending of six industrial assets into the Growthpoint Australia Logistics Partnership, the sale of another industrial asset at 3 Millennium Court in Victoria, and the disposal of our stake in Dexus Industria REIT, which all out-released AUD 335 million of capital. AUD 37 million of this was put to work in co-investments in Growthpoint managed funds. Gearing is below the midpoint of our target range and leaves us with a comfortable buffer to our LVR covenant, despite an extended period of cap rate expansion. Strategic capital management has seen us end the year with all near-term debt maturities addressed. With AUD 645 million of debt transactions executed in second half 2025, our weighted average debt maturity moves out to 3.9 years, with no expiry until December 2026. This includes AUD 320 million converted to sustainability-linked loans, bringing the total to AUD 1.3 billion.
If Growthpoint continues to achieve the sustainability targets in these loans as it did in FY25, then discounts will continue to be obtained, with a larger pool of loans increasing the benefit to the group. Our weighted cost of debt moved up to 5%, reflecting some cheaper hedges rolling off during the year. Given the cash rate has been moving down, with the latest cut to 3.6% in August, and the fixed rate debt stabilizing around 3.3%, the weighted average cost of debt should be at or near its peak. With that, I'd like to hand over to Michael to cover off on our portfolio of directly held high-quality assets.
Thank you, Dion, and congratulations on your great career at Growthpoint. Slide 11 provides a snapshot of our directly held portfolio, where the team's asset management expertise has again been demonstrated, with significant leasing across both our office and industrial portfolios. Further to the 123,000 sq m of space leased during FY25, we have at agreed terms on an additional 90,000 sq m of leasing post-balance date, providing excellent momentum into FY26. We are focused on driving income and maintaining high occupancy across our portfolio, a 94% portfolio occupancy rate, and a 5.6-year weighted average lease expiry, a testament to these efforts. The portfolio's high-quality income is underpinned with over 80% of the income derived from listed companies and government tenants. Moving to slide 12, we can see the capitalization rates and valuations are stabilizing across Growthpoint 's portfolio, reflecting market trends.
Our office portfolio value declined by 7.4% on a like-for-like basis over FY25. The majority of the contraction was attributed to the first half of the year, with values from all states other than Victoria largely flat in the second half. The group's industrial portfolio increased by 4% on a like-for-like basis, driven by stabilized yields, rent growth, and the lease extension at the Perth Distribution Centre for Woolworths. While the industrial leasing market is normalizing, the strong fundamentals and weight of capital are likely to provide sustained demand for the sector. Moving to slide 13, which emphasizes the quality of our highly green credentialed modern office portfolio. Pleasingly, we have increased our landlord satisfaction rating to 8.2 out of 10 over the year, reflecting the hard work of the team and our ongoing focus on creating value beyond real estate.
Slide 14 highlights the active leasing across our office portfolio, which delivered 2% like-for-like property FFO growth. During FY25, we completed over 23,000 sq m of leasing across 36 deals with an average lease term of 5.1 years, representing 6.6% of office portfolio income. Post-balance date, we have continued our leasing momentum, securing terms across 15 tenancies, covering over 19,000 sq m and accounting for 24% of both existing vacancies and FY26 expires, positioning us well for the year ahead. Approximately half of the aggregate office leasing has been undertaken within our Victorian office portfolio. Conditions are improving across the office markets in which Growthpoint invests, evidenced by positive net absorption, face and effective rent growth, and vacancy declining from 13.5% to 14.5% over the year. These evolving market conditions are providing the backdrop for the positive leasing momentum across our portfolio and a stabilization of office valuations.
Moving to slide 16, our modern industrial assets are well located and leased to high-quality tenants. Over the year, we have actively increased the industrial portfolio WALE to 5.8 years from 4.9 years. Occupancy reduced slightly to 98% during the year due to a vacancy at our Preston asset in Victoria, which we are actively marketing for lease. Growthpoint's customer-centric approach resulted in the agreement and commencement of the significant expansion of the Woolworths Regional Distribution Centre in Perth. Practical completion of these works is forecast by the end of 2026, post which the Woolworths lease will be extended by 10 years. Across the year, we completed over 100,000 sq m of leasing, equivalent to 18.2% of industrial portfolio income, agreeing an average lease term of 10.9 years and positive leasing spreads of 25%. Pleasingly, we delivered 6% like-for-like industrial property FFO growth over the year.
Post-balance date, we have continued our leasing momentum, securing terms across four tenancies, covering over 71,000 sq m . This includes 53% of all existing vacancies and FY26 expires. Industrial occupant markets remain tight, with the national vacancy rate at 2.8%, up from 1.9% in FY24. Rental growth has continued, moderating over the year; however, it is still healthy at 6.3%. Speculative construction activity is reduced, with most new developments backed by tenant pre-commitments, ensuring supply is closely aligned with future tenant demand. After three years of expansion, industrial market yields compressed in the second half of FY25. Looking ahead, low vacancy rates and sustained demand are expected to continue supporting positive rent spreads across Growthpoint's portfolio, with an average spread of 25% achieved in FY25. I'll now hand back to Ross to discuss funds management and the outlook.
