Good morning, ladies and gentlemen, and welcome to the annual general meeting of Mirvac Limited and the general meeting of Mirvac Property Trust, which I'll refer to today as the meetings. I hope you enjoyed the welcome video. It's you know, we're very proud of what Mirvac does, and you as security holders are part of that dream. So, welcome. My name is Rob Sindel, and I will chair the meeting today. In the unlikely event of an emergency, an alarm will sound. If this should happen, please follow the direction of the Mirvac employees. May I also ask everyone in the room to please switch their mobile phones to silent mode? I've been informed that there is a quorum, and therefore declare the meetings open.
I'd like to begin by acknowledging the Gadigal people of the Eora Nation as the traditional owners of the land for which we are presenting to you today. I'd also like to pay my respects to elders past and present, and to all Aboriginal and Torres Strait Islander people. I'd also like to welcome those of us who've joined us here in Sydney today at our office, and those who have joined us online. Welcome. Joining me here in Sydney this morning, to my immediate left is our Mirvac Group CEO and Managing Director, Campbell Hanan, and non-executive directors, Jane Hewitt, Damien Frawley, and Peter Nash. To my right, Michelle Favelle, our company secretary, and directors, James Cain, and Christine Bartlett. Members of our executive leadership team are also here today and will be available to speak to security holders after the meeting. Voula Papageorgiou, where are you, Voula?
Our lead external audit partner from PwC is also available to answer any specific questions on the audit. As many of you know, during the year we farewelled our longstanding board member, Samantha Mostyn, AC, who retired from the group following her appointment as Australia's 28th Governor-General. Sam joined Mirvac in 2015 and made a significant contribution to the group as a trusted advisor and colleague of all of us of Mirvac. I had the pleasure of working with Sam for the past four years and appreciated her wise counsel and dedication to Mirvac, and fantastic to see her appointed as the 28th Governor-General. Following Sam's retirement, the board has continued its ongoing renewal and succession program. A key focus during the year has been to balance the overall mix of skills and expertise of the board as we guide the group's strategic ambitions.
Last month, we announced the appointment of Rosemary Hartnett as an executive director. Rosemary has over 30 years' experience in the Australian property and financial services sector, working in senior roles across a number of large ASX-listed organizations. Rosemary's appointment will further strengthen the depth and knowledge of your board as we continue to focus on delivering long-term value to our customers, our community, and of course, our security holders. Rosemary joins us online this morning from Melbourne, and I look forward to welcoming Rosemary to her first board meeting in December. Before we move on to the formal matters which relate to the resolutions outlined in the notice of meeting, both Campbell and I will address the meetings. I'd like to start my address by saying how proud I am of the Mirvac team and their achievements during the year.
Under Campbell's leadership and revised strategy, and against a backdrop of economic headwinds, we achieved a number of important objectives that position the business well for the future. This included attracting aligned capital partners to major development projects, notably 55 Pitt Street here in Sydney and Aspect North and South, our industrial development in Western Sydney, as well as the successful execution of our AUD 1 billion non-core asset sales program. The strategic shift to sell non-core office assets and redeploy capital into living and industrial sectors is expected to deliver enhanced returns over the longer term. The performance across all divisions underpinned a solid result in financial year 2024, with group earnings before interest and tax up 12% on the prior year to a record AUD 860 million.
This was offset by a significant increase in our net financing costs and operating income tax expense, resulting in an operating profit of AUD 552 million, down 5% on the prior year. A statutory loss of AUD 805 million was largely driven by industry-wide asset revaluations, particularly in the office sector. We paid an annual distribution to security holders of AUD 10.05 per staple security, which was in line with the FY 2023 and consistent with market guidance. In times of market volatility, robust capital management is more important than ever. I'm pleased to say that our balance sheet remains strong, and it's a testament to the work the team has undertaken to reset the business, particularly through asset sales and the refinement of our capital allocation framework and capital partnering initiatives.
Headline gearing was maintained within our target range of 20% to 30%, along with positive credit ratings of A3 and A- from Moody's Investors Service and Fitch Ratings, respectively. Turning now to health and safety, during the year, the board continued to support the programs that broaden our focus across psychological risks and mental health initiatives. This included training programs to equip our leaders with the necessary tools to manage their well-being as well as the needs of their teams. Over the year, more than 400 of our managers, including the board, participated in this course. The board also supported the introduction of measures to prevent major hazard failures from happening and to drive an increase focused on the controls needed to maintain excellent health and safety performance at our projects.
We want our leaders to ask the right questions at the right time and understand the warning signs and hazard failures before they occur. Combining these efforts underscores our commitment to caring for our people, also the community, while upholding the highest standards across all of our portfolio and sites. I would now like to touch on our remuneration framework at Mirvac. Aligning executive pay outcomes to performance over the short and long term is a foundation principle of our approach. While we achieved key strategic initiatives and delivered on our guidance in FY 2024, our overall profit was lower than the prior year. As a result, short-term incentive outcomes for the Group CEO and Managing Director and key management personnel reduced from 64% of maximum short-term incentive to 57% this year.
