Good morning, everyone, and thank you for joining us for the 2024 Interim Results Briefing For The GPT Group. Joining me in today's presentation are four members of our executive team: Merran Edwards, our CFO, and our sector heads, Chris Barnett, Head of Retail, Martin Ritchie, Head of Office, and Chris Davis, Head of Logistics.
I would like to start by acknowledging the traditional custodians of the lands on which our business and our assets operate. The team presenting today is on Gadigal Country. I pay my respect to elders, past and present, and to any First Nations people that have joined this briefing.
This morning, we'll address the interim results, provide an update on the strategy and direction for the organization, and then provide a review of the performance and outlook for each of our primary sectors, followed by an update regarding the group's outlook and 2024 earnings guidance.
The financial performance for the first half is in line with expectations, and the guidance provided for 2024 , including funds from operations of AUD 0.161 per security and a distribution of AUD 0.12 per security. We have achieved solid revenue growth, underpinned by strong leasing activity. Our balance sheet remains robust, providing us with the financial flexibility to pursue investments and navigate market challenges and opportunities.
Our financial performance for the first half reflects the strength of our diversified portfolio and our disciplined approach to capital management. Now, the graphic on this slide illustrates the current scale and breadth of the GPT platform. At 30 June, our assets under management were AUD 34.4 billion and comprised AUD 12.3 billion of direct property interests across our three core sectors, as well as a further AUD 22.1 billion of assets under management in funds, partnerships, and mandates.
Over the past two years, our funds under management have grown significantly, with additional mandates and partnerships being brought on board with investor partners. Over time, it is planned that there will be a significant shift in the balance of capital on the left-hand side of the chart to the right.
While I won't provide a target as to the quantum and timing, as it will largely depend on market conditions and opportunities, I would say it is clear that we will be better utilizing the expertise and capability in the business to drive higher returns on capital through partnering. Our ambition is to be Australia's leading diversified real estate investment manager.
This ambition, and the strategy to achieve this goal, is underpinned by four fundamental elements. Firstly, exceptional operating capability is the foundation of our value proposition to all stakeholders. We take the view that we are owners first and act accordingly. By employing this capability, we have the ability to drive superior outcomes. We believe there's an opportunity for GPT to take advantage of investment opportunities with partners to drive sustained earnings growth.
Our diversified platform provides the capability and expertise to optimize capital allocation for both our own and our partners' capital, and the fourth element is that we will develop and execute strategies where we're not only underwriting the opportunity, but also investing meaningfully alongside our partners. It is important to emphasize this is an evolution of our strategy with an acceleration and greater emphasis on our investment management segment.
I would like to thank the board and the entire senior management team for their support and contribution in setting this strategic direction. Ultimately, our success will be determined by our execution, and I am confident we will be successful. We will take aggressive steps to accelerate the execution of our strategy, but recognize it will take time and require sound investment and operational decisions.
Key areas of focus in 2024 include setting the team, and this has included new CEO, CFO, and CIO. Clarify and embed the strategy, both within the business and with the external market. Optimize resource alignment and prioritization within the business, which is underway, and deliver performance for our investors, which has always been a priority. And finally, expand and build the investment and management platform, and that is also underway.
After nearly six months in the role, I am confident in our team, our portfolio, and the potential of the platform to achieve our goals. In terms of ESG and our business, it is important to highlight that ESG considerations are integral to our operations and investment strategies. Our activities are aligned with our strategy and enhance our competitive position.
Given the nature of our business, an important priority is the energy, water, and waste associated with the assets we own and manage. This focus aligns with the nature of the business we are in and governs our resource allocation. As you can see across the business, and in each of our core sectors, meaningful achievements and high standards of performance are maintained.
Our commitment is to deliver sustainable value to our investors, and our approach to ESG is an important contributor. I will now hand to Merran to go through the financial result for the half.
Thank you, Russell, and good morning, everyone. I will commence on slide 9, initially focusing on our earnings drivers. In line with our strategy, which Russell has just taken you through, we are now presenting our earnings drivers to disclose FFO from management operations, which we expect will increase as a percentage of FFO over time. For the period, management operations contributed 9.7% of FFO, and our co-investment earnings were 12.5% .
