Standing by and welcome to the Shopping Center Australasia Property Group FCP FY 'twenty
session. Presenting these results with me today is Mark Fleming, our Chief Financial Officer. Results that we've been able to achieve in the last 12 months, particularly the last 6 months where we're consistent with what has happened during FY 'twenty one. We have remained true to our core strategy and remain as important as at present. Firstly, let me take you to Slide 4, which settled in an increase of in excess of 400% on the same period last year.
Our NTR maturity. Moving to Slide 5, which sets out some of the key achievements and the impact of the current restrictions in a number of states on the FY 'twenty two financial year is uncertain. We had a valuation uplift of $409,000,000 or 13 financial results.
Thanks, Anthony, and good morning, everyone. I'll start. On the top right hand side of this slide, you can see the moving annual turnover performance of our tenants, which overall has been very strong over the last 12 months. Many of our specialty tenants suffered sales declines during the various lockdowns as you would expect, particularly in Victoria during the first half of the financial year. But what we've consistently seen is that specialty tenant sales rebound strongly once restrictions are lifted And that's what happened in the second half of the financial year because for most of that period, there were only limited restrictions in most parts of Australia.
In terms of cash collection, it's a similar story. You can see that over the second half of the financial year, our cash collection rates returned to historical levels with around 90% of rents collected within 30 days and 96% of rent due in the period was collected by 30 Jan. Moving on to Slide 8, which shows the impact of COVID-nineteen. As the top right hand chart shows, we've assessed the direct and quantifiable earnings impact of COVID-nineteen in FY 2021 at around $7,300,000 made up of 3 components. Firstly, we waived 6 $900,000 of rent during the year.
Secondly, other direct impacts of the pandemic amounted to approximately $4,400,000 And finally, partially offsetting these impacts was a reduction in the expected credit loss allowance of $4,000,000 because increased allowances for deferred and unpaid rent during the year were offset by greater than expected collections of FY 2020 unpaid rent. Other indirect impacts such as increased vacancy and reduced leasing spreads are difficult to attribute and quantify and are excluded from this analysis. The bottom right chart shows our distribution per unit trend in half years. And as we've previously indicated, we would expect to return to the pre COVID level for AFFO per unit and distributions of at least CAD0.075 per unit per half year once the impact of the pandemic has ended. Turning now to Slide 9, profit and loss.
Our statutory net profit after tax was $462,900,000 which was up by 4 41% compared to the same period last year. The primary reason for that increase was an increase in the fair value of investment properties during the year. Stepping down the P and L, net property income increased by CAD10.1 million or 5.6 percent due to acquisitions and reduced COVID impacts compared to the prior year. Funds management income increased due to performance fees realized in relation to the SURF 1 and SURF 2 retail funds. Corporate costs increased due to an increase in directors and officers insurance premiums and because no KMP stip was paid in respect of the FY 2020 financial year.
Fair value of investment properties increased due to a combination of cap rate tightening, improved NOI outlook and removal of allowances for future lost rents due to the pandemic. Fair value of derivatives has decreased by CAD65,900,000 due to the cross currency interest rate swaps associated with our U. S. Private placements due to the appreciation of the Australian dollar and a steeper yield curve. Finally, interest expense includes $9,100,000 of swap termination costs.
Our weighted average cost of debt reduced from around 3.5% in FY 2020 to around 3.1% in FY 2021 and the spot cost of debt as at 30 June 2021 was around 2.4%. Moving to Slide 10, funds from operations. To get to funds from operations or FFO, we reverse out the non cash and one off components of our net profit after tax, including fair value adjustments. FFO of $159,000,000 is up by 12.9% on the prior year, primarily due to acquisitions, reduced COVID impacts and lower cost of debt. AFFO of CAD135.8 million was up by 9.3% on the prior year, slightly less than the FFO because of an increase in maintenance CapEx and leasing incentives.
AFFO per unit of $0.126 per unit was slightly lower than the prior year due to the dilutive impact of the capital raisings late in FY 2020, which weren't fully redeployed until the second half of the FY 2021 financial year. Distributions were $0.124 per unit representing a payout ratio of 98% of AFFO. Turning now to Slide 11, which shows our summary balance sheet. Cash has reduced to more normal levels due to utilizing $180,000,000 of term deposits to repay the medium term note in October last year. The book value of our investment properties has increased to CAD 4,000,000,000 due to CAD 452,400,000 of acquisitions and AUD409.4 million increase in the like for like valuation of investment properties.
