I would now like to hand the conference over to Mr. Russell Proutt, CEO and Managing Director. Please go ahead.
Good morning to everyone who has joined our 2025 full year results call this morning. Today, I'm joined on the call by the GPT executive team. I would like to start by acknowledging the traditional custodians on which our business operates. We pay our respects to elders, past and present, and honor our responsibility for country, culture, and community in the places we create and how we do business. 2025 was another year of delivering results and strategic progress for GPT. Earnings guidance was upgraded twice during the year from the levels initially communicated at the start of 2025, and ultimately, we delivered AUD 650.5 million of funds from operations, or AUD 0.34 per security.
FFO was up 5.5% on reported 2024, and after adjusting the impact of trading profits, this growth rate was even higher at 6.9%. The quality of our investment portfolio is reflected in the performance metrics. Like-for-like net property income growth of 6.3%, occupancy levels circa 98%, and an average cap rate of about 5.76%. We also made significant progress in building our investment management platform, ending the year at about AUD 40 billion of assets under management. This contributed to nearly 11% income growth in our management operations. Now, turning to the GPT platform. As illustrated, our platform structure is consistent and growing. We have scale across three lines of the largest and most investable property sectors in Australia, being retail, office, and logistics.
We were active in 2025 across all these sectors and investment formats. As we expected and conveyed previously, our near-term growth has been driven by expansion of our mandates and partnerships. And as in 2025, we expect to continue to grow with existing partners, as well as through the introduction of new institutional investors to the platform. In terms of our strategy, there is no change. Firstly, we must be great at the asset level, serving our customers and supporting their success, which is why we directly manage nearly every asset across the platform. Our second pillar speaks to our focus on results and the effective utilization of capital, recognizing that this is critical to truly create enduring value.
And complementing this is our breadth of capability that allows us to mobilize capital and invest opportunistically to take advantage of opportunities as they arise. And lastly, aligned partnering. This is the concept of ensuring that there is true and demonstrable alignment of interest with our partners. Look, while we always seek to refine and challenge our assumptions, we see these four elements in combination as being our formula for success. Now, as far as putting strategy into action, on the next slide, we outline clear examples of how each of these pillars have together contributed to this great result in 2025. In the first column, we continue to build on existing foundations. More than 6% like-for-like investment portfolio NPI growth, with all sectors maintaining high occupancy and strong leasing spreads. This underpins the high quality and resilience of our earnings and cash flow.
We demonstrated our ability to mobilize capital when opportunities arose, such as with the Grosvenor investment, as well as investing in our retail portfolio. We also raised capital for reinvestment and growth in our logistics division and in our retail fund. The value of platform breadth was evident in our ability to grow in our core sectors, whether that was taking on management of five shopping centers in three separate transactions, or growing our logistics portfolio through development. And finally, the value of partnership and truly aligned partnering was reflected across multiple investments, as well as with the successful restructuring of our pooled funds. Going forward, you can expect us to continue to aggressively pursue value creation in this way. I will now hand over to our Chief Financial Officer, Merran Edwards.
Thank you, Russell, and good morning, everyone. Starting with our segment financial performance. Our retail investment properties delivered strong 5.1% like-for-like growth, driven by rent reviews and positive leasing spreads. Strategic divestments resulted in headline growth of 0.8%, while enabling capital redeployment to higher return opportunities. Our office investment properties delivered robust like-for-like growth of 8.3%, driven by higher occupancy and rent reviews, plus one-off income, resulting in headline growth of 11.9%. Our logistics investment properties delivered strong like-for-like growth of 5.1% from positive leasing spreads and structured rent reviews. The headline performance result of a 7% decline reflects portfolio planned divestments, with proceeds reinvested in our co-investment strategy. Co-investment net income increased 29.2%, primarily driven by the successful Perron partnership.
Management operations earnings grew a solid 10.8% as new assets came under management throughout 2025. Finance costs of AUD 219.7 million reflect an increase in debt levels as a result of strategic growth initiatives during the year and a higher weighted average cost of debt. Corporate costs also increased, reflecting the full-year run rate of strategic investment in talent to support our growing platform. Income tax reduced versus 2024, reflecting lower one-off non-deductible tax items in 2025. Overall, this delivered AUD 650.5 million in funds from operations, up 5.5% from 2024, or 6.9% when excluding trading profits... AFFO delivered is AUD 494.4 million, up 5.2% with maintenance and leasing CapEx remaining elevated due to office leasing.
Our expectation for 2026 is that CapEx will be approximately AUD 170 million. Our statutory net profit after tax was AUD 981 million, reflecting positive revaluation gains across the investment portfolio. Turning now to our financial position, which remains strong and flexible. During the period, we strategically grew our co-investments by 67%, primarily through AUD 1.4 billion invested in new partnerships. Other assets have reduced by 17.9%, primarily as a result of movement in derivatives. Other liabilities have increased 18.7% as a result of movement in derivatives and a deferred payment for Grosvenor. Borrowings have increased as a result of strategic transaction and development activity throughout the period.