FFO from our direct property investments totaled 77%, comprising retail of 31, office of 24, and logistics of 22. Moving now to page 10. Overall, our portfolio experienced a 3.6% decline in value over the period. Pleasingly, our high occupancy and positive leasing spreads have underpinned property-level earnings across the portfolio, demonstrated by the strong income yield across all sectors.
The strength of our retail portfolio proving the most resilient, followed by the income yield in our logistics portfolio, offsetting the cost of capital impact. Strong income returns across our office portfolio have not been sufficient to offset capital value movements. Sector dynamics will be expanded upon by our heads of retail, office, and logistics in the following sections. Now turning to slide eleven, I will take you through the actual segment result for the half year.
Overall, we have seen an increase in total investment portfolio and management FFO for the half year of 3%. However, this was more than offset by a 22% increase in finance costs, resulting in an overall decrease in FFO of 2% to AUD 309 million. Our retail investment portfolio income grew 5%, driven by rent reviews, positive leasing spreads, and higher turnover rent.
Despite a challenging environment, we only saw a slight decline in office portfolio income of 1%. And the logistics portfolio continues to perform well, up 6%, supported by high occupancy, strong leasing spreads, and fixed rental reviews. Income from funds was down 5%, primarily due to higher interest costs. Higher management operations were achieved due to a full period impact of new mandates, partially offset by asset devaluations. We continued to exercise prudent cost control, with corporate costs remaining flat.
Our net loss for the half year after tax was AUD 249 million, driven by asset devaluations, offsetting a strong AFFO period. Turning now to our financial position on Slide 12. Our balance sheet remains strong, with net gearing of 29.6% in the middle of our stated range of 25%-35%, and material headroom to our 50% covenant.
We continue to take a disciplined approach to capital management, conscious of the uncertain outlook for valuations and the increased cost of capital. We have no unfunded capital commitments, with AUD 1.4 billion of liquidity, and we continue to hold our A- S&P and A2 Moody's ratings. Our weighted average cost of debt has increased to 4.9% due to higher rate hedges commencing during the period.
The group maintained high hedging levels throughout the period, and this continues into the full year, with our interest rate exposure 99% hedged in 2024. For the three years ended 31 December 2026, we are hedged 77% on average at a fixed base rate of 3.5%, providing protection against further interest rate volatility. I will now pass to Chris Barnett for an update on our retail business.
Thank you, Merran, and good morning, everyone. We commenced 2024 with a level of optimism that GPT Retail could continue to outperform, given the quality of our portfolio, the strong fundamentals of the Australian economy, and the positive sentiment from our retail partners, who are looking to grow with limited floor space supply. Our investment portfolio has delivered comparable income growth of 5.8% for the half, predominantly as a result of strong rental growth and higher sales, leading to increased turnover rental.
GPT's retail platform has continued to expand, now comprising 17 shopping centers, valued at just under AUD 14 billion. These centers, which are owned and/or managed by GPT, have over 4,300 retailer partners, generating AUD 11.5 billion in annual retail sales. Now turning to Slide 15, where our leasing teams continue to achieve solid results, building on the momentum of the past couple of years, delivering a portfolio occupancy of 99.6%.
Strong total center sales to 30 June has driven specialty productivity to over AUD 13,000 per square meter and delivered a portfolio specialty occupancy cost of 15.8%. The combination of total specialty sales growth and strong retailer demand has resulted in positive leasing spreads of 4.3% for the deals concluded to June. And for those deals completed during the half, all were structured with fixed-base rents and annual increases averaging 4.9%, and our lease terms have continued to average over five years.
Turning to retail sales on Slide 16, where our centers continued to perform strongly, with total center sales growing 4% and our total specialties up 3.7%, when compared to the very productive first half of last year. Our major retailers delivered solid growth, with our discount department stores up 5.1% and supermarkets up 6.3% for the half. Similarly, our total specialties have also grown, with fresh food, dining, leisure, health, and beauty all benefiting from higher customer demand.
