Please be advised that today's conference is being recorded.
I would like to hand the conference over to your first speaker today, Ms. Susan Lloyd Hurwitz, CEO and Managing Director. Please go ahead.
Thank you. Good morning, and welcome to our FY twenty twenty one results presentation. I'm joining you from the lands of the Dharug people of the Eora nation and pay my respects to elders past and present right around the country wherever you are today, lockdown or not. As we're working remotely here in Sydney, we've gone with the least risky remote presentation method this morning, good old fashioned phone call and a webcast of the slides. We look forward to meeting with many of you virtually in the coming days and truly look forward to meeting in person next time.
With me on the call today are Courtney Smith, Brett Drapfen, Campbell Hannon and Stuart Pencliff. We've got a lot to get through, so let's go. Our resolutely urban strategy continues to evolve. It seems clear that trends that were trends before COVID have been turbocharged, work from anywhere, rapid digitization, online shopping, retail as an experience, demand for logistics space and a focus on sustainability, health and well-being. Citizens have elevated expectations around communities and places.
We were well placed before COVID to respond to these trends and are even more so now, aspiring to be a leading creator and curator of extraordinary places and experiences to make life better for millions of people in Australia. ESG is at the heart of everything we do through our This Changes Everything strategy, which we've been running since 2014. We've been heartened by the significant increase in ESG related meetings with our investors over the past few years and look forward to more engagement. There's obviously way too much here for me to get into today. The summary is, we continue to have very ambitious goals and we are well on our way to meeting them.
I'd like to call out a couple of highlights. We have a goal to be net positive carbon by 02/1930 and we already have achieved an 80% reduction in our carbon footprint. During the year, we launched our second reconciliation action plan, confirmation of our support for the Uluru Statement from the Heart. We also released our first modern slavery report. We were pleased to be ranked third for ESG in property out of a survey of 1,400 companies in the Asia ex China Institutional Investor Survey.
We drove Murvac forward with significant momentum over the last year, exceeding earnings guidance and positioning us for future growth despite all the challenges COVID continues to throw society and as individuals. Our statutory profit is up 61%, operating cash flow up 41%, DPS up 9%, AUM is up 8%, NTA up 5% and ROIC increased by 200 basis points. We undertook multiple transactions selling $840,000,000 of non core assets, 22% ahead of book, including Australia's larger hotel transaction. We also facilitated the purchase of 49.9% interest in 200 George Street by LINE Capital Partner, which was Australia's largest office transaction for the year. In July, we formed a new partnership to manage a portfolio of SunSupra's real estate assets and sold a 49% interest in the locomotive workshop to this partner.
Our average debt cost reduced to 3.4% and our future development pipeline grew by 18%. We responded to strong residential conditions and increased releases by 117%, achieved our best sales level in over five years with sales up 83% and we comfortably exceeded our settlement target with 562 lots settled. But most importantly, throughout all the challenges of constantly changing rules, lockdowns, isolation, mental health challenges and homeschooling, we have kept our focus on doing our very best to care for our people and our customers. And as you would expect, we've been unwavering in our commitments to sustainability, innovation, safety and This considerable momentum is set to continue into our fiftieth year with our risks well managed. I pay tribute to the founders of Mirvac, Bob Hamilton and Henry Pollack, and we look forward to honoring them in our fiftieth year reflections.
As we move into FY 2022, you can expect us to continue to execute on our core competencies, creating new high quality assets, curating those assets through customer experience and management, moving residential business forward and growing our third party capital under management. We will continue to respond to favorable capital market conditions and recycle non core assets with capital release being recycled into funding the next wave of value accretive projects. And most importantly, we have a clear runway for future growth. Our secured pipeline is $28,000,000,000 across all sectors of the business. Some of this is going to take some time to play out.
But in the near term, we hold $1,200,000,000 of residential pre sales and expect to release over 2,700 lots in FY 2022, including seven apartment buildings. Visibility for FY 2022 is exceptional with over 90% of residential EBIT secured and substantial commercial development profit from 80 Ann Street and locomotive workshops locked in. This is all part of our journey. We have shifted from being a predominantly residential developer to demonstrating our award winning capability as a top tier commercial developer. And now we are aspiring to be a leading creator and curator of extraordinary urban places.
Our asset creation capability delivers four benefits for security holders: development profit, new recurring high quality income, asset and fund management fees and valuation uplift. Over the past six years, this flywheel has delivered development profit of $368,000,000 new recurring high quality income of $113,000,000 per annum, asset and funds management fees of £30,000,000 per annum and development revaluation gain of £518,000,000 Before I hand to Courtney, I'd like to underscore our commitment to culture. Employee engagement is the single most important predictor of company performance. And regular pulse checks over the year confirmed that our engagement remains high and more importantly revealed areas we could work on. We are extremely focused on our people, HSE, diversity, innovation and aspiring to be a force for good even when we don't get it quite right.
I'm especially proud that we were ranked number two globally for gender equity according to Equalink for the second year in a row and that we were named ASRBOS, Most Innovative Company in the Property sector also for the second year in a row. But there is so much more than we can that we can do and we'll keep working on it. Now I'd like to hand to Courtney to discuss results.
Thanks, Sue, and good morning, everyone. As a relative newcomer, it's clear to me that the people at Mervak are passionate and truly believe in Mervak's purpose to reimagine urban life. And I'm particularly impressed by the commitment and dedication of everyone I've met within the business today. I'm excited to have joined the Mirvac team and look forward to being part of Mirvac's continuing success. It's a pleasure today to be delivering these financial results.
Today, we report operating profit after tax of five fifty million dollars a statutory profit after tax of $9.00 $1,000,000 earnings per share of $0.14 and distributions per share of $0.99 As market sentiment and conditions have progressively improved over the last year, the business has built considerable earnings momentum, particularly in the last six months, with the result being delivered today the earnings guidance provided in February, as well as the upgraded guidance provided in April as part of our Q3 operational update. In addition to this strong earnings outcome, operating cash flows of $635,000,000 are materially higher in FY 'twenty one with growth of 41% and NPA increasing by 5%, overall delivering a 7.2% return on invested capital. The key performance drivers of this result include in our integrated investment portfolio, better cash collections with reduced rental relief and an increase in operating income, principally from the completion of our newest assets, Alderfleet in Melbourne and South Everleet in Sydney. We saw an uplift in value of $274,000,000 in our investment portfolio, reflecting the quality of the portfolio. And we finished the year with 100% of our aged arrears covered by our ECL provision.