Other assets has decreased due to the reduction in the mark to mark valuation of our cross currency interest rate swaps as discussed earlier. Net debt has increased primarily due to acquisitions during the period. Net tangible assets per unit increased to $2.52 per unit due to the investment property fair value increase, partially offset by the decrease in the fair value of derivatives. Finally, our management expense ratio has increased slightly to 41 basis points due to the $1,800,000 increase in our D and O insurance premiums and because no KMP stick was paid for FY 2020. Moving to Slide 12, which deals with debt and capital management.
Our gearing sits at 31.3%, which is toward the lower end of our target range. During the year, we repaid the CAD225 1,000,000 expiring medium term note. We issued CAD50 1,000,000 of new 10 15 year notes and we increased some of our bank facilities to fund acquisitions. As at 30 June, our weighted average cost of debt has reduced to 2.4%. Our weighted average debt maturity has increased to 5.3 years.
We have $290,000,000 of cash and undrawn facilities and we have no debt expiring until FY2023. Finally, as you can see, we're well within our banking covenants. Thank you. And I'll now hand back to Anthony for the operational performance overview.
Excellent. Thank you very much, Mark. So looking at Slide 14 and the overview of our convenience portfolio, We now have 80 neighborhood, 1 freestanding Woolworths and Big W and 11 convenient subregional assets comprising 7 44,000 square meters with approximately 2,000 specialty tenants and 122 anchor tenants. Our weighted average cap rate is 5.9 percent. And as you can see, our geographic diversification is well balanced across all states in Australia.
48% of our gross rent continues to come from our income tenants, including Woolworths, Coles, West Farmers and Aldi. And of the other 52%, there is a heavy weighting towards our core nondiscretionary categories being food, retail services and pharmacy and medical. Slide 15 describes our portfolio occupancy. Specialty vacancy is stable despite the COVID-nineteen challenges. Our occupancy level decreased to 97.4%, primarily as a result of country target at the Gateway Lang Warrinn exiting in April 2021 and a replacement tenant is close to being secured.
The total special vacancy remained at 5 0.1%, which is slightly above our targeted range of 3% to 5%. And the long term stability of our portfolio occupancy illustrates the resilience of this portfolio. Specialty tenant monthly holdover has been a particular focus for the team and that has remained stable at just over 1.3%. And we have 3 anchor tenant expiries in FY 'twenty two and all terms are agreed on these 3. Turning to Slide 16, the sales growth and turnover rate.
Strong sales growth has been continuing and our supermarket MAT has increased by 3.2%. The panic buying experienced in FY 'twenty was not repeated. However, the living local and shopping local continues. Our discount department stores have strong sales growth of 9.2% and BIG W's performance continued to be positive throughout the year. Our Mini Major sales growth has strengthened to 6.4%, primarily from discounters and pharmacies in our portfolio.
Our specialty sales increased strongly by 9.7% and the lockdown in the last quarter of FY 2020 were not repeated. Our turnover rent continues to increase. We now have 42 anchors or 34 percent over with a further 15 acres within 10% of the turnover threshold. And there were 9 anchor tenant turnover rents recaptured in the base rent review during the year. Turning to Slide 17, our specialty key metrics for our existing centers are outlined and we saw a strong rebound in the second half of FY 2021.
Strong second half leasing performance with positive renewal spreads, the second half was 1.6% versus the first half of minus 4.6%. And improved new lease spreads in the second half was 3% versus 0.8% in the first half. In addition to the above, we also executed 75 COVID lease extensions for an average extension period of 13.5 months. The strong sales growth and reducing occupancy costs positions us well for future rental growth. Our sales productivity increased to just under $10,000 per square meter and our average rent per square meter has increased by 1.9% to $7.93 per square meter.
And our occupancy cost decreased to 8.6%. Our strategy is focused on taking a considered position on tenants holding over, while targeting positive renewal spreads and maintaining a high retention rate on the renewals of 73%. Reducing specialty vacancy with a focus on reducing our longer term vacancies, 127 new deals were done with positive rental uplifts and lower incentives in the second half. And we continue to remix towards those non discretionary categories. We also continue to achieve our 3% to 5% annual fixed rent increases for 88% of our specialty tenants.
