Welcome to Stockland's first half 2026 result briefing. There will be a formal presentation, followed by a Q&A session. I will now hand over to Tarun Gupta, Managing Director and CEO, for opening remarks.
Good morning, and thank you for joining Stockland's half year 2026 financial results update. Before we begin, I'd like to acknowledge the traditional owners and custodians of the land on which we meet, the Gadigal people of the Eora Nation, and pay my respects to elders past, present, and emerging. Joining me today is Josh McHutchison, our CFO, Kylie O'Connor, CEO of Investment Management, and Andrew Whitson, CEO of Development. In the first half of FY 2026, we delivered a strong financial result while continuing to invest for future growth. The execution of our strategy over the last four years has translated into strong operational and financial performance. We have significantly lifted production volumes across our platform, activating more of our pipeline to deliver attractive, sustainable returns.
We have positioned our MPC and LLC platforms to deliver for our customers and our security holders in an environment of a continuing structural imbalance between supply and demand. Now, turning to the result. Funds from operations for the period was AUD 325 million, up almost 30%, with FFO per security of AUD 0.135. The result reflects a significant lift in MPC settlement volumes, higher fee income from development partnerships, and a strong underlying performance from our investment management portfolio. Importantly, we have delivered this growth while maintaining balance sheet strength and risk discipline. Net tangible assets increased to AUD 4.25 per security, and as anticipated, gearing ended the half at 28.1%. Over the last four years, we have focused on reshaping our portfolio, embedding additional growth pathways, and positioning the business for sustainable performance.
FY 2026 represents a step change in delivery of our strategy, and we are seeing that clearly reflected across the business this half. In our residential platforms, MPC and land lease sales were up 87%, reflecting higher project activation and improving conversion as we focus on increasing delivery into a supply-constrained market. We have seen increased demand from first-home buyers for our affordably priced product. We launched four communities during the half across Queensland and Western Australia, with two additional launches targeted for the second half. We have created additional drivers for longer-term growth in sectors such as data centers, apartments, and logistics, maximizing the value of our land holdings and leveraging our end-to-end capabilities. We secured approximately 350 MW of power at two of our existing Victorian logistics assets, supporting future data center development.
This brings our total secured power bank to approximately 450 MW. We are progressing final documentation for a data center partnership with EdgeConneX, exploring both near- and medium-term opportunities across our portfolio. Across our commercial development pipeline, we completed approximately AUD 420 million of build-to-hold projects and commenced a further AUD 620 million of developments across logistics, town centers, and communities real estate. We are pleased to have recently expanded our relationship with an existing investor by forming a new 50/50 partnership in the land lease sector. The new partnership will be seeded with two existing development projects with an initial gross asset value of approximately AUD 200 million. Across our business, we have focused on maximizing our options for future growth, while always maintaining a focus on risk, capital efficiency, and sustainability.
To that end, we have now met our target of net zero Scope One and Two Emissions. Importantly, this has been achieved through initiatives such as our rooftop renewable energy partnership, decarbonizing our footprint, and generating commercial returns for Stockland. I will now hand over to Josh to provide an overview of the financial results.
Thanks, Tarun, and good morning, everyone. As Tarun mentioned, the consistent execution of our strategy has delivered strong operational and financial outcomes over the half. The first half 2026 result is characterized by significant earnings growth, a strong balance sheet, and capital settings that support future growth. Turning to the financial result in detail. Funds from operations of AUD 325 million was up 29.5% on the prior corresponding period, with FFO per security of AUD 0.135. The investment management segment delivered consistent FFO, with strong comparable FFO growth, high IM fee income, and build-to-hold completions, offset by the strategic recycling of assets into capital partnerships in the previous period. We have almost tripled development FFO, primarily driven by significantly higher MPC settlement volumes from our expanded platform and growing development fees, consistent with increased development activity and partnerships.
Growth in unallocated corporate overheads was consistent with the growth in our platform and investment in capability, increasing 8%. Over the last three years, our overheads across the business have grown by 4.6% per annum versus a revenue growth of 9.3% per annum, and we remain focused on continuing to generate positive operational leverage. We expect total overheads across the business in the second half to be broadly in line with the first half result. Net interest expense was down, reflecting higher interest capitalization into projects in line with increased activation of the pipeline. Average net funds employed across commercial, MPC, and LLC development was around AUD 700 million higher in first half 2026, compared with first half 2025, and a greater proportion of it was in active production.
FFO per security was up almost 30% on a pre- and post-tax basis to AUD 0.135, and AFFO per security at AUD 0.108 was comfortably above our distribution per security of AUD 0.09. Moving on to capital management. We have maintained a strong balance sheet position. As expected, our gearing finished the period at 28.1%. We expect gearing to moderate back towards the midpoint of the target range by June 30, 2026. This reflects a weighting to the second half for both MPC and LLC settlement volumes and group operating cash flow. Our weighted average cost of debt for the period was 5.2%, compared with 5.3% for FY 2025, and we expect this to trend up slightly over the second half to average 5.3% for FY 2026.