Commercial and mixed use earnings were driven by development profit recognition relating to older fleet, South Beverly as well as 80 Ann Street in Brisbane, which is now 81% pre committed and on track to reach practical completion in late FY 2022. In residential, we've experienced strong sales and settlements during FY 2021 with sales up 83% and settlements of 2,526 lots comfortably exceeding our guidance of greater than 2,200 lots. Our residential gross margins were elevated at 26% driven by the higher weighting towards higher margin MPC projects. And whilst we are cautious given the current circumstances, with an expectation of markets opening towards the end of this calendar year, we are confident that this momentum will continue into FY 'twenty two and beyond, reflecting the strength of the platform. Moving to the status of our rent collection, we have made good progress through the year with 89% of tenant relief requests resolved.
The FY 'twenty one result includes a $20,000,000 negative impact on NOI relating to the resolution of those tenant requests. In FY2020, the total equivalent COVID impact was a negative $48,000,000 As business conditions improved during the year, cash collection rates improved each quarter with an overall cash collection outcome of 98% of net billings. The impact of COVID has effectively been contained to retail, which represents only 27% of our NOI. And despite the challenges in the retail sector, our cash collections reached 94% of net billings by the end of the year. At June 30, aged arrears stood at $32,000,000 mainly in retail and 100% of these arrears are covered by our ECL provision.
And whilst we are monitoring the impact of the latest lockdowns, we believe we are appropriately positioned benefiting from having a strong track record of managing relationships with our tenants. Turning now to the detail of the FY 2021 results. Investment EBIT of $576,000,000 is a 6% growth from the prior year, largely driven by a 5% increase in net operating income following the completion of older fleet in South Beverly earlier in the year, improved cash collections plus lower COVID relief. The overall development EBIT of $2.00 $1,000,000 is lower in FY 2021 by 32%. Commercial and mixed use development earnings include contributions from the completion of older fleet and South as well as profit recognized on 80 Ann Street.
Given they completed earlier in this financial year, contributions from Alderfleet and South Eberleet are lower in FY 'twenty one compared to FY 'twenty. And in residential, notwithstanding the number of lots settled in FY 'twenty one being similar to FY 'twenty, the earnings contribution in FY 'twenty one is lower due to 82% of lots settled being MPC lots, which have higher margins but a lower profit contribution compared to FY 2020, which was made up of a greater percentage of apartment settlements, which have a higher profit contribution. Unallocated overheads reflect the overheads within the group, which are not directly incurred by or allocated to a business unit. These overheads, whilst increased materially when compared to FY20, have actually started to normalize and this has been driven by four factors. Firstly, FY 'twenty did not include short term incentive payments with $14,000,000 included in FY 'twenty one.
Secondly, in FY 'twenty, Mervak received the benefit of $9,000,000 in JobKeeper payments with no benefit recognized in FY 'twenty one following our decision to repay all JobKeeper payments received in FY 'twenty one in March. Thirdly, as was highlighted at the half year, insurance costs across the market have risen materially in FY21 and Murvac has not been immune from these increases. And finally, FY21 includes a $7,000,000 increased relating to software as a service or SaaS implementation costs due to a change in accounting for these types of costs. Overall, operating profit is 9% lower in FY 'twenty one. However, statutory profit has increased by 61%, driven mainly by a $395,000,000 gain in property revaluations across the portfolio, made up of a 121,000,000 development gain and a net uplift of CAD274 million across our investment property portfolio.
Operating cash flows in FY21 are strong at $35,000,000 which represents a 41% increase compared to FY 'twenty, driven by the capitalization of older fleet at four seventy seven Collins Street and improved cash collection rates within our investment portfolio. FY 'twenty one distributions are comfortably funded from both operating earnings and adjusted funds from operations with a 7188% payout ratio on each respectively. Heading into FY 'twenty two and beyond, we expect future distributions and distribution growth will continue to be funded by recurring passive income as our development pipeline is completed. MEVAC remains in a strong capital position and our capital management strategy continues to focus on diversifying our capital sources, increasing long term debt and limiting debt expiries in any one year. Our six point six year average debt maturity profile without significant maturities until FY 'twenty three support our solid and stable balance sheet position.
Gearing of 22.8% remains at the low end of our preferred 20% to 30% range. Our credit rating remains unchanged from A3 Moody's and A- Fitch rating. And we have $867,000,000 in cash and undrawn debt facilities to provide financial headroom and flexibility. So with that, I'll now hand over to Brett.
Thanks, Courtney, and good morning. Despite the ongoing volatility post COVID, FY 'twenty one has witnessed a strong year with disciplined allocation of capital against our strategy and excellent momentum in into future years. A strategy that leverages our asset creation capabilities to generate strong returns and long term value focused on the urbanization of key Australian gateway cities. We believe major cities and urban environments will continue to remain Australia's foundation for economic growth, wealth creation and innovation, driven in part by the proximity to deep skilled talent pools and high levels of livability, including the abundance of physical and social infrastructure. Despite the headwinds of COVID, our FY 'twenty one ROIC has increased 200 basis points to 7.2%, above our average cost of capital.
COVID impacts have largely been isolated to our retail portfolio. Portfolio. And clearly, there has been tailwinds in industrial and residential supporting our diversified portfolio stance. Our integrated investment portfolio has grown on the back of project completions to GBP12.7 $7,000,000,000 with a continued focus on modern long way low CapEx office and accelerating Sydney focused industrial exposure, a committed rollout of our BTR pipeline and a focused urban retail strategy. Within our development activities, our capital base has increased to $2,000,000,000 as we have accelerated deployment to strong residential markets and advanced key commercial, industrial and mixed use projects, whilst maintaining disciplined stance on restocking.
With a strong pipeline of new project completions, we have continued to optimize our portfolio allocation strategies, with disposals completed or planned for some 600,000,000 assets across secondary office, retail and hotels, with completed transactions secured at an attractive premium to book value. Herbeck has long had a strategy of investing alongside our line capital partners, either through joint venture or co ownership. Over more recent years, we've accelerated our third party capital strategies to grow external assets under management and recurring funds management earnings. Funds under management have grown at an average of 23% since FY 'fifteen. However, more recently has seen strong acceleration with improved resourcing and capabilities, significant transactions and growing external mandates to match the momentum of opportunities within our business.
FY 'twenty one has witnessed some strong outcomes, including securing a new partnership with leading Australian superannuation fund, SunSuper, which now includes the sale of a 49% interest in the locomotive workshops. And in the largest transaction this year, we utilized our preemptive rights on the Murbeck developed 200 George Street to secure a 49.9% stake for an aligned capital partner, whilst retaining our existing 50% ownership, which increased in value by 11%. Merveq's secured development pipeline provides a platform to grow the size and quality of our own balance sheet, but equally provides future opportunities for our capital partners as we continue to grow our funds under management into FY 'twenty two and beyond. At the half year, we outlined a restructure, which included the creation of the commercial and mixed use development division to better focus on large scale commercial and mixed use precincts that shape and define our future cities. Importantly, this division does not operate as a silo, fully leveraging Murvac's sector leading skill sets, including new business, design, residential, construction, leasing and asset management capabilities.
