Ladies and gentlemen, thank you for standing by and welcome to the Ingenia Communities Group First Half 2019 Results Presentation. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer Please note that this conference is being recorded today to date 19th February 2019. I would now like to hand the conference over to your speaker today, Mr. Simon Owen, Chief Executive Officer and Managing Director.
Thank you, sir.
We are really excited to be presenting NGNU's results today.
Right off
the bat, want to make it very clear that we are confirming full year guidance. EBIT growth of 15% to 20%, underlying EPS growth of 5% to 10% and 3.50 plus settlements. Ingenium's business model is uniquely leveraged to the intersection of 3 key thematics. An aging population, a housing affordability crisis, and several generations of people retiring with limited savings beyond the family home. Furthermore, our recently announced strategic partnership with some communities a long standing global leader in manufactured housing only strengthens our capability to deliver, grow and lead.
I'm very security role. But before we go into the details, I'd really like to focus on 4 key themes today. Portfolio construct, market leadership, deal flow and innovation. Number 1, portfolio construct, The residential property market is tough. I'm not going to pretend otherwise.
We are having to work hard for sales and settlements. But our portfolio is uniquely leveraged to the continuing aging of the population. Every day, some 700 Australians turn 65. That's seven hundred people every day, and this will continue for the next 30 years. And Ingenia is firmly focused at the lower and mid quartile price markets in outer ring metro and accessible sea change locations.
Whether it's genuine resilience in home prices and underlying demand. Our incoming residents are not requiring a mortgage or refinance. They are downsizing both in terms of property size and financial commitment. And our incoming residents are typically selling to 1st homebuyers for upgraders who can, whose serviceability is supported by generational low unemployment levels. I think that there's also sometimes overlooked that our business is underpinned by owning land and collecting rent.
We presently have over 7700 income yield in homes, cabins, and sites. And this number continues to grow every week. As we sell new homes and add new rental and tourism patterns across our portfolio. Every week, we collect more than $2,000,000 in cash rent with a significant component of this underwritten by government based payments. Our portfolio construct is based around growing and increasingly deep pool of rental income that gives the business fantastically reliable, weekly cash flow.
Number 2, market leadership. This year, Ingenio remains on track to become the leading developer of lifestyle communities in Australia. In addition, the group has an incredible growth runway in place. And our development pipeline of 3900 and 84 Homesites is larger than our next two peers combined. The end sales value of this development pipeline now exceeds $1,200,000,000.
And would add over $34,000,000 to recurrent annual cash rent. The size of the lifestyle community pie is growing, and so is Ingenio's share of the pie. It remains our absolute resolve to be the clear market leader, as measured by settlements, pipeline, profitability, and most importantly, resident satisfaction and engagement. Number 3, pipeline opportunity. Since announcing a strategic development partnership with Global Leader, some communities last November.
We've been able to secure 6 development projects, totaling some 1200 home sites. These projects are now all under due diligence and detailed commercial assessment. Competition for quality development sites is markedly lower, while, for the same time, small and mid teen developers are increasingly looking to offload projects as credit tightened and the resi market continues to slow down. We're also seeing a lot of quality mature acquisition opportunities start to become available. Number 4, innovation.
Ingenia is a genuine leader and innovator in our sector, and this should assist with a longer term Tier outperformance. We are already a leader in the build to rent sector, where we own and manage already over 2000 400 Rental Homes, and we've developed considerable intellectual property in this space. We also have 1st mover advantage in some compelling high growth sector adjacencies, including importing flat pack homes and rental units, which of themselves could be an entirely new business segment for Ingenia and our security holders. I'm now going to move to the presentation. Joining me on the call today is Scott Noble, our Chief Financial Officer.
Nicky Fisher, our long standing Chief Operating Officer, is up in Cairns today and unfortunately can't be with us. There's about 10 slides that I would like to talk to today before opening the call up to Q And A. So let's start on Page 2, which are a few of the key highlights. Our earnings before interest and tax Our up 15% on the prior year to $22,400,000. And our operating cash flow is up 51% to $17,000,000.