Our specialty sales per square meter productivity is now 30% higher than pre-COVID levels, at over AUD 13,000 per square meter. Now looking at Slide 17, and as stated earlier, we optimistically entered the year confident our assets would continue to outperform. We're pleased with our first half results, and we maintain our optimism for the remainder of the year. We believe retail sales will benefit from strong consumer demand off the back of the July tax cuts, coupled with high levels of employment and current wage growth environment.
... Our leasing metrics will continue to be positive, as there is limited new retail GLA supplied to a market, which is underpinned by strong retailer appetite to expand. This retailer demand has led us to finalize preparation for the expansion of Rouse Hill Town Centre, with a projected commencement in early 2025. The 10,000 square meter development will allow us to present a modern retail tenancy mix aligned to the needs of the fast-growing trade area.
Off the back of the incredible performance of Melbourne Central, we continue to develop a master plan for retail expansion, with planning documents being prepared for lodgement later this year. The outlook for the second half of 2024 remains positive. Our assets are in great shape, and our quality portfolio and operating platform is well positioned for future growth, and we will continue to leverage our success to attract new clients and partners, and I'll now hand you to Martin for the office sector update.
Thank you, Chris, and good morning, everyone. The platform has grown significantly, with office assets under management increasing to AUD 14.9 billion with the addition of the CSC portfolio, which includes the super premium 101 Collins Street in Melbourne, and a 50% interest in the premium QV1 in Perth. We now own or manage 32 assets, comprising 1.26 million square meters of prime grade net lettable area and over 620 customers.
The direct office investment portfolio makes up 24% of group earnings, and comparable income declined by 1.3%, while the segment contribution was down 3.4% as a result of increased GWOF interest costs. Slide 20 demonstrates that we leased approximately 9% of the portfolio in the first half of 2024, being 80,700 square meters.
This is a 90% increase in volume compared to last year and reflects the high quality people, relationships, and systems that we have in place. As a result, portfolio occupancy, including heads of agreement, is 92.4%. Of the deals done, face rents increased by 4.2%. The balance of new customers to renewals was approximately 50/50. The average lease term struck was 5.4 years, and incentives are in line with market, averaging 43% of gross rent.
We are seeing that 91% of our lease renewal space is for the same or larger amounts of space, demonstrating the attractiveness and flexibility of our offering. As a result, our portfolio weighted average lease expiry has increased to 4.9 years. Slide 21 gives more detail on our leasing success.
The table on the left shows the key deals, which indicate larger tenancies being secured. Key leasing progress includes 17,000 square meters at Darling Park and 12,500 square meters at Melbourne Central Tower. Our portfolio occupancy is high compared to the Eastern Seaboard prime grade average of 82.5%. The lease expiry chart on the right of the slide shows that vacancy is 8%, with 3% expiry in the second half. 2025 lease expiry is 5%, and we will address the 2026 expiry over the next 18 months.
Our strong first half of leasing demonstrate that our buildings are in demand. We've achieved over 92% occupancy and hope to see this in the mid-1990s by year-end. In terms of great customer amenity, a new GPT Space & Co. just opened in Darling Park to support leasing. Two further new locations will open by year-end at 530 Collins Street and 181 William Street. These locations provide high quality, well-managed flex space solutions to our major portfolio customers and incubate smaller customers to grow in the portfolio.
With Two Park Street, Sydney, transitioning to GPT Property Management, we now manage over 85% of our operating buildings, expanding our touchpoints with our customers. I'll now pass to Chris Davis to present the logistics result.
Thank you, Martin, and good morning, everyone. Strong momentum for our logistics portfolio has continued into the first half of 2024. We have AUD 4.6 billion of assets under management across GPT's balance sheet portfolio, our QuadReal partnership, and mandate with UniSuper. Complementing the current 1.4 million square meter portfolio, we have a significant development pipeline of projects in key markets.