Courtney has already outlined the EBIT results for FY 'twenty one. However, it should be remembered that EBIT is only a partial representation of the true return generated from our asset creation capabilities. EBIT is recognized on the portion of project interest sold to Capital Partners. However, this measure does not reflect the revaluation gain for the interest retained within our integrated investment portfolio. Combined, the total return achieved in FY 'twenty one is $154,000,000 representing an improvement of 15% on FY 'twenty.
Looking to FY 'twenty two, EBIT is expected to significantly increase on the back of the completion and sale of the locomotive workshops, which is now settled, and the completion of 80 Ms Street in the second half, again, already derisked with the sale of the 50% interest to M and G. Likewise, the future pipeline includes our well advanced Sydney industrial projects, 55 Pitt Street, and the recent progress at Harborside, which provides strong momentum to sustain strong earnings into FY 'twenty three and beyond. Movat continues to demonstrate its credentials when it comes to large scale city defining precincts with the upcoming completion of the last building in their multi award winning South Everleigh. Likewise, we were one of the leaders in the establishment of the Sydney's vision for the Circular Quay Precinct in Sydney with the completion of the Eli Centre at 200 George Street in 2016. Such activity I'm sorry, much activity is now underway to add to this precinct, and it is pleasing to see that our 55 Pitt Street development will add to this precinct, having advanced through the design competition phase.
DA is now for demolition of main works and vacant possession notices issued to enable the buildings to be located at the end of this calendar year. Testimony to our development capabilities, our team has secured additional development rights and advanced the design concept to achieve significant uplift in NLA, with the current scheme now reflecting an approximately 50% uplift to the original concepts. We are yet to announce timing for the commencement of construction. However, we will balance the current low occupancy with leasing momentum and the favorable feasibility outcomes associated with the age of ownership, NLA uplift, cap rate compression and capital partner demand that will see this project not only being a valuable addition to the Sydney line, but also a significant EBIT and total return contributor for the group. It is worth reflecting on the groundbreaking South Everleigh Precinct, which has created a $1,800,000,000 collection of assets and again showcased Mervak's development capabilities to create low rise campus style collaborative workspace in a mixed use precinct that includes world class adaptive reuse of heritage buildings and an indigenous partnership for the creation and management of cultural landscapes.
The Locomotive Workshop building is in its final stages and features the creation of a 31,000 square meter ground scraper within the 1880s built heritage listed former locomotive workshop building. As previously mentioned, we have last week settled the sale of a 49% interest to our capital partner Sunsuper for approximately $231,000,000 reflecting a cap rate of 4.7%. Earnings will be fully realized in the first half of 'twenty two, again, evidence of the momentum already secured for the balance of the year. Murvac enters FY 'twenty two with a forward pipeline of development opportunities with an end value of $28,000,000,000 This is the strongest combination of quality projects across multiple asset classes I have personally seen in my time at Murdoch, which combined with our new business opportunities gives us great confidence that we can continue to deliver strong embedded margins, sustainable earnings attractive total returns. On that note, I'll hand to Campbell to discuss the integrated investment portfolio.
Thanks, Brett, and good morning. The integrated investment portfolio was created last October an amalgamation of all the recurring income businesses within Murdoch, including office, retail, industrial and build to rent. The new structure retains our sector specialization. However, the underlying operations have been redesigned into an integrated cross disciplined service team focused on standardization of process and reporting, a single view of customer and utilization of our scale to procure and service our customers in a more consistent and efficient way. This has delivered immediate benefits to the group, whether it be the centralized team focused on cash collection, the seamless rollout of facility services to our first built to rent asset or the cost benefit of removing duplication, which led to an improvement in our operating costs.
The impact of COVID, while significant in the first half, recovered dramatically in the second half. The Retail portfolio carried almost all of this burden with a $20,000,000 impact from more than 1,200 rent relief requests. The subsequent leasing activity, together with significant improvement in cash collection during the second half, has helped secure a 5% increase in our NOI over the prior period. I'm particularly proud of our team's ability to drive our cash collection to 98% of billings on a net basis, driven by our retail collections, which finished the year at 94%. This year has really demonstrated the benefit of our office strategy.
Modern, long capital growth. We continue to enjoy the benefits of our long while with expiries limited to a maximum of 8% per annum for the next three years. This number will continue to fall as we complete the 80 Ann Street and locomotive workshop developments during the twelve months. Key highlights for the year include: NOI was up 5% to £366,000,000 led by a 0.2% increase in like for like income and the rental contributions from the foundry at South Everlane in Sydney and Alderfleet in Melbourne. Occupancy has held up well at 95.5 and remains well above the markets we trade in.
Interestingly, 80% of our current vacancy resides in buildings built before the year February, demonstrating the resilience of our portfolio in the face of soft market conditions. 55% of the portfolio was externally valued during the year, delivering net gains of £277,000,000 up 3.8%. Maintenance CapEx remains low at £32,000,000 and our well remains high at six point three years buying income. Leasing activity improved in the second half with approximately 41,005 square meters of deals completed for the year. And great progress was made at the locomotive workshop, which is now 97% pre leased, up from 72%.
And at 80 Anne Street in Brisbane, pre commitments are now at 81% versus 73%, with strong interest in the remaining space. Looking forward, our limited lease expire exposure over the next three years will continue to drive outperformance as the market deals with the challenges of higher vacancy and higher tenant incentives. Whilst we've been astonishing the benefits of a modern office portfolio with long rail and low CapEx for many years, we're now seeing the financial benefits of this strategy, with the Murdoch office portfolio outperforming the Australian office benchmark. These results are an endorsement of our strategy, and you should expect to see us continue with the sale of older assets to help fund the next office developments in our substantial pipeline. Our Retail business has weathered a challenging environment with consistent improvements in cash collection, foot traffic and sales over the period.
In June, with the exception of our CBD assets, our monthly sales results almost returned to pre COVID levels. Whilst lockdown post June is likely to impact FY 'twenty two NOI, we have made adequate provisions through the ECL and our forecast NOI assumptions and do take some comfort knowing the sector is capable of rebounding relatively quickly in a post lockdown trading environment. Turning to our operational results. NOI was up 11% to £157,000,000 on a PCP basis, demonstrating improving conditions over the course of the year and the recovery in cash collection. Occupancy remained strong at 98%, and leasing volumes improved, albeit at lower rental levels.
