All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. Please note that this conference is being recorded today, Wednesday the 21st of February, 2024, at 9:00 A.M. Australian Eastern Daylight Time. I would now like to hand the conference over to Mr. Elliott Rusanow. Please go ahead.
Thank you, and good morning, everyone. Welcome to Scentre Group's 2023 full-year results briefing. Before we begin, I would like to acknowledge the traditional custodians of the lands we are on this morning and pay my respects to their elders past and present. I'm joined today on the call by our Chief Financial Officer, Andrew Clarke, together with Lillian Fadel, Group Director of Customer, Community, and Destinations, John Papagiannis, Group Director of Businesses, and Stewart White, Director of Development, Design, and Construction. Our focus on having more people spend their time with us has delivered strong operational and financial results for 2023. Funds from operations increased by 5.2% at the upper end of our guidance, and distributions to our security holders of AUD 0.166 per security was ahead of guidance. Funds from operations for the second six months of 2023 grew by 9.4%.
This was as a result of strong operating metrics that were the outcome of our customer-focused strategy, together with our strategy of proactively managing our interest expense that Andrew will discuss soon. The execution of our strategy has seen earnings grow in 2022 and 2023, and we are guiding today for earnings to continue to grow for the calendar year of 2024, something that is unique in our sector. Our net operating income increased by 8.8% to a record level for the group. This performance was driven by our team's focus on creating the places and experiences that people choose to come more often and for longer. I would like to thank our team for their outstanding efforts in achieving these results. Our strategy saw customer visitations increase to 512 million people in 2023, up 6.7% from 2022, or 32 million more visitations for the year.
Our 42 Westfield destinations, located in close proximity to 20 million people across Australia and New Zealand, are welcoming approximately 10 million visitors each week, and our customer visitations continue to grow. A driver of our increased customer visitation has been our unique approach to activations at our destinations. This is anchored by partnerships with leading brands, including Disney, Live Nation, and Netball Australia, together with extensive local community-based events. We are the places where businesses, brands, and people want to connect with each other. As a result, our business partners achieved a record level of sales for the year, increasing to AUD 28.4 billion, AUD 1.7 billion more than in 2022, and AUD 3.4 billion more than in 2019. Business partner sales have continued to grow in the early part of 2024.
This has driven strong demand from businesses to partner with us in connecting with customers, with our occupancy increasing to 99.2%, specialty rents increasing by 7.5%, and new lease spreads increasing to 3.1% for the year. For the second half of 2023, new lease spreads increased to 3.6%. We finished the year with 247 holdovers, representing less than 2.5% of income. Average specialty leases have a term of 6.8 years, and over 80% of our leases have annual escalations that are in excess of inflation. During the year, we continue to make progress on strategic customer initiatives, particularly our Westfield membership program. The program, which launched four years ago, now has over 3.8 million members. We believe this initiative will provide unique growth opportunities for the group by creating a more direct relationship with customers and allowing for a better understanding of them.
This helps us determine how we better activate our destinations, as well as how we evolve our destinations over time. A primary example of this is our development program. In November, we successfully opened the final stage of the AUD 355 million investment at Westfield Knox in Melbourne, with customer visitation 14% higher than the comparable period. Works continue to progress as part of the group's expansion of Westfield Sydney on the corner of Market and Castlereagh Street in the heart of Sydney CBD. We will introduce 6,000 sqm of luxury retail space over five levels, including the new Chanel boutique. Other brands to join the expansion at Westfield Sydney include Moncler, Omega, and Canada Goose. During 2023, we commenced the AUD 50 million redevelopment at Westfield Mt Gravatt in Brisbane, introducing Uniqlo, Harris Scarfe , and a range of specialty stores to the previous department store space.