Slide 18 outlines our sustainability strategy. FY 2021 was a very significant year for SCP Carbon. We set a target of achieving net 0 in our operations by 2,030 on our scope and water use by 25% across our largest consumption sites by 2025. Waste, we're looking to divert 60% of our operational waste from landfill by 2,030. Leading local, we are continually working with the Smith family of all of our employees.
And 6, diversity inclusion, we have achieved and will look to make going forward into FY 'twenty two and onwards. Slide 2015, 2016 and 20 21, 2022 has and will be significant. We have a realistic plan and as a group we're committed to reaching the 2,030 growth opportunities which starts on Slide 21. SEP has a strong track record of $38,000,000 each financial year since our inception in December 2012. Slide 22.
FY 'twenty one was a particularly active year for acquisitions. We contracted 9 centers for in excess of 5.50 $1,000,000 and we completed 7 of those centers for $452,000,000 during FY 2021. Raymond Terrace in New South Wales and Drayton Central in Toowoomba, Queensland were settled in July 2021. We also acquired the adjoining land at Greenbank in Brisbane and also the adjoining petrol station in Warrenborough, WA. FY 'twenty one was our most active year after FY 'nineteen when we acquired a significant portfolio from Vicinity.
Slide 23 continues to highlight the fragmented ownership within our sector, which provides SCP with further acquisition opportunities. We are the largest owner by a number of continued to consolidate by utilizing our funding and management capability to execute acquisition opportunities. Since listing, we have now acquired 57 convenience centers for over $2,100,000,000 in aggregate and the majority of these acquisitions have been off market and we expect this to continue. There has been a continued demand from investors for the neighborhood centers during the year. SCP will continue to be disciplined with respect to acquisitions and we could debt fund approximately $190,000,000 of acquisitions, while still keeping our gearing below 35%.
The demand for quality neighborhood assets remains strong with recent transaction cap rates less than 6%. In summary, we've identified and are working on 30 potential developments, totaling capital allocation and significant focus on sustainability for FY 'twenty two, in line with our sustainability plan. Slide 25 outlines our Retail Funds Management business. In FY 'twenty one, we successfully concluded both the SURF 1 and 2 funds, achieving 11% 12% IRRs respectively for those unitholders. This generated $1,200,000 of performance fees for SCP.
SURF III, which was launched in July 2018, now has 3 assets as Swansea was sold in July 2020. The proceeds were used to repay debt and strengthen the balance sheet of that fund. We will explore additional funds management opportunities going forward in FY 'twenty two. I'd now like to talk about our key priorities and outlook. Turning to Slide 27.
Despite the impacts of COVID-nineteen, our core strategy remains unchanged. In fact, as a result of COVID-nineteen, we believe that our strategy is even more resilient to the current impacts facing the industry. We'll continue to seek and deliver defensive resilient cash flows to support growing distributions. We'll continue to focus on the convenience based retail centers with a strong weighting to the non discretionary retail segment. We will be seeking long term leases to quality anchor tenants such as Woolworths, Wesfarmers and Coles, which was again demonstrated by our latest acquisitions.
And we will continue to explore both the core business growth opportunities as per our development pipeline and acquisition acquisition opportunities within our sector and also some future fund management opportunities. I'd now like to hand over to Mark to discuss some online retail implications for our sector, the future impact of COVID-nineteen and our longer term AFFO growth targets.
Thanks, Anthony. Moving to Slide 28, online retail implications. One of the questions we get a lot is what impact online retail is having or is likely to have on our centers. Our view is that our centers are likely to benefit from the trend toward online retail. The reason for this view is that our centers are located closer to the end consumer than any other commercial property and as such are well suited for last mile logistics.
We believe that the store based fulfillment model will predominant model for online grocery fulfillment in Australia due to low population densities, large distances and established existing supply chains including cold chain. Over the last 12 months, we've seen this play out with both Woolworths and Coles increasingly using our centers for last mile fulfillment, both pickup and home delivery. 75% of the supermarkets in our portfolio have dedicated click and collect parking bays and we're ramping up plans for drive thrus at several of our centers. And we're happy to work with the supermarket chains on these initiatives because online sales generated in our stores are included in our turnover rent calculations. We're seeing similar trends with our specialty tenants who are also using their stores for pickup or delivery to the local area.
And again, we expect this trend to continue to grow in coming years. Moving on to Slide 29. We've included this slide to help people think about the potential impact of the ongoing pandemic on our FY 2022 results. As we saw in both FY 'twenty and FY 'twenty one, the primary impact of the pandemic this financial year is expected to be reduced rental income from specialty tenants whose sales are impacted by government imposed lockdowns. In prior periods, the bulk of that impact has been in 3 specialty tenant categories being apparel, services and cafes and restaurants.