We continue to take a disciplined approach to capital management, with net gearing of 31.1% within our target range of 25%-35%, and with material headroom to our 50% covenant. We have AUD 1.2 billion of liquidity, with no unfunded capital commitments, and we continue to maintain our A2 Moody's and A- S&P ratings. We've been proactive in managing our debt position, extending facilities at approximately 10 basis points lower margins, increasing hedging to 72% of average drawn debt, and capturing attractive October pricing to restructure hedges in line with market at the time. This disciplined approach has had the effect of reducing our forecast average cost of debt for 2026 to 5% from 5.3%. I will now pass to Mark Harrison for the investments update.
Thank you, Merran, and good morning, everyone. 2025 was a year of execution and investment momentum for GPT. As shown on slide 11, property valuations for our AUD 16.1 billion investment portfolio increased by AUD 308.5 million, or 2%, for the 12 months to 31 December. This uplift was primarily driven by income returns, with the portfolio weighted average capitalization rate and discount rate largely stable for the period, at 5.76% and 7.04% respectively. We continue to see prime quality assets outperform, with divergences across asset quality and submarkets. Market dynamics for each of our core sectors remain positive, with healthy leasing conditions evident in the retail and logistics markets. The office market remains asset and market-based, with a flight to quality persisting in both leasing and capital markets.
Now turning to slide 12. In 2025, we executed strongly on our stated objective to curate our existing portfolios and create new funds and partnerships, leveraging our research-led capital allocation. During the year, we completed AUD 4.9 billion of gross transactions across our platform, active across each of our core sectors. Partnerships with like-minded capital have been the cornerstone of our transactional activity, illustrating our disciplined approach to capital management. Highlights for the year included the acquisition of 50% partnership interests in Grosvenor Place in Sydney and the Perron Retail assets, the divestment of non-core fund assets to provide investor liquidity, and the repositioning of balance sheet, pooled fund, and mandate partner investments to optimize portfolio construction. On the following slide, we demonstrate our aligned partnering, driving value creation for our investors and partners.
Our strategic holdings in GWSCF and GWOF provide an alignment of interest and a keen focus on performance. Active investor engagement throughout 2025 saw the group raise equity for GWSCF and restructure the liquidity regime for GWOF, both of which focus on optimizing investor outcomes. Both GWSCF and GWOF have now outperformed their MSCI benchmarks over a one, three, and five-year period. New wholesale partnerships created across the office, retail, logistics, and alternate sectors in 2025 demonstrate GPT's capability to execute partnerships across core, core plus, and value add return profiles. Our focus remains on positioning GPT as the leading diversified investment manager in Australia, delivering exceptional value, innovation, and sustainable growth for our investors and capital partners. Turning to sustainability, our commitment remains to deliver sustainable, long-term value across our owned and managed assets.
All our ESG activities are aligned with our strategy to optimize asset performance and enhance our competitive position in the assets we own and manage. I will now hand to Chris Barnett, our Head of Retail, for an update on our retail business.
Thank you, Mark, and good morning, everyone. 2025 has been an exceptional year for our retail business. During the year, we increased our assets under management by AUD 5 billion, with the introduction of 5 new assets seamlessly integrated into our business over a 5-month period. Our retail platform now comprises 18 shopping centers, totaling AUD 16.6 billion of AUM. These centers, which are owned and or managed by GPT, have over 4,300 retailer partners generating AUD 12.6 billion in annual retail sales and are enjoyed by over 240 million visitors a year. The quality of the GPT portfolio, when measured on a market value per square meter basis, is market-leading, and one of the reasons why our platform consistently outperforms.
Our investment portfolio has delivered comparable income growth of 5.1% for the year, predominantly as a result of strong rental growth and being able to deliver our 12th consecutive quarter of positive leasing spreads. Our centers have continued to enjoy strong sales, with total center sales growing 4.2% and total specialties up 5.3% for the year. Specialty sales growth has been driven by both discretionary and non-discretionary spending, with the on-trend categories of leisure, health, and beauty all continuing to benefit from high customer demand. We continue to evolve our assets with a specific focus on driving specialty sales productivity. We partner with our retailers to understand their core customer segments, and we align their shoppers with the corresponding trade areas of our centers.
This discipline continues to attract the most relevant retailers, allowing us to curate the most productive shopping center portfolio in the country. Our specialty sales continue to grow strongly, now achieving almost AUD 13,800 per sq m. Even with the addition of the new assets to our portfolio, our leasing team have been able to deliver outstanding results, maintaining a total center occupancy at 99.8%. Continued sales growth, high center occupancy, and strong retail demand has delivered leasing spreads of approximately 5% on the 565 deals completed for the year. Now, looking at the drivers of our retail platform, and as we highlighted at the half, we were optimistic that our retail business would continue to outperform for the remainder of the year, and our results have delivered on that outlook.