Our fixed hedge ratio averaged 74% for the period, and we took advantage of a favorable point in the credit cycle during the half to extend our weighted average debt maturity to 4.8 years through the issuance of AUD 400 million of 10-year medium-term notes. We finished the period with AUD 2.1 billion of liquidity, comfortably covering approximately AUD 1.25 billion of drawn debt maturing in calendar year 2026, as well as providing future funding flexibility. Consistent with our previous guidance, we expect the FY 2026 distribution per security to be in line with FY 2025. The distribution reinvestment plan was in operation for the period, and we continue to actively manage our capital settings to support growth. Now on to cash flows. Operating cash flow for the period was - AUD 315 million.
This reflects an increase in development expenditure across our MPC, LLC, and build-to-sell commercial development pipelines, in line with increased pipeline activation and in advance of completions and settlements. Consistent with FY 2025, we expect second half operating cash flow to be materially stronger than first half, driven by the weighting of settlements to the second half. Overall, we have delivered a strong result for the period and invested for future growth while maintaining a strong balance sheet and ample funding flexibility. I'll now hand over to Kylie to take us through the investment management result.
Thanks, Josh, and good morning. The first half of FY 2026 has been another strong period for the investment management business, delivering consistent performance while also being positioned for further growth in future periods. The portfolio delivered comparable FFO growth of 3.7%, underpinned by solid performance across all sectors. We continue to achieve positive leasing spreads, ranging from 3.3% in retail to 32% in logistics. New development completions are supplementing our growth, and fee income from partnerships continues to build. We delivered a solid financial result for the half while absorbing net operating income dilution from the strategic transfer of assets into partnerships in FY 2025 and investing in capability and platform expansion to drive growth in future periods.
We remain actively engaged with our existing capital partners to expand their exposure across new sectors and strategies, supported by the scale and diversity of our development pipeline. The logistics portfolio was again a standout, generating comparable FFO growth of 7%, driven by positive leasing spreads of 32% on leases and renewals negotiated during the period. The team is driving solid underlying income growth from the portfolio, while also actively managing several assets that are being positioned for further development as either logistics or data center opportunities. The WALE, at 3.3 years, continues to provide us with access to positive reversions, with the portfolio 12% under-rented. Over time, we expect this WALE to increase as new developments with longer leases come online and brownfield opportunities are converted. Moving to town centers.
We've delivered comparable FFO growth of 3.2%, with positive leasing spreads of 3.3%. The portfolio continues to benefit from its high weighting to essentials-based categories, while discretionary categories such as leisure, homewares, and jewelry continue to show improvement. Comparable specialty sales are in line with benchmark averages, while occupancy costs remain at a sustainable 15.1%, and portfolio occupancy is high at 99%.... In line with strategy, we delivered a new neighborhood town center within our Gables MPC community during the half. The center was delivered fully leased to Woolworths and 24 specialty stores, with positive early trade performance. Turning now to our workplace portfolio, the majority of which is being prepared for repositioning, including mixed-use opportunities.
A small increase in FFO was primarily driven by the completion of the final two buildings at Stage One of M_Park in New South Wales. A total of 8,000 square meters of leasing was completed across the precinct, bringing overall occupancy to 74%, with Eleven Khartoum Road now at 87%. The workplace team remained focused on ensuring the highest level of operating income and adding value via development opportunities across the portfolio. A growing component within the IM platform is our community's rental income, which is comprised of our established LLC assets and an emerging portfolio of childcare and medical centers located within our master plan communities. The assets deliver stable long-term earnings and an attractive development pipeline underpinning future growth. Sector income increased by 10%, with the uplift supported by the addition of completed LLC and CRE assets during the period.
The portfolio delivered comparable FFO growth of 2.1%, reflecting the relatively small size of the comparable basket. The LLC operational portfolio now consists of more than 3,300 home sites under management, providing recurring rental and fee income, with the majority of rental increases linked to CPI. Our significant pipeline, comprising more than 7,500 home sites, also provides future growth opportunities. Approximately 29% of the portfolio was independently revalued over the half, resulting in an increase of AUD 81 million on the June 30, 2025 book value. This reflects positive revaluation movements for both logistics and town centers, partly offset by some devaluation across assets held for repositioning in the workplace portfolio.
Overall, the investment management business continues to deliver sustainable earnings from a diversified base of assets and new income streams, with future growth opportunities supported by our high-quality development pipeline and long-term partnerships. Thank you. I will now hand to Andrew.