Against a disappointing security price and weaker returns on invested capital over the three years to June 2024, no performance rights vested for the FY 2022 long-term incentive. The board is satisfied that this is appropriate given the strong alignment with security holders. Looking forward, the board and I remain focused on a number of key priorities that align with the group's ability to deliver long-term value. We're very pleased with the direction of the business, particularly with the strategic shift towards living and industrial sectors, which Campbell will talk to shortly. We will continue to provide close oversight of the group's investment decisions with the aim of driving improved outcomes for security holders, our customers, and the communities in which we participate.
Managing our cost base and overheads remains another key focus, and the board will continue to actively monitor and support the leadership team with the good progress that's already been made. Finally, our in-house design, development, and construction capabilities will continue to play an important role in the delivery of exceptional placemaking outcomes, with a focus on driving standardization, leveraging technology in a challenging environment. We support the group's ambition to leverage our integrated model and deep expertise to bring more affordable product to market, with a primary lens always on our customer. Of course, having the right policy settings from government and regulatory bodies will also support the property industry to improve productivity and deliver much-needed housing supply for all Australians.
The construction industry represents around 10% of the Australian economy, and we are supportive of incentives that encourage and promote greater productivity, such as increasing the pool of skilled labor and a greater use of modular housing. Initiatives aimed at improving housing affordability, such as stamp duty concessions and incentives for first home buyers, are also a positive step. Now, the board has been fortunate to visit many of our projects over the last 12 months. We continue to be impressed by the commitment and dedication of our people, as well as the quality of the projects we deliver at Mirvac. As previously announced, we're expecting lower earnings in financial year 25 due to lower margins at a select number of residential projects and higher development net interest. However, the group's fundamentals remain strong, and we are positive on the long-term growth of the company.
Mirvac has operated through numerous property cycles over its 52 years, and we have a proven ability to navigate through challenging and adapt to any market conditions. Our diversified and integrated platform also provides us with the capability to take advantage of any opportunities as they arise. To conclude, and on behalf of the board, I'd like to reiterate our strong support of the Mirvac team and thank them for their commitment during the year. In particular, I'd like to call out Campbell and the leadership team for their expertise in navigating through these challenging market conditions. I'm confident we are well positioned for the growth in the Australian economy and the underlying demand for housing and quality workplaces. Of course, I'd also like to thank our valued security holders for your continued support of Mirvac.
Thank you, and I'll now hand over to Campbell for his part of the address.
Thank you, Rob, and welcome to all of you who have joined here at 200 George Street in Sydney or online. I'd also like to acknowledge the Gadigal people of the Eora Nation, and I pay my respects to elders past and present. The video that you saw at the start of the meetings today revealed our new brand and logo, the first significant change to our logo in almost 20 years. It marks the evolution of the brand in an ever-changing world as we continue to leverage our collective imagination to drive better outcomes across all parts of our business.
As Rob outlined in his address, the past 12 months have been challenging, particularly for the Australian real estate market, and I'd like to acknowledge the resilience and the commitment of the entire Mirvac team. We were able to execute a number of important objectives at a time when others could not, and it's a testament to the team that we're able to achieve what we have. At our full year results in August, we acknowledged that we expect earnings to be down in FY 2025, largely driven by elevated construction costs, which have impacted development margins at select residential projects, along with higher development net interest costs. Nevertheless, we have already made steady progress against our strategic goals in the Q1 , and our business remains in good shape. It's also pleasing to see green shoots emerging and a more positive sentiment starting to return.
As an example, we recently exchanged contracts for the sale of two office assets in Sydney at around book value, and this, along with increased transactional activity, is a good sign that office valuations are beginning to stabilize. In addition to this, we are seeing an encouraging uptick in activity across our residential business. Our recent launches at Highf orest and Riverlands in Sydney have attracted strong interest. Our master plan communities in Brisbane and Perth continue to trade well, and we're seeing an encouraging uptick in activity in Melbourne. We've also received strong inquiry for our highly anticipated Harbourside Residences at Darling Harbour, which we are launching this month. I'm particularly excited about what we are delivering here, which will become another iconic legacy project for Mirvac. The strength of Mirvac lies in our ability to create places, precincts, and communities that stand the test of time.
We have an integrated design, development, and construction capability that we leverage to create high-quality assets and homes in which our customers want to work, live, play, and shop. Over the past 10 years alone, we have created 14 new commercial assets, delivering approximately AUD 1.3 billion in value for security holders and generating AUD 150 million a year in net operating income. In addition, we have sold over 26,500 homes across our residential communities and apartment projects. While we have been prudent with our capital in a more challenging environment, we continue to leverage our development capability to progress projects that support our capital allocation ambitions, that add income to the group and deliver value to our partners and security holders. Our focus on growing our third-party capital relationships with aligned partners will also enable us to unlock value from our development pipeline while maintaining balance sheet discipline.