100% of the retail portfolio has now been externally revalued since COVID, with valuations stabilizing in the second half to be down £12,700,000 or 0.4% for the year. Our asset allocation philosophy remains unchanged. We retain our view that high quality assets in densely located inner urban catchments that deliver bespoke offerings for loyal local communities will outperform in the longer term. Albeit we acknowledge the speed of return of office workers, tourists and students will be a key influencer in our performance in the shorter term. We have taken advantage of the convenience based hyper local retail trend by selling Cherrybrook Village for a significant 43% premium to book value.
And we will look to dispose another of our convenience based assets, tram sheds, this financial year. Turning to the Industrial business. This asset class continues to be a beneficiary of the economic tailwinds in the form of growing online retail sales, automation and the buildup in inventories. Capital continues to chase this sector with cap rates tightening considerably over the course of the year. Key highlights include: NOI was up 4% to £56,000,000 including like for like growth of 4.5% occupancy has increased to 100% and YL increased to seven point four years.
Fifty one percent of the portfolio was revalued during the year, delivering significant gains of £137,000,000 up 13%. We're excited the development pipeline is now progressing from the statutory approval and design phase into the construction phase. Settlement of our infill last mile site in Morbyn is due this quarter. Construction is imminent and 30% of the 73,000 square meter development opportunity is now secured with tenant agreements. We are very close to securing our development application at Aspect Industrial Park at Kent's Creek.
And pleasingly, we've agreed terms with a 30,000 square meter tenant. We aim to be on-site in coming months to commence civil works, and we remain encouraged by the growing level of tenant interest with the first building expected to be completed in FY 'twenty three. Elizabeth Enterprise Park at Badgeries Creek has also secured rezoning with DA plans progressing and is likely to commence civil works in calendar year 'twenty two. We have also acquired Stage two of this site, adding a further 52 hectares of developable area to the 38 hectares acquired in Stage one. With a sizable 2,000,000,000 pounds industrial pipeline, there is opportunity to continue to upright the balance sheet exposure while undertaking our usual capital partnering activities to unlock development profit.
Importantly, these development sites were acquired at attractive pricing, so we're confident these developments will deliver strong returns from FY 2023. Turning to build to rent. We've been operating our first asset, Live Indigo, at Sydney Olympic Park for ten months. Occupancy has now reached 80% with a relatively consistent monthly let up rate. The customer proposition remains strong.
Our customer surveys tell us that security of tenure, being pet friendly, the high level of amenity, the creation of community and the high level of customer service is of high importance and that our customers are prepared to pay a premium and rent for the experience. The rent premium of Live Indigo is still in the 15% to 20% range when compared to neighboring properties. 73% of our renters are millennials Gen Z, with approximately 84% in either shared, singles or couples accommodation. This insight has been important for the design of our future projects, particularly the mix of one-, two- and three bedroom apartments. On this front, we've made great progress.
Our four ninety apartment development, Liv Munro, at Queen Victoria Markets on the Melbourne Fringe, is built to Level 21 and is due for completion in late 'twenty two. Our Livernoor development at Eusted, Brisbane has commenced work on-site and is due for completion early 'twenty four. And Liv Aston in Melbourne CBD has received planning approvals and is due to commence construction early next year. LIVERS, a new business for Murdoch, continues to benefit from our experience in design, construction and site selection in our residential business, and we continue to work together to find opportunities to grow the business to our medium term target of 5,000 apartments. Post the first rent roll at Live Indigo at Sydney Olympic Park, which will occur in October, we will finalize our third party capital strategy.
Whilst we continue to be approached by interested third party capital partners, we remain resolute in proving up the financial performance of this asset class before raising capital. I'll now hand over to Stuart Pencliffe for the residential update.
Thank you, Campbell, and good morning. I'm very pleased to report we completed 2,526 settlements well ahead of our guidance despite the ongoing challenge challenges of COVID. We've settled a further 200 lots since the end of the year. Off the back of Home Builder and other stimulus, MPC settlements contributed 74% of our FY 2021 result and over 80% of our lots settled. At 26%, our gross development margin was well above our through cycle target.
This was driven by a high proportion of MPC settlements as well as a contribution from the sale of development rights to the Victorian state government related to the future Metropolitan Ring Road at our Woodleigh project. Owner occupied demand for Mervak's quality product has resulted in a 70% year on year reduction in unsold completed apartment stock, with completed apartments only available at two projects across the country. This strong demand also saw us settle the final lots at Marikan Cove, Beachside Leyden, Tullamore Phoenix, Ascot House and at St Leonard Square as well as at Crest at Gledswood Hills in New South Wales. Defaults remain slightly elevated at 2.7% due to the previously disclosed COVID related settlement challenges at Sydney Olympic Park. Settlements at all other projects have gone well despite the ongoing impacts of COVID.
Throughout the year, we received over 20 awards recognizing our high quality product and continued focus on design excellence, including the prestigious ULI Asia Pacific Award for Excellence for our American Co. Project. Owner occupied demand remained very strong during the year, with these purchases making up 80% of all sales and driving an 83% year on year increase with 3,375 sales achieved. This demand is well aligned to Mervak's strategy to develop for the owner occupier with our focus on quality and attention to every detail continuing to drive demand and customer loyalty. This strong market momentum across all product types has seen our presales balance grow by 25% to $1,200,000,000 MPC presales went from strength to strength, growing by over 100% year on year as purchases recognize the benefits of our continued commitment to early investment in physical and social infrastructure.
Presales will continue to grow during FY 2022 with the launch of seven apartment projects as well as ongoing demand for MPC with many projects selling twelve months in advance. In addition to our significant pre sales, we are well positioned for FY 2022 and 2023 with over 600 deposits on hand worth over $225,000,000 Mervak's competitive advantage continues to be our diverse product offering, providing purchases a range of options from greenfield land, detached homes through to middle ring terraces and inner city apartments. Our strategy to be shovel ready to respond to demand has paid dividends during the year as we released over 3,300 lots to the market. This was more than double our prior year releases, including an acceleration of over 1,500 MPC lots. Our ability to launch the right product at the right time saw us successfully launch six projects during the year as customers sought out our design and build quality that only Mervak can offer.
These launches included two new apartment projects, Green Square in Sydney, Fifty Percent pre sold and Quay in Brisbane, now over 70% pre sold, with both projects contributing over $200,000,000 in pre sales. During the year, we also added over 1,700 lots to our pipeline with the acquisition of an 55 apartment project in Waverley, New South Wales, an apartment site on Princess Park in Melbourne and the addition of a further two land holdings are joining our highly successful Smiths Lane project in the Southeast Of Melbourne. The success of this year's apartment project launches demonstrated that well designed, well constructed apartments are still very much part of the future canvas of our cities. Nearly 80% of apartment sales were to owner occupiers who placed their confidence and trust in Mervak to deliver. A clear post COVID trend has been the high demand for amalgamated and larger apartments.