Thanks, Kylie, and good morning, everyone. The development segment delivered a strong first half result on the back of disciplined execution of our strategy. I'm particularly pleased by the increased activation we've driven across our MPC and LLC pipelines, a strong uplift in MPC settlement volumes, and growing demand for our LLC product. This positions the business well to continue to perform through the cycle. Development FFO was AUD 106 million, compared to AUD 36 million in first half of 2025, reflecting a significant lift in MPC settlements, disciplined project activation, and higher fee income from our partnerships. Our deliberate decision to upweight to the strong Queensland market, expand our platform, and accelerate activation of our pipeline are delivering results. MPC settlements are up 60% over the half. There were no commercial development profits this half.
We expect this business to contribute to earnings in the second half with the completion of build-to-sell projects. We've also achieved strong leasing outcomes across our logistics and town centers pipeline. In master-planned communities, settlements were up strongly year-on-year. The development operating profit margin was 18.1%, reflecting strong price growth in Queensland and Western Australia. Consistent with previous guidance, we expect full year margins in the low 20% range. We end the half with 5,458 contracts on hand at an average price, slightly above first half 2026 settlements, giving us good visibility for the full year. Our focus is now on building our contracts-on-hand position for FY 2027. Net sales were up 87% on the prior corresponding period, reflecting higher project activation, the successful integration of the Lendlease portfolio, and increased conversion.
In January 2026, we secured a further 418 net sales. This reflects the timing of releases to coincide with the launch of our summer marketing campaign from late January. Our recently acquired Kings Forest project in northern New South Wales delivered first settlements during the half. We're seeing good demand for this product, which is selling into the heavily undersupplied Gold Coast market. We've continued to selectively restock on capital-efficient terms with our South Morang acquisition during the half, providing us with exposure to the infill Northeast Melbourne market, which continues to outperform the broader Victorian market.... Onto our market outlook for the year ahead. Overall, we remain constructive on the residential market over the medium term, as Australia continues to face a growing structural undersupply, with population growth supporting demand. However, market momentum is correlated to interest rates.
In New South Wales, tight supply is expected to continue to support prices despite affordability pressures. In Victoria, the recovery is forecast to gain traction, supported by normalizing listings, with ongoing variability by corridor. In Queensland, strong demand and constrained supply are expected to underpin sales volumes, with price growth to moderate due to emerging affordability constraints. And in Western Australia, conditions are expected to remain robust, though lower investor sales point to a moderation in demand over time. These fundamentals support our confidence in meeting our FY 2026 forecast. Our land lease community settlement volumes for the half were broadly in line with first half of 2025. We expect a significantly higher volume of settlements in the second half, as several new communities deliver first settlements.
We're also expecting a higher operating profit in second half of 2026, with first half margins reflecting the settlement mix and higher marketing costs associated with new launch communities. Contracts on hand increased to 637, up around 60% versus June, at a higher average price. Our land lease sales were up 81% over the half. We're seeing strong underlying demand, particularly in the Queensland market, and our Victorian projects are now benefiting from the completion of community infrastructure, which is driving higher conversion rates. We're actively managing release timings to maintain our delivery time frames. We've also seen continued price growth across all markets. This has been partially offset by cost escalation in the Queensland and Western Australian markets. Across our commercial development pipeline, we now have AUD 1.2 billion of high-quality investment product under construction.
This includes AUD 800 million of logistics developments, which is over 90% leased, and three essentials-based town centers within our MPC communities, with a combined value of AUD 400 million. The conversion of our commercial development pipeline into product generates attractive yields on cost, high-quality investment product for us and our partners, and increased amenity for our residents. We're continuing to grow our powered data center pipeline with an additional 350 MW secured over the half at two of our logistics properties in Western Melbourne. So overall, from a development perspective, the disciplined execution of our strategy over the half has driven strong FFO growth. We're on track to deliver a step change in residential settlements over the full year, and progress across our commercial development pipeline provides growth levers for future periods. I'll now hand back to Tarun to conclude.
Thanks. Thanks, Andrew. So to conclude, our first half 2026 result demonstrates that the disciplined execution of our strategy is driving strong operational and financial outcomes. The macro environment, including interest rates, remain uncertain, but we have a well-diversified, resilient, high-quality platform, and over the last few years, we have reweighted the business towards sectors where we have deep capability in and that benefit from long-term structural tailwinds. We are on track to deliver a step change in settlement volumes in FY 2026 for both MPC and LLC, along with the higher production volumes across our commercial development pipeline. We expect commercial development activity, including our Sydney logistics pipeline, data centers, and mixed-use opportunities, to provide multiple drivers of returns in future periods. And while driving growth, we remain focused on risk management, capital efficiency, and sustainability.
We are reaffirming our guidance for FY 2026 FFO per security of AUD 0.36-AUD 0.37. Our FY 2026 distribution per security is expected to be AUD 0.252, in line with FY 2025 and within Stockland's payout ratio range of 60%-80% of FFO. We will now open the line for questions.