We commenced our redevelopment of Rouse Hill Town Centre in the beginning of the year, and we're pleased with both the leasing momentum and the builder's progress, and we look forward to successfully launching that project later this year. I'm also pleased to announce today that we have board approval to commence our exciting redevelopment of Melbourne Central. This iconic center in the heart of the Melbourne CBD is the most productive retail space in the country, and our redevelopment will further enhance the center's strength by introducing a first-to-market international major tenant, which will anchor a best-in-class dining and entertainment precinct. We will commence this project in the upcoming months. Our outlook for the year ahead remains positive. The fundamentals of the retail economy are strong.
High employment, real wage growth, strong sales growth, high levels of retailer profitability, delivering continued retailer demand in a market with limited new GLA maintains our optimism for 2026. Our assets are in great shape, and the quality of our portfolio and operating platform is well positioned for further growth. I now hand you to Matt for the office sector update.
Thank you, Chris, and good morning, everyone. 2025 has been a year of transformation across the GPT office platform, with a refreshed leadership team and refined structure, driving operational excellence and setting us up well for future growth in a recovering market. This transformation is reflected in the result we here have been able to achieve across the office portfolio over the last 12 months. The GPT office platform has grown to AUD 17 billion in assets under management, driven by the strategic acquisition of Grosvenor Place in December 2025 and positive revaluations. The acquisition of Grosvenor Place demonstrates our ability to invest in office segments where we have high conviction. Turning to investment portfolio performance. The office portfolio has delivered a strong result, with a continued positive trend in key metrics driven by a sustained market recovery and focused execution.
The Office Portfolio has achieved like-for-like net property income growth of 8.3%, the strongest result in 10 years, and a 640 basis point improvement when compared to 2024. During the year, we secured approximately 136,000 sq m of new leasing, including Heads of Agreement, across 137 transactions, with early leasing success at Grosvenor Place, securing 6,000 sq m of lease transactions post-settlement. We believe that tenant right-sizing post-COVID is now generally completed, with approximately 75% of renewing tenants in our portfolio leasing either the same or more space in 2025. We have also witnessed an increase in active deal inquiry amongst larger tenants, particularly in the second half of last year.
Leasing spreads remain healthy at 7.2%, with gross leasing incentives continuing to trend downward when compared to the previous year, with comparable portfolio occupancy, excluding Grosvenor Place, increasing from 94.7%-95.6%. Looking ahead to 2026, we will continue to build upon 2025's success, prioritizing the let-up of strategic vacancies across the portfolio, prudently managing capital expenditure, and delivering outperformance for our investors. Turning now to office platform growth drivers. The Australian office market is now clearly in early recovery. It should be noted, however, that some office submarkets are performing at different levels than others, and we believe that structural headwinds will persist for secondary office product. Tenant customers remain focused on high-quality, well-located buildings with strong amenity. Recentralization remains a key theme across markets.
Positive net absorption and constrained supply, driven by elevated economic rents, will continue to place downward pressure on lease incentives and drive positive rental growth in coming years. As office capital market activity continues to gain momentum, driven by improved physical market conditions and positive revaluation growth, we will prioritize the creation of new investment products to broaden our existing investor base and grow the platform. Grosvenor Place proves our ability to secure exciting investment product at scale. Active portfolio curation will continue to help drive our performance, with the recent exchange of contracts at 750 Collins Street, Melbourne, demonstrating our ability to deliver successful divestment outcomes. For GWOF, following the successful vote to defer the fund's liquidity event from July 2026 to July 2028, we will continue to work proactively with existing fund investors to provide liquidity solutions as required.
I will now pass to Chris Davis to present the logistics result.
Thank you, Matt, and good morning, everyone. We have delivered excellent results for our AUD 4.9 billion logistics platform, with 69 investment assets complemented by a AUD 3 billion development pipeline. Partnerships and mandates now stands at AUD 1.4 billion, inclusive of our second logistics strategy with QuadReal. We are targeting continued expansion in the investment management component of AUM as we grow through acquisitions and the creation of new investment products. We're activating the development pipeline, with four facilities currently underway. Three of these are in Western Sydney, with a lease already in place over part of this space. In Melbourne, the Asahi pre-lease at UniSuper's Deer Park Estate commenced in the second half. Our focus remains on curating a portfolio weighted to growth corridors that attracts the highest levels of tenant demand, driving rents and superior returns.
The portfolio is over 95% weighted to the eastern states, with nearly half located in the sought-after Sydney market. Our team has delivered outstanding leasing outcomes, with high portfolio occupancy and an active management approach, achieving comparable income growth of 5.1%. Leasing deals totaling 188,000 sq m were agreed in 2025. Over 60% of this was renewals, which has substantially reduced our near-term expiry. Strong rent outcomes were achieved, with face leasing spreads of 28%, led by Sydney and Melbourne at 34%. Leasing velocity has continued through the start of the year, with an additional 50,000 sq m of terms agreed, bringing 2026 expiry down to 4.5% and 2027 to 10.4%. This progress demonstrates our proactive approach to customer engagement.
