I would now like to hand the conference over to Mr. Paul Siviour, COO of Elanor Investors Group. Please go ahead.
Thank you. Thank you, and welcome to the investor call, where we will present the results for the year to 30 June 2024, for the Elanor Commercial Property Fund. On the call today, I'm joined by my colleagues, David Burgess, Head of Investments and Fund Manager, and John De Almeida, Head of Office, who will present the results. We're very pleased to be able to present these results for Elanor Commercial Property Fund for the year to June 2024. They reflect continuing strong performance by the fund. The fund met its distribution guidance of AUD 0.085 per security, which reflected an 81% payout ratio during the year, and with strong occupancy and strong rental growth across the fund's portfolio. David will expand on those points as we take you through the presentation.
Before we commence, though, I refer those on the call to Elanor Investors Group announcement on the 23rd of August, that it's exploring a range of strategic options to enhance its financial position. I confirm that this relates solely to Elanor Investors Group and not Elanor Commercial Property Fund. Elanor Investors Group is the RE and manager of the Elanor Commercial Property Fund. I'm sure that participants on the call appreciate that we'll not be able to provide any comment on ENN on this call, other than to say that ENN will update the market in accordance with its previous announcement. So handing over to David Burgess, who'll take us through the majority of the presentation.
Thanks, Paul, and thanks for dialing in for today's presentation. If I may refer you to start on slide four of the pack. Now, despite what has been another difficult year for commercial property in Australia, ECF has performed well from an operational perspective, although valuations have continued to be negatively impacted. We have comfortably delivered on our DPU guidance due to strong leasing results across nearly all of our assets. The strength of our asset management and leasing throughout the year has resulted in the portfolio maintaining a very high occupancy, positive rental growth, and a reduction in future lease expiries in both FY 2025 and FY 2026. Return hurdles have continued to rise and impact asset values, although we do believe we are getting closer to the trough of the cycle.
Gearing is at the upper end of our target range, and our focus is to reduce this to the lower end, and there's a clear plan to execute on asset sales to achieve this, which is factored into our guidance, which we'll talk about later. Now, turning to slide five for result highlights. FFO per security for the year was a strong AUD 0.1047 per unit, and distributions were as guided at AUD 0.085 per unit, as mentioned before. This represents an 81% payout ratio. Occupancy at period end was a very high 98.4%, and the portfolio WALE increased to four years from 3.1 years at the beginning of the period. Like-for-like income growth was a strong 4.7%.
Over the year, valuations decreased 7.8% as a result of cap rates rising to 7.64%. This has resulted in gearing at the upper end of our target range, and NTA falling to AUD 0.84 per unit. Going to slide six on our leasing performance. There has been a significant amount of leasing that has been completed during the year at very good metrics, with 85% of transactions completed or at heads of agreement stage, having positive leasing spreads. Of the 26,000 sq m completed, nearly 15,000 sq m were for expiries in FY 2026. Specifically in key assets at WorkZone West in Perth and O.G. Road in Adelaide, which I want to discuss in a moment. This has resulted in a 43% reduction in FY 2026 expiries.
Assets such as Mount Gravatt in Brisbane, 50 Cavill Avenue on the Gold Coast, and 19 Harris Street, Pyrmont, have experienced strong leasing spreads. At Cavill Avenue specifically, there were over 2,700 sq m of leasing completed at a very, very strong 10% positive leasing spread. Conversely, assets such as WorkZone West were negative, as expected, due to the material over-renting in that building that we have discussed previously. On slide seven, we cover WorkZone West and Campus DXC in Adelaide. WorkZone West in Perth has been delivering an exceptionally high yield, given the whole-of-building lease to CPB Contractors, the significant over-renting in the asset, and the limited CapEx required given the quality of the building. We have now agreed terms for over 57% of the building from the current lease expiry in August 2025.
Of the remaining 6,300 sq m of NLA, 4,900 is in active negotiations. At O.G. Road in Adelaide, we've renewed the existing tenant over the entire building for a five-year term from the current lease expiry. This increases the WALE to 6.2 years, and as a consequence of this deal, we have achieved strong valuation uplift from that asset. Looking forward on slide eight, we will continue to execute on leasing across the portfolio and have strong renewal prospects. In 2025, there are mostly smaller areas across multiple buildings that expire, and we are in active negotiations with many of those tenants. As mentioned, in 2026, we're in active discussions with over 70% of the expiry, including WorkZone West and Garema Court in Canberra.
Turning to valuations on Slide 9. Valuations have continued to be impacted as return hurdles for commercial real estate increase. However, we do believe they're getting close to the trough of the market. Our portfolio weighted average cap rate is an attractive 7.6%. Rental growth has offset some of the impact, and we do expect rental growth to continue across most of our assets. For the year, adopted valuation market rental growth was over 5%, and these rents are still materially below replacement cost rents, which provides a tailwind for many of our assets. Turning to the Harris Street investment on Slide 10. 19 Harris Street has been impacted by rising cap rates like other commercial assets in Australia. The carrying value of ECF investment on an equity accounting basis is AUD 18.7 million, reflecting AUD 0.559 per security.