Both New South Wales and Victoria are currently in lockdown with both states announcing that the code of conduct will be reinstated until January 2022. As you can see from this table, the 3 most impacted categories in New South Wales and Victoria represent around 7% of our gross rental income or around $2,000,000 per month. As the duration and extent of the lockdowns is changing on a daily basis, accurately forecast what the impact will be on our FY 2022 earnings. But hopefully this slide is useful for those who want to run some different scenarios. Finally, as you can see from the sales growth numbers in this table, every time lockdowns have ended, we've seen very strong rebounds in tenant sales, particularly in those 3 most impacted categories.
And we'd expect the same thing to happen again this time around. I'll move now to Slide 30, longer term AFFO growth target. While the pandemic is expected to negatively impact earnings in FY 2022, we still believe the longer term earnings growth supported by supermarket turnover rent and fixed specialty rental increases develops.
Thanks again, Mark. Just turning to Slide 31, which outlines our key priorities and outlook for FY 'twenty two. We will continue to deliver on our strategy and to love local, shop local and act local. Our core business focus will continue to be serving our local communities for their everyday needs, partnering with our supermarket anchors to improve their online offer, our centers to ensure that we have successful specialty tenants paying appropriate rents and also executing on our sustainability strategy. This will support our strategy of generating defensive resilient cash flows to support those secured growing and long term distributions to our unitholders.
With our growth opportunities, we do have excess capacity to fund some acquisitions. However, we will be remaining disciplined and true to our strategy. We will continue to explore value accretive acquisition and divestment opportunities that are consistent with our strategy. We will progress our identified development opportunities, including our sustainability investments. And finally, we will consider further funds management opportunities in the future.
With respect to capital management, we will continue to actively manage our balance sheet to maintain diverse weighted average debt expiries and a lower cost of capital consistent with our risk profile, 35% at this point in the cycle. Due to the uncertainty related to the current COVID-nineteen lockdowns, we will not provide FY 'twenty two guidance at this time and it is our intention to target a distribution payout ratio of approximately 100% of AFFO. Our target is to return AFFO per unit to our pre COVID levels of 0 point 0 $0.075 per half or 0 point 15 per annum, once the impacts of the COVID pandemic have ended. In conclusion, I'd like to say that during these difficult times, we will continue to deliver on our clearly stated strategy and objectives. We will continue to focus on and optimize our core business, taking into account the impacts of COVID-nineteen on our tenants, with particular focus on rent collection and continued deal flow on renewals and reducing vacancy.
We've built strong foundations to enable us to continue to seek out and execute on our growth opportunities that are consistent with our strategy and risk profile. FY 'twenty one was a particularly challenging year for the team. However, the strong rebound experienced in the second half of FY 'twenty one reinforces our strategy and we see no reason to deviate from it. Remember, love local, shop local, act local. I'd now like to invite any questions.
Your first question comes from Lou Peraint from Jarden Australia. Please go ahead.
Yes. Good morning, guys. Two questions, if I may. The first one, on your Slide 29 with the impact on COVID-nineteen, and I appreciate that additional color. Can you confirm kind of what percentage by income or by specialty stores is currently not operating?
Is that in line with that 7% of those 3 higher risk categories? Or is it more or is it less?
Yes. Thanks. I'll answer that one. It is pretty much in line with what we've put on Slide 29 there, because a couple of them happened just over the weekend, we're just still getting all the exact numbers, but it's very close to what is in those percentages there.
Great. And then what's the percentage of SMEs versus or under the Code of Conduct? Is it about I mean are the majority of those, I think, or
It's about fifty-fifty. It's about fifty-fifty approximately.
Great. And then secondly, just on the longer term acquisition outlook, kind of what are you seeing at the moment? It feels like it's getting more competitive. How comfortable are you that you can kind of maintain that average of looking at up to €38,000,000 a year in this kind of competitive environment?
Yes, it's a very good question. It's certainly over the last 18 months, really strongly the last 12 months, we've had some increased competition from institutions, the likes of HomeCo and Prime West on behalf of GIC and some others. Certainly, we have had a strong year in the last 12 months. I wouldn't like to predict that we'll have another strong year like that, but I think we should be able to do our average quite well. Most it's very rare we actually win an auction, straight public auction.