This will be substantially higher, except for the deliberate investment in inventory At our new Plantations project, which has 52 new homes under construction, including 6 display homes, and our first residents are scheduled to move in during May. I've touched on lots of positive news, but there are always a few areas where we can do better. Probably the lowest hanging fruit in the business today, is continuing to improve the incoming customer journey for new lifestyle residents. This would include better alignment between product project launch and home settlement and increased responsiveness on defects management. Addressing these issues, would likely significantly improve referral sales and potentially lower our above the line marketing spend.
On page 3, today, in January, is pleased to announce 2 new acquisitions. Back in 2015, in January acquired a partially built lifestyle community in Lara between Melbourne and Geelong. At acquisitions, this had 177 development sites, which has now been largely fully built out and sold. We have now been able to secure on acceptable terms to acquire the 68,000 square meter site directly adjoining the community, which subject to Council approval, could have an additional 181 Homes and create 1 of the largest lifestyle communities in Victoria. We're also pleased to announce the acquisition of an established mixed use holiday and lifestyle community in the Byron Bay region of Northern New South Wales.
Which upon settlement will be immediately accretive to FY2019 earnings. This acquisition will nicely fit into our market leading portfolio of holiday mixed use communities along the New South Wales and Queensland coastline. On page 4, I'm really excited to announce tremendous progress made since November, but our new development JV with some communities. From Brisbane to Melbourne, we now have 6 projects locked down, including 3 that are DA approved. There are also a few more projects that we're about to put forward.
Our JV with one of the clear global market leaders in our sector is tracking well ahead of plan. On page 6, I would like to briefly comment on the market landscape in which we operate. And this is a new slide. Whilst demand for quality affordable seniors accommodation continues to expand, as evidenced by our order book, for 272 New Homes. Without exception, the greatest near term uncertainty is when aggressive policy can commences for the 2019 federal election, which is likely to be held in May.
This may cause some prospective residents to sit on their hand. We continue to tightly manage our expense line looking for cost outs and leveraging our growing development spend. However, utility costs, including power, continue to grow our multiple to CPI. Building costs remain flat, and we are continuing to see builders bid aggressively in order to secure work. I'm now going to hand over to Scott to walk through the financials and capital management commencing on page 8.
Good morning, and
thank you for joining our half year results call. Revenue increased 21% and even increased 19%. These improved results were driven by the growth in rental income from our lifestyle and holidays business, and the growth in revenue from our development business, which delivered 25 additional settlements and a 22% increase in average sales price. Underlying profit increased 20 percent to $17,500,000 and underlying earnings per security increased 14% to $0.081 per security. Statutory profit declined 24% impacted by fair value and statutory differences between the current and prior periods.
This period statutory result includes an increased reduction in the fair value of development property, due to the high level of settlements and higher margins being realized. The impact of transaction costs and stamp duty on the River Shore acquisition the write down of the value of the, Aviva Development Land and impairment of other noncore assets. And higher operational CapEx on facilities, which did not directly contribute to operating income improvements, but which will add value in the future. The group's operating cash flow for the half was up 51%. Net asset value per security increased 2% to $2 62.
Directors have declared an interim distribution of $0.054 per security, up 6% on the prior period. Turning to Slide 9. Development EBIT increased 115 percent to $8,800,000, with development EBIT margin growing 5.90 basis points. This improved result was driven by a combination of increased settlements and higher margin projects. Lifestyle and holidays EBIT increased 4 percent to $13,500,000 The lifetime holidays margin declined slightly to 39% over the margin on our stable assets was marginally higher than prior period.