A great example of this is our partnership with Mitsui Fudosan for a 66% interest in our 55 Pitt Street development, the largest office transaction in the world for FY 2024. This partnership will help fund this next generation state-of-the-art development, which has an estimated end value of approximately AUD 2 billion and will be one of just two major office towers expected to be delivered into the Sydney CBD over the next four to five years. Our industrial venture with Australian Retirement Trust and our build-to-rent venture with Mitsubishi Estate and Clean Energy Finance Corporation will also help us to accelerate growth in the logistics and living sectors in line with our capital allocation targets, and we're excited about the opportunity to introduce capital partners to our next state-of-the-art logistics development at Badgerys Creek in Sydney.
Our unique development capability underpins our leadership in the living sectors, which continue to be supported by strong structural tailwinds, including population growth, a restricted supply outlook, and a growing cohort of renters and downsizers. Alongside this, affordability constraints, lifestyle changes, and an undersupply of housing in Australia are also resulting in a need for better choice of housing options. The average age of a first home buyer, for example, is around 36 years, which means people are renting for longer. Likewise, downsizers are increasingly looking for a better way to retire. Our deep skill set and in-house capability, refined over more than 50 years, enables us to provide solutions across the full housing spectrum, from build-to-rent to apartments, houses, terraces, land, and land lease communities.
This diverse offering means we can meet the needs of our customers at different stages of their lives while helping to address the chronic undersupply of housing in Australia. Our operational build-to-rent portfolio is one of the largest in Australia, and during the Q1 , we completed LIV Aston in Melbourne, which is already 40% leased and attracting positive customer inquiry. We have additional developments underway at LIV Anura in Brisbane and LIV Albert in Melbourne, which will grow our portfolio to approximately 2,200 apartments by 2026. Our build-to-sell developments across apartments and master plan communities are also performing well. We're starting to see good momentum, as I mentioned, with sales activity in the Q1 up 33% on the prior corresponding period.
We have been actively restocking our pipeline with 8,400 new lots secured on capital-efficient terms over the past year, and we expect to launch six new master plan communities over the next 18 months, enabling us to take advantage of an expected improvement in housing demand. Our recently acquired Serenitas land lease platform is performing well, with new home settlements up 9% on FY 2023 and a further three new communities secured in the past six months. Another key benefit of our creation capability is the modern, well-located assets that we deliver into our investment portfolio, helping to generate new income and drive continued outperformance. Our high-quality portfolio, which has largely been created by Mirvac, has delivered over 170 basis points of outperformance against the benchmark indexes over five, seven, 10, and 15 years.
The quality of our portfolio is further evidenced by the solid operating metrics we have maintained, including high occupancy, a long-weighted average lease expiry profile, and positive like-for-like growth. Recent development completions further lift our exposure to the living and industrial sectors, improving the cash flow resilience and growth of our investment portfolio. Our end-to-end asset curation capability also ensures that we can continue to create exceptional experiences for those who work in our office buildings and logistics assets, shop in our retail centers, and live in one of our build-to-rent apartments. Turning to our people, having the right culture in place is essential to our performance, and we strive to foster a workplace that is performance-oriented, safe, and collaborative.
It is my personal ambition for Mirvac to be known as the university for real estate professionals, and during the year, we focused on nurturing our future leaders and strengthening our talent pipeline. We have had great momentum in this area with a number of learning and development programs in place that are designed to grow the next generation of property experts. It was pleasing to see our employee engagement score increase by 1% this year to 77%, a significant achievement given the challenging operating conditions. In sustainability, we aim to generate positive impacts in all areas of environmental, social, and governance. Having been net positive in Scope 1 and 2 carbon emissions for the past three years, we're now addressing the far more complex area of Scope 3.
The electrification of our assets will play a key role, and our goal is to convert assets within our portfolio to all electric and supplied by renewable energy by 2030. Investment assets under construction will also be all electric. While this is an ambitious task, we're making good progress. For example, our office asset at Ann Street in Brisbane is all electric in its operations and was the first building in the world to receive a six-star Green Star Buildings certified rating. As well as having a positive environmental impact, we are also committed to leaving a positive legacy in our communities and continue to progress our efforts across community investment, social procurement, and reconciliation. Looking ahead, we remain committed to delivering on our strategic objectives to deliver value for our security holders.
We continue to see strong tailwinds across the broader living sectors, and our integrated platform and robust residential pipeline position us well to take advantage of improved market conditions over time. Our modern, cash flow-resilient investment portfolio continues to deliver a stable income stream, and we expect this to further improve as we execute on our capital allocation strategy supported by our development capability. While we are forecasting residential margins to be below our through cycle target range of 18% to 22% in FY 2025, margins at our next phase of residential projects are expected to normalize. The majority of total construction costs have been secured at development projects completing over the next two years, and it's encouraging to see costs in Sydney and Melbourne beginning to stabilize. We're excited about the momentum building across the business, and we look forward to executing on our value-enhancing initiatives in the years ahead.