These stores will open throughout 2024. At Westfield Tea Tree Plaza in Adelaide, the group commenced a AUD 27 million redevelopment, which will introduce JB Hi-Fi, an expanded Timezone , and additional dining. We continue to progress works on our AUD 4 billion pipeline of future retail development opportunities. Our destinations are located on more than 670 hectares of land holdings, making Scentre Group a significant landowner in high-density urban locations and growth regions across Australia and New Zealand. This could provide the group with unique and long-term growth opportunities highly aligned to the macro thematics in both Australia and New Zealand. Operating as a responsible and sustainable business is an integral part of our strategy. Progress continues on our pathway to net zero by 2030 for Scope 1 and 2 emissions, with the recent completion of rooftop solar installations at Westfield Fountain Gate, Knox, Hornsby, and Tuggerah.
Together, these installations more than double the group's solar generation capacity to 12.2 MWh or megawatts. I apologize. We have entered into long-term energy agreements in New South Wales and Victoria, which, together with our existing agreements in Queensland and New Zealand, will assist us in achieving our net zero target by 2030. I will now hand over to Andrew to present the financials.
Thanks, Elliott, and good morning, everyone. Funds from operations for the 12-month period was AUD 1,094 million or AUD 0.2111 per security, which grew by 5.2% compared to the prior corresponding period. The group announced an increase in the final distribution to AUD 0.0835 per security, bringing the full-year distribution to AUD 0.166 per security or AUD 861 million, representing 5.4% growth on the prior year and above guidance. Net operating income for the period was AUD 1,951 million. This is an increase of 8.8% over 2022. As a result of delivering strong cash collections, this includes a AUD 13 million release in the expected credit charge. This compares to a AUD 14 million charge booked in 2022.
Underlying net operating income, excluding the release of the expected credit charge, grew by 7.2% for the period, which was primarily driven by inflationary-linked specialty annual rental escalations of 7.5%, positive leasing spreads of 3.1%, and an increase in occupancy from 98.9% to 99.2%. Operating and leasing capital was AUD 149 million for the year. During the year, AUD 2.7 billion of gross rent was collected. This is equivalent to 103% of annual billings and represents an increase of AUD 131 million compared to the prior corresponding period. As a result of the strong cash flow, net trade debtors after the expected credit charge at 31 December 2023 were AUD 22 million. This represents a reduction of AUD 62 million or 74% compared to 31 December 2022. The group continues to proactively manage its funding and interest rate exposure.
During the year, the group extended and established new bank facilities totaling AUD 3.1 billion and issued AUD 400 million of domestic Medium-Term Notes. The group repaid bonds totaling AUD 1.5 billion and redeemed the AUD 162 million Westfield Southland Property-Linked Note using existing bank facilities. In December, we completed the repurchase of AUD 300 million of Subordinated Notes using existing senior bank facilities, which have significantly lower margin. This has resulted in a net benefit to the group of approximately AUD 100 million that will be realized over the remaining period of the notes. At the same time, we announced the activation of our Distribution Reinvestment Plan with effect from the February 2024 distribution. The DRP will add to the group's various sources of capital. At year-end, the group had AUD 3.5 billion of available liquidity, which is sufficient to cover all debt maturities until the end of 2025.
The weighted average interest rate for the 12-month period was 5.6% in line with forecasts. Included in this was an average base rate for the period of 2.6%. During the period, the group executed additional hedging of AUD 3.7 billion. This has increased hedge coverage to 92% at January 2024 at an average fixed rate of 2.65%. As a result of the refinancing initiatives that were executed during the year, the average margin on total bank, bond, and hybrid notes reduced from 3.1% to 2.9%. Excluding the subordinated notes, the weighted average interest rate for the period was 4.7%. The weighted average interest rate for 2024 is expected to be approximately 5.8%. The statutory result was a profit of AUD 175 million, which includes an unrealized property revaluation decrease of AUD 1,017 million.