Lifestyle and holidays EBIT and margins were adversely impacted by the disposal of noncore assets in 2018. The closing of Raus Hill, which is planned to settle at this financial year and the commencement of our key developments, which are not yet delivering positive operating income or margin. Ingenia Gardens continues to deliver strong cash flow to Ingenia. The EBIT result was impacted by the sale of the 5 Tasmanian Villages in April 2018. On a like for like basis, Ingenie Gas delivered improved EBIT for the group.
Corporate costs increased 5% This was primarily driven by higher B and O and liability insurance premiums in the period. Consistent with prior years, will be a greater percentage of annual EBIT in the second half of the year, driven by new acquisitions and higher settlements, which is supported by a record level of contracts and deposits on hand. Turning to capital management on Slide 10. During the half, we completed an accretive placement to some communities. And a 13% premium to the closing share price prior to the placement, raising $75,000,000.
We've entered into a strategic partnership with SUN, which will accelerate development and create new fund management revenue streams for the group. We have progressed the contractual conditions on the sale of our sale, which is now planned to settlement in quarter 4. This sale will release $22,900,000 in proceeds to the group. At 31 December, during was 22.3% and LBR was 27.8% compared to our covenant of 50%. Weighted average debt maturity was 3.8 years, and the cost of drawn debt was 3.85 percent.
Post 31 December, the board approved a $5..4 distribution, which will be 17% tax deferred. The DRP will remain in place and will be 75% underwritten to partially fund the accretive acquisition in the Byron Bay region we announced today. Turning to Page 11 on valuations and cap rates. During the half, we extended revalued 27 assets. We've seen the average cap rate at the lifetime holidays portfolio improved by approximately 24 basis points since June.
The location of our properties, the high level of corporate activity in the asset class over the last 12 months, and improved scale of our villages has helped support the improved cap rates. In a declining housing market. Ingenier cap rates remained stable. Ingenier guidance, cap rates remained stable at 10%. Reflecting the lack of market transactions in this high yield stable cash flow business.
I'll now hand you back to Simon. Thank you.
Thanks, Scott. I'm going to recommence on our group strategy slide, which is on Page 13, which is also a new slide Our entire portfolio construct is based around creating deep pools of borrowingly predictable weekly cash rents. Primarily focused on the aging of the population and largely supported by government transfer payments. On Slide 17, which is our key lifestyle and holiday segment. As Scott noted, Portfolio segment in this business was marginally up $13,500,000 for the half.
EBIT margin was down slightly to 39%, impacted by startup operational costs, associated with our new Greenfield projects at Latitude 1 and Plantation. Over the medium term, we expect the operating margin to expand into the mid-40s. For the first time, we've disclosed our re leasing spread, which is 13%. This represents the difference between the final rent paid by a departing resident and the new rent for an incoming resident on the same premises. Like for like rents is up 4.2% on the prior period.
And these are some really strong numbers, which demonstrate that scale benefits now being delivered across the portfolio, but with plenty more to come. I'm now going to move on to Slide 18. Which is our Ingenio Holidays business. This is again where we're really enhancing returns through active management. The cash flow from this business does certainly have a seasonal bias, but from experience tends to be highly predictable year on year.
Ingenya now has a unique database of over 220,000 people who we communicate with on a regular basis. Our strategy with Holidays is about owning the customer and creating unique experience. It's about controlling the sales channel where possible and focusing on yield optimization and length of stay rather than chasing the market for rate. Our holiday business is a compelling and complimentary opportunity with significant attractive earnings upside. I'm now going to move on to Page 22, which introduces development.
And put simply, we're selling more homes at higher prices and better margins every year. Our development margin expanded 5.90 basis points over the past 12 months, with further growth expected as we commence settling projects like plantations and increasing our volumes. Our home sales prices are up 22%. And our above ground profit per home, up 21% over the past 12 months. And this is just as we started searchably leveraging our development runway.
On Page 24, I would like to briefly discuss our 2nd greenfields project. Plantations, which is located just north of Coff Harbour on the New South Wales, North Coast. To date, 98% of the first release stage of 45 homes have been deposited or contracted at a weighted average sales price exceeding $450,000. This builds upon our highly successful Latitude 1 project on the New South Wales Mid North Coast. Where weighted average prices now exceed $500,000.