Thanks, Michael. Growing funds management is a key pillar of our strategy. Through our funds management platform, we now manage AUD 1.4 billion of assets across 11 unlisted funds. These operate in our chosen sectors of office, industrial, and retail, with an investor base of institutional partners and wholesale syndicates. It's been an important year for our funds management business as we launched the first two funds under the Growthpoint banner, creating AUD 328 million in new assets under management. Most importantly, over 45% of the investors into these funds were new to our funds management platform. This included the Growthpoint Australia Logistics Partnership, which was seeded with six directly owned industrial assets and has since grown following the acquisition of a AUD 40 million property in Stapleton. Further, we established the Growthpoint Canberra Office Trust to acquire a AUD 90 million asset in Canberra CBD with our wholesale syndicate investor base.
In total, we raised AUD 170 million of gross equity. This momentum has been reflected with an increase in funds management revenue of 20%. As we approach FY2026, we will continue to pursue growth through funds management, whilst actively managing our near-term fund maturities. We intend to succeed by leveraging our key points of difference, which we see as our customer engagement through leveraging our high-quality customer base across our directly held and managed portfolios, where we have access to tenants to drive occupancy and market insights. Our capital position gives us the ability to meaningfully co-invest alongside our investors and also generate returns for Growthpoint security holders. Most importantly, our capability. Our dedicated team specializes in our chosen asset classes, which are spread across office, industrial, and retail. Our East Coast offices have an ability to deliver hands-on active management.
We've been active in the market and we have a clear strategy of investing in our specialty sectors with assets of AUD 50 million- AUD 200 million and partnering with institutional and wholesale syndicate investors. On to sustainability. This is a key pillar in our strategy and is a defining feature of the Growthpoint business. We focus on this as we know this directly translates into higher tenant inquiry, occupancy, and customer satisfaction across our portfolio and will drive returns over the long term. This year, achieving our net zero target on the 1st of July was a significant milestone for Growthpoint . Over the year, we met all sustainability-linked loan performance targets and increased the quantum of these loans on issue to AUD 1.3 billion, accounting for almost 68% of our loan book.
We've continued to demonstrate our progress in sustainability with our GRESB score, increasing that to 85, exceeding the peer average of 76, and ranking second in our peer group. Our average NABERS ratings for energy and water remain stable at 5.2 stars and 4.9 stars, respectively. We've also improved our NABERS indoor environment rating to five stars. 75 Dorker Street became the first building in our portfolio to be certified carbon neutral. This is a tangible example of how we're helping tenants to meet their own sustainability goals whilst creating future-ready workplaces. Moving to the outlook. At our half-year results presentation in February, I announced Growthpoint 's refreshed purpose of creating value beyond real estate. Our vision is to create sustainable value in everything we do by being a forward-thinking, trusted partner of choice.
We formalized our strategy to deliver growth through funds partnerships underpinned by income-driven returns from directly held high-quality real estate assets, and we outlined our strategic pillars and foundational strengths. Looking to our key focus areas for FY2026, as Michael set out, leasing remains a key focus, addressing current vacancies and key upcoming expiries. Targeted capital expenditure will be directed at minimizing downtime and enhancing asset values. With terms agreed on over 90,000 sq m of space in FY2026 to date, representing 7.5% of our portfolio income, we've made solid inroads. As we also noted, we will continue to prioritize growth through funds management, focused on our core sectors. We intend to allocate capital to support co-investment in new funds, assuring alignment with our unlisted fund investors and allowing Growthpoint security holders to benefit from the underlying fund performance.
Following the achievement of our net zero target, our sustainability focus shifts to continuous improvement in NABERS, progressing climate reporting, and post-net zero initiatives. With ongoing optimism from a stabilizing rate environment and a renewed strategy, we look forward to carrying our momentum into FY2026. We provide FFO guidance of between AUD 0.228 and AUD 0.236 per security for financial year 2026, noting that this does not assume any impact from acquisitions or disposals of direct assets. We also provide distribution guidance of AUD 0.184 per security, an increase of 1% on the ordinary distribution that was paid in FY2025. Based on our most recent closing price, our guidance implies an FFO yield of 9.1% at the midpoint of the range and a distribution yield of 7.2%.
I'd like to thank our team for their dedication and contribution to our performance in FY2025, and we also acknowledge our tenants, suppliers, and other key stakeholders for their continued support. Finally, I would like to acknowledge that this is Dion Andrews' final results after 15 years at Growthpoint . Dion has made significant contributions to Growthpoint's success during his 15-year tenure, and on behalf of the board and the management team, we would like to thank him for his commitment to Growthpoint over that time. Thank you for your participation today. I'd now like to open the line to questions, either online or via the call. In the first instance, please direct them to myself. If there's any questions, please go ahead.