A strong financial result has been delivered, driven by comparable income growth of 5.9% through positive leasing outcomes, structured rent increases, and continued high occupancy. We are well-placed to deliver further growth in the logistics sector through development and expansion of our funds platform. Now on slide 25, our portfolio is over 99% occupied, with a weighted average lease expiry of 5.4 years.
Our modern portfolio attracts high quality customers, with the majority of income generated by ASX-listed or multinational corporations, including Coles and Woolworths, and transport operators Toll, DHL, and FedEx. Leasing spreads averaged 36% in the half, and we are seeing deal momentum continue, with 32,000 square meters of terms agreed in July.... First half deal volumes were weighted to Sydney, including Silk Logistics and InfraBuild, with a number of heads of agreement in place in Melbourne.
Our expiry profile is well balanced and provides opportunity to capture income upside as leases expire, with the portfolio estimated to be at least 15% under rented. Now on slide 26. Our extensive development pipeline has an estimated end value on completion of over AUD 3 billion and is over 90% weighted to Sydney and Melbourne. The pipeline has grown, with UniSuper's acquisition of a large-scale site at Deer Park in Melbourne's Inner West.
In the last 12 months, we've achieved development approvals for our key projects in Sydney, Melbourne, and Brisbane, positioning us well as we engage with major occupiers on their future requirements. This includes estates in Kemps Creek and Truganina that will deliver portfolio growth in prime markets and capitalize on limited land ready to develop. Close to 60% of our portfolio has been delivered through development, allowing us to invest in features that future-proof assets and attract high-performing tenants.
This investment also supports our customers' net zero aspirations, with over half of the top 100 occupiers now having publicly stated targets. Turning now to growth drivers on slide 27. Conditions for logistics sector remain positive, underpinned by occupiers investing in their supply chains, population growth, and e-commerce.
Market vacancy remains low at 1.9%, with Australia one of the tightest markets globally. We are seeing a healthy volume of leasing briefs in the market, and take-up is anticipated to be higher in the second half compared to the first six months of the year. Supply is set to increase, albeit the pace of these deliveries will be impacted by authority approval delays being experienced across the market. We are well positioned to drive continued growth for logistics segment.
This will be achieved through the execution of leasing strategies across existing assets and our development pipeline, and through further growth of funds under management. Our significant balance sheet portfolio and controlled development projects provides the opportunity to create new products and form partnerships in a sector where investors are looking to upweight. I will now hand back to Russell.
Thanks, Chris. We've outlined our plan to position the business for long-term growth by focusing on building our investment management platform. GPT has a very strong and sound foundation from which to grow. Our portfolio is very well positioned to deliver resilient and growing earnings, and we see increased capital engagement supporting the successful execution of our strategy.
For the year 2024 , we affirm our expectation for earnings and distributions of AUD 0.32 and AUD 0.24 per security, respectively. Before we take questions, I would like to take this opportunity to thank investors for their support and confidence in our business, and the entire GPT team, who deliver on a daily basis. It has been my honor to step into the role of CEO. Operator, we will now take questions. Thank you.
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're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Lou Pirenc with Jarden. Please go ahead.
Yes, good morning, Russell and team. Two quick questions from me. The first one, I mean, you've not changed your guidance. Is the trading profits that you're expecting within the full year, FY 2024, the same as well as at the beginning of the year, or has that changed?
Lou, there's been no change on that estimate for the year.
Great. Thank you. And then just on page six, on around the strategy, you kind of talk about the source of the growth capital, and use balance sheet assets initially. But should we read into that, that you want to sell assets to into funds or to fund growth in other assets? Can you just clarify that?
Yeah, it'd be more in the structure of either a fund or a partnership, Lou. The assets on our balance sheet are assets of obviously very high quality, and we'd want to retain an ongoing interest. So, for example, if it was a 20% retained interest with a portfolio of assets that we raise capital against, we'd be able to reinvest that capital in the business. But this isn't a model where we'll be just recycling assets to reinvest in comparable assets.
Cool. Makes sense. Thank you.
Thank you. Your next question comes from Caleb Wheatley with Macquarie. Please go ahead.