Overall, property valuations decreased by 1.9% during the period, driven by an average 42 basis point softening of capitalization rates, which was largely offset by the growth in net operating income. This includes the revaluation of Westfield Knox following the completion of the redevelopment. The weighted average capitalization rate for the portfolio was 5.35% at December 2023 compared to 4.93% at December 2022. All properties were externally valued during the period. We have provided on slide 27 a summary of the values by property. Thank you, and I will now pass you back to Elliott for closing remarks.
Thank you, Andrew. Our strategy to create extraordinary places and experiences where people choose to spend their time, enabling more businesses and brands to connect with more customers, is expected to continue to deliver growth in earnings and distributions. Our Westfield destinations, strategic land holdings, and our unique brand provide significant long-term growth opportunities for the group. Subject to no material change in conditions, the group expects funds from operations to be in the range of AUD 0.2175-AUD 0.2225 per security for 2024, representing 3%-5.4% growth for that year. Distributions are expected to be at least AUD 0.172 per security for 2024, representing at least 3.6% growth in distributions for the year. I will now open the call for questions. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question, it comes from Richard Jones from JP Morgan. Please go ahead.
Good morning, Elliott. Thank you. Just wanted to get some more color. Obviously, you've done the first tranche of the buyback related to subordinated notes. Just interested in your strategy around further buybacks and, I guess, your plans around what you're going to do with the expiry in 2026.
Thank you, Richard. And I'll surely hand over to Andrew, but I think what you do highlight is our proactive approach to managing our interest exposure, but also the tailwinds that we see coming through, the potential tailwinds coming through with our interest expense related to the subordinated notes. It's interesting. I was reflecting overnight about the subordinated notes. And if you recall, at the time when we issued those, it was, in effect, to provide the group with additional sources of capital during a period of uncertainty related to a pandemic. Sitting here today and looking back, I think we can all agree that the pandemic was a moment in time.
Our strategy of effectively renting capital in that form of subordinated note, which provided some form of equity credit, has placed the group in a very good position with regards to relative earnings growth versus the alternative of issuing equity at that time. I'll hand over to Andrew.
Yeah. Thanks, hi, Richard. Look, I don't really have much to add to that. I think that's pretty much what I would have said. I think you can see that we've been very proactive in terms of looking at the subordinated notes or looking at our overall weighted average cost of debt as an opportunity for the group. You can see that the average margin that we had on all our bank, bond, and hybrid facilities was 3.1% at the start of the year. And then we've been able to bring that down to 2.9% at the end of this year, at the end of 2023. And so our strategy continues to look at opportunities, whether that's buying back the subordinated notes or refinancing existing facilities and to continue to bring that margin down. So we look at it as a long-term opportunity.
Okay. But more from a strategy of how you finance the buyback and the expiry in 2026 of the first tranche, just interested. I assume plan A is some form of asset sales to refinance those notes.
Yeah. Look, we have a number of sources of capital as opportunities. I think what you've highlighted is a very obvious and natural strategy for us to look at over time. We've got 12 assets that we own 100% share of those assets. Those assets combined are worth around AUD 19 billion. So you can see there's a significant pool of potential capital that we could recycle. We've also got really strong growing cash flows in our business, which is really important to maintain a single-A credit rating. That's what we're focused on, is if we can maintain that single-A rating or not, I shouldn't say if. We will maintain the single-A credit rating based on driving cash flows. And so we'll continue to look at various sources of opportunities. But the potential joint venturing of assets is absolutely one of those.
And can you give us a feeling just around timing and whether you've started a process of looking for partnering at this point?
Well, I think we're always looking for sources of capital. But it's worth bearing in mind that 2026 is a little bit of time away, and we have a bit of time on our hands in terms of that. But there's probably a few logical sources of capital to refine that. It's the first call option, I should say, with regards to that note, the first tranche of that note. One of those is what Andrew discussed, or two of those, which is the potential joint venturing of assets, our strong cash flows, which continue to grow through our operating strategy. But there's also the opportunity of refinancing those with a reissuance of subnotes, probably at better terms than what we issued them at the time, or potentially even debt. So I think that the opportunities to the group are actually quite large.