On behalf of my colleagues, I'd like to again thank the broader Mirvac team for their commitment over the past 12 months and for continuing to deliver on our strategy. I'd like to thank the board for their wise counsel and guidance in a challenging environment, and I'd like to thank you, our security holders, for your continued support. Thank you, and I'll now hand back to Rob.
Thank you, Campbell. We'll come to the formal part of the meeting. I'll explain the procedure for voting and asking questions. I'm sure many of you know, but we'll move through it quickly. All resolutions at the meeting will be decided by poll, which I'll now open. This gives you the choice to vote now or at any time throughout the meetings, and the polls will remain open for all resolutions until the end of the meetings. For those present in the room, when you registered today, you have been given an attendance card. Please raise your hand if you don't have an attendance card. That's great. Thank you. If you have a yellow attendance card, you are a voting security holder, proxy holder, or corporate representative, and you're entitled to vote and speak at these meetings.
You can vote by placing a cross or a tick in the for, against, or abstain boxes opposite each of your resolutions on your attendance cards. If you have a blue attendance card, then you are a non-voting security holder who is entitled to speak at today's meeting but not entitled to vote. If you have a red attendance card, then you're a visitor and not eligible to vote or speak at today's meetings. Please place any completed voting cards in the ballot boxes at the back of the room before the polls close. As the chair of the meetings, any open proxies given to me will be voted in favor of each resolution.
The number of direct votes, as well as the proxy votes received prior to today's meetings, will be displayed on the screen for each resolution after discussion time and at the end of the meetings and before the polls close. Questions for all items of business will be considered together during the discussion time later in the meetings. Only questions that are relevant to the business, sorry, only questions that are relevant to the business of the meetings will be addressed. If you have any questions relating to customer or personal matters, please speak to a member of management after the conclusion of the meeting. He'll be more than happy to assist you. I'll provide further governance, sorry, I'll provide further guidance on the question procedures when we get to the discussion time. Bit of a tongue twister there for me.
As shown on the screen, there are four items of business in today's agenda. The first item of business is the receipt and consideration of the financial reports, the director's reports, and the auditor's reports for Mirvac Limited and its consolidated entities for the year ending 30th of June 2024. While there is no resolution for this item, security holders and proxy advisors, proxy holders are welcome to ask questions of management on these reports and Mirvac's operations generally, as well as on the audit. Item two contains two separate resolutions for the re-election of directors and one separate resolution for the election of a director. The first resolution is for the re-election of Jane Hewitt as a director of Mirvac Limited. Jane retires under the director rotation requirements in Mirvac's constitution and therefore offers herself to the security holders for election to the board.
The resolution for item 2.1 is now shown on the screen. Jane was appointed a non-executive director of Mirvac in 2018. She is a member of the Audit, Risk and Compliance Committee, the Health and Safety and Environment and Sustainability Committee, and the Human Resources Committee. The board highly values Jane's experience and her contribution to the board and unanimously supports her re-election. I now invite Jane to address the meeting.
Thank you, Rob. Good morning, everyone. It has been an absolute privilege to serve on the Mirvac board since December 2018 and work with the board and management since re-election two years ago. The reasons I have put myself forward for re-election are, firstly, I have a 30-year career in real estate, and I love seeing how quality developments come to life as places where Australians live and work. I believe the integrated platform at Mirvac brings the deep experience and expertise to the development process. I enjoy working with our highly talented executives who patiently and meticulously set up our developments as successful ventures. Working in collaboration with funds management and investment management experts, this creates the best opportunity to unlock significant value during the development phase. A great example of unlocking that value is where we meet today.
In the time I have served on this board, the retail, hotel, and office precinct around us has come to life. It has vastly transformed the way city workers and visitors experience Circular Quay, and with the opening of 55 Pitt Street next door, we'll be cemented as the place to be in Sydney CBD. That's the vision I'm proud to be a part of. Secondly, the decision to increase our exposure to living sectors is an exciting opportunity for Mirvac. While it makes good business sense, it is also a highly strategic move for Mirvac, as living is in our DNA. We have incredible talent and IP in living, and we will drive innovation in the living sectors for all Australians. So what do I think I can bring to the board going forward? Mirvac is uniquely poised to capture the living sector opportunity at all levels.
My 30 years of experience working across all living sectors, particularly build-to-rent, B2C businesses, and social and affordable housing, has given me a unique lens with which to guide and support the exciting living sector opportunity at Mirvac. I am highly ambitious for success here. The last few years have been a challenging environment for Mirvac people and their stakeholders. I've learned a lot about Mirvac's business, but I've learned more about the capability of our people. Thanks to the strong commitment of our people to do the hard work and transform this business, we sit here today in a strong position to execute on a strategy that is fit for a rapidly transforming business environment. My background in entrepreneurship and innovation forms the way I approach board discussions, as I have seen firsthand how critical it is for business to be adaptive and forward-thinking.