Thanks, Tarun. We will now start the Q&A session. I will introduce each caller by name and ask you to go ahead. You'll then hear a beep indicating your microphone is live. Our first question comes from Lauren Berry from Morgan Stanley. Please go ahead.
Hi, good morning, everyone. I'm just interested in the settlement guidance range of 7.5-8.5 thousand lots. Like, you've kept it the same versus where we were six months ago. Looks like if you add up your settled lots this half and the contracts on hand, that's getting you to just below the lower end of the range. So yeah, just interested in how you're thinking about the range and what's the actual potential for you to get to the upper end?
Yeah, thanks, Lauren. Yeah, we start the second half with a strong contracts on hand position on the back of that second half sales result, which obviously gives us good coverage for the rest of this year, and then starting to build the pipeline into 2027, which is positive. You know, the main factors with regards to where we land for the year now are really down to two elements. One, settlement rates, as we move into sort of the May and June period. Then the second one is just the completion of production. Production's well progressed. It's really getting through all of the back-ended authority approval requirements to get registrations and call for those settlements.
So they're the elements, but we're obviously pleased with where we are, and it sets us up well to be within our guidance range.
As you know, we still have a material skew to the second half in terms of our lots and FFO. As the months and weeks progress from here, it will then illustrate where in the range we land. But as Andrew said, right now, we're positioned very well.
Great, thanks. And then on, you know, how momentum's going, post all the chat about rate hikes, you noted in the call that resi momentum is very correlated to the rate environment. Are you able to give us a little bit more color on how, like, inquiries or visits to your display suites have been going in the last, say, three or four weeks?
Yeah, I'll get Andrew to comment just on that specific question, but you know, we have a quality, well-diversified business. The interest rate increase was only recent. It's really very early to see any impacts, as you would have seen in when rates go up and also when they were coming down last year. It's really the second or third interest rate rise where you start to see you know, a shift in buyer behavior. And then the sales impact, whether positive or negative, is sort of follow 6-9 months later. So it's that sort of response you'd see. And you know, we'll be reporting on that in due course.
But as I said, in terms of our own strategy and our business, as we look into 2027 and beyond, clearly we have a very high-quality residential business. Our scale is very different to before. Activation's 85%, and the land lease business performing well. So that business is strong, but we've got many material drivers of growth that are now upon us, such as data center, Sydney Logistics, and our apartments pipeline. So the business is well positioned to deliver sustainable performance. But this specific question on what we're seeing around the grounds, Andrew?
Yeah, thanks, Lauren. On the sales office floors, you know, we're not hearing any feedback from customers, you know, deferring the purchasing decision due to, you know, the rate increase or the outlook. So yeah, as Tarun mentioned, normally, there is a delay there, but we're not getting that feedback at the moment. In three of the four states, if we had more product to release at the moment, we would be making more sales. And you can see that in, you know, the national land survey data in the back of the deck, you know, sales volumes, total market sales volumes in both Southeast Queensland and Western Australia have declined, and a number of active projects have declined, and that is purely supply.
That's not reflective of demand, and we're experiencing something very similar in our pipeline—in our portfolio, and we do manage, you know, those delivery time frames, so we don't get out too far as well from sale to settlement.
Okay, great. Thanks, guys.
The next question comes from Tom Bodor from Jarden. Please go ahead.
Good morning, Tarun. I was just interested in your new land lease partnership. Is that effectively replacing an old capital partner that would like to be redeemed, or is that an entirely new partnership?
Yeah, Tom, so it's a new partnership into the land lease sector for us. As you know, we've got Invesco as our partner, and this will be a new partner joining us. They're one of our existing clients, and we'll share that, there's a couple of conditions precedent to go, so we're just working through those. So it's pleasing that one of our existing clients is looking at it. It's a different partnership. The one you're referring to, which is in SRRP, which is Mitsubishi, they are, you know, they are recycling their capital. They've had a great experience over the last five years. As they've said publicly, the portfolio's performed exceptionally well, but as they're doing across many of their investments here in Australia, they're looking to recycle, and we're supporting them on that.
That may actually lead to some other investor interest, but that's too early to say. That process has just started. They're using an agent to run that, and we're supporting. So yeah, this new partnership is just create another one that we're doing in the sector, which again shows the demand for our platform and the pipeline, the quality of pipeline we have going forward.
... Okay, great. Thanks. And then that decision by Mitsubishi to potentially sort of exit and potential for a new buyer, are you reliant on that to generate future sell-down profits in that business? Or can you generate those with the Invesco partnership? Just, I noted you didn't have any sell-down profits this period.