We are consistently seeing our larger, more premium products selling first. Amenity is also taking a new level of focus in our buildings with premium levels of specification and finishes now standard. The growing differential between the established housing market and apartments is seeing prices and many owner occupiers gravitate to apartment living in lieu of stand alone homes. Nationally, established house prices have risen by almost 16% in the last seven months compared to just 8% for apartments, and this is forecast to continue. The average difference between house and apartment prices is now over 50% in Sydney, Melbourne and Brisbane, and even higher in areas of our up and coming apartment launches.
Significant falling supply across the Eastern Seaboard provides Mervak a unique opportunity to commence projects when many others can't. This puts us in a very strong position to have completed stock available when immigration levels return to normal. These trends give us the confidence to launch a further seven projects of over 1,100 apartments during FY 2022, including the much anticipated nine at Willoughby and our third and final apartment building at Tullamore Form. This will be our largest apartment release program since FY 2016, and customer anticipation for these new projects is strong. These new launches will significantly contribute to Mervak's presales balance until these projects begin settling in FY 'twenty three.
FY 'twenty two will again be heavily weighted to MPC settlements with only two apartment projects completing during the year. This weighting will also see gross margins remain above our through cycle target. With 91% of our EBIT for the year now secured and limited settlements in New South Wales, we are confident in our ability to settle greater than 2,500 lots subject to broader extended lockdowns across the country. We anticipate continuing to see a slow return of investors to the market in both MPC and apartments followed by offshore buyers. Our pipeline remains strong with plans to release over 11,000 lots in the next five years above what we released between FY 'sixteen and FY 'twenty.
Our commitment to restocking at the right time in the right place on the right terms remains. We are excited to be entering the next phase of the cycle, delivering delivering high quality, well designed homes to suit the needs of our customers and are confident in our abilities to continue to deliver strong results. Thank you. And I'll now hand back to Sue.
Thank you, Stuart. Finally, to guidance. Regarding to EPS of at least $0.15 per stable security, 7.1% growth and EPS of $0.01 $02 per stable security. This is based on our view that with an accelerating vaccine rollout, the introduction of rapid antigen testing, which for example we're piloting for the New South Wales government at Green Square this week and potentially a vaccine passport, business conditions will start to normalize again towards the end of calendar 2021. We're confident to put out guidance despite the currently exceptionally challenging COVID conditions.
And to end, I want to be clear about why. Firstly, international evidence is clear that a high level of vaccination significantly reduces severe health outcomes, allowing economies to open up. Australia's vaccine supply will shortly be plentiful and vaccine willingness is rising. We have seen that economic conditions can rebound swiftly when restrictions ease and that remains the expectation of the RBA. Secondly, we have outstanding visibility of earnings.
More than 90% of our expected residential earnings for the year ahead are already secured. And we've also already locked in commercial development earnings from the locomotive workshops and 80 Ann Street. Finally, our modern integrated investment portfolio has very low exposure to small office tenants, few near term lease expiries, long way of low CapEx and high quality grown recurring NOI including from our newly completed assets. We believe we have risks well covered with appropriate current provisioning and we have made an allowance for deterioration in conditions in the first particularly in retail. We look forward to continuing the LEVAC's momentum into FY 2022 and beyond.
Thank you for spending time with us this morning and we look forward to speaking with you one on one in the coming days. I'll now open up for questions and see if we can successfully mute and unmute ourselves as we share the questions around. Operator, over to you for questions.
Your first question comes from the line of Lauren Barry. Please ask your question.
Hi, good morning Sue and team. I just wanted to start on your guidance if I could. You've said on the call that you're expecting a significant increase in development profits. You'll have more NOI coming through from those completed office developments. You've obviously got build to rent ramping up this year and very strong resi margins.
It seems like everything is going pretty well in the business apart from perhaps retail. Could you just comment on why, I guess, your guidance is only 7% in light of all of that? And maybe what any expectations that you have for COVID related rent relief this year?
I'll start and then
Courtney can join on that question. I think as we were saying, Lauren, we've got very good and clear visibility of the earnings for next year already. So next year FY 2022 is largely about execution. We've never had 90% of resi EBIT secured this time before we've got a significant chunk of the commercial profit. Now this is upside to FY 2022.
It will come from potentially faster resi sales and settlements potentially and maybe less red relief than we are currently forecasting for. But at this stage and given that Sydney is in an indefinite lockdown, I think it would be imprudent to bank those things at this stage. Courtney, would you like to add to that?
I think Lauren Sue's covered it. Just to raise, we have flagged that there are some asset sales on the horizon, so that will obviously have impact on our NOI. But then we're looking forward on rent collection and the timing around our residential settlements just to make sure we had considered that in the way we've positioned guidance.
Okay, sure. And just on those noncore asset sales, you've highlighted around $600,000,000 in the presentation. Is that about the extent of sales that we should expect this year? And then going forward, are there any other assets you're considering noncore at the moment that you might look to divest?
I'll hand that one to Brett.
Yes. Thanks, Lauren. Yes, look, 600,000,000 number is certainly a figure that is a representation of what's planned for FY 'twenty two. I think going further forward, I think what we've always said is that we will continue to optimize our portfolios, particularly as we have the new development projects coming online. So I think some of the probably more older style assets in our portfolio, we'll continue to look at over time, but the $600,000,000 is the figure that you should allow for now.
And what's the average yield on those $600,000,000 of assets that you're selling?
Yes. Look, the average yield would be around sort of 5%, but give or take, but we can get you the exact number, if you like.
Okay, cool. Just jumping to resi now. Stu, I would be interested to know what the impact of the current lockdown is that you're seeing. Has this impacted sales rates in any way across your projects?
Look, suppose from a Sydney perspective, we had the two week construction pause, which obviously impacted on program. But we are back now up and running. From a sales perspective, amazingly, we have still been successfully able to continue to sell our product, in a virtual environment. We do have a number of launches as we as I highlighted in my speech over the next six months. So we're just working through at the moment the timing of those launches.
But at this point in time, we're being able to navigate around the lockdowns.
Okay, great. And just last one from me. You've obviously got a huge apartment pipeline coming up, and that's going to make profits look pretty juicy over the next two or three years. Have you considered capital partnering any of these projects like you did last cycle with a few of your bigger marquee projects?
Look, I think and I'm happy for Brett to
jump in.
But obviously, we will always look at capital and looking look at the most efficient way of structuring deals. We are seeing a lot more opportunity at the moment. And with that opportunity, we will certainly consider capital partners coming in on our projects.