In the coming month, the group intends to formally commence Civil Works on our 3rd Greenfields project in Harvey Bay on the Queensland Fraser Coast, where we already have a strong pipeline of deposits, in place. Moving on to Slide 25, which remains one of my favorites. There's no other lifestyle community operator that has a pipeline offering anywhere needed as quality or breadth of projects. In addition to the 10 projects in junior already has in development, we now have an additional 5 expansion projects and 12 new Greenfields projects. A majority of these new projects have been secured by an option where the land does not need to be acquired until all development approvals are in place.
Our strategy over the past few years has been where possible to acquire or secure the land adjoining existing communities. So today, we own or have options for land are joining Chambers Pines, Betania, Latitude 1, Harvey Lake, and Lara, and we're currently negotiating the acquisition of land, expansion land, are joining another 3 communities Our experience is that when you're acquiring the land next to an existing community that is typically provides for very low risk and highly profitable development. I respect that the market remains nervous on the outlook for residential property. So I'd like to briefly touch on Slides 2627. The chart on Page 26 shows that the real price weakness in the market at the moment we've been experienced in the top end of the capital city markets.
On the flip side, there remains firmness in the middle of lower deciles, which are the markets where Ingenium plays. There is no doubt we are having to work harder for sales, but I do think the combination of our attractive price point our geographic diversification, demographics, the quality of our offering, and the growing awareness of both the land waste model and in junior will support our settlements target in 2019 and beyond. In recent months, we've established an internal call center and are actively mining the 12,000 open leads in place across our lifestyle business. As of 17th February, we have 272 deposits or contracts in place, which, combined with 143 year to date settlements, represents over 120% coverage of our forecasted 2019 settlements of 3 50 plus homes. This gives us great visibility for the run home to 30 June and confidence that even in a slowing housing market, of the resilience in affordable seniors housing, I'll now touch briefly on Page 28.
As I noted previously, we remain on track to deliver our FY2019 guidance. 350 plus new home settlements, EBIT growth of 15% to 20% and underlying EPS growth of 5% to 10%. This comes on top of our greater than 50% growth achieved last year. There is certainly some market risk particularly depending federal election. However, all remains on track at the moment.
And finally, on Page 29, which is our management focus. Sitting up sales, integrating recent acquisitions, asset recycling, sourcing deal flow, and procuring project approvals. And lastly, commencing our 1st new development project with SUN, remain the key focus for management over the next year. On closing, I think this result again demonstrates the quality of Ingenius management platform. The resilience of our business model and the unparalleled growth opportunities that provide quality, affordable lifestyle communities to Australian aging population offers.
And on that, I'll now hand back to the moderator.
Thank you very much, sir. Your first question comes from the line of Michael Keith from Goldman Sachs. Please go ahead, sir.
Good morning, Simon and everyone. Congratulations on the results. Just could you talk a little bit more about time on market that you're seeing? I mean, you mentioned days on market sort of extending a little bit out there. Could you just say, do you track that for your incoming residents and maybe how has that changed at all
in the last 6 to 12 months?
Yes. Hi, Michael. Good to speak, and a great question. Firstly, every single one of our sales people has an iPad and subscription service to residential data. So for every single person who's deposited or completed a 1st Choice club.
Every week, we're tracking what's going on in their local housing market, time on market, how realistic is their sales price? We're typically talking to their real estate agent who's selling their home. So we're watching that very closely. Notwithstanding what you read in the Sydney Morning Herald or the age, I mean, there's not one homogeneous housing market in Australia. So when we look across the 10 projects we have in market at the moment and the 3 or 4 that we're going to launch in the next 6 months, you know, we have some markets that are very strong.