Yeah, no, we've got this new partnership, plus the Invesco one, plus the SRRP will have capacity depending on the new investor. But that portfolio is stabilized now, so it started with six assets. Five have already stabilized, and the last one is in another couple of years of sales to go. So that's a much more core stabilized portfolio, and that'll attract the relevant style of investor, whereas the two partnerships we have now with Invesco and this new investor are more developed to core style. So again, across the risk spectrum, we are populating that, but we've got enough demand coming through for our partners, and also we have our own requirement to access land lease earnings.
As you know, we said around 10% of employed capital would be comfortable in phase one of our strategy. We are around that, so we, Stockland, also have a great need to continue to access those quality earnings, so the business is in a very strong setting going forward.
Right, thanks. And just a final one. I think in the outlook statement, you talk about an expectation for more commercial development profits going forward. Just be interested if you could elaborate on sort of the timing of that uptick and how those profits might be realized. Is it developed to core or is it more developed to sell type?
No, as Andrew said, it's, yeah, it's developed to sell in our pipeline. So developed to sell CP pipeline, and it'll be between February 14th and June 13th.
Thank you. The next question comes from Cody Shield from UBS. Please go ahead.
Morning, Truona team. Thanks for the time. Just first question, a substantial amount of those settlements in the first half, they went through the JVs. So what will that volume look like in the second half, and, and how should we think about it from a revenue or development margin, sorry, development management fee perspective?
Thanks, Cody. So for the full year, it's gonna be tracking at about 25%, through the JVs. Yeah, when you think about... Yeah, the way to think about it would be, yeah, looking at the overall revenue figure and the margin in the low twenties, that's sort of the building blocks.
Okay, got it. And then, maybe just turning to buyer type. So it looks like you didn't really see a big jump up in first-time buyer activity in Q2, which is, you know, surprising with the policy change there. So what are you guys seeing from that segment of the market at the moment in terms of demand? I know you touched on the broader picture, but just on that segment would be great.
Yeah, I think you're seeing that, Commonwealth Government scheme driving demand for first-home buyers right across the market, and recognizing that when people apply for that scheme, it is upon settlement. So a lot of the sales that we're making potentially aren't flowing through to that data right at the moment. But we have seen an uptick in first-home buyer inquiry. Given the supply-constrained nature of three of the four markets where we trade, that is having an impact on the availability of land for first-home buyers as well. So, you know, that is definitely, yeah, supporting underlying demand of the broader market, and, you know, over time is a positive for getting first-home buyers into homeownership.
Yeah, we saw, I think, we reported a 50% pickup first half to second half, 2025. And that recovery in demand was underway before the Commonwealth support scheme. That came, as we've said, over 90% of Stockland product is eligible for that scheme. And we've been pivoting, as we have for the last couple of years because of affordability constraints, to provide more affordably priced products. So the combination of our own, you know, lot offers, plus some support is driving that demand, which is really pleasing to see 'cause, you know, the first-home buyers getting into housing is a key plank of what we're trying to support.
Great. That's clear. And then just the last one on cap interest. So, you know, we had a big step up there in first half. Is that gonna subside into the second half?
Yeah. Thanks, Cody. I think, you know, the, the average development NFE for first half 2026 was around AUD 700 million higher than for 2025. So that's obviously a key driver of that step up, and that's before we take into account our share in of the debt and development partnerships as well. And I think perhaps an additional point there is the increase in the activation of our projects also drives a greater proportion of development capital that is subject to interest capitalization. So, you know, I think as we look forward, you know, you would expect, you know, as settlements come through and whatnot, those, you know, those numbers will adjust. But yeah, and I think they're the key drivers as what's driving that capitalized interest uptick.
... The next question comes from Richard Jones from JP Morgan. Please go ahead.
Thank you. Andrew, maybe a question for you. Just in terms of the MPC settlement, it looks as though it was perhaps less of a skew than you were originally guiding. I think you were kind of saying it was going to be a similar skew to last year, which had less than 30% of settlements in the first half. Just wondering if you can call out why you might have had a better settlement level and perhaps lower skew than originally expected.
Yeah. Thanks, Richard. The number is slightly less than last year, which is positively. Obviously, the prior year, we had the impact of some pretty significant weather coming through in that period, which pushed settlements to the second half. Yeah, the number being slightly better, both our ability to accelerate production. You know, it is a supportive environment at the moment for getting more supply on the ground and into market. So, yeah, working with all the regulators has been positive through this half. And then completion rates, Richard. Yeah, it's good to see the completion rates. And you can see that flowing through to both, you know, the cancellations and the default rate numbers over the half as well.
It's sort of a combination of those factors, which has moved us back toward with the more traditional 40/60 split. There always is a second-half skew, but we want to get it more balanced.