The strong the large majority of our assets come from off market opportunities and I think that's going to continue. Prices have compressed and continue to compress. And it is getting harder, but I think we still will be able to eke out appropriate accretive acquisitions, but we'll do it in a disciplined way. We're not going to pay over and above what we think an asset is worth. So but I'm confident that we will still be able to deliver on what we think families, individuals that sell for lots of different reasons, but there is certainly those assets.
Great. Thank you.
Thank you. Your next question comes from Simon Chan from Morgan Stanley. Please go ahead.
Hi, good morning, Anthony and Mark. I'll reiterate on one of your comments about exploring further funds management opportunity throwaway comment or are we close to something? And if we are, can you give us some insights as to size, scale, quantum and timing?
Good pickup, Simon. It was a deliberate change of language versus what we had there before. And this is really just flagging to the market, so there are no surprises. There's nothing imminent, but we are strategically starting to explore some funds management opportunities using institutional capital rather than retail capital. But the exact nature of those opportunities, whether it's in our core categories or in adjacent categories, who the partners might be, all of that is still being worked on.
So there's nothing imminent to announce, but we just wanted to, I guess, flag to the market that we are starting to consider moving into that institutional funds management space.
That was fantastic. The adjacent category, can you elaborate on that? What do you mean by adjacent?
Look, there's nothing specific at this time, but it would be related to convenience based retail in some shape or form. So I don't really talk about specific categories because there's no specific proposals at the moment. But something that's similar to our current core business.
No problem, sounds good. My second question is relation to your maintenance CapEx and leasing costs. They seem to have gone up a bit this year. I think in total, it was $16,000,000 in FY 'twenty and it became $23,000,000 in FY 'twenty one. Yet lease deals actually declined from 50,000 square meters to 39,000 square meters.
Are you simply offsetting leasing spreads with higher incentives?
Well, I'll deal with maintenance CapEx first and then go to leasing CapEx. But maintenance CapEx has been increasing but so has our portfolio. Dollars 1,000,000 as a percent of our current asset value, it's about 25 basis points. It has been gradually increasing and I think it will continue to gradually increase as our portfolio ages and grows. The leasing CapEx, there is a specific reason, which is that there was a whole lot of deals done in FY 2020 prior to the lockdowns in March, April, May.
And because of those lockdowns, the actual opening date of those shops, those tenancies wasn't until the FY 2021 financial year. So the leasing statistics we give are for deals done within the period, whereas the leasing capital that goes into the AFO is based on when the shop opens. So it was really just a timing issue in that a lot of the FY '20 deals weren't actually opened until FY 'twenty one.
That's very clear. Thanks. That's all I've got this morning.
Thank you. Your next question comes from Sheolto McInerche from Jefferies. Please go ahead.
Hi, everyone. Just following on from Simon's question. When you say adjacent asset classes, would that include like convenience retail service stations for example, would you look at those?
Look again, this is complete speculation, but yes, it could include petrol stations. We already have a number of petrol stations obviously in our portfolio. But yes, that would be an example of what we could look at. But again, this is very hypothetical at this stage.
Yes. And then just on the I know you appreciate this pandemic seems to never end. But if you look at the assistance provided in 2020, you gave $20,500,000 but then you wrote back $4,000,000 of ECL. So it would have been $16,500,000 $87,000,000 this period. So what is it assuming somewhere between the $2,000,000 to $7,300,000 and $20,500,000 is where it probably lands for 'twenty two.
So obviously more impacted in the first half.
Well, there's a reason we haven't given guidance because we it was only on Friday night that New South Wales announced the Code of Conduct for example. So this is changing every day. But what I would say just to give you a little bit more color is what we saw last time last year and the year before during lockdowns. And in New South Wales, when New South Wales was locked down in FY 2020, we roughly gave about $500,000 per month in waivers and deferrals. Likewise, during the height of the Victorian lockdowns in the first half of this financial year, we were giving approximately $500,000 per month in waivers and deferrals.
So if I had to sort of stick a finger in the air and say, well, what's my gut feel? I would stick to about that, which is $500,000 a month in New South Wales, dollars 500,000 a month in Victoria while the lockdowns are in place. But obviously that's a very indicative number based on what happened last time around.
And we just don't know how long the lockdowns will be in place for. That's the issue. And also whether anything else will change. So that's our uncertainty. And you have as good a view on that as what we do.