So, you know, Lara down in Victoria at the moment, you know, time on market around the 20 days, probably our slowest market at the moment would be, the range up in Mora set where time on markets around 80 days. So it does vary. I've clearly called out that we're not trying to pretend that we're not in a challenging housing market. But we're continuing to hit our numbers in a couple of select projects where offering 6 months rent free. We haven't had to do any sizable discounting today, but you can see that our margins are above the ground and profits continuing to grow, Yes, broadly speaking, the sort of coastal SeaChange markets are holding up.
I think if we look at Latitude 1 and I was up there on Friday with Sherry, our sales agent, we've probably seen prices come off around 5% to 7.5% in the last few months. And the time on market there is around 60 days. Every single person who we're expecting to move into our community by 30 June currently has their house on the market and we're working with them very closely. We put on a couple of additional people in our sales team. As I mentioned, we've set up a call center where we're working with our 12,000 open leads and really working on that.
We're running some internal promotions on trying to increase our internal referrals. So there's a lot of moving parts at the moment where we're sitting in an incredibly strong position. The demand that our Plantations project, up near cost is really strong. And as I said, Now we've got 98% of the new homes that we're bringing to market in May June have already been deposited or contracted. Demand is very strong at Latitude in the last months.
We've seen a little bit of a pickup in Brisbane. Probably just a couple of regional projects, Hunter Valley and Albury. And the last one or 2 homes of the Grange is probably where there's been the greatest weakness.
Okay. Just on the operating margin, you mentioned it did fall a bit. I know, Scott, you mentioned it a little bit there, a little bit more color on that. And you clarify, you said mid-40s or something like that is what you expect over the long term. Could you give us a sort of timeframe roughly on that?
Mid-40s is where we expect we're going to land. And the speed at which we get there will depend on, I guess, the mix of greenfields development projects the mix of total earnings. Just to give you a by way of example, a typical project like Latitude 1, we would need somewhere around 80 to 100 residents paying rent for that community to hit breakeven. And thereafter, every dollar of rent is a dollar of profit. Typically, 6 months before the first resident moved in, we're employing the village manager and activities manager and someone in, grounds and landscaping.
So that cost, which goes through the profit loss, there's basically no revenue. So At this point in time, excluding development profit, Latitude 1 is making a loss. We've already got the team in place, other plantations in anticipation of the first resident moving in in early commit may. So it's not a huge cost that we're carrying, but it is enough that it drags the margin down by a little bit less than 100 basis points compared to 12 months ago.
Okay. And just lastly, just on Lara, that expansion is that will that share the facilities of the existing community?
Yes, I would say a great question. So we would anticipate that it would, but we would also be looking to build some complimentary and ancillary community facilities next door. So I would imagine, Lara has got quite a very nice $3,500,000 community facility, including an indoor heated pool that pool is probably a bit small. So I would imagine we, we'd probably look to put in a smaller, maybe 200 square meter Clubhouse And maybe another slightly larger pool. I would be anticipating the clubhouse spend on expanding Lara will be less than $2,000,000.
Another reference point would be at Lithuania. So when we bought the Nathaniel Village, it had a DA approval for 133 Homes. We've now got a D. A. On the adjoining land for another 100 and 96 Homes, and we're putting in a the $2,000,000 club assets.
Your next question comes from the line of Steven Lamb from CLSA. Please go ahead, sir. Thank you.
Hi, Simon and team. I'm just wondering, was this due in terms of settlements slightly bigger than expected?
No, Stephen, the SKU that we've experienced is broadly, in line, with what we're expecting We would certainly, at the moment, we've got 120% coverage of the full year settlements. Every one of the rest people who, we're expecting to move in by 30 June currently has their home on the market. And we do expect that it'll be a very strong close to the year. By way of reference point, in June, 2018, in the month of June, we settled 76 homes from our experience over the last 5 or 6 years. And it's not inconsistent with what you see in the DMS space quite often Christmas is a time when the family gets together and that can often be the catalyst for mom and dad or grandma and grandpa putting their home in the market and starting to think about their retirement living option.