I have a track record of bringing new ideas from concept to successful execution, which I believe positions me well to contribute to our growth story. As Mirvac people shape the future, success will come from continued hard work that is on strategy, but also from working as one team, which we do, continual alignment of Mirvac's strong purpose, values, and culture. These values are the reason I joined Mirvac, and I would like to continue to contribute and work alongside the Mirvac board and management. I look forward to continuing that work with your support. Thank you.
Thank you, Jane, and you can tell from the address the deep understanding that Jane has of the market and her understanding of Mirvac and the contribution she makes, so thank you, Jane. The next resolution is for the re-election of Damien Frawley as a director of Mirvac Limited. Damien retires under the director rotation requirements in Mirvac's constitution and offers himself for re-election to the board. The resolution for item 2.2 is now shown on the screen. Damien was appointed as a non-executive director in 2021. He is a member of the Audit, Risk and Compliance Committee and the Human Resources Committee. The board also greatly values Damien's experience and contribution to the board and unanimously supports his re-election. I now invite Damien to address the meetings.
Thank you very much, Rob, and good morning to everyone who has joined the meeting today. I greatly appreciate the opportunity to address you all today. It has been my privilege and pleasure to represent you all on the Mirvac board for the past three years. During these three years, the organization has faced many challenges, as you know, and as you've heard today, macro issues continue to persist. However, we are starting to see opportunities present themselves across the business. I strongly believe the Mirvac board and the executive have navigated these challenging times in a responsible and measured way. Capital preservation has been a high priority for us over the past few years. Balancing that caution while continuing to invest in well-considered future growth opportunities has been an ongoing focus of the organization.
If elected today, I look forward to working closely with my fellow board colleagues, Campbell, and his high-caliber team as we continue to deploy your capital in an appropriately risk-adjusted manner to achieve the strategy. Delivering results to you, the security holder, and being thoughtful around how we generate returns sits at the center of what we do around here. Understanding the meaning of accountability is a critical requirement of being part of this organization. I remain passionate about being a part of the future success for Mirvac as it strives to become the preeminent asset creator, asset manager, fund manager, and asset owner in this country. My experience with QIC and my current position as the chair of Hostplus allows me to bring insight to the Mirvac organization in the areas of capital deployment and capital partnering.
I'm confident that I can continue to contribute in the areas of my expertise as well as commit the time and professionalism required to discharge my director's duties on your behalf. It would be a great honor to receive your support today to act as a non-executive director for Mirvac for the next three years. Thank you very much and have a good day.
Thank you, Damien. The next resolution is for the election of James Cain as a director of Mirvac Limited. James was appointed a non-executive director in December 2023 and offers himself for election to the board. The resolution for item 2.3 is shown on the screen. James is the chair of the Health, Safety, Environment and Sustainability Committee and is a member of the Audit, Risk and Compliance Committee. He has over 30 years' professional background in property, infrastructure, major capital works in both the public and private sectors. James's experience and contribution to the board has been demonstrated to us, his colleagues, over the past 11 months, and the board unanimously supports his election. I invite James to address the meetings.
Thanks, Rob, and good morning, everyone. Thank you for giving me the opportunity to speak to you today as you consider my nomination for election to the board. Mirvac's an organization that I've always admired, and since joining the board a little under 12 months ago, that admiration has only been reinforced. Mirvac is an extraordinary business. It has a clear strategy, a unique integrated delivery model, a highly developed risk management system, and perhaps most importantly of all, a cohesive culture, and it's a values-based culture, one that strives for quality returns as well as leadership in sustainability, safety, inclusiveness, and corporate governance. While I'm clearly enthusiastic about continuing as one of your board members, I also think I have something to contribute to Mirvac through relevant experience gained working in the real estate sector for over 30 years.
This includes working in construction sites early in my career, working in design management, in project delivery and development management roles in a number of relevant sectors, including office, residential, retail, and industrial projects. I've built a substantial experience as a senior executive and as a non-executive director, including in property funds management and the infrastructure arenas as the Chair of ISPT, as well as a Chair and Deputy Chair of the Port of Melbourne. This experience has prepared me to contribute effectively to the board, ensuring that we continue to lead innovative and sustainable real estate development and property funds management in the future. The property sector is complex, and while the overall outlook for Mirvac is positive, there will be challenges along the way.
The quality and commitment of senior executives in our business, Campbell Hanan and the executive leadership team here, and the leadership of the board by Rob Sindel give me great confidence. I'm excited about the prospect of working alongside fellow board members to achieve our strategic objectives and continue the growth and success of Mirvac. Thank you for considering my nomination to the board today.