We're seeing building momentum in leasing markets, with inquiry increasing by a third over the past six months, now sitting at over three million square meters nationally. Turning to growth drivers, Australian Logistics ranks as one of the tightest markets globally and is favored by investors on the strength of its fundamentals. Looking ahead, we expect to see supply that is aligned with demand, with vacancy rates to stabilize and start to contract. Structural tailwinds of population growth and rising e-commerce remain. Within the investment portfolio, delivery of comparable income growth through leasing and high occupancy will be the priority. We will capitalize on our AUD 3 billion pipeline, with over AUD 400 million of developments underway. We have a stable of shovel-ready projects and are engaging with tenants who are attracted to the delivery certainty these projects offer with DAs in place.
Further growth will come through expansion of the investment management platform and creation of new products with aligned investors. I'll now hand back to Russell for his closing remarks.
Thank you, Chris. Looking forward, we are excited and optimistic about the opportunities in front of us. We will be an active investor with the clear objective to deliver exceptional value to all stakeholders. In doing so, we will continue to set ambitious goals combined with disciplined execution. Barring unforeseen circumstances, in 2026, we expect to deliver FFO growth of approximately 4% or AUD 0.354 per security. Now, excluding trading profits, this represents growth of 5.7% above 2025 earnings. We also expect distributions in 2026 to be AUD 0.245 per security or a 2.1% increase over 2025. Thank you for your time today. I will now hand over to the operator for questions.
Thank you. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. If you are on a speakerphone, please pick up the handset to ask your question. Our first question today comes from Solomon Zhang from UBS. Solomon, please go ahead after the beep.
Morning, Russell and team. Thanks for your time. Maybe first question for Matt. You previously had disclosed the actual or rent-paying occupancy, which is sitting at 88.6%. Will we perhaps just get an update on where that sits today? And maybe just work through some of the 2026 expiries and how much have been de-risked confirmed renewing and how much is expiring?
Yeah, thank you for the question. As we stated, occupancy, including heads, is 93.2%. If you exclude Grosvenor, it's 95.6%. We've actually now aligned our occupancy disclosures with industry peers to ensure consistency and comparability. So as a result, we've actually stopped disclosing that actual rent-paying occupancy metric. But just a couple of points. Just given the nature of office leasing and that lag between signing leases and leases become rent-paying, you're always generally gonna see a lag between the two data points. That gap generally is around 300-400 basis points, and generally, we're tracking within that range. The 2026
Great. Just in terms of your -- Yeah, thanks.
No problems. We've made some-
Just in terms of the 2026 expiries. You got, sorry.
No worries. We've made some good inroads in relation to those 2026 expiries. There are a number of conversations that we had late last year, which has now been opportunities that we're looking to convert within the first quarter of this year. As you know, no single expiry in 2026 is really more than kind of 1.5% of total rent roll. But we are making good inroads, and hopefully, we'll be able to give some positive announcements over the course of the first quarter, as I mentioned.
Thanks. And maybe sticking with the office theme, just from Grosvenor, I understand that the vacancy is around 30%, but can you provide any color as to lease expiry and how much has been de-risked for 2026 specifically?
Yes, so we've made some good inroads on a leasing front, post-settlement in December. So the nature of deals that we've seen there, it's been a mix of existing tenants renewing and taking more space, and actually new tenants leasing vacancy. So we've got roughly 20,000 meters of active inquiry running at the moment, for that asset. We're tracking underwrite in those deals that we are signing, and we're hoping, just given the positive market momentum that we're seeing, that we'll continue to chop into that vacancy over the course of calendar year 2026.
Great. And maybe just a final question for Merran. So you called out AUD 8 billion of refinance debt. Could you just confirm what margins you're achieving on, on the new debt, and I guess how much you've saved versus the old debt, and maybe your spot debt margins across the entire platform as of December 2025?
Yeah. Hi, Solomon. Look, of the AUD 8 billion, about AUD 1.5 billion of that is actually at the group level, and what we've achieved there at, for line and margin is, on average, we're getting around 115 basis points. What was your next question, Solomon?
Yeah, so across maybe your balance sheet debt, where would your average margin be versus your 1% you're getting on incremental?
Lending margin across the group debt is about 160 basis points.
Thanks. Appreciate it.
Thank you. Our next question today comes from James Druce from CLSA. James, please go ahead after the beep.
Yeah. Hi, good morning, Russell, Merran, and team. Thanks for the presentation. Just on... First question is probably just around the equity raise in retail. I think you're looking at AUD 500 million in August. Just how that went and just some color on that, please.
Yeah, look, we highlighted that just under AUD 300 million has been raised, a combination of clearing secondaries as well as primary. They're still in the process of raising capital. We expect that to continue through the half. You remember, we just only restructured the fund at the very end of 2024 and started marketing into 2025, so it's ongoing, and, we're pretty positive on the pipeline that we've developed.