Okay. Thank you. And then just interested in your sort of high-level thoughts again, Andrew, just around migration demand. Obviously, you know, we were in lockdown through late 2020 and 2021, and migration reopened in 2022, and we saw obviously a population surge. It seems to be around that 3-4-year lag that drives demand. So would you be expecting migration-led demand to be picking up across your estates?
Yeah, Richard, your stats you quote there are spot on. You know, it is that 3-4-year delay that we've seen from, you know, new migrants entering the country, traditionally rent, you know, around Sydney and Melbourne, you know, establish that credit history, and look to purchase real estate in that sort of timeframe lag. So, yeah, there is a thesis that we should see that increase that we saw post-COVID flowing through to demand over the next few years, particularly in the MPC space. And, you know, we are seeing good demand for that affordably priced product. Yeah, and one of the benefits of our portfolio is we're able to remix our product in an agile manner.
You know, we're planning over the next 12 months, how do we get more affordable product to market? How do we resequence, how do we remix to continue to lower that average price point? Because that's where we're seeing the greatest demand across all segments, you know, that's first-time buyers, downsizers, and investors.
Thank you. One more quick one. Just in terms of the data center opportunities, can you outline when you might expect the first project to kick off and how you're thinking about the funding structure?
Yeah. We're now working, obviously, firstly, very pleased we've got now three projects with power secured. As you know, power is the critical part on this strategy and in this sector. So that's pleasing. We're now working to get, you know, DAs, building approvals, that sort of, you know, getting the sites ready, which will take a little while, and then also executing final power purchase agreements in due course. So that's our focus. The Edge partnership is in final documentation, so we're talking to them about how we activate the near term, the short term, and medium-term opportunities. So all that work's underway. Timing-wise, we'll let you know in due course. Unlikely we get anything started this financial year, but as we move into 2027 and beyond, we'll provide updates.
Once we start to get those conditions precedent on power, the planning approval starting to come through, which the sites are zoned for, we're now applying for DAs, and then clearly, customer contracts and customer interests on the critical path. So we'll share that in future periods with you. But again, as I said, pleased with securing power, which is clearly, you know, a special skill our business has given, you know, how much power activation we do right across our platform in the residential business.
Thank you. The next question comes from Suraj Nebhani from Citigroup. Please go ahead.
Thank you. Good morning, everyone. Just following on from Richard's last question about data centers firstly. Tarun, can you talk to the strategy there or any updated thoughts you have on that with respect to the realization of the upside?
Yeah. Hi, Suraj. Yeah, the strategy is what we said in August, so I'll recap. We are looking to allocate, you know, over the next sort of five years, over the plan period, about 5%-10% of group capital into the DC opportunity. And that'll come out of our workplace and logistics capital allocation, mainly down weighting the workplace as we sell down our positions, which we've started to do. We'll fund majority of that 5%-10% capital allocation. So that's the capital allocation part. In terms of our value add strategy, it's really we are, you know, we're playing developer here. We've got very well-located land across Sydney and Melbourne.
As you've seen, we've added value already to that land by securing power and the planning approvals that are coming through. From here, we'll be working with Edge, depending on their requirements for the sites to get customer contracts, et cetera, there. Funding-wise, you've got to think it's a 50/50 partnership with Edge, so our exposure is 50%. They'll be off balance sheet, you know, debt finance, say, 50%, conservatively. Then our land goes in at 100% as our equity into the partnership at fair market value. So when you put the math together, you can see, even with the power bank we've secured, we can quite easily fund it with that 5%-10% capital allocation at the balance sheet level that I've called out.
So we are, you know, still, you know, still lining up the ducks, but in future periods, we will start to give visibility of timing of land profits and obviously joint venture earnings, as time progresses. So, first focus is get the power in place.
Tarun, just on the end, ownership model, and any, any thoughts you have there, is Stockland planning to own this on the balance sheet, or is it a, you know, develop to sell down the track or, you know, too early to determine that?
No, I think during the development phase, we'd like it, you know, a substantial exposure because the returns profile is attractive. But when these assets eventually reach stabilization, as we do in all our sectors, we'll be looking to bring in, the right institutional capital who own those developed core style returns or core capital. But that, that's how the partnership will be structured. But initially, we want the development exposure, as I said, so that's the path we're following. I think what you're seeing is,
Sure
... with the three power approvals we've got in the planning, and there's more in the pipe, we have a lot of optionality now, in terms of adding value, and extracting that value out of this great pipeline.
That makes sense. Maybe just one more on the partnership side of the business. Obviously, you announced a new partnership today on the land lease side. Can you talk to where you're seeing most interest? You know, are you seeing interest from the retail side as well for a partnership or, you know, some other parts of the portfolio where you're looking for opportunities?