Thank you, James. Questions on the re-election or election of directors will be considered during the discussion time shortly. The next item of business deals with the adoption of the remuneration report for the year ending 30th of June 2024. While the vote on this item is advisory only and therefore non-binding, the board will take into consideration the outcomes when considering our remuneration policy in the future. The adoption of the remuneration report is unanimously recommended by members of the board, and the resolution for item three is now shown on the screen. Again, questions on the remuneration report will be considered shortly. The last agenda item today is item four and relates to the participation of the Group CEO and Managing Director in the long-term performance plan at Mirvac. Campbell is the only director eligible to participate in this plan.
The resolution for item four is now shown on the screen. The board believes that the offer of performance rights under this plan is an important part of Campbell's overall remuneration package. The performance rights are designed to align his interests with those of security holders, to provide a long-term incentive and to pursue the growth and success of Mirvac that in turn generates greater shareholder return. The participation of Campbell in this plan is unanimously recommended by all members of the board, excluding Campbell, who was not eligible to vote. Again, questions on this item will be considered shortly. So that brings us to the end of the resolutions being put to today's meetings. If security holders have not already voted, I ask that you do so now by recording your votes for all resolutions on your yellow voting cards.
Alternatively, you may wish to wait till after the discussion time. Turning now to questions. We've had a number of questions online, and one institutional investor has expressed these well. The first question concerns Peter Nash's workload, so I'm happy to take that. I'd just personally like to say Peter is a very diligent, very dedicated, and very valued member of the Mirvac board. He is one of the most inclusive yet challenging directors on the board in the sense that he's always willing to challenge and put the right questions to management, and he has an exemplary record in terms of attendance. So we have no concerns about Peter's ability to discharge his duty. He's also a very valuable member of the Audit and Risk Committee, which he chairs. So I hope if there's any other questions, happy to take them at the time.
The second question relates to the rotation of Mirvac's external auditors, PwC. So our auditors have performed. Sorry, our second question is in relation to PwC and their rotation as our external auditors. So again, PwC has been auditors of Mirvac for a number of years. They do have a rotation policy, so every five years we get a new lead auditor. I introduced Voula earlier. They've done a great job. They're very dedicated and very diligent in the auditing of Mirvac. As directors, we have an obligation every six months to ensure their objectivity and their, I'm looking for the right word, their independence. And also they have that obligation to the board. So we're very comfortable with PwC. Every year, every six months, we go through that process, but every 12 months we go through a process to decide whether we'll renew.
Sorry, every five years we'll go through a process to decide whether they're the relevant auditor or should be. The final question from DWS concerns our disclosures over the STI outcomes, and I should say at the outset that the level of detail in our balanced scorecard has increased with metrics around how we measure performance in the remuneration report. This year we provided additional details of how we measure value, relevant operational results, and an assessment against individual targets. We also included additional information on how performance has been assessed by the board. We will, of course, continue to look for ways to improve disclosure wherever possible. Turning now to the room, I'd value any questions from security holders.
Hello, Mr. Chairman. Allan Goldin, shareholder or security holder in my own right, and representing the ASA, I hold proxies for just under 800,000 securities. I must admit I find it very strange not being able to have discussion at the time of each resolution and having them all lumped in together. It sort of gets away from the resolution. So I find that a bit strange myself. But just going back to the first resolution, why is this meeting not a hybrid? Why are those people who were just asking those questions had to ask them in advance, couldn't wait until they heard you and the CEO speak and then decide to formulate their questions? There is no interactive allowance for them, which you always have in a hybrid. So why is this meeting not a hybrid?
Well, I think from our perspective, we've done both, and we think the opportunity within 48 hours, up to 48 hours before the meeting, you can ask a question, and the additional expense of holding a hybrid meeting is actually quite significant because you've got to have real-time technology. It's very complex, so we've balanced the cost of that versus the opportunity for security holders. The other thing is we're always available to security holders. It doesn't need to be the annual general meeting where security holders can talk to management, so from our perspective, it's the balance between those two things, so it's a live broadcast. It'll go up on our website, but we're always open to comment, questions, or criticisms.
Okay. Thank you. Yeah, and the cost is a natural factor. In the annual report, we can't find the skills that each director has. So I am surprised in the notice of meeting. Though it's very nice hearing from each of the candidates, and I thought they all three spoke very well and talked about their contributions. But I'm really surprised in the notice of meeting because we didn't have a skill base for each director. We weren't being advised in the notice of meeting, this is what this candidate will add to the board or what this existing candidate adds to the board. So I guess a criticism or a comment to say, it'd be good to see that in the future so that we know before we hear from them.
Yeah. Can I maybe make a couple of comments on that? That is, when we look at the skills matrix, we don't take it as a tick-the-box exercise in the sense that we're looking for particular broadness of skills. One of the things that we have been doing is making sure we've got a lot of property expertise, and you see that with Jane. You see that with James Cain. You see Damien's funds management and asset management background, and you'll see that with Rosemary Hartnett. So we take a very considered and overall view of the skills matrix we're looking for. And I think defining that as a tick-the-box exercise, it doesn't quite pass muster for me. What I think I heard from each of the directors who have nominated for re-election today or election is they come at it from a very different perspective.