The timing of that will be timed, as we've seen, as opportune to capture that tailwind that I started the answer to that question with.
Thanks, Elliott. Thanks, Andrew.
Thank you.
Thanks.
Thank you. Your next question comes from Lou Pirenc from Jarden. Please go ahead.
Yes. Good morning, Elliott. Andrew, just a quick one on leasing. Clearly, leasing spreads are holding up well despite a slowdown in retail sales. Can I just ask what you're expecting or what's reflected in your guidance in terms of what happens to leasing spreads from here? And maybe just talk a little bit about just generally what's happening with negotiations with tenants.
Yeah. Thanks. We would expect the conditions to remain. We've got strong demand for space. We actually have very little space available to lease, which means that demand has to compete for far more limited supply. And so we would expect that conditions with regards to leasing will continue to remain robust. If we bear in mind that AUD 28.4 billion, which is actually now AUD 28.5 billion of MAT, that's a large pool of dollars that businesses are competing to try and get a piece of. And so I know that there's a lot of focus on year-on-year growth, but we've got to bear in mind that we are talking about significant dollars that are being consumed at our destinations, and businesses want to have a piece of that.
They're prepared to pay an ever-increasing amount, reflected in our leasing spreads, reflected in our annual escalations, maintaining our standard lease structure in order to meet with what is a growing level of customer visitations, which ultimately is what's driving that stronger level of activity that those businesses are trying to compete for.
Great. Thank you.
Thank you.
Thank you. Your next question comes from Grant McCasker from UBS. Please go ahead.
Hi. Good morning, Elliott and Andrew. Just a question on the leasing. It looks the expiry profile for 2024 does appear to be elevated, and I think you talked to sort of low holdovers. Is there any sort of reason for that, sort of 19% of specialty leased area?
I think it might have to do with when we completed some developments, particularly there was Carousel that completed in 2019. Newmarket started to come online in 2019. So if they're five-year leases on average, when they're signed, obviously, our lease duration is 6.8 years now, but that would explain part of the, call it, elevated increase. But around 20% of leases or specialty leases, somewhere between 15%-20%, do get released each year. You saw in our slides that we leased over 3,200 new leasing deals during the year. So we are very active in the leasing space. It was slightly down the prior year, but 3,000 is a lot of there's a lot of transactions to be doing each year.
Okay. You made a number of remarks in your commentary around strategic land parcels to drive value. Is there anything that you're doing or that we'll see that come to light in 2024 to be aware of?
Well, I think that we're highlighting it because we look at it as a long-term opportunity. We will spend, sorry, devote some more of our, call it, mental or human resources to exploring what those opportunities are. But land is something we own. We've owned that land for a very long time. Most of that land is located, well, it's located where our centers are, our destinations are, but which are located in urbanized, densely populated areas, close to infrastructure, key infrastructure. The macro-thematic of Australia and New Zealand is increasing population. There's a lot of debate among policymakers about where all this increased population is going to be housed. The likelihood is that it's going to be housed in densification. And our destinations are located in areas which are ripe or which already existing have densification.
And so we have the opportunity through the land, through our destinations, to what we see drive long-term growth opportunities through that potential. So we're not calling out that this is a 2024 thing in and of itself, but a far broader long-term opportunity aligned to the broader long-term needs that exist in both Australia and New Zealand.
Okay. Great. And then just a quick one. I think, Andrew, you called out just from refinancing a saving of AUD 100 million. Is that right? Can I just clarify comments you made in your prepared remarks?
Yeah. That's right, Grant. So when we bought back the AUD 300 million of Subordinated Notes, the margin that we replaced those hybrid notes with, the saving that we're generating from that, will save AUD 100 million over the remaining period of the notes to the reset dates. There was an upfront cost to the buyback, which was effectively, we bought the bonds at a discount to the face value. We did have to break the cross-currency swaps associated with those hybrids. The net cost was around AUD 20 million. And then the saving is 100 so 120. So net, it's AUD 100 million over time.