Thank you. If you wish to ask a question via the phone line, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please enter it into the ask a question box and click submit. Your first question comes from Callum Bramah of Macquarie. Please go ahead.
Good morning, everyone. Thanks a lot for taking my questions. Just in relation to the guidance, I just wondered if you could give us a little bit of color on some of the assumptions you've made, particularly around occupancy. If you think about it, whether it's period end or average rent paying occupancy over the period, particularly in office and industrial, noting the leases that you've signed post-balance date. I also just was wondering if you could give a little bit of color on what you're seeing in the way of rents and underrenting in industrial as well. I think it was + 25% in fiscal 2025. The other one was whether or not you assume any sort of funds or what we should think about with the funds contribution, because I think the second half was around AUD 3.7 million from memory.
You'd annualize then at AUD 7.4 million, or should we be assuming that you will launch funds and get transaction fees? Maybe I'll just hold there.
Sure. Thanks, Callum. Thanks for your questions. I'll tackle a couple of parts and I'll pass to the guys for any further detail. I might start bottom to top, Callum. As it relates to the contributions to our guidance, particularly from funds leasing, on the fund side of things, yeah, we had that skew first half, first second half, and that was really driven by the new fund creation we had during the year, which drives those upfront fees happening in the first half where we didn't have that in the second half. Our activity was stacked in H1 to H2 as we look back on FY2025. As we look forward to FY2026, you know, within our guidance, we're assuming a similar amount of fund creation to what we had in FY2025 for the full year. As we get to occupancy, we commenced the year with 93.8% occupancy.
As Michael and I touched on, we've made some good inroads into the lease expiry that we've got in FY2026 upon us and a couple of the major, particularly in the industrial side, have subsequently been de-risked post 30 June. We're really assuming, you know, over the course of the year, it's one of the reasons we have range in our guidance because as time goes on, we'll have better visibility on both fund creation and leasing targets. We're assuming a broadly similar amount of occupancy throughout reporting periods through the year. Anything else that sits within the guidance? I think about the only other thing to note that's relevant is, you know, whilst we're seeing our debt stabilize, the comment that Dion made, we had some, you know, lower cost swaps come off in June 2025 and another couple that's still rolling off in FY2026.
It'll contribute to an interest cost in a continued headwind in FY2026.
Did you want me to take the industrial?
Yeah, actually, Michael's talked to the industrial.
Across the portfolio account, the industrial portfolio is 11% under lent against valuation rents. If you look forward to the sort of FY2026 expiry, it's more like 15%.
Thanks so much.
Our next question today will come from Richard Jones of JP Morgan. Please go ahead.
Thanks, and good morning, Ross and team. Just pass on my well done to Dion too on a long tenure at Growthpoint. Question just in a bit further on the color on the industrial side there. Can you just call out a couple of the major deals that you've done post-balance date and what spreads you've booked?
I'll pass over to Michael to touch on some of that. I'm not sure how much we can go into on some of the rents booked, but he can maybe give a bit of color on where that leasing's come from.
As I mentioned on the call, we've done four lease extensions across the book. We probably can't talk about the actual deals quite yet because they are commercially sensitive. I expect that we'll be able to announce more on our quarterly.
Okay, and the comment you made about 15% under renting in 2026 is consistent with the spreads you're getting then?
Yeah, I mean, we have the major expiry, which we have finalized during the year, is the Linfox expiry at Lenore Drive. That was the key one that we wanted to take care of in the first half, and they pleasingly extended their lease. We'd aim to get similar leasing spreads to what we achieved in FY2025 across what we're doing in 2026.
Michael, just on the major office expiry for 2026, are there two or three you can call out and what your expectations are? Can you work through that as well?
The largest expiry is ANZ at Dorcas Street in South Melbourne. That's about 10,000 sq m . We know that they're going to vacate, so we are not forecasting any new income on that space. That doesn't become vacant until March 2026. We've got the majority of the year with income from ANZ. There are a couple of others which we've made some good progress on, but again, we're just in an awkward position where we can't announce them quite yet.
Okay, that's it for me. Thanks.
Our next question will come from Howard Penny of Citi. Please go ahead.
Thank you very much and congratulations and thank you, Dion, for the years. Just a question from me on funds management. I felt like you made the comment that there's a large amount of new investors coming into the funds. As far as possible, could you describe where the capital is being attracted from and perhaps, you know, the difference you showed you're doing as far as you can comment on attracting from the pools of capital?