All right. And I don't think anyone knows what they do, but hope we get out of it quicker than anything. Just on your gearing, so you're happy to go to sort of 35%. But to get your indicative sort of target, the range, you'd probably you go above that 35 percent. So would you bring in capital partners for some acquisitions in line with that funds management discussion before?
Well, I think they're 2 separate things. So on balance sheet, we are and our preference is to stay with that. So on balance sheet, I can't say it's not owning 100% of every asset unless there was something very some very specific deal. But the strategy is to own 100% on balance sheet and that our gearing range is, as I said, 30% to 40%, but it preference to stay below 35%. If we were to look at a fund, then that the gearing of that fund would be assessed at the time depending on the assets, depending on the partner, depending on the characteristics of that fund.
So that's probably a bit hypothetical too.
And you just keep the co investment stake in that fund.
And presumably, we would have a co investment stake in that fund, correct.
Your next question comes from Richard Jones from JP Morgan. Please go ahead.
Hi, a few similar type questions. Just in terms of cash
21. In New South Wales, it was 89%, in Victoria, it was 91%. So limited obvious impact in July, but the caveat there is that rent is due in advance. So a lot of the rent was obviously paid in the last week of June before the lockdown happened. August, I think it's really too early to say and I don't want to throw out numbers because we're only a couple of weeks into it.
But there is signs that those numbers are going to be weaker obviously in August as you'd expect with New South Wales and Victoria trailing at the moment and weaker than where we were in July at this point in time.
Okay. Can we reference it with some of the months in 2020?
Yes. Well, I think at the worst point, and in fact, we have the numbers there on Slide 8, I think.
We haven't had a complete month.
We haven't had a complete month. So the worst it got was around 69% Slide 7, sorry, Slide
Yes. Okay. Just in terms of the comment about potential institutional mandates, is this the internal thinking or have you been approached by capital partners?
Just in terms.
Thanks, Gus. Thank you. Your next question comes from Stuart MacLean from Macquarie. Please go ahead.
Good morning. Thanks for your time. First question is just on the Slide 24, which is the development pipeline, we spend $52,000,000 this year. How do we think about return on that spend?
So we have internal rate of return hurdles to these developments. So approximately we'd be looking for a 7% internal rate of return, 10 year unlevered cash flow basis.
Okay. And more simply year 1 benefit, is that are we talking 4%, 5% yield on cost?
So that's it'd be okay if you had to put that in your model. I'm not saying that's our number. The sustainability initiatives have a good return and a good year one return, thus it depends on what the actual project is.
Okay. And then second question on the portfolio. It looks like occupancy has been broadly trending down over the last 4 years. And so I know it's not by much, it's 5%. But just what's the outlook there for occupancy?
And if you can maybe tie it into what means maybe for leasing spreads going forward, if you still find that you've got the supply demand tension there? And can you get those spreads moving back positive?
Yes. Thanks for that. Look, we had a big change of focus from 2020 to 2021, where 2020, I'm talking calendar year, we're really sort of focused on securing income. And 2021, we really changed a bit of our focus to sort of maximizing income and you can see that in those leasing spreads. It was really the first half versus the second half was a lot stronger.
So, there's our tenants on monthly holdover increased slightly from roughly 1% to 1.3%, which is still very, very low in the whole retail space. Our retention rates were still high, but we did our occupancy with a couple of the target at country target at Lengwarren and there are a couple of other mini major discounters that were paying very low rent that we think we can get some better rents on those that we didn't renew with them. So and it's a bit of a remixing opportunity for us. So looking forward, we subject to how this lockdown extends. But if there is a similar rebound to last year, we are again thinking that our rents can increase, our occupancy cost is very low, the specialty sales are very strong and really come back very strong when you come out of lockdown.
So we're really quite positive about where we can be in the future and are truly focusing on those non discretionary areas.
Do you think occupancy can improve from these levels? And has that occupancy been negatively impacted by the portfolio acquired by BCX from VCX?
No, it wasn't impacted from VCX. Neighbourhood shopping centers will always have a specialty vacancy of that 3% to 5%. And in a great year, it's 3%. And if you're sitting around 5%, that's sort of where it sits. So and it's pretty much what it moves.
So but yes, I think you'll see a bounce back in occupancy next year as we fill up some of those holes that we had with those couple of mini majors and target at the Gateway.
Great. Thank you for your time.
Thank you. Your next question comes from Adrian Dark from Citi. Please go ahead.