Hi, Suraj, it's Kylie here. Yeah, thanks. We are seeing good demand from both offshore and domestic capital. And as you've mentioned, retail seems to be a bit more on the wish list for those groups. The other thing we're seeing out of the sort of Asia core funds, they've been actively sort of raising capital and have capital to deploy. So a little bit more of an interest in that sort of core to core plus type strategy. Living and logistics are still probably the most sought-after sectors, but definitely a bit more appetite on the retail front.
The next question comes from Callum Bramah, from Macquarie. Please go ahead.
Hi, guys. Thanks very much for taking my question. Just a couple of them. Maybe so on sales and sales momentum, I think you said 418 in January. I think that's up only a little bit really from 396 in the PCP. So maybe if you can just give color about, you know, how that's going. The other bit, it's just on margins for MPC. I think you did 22.9 last year. You've had strong price growth. So can you just give me a little bit of your thinking around whether you should see further margin expansion relative to 25, or what the factors are that would prevent that maybe coming through?
Yeah, thanks, Callum. Looking at January sales first, you know, there's a couple of factors to think about there. You know, traditionally, January is a lower sales month just because of the, you know, coming out of the Christmas close down. And that January number is a lot driven on timing of releases, given the short period of trading that we have there. You know, with our campaigns, we hold back releases to coincide with the launch of our campaign, which was in the latter part of January, combined with, you know, wholesale, timing of wholesale transactions, and then just normal releases. So yeah, that January number can be influenced by those factors. You know, we're seeing, as I mentioned, in three of the four states, if we had released more product, we would have made more sales.
With regards to the margin, yeah, the mix influences those margins. We are seeing some margin expansion in Queensland and WA on the back of the price growth within the established house market, which is reading through to price growth within land. But that is being obviously offset partially by mix, and you're seeing that with the pickup in volumes in Victoria at a lower margin. So we're on track for that guidance range of the low 20s, which we'd reaffirmed.
Thanks, Andrew. And maybe one just around cash flow expectations for 26. So, can you just maybe reference, I think you did 328 for positive operating cash flow in fiscal 2025. Are we expecting a lot larger number than that? And maybe my last one would just be around the medium-term note and the terms or rate on that, please.
Yeah, sure, Callum. You know, firstly, on the operating cash flow, you know, as I said, you know, the key driver of the number for the half was the increased investment in the development NFE, which is around AUD 400 million between June and December. There was also some working capital movement and some other cash that was retained in partnerships for future deployment. So if we think about the sort of second half, if we just calibrate around, you know, the midpoint of our settlement range for MPC and LLC, that equates to about a AUD 1.5 billion plus additional operating cash flow in the second half. So as an indication, yeah, we are expecting a stronger, much stronger result in the second half.
Where exactly it lands will depend, obviously, on a number of factors, including that final settlement, those final settlement numbers, as well as the development spend on our own balance sheet and through partnerships. But yeah, we certainly expect a much stronger second half than first half operating cash flow, similar to what we saw in FY 25.
Thank you. The next question comes from Adam Calvetti from Bank of America. Please go ahead.
Hi to Tarun and team. Look, the first question is just on the settlement guidance range, 7.5-8.5 thousand. I think you said six months ago that was driven by Victoria. I mean, your 12-month outlook is the most positive of any other state. Can you just give some commentary on what you're seeing down in Victoria?
Yeah, sure. Thanks, Adam. Yeah, Victoria, and you can see it in the numbers, quarter-on-quarter, leading into the end of the first half. We've seen improvement in that market. Yeah, it's moved through the bottom, from a volume perspective, and, you know, in the stronger corridors, we are seeing some moderate price growth. So in the southeast and the inner north, we're starting to see some price growth, which is good. You've seen a normalization of those resale numbers in a lot of those corridors, but it is still variable by corridor. You know, the west, the recovery has been slower, resale listings are still more elevated, and you're still seeing that in the outer north as well.
Overall market volume still running below, you know, those long-term averages of, yeah, up around 15,000-20,000 per annum. So we still see the potential for further momentum in that market over the next 12 months. And, you know, that's both volume and the potential for some further price increases, but we are seeing it being variable. So, yeah, we'll describe it still as early stage recovery in that market, but we're well positioned with, you know, exposure to all the main corridors, and ability to manage our release programs down there to match the momentum that we see over the next 12 months.
Okay, thanks for the color. And then just on margins, what's the spread between something like Queensland and Western Australia versus Victoria?
Yeah, we don't talk about margins for existing for specific states. You know, we're in that low 20 range. To get there, you've got some above, some below, obviously. So yeah, that's what we're seeing, Victoria being at the lower end and you know, now Queensland and WA being above the guidance range.
Yeah, great. Maybe just one more, if I may. Just on occupancy against the investment management segments, that's fallen across the board, but you had some pretty strong comp growth. And what's expected just for occupancy for the second half? Is that gonna increase, or how do we think about that?