Okay. Thank you.
Your next question comes from the line of Shoto Maconochi. Just
a follow on from thanks, everyone, for your time from Lauren's question. Just on the invested capital, I know you sort of have a target. It's up to $2,000,000,000 now of the active active side. Does that obviously, it's going to ramp up when you launch these new apartments and with build to rent without the capital partners there. So it'd be fair to assume you'd bring in some capital partners, obviously, with the build to rent potentially in the active pipeline given that may tick up.
But I do note your investment portfolio has grown commensurate with that tick up too. So just keen to sort of hear your views on that.
Brett?
Thanks, Shelfair. Look, good question. I think it's fair to say that we you've seen the active invested capital increase up to the $2,000,000,000 mark, and that's really on the back, as I said in the speech, around some acceleration of deployment. That figure has the ability to move up a little bit more, not significantly in terms of our own balance sheet. But as you rightly mentioned, there is clearly some very good opportunities for Align Capital Partners as we go hand in hand, I guess, in deploying our pipeline, both on balance sheet and also with key aligned capital partners.
So it's very much going to be across the board that type of strategy. And it's not just a commercial type strategy in terms of capital partners. You should expect to see that in other asset classes as well.
And we should assume no more than 15% of the total capital in inactive, give or take. We might exceed that slightly, but that's sort of the max range you sort of target still?
Look, I think on a longer term run rate basis, I would sort of I always go to the eighty-twenty myself, and it will just vary a little bit. It really quite a big determinant of it is the timing of the fund through structures. In our commercial development activities, the fund through structures are a very efficient use of capital, obviously. And so just the timing around those fund throughs has the ability to change that percentage a little bit.
Yes. And then just on the production, 2,500 lots, given the run rate where you're at today and the contracts on hand and the visibility, how much are you constrained by production and settlement in order to get above that? Is it a big item that's impact giving you selling out twelve months forward? Like you expect you to do I know you've only got two apartments, but you expect to do at least 200 more than that given where you're at? Because I think you know we put a run rate of where your contracts on hand is settling, but I couldn't see that in the presentation.
I may have missed it.
Yes. Look, it's really constrained by production at the moment. Obviously, we had a lot of pull forward. We accelerated a lot of projects into 'twenty one in response to significant demand on the ground. And 'twenty two will be dominated by MPC, and the constraint really is production in the field.
Okay.
Okay. And then just on that new thanks for the new disclosure, a bit clearer. But would you expect to have any cost synergies from that integrated investment portfolio? Is it more operational and decision making? Just keen to understand that.
I might take that one. Were some savings from the reorganization that have been reflected in FY 'twenty one, but they've been offset by the cost of implementing those changes. And then also, we are seeing the cost base normalize generally. STI is now back in the cost base and seeing insurance increase. So yes, there has been savings from the restructure and operational efficiencies beyond that, but we're also seeing cost base shift otherwise.
Okay. And then just on the provisioning in retail. Obviously, you expect June cash collection to be strong, which it was given you pay one month upfront for your rent. But what are you seeing at the moment in a cash obviously, you've got a lot of Sydney office and retail and CBD. What are you seeing across the board in rent collection given we're in August now across the asset classes.
Can you give a color on that? And what provisioning did you put in? Is that currently in for ECLs at 30? Because they may be a bit light given where we are now.
Charlton, it's Campbell. I might jump in and
Greg. So
July has actually been surprisingly good. And I think that, again, a lot of the July invoices were paid. Certainly, it's almost a little early for us to give color on August because a number of our August arrears are not due and payable yet. So certainly, over the next two to three weeks, we will get a better sense of what that looks like. But we certainly expect it to be more challenged than it was, obviously, two months ago.
And we've had we've got adequate provision to cater for that.
Okay. So that's been factored into your provisioning. Do you think the provisioning is thirty June, that doesn't include at that date? Or is it there's a bit of retrospection you can apply when you do the account? So was that factoring
in? Maybe, Shilta, I can answer that. We we do have to take a position at the June 30. So the ECL provision at the June 30 is $35,000,000. Our age to release at the June 30 is $32,000,000, so we are well covered, on the age proportion.
And we do have allowances in our forward forecast, particularly related to retail is how I would how
you think about So you factored into guidance into that provisioning
for the full That's right. Okay. And
then on the partner launches, you're confident the demand there is still pretty strong given what you've seen and lack of net overseas migration. Is it more upgraders and first home buyers given that big pricing differential? Can you give bit of color on apartment demand and the demographics?
Yes. Look, I think the two most appropriate measures are Green Square here in Sydney and Quay in Brisbane. And those apartment launches have been dominated by owner occupiers, but also a significant proportion of right sizes and obviously upgraders in those markets. So as said in the speed shelter, it's really larger apartments. It's amalgamations, and it's people gravitating towards apartment living in these core locations because house prices in the established market have moved so significantly, and they're seeing the value in apartments.
Great. Thanks so much for your time, everyone, and good results. Thank you.
Thanks, Jojo.
Your next question comes from the line of Stuart McQueen. First
question is just on the payout ratio moving into FY 'twenty two. It looks like it's about 71% in 'twenty one, but falling to 68% in 'twenty two, just looking at guidance. Just what's driving that? Is it the outlook for AFFO? Is it more incentives required?
Just a bit of color on that would be great. Yes,
Stuart. It's Courtney. You see, DPS growth is 3% versus our EPS growth of 7%. That growth in the EPS is coming from active earnings, so we're holding our EPS growth in line with what is prudent and the payout ratio in 'twenty two based on our guidance is around 68%. On AFFO, it's around 84%.
So we think that's appropriate and we'll be focusing on paying out those distributions from recurring earnings.
Okay. So going forward, we should expect that that DPS is growing more in line with commercial earnings and kind of stripping out any growth that's coming through in the development book. Is that the best Yes.
That's the right way to think about it.
Yes. Okay. Second question, and sorry to harp on about COVID impacts in guidance, but do you have a $1 million number that you can provide for what's in FY 'twenty two in terms of those provisions? Is that in line with FY 'twenty one, for example, that $20,000,000 mark?
I don't think we want to disclose necessarily what we specifically allowed. I just would say we've obviously well provisioned at the end of thirty June and we do expect to collect even some of those aged arrears to be honest, but we are well positioned and we do have appropriate allowance in 2022.
And the thing I would want to add to that, we said, we do expect conditions to be challenging for the first six months. But given vaccine rollouts and antigen testing and so forth and the rapid rebound that we've seen in economies all around the world when restrictions ease, when health outcomes become better, I'd argue that the economy will have a significant amount of pent up demand in the second half of this year. And that's the context in which you should think about COVID current COVID issues.