While leasing at the asset has been strong and occupancy is high, the decline in value has resulted in elevated gearing in that fund. It is worth noting there is no look-through covenant for ECF, therefore no adverse impact on ECF's strong covenant headroom, which Paul will talk about in a moment. Our preferred course of action is to reduce gearing with a hybrid debt instrument to recapitalize the fund. This has support from the senior lender that will extend the senior loan facility to June 2027. I'll now pass back to Paul, who will discuss the financials.
Thank you, David, and turning to page 13 of the presentation, where we've set out the fund's income statement and income generation for the year. Funds from operation of AUD 33.1 million reflected an FFO per security of AUD 0.1047, and the distribution per security flowing from that FFO was AUD 26.9 million or AUD 0.085. That distribution was struck on relatively conservative payout ratio of 81%. Turning to page 14 in relation to the balance sheet, David has referred to the reduction in the total portfolio value over the year of approximately 7.8% to AUD 514 million, and that generates a net tangible asset value per security of AUD 0.84 per security.
As mentioned, gearing at 39.9%, while presenting significant headroom with covenants, is at the upper end of the range of the fund's preferred gearing range of 30%-40%. David will comment as part of FY 2025 guidance on commentary in relation to potential asset sales to reduce gearing to the lower end of our range, and to link that further with forecast FFO guidance range on the basis of either realizing assets at what we believe would be appropriate returns for fund investors, or alternatively, what that FFO guidance would reflect if no asset sales were realized. The...
In respect of capital management, turning to page 15, the fund has drawn debt of AUD 195 million at the thirtieth of June with a facility limit that provides a very significant capacity for CapEx, leasing CapEx, as the fund continues to drive leasing rental income. The debt facility is well hedged at 76%, and that generates a weighted average cost of debt of 4.5% per annum, which is an attractive interest rate and, based on no change in variable rates, the variable part of the facility is approximately AUD 45 million. That presents a very stable interest rate forecast for the balance of the fund's debt term, which is out to August 2026.
If I can just turn to gearing and provide some comments to explain that carefully. That the gearing of 39.9% reflects the balance sheet presentation, that equity accounts the fund's interest in Harris Street. As David mentioned before, the Harris Street Fund is a separate fund with its own debt that is non-recourse outside of that fund, and of course, Elanor Commercial Property Fund has a 49% interest in that fund. So on the basis of the presentation of the fund's interest in Harris Street Fund as an equity accounted basis, the gearing is 39.9%.
We have shown for market disclosure what the look-through gearing is, which is 45%, if you were to present the results on the basis of the fund taking up its 49% in both the value of Harris Street and the 49% of Harris Street's debt. As we mentioned, non-recourse to Elanor Commercial Property Fund, and does not have any impact on any of the fund's covenant calculations or headroom. Turning to covenant calculations, the fund has very significant LVR headroom in respect of its covenant on the basis of a 44% loan-to-value ratio as measured for banking purposes, which presents a very significant headroom to the value of the fund's assets, approximately at least 15%, in respect of the current valuation of those fund's assets.
In addition, the fund generates, as you know, very significant income, and the interest cover ratio is 4.66%, which is presenting a extremely significant headroom in respect to the fund's covenants. I'll now hand back to David, who will talk specifically to FY 2025 guidance.
Thanks, Paul. In summary, we're very pleased with how the assets are operating from a occupancy, tenant demand, and income perspective. Our key focus for FY 2025 is to position ECF to enable continued income stability, FFO growth, and importantly, NTA stabilization and growth as the market recovers. This involves continuing our strong asset management and leasing focus across all our assets, and executing on asset sales, like I mentioned, to reduce gearing to the mid or lower end of our target range. FFO guidance is AUD 0.093-AUD 0.098 per security, with the lower end of the range assuming several asset sales, and the upper end of the range assuming no asset sales.
Our forecast distribution for the FY 2025 period is AUD 0.075 per unit, which reflects an 11.6% yield on current security price, and a payout ratio of just over 80% based on the lower end of the guidance range I just articulated. On that note, I will hand back and open for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. We will now pause momentarily to allow questions to be registered. Thank you. There are no questions at this time. I'll now hand back to Mr. Paul Siviour for closing remarks.
Thank you very much. Just to again reiterate the quality of the fund's performance in respect of FY 2024, it's off the back of a fund that has 98% occupancy across the portfolio and is generating strong like-for-like income growth. We see ongoing positive leasing activity in respect of the fund's portfolio, and as David mentioned, we are guiding to a distribution per security of at least AUD 0.075 per security, which is framed against the bottom end of the FFO guidance range of 9.3, which, as David mentioned, reflects the potential for several asset sales. I'd like to congratulate David and the team on another strong result for ECF, and also for commencing FY 2025 with strong prospects for the fund.
I'd like to also thank those on the call for their interest in ECF and for joining us today. Thank you, and have a good day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.