Okay. Great. Thanks for the clarity.
Thank you.
Thank you. Your next question comes from Ben Brayshaw from Barrenjoey. Please go ahead.
Good morning, Elliott. I was wondering if you could just perhaps this is a question for Andrew as well. Just discuss Westfield Sydney to plan AUD 450 million spend. Just noting your comments, I think, in the presentation that it is scheduled to kick off in the fourth quarter of this calendar year. What percentage of the gross level area has been committed at this point? And how do you see that impacting funds and operations in FY 2025? For example, are you already capitalizing interest on the site? Could you just put a conversation around that, please?
Yeah. So where we're referring to the expansion of Westfield Sydney is the previous men's David Jones store that you might recall was purchased in 2018. Half of that AUD 450 million had already been expended in the acquisition of that site. So the incremental spend is effectively what has actually been a lot of that's been spent already in fitting out that or defitting out the old men's wear store. The facade has remained, but what's inside is completely different. It then builds up to a podium where we're building on behalf of Cbus. There's a third-party constructor contract, their office and their residential tower, which is not included in the AUD 450 million. But in terms of that impact on FFO, there is no downtime or loss of income from out-of-production assets coming from Westfield Sydney from that. This is expansion space.
It's 80% committed, and we expect it to open from later this year. So it will be adding to FFO into 2025. Obviously, we're not giving guidance for 2025, but we don't have lost income coming from that, hopefully, that makes some sense.
Yep. And just on project income in that context, should we be thinking that the AUD 17 million for the last 12 months is I mean, how are you, I guess I mean, how are you seeing that for the next 12 months in the context of Tea Tree and Gravatt and, as you say, Westfield Sydney?
Yeah. Hi, Grant. Andrew here. Look, we would expect our project income to be at similar levels in 2024, as Elliott said. We're not providing guidance for 2025. That's a range of those projects, some of them which you mentioned in terms of where there's joint venture owners or we're doing the third-party work.
Yep. Great. Andrew, thanks.
Thank you. Your next question comes from Caleb Wheatley from Macquarie. Please go ahead.
Good morning, Elliott and Andrew. Thanks for taking my questions. Just wanted to dig a little bit deeper into the 4Q sales. Seems like the like rate's picked up a little bit there. Just would be keen to get a sense for how that's trended sort of a month-by-month basis, just conscious that Black Friday's becoming a more important sales event. Ben Brayshaw, Barrenjoey, please.
Yeah. Thank you. Yeah. Look, there has been and this is a function of what you're cycling from. So the fourth quarter, we've provided that detail on slides 25 and 26 compared to 2019 and 2022. It's fair to say that actually, Boxing Day, I think, was a record Boxing Day. So there was a lot of talk about Black Friday. Black Friday was a very strong day. So was Boxing Day. So sales in December were quite good. Sales in October were okay. And so we actually saw a pickup from actually the middle of October, stronger in November and stronger in December. And that momentum has continued in the early part of this year. So the sales momentum continues to grow, bearing in mind it's now cycling off some very high bases.
So as I said, what we're seeing is, in effect, potentially a disconnect between the demand for space and the growth in sales where we still see very, very strong demand for space and moderating sales growth but coming off in an incredibly high base. And so sales don't really need to grow all that much in order to generate incredible demand for space from businesses wanting to compete for those sales.
Great. And conscious of the strong level of sales sitting in there at the moment, but just in terms of sort of store-level profitability, if you will, cost pressures still seem to be coming through sort of more broadly. How are discussions with tenants going from an overall EBIT level store profitability standpoint at the moment?