Okay. Thank you. My next question is probably for just in regards to the ROIC hurdles. I think you said to talk about 9% ROIC as being a target across the group through the cycle. Does that is that target still does that still exist in a post COVID world?
Yes. Look, the ROIC we obviously look at is in terms of how, I guess, we see the group's weighted average cost of capital and then how we see the basically roll up of the divisional performances within the business. I think it's fair to say that the 9% is probably going forward is probably high now. You'd see that come back if you look at where returns are, particularly in the passive side of the portfolio. So I'd probably say that if you think about what ROIC performance you've seen in passive portfolios and probably not a significant change in expectation around the active portfolios, that's probably the way to think about it.
Okay. So is that it's now 7% to 8% kind of in line with where you were this year? Is that an appropriate target going forward?
Yes. Look, we don't specifically quote the group's weighted average cost of capital, but our expectation is that we would exceed the group's weighted average cost of capital.
Okay. So kind of but no comment on ROIC targets like Moabac used to provide, just kind of stepping away from that at the moment?
Not specifically in an overall three year But again, I think you can see the sort of current level performance as a more reasonable run rate.
Okay. And then my last question is just for Stuart on the resi side. Does the continued lockdowns put any risk to the settlement dates of Waverley and Willoughby just in terms of sale launches? And could that push settlements from 'twenty three into 'twenty four for those? And then second question, just on Harborside, can you give an update on progress at Harborside and when that could potentially reach settlement?
I'll deal with the first question, and I'll hand over the second question But from a timing perspective on Willoughby and Waverley, at this point in time, we're on track. The teams are back on-site. But obviously, any further lockdowns and closure of construction sites potentially could have an impact in future years. I think importantly, where we are today is I think New South Wales government has acknowledged the importance of construction and the way in which construction fuels the economy.
And the tier one sites are quite sophisticated, well set up to deal with COVID. And as Sue alluded to, we've got testing on-site. We've got the methodologies in place to be able to ensure that our sites can continue to operate safely.
There's no risk of kind of starting a delay in launching of those projects, which just pushes everything back six months?
Look, those projects, we've started early works on those projects. So we've started early earthworks. So we're well into those earthworks. And at this point in time, we are still on schedule to launch those projects towards the end of this year.
Thank you.
Thanks. I'll give you an update on Harborside. Yes, look, pleasing to get the IPC determination. Probably the what I'd say to you is in terms of our near term focus over the balance of this financial year basically is to advance the design competition process, which is the next step. And equally, we'll be finalizing the last stage of the unsolicited proposal process in terms of wrapping that up.
Once we get through that, we are in full control of our ability to issue vacant possession notices and then we'll roll out the orderly development of the project. So probably difficult to commit to exact timeframe at the moment, but as I say, this balance of this financial year, particularly around design competition and finalizing the unsolicited proposal.
Your
next question comes from the line of Adrian Dart. Just
one question for me, if I could, in relation to disposals. So MEVAC's obviously been active in FY 'twenty one. It looks like there are a number of additional disposals flagged in 'twenty two. I was just keen to understand a little bit better the thought process behind that. Is that driven by a desire to reweight the portfolio?
Is it individual asset considerations?
Or is it
funding or some other factor driving that?
Adrian, it's a combination of all three of those things. We're constantly striving to keep the portfolio modern, low CapEx fit for purpose, particularly with all the accelerated trends we were talking about through COVID. So we look at a portfolio level, keeping the quality quality high and age low. We also look at individual projects, for example, Cherrybrook, which is it doesn't fit our strategy anymore, but it clearly is a very attractive asset given the price that we were able to divest that. So the whole range, including freeing up capital to invest in the next phase of our asset creation strategy.
So answer is all three.
Thank you.
Your next question comes from the line of Richard Jones. Please ask your question.
Thanks. Did did you guys call out what the expected realized profit was on on Loco Workshop? If if not, can you can you do that?
Look. We haven't we haven't called it out exactly. But I think if you work out the disclosed sale price and capitalization rate at 4.7% and in the additional information pack, we've disclosed the yield on cost for that project, then you can back solve to that.
Question for Campbell. Just interested in your view on office markets. There's obviously, I think, varying forces at play where you have softening but stabilizing vacancy. I think you've got net effective rents in Sydney and Melbourne have been under some pressure, but you've got really exceptional demand on the investment side on the other hand. Just interested in how you think things will play out across those kind of inputs in 'twenty two.
Yes. Thanks, Richard. Look, you're right. There's no doubt that across the office markets that we invest in that you have seen a deterioration in effective rent growth, particularly Sydney CBD. We're certainly very thankful that we've been investing capital outside of Sydney CBD and particularly Sydney Fringe, which has been a really strong performer.
I guess the trend which picks up a little bit on Sue's comment before, our focus really is to ensure that we are creating products of tomorrow that our customers of tomorrow are looking for. And COVID has really exacerbated and accelerated that view. Secondly, the most important thing investing in a cyclical asset class like office is to be able to weather the storm of lease expiry exposure. And certainly, the one thing that we're grateful for is that Long Vale in this environment does limit our risk of exposure to the higher incentives and higher vacancies, which are a component of current market conditions. We certainly don't think, though, that office markets are going to deteriorate forever.
And certainly, we saw really good evidence of growth in demand for office space again through the last quarter of last financial year.
I think, Richard, if this current lockdown in Sydney has shown anything, it is really proven that the theory that was discussed endlessly last year that the office is dead, that theory is dead. I don't think any of us have met a single person who thinks that this is a good way of working into the long term. So we feel very confident about having the right product that will allow customers to use workplaces how they want to enter the future in a healthy well-being environment with high technology.
Great. Thanks, Sue. Thanks, Campbell.
Next question comes from the line of Andy McFarlane. Please ask your question.
Hi, guys. Thanks for your time. A couple of quick ones for me just on Ready! In terms of presales, how far forward have you now presold in terms of coverage? So maybe across sort of apartments and land, how far are you talking in terms of months out?
Have you you sold ahead?
From a sorry, Andrew. It's Stuart speaking. From a MPC, so from a master plan community's perspective, we're we're on average about twelve months out now. And then from an apartments perspective, as I mentioned in my speech, you'll start to see contributions from apartments really coming through in FY 'twenty three and 'twenty four.
Got it. Thank you. And in terms of EBIT, you talked to 91% coverage for FY 'twenty two. Do you have a sense on the level of EBIT coverage you have for FY 'twenty three?
No, we don't put out the number in subsequent year at this point.