What Jane said, what Damien said, and what James said all came from a slightly different perspective. And for me, that's what makes a really good board. It was a very different view on the organization and the skills they bring. And I think that diversity, you end up with better decisions. So I take the point about whether we should put the chart in the notice of meeting, but we think it's a much broader.
Yeah. The other thing is I also find it disconcerning that we don't see what the existing votes are before each resolution or just after each resolution is introduced. In particular, if there is a surprising vote against one of the candidates or something else, you don't have the opportunity to say, well, why is that happening? I mean, though I would have voted for Mr. Nash if he was standing, others may not have. And so I would have liked to have discussed it at that time if I saw that there was a vote against him that was large.
Okay. Well, I think we can take that on board. I think.
Again, that's all it is. And by the way, if anyone wants, I do have a few other questions because I'm asking them all at one time. And I'm really happy to let other people speak first. So if anyone's interested, please stand up. I get bored listening to my voice.
Good on you, Alan. We'll break it up a bit.
My name's Kevin Daly, Mr. Chairman. I've just got a very short question, so it won't be much of a break. It has to do with your office portfolio. In the annual report, you talk about the growth of rents and actually the decline of cap rates on a year-on-year basis. But what are those levels? What's the rent level this year compared to what it was pre-COVID? And what cap rates pre-COVID for the office portfolio?
Oh, thanks, Kevin. I think I'll ask Campbell to address that.
Certainly, Kevin. I can respond to that. Rent growth last year across our portfolio was about 3.3% on average. So we are getting rental growth. The big challenge has been what's happened to cap rates on value. And over the last three or four years, cap rates have moved, softened by probably the best part of 175 basis points. And so the rent growth that we've received even was not enough to offset the fact that the cap rates have declined. And to use some maybe slightly different language, it's just about the yield that the asset is valued at. And as interest rates tend to get higher, people tend to value down the value of investment income streams. So that's led us to have a sort of peak-to-trough valuation movement in our office portfolio of just over 20%, which I think is pretty much industry standard.
With respect, that wasn't the question I asked. I asked you what the levels were of rent pre-COVID compared to now and what the cap rates were pre-COVID.
I think we've been growing our rents by, and again, I'd need to come back and check this, but we've probably been growing by about 3% per annum, and I think cap rates for the portfolio were probably about 5%, just over 5, 5.5%, and they're now approaching, actually, it's probably 5.25%. They're now about 6%.
Okay. So rents have been growing since COVID. So they're bigger now than they were before COVID.
[crosstalk] . That's right. Yeah.
We can give you the cap rate. I'm sure one of the team is madly calculating that and can give it to you while we're having a cup of tea. Yeah.
5.4% to about 6% now.
That's a mix of lots of different offices, obviously, so.
Mr. Chairman, thank you again. Specifically with James Cain, why was he on the board for 11 months before he faces the security holders? And we're going to have the same thing, of course, next year with Rosemary Hartnett. Yes, it's a question of timing, but it just seems like it's not good timing that someone's there for so long.
Yeah. I'll talk about Rosemary first. When Sam Mostyn resigned, she rang in the afternoon and said, "I'm resigning today because I've got to give up. I'm going to be the Governor-General in three weeks' time." So that was relatively unique. I'd never had that phone call before. So we started the process. By the time you do a proper skills assessment, by the time you put the candidates through the process, the notice of meeting needed to go out. We didn't want to rush Rosemary's appointment until we'd done all of the checks that we need to do. And so that fell to be 1st of December was the right timing. With James, similarly, we went through the process. We actually had two very good candidates in the process that we went back and forth a couple of times.
We think we've made the right selection, don't we, Jay? And I wouldn't get concerned about that. There's no ulterior motive. It's just when it falls, when we've got to do the notice of meeting, and we'll put it in at the time.
Okay. Thanks. Just two things on remuneration. Why do you calculate the number of performance rights issues based on an actual period of 30 days and then artificially inflate the number by discounting for distributions that may or may not happen for rights that may or may not vest as shares? It's so much simpler and more transparent to just base the number of performance rights on the actual share price for a period of time, such as seven days before. So my question is, why don't you do that?
Yeah. And we had the opportunity to meet with the ASA before the meeting. And I appreciate your comments on that. And we've taken those on board. It's not unusual. You've got to calculate some way to say, well, if there's distributions during that period, then management has the opportunity to get the benefit of that. Arguably, if there's no distributions, the share price is unlikely to go up, and therefore the LTI won't vest. But I think we've taken on board your comments. I think it's fair and reasonable. There's a number of companies who do it that way. There's a number of companies that still use the options to basically work out what the likely distribution is. But take your.
I think you'll find it's pretty rare.
There's still a few, but we appreciate it.