Well, a lot of the supply chain issues that were prevalent in 2022 and early 2023 have dissipated. From a profitability standpoint, it still seems to be quite strong. Just to put some context around what I said about the supply chain, shipping costs, as an example, are 80% lower. There are cost pressures on some of the line items. There's also cost depressures on other parts of the line item. I think that the best measure from our point of view is that businesses are prepared to pay more rent to access our space, which would suggest that they're quite comfortable with their level of profitability.
Great. Thank you. A final question just around potential further developments. Obviously, Westfield Sydney coming in now, but you're noting that severe shortage of supply. How are you thinking about sort of medium to longer-term development opportunities across the portfolio?
Well, you could see. Actually, I have the slide in front of me. The slide number. Slide nine, we highlight a number of opportunities that primarily in our they're redevelopment opportunities in our existing assets. But what we're really doing is repurposing existing space to meet what the customer is actually choosing to spend their time and, in effect, their dollars on. And so we would see that pipeline of opportunity continue, probably more akin to what we're doing at Mt Gravatt or at Tea Tree. And there are some opportunities. Obviously, Burwood is an opportunity which is of a larger scale, similar to what we did at Knox. But at Knox, we repurposed existing space. We actually added very little incremental new space, again, brought to life because of the departure of a department store.
So if we think about it, Knox's departure of a department store facilitated that redevelopment opportunity. Mt Gravatt's departure of a department store facilitated that redevelopment opportunity. Tea Tree, a downsize of a department store, facilitated that development opportunity. Burwood, we're doing a similar thing with a downsize of David Jones. Southland will be doing a similar thing with a downsize of David Jones. So these are opening up opportunities of taking back space, which is quite historic in terms of its economics to us from department stores, repurposing that to what the consumer is spending their time and money on, more entertainment, more lifestyle, more mini-majors, which are taking that space. We also highlight on that page Bondi Junction. David Jones will be downsizing their store.
That will facilitate us reconfiguring, very excitingly reconfiguring the bottom level of David Jones sorry, of Bondi, which opens up the opportunity of completely rebooting the entertainment and lifestyle that we have on level six, the top level of Bondi. And when we do that, Bondi will regain its position as being the best suburban asset destination in Sydney. And so we're very committed to making that happen and making that a reality. So that just gives you a highlight of some of the redevelopment opportunities that we do have in front of us from a retail perspective.
That's great. Thank you for taking my questions.
Thank you.
Thank you. Your next question comes from James Druce from CLSA. Please go ahead.
Yeah. Good morning, Elliott. Andrew, just following on from Caleb's question around specialty sales. How are you seeing this year? Do you think you can hold around that 3% mark, the specialties that you're hitting in the December quarter, or do you think it'll or how are you seeing it the next year?
Well, it's very hard to crystal ball gaze what business partner sales growth is going to be because, ultimately, it's the business partners who generate that growth. What we are focused on, though, is generating more customer visitations. And so through that, we're providing businesses the opportunity through more people coming to convert that into a sale. So the parts that we are focused on is driving customer visitations. We've got very exciting activations planned with Disney, with Live Nation, with community activations, even far more enhanced than what we delivered in 2023, which generated a lot of activity from a customer visitation standpoint, growing our membership platform as part of that. And that provides businesses an opportunity to try and convert those people coming into a sale and to effectively a profit.
What we're seeing on the other side, which I've said before, is a very strong demand from businesses to try and come into our destinations in order to, in effect, compete or connect with those customers. And so whether that number is going to be 3%, whether it's not going to be 3%, I don't know the answer to that. But what I do know is that we're very focused on growing customer visitations, and we're seeing extremely strong demand for space. And so that gives us a high degree of confidence, very high degree of confidence, of being able to guide to FFO growth in 2024 between 3% and 5.4%.
All right. That's clear. I couldn't find the number for occupancy costs. Maybe just touching on some of your previous comments about tenant profitability, do those occupancy costs can you push those higher than what they have been on the long-run average?