Good morning, Russell and team. Thank you for taking my questions. Just to follow up on the guidance, the second half trading profits would be about 4% of full year FFO. I'm just keen to understand what the offsetting factor is, given the first half FFO is pretty much in line with the AUD 0.32 per share for the full year, please.
Yeah. There's obviously some increased interest costs coming through in the second half as well, so it really rebalances it. I would say it's probably, as we sit here today, then you're absolutely right, that we guided toward AUD 0.32 and AUD 0.24 per security on earnings and distributions, and we landed 50% on both. The second half, on a net basis, will look very similar to the first half as we sit here today, with that, those two being the primary offsets between the elements on the P&L.
Okay, great. Just to follow up on the dividend guidance, obviously linked to free cash, an FFO per share of AUD 0.135. Is that sort of suggesting we're gonna have a pretty significant second half skew on LC and TI as well?
... No, I don't, I don't think so. I think the delta between the free cash flow and the AFFO is largely the distribution payout from the office fund. And so we'd be picking up 100% of the earnings or our proportionate earnings on an equity basis. However, we're not getting 100% of those earnings paid out in distributions at the time, so that's where we adjust our distribution against AFFO to free cash flow for those items.
Okay, great. Thank you. That's all from me.
Thank you. Your next question comes from Howard Penny with Citi. Please go ahead.
Thank you very much. Just talking strategy on funds management growth, it feels like one of the key differentiators on the strategy surrounds the co-investment. How do you see that co-investment working? And if you could provide any sort of outlook on how, you know, the timing of the effectiveness of the strategy.
Yeah, sure. Look, mathematically, as I suggested, if we were retaining a significant interest in any investment or fund or partnership, say, circa 20%, and if all of those assets were to shift to the right-hand side of the chart in the deck, that would actually translate into about a AUD 70 billion increase in AUM.
Obviously, a move like that is gonna take time, and it's also not gonna be linear. But we do believe that our ongoing investment in a significant amount of any fund or partnership is important for alignment of interest and making sure that what we're driving is return on capital, as well as getting compensated for the services that we're providing.
That's great. Thank you very much. And then just on the office side, balancing the strong occupancy that you guys have been retaining with incentives, how are you balancing those two forces at the moment, with the expiries over the next two years?
Yeah, sure, sure, Howard. You're a little bit garbled, at least on our end. I think the question was, you made significant gains in occupancy, obviously, across the office portfolio, but how are you balancing out, essentially the economic equation to filling the space versus, obviously, a relatively high incentive environment? If that's the question, I'll hand it over to Marty.
Yeah.
Yes. Thank you.
Okay. A very positive result in office. We've leased about 9% of the portfolio, and base rents are up about 4%. Effectively, we're, yes, you're right, we've reduced that leasing risk. With incentives, we're just meeting the market on incentives. That's delivering us these results. As you identified, we've only got about 3% left to deal with this year, and then next year is quite a low vacancy, low expiry rate of about 5%. It's a bit of a breather while we really get on top of it.
Yeah, and that lower level as well is gonna be, in the next 12, 24 months, we'll be focused on hitting that 26 tower, which is another significant level, but we have some time to deal with that.
Thank you very much, and well done on the results.
Thanks, Howard.
Thank you. Your next question comes from Solomon Zhang with J.P. Morgan. Please go ahead.
Morning, Russell and team. Just on the strategy of selling down stakes to potential capital partners and catalyzing growth there, how are you thinking of the, I guess, managing the short-term potential dilutive impacts, of that sell-down? Because presumably, some of the yields might be higher than, the funds management earnings, as well as the cost of debt that you're reducing.
Yeah, no, it's a good question, but I think it's important to focus on the component of our strategy, which is about ensuring we're doing things for long-term value creation, enduring value. I, I believe the execution of the strategy, and if there are some interim deltas, which I don't think there'll be material as we sit here today, given what we're looking at in our pipeline, but even to the extent there would be, I would not sacrifice long-term value for short-term brief intermittent reductions in, let's say, FFO.