Good morning, Anthony and Mark. I had 3 topics I was hoping to hit, if possible, please. First question might be for Mark. In terms of total COVID support provided to tenants to date, would you know how much of that has been mandated versus more discretionary, please?
I don't have that explicit breakout on me. It is the vast majority is to SMEs. So it was $10,500,000 in the year and the heavy majority of that was to SMEs, but I'll have to get back to you on the exact split.
And could you clarify for us, it looks like there have been some interest rate swaps. Could you remind us of the driver of that please and the impact on the weighted average cost of debt in 2022?
Yes. So obviously with the yield curve flattening, we felt that there was value in terminating the swaps. The cost of that as I said was 9.1 $1,000,000 And in terms of the benefit to the cost of debt, it's a saving in FY 2022 of approximately $4,000,000 So that would equate to around about a 0 point 3% or 4% decrease in our weighted average cost of debt.
Thank you. And just finally on the long term growth slide, which I see has made a comeback, it looks like the components of that slide are fairly similar to what they were pre pandemic. But we're interested in, I suppose, whether you think the drivers of inorganic growth going forward might be a little bit you've already touched on the funds management opportunities. I guess I was trying to understand, is that potentially driven by the difference in cost of capital or acquisition appetite between FPP and some other players in the market? Or do you see any other shifts in inorganic growth opportunities?
No, I think it's, as we've already discussed, acquisitions are obviously have been, will continue to be our largest source of growth in our view. There is potential in funds management, which we're exploring And part of that would be potentially accessing lower cost of capital for certain segments of the market that are difficult for us to invest in with our current return hurdles. Probably if that was to come through, then that would become a bigger part of that. But I still think acquisitions is the main driver.
Thank you.
Thank you. The next question comes from Ed Prius from Morningstar. Please go ahead.
Hello. Thanks for the presentation. I found the information quite interesting on the way the rent is shared and the opportunities from online. I was wondering is that share turnover and sort of supermarket tax that are done through Click and Collect or perhaps online that fulfilled through goods in your centers. Is that a topic of conversation that's coming up in your negotiations with supermarkets at the moment?
Yes, okay. Look, Woolworths and Coles are very focused on increasing their online business, whether that's home delivery, click and collect, just store pickup, whatever it is, they're very focused on it. We're very big believers in it as well and we are working with them to do drive thrus, dedicated click and collect bays. We think it's a real benefit and adds to the convenience of our shopping centers. Are the sales for all of those included in the leases or the definition of turnover?
Yes. We do buy and have bought a shopping center once where it wasn't included. We have bought shopping centers where we do try and negotiate. But the leases are very long term leases. They're 20 year leases.
The initial and the option just rolls on and the definition of sales and everything included it where it may have been a very, very old lease that didn't really contemplate online the rent as a percentage of their income. And so I think it will continue, but certainly and we are very supportive of it and we'll work with Woolworths and Coles because it's just a great convenient offer and we want to be a great convenient shopping center and yes, it's going to continue and we will continue to negotiate with them, but I don't think they're going to walk away from turnover based rent deals for their stores.
Thank you. Your next question comes from Murray Connellan from Moelis Australia. Please go ahead.
Hi, good morning, Anthony and Mark. I was just wondering over the last I appreciate it still fairly early days in terms of current lockdowns, but in the last 2 months, the housing sound leasing discussions, has it gone fairly quiet? Or are most tenants happy to continue to engage you despite near term lockdowns?
It's a good question. Look, July was the first half was very good and July was also good. We have seen in the last in August as the lockdown sort of lingered in Sydney, we didn't have a lot of exposure in Sydney per se. But certainly from a leasing perspective, it has had an effect. And because when lockdowns do come, people are just focused on getting through the lockdown and aren't focused about the future as much.
But when it bounces back, it really comes back pretty quickly. So it is a bit quieter on the leasing front at the moment, particularly in New South Wales. And I expect Victoria, if they stay in a prolonged lockdown, that's what happened last year as well. But the other states aren't as affected except with sort of national retailers where they are focused in sort of Sydney and Melbourne as well.
Great. Thanks very much.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Melo for closing remarks.
All right. Well, thank you all very much for dialing in today and look forward to speaking to you all over the next couple of weeks. And any questions, please come back to Mark or myself. But look forward to seeing you over the next couple of weeks and thanks very much for your time this morning. I know it's been very busy for everybody with a couple of us all being out at the same time.
So thank you and look forward to seeing you. Goodbye.