So we're broadly pretty happy with where we're tracking at the moment. I think as I called out, at least twice in the presentation, when we look at all the risks in front of us, I think the federal election, when that starts to get into some pretty aggressive politicking, that's probably something that, we're cautious about at the moment.
On the federal election, are there any specific policies from dealer parties, which makes you particularly concerned right now? Or is it more watch and brief for now?
Well, I think generally, I've been in the senior housing space for over 12 years now. Elections, federal elections, and we do have a New South Wales election in April. Do tend to cause residents, incoming residents to sit on their hands. I do think, 2 of the key policy platforms that this election is going to be fought on is going to be what happens to the housing market, if from short and proceeds to, remove negative gearing on housing or investment housing. And secondly, for self funded retirees and the, the cash rebate, what that has.
So it's not specific policies, but I think they're policies that policy platforms that are going to, make a lot of seniors or pensioners, quite nervous and cautious about what the future holds. The balance against that, we've got 10 projects actively in market plantation is streaming ahead and we expect to have the 1st residents moving in in May. I think at Latitude 1, we've got one home that's built that's not solved. We've got around 2 forty homes that are under construction at the moment. We've got significant pent up demand.
We probably got 30 or 40 people staying in our various holiday parks at the moment waiting for their home to be completed. Our demand outlook is very strong. We've never had this many deposits or contracts in place. We still absolutely remain on track to hit our earnings guidance. We just want to call out that the housing market is slowing down and we are going into a, a federal election cycle.
And on plantations, so 1stcillaries in May, I think at FY18 results in the bubble chart, it looks more like the fulfillment target was February. So was there anything that caused side pushback?
So I could let Henry, our development manager answer that, but really what happened is, we experienced some wet weather in late 2018 calendar year. And unlike Latitude 1, which is on sand and the water drains away very quickly. Plantations has got a clay base and we couldn't actually get the slides in. So we had a weather related event, which probably took 2 or 3 months out of our schedule. But we've got some 44 residents who have got their home in the market or who have already sold.
Who are all coming out of the local market, who are all ready to move in, in May June. And we, we believe that we are firmly on track for first residents to move in, in May. This is entirely consistent with what we experienced last year at, at Latitude 1 and our Conjola project. So again, both of those projects weren't ready till, April, May, June for new residents to move in and we're able to comfortably hit our numbers.
Okay. Thank you. And what your CapEx news and also sort of CapEx for the full year? And then if first half was a little bit lower than first half twenty eighteen?
Know it's Scott's champing. It's a bit to answer your questions online.
Thanks, Steven. We're expecting probably the second half $25,000,000 to $30,000,000 of CapEx spend across both construction and our operating CapEx. So that would take the total between 55% 60%.
And of that, how much of that is sort of like the cabin accelerator cabin rollout that guys were planning after the JV equity injection?
Yes. Good question. I think we spent about $3,000,000 in the first half, and we're probably expecting about the same in the second half.
And average sale prices? I noticed that obviously with more Latitude 1 selling, what are you assuming for second half or full year? Because I think it was up 12% already on the full year 'eighteen number?
Yes. Looking forward, those will, slightly above what we're currently selling at. Because of the higher contribution from Latitude 1 and plantations.
And Ralph Hill, sale, is it a condition precedent on that still vacant possession? And how's that going?
Yes, that's correct. And we are really well placed. We expect a basic possession by the end of this month. In settlements, I think we're targeting the 1st May late April 1st May.
Okay. And you were saying, Avino, I missed a bit. I think I heard that you've written down the value of this development, NAND. So basically, you're no longer assuming that will go ahead because I think previous comment regarding your if by 'nineteen to 'twenty, I'm targeting EBIT growth of 15% plus you had assumed Avina to occur in second half 'twenty?
That is correct. So we are, we're still comfortable with the, that guidance. We've got replacement assets which we're identifying, such as the lateral one that was announced today. In terms of the Vena, we've written that down just by that $2,500,000, the development land piece. In accordance with the accounting standards, it's now valued on a like a rural land basis due to the negative outcome from the land environment call.