Okay. And can we get some broad sort of drivers for 2026, just in terms of like-for-like growth from the different divisions, what the cost of debt is doing, just a bit of color on the makeup of your guidance, please.
Yeah. So why don't we just go macro across all three, probably north of 5% like-for-like growth across the business on investment properties and our co-investments. From a debt perspective, remember, we're about 72% hedged, and I think in the appendix, we for 2026, we're about 3.2% base rate. So a pretty predictable cost of debt for the year. And then really, it's about the transition into the management operations, how we can grow that during the year, year-on-year. The guidance we gave was a reflection really of that underlying 5% growth and continuation of the management operations around current levels, given that the restructure at GWOF will have a AUD -5 million-AUD 6 million revenue hit.
Okay. And just one more for me, just on the payout ratio. So the DPS growth is slightly below, you know, the where FFO growth is coming through this year. How do you sort of think about that going forward?
Yeah, look, the range is 95%-105% of free cash flow, and it's free cash flow based, and so, the 2% growth seemed like the right number for this year as we have, CapEx coming through on all divisions for maintenance and leasing, but also bringing Grosvenor on as well. We want to make sure we're conservative around that. So despite the very strong earnings growth, we thought distribution growth of 2% was appropriate and well managed within free cash flow.
Okay. Thank you.
Our next question today comes from Simon Chan from Morgan Stanley. Simon, please go ahead after the beep.
Oh, good day, guys. Hey, I've got two questions today. One's focused on development, the other's focused on fundraising. Perhaps the development one first. Both in your retail and logistics presentation today, you focused a lot on developments. I was just wondering if you could, g ive us a bit more color. I mean, you know, in industrial, we've been hearing that the market is probably not as easy or lucrative as two or three years ago. So just trying to, you know, get a feel for, for the sort of development returns you're expecting there, the incentives you're handing out there, and likewise in retail. Just after a little bit more color on Melbourne Central, please.
Yeah, sure, Simon, it's Russ. What I'll do is, I'll hand this over to Chris Barnett first, and then Chris Davis for logistics.
Thanks, Russ, and morning, Simon. I'm always very happy to talk about Melbourne Central, and really excited at the opportunity to announce the commencement of the project. 'Cause I think we all know that Melbourne Central is the most productive shopping center in the country today, and that's actually no mean feat because it doesn't have an Apple store and it isn't anchored by luxury tenants, which are historically highly productive. But what Melbourne Central is very good at is making sure that we entertain the 55 million people a year that enjoy that asset. And as a consequence of that, we're able to kick off the development there. We're adding around about 7,500 sq m of new building.
It'll be on the rooftop of the existing Lonsdale Building, where we'll add a level three and a level four. And when we finish the development, it'll be anchored by a first-to-market major tenant and a best-in-class dining precinct. And the other thing I think we should acknowledge here is that it is also anchored by the newly refurbed HOYTS Cinema, which is really the only cinema in the country today that's got both luxury cinemas at D-BOX, which is the four-dimensional cinema mega screen that has the shaking seats. It has an IMAX, and it also will have, by the end of March, an Onyx cinema, which is Australia's largest LED screen. So we think all the things that are great about Melbourne Central will continue with this development.
The development's about AUD 170 million, and we should be completed by mid-2028.
Thanks, Simon. Chris, you're next.
Yeah, so in terms of the market, so, I mean, the starting point in terms of vacancy at 3% is low. And as I mentioned in my presentation, we've seen a pickup of inquiry, and then when we look at the supply side, it's actually gonna be a little bit lower than historic averages this year, circa 10% across the East Coast. So overall, the market is well positioned. We have seen a normalization of incentives, sort of in that sort of early 20s sort of range. And then our projects, we are well positioned, so we've got a lower historic land base in terms of cost, DA is in place, and as you've seen, we've started four new projects in the second half, and our returns are sitting in that sort of 6%-6.5% range yield on cost.
Obviously, that just depends on the particular submarket.
Great, that's very clear. Just my second and final question. Russ, you started this presentation today by flagging, you know, this year you're expecting to grow with existing partners and new instos coming onto the platform. I would think that you actually have a pretty good idea as to, you know, where your ideas and propositions could be most responsive with partners, right? Perhaps could you, you know, give us some insight as to where you think some of your ideas are gonna be most effective or taken up by instos partners? Or what, which one of your ideas are gonna be least taken up by instos partners?
I don't really strive for my ideas that way, Simon, but least to most. But, like, it's absolutely essential. Obviously, we service and serve our existing partners, and you've seen that opportunities come from doing so, whether that's adding Macquarie Centre and ACRT, adding Grosvenor in our CSC relationship, or establishing a new one with Perron. So obviously, the relationship, the investment capability, and the partnership's critical. As far as where the next stage goes, I would expect growth across multiple platforms, existing ones in the business, but also, look, you saw us start a new value-add partnership at the end of December, relatively modest first investment. We think that is an opportunity to grow. And there is a series of new investors that we're talking to about opportunities across all three sectors.