Okay. No problem. Just in terms of MPC as well, obviously, you've been restocking across apartments and a few other sort of projects, noting sort of Smiths Lane, but also noting that the market has been pretty active in terms of some of your competitors. How are you thinking and also, obviously, you've been selling a lot in terms of MPC. How are you thinking in terms of restocking that land book, noting the pipeline is lower than it was at prior periods.
Yes. I think Andy, I think that's where from a Mervak perspective, we're quite lucky because we obviously do have a significant pipeline secured. So we're not forced to restock. But when you look at the strategic restocking that we have been undertaking, it has been adjacent to existing projects where we can really leverage the significant investment that we've made in those projects both from a physical and social perspective. And that's really where our focus has been.
But in saying that, you would have also seen that we've done a number of site acquisitions in the middle ring, particularly here in Sydney, in the Southwest Of Sydney where we can differentiate ourselves from sort of urban edge development where we can bring in the Mervak built form capability. And you've seen us more recently launch projects like George's Cove and more recently acquired projects like the Riverlands Gold Course in Milpera. So that will probably be an area that you'll see more and more activity from us from an acquisitions perspective.
Got it. Thank you. Just in terms of build to rent, noting that you've been pretty actively or actively purchasing sites for that business over the calendar of last year and year before, sort of 2% to 3% per annum. How are you sort of thinking about that go forward, noting there hasn't been so much restocking or new acquisitions this year?
I think I'll start on that one and Brett can maybe jump in or Campbell from a new business perspective. I think it's a very significant pipeline that we have built and we haven't yet brought in capital partners. So we're conscious of the effect on balance sheet of the amount that we've deployed. We clearly have a lot of work to do ahead of us to build out the Lids products that we have already under control. And we are always in the market looking for future sites, but we do need to balance out the impact on our capital.
Brett, do you want to make any further comment on that?
Probably the only thing I'd add is we are specifically resourced in terms of new business capabilities in BTR. And I can assure you that the team are continuing to look at opportunities. And so we still have those longer term aspirations to continue to grow the BTR portfolio.
Thank you, guys.
Your next question comes from the line of James Druig. Please ask your question.
Hi, good morning, Susan and team. Thanks for your time. Just following up on Stuart's earlier question around the DPS guidance of around sort of 3% and he was talking about payout ratio. Can we just talk a little bit more about the ins and outs of the trust portfolio in 'twenty two? We touched on the asset sales, but maybe just the development stabilizations and what we're sort of thinking about for like for like income for retail and office.
Campbell, do you to start? Yes.
So look, like for like income growth on the office portfolio was pretty flat for the year, as reported in my comments, at up 0.2%. And that was really driven by a slightly increased vacancy through the period. Clearly, the real benefit for us was the new income coming in from older fleet in Melbourne and South Ebony. And similarly, this year, looking forward, we will have throughout the year income coming in from the locomotive workshop. And through the latter half of the financial year, you'll start to see income contributions from 80 Ann Street in Brisbane, but they will be offset by some asset sales.
On the industrial side, certainly, like for like growth is good at 4.5. And in Retail, the income growth that we reported, 11%, a lot of that, given occupancy, was relatively flat at 98% through the year, really was driven by rent collection. So that's prior year's arrears being collected through FY 'twenty one.
Yes, Kate. So it sounds like you're being fairly conservative on the retail side for this next twelve months.
Look, we I don't know whether we'd go as far as saying that we're being conservative. We've been prudent. And I think the particularly with lockdown in Sydney, where the majority of our assets we have gone from essentially 98% of our stores being opened in two days before lockdown to probably 60% now. And I'd say that that's a trend that pretty much every retail owner would be experiencing right now.
Okay. And while I've got you on the line, Campbell, I just wanted to get the number. You break out the cash incentives in the additional info for office and retail, but there's some noncash incentives that obviously go in that bucket as well. Just wondering what those noncash incentives were for the period.
So those are really probably rent frees that we're talking about and they get amortized through in a similar way as some of the CapEx. So it really comes through the NOI line.
Yes. Just wondering what that number was. On the quick math, it's around AUD 40,000,000, I think, for the period. I just wanted to know what the split was between office and retail.
I'll one offline this afternoon. I'll take that one offline and get back to you
right. And then finally, just on 55 pit. So it seems like you're pretty close to pushing the button, and it sounds like a fairly long build. And I know there's a number of factors that you're thinking about in terms of when you push the button on that. Is it fair to say that you probably won't need a pre commit if it's a long build because it's hard to get a pre commit four years out, say?
Yes. Look, I don't think we'd make any comment around a specific level of pre commit. I think, clearly, there's a lot of factors at play on 55 Pitch Street, as you rightly say. We've owned that asset for some time. The team have done a tremendous job in terms of, I guess, getting it to a point where we have issued vacant position notices and sort of it will be a high performing asset in terms of EBIT contribution and value uplift over time.
We just we will make a risk adjust decision as we move through the balance of this year around just when we formally do start the next phase of construction commencement. But clearly, an exciting project for the group and clearly many pathways around capital partnering and other options.
Okay. Thank you.
I'll your
Sue, it's been a long call. So just a moment for the time. I'll take my questions offline.
Okay. Thanks.
Your next question comes from the line of Tom Boder. Please ask your question.
Good morning, all. Just a very quick one for me, mindful of time as well. But I just wanted to understand what proportion of harvest side do you anticipate will be residential, just the percentage of GLA there?
Look, we're still doing a little bit more work around that, but I think what we do is take it offline and we'll give you a bit more detail on Harlow side, if you like.
Thanks.
Your next question comes from the line of Alex Prineas. Please ask your question.
Yes. Good morning. Just on the renewals that you have, the office renewals that you've had over the last period and also since the end of the period, what type of footprint are tenants going for? Is it sort of similar sized doors? Is it significantly smaller?
And what type of leasing flexibility is is being built into the lease in terms of expansion and contraction rights and that that sort of thing?
So it's Campbell speaking. So clearly, the majority of the leasing deals, we really only started to see what I'd call better quality demand relocating in the last six months. The first six months of the financial year were very slow. On average, I think and again, this would be a bit of a guesstimate. I would say that probably on average, corporates over 2,000 to 3,000 square meters are probably handing back a little bit of space.
Tenants below 1,000 square meters are probably close to hanging on to what they previously occupied. So there's not really a thematic there yet. Most tenants are still quite happy to take longer term leases, we found. And that's really in response to the cost of fit outs and how they think about the cost of fit outs. So certainly, the lease term and the associated incentive is very important in delivering the capital that the tenant requires to fit out.
Thanks for that.
There are no further questions at this time. I would like to hand the conference back to these presenters. Please continue.
Thank you very much, everybody, for spending time with us this morning. We look forward to speaking with you either this afternoon or in the coming days and next time in person. Thank you very much. Have a good day.