And there's no plans to appeal the need to?
We're still looking at all our options at the moment. That is one thing we are considering, but there are also another a number of options we're looking at.
Yes, Stephen, when we, look at Avita, and that's obviously one setback that we have had, That's an incredibly valuable strategic land holding in Western Sydney where the median house price in that Vineyard precinct. So three years old, our balance sheet is not designed to be a long term owner of non yielding properties. But when we look at Sydney, there's 7 land lease communities, when we look at, the smaller cities of Brisbane and Melbourne, which is around 1,000,000 people. There's a 30 or 40 land lease community across both of those markets in total. So Sydney is massively under bedded in terms of land lease communities.
The New South Wales government's approved a massive new housing development directly Across the Street. So we are still working out what our longer term options are. We've taken the future development potential for Avena out of our development pipeline. Notwithstanding that, we still have a pipeline now 3900 and 84 Sites, which is bigger than our 2 largest peers combined.
Thank you. And last one from me. Gross profit per home for the second half would it be
Yeah, look, I've maintained a similar sort of level to what we've got at the moment. We're slightly above the $140,000,000. In terms of, gross development margin. We'd like to get a little bit higher, but obviously with, I suppose pressures on that or the outlook on the market, we'd probably keep it at a similar level for forecasting.
Thank you very Your next question comes from the line of James Barker from Morgan. Please go ahead sir. Thank you.
Good morning. Thanks for taking my questions. Most of them have been answered, but just was interested in the tax rate for this year. It seemed a little bit lower in the first half. Maybe just your expectations for the full year?
Yes. Look, expectations for the full year is still at 14% to 16%. More in the first half because of the lower number of settlements of the SKU towards the second half will be higher.
Okay, thanks. And maybe just on the trajectory of the sale performance throughout the half. Did you see it sort of deteriorating to the second quarter and maybe just some comments on pricing versus selling costs as a percentage of sales? Has that gotten tough in the last few months?
I mean, our sales, tracking tends to be very similar to what you see in the residential market. So December January, traditionally quite slow. And then the market launches pretty aggressively after Australia day. And we're now in our peak selling period. So we didn't experience any unusual events in the the first or second quarter of the current financial year.
I didn't quite catch your second question, but No, generally speaking, our cost of sales and marketing is somewhere in the region of 5% to 5.5%. Of the gross sales realization. We are putting a little bit of more money into our sales and marketing team. So as I mentioned, we have established a three person call center up in Brisbane to mine our 12,000 open leads. We put a little bit more money into above the line marketing.
So up in the Brisbane market, you probably see us sponsoring the big glarusso traffic helicopter again very shortly. We're working with some of the local community clubs to sponsor events. Up in plantations, we recently was a key sponsor of, a major festival up there, which has generated great awareness of our products. We are putting more money into sales and marketing. But our margins, so our total gross sales realization price is higher.
Our above the ground development profit is higher. So we may have to give away a couple of additional $1000 there just to make sure that we've, we're maintaining our sales volume. But broadly speaking, market conditions are No. Boins, so we're very focused on what's coming up ahead.
Okay. Thanks. And maybe just the swing factors in terms of your guidance. Is this relating to the number of settlement or is it just what we've spoken about there in terms of selling costs to achieve those settlements?
Well, I think I used the words, fantastically, boringly predictable, which describes the land rents So that part of the business, it would take something pretty catastrophic for that to unwind. So the key swing factors, if I had some think of 3, one would be, if for whatever reason, we had a delay at Plantation. So we know the demand is there. So a delay of planned patients would probably have to be some sort of construction snafi, but, everything's on track at the moment. So for that, that is a risk I think secondly, we've got plenty of residents who are ready to move into our communities.