So there's active dialogue in office, in logistics, and in retail. But where they hit and where they land, it really depends on the opportunity and whether we can reach agreement on terms and whether it makes sense for both organizations. And as you know, like there's a long list of deals I think everybody has or hasn't done, but only those that get done get disclosed. So I would expect us to be active in all three sectors this year. So it's a very long way to say I'm not gonna go into detail of any one particular opportunity, but like I said, I think we're very well positioned in 2026 to execute.
That's great. We'll be watching keenly. Thanks, Russ.
Thank you. Our next question today comes from Adam Calvetti from Bank of America. Adam, please go ahead after the beep.
Hi, Russell and team. Thanks for the result. I mean, what's the assumed lease-up for Grosvenor in 2026?
Yeah, we're assuming a let-up period of between 12 and 30 months post-settlement. That's how we've looked at it in our acquisition underwrite. As I mentioned earlier, we've made some good inroads in relation to early leasing post-settlement. So, we've got leasing either in heads or signed of around 6,000 meters, with active inquiry of around 20,000 meters, at the moment.
Okay, that's pretty clear. And then on the wider developments, where are the pre-commitment, commitment levels sitting at?
Well, right now, we don't have anything in office that's underway, so speaking to logistics and retail. Retail really depends, like on Rouse Hill. Maybe, Chris, you can speak to Rouse Hill, Melbourne Central, where we're at with respect to pre-commitment.
Happy to, Adam. At Rouse, as I said, we commenced the development there at the beginning of the year. And we are actually looking in really good shape from both the building perspective as well as leasing momentum. I think we've actually only got a handful of deals to complete there. And at Melbourne Central, the anchor tenant is obviously the most important thing, which we're just in the process of finalizing our deals, but we'd look to have 30%-40% pre-commit before we commence that development.
Okay, great. Maybe just on the industrial side.
Yeah. So we have four buildings that are underway, so they start in the second half of 2025. So one of those is leased to Asahi in Melbourne, which is UniSuper's project. We've got three specs in Sydney, which are small buildings. One of those we leased last week, and the remaining two are finished in the second half of this year. We've got good inquiry on those.
Okay. How's that lease that you've just done last week compared to underwrite or maybe where you assumed?
It was slightly ahead.
Great. And last one from me, I mean, your Yiribana Logistics E state West has been delayed six months. What's the rationale or reasoning behind that?
So that's a really good project for us. We've got the first two buildings finishing sort of, you know, mid this year, as I mentioned, and the final building will be next year. So there has been just general delays in the market, generally because of authorities, but we're now well, well and truly on track.
Great. That's it from me. Thanks, guys.
Thanks.
Thank you. Our next question today comes from Andrew Dodds, from Jefferies. Andrew, please go ahead after the beep.
Oh, good morning, guys. Thank you for taking my questions. I'd just be interested, following the announcement of the GWOF monetization last year, just how much of that upfront 25% liquidity window has been utilized so far?
Well, we had submissions in December, and so we'll be looking to satisfy that 25% over the course of the next 24 months. We have 750 Collins Street obviously already under contract, which should settle in April, and that'll go a long way to partially satisfying that. But the 25% is the focus right now.
Okay. So is it safe to assume that the whole 25% gets hit?
Yeah, yeah, absolutely. And then that's what we expected.
Okay. Okay, great. And then just, just on Grosvenor, sorry. Are you able to talk to how much sort of capital you're assuming, or you're expecting to spend in order to, to get it back up to, you know, sort of decent shape, you know, sort of quoting the 30% vacancy figure, which was asked about before?
Yeah, as you noted, the real opportunity here is to stabilize occupancy post-settlement in improving markets. So, you know, when we look at our assumptions for year one CapEx, the assumption is around AUD 30 million-AUD 35 million. If you look at the split between maintenance and leasing CapEx, it's roughly a 70-30 split between leasing CapEx and maintenance CapEx. And as I mentioned earlier, we've made some good inroads in relation to the early leasing of vacant space within the building.
All right, great. Thanks. That's, that's all from me.
Thank you. Our next question today comes from David Pobucky, from Macquarie. David, please go ahead after the beep.
Good morning, Russell, Merran, and team. Thanks for your time. Just the first question on the management operations result. Really strong result, and a large step up in the second half versus the first half, I think about 18%. So if you wouldn't mind just talking to some of the moving parts in that half-on-half step up, please.
Sure. A lot of that movement came from the bringing on of the five shopping centers for the whole year, and obviously, they'd be fully operational in the second half, so a lot of that shift was there. And then also just general momentum in the business from the other, the other growth. But it's really those Macquarie, Cockburn, Belmont, Sunshine, Macarthur coming on board for the full, full period.
Thanks, Russell. And just the second one on MC and TI. Thanks for providing guidance for FY 2026, in terms of that stepping up a bit. Have you seen, you know, or have we moved past the peak year in office incentives, noting your incentives have, have boosted modestly? And when can we expect, you know, that to really start coming through in your earnings?
