Good afternoon, ladies and gentlemen. My name is Katherine Grace, Stockland's Chief Legal and Risk Officer and Company Secretary. I would like to begin this afternoon by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation, and pay my respects to their elders, past and present. Before our Chairman, Tom Pockett, formally opens today's meetings for Stockland Corp Ltd and Stockland Trust, I would like to outline some procedural matters. Today's meetings are being held in a hybrid format, with security holders joining us both in person and online. We have designed the meetings to give security holders the opportunity to participate in several ways.
For those of you participating in the meetings via the online Lumi platform, you are free to send in your questions now by selecting the messaging icon, then selecting the item your question relates to, typing your question in the box towards the top of the page, and pressing the send button. If you would like to ask your question verbally, please click the request to speak button and follow the prompts to ask your question. For security holders who have dialed into the meetings via the teleconference line, please follow the prompts if you wish to ask a question. For security holders in the room, we will invite you to ask questions at the relevant time.
The Chairman will shortly open the meetings, and at that time, the polls will be formally opened to enable security holders and proxy holders to vote by selecting the voting icon and selecting your voting preference for each resolution on the online Lumi platform. To cast your vote, simply select one of the options. Your vote will be automatically recorded, and there is no need to press the submit or enter button. For security holders or proxy holders in the room, you will be able to vote using the handheld device provided when you registered at the door. Once voting opens, in-room attendees will be presented with a list of today's resolutions on the voting keypad. Use the track board to highlight the resolution you wish to vote on and press the green square to confirm.
The resolution text will appear, and you can bring up voting options by pressing on the green square. Press one to vote for a resolution, two to vote against, or three to abstain. To move on to the next resolution, you can press the green square or return to a full list of resolutions by pressing the red triangle. As advised in our notice of meetings, participants who have dialed into the meetings will be unable to vote using the teleconference facility. I will be moderating the questions submitted online today from security holders during the meetings. Questions may be amalgamated if there are multiple questions on the same topic, and please note that only security holders may ask questions during the meetings.
We will address the questions during the formal business of the meetings, as is our customary practice, and while it may not be possible to respond to all questions during the meetings, we will endeavor to directly respond to any questions we don't get to as soon as practicable after the meetings close. A recording of the meetings will be available on the Stockland website shortly after the meetings conclude, and I will repeat these instructions later in the meeting before we commence the formal business. For security holders attending the meeting today in person, could you please ensure your mobile phones are now switched to silent, and I note that in the unlikely event of an emergency, you should follow the instructions of the Stockland staff. Finally, as this is a hybrid meeting, technical issues may arise.
If we do encounter any issues, we will have regard to the impact on security holders, and the Chairman may issue instructions for resolving the issue and may continue the meetings if it is appropriate to do so. I'll now hand to Tom Pockett, our Chairman, to formally open the meetings.
Thank you, Katherine, and good afternoon, everyone, and welcome to Stockland 2025 Annual General Meetings. My name is Tom Pockett, and I am the Chair of the Boards of your company. As a quorum is present, I now formally declare the Annual General Meetings open. Voting on resolutions two to five in the notice of meetings is now open via the online Lumi platform.
I am joined today by my fellow directors, who I'll now introduce: Tarun Gupta, who was appointed Managing Director and CEO in June 2021; Melinda Conrad, appointed in May 2018 and Chair of the People and Culture Committee and Nominations Committee, and a member of the Risk Committee; Laurence Brindle, appointed in November 2020 and a member of the Audit, Risk, and Nomination Committees; Bob Johnston, appointed in October 2024 and a member of the Audit and People and Culture Committees; Chris Lawton, appointed on January 1, 2025. I am delighted to welcome Chris to the Board and to his first Stockland AGM. He is standing for election at today's meetings. Chris has more than 40 years experience in professional services, including 25 years as an audit partner with Ernst & Young.