Yeah, happy to, Howard. Thanks for the question. We tried to provide a little bit more color on the deck this year on, you know, where our target areas are and some of our, you know, methods of differentiation. As it relates to the new capital that came into the business in financial 2025, we obviously established the Growthpoint Logistics Partnership, which was an institutional partner that was new to the platform, and that did represent a good amount of that particular new capital. Through the wholesale syndicate base, there was a good sponsorship from new investors into there. As it relates to investor appetite at the moment around the grounds, I think what we're seeing across the asset classes that we operate in, there's still interest for the right kind of office.
I think as we look across the spectrum from the sort of syndicate investor base, it's probably where we see more office appetite than perhaps from the institutional investor base as we stand today. That's probably where we're focusing some of our efforts for new fund creation. Those investors have gotten attraction to the yield proposition. I think that'll continue as we've seen another interest rate cut this week and pressure on things like term deposit rates and other proxies that people have for investment in income. Probably more on the wholesale side for office than perhaps institutional, albeit that is starting to turn and there are more conversations emerging. On the logistics side, we're really seeing, again, the appetite remains in the core plus to value add space from capital investors. There's pockets of core, but not much. It's really core plus to value add is coming through.
That side of things is really more for the institutional investors than what it is for the wholesale. On retail, we're really probably seeing that in a sweet spot where it's appealing to both at the moment. It's probably had a few years where it's been the dominant market for wholesale style investors. Institutional appetites are reemerging as we come towards the end of 2025.
Thank you. Just two questions quickly on funding. The gearing's being reduced. Is this a level that you'd be comfortable to hold it at, or do you see further reductions in that? The second question on the sustainability-linked notes. Are you seeing a funding advantage in those in terms of interest rates?
I'll go to gearing, and I'll pass on to the rates question for Dion , Howard. We've been focused on making sure our gearing's right to market. We took very deliberate steps in FY2025 to bring that gearing down through the sale of the assets into the Logistics Partnership, the disposal of the stake in DXI, and Millennium Court. I think in all of those circumstances, the important feature of all of that was we protected value in doing it. It wasn't just a case of sell the assets to bring gearing down without a lens to value. We achieved quality outcomes in all of them. Even looking back on the DXI sale, I think that all over the last 12 months showed off a pretty good price in market. We're below 40% today. Our target band is 35% - 45%.
As Dion pointed out in his commentary, we have ample space to cover it. It's something we keep monitoring and making sure we're giving ourselves capacity to co-invest as the primary objective with that gearing level at the moment.
On the sustainability-linked loans, being able to increase up to AUD 1.3 billion, I think the real benefit is coming through competition. It is very appealing to financiers to be able to get in on the sustainability-linked loans. That is creating more demand for our borrowing or lending from our side. The real benefit then comes from if you're able to achieve the outcomes within the loans, obviously you're getting that additional discount. I would think the base rate or the base margin aligned fee is probably still relatively well within market for a triple B like us. There is very good competition, very good demand from banks, and then we're able to achieve that discount for the last couple of years, which is really beneficial.
Thank you very much, and congrats again, Dion.
Thank you.
Again, it is star and then one to ask a question. From the webcast, use the ask a question box and click submit. Our next question today will come from Ben Brayshaw of Barrenjoey. Please go ahead.
Good morning. Thanks for your presentation, Ross and team. I'm just wondering if you could comment on utilization for the office portfolio, whether you have any data points on how attendance is tracking.
I'll let Michael go to that, Ben. I think I won't.
All right, Ben, here you go. We don't have any specific data points to speak to other than when we go and inspect and we meet with our tenants. One of the key themes that's come out of our meetings with the respective C-suite members of our major customers is that the majority of them want their teams back in the office in a more meaningful way. Quite a few have the sense that they don't have enough desks in situ if they do get them all back due to the fact that a number of those businesses have grown in the midterm. We've noticed over the half that we've had a couple of tenants expand within our portfolio as well, which has been really pleasing. We're seeing good momentum from both our own customer base and equally from outside.
We don't specifically track the number of people coming in and out of each of our office assets.
I think one other change, Ben, we might have started to observe in market over the last few months is I think as we went through 2021 to 2025, indecision was the hallmark of tenants. It was easier to perhaps renew and do nothing than make a deliberate stand about their office occupancy requirements. I think as we've seen the acceleration in the narrative of more in-office attendance, both the benefit of our portfolio in parts and also on the other side on some exits. I think tenants are saying workplaces are critical and they're looking to refresh their workplaces as an engagement method to sort of reset culture, I guess. I think we are seeing a little bit more churn in market than what we might have seen for the last two or three years.
Thanks, everyone.
Again, it is star and then one to ask a question. There are no further questions at this time. I'll hand the conference back over to Mr. Lees for closing remarks.
Great. Thank you, everybody, for taking the time to dial in today. We look forward to seeing you over the next few weeks as we have various investor meetings. Once again, congratulations to Dion and thank you for your attendance.