I can take that if you like. I think 2026 will be the peak year, from an office perspective. What we can now see is there's been a nice shift with, fit out versus rent abatements, and we're seeing the rent abatements being predominantly the amount, of the lease incentives now, with that going to about 65%. So you should see 2026 as the last peak year for office.
Thanks very much. Appreciate it.
Thank you. Our next question today comes from Daniel Lees from Jarden. Daniel, please go ahead after the beep.
Oh, hi. Thanks, team. Just in relation to FY 2026 guidance, is there any skew that we should be assuming in that number, first half, second half?
No. Look, expect it to be quite even throughout the year. At this stage, we don't expect any skew first half, second half, though I would note we typically always have a skew in CapEx to the second half, and that's just our average year.
Great, thanks. And just one more from me.
It looks like on the hedging front, FY 2027 has dropped a little bit, but you've disclosed FY 2028 for the first time. Is that new hedging or a bit of a blender, blended extend, or can you talk us through what's going on there?
It's a combination of a few things. There's definitely new hedging. We were quite proactive with our hedge book in the second half of last year. We put a lot of new hedges on, which increased our hedge rate. We did do some blend and extends, both obviously done at no cost, and we did some restructures towards the end of the year as well, which increased our hedge rate. Our average hedge rate is 72%. We sit at 78% today, and it tapers off throughout the year, and then the average for the next year is 55%.
Great, thanks very much.
Our next question today comes from Liam Schofield from Morgans. Liam, please go ahead after the beep.
Yeah, morning, team. Just on the balance sheet, can you just talk about interest rate sensitivity? Like, obviously, you've outlined gearing, just the prospect of higher rates, how does that impact you guys going forward, and your capacity to maintain distributions and fund developments?
Yeah. Hi, Liam, it's Merran. We have, as you can see, quite a high hedged rate. So we do have a little bit of risk with interest rate rises. We assume that there are no further interest rate rises in our 2026 guidance. If there was an interest rate rise in August, for example, that would have a small impact of about AUD 2 million. In 2027, you can see the same thing. We've assumed the cash rate.
And-
I think-
One final one, just on Grosvenor.
Never... I was just gonna-
Just on Grosvenor now.
Earlier.
Oh, sorry.
There's no unfunded liabilities. There's no unfunded liabilities in the business.
Perfect. Thank you. Just the final one there, just on Grosvenor, obviously, early days, what's the plan for, like, partial divestment of that type of asset? Is it going to be just held on balance sheet for the foreseeable future, or should we think about some potential divestment?
Yeah. Thanks, Liam. It's Mark.
In the fund.
Thanks, Liam. It's Mark. I would say, given the active inquiry that we have from a leasing front, yeah, we're working through that in the immediate term, but you can absolutely assume at the right time, we would look to bring capital partners into that investment opportunity.
That's all from me. Thanks, guys.
Thank you.
Thank you. Our next question today comes from Adam West, from JP Morgan. Adam, please go ahead after the beep.
Thanks for taking my questions. I guess my first question today is just on the office cap rate. Obviously, it's compressed six basis points, but I'm just wondering what assets were driving that, and if the 10-year was to hold at its current levels, do you expect cap rates to sort of stabilize, or would you expect some expansion for the next year or two?
Yeah, thanks, Adam. It's Mark again. What we saw was, you know, as Matt outlined in his presentation, we just saw differential behavior by assets and submarkets. So we saw higher quality assets like Grosvenor and Two Park Street hold firm, and secondary and non-core assets slightly soften. So I think overall, you can expect cap rates to remain stable from here based on what we're seeing in transactional activity, with affirming bias for better quality assets and potentially a softening bias for secondary and tertiary assets.
Yeah. No, that's clear. And I guess, just in terms of the leasing spreads in the Office Portfolio, what assets were driving, I guess, the higher spreads? And then following on from that, where does the underrenting sit relative to the FY 2026 expiries?
Thank you for your question. So on leasing spreads, it was actually relatively spread across the portfolio. If I look at it on a state basis, really on a gross face basis, Brisbane and Sydney really led the charge. But interestingly, Melbourne also posted a relatively positive result at around 5.1%.
Yeah, yeah. No, that's clear. I guess just final one to me, just on the retail trading performance, do you have any color you can provide, I guess, in slow growth in quarter four?
Adam, when you say slow growth, our total centers still achieved 4% growth for the quarter. You can see that really we're having an acceleration of performance in the second and third quarters, but the fourth quarter actually mirrored the first. And as I said, we're very happy that the total center sales growth for the period ended at 4.2%.
Yeah. No, that's clear. That's everything from me. Thanks.