Chris is a member of the Audit and Sustainability Committees; Kate McKenzie, appointed in December 2019 and a member of the Nominations, Risk, and Sustainability Committees; Stephen Newton, appointed in June 2016 and Chair of the Audit Committee and member of the Risk Committee. Stephen is not seeking reelection today and will retire from the board at the conclusion of the meeting. I'll share more on Stephen's contribution shortly. Andrew Stevens, appointed in July 2017 and Chair of the Sustainability Committee and member of the People and Culture Committee; Adam Tindall, appointed in July 2021 and Chair of the Risk Committee and a member of the Audit and People and Culture Committees; Penny Winn, appointed on 27th February, 2025. I am also delighted to welcome Penny to the Board and to her first Stockland AGM. She is standing for election at today's meetings.
Penny has over 30 years experience in retail in Australia and internationally and is an experienced Board Director. Penny is a member of the Audit and Sustainability Committees. Katherine Grace, who you've already met, is Stockland's Chief Legal and Risk Officer and Company Secretary and appointed in August 2014. Also in attendance today is [Jane Riley], who represents our auditors, PwC, along with members of the Stockland Leadership Team. As you will be aware from the notice of meetings, there are four resolutions for your approval today. We will provide an opportunity for discussion and to answer any questions you might have when we deal with each of the formal agenda items. I encourage you to vote in advance of or during each resolution to ensure you have sufficient time. I will now make some comments regarding Stockland's strategy and results.
The Stockland strategy has seen us fundamentally change the composition of our portfolio of assets since 2021. We have transformed from a balance sheet-funded developer to an organization with a portfolio of high-quality assets that are creating value and sustainable growth through utilizing high-quality capital partnerships with major institutional investors. Since launching the strategy, we have recycled $3.6 billion of assets and delivered a total security holder return over the same period of more than 65%. Most importantly, the strategy has set the foundations for future delivery. Turning to FY 2025, Stockland delivered a strong operational and financial performance. Our statutory profit was $826 million, compared with $305 million in FY 2024, with the statutory result for FY 2025 including a positive net investment property revaluation of $197 million. This contributed to an increase in our net tangible asset backing, or NTA per security, from $4.12 to $4.22.
Funds from operations was $808 million, or $0.339 per security, which was at the top end of our guidance range. Our full-year distribution was $0.252 per security and represents a payout ratio of 75% of funds from operations. Apart from our solid results, two key outcomes integral to our delivery strategy were the finalizing of contracts to deliver the Waterloo renewal project with Homes New South Wales and forming three new partnerships in the logistics sector. Having secured several incremental growth opportunities throughout FY 2025, the Board's determined that from FY 2026, we will target a distribution payout ratio of between 60%- 80% of funds from operations, compared to the previous range of 75%- 85%. The change reflects the board's focus on seeking to balance consistent cash distributions with reinvesting capital to generate strong returns. In FY 2025, we made significant strides toward achieving our sustainability goals.
We are on track to meet our near-term target of net zero Scope 1 and Scope 2 emissions by the end of 2025, with the core component of our Net zero strategy being the delivery of large-scale on-site renewable energy. We also made good progress toward our 2030 target of creating over $1 billion of social value, with our most significant contributions to date coming from our delivery of social infrastructure and education facilities across our communities. Lastly, I would like to thank my Board colleagues and the Executive team for their leadership throughout the year. On behalf of the Board, I would also like to thank the broader Stockland team for their ongoing dedication and commitment. As I previously mentioned, Stephen Newton will retire at the end of this AGM. Stephen has made a wonderful contribution to Stockland.
He has brought his expertise, knowledge, and experience from his long career in the property industry to assist and guide the group over his time on the Board. Stephen, on behalf of myself, the Board, the Leadership team, and our Security holders, we thank you for all your contributions in making Stockland successful, and we wish you all the very best in your future endeavors. Ladies and gentlemen, can you please put your hands together for Stephen? Turning now to the resolutions for today's meetings. The first item of business is a non-voting item to consider the financial statements for the group. Resolutions two and three relate to the election of Non-Executive Directors, Chris Lawton and Penny Winn. You'll have the opportunity to hear from Chris and Penny later in the meeting. Resolutions 4 and 5 relate to remuneration.