But as we're sitting here today, I look at the pipeline, and we're active across every part of our business, both all three sectors, as well as the mandate with QuadReal and PBSA, but also within our funds management platform. There's a lot of activity, and long-term value creation is the focus on all of them.
Gotcha. And just in terms of your discussions with, you know, capital partners today, do you feel like they're a little bit more open to deploying capital versus six months ago, or still very much waiting for, for rate cuts to come through?
No, I think the discussion, at least the ones we're having, are a lot less around rate cuts. I think there's a general view that we're at a much more stabilized level, and you can price risk accordingly. With respect to areas of interest, I'd say the majority of our engagement is around on the logistics and retail side as we sit here today.
But however, discussions in office, and as you saw, the trade that was announced in the news today, there is a much more constructive dialogue with capital around all sectors. So I would say it's much more engaged and active than it was six months ago. However, it continues to be cautious and measured.
Great. And maybe just a quick one for Chris. Could you just quantify the turnover rent in this half and how that compares to second half 2023?
Yep, Solomon, I can. We obviously did benefit from total center sales, and we are getting a higher percentage rent for the first half. But if you look at it across the board, from an ancillary perspective, percentage rent is less than 3% of our total revenue. So, we would think if sales continued, that'll be repeated in the second half, but it really is, it's a nominal amount in the scope of things.
Yeah, thanks.
Thank you. Your next question comes from Tom Bodor with UBS. Please go ahead.
Good morning, Russell and Martin, and team. I was just interested in your comments around co-investment, maintaining a significant co-investment stake. ... You know, how low would that go, and does it depend on the type of partnership, or are you going to sort of have a baseline minimum that you expect?
I don't think it's gonna be an absolute rule, but when I'm circling around a 20%-25% level, I think that's an appropriate level for the business, the capital profile of the business, and really aligning our interests with our partners and co-investors. I think that's an appropriate level where, regardless of fee structure or otherwise, the returns generated on the capital employed are, is fundamental to the relationship, and I do think our partners are looking for that.
Okay, thanks. And then just to pick up your comment around, you know, sort of asset sales and not sort of looking to fund growth through just selling assets, you know, sort of to selling down completely. Are you comfortable with the portfolio as it stands, or is there some non-core stuff that you would consider selling?
Yeah, without calling out a particular asset in any of the sectors, we absolutely will be managing our portfolio to optimize them. So that would include selling assets outright within the portfolio. I just didn't wanna highlight it as a primary driver of the strategic growth of the business, but you're always pruning the portfolio for optimization.
Okay. Thanks so much.
Okay.
Thank you. Your next question comes from Ben Brayshaw with Barrenjoey. Please go ahead.
Yes, good morning. Hi, Russell. I was wondering if you could just, in relation to releasing capital from the balance sheet, maybe just discuss what percentage of assets that you, at this point, might consider to be core versus those where you might have a preference to undertake an outright disposal?
I don't have a number in my head, but I'd say 80/20 at the most, if not more, are keepers than not. But I don't have a particular ratio we're moving towards. But the greater proportion of our portfolio is extremely high quality and also very difficult to replicate, so I would not think we'd be looking to dispose of a high percentage at all.
Okay. And should we be assuming that office and retail would be the two sectors that you might target for capital release? Or would you actively look to potentially release capital from logistics as well?
I think all sectors are up for this strategy, and, like, for example, if we were to release capital in the logistics side, we'd likely be reinvesting into further logistics opportunities. It wouldn't be a change in the weighting per se, as the balance sheet looks today.
It would just be in how we hold those investments, and we'll allow the logistics division, for example, to grow more quickly. And if you look at the profitability of the segment, the funds management side of the equation of both office and retail is significantly higher than logistics, just because of the nature of how we hold those assets.
Mm-hmm. Okay. Just in relation to the AUD 2.1 billion of capital deployed into the two wholesale funds, is that, in terms of the strategy, core for the time being, or would you have a preference to reduce that exposure over time?