Thank you. Our next question today comes from Richard Jones, from JP Morgan. Richard, please go ahead after the beep. Richard, you are now live. Please go ahead with your question. Richard, one final check. Just check your device is not muted. You are live. Please go ahead with your question. We will try and reach out to Richard to see what's going on there. Our next question today comes from Pete Davidson, from Pendal Group. Peter, please go ahead after the beep.
Good morning, guys. Just a quick question for Chris, yeah. It's a pretty strong retail results for its op costs, spec sales. Chris, can you just tell me about Melbourne Central, you know, sort of the Monopoly Dreams. How does that trigger in your results? Like, what have you done with that? Because I think they didn't quite go, and as one of the bankruptcy, can you just walk me through what's happening there?
And Pete, thanks for your question. Without wanting to speak about specific tenants, it is public that Monopoly Dreams went into administration at the beginning of the year. As a percentage of total GLA, it's reasonably insignificant contribution to the group, or certainly to the center. What I'm happy to say is that we've been able to re-lease that tenancy with a flagship international retailer. And we would look to ensure that we have those tenants replaced and trading by the second half of this year. And the replacement has been accretive to both valuation and cash for 2026.
What happens to the back rent or the rent receivable, Chris, how do you treat that in the accounts?
Pete, I'm sorry, I didn't hear that.
How would you treat the back rent?
Oh, the-
Yeah.
The total loss of cash will be covered by bank guarantees that the tenant had in place. And as I said, the new deals that we've replaced it with are accretive and won't have any impact to 2026.
Oh, great. All right. That's great. Thanks, Chris. Good result. Thanks.
Thank you.
Thank you. Our next question comes from Winky Tan, from Morningstar. Winky, please go ahead after the beep.
Hi, good morning, team. I dropped off for five minutes before, so I hope my questions have not already been covered. So my first question is on office leasing. I noticed that your lease term has averaged about six and half years in the past 12 months, and I noticed that it has generally slowly increased for the past two, three years. Just wanted if you can talk about if you're observing this—is this a general trend that the leasing terms have ticked up in the past two, three years? Or, and whether there's anything changed structurally for the last 12 months or so. Thanks.
Thank you for the question. In relation to leasing terms, what we've seen, at least over the course of the last 12 months, is larger tenants now coming to market to either take more space or renew space. Generally, post-COVID, they have a lot more look-through in relation to their forward space planning, and on that basis, they're looking to generally take longer lease terms. You still have those smaller tenants, sub 2,000 meters, that generally take shorter lease terms than those longer tenants. So, definitely, a trend that we have witnessed over the course of at least the last 12 months.
Thanks for that. In regards to that 7.2% leasing spreads in your, in your office deals, just, could you talk to what are the drivers to that 7.2%?
Yeah, so it's really a combination of increases and improvements in face rents achieved on relet, and also a reduction in the incentive that's offered as part of that relet. They're really the key drivers.
Great. Great. Thanks.
Thank you. Our next question today comes from Howard Penny from Citi. Howard, please go ahead after the beep.
Thank you very much. Just two questions on below the line. So, I see income tax expense has reduced a lot. Could you just take us through, you know, what you've done and initiatives you've put in place to get that down a little bit? And then, the second question, just looking forward, we've seen across the sectors some refinancing at better margins. Can we expect that to come through in GPT next year, perhaps?
Hi, Howard, it's Merran. I can take both of those. First question in regard to income tax expense. There is a reduction from 2024 to 2025. In 2024, the FFO tax rate was about 36%, and that was driven... So it was higher last year, and that was driven as a result of some one-off tax, non-deductible tax items. In 2025, we have an effective rate for FFO of 30%, and in 2026, we expect that to continue, so you can expect a 30% effective rate for FFO again. In regard to what was your other question? Refinancings? So that's-
Yes, refinancing margins.
Yep. Okay, so what we have done is, across our debt book, we've looked at, our loans and whether or not we can refi and extend those loans, and as a result, we ended up with, on average, the ones that we have completed, about a 10 basis points reduction in their line and margin fees, which you will see flow into 2026, and you'll see our cost of debt for 2026. The weighted average cost of debt is expected to be 5%.
Thank you very much. And maybe just a second question, back on funds under management. With your conversations with both domestic and offshore investors, are any of them, you know, raising the fact that we're, you know, in a higher interest rate environment or at least rising interest rate environment, that's becoming a deterrent, or are they still very attracted to the fundamentals of your portfolio in Australia?
Yeah, Howard, it's Mark. I'll take that. I'd say in our recent discussions, following some interest rate volatility, there's still really strong interest for capital from reallocation to real estate out of other sectors, primarily being driven by strong income fundamentals and like-for-like income growth. So, given where we're seeing asset values at a discount to replacement cost, it still seems to be positive equity tailwinds for us.
Well, thank you, and congrats on the results.
Thanks, Howard.
Thank you very much. There are no further questions at this time. I'll now hand back to Mr. Proutt for closing remarks.
Thank you again for everybody for being on the call this morning, and thank you for your questions. And, I'll hand it back to the operator now.
Thank you very much. That concludes today's event. You may now log out.