Yeah. Hi, Adam. So yeah, if I look at logistics, we had slightly decreased occupancy, and that's really just based on a couple of completions that have come in and time for leasing. We are pretty confident in being able to lease those vacancies over the period. Retail has remained really strong. You've seen some good numbers come out of the retail portfolio, so that will remain at that 99% sort of level. And then on the workplace portfolio, that has really been the completion of the building, the final buildings at M_Park , which have come online late December, the last one, and we're active in the market on that space.
Thank you. The next question comes from Ben Brayshaw from Barrenjoey. Please go ahead.
Hi, Tarun. I was just wondering if you could comment on the process to introduce a new partner into SRRP, and I guess how confident you are that-
... you know, a suitable capital partner, you know, can be found from that process?
Yeah, Ben, it's Mitsubishi, our client's running that process. They've got an agent. It's a transfer of units, not the asset sale. So, we're assisting them on that process, but it would, wouldn't, I think that's all I can say at this stage. But it's, it's an attractive portfolio is the other thing I can say.
And does that include the Stockland Communities Partnership, which was established in the second half of 2023?
No, it doesn't.
Great. Thank you. And just my second question is on MPC. Perhaps, Andrew, could you just comment on the contracts at hand in terms of average price, so far as how that compares with first half settlement revenue per lot?
Yeah. Thanks, Ben. So contracts on hand sitting at just under 5,500, and that's slightly above the average price for settlements in the first half.
Thank you. The next question comes from James Druce from CLSA. Please go ahead.
Yeah. Hi, good morning to Tarun and team. My first question is just around just underlying growth. If you look at superl ot revenue, that's picked up from AUD 43 million - AUD 121 million. It's normally pretty high margin stuff as well. The capitalized interest has picked up from AUD 81 million - AUD 107 million on PCP. So if you actually sort of adjust for those two items, it looks like your half on half growth is, you know, on my numbers around 5%. Just given the commentary around August last year about a step change in the business, it doesn't really feel on that underlying basis that's coming through yet. Am I missing something?
Yeah, James, you know, the first half is only half the story. You got to look at the full year impact of what we are doing. We put a lot of things into production. The earnings are coming in the second half, right across the platform. So FY 2026 is the step change year, not the first half FY 2026. I think on a full year basis, we're holding our guidance. We're holding, you know, our lot guidance. If you look at those numbers, you know, FFO is up in the 8% range. Our MPC settlements will be up 25% or so, given where, wherever we land in the range. And our LLC settlements will be almost up 50%, and our logistics business production's doubling. These are not insignificant numbers.
They are step changes coming through, and then the earnings impact of that, you will see on a full year basis. So that's what I can say, but the first half, so far, we're on track. And, you know, second half, we look forward to the next four months.
Great. Can we just get a guide for the super lot revenue for the full year from Andrew, please?
Yeah, we're. Yeah, our normal range, James, sits in the 20-50 range. We're gonna be, you know, top end of that, maybe just above. It depends, you know, the exact timing, 'cause some of these are—as you know, some of these are, you know, government contracts for things like school sites and other elements that we transact, you know, dependent on underlying demand and dealing with the counterparty, delivers essential infrastructure as well. So yeah, we'll be around that number.
So I'm not following. On a revenue number, you did AUD 121 in the first half.
That's on a revenue number. No, I'm talking, I'm talking FFO.
Okay. Yep. Okay, that makes sense. And just on the data center sort of deal that you're doing with EdgeConneX, I mean, you sort of announced that in August. I know, I appreciate it's expanded now to a couple of other projects. Are you looking at doing a deal across all the projects now? Is that what's kind of been the hold up in finalizing that joint venture agreement?
We said, James, we're in final documentation on that. We've got a big emerging pipeline, and as you say, you know, they are the things we are more focused on... Which assets will fit which customer need. That's where all the energy is going in. So yeah, and we'll, we'll, we'll put out a note when the docs are executed, but our focus is on getting these projects lined up for customer interest now in the next phase.
Thank you. We have another question from Suraj Nebhani from Citigroup. Please go ahead.
Oh, thanks, thanks for the follow-up. Sorry, just got cut off initially. Just last one was with respect to super lot revenue. I think James picked that up as well. That was up a lot versus the first half last year. What do you expect that in the second half to be, please, or some guidance around that?
Well, I think as Andrew said, Suraj, it's the AUD 20 million-AUD 50 million full year contribution, which is pretty typical for our business last two, three years at the upper end. That's the key number to look at. Revenue doesn't equal profit.
Thank you.
Thank you. There are no further questions. I'll now hand back to Tarun for closing remarks.
Great. Thank you for your time today and, for all the questions. We look forward to seeing you on the Investor Roadshow over the next few days. Thank you again.
That concludes today's call. Thank you for joining us. You may now log out.