It's probably not a priority right now, and as I mentioned before, it is important that we own or have a significant stake in those funds. Right now, we're going through a process of working with those fund investors to make sure both are well positioned for long-term success. So right now, we would not be looking to change or reduce our stakes in either fund.
Just my final question. Thanks for the color. Are there any new sectors that you might consider as potential diversification opportunities over and above the three core segments?
Look, there are several we're looking at from an early days perspective, from an early research perspective. I think obviously one segment that has some visibility within our business would be the student accommodation business that we have the investment management mandate with QuadReal.
We think there's opportunity in that segment. There's obviously a level of disruption, but to the extent it has a meaningful impact on our business in the near term would be limited. I think the three core sectors will be primary with respect to financial outcomes going forward, but at least for the near future. But we absolutely are exploring other areas, but it has to match up with our expertise and capability.
Thanks, Russell.
Thanks.
Thank you. Your next question comes from Simon Chan with Morgan Stanley. Please go ahead.
Hi. Good morning, Russell and Merran. Hey, Russell, you've talked about capital partnering multiple times throughout this presentation. Just wondering if you've given thought to whether or not GPT is likely to head down the path of, you know, mandates, wholesale partnerships, or more likely to, you know, expand your funds management platform, you know, pooled funds, commingled funds, et cetera? 'Cause the two are very different, right. Have you given thought to that?
Absolutely. And you're right, you're right, Simon. Mandates in particular are very, very high touch, and so we'll be very selective on who we partner with and how we partner with capital partners. And I would say that you would see some growth on the mandate side, but much more growth in partnerships and funds. That would be the points of emphasis, but obviously, we have some great partners on our mandate side of the business, but I wouldn't expect to see much more than maybe one or two added in the next near future.
Great. Cool. My other question is just, I just want to bring you back to guidance and the answer you gave earlier to one of the earlier questions. You've done AUD 0.16 in the first half. Your guidance implies AUD 0.16 for the second half, yet you've got this big Sydney Olympic Park trading profit to come through.
Your reason for that is interest expense increasing, but your debt's 99% hedged in the second half, similar to what it was in the first half. Surely, interest expense is not gonna wipe off, you know, the AUD 25 million due to come through for Sydney Olympic Park trading profits?
Simon, it's Merran. I can grab that. The other part that is offsetting that is, yes, we are 100% hedged, but our lower cost hedges are starting to roll off, so our cost of debt is increasing about 30 basis points in the second half. So you will see that our cost of debt does go up in the second half.
Okay, 30 basis points versus the first half, is that what you say?
Yeah.
Okay.
Thanks.
That's terrific. That's clear. Thanks. Thanks, Merran. Thanks, Russell.
Thanks, Simon.
Thank you. Your next question comes from James Druce with CLSA. Please go ahead.
Good morning. I'm just wondering what the actual occupancy is now for the office portfolio, excluding HOAs?
So yeah, rent-paying occupancy right now is 86.6%.
Okay. How much... I mean, you're at ninety-two for HOA. How much of that income is coming through this half?
How much of the ninety-two income is coming through this half?
From 87-92 , yeah.
Yeah, I see what you mean. So by December, I guess rent-paying occupancy will be in the line of 88.6% without any additional leasing that's come obviously gonna come through on top of that during the next six months.
Right. So just a 2% pickup. Okay. And then are there any sort of known expiries and that are gonna be going vacant in the second half?
Yeah. So and just to complete it, I think, yeah, the 92.4% occupancy would all become rent paying by middle of next year. And yes, out of the second half, we've got 3% expiring, and we've got either renewals or interest to lease that space on about 1.8%. So you've covered 1.8% out of 3% of the expiry in the second half.
Okay. And are there any known expiries that just won't be renewing?
Yeah, there are some that are... Well, the difference between the two numbers, yeah, the 1.2% is known to be not renewing-
Yeah.
and the 1.8% is looking positive.
All right. Thank you. That's it.
Yeah. Thanks.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Proutt for closing remarks.
Thank you, everybody, for joining this morning on my first results briefing since my time at GPT, and I really appreciate everybody's interest today. Thank you.