Yeah. So I think it is in the disclosure. I'm not sure exactly where. But the occupancy costs were 16.7%. So as you know, they were 16%, which sort of has increased to 16.7%. And as we talked about previously, given the high level of productivity that's being achieved, we do believe that the occupancy costs should continue to increase because with that high level of productivity, the profitability, the marginal profitability of that extra dollar in sale that the business partner is able to achieve because we're driving more people through means that they're able to pay more of that revenue to us in accessing that customer. And so we would expect occupancy costs over time to continue to increase back to higher levels.
Okay. Finally, one more for me. Just the proportional cash flow was down a little bit over that year. Is there anything to call out? Is that still the catch-up from the prior year in terms of getting paid?
Yeah. Hi, James. Andrew here. So our net operating cash flow continued to be above FFO. So I can't remember how many periods in a row that's been now, but I think it's been around three years that we've had cash flow above FFO, highlighting the strength of that cash flow. I think I spoke about the AUD 2.7 billion of gross rent cash collections and the fact that we've collected levels of rent that's equivalent to 103% of billings and that our debtors have come down now to AUD 22 million. I think it's the lowest memory that we've had as a group in terms of our level of debtors. So the overall cash flow is very strong. You may be asking about are you asking about comparing cash flow compared to last year?
The key reason that although gross rental cash flows are stronger, we're obviously in a higher interest rate environment. And so the growth in interest expenses is coming through that cash flow again as well.
All right. Thank you.
Thank you.
Thank you. Your next question, it comes from Sholto Maconochie from Jefferies. Please go ahead.
Hi, Elliott and everyone. Just on the, I think you said on the call before you released AUD 13 million provision, a lot of other retail REITs did similar. There was nothing in the first half, from memory. Is that correct? Released?
Hi, Sholto. Andrew here. I think you're referring to the release of the expected credit charge. So we did release AUD 13 million for the year. From memory, in the first half, we released AUD 5 million.
What changes is that the debtors were quite stronger than expected? You're not unique to this. Everyone's had pretty good results from retail.
Yeah. Well, I think our cash flow, as I said just before, has been extremely strong. And then what that means is we're collecting debtors, and debtors are now down to AUD 22 million. We continue to finalize and document negotiations relating to the pandemic period where we were mandated to provide rental support. And that's the outcome of the progress we made in 2023.
That's good. And then just on the, I think, the WACD, you said ex-notes for this year was 4.7%, and you're going to 5.8% cost of debt for 2024. What is that number without the subordinated notes in it for FY 2024, the cost of debt?
I think it'll be 4.9% for 2024, excluding the sub-notes.
Okay. I may have missed this in the preso. If you've seen onto that.
Well, I'll have to confirm that when you're. I have to confirm that, but that's a good estimate.
Okay. That's all right. And then just on, what was the company NOI you did this year? I may have missed it in the preso.
Yeah. We spoke about underlying NOI growth, which was 7.2%, which is backing out the release of the expected credit charge. We've also had a bit of a drag from some of the development activity. And so if we were to cut a comparable NOI number, it's probably sitting around 7.4%, so slightly higher than what we're referring to as underlying NOI. It's not really something that we focus on significantly because, overall, it's about growing the overall earnings of the group and growing the overall growth.
Yeah. The 8.8% growth in net operating income is what we're laser-focused on.
And then what do you assume for 2024? Obviously, if inflation's only running at 4% in December, what are you assuming on your inflation assumption and spreads for this year?
Yeah. So we expect inflation for the rental escalations to sit around the 3.5% mark for 2024, on average. As Elliott highlighted, we continue to expect positive leasing spreads coming through as well.
All right. Great. Thanks very much and good result. Thanks.
Sholto, just before you leave, the weighted average cost of debt, excluding the Subordinated Notes, is 4.8%.
All right. Brilliant. Thanks so much.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Rusanow for closing remarks.
Well, thank you, everyone, for joining our call today. We look forward to seeing you in the next coming weeks. Have a great day. Thank you very much.