I mean, the ASX 200, it is rare. There is some, and the Lendlease meeting that's on at the moment is one of the ones who goes and after the award is made, gives a bonus number of equities based upon the distributions that happened during that period of time, the three-year period, four-year period in their case. But okay, the last thing is, okay, we understand why the gateway for your STI was lower than it was the year before. That's what the market is. We have already seen, though you didn't talk about it today, we saw it in the annual report, and we saw it at the results that the projection for this year is also lower than 2024. So will you give us a preview? Are you projecting with the STI gateway for next year?
Is it going to be more than 10% lower than this year? I mean, you must know the answer.
What we do is we take what is our budget at the time, and we've sold AUD 1 billion's worth of assets. And a lot of those assets had income associated with them. So there's a natural step down. We've reinvested that AUD 1 billion in the living sector, which we think has fundamentally good prospects in Australia. And I think with population growth and other things that most people would agree with that. That means there's a potential step down in earnings, which we've flagged in FY 2025. But that's a strategic decision, and we shouldn't necessarily hurt management for the fact that that's happening. So we start with a budget. We say you've got to achieve at least 90% of that for the gateway to open. And once the gateway opens, we make an assessment. And as I said, year- on- year, that's fallen from 64% to about 57%.
But the assessment is not only about financial performance. It's as much about the strategic implementation and getting asset sales, in this example, asset sales, which we're very proud of the AUD 1 billion worth of asset sales that we did in what was a very challenged market. So we rewarded management for that, or we recognized that as part of the STI, and they were above the 90% gateway. So we were comfortable.
I mean, which is good. And as was said, there's already been contracts on at least two office buildings at book value, which is fantastic. But the point is that your 90% of your target, you already know, is going to be lower than it was this year because your targeted budget is lower than it was this year. So just taking a fast calculation, just hoping it's not going to be much more than 10% below what it is this year. Because if we take a look at what the earnings per share projection is, it could end up being more like 15% to 20% below. I'm hoping that's not the case.
Yeah. Well, we're three months, four months into the year. So we give you a projection. We give guidance around FY 2025, which we've done. That's, to me, a separate issue to how we remunerate, attract, and reward management. We do that in the confines of saying, that's where we start the year. We set a stretching budget. And then we say, if you don't achieve at least 90% of that, the gateway doesn't open. So they're two different things. I get your point. No security holder wants to see year-on-year earnings decline and management getting a bonus. And I think we get the balance right. If that happens, there's no LTI. And the LTI is generally the more beneficial from the management's perspective. But we just get that balance right between retain, attract, and incentivize. And I think hopefully we've got that balance right.
Okay. Thank you very much, Mr. Chairman.
Yeah. Christine's chair of the Remuneration Committee.
Thank you for your question. Look, the one other thing I just wanted to add to your answer, Rob, was the fact that the way we calculate the STI pool is it's up to 6% of the profit. It's not necessarily always that amount, depending on the performance. But because it's 6% of profit, it naturally increases or decreases depending on the outcome of a company's performance. And I think that's a really important ingredient in making sure that we're not overspending and we're rewarding appropriately.
Okay. Thank you.
Hopefully, there'll be more questions, and then we can see the votes so far.
Thank you. We take the point on putting up the proxy votes during the resolution, and we'll discuss that.
Thank you.
Brian Ellison, shareholder and long-term member of the Shareholders' Association as well. This has been a very innovative meeting. I've never been to one that's been conducted like this before, and I was just wondering if I had not been paying attention or have you not shown the proxies for the resolutions?
Oh, sorry. That was my mistake. We were going to show the proxies. We'll put the proxies up at the end of the question time.
Okay. Considering the distance of the audience from the screens too, would you like to read out the percentages when you do that?
We can do that.
Thank you.
Why don't we do that now? I think I missed that, did I, Michelle?
No, no, you didn't.
Yeah, okay.
It's coming.
It's coming. I will read them out. Thanks, Brian. Any more questions from the floor? Okay. Well, there don't appear to be any further questions. I'll now conclude the discussions on all resolutions. The proxy votes and direct votes on all resolutions that have been received prior to today's meetings are now displayed on the screen. Can you read that on the screen? No. Actually, I need my glasses too. Who's got the good eyes? Michelle, can you read those? Reelection of Jane Hewitt is 91%. Reelection of Damien Frawley is 94.5%. Election of James Cain is 96%. Adoption of the remuneration report is 98%. 96%, sorry. That is my eyes. But I think you've made a very good point, Brian. And participation of the group CEO, 98%. Is that right, Michelle? Thank you.
So if you haven't already done so, please record your vote on your yellow voting card and place it in the ballot box at the back of the room. There's just somebody coming around to pick up the ballots. I'll pause for a moment. Thank you. Everyone's handed in their votes. Thank you. This concludes the formalities of today's meeting, and the results of which will be released to the ASX and published on our website later today, where you will be able to see them. On behalf of the board and the management of Mirvac, I thank you for your attendance and participation at today's meeting. I now declare the meeting's closed and subject to the finalization of the poll, and invite those of you here to join directors and the management team for refreshments in the foyer. Thank you.