A lot of them just need to sell their home. And if we see that the time on market, so across our 10 projects, I think the average time on market's around 42 or 45 days If that pushed out to 70 or 80 days overnight, that could slow down our settlements rate. I mean, it's not like we're selling airline seats where once the plane takes off, you can never sell seats. A few settlements may drift into July. I probably can't think of any other major swing factors other than those 2.
Okay. That's all for me. Thank you.
We have a follow-up question from the line of Michael Pete from Goldman Sachs. Please go ahead, sir.
Hi, Simon or Scott. I just wanted to ask the question on second half cash flow. Just can you remind us what's got to go out the door in terms of acquisitions to be paid for and the divestments that are coming?
So we've announced the acquisition today of, Byron Bay and Lara, adjacent land. That'll be $15,300,000 of outflow. Of that, we're looking for underwriting the DRP to equip 1 of 75%. So that'll give us $6,000,000 of additional, capacity there to help fund that, because we normally get about a 25% take up in the DRP penny. I'm trying to think.
Any other? Oh, we just completed Ashley last week. And that was $31,000,000 from memory of top. $29,000,000 off the top of my head. I think that's the only other explanation
at the time I was in there of Aspley?
Aspley, we just mentioned Aspley, Michael, we've just completed that.
Time of that JV being set up?
So Michael, River Shore and Ashley were announced at the time we made the 14% above market placement to some. So Reveshore, which is our premier holiday park on the Queensland Sunshine Coast settled last calendar year. And as we settled last week. And look, I would be surprised if we settle on one property going into the SunGenia development JV before 30 June.
And just on that JV, the deployment of capital. I mean, can you give us a picture if you can over the next sort of 12 months of how much you think you'd be deploying?
I can't just get. I mean, we've given you great clarity on how many projects we've secured, where they're located, the fact that 3 of them are DA approved, our broad intention is to start a project this calendar year and then start at new projects every 6 months thereafter. We are clearly running ahead of that at the moment. And the 3 DA approved projects, should we proceed to acquisition with all of them, they could potentially all be under construction this calendar year. So until Nat and her acquisitions team finished their due diligence until we going through the final bankable feasibility analysis.
It's really hard to give you a lot
more timing.
Well, I'm going to say
to that that we're really well progressed on, debt within that vehicle as well. So that'll be both equity funded from ourselves and Sun as well as having a debt component as well.
Okay, good. Just on the rent discount, you mentioned, it sounds like a good strategy just to offer a bit of a rent break, upfront. And not a big cost for you
to pay, but can you just is that
a hit to the rent on the permanent mental income, say, for the first Johnson, how many are you generally offering or take up this offer?
Well, in terms of it's only a couple of communities that we're offering, the 6 months discounted rent. So at a community like, Plantations or Latitude 1 where we're really struggling to build the homes quick enough at the moment. We have 3 builders in place at Latitude 1 and we're probably not that far away from having to put 2nd builder in a plantation. We're certainly not going to offer any rental discounts. The total P and L impact of that rental discount for 6 months would be in the order of 3.5 or $4000.
And when you're talking about a gross realization of somewhere between $450,000 $500,000, it's a very small impulse on our P and L? My mother said that, that will,
you'll actually see that come through. If it's offered as part of a sales incentive that'll come through our, our team development margin that's coming out.
Out of developed margin or does it come out of rent?
It'll come out of development margin if it's a salesman.
Got it. And just any slippers in the half
Yeah, we had, 5.5, 6.5.
Okay, great. Thank you very much.
Thank you.
Thank you very much. There are no further questions at the point. I would now turn the call back to Mr. Owen for any closing remarks. Please go ahead, sir.
Thank you.
Well, thanks everyone for dialing in today. We're really excited where the group's positioning. We think we've got a great, no, short, medium term and longer term outlook. And Donna and I, Scott look forward to catching up with all of you over the next few weeks. Thank you very much for your time today.
Ladies and gentlemen, that does conclude our teleconference for today. Thank you for participating. You may all disconnect.