We have released the proxy results for all the resolutions ahead of the meeting, and these are now shown on the screen. As you can see, all resolutions have solid support. Finally, to our security holders, my thanks to you for your ongoing support and investment in Stockland. I will now hand over to Tarun for him to make a few comments.
Thanks, Tom, and good afternoon, everyone. I would also like to acknowledge the traditional owners of the land, the Gadigal people of the Eora Nation, and pay my respects to elders past, present, and emerging. As we come together today, I'm reminded of the words of our founder, Ervin Graf, a Hungarian immigrant who arrived in Australia on a temporary visa and who had a simple vision of bringing affordable housing to Australian families. He said, "Our purpose is not to merely achieve growth and profits, but to make a worthwhile contribution to the development of our cities and great country." Ervin and his partners, Albert Scheinberg and John Hammond, had a driving belief and a defining vision to create something better, which saw Stockland deliver Australia's first affordable housing in 1952 at Sefton in Sydney's West.
Today, their vision lives on in everything we do for our people and our communities, and I'm pleased to share with you that we're making good progress. For our customers, as we grow, we continue to focus on delivering on our purpose of a better way to live. Over the last financial year, in our masterplanned communities business, we achieved more than 6,800 settlements, and I'm proud to say that almost 34% of these were to first home buyers. This means we've helped over 2,300 Australians get a foot into the housing market last year, and over the last five years, we have helped more than 12,000 first home buyers gain access to housing, which makes Stockland the largest supplier of homes to first home buyers in the country.
Over the last four years, we have bedded down the fundamentals of our strategy and have arrived at an inflection point for the growth of our business. Our immediate focus is on growing our land lease communities, masterplanned communities, and logistics businesses, and over the longer term, to create a more diversified pipeline of growth in data centers, apartments, and strategic partnerships. I'll now focus on the year that has been. As Tom noted, we delivered a strong financial and operational result for FY 2025, which was at the top end of our guidance range. Funds from operations was up 2.8% on FY 2024 and reflected a material uplift in MPC settlements, higher development fee income, and a strong underlying performance from the logistics portfolio. This was partly offset by the impact of asset sales over FY 2024 and FY 2025 as we recycle capital into growth opportunities.
FFO from investment management segment was $591 million, which was down 6.3% on the prior year, primarily because of the disposal of town center and logistics assets over the past two years, as well as the transfer of logistics assets into new partnerships. The portfolio delivered comparable growth of 3%, which was driven by positive leasing spreads in logistics, town centers, and workplace, as well as growing income from our communities' rental assets. The development segment delivered FFO $460 million, up 11.6% on the prior year. The result was underpinned by a strong performance from the MPC business, which included a part-year contribution from the acquired MPC portfolio and higher fee income from partnerships across MPC, commercial development, and land lease. There has been some improvement in MPC trading conditions in the Victorian market, which represents our largest MPC exposure and has lagged other markets for some time.
Pleasingly, the acquired MPC portfolio is performing ahead of acquisition assumptions, and it has replenished our pipeline as we look to deliver materially higher settlement volumes at an increased number of activated communities. Across our MPC and LLC businesses, 82% of our development pipeline is now activated, underpinning future growth. We finished the financial year in a strong capital position with gearing of 25.2%, which provides the group with significant capacity for investment into our strategic priorities. While delivering a strong financial result and driving near-term growth, we also secured several longer-dated capital-efficient residential and logistics projects that we expect to contribute to earnings in future periods. From FY 2027, we aimed to commence construction at our Waterloo project, which will ultimately deliver more than 3,000 apartments in what will be one of Australia's largest and most significant inner-city renewal initiatives.
We formed two significant capital partnerships in the logistics sector in the first half of the financial year, with leading global investors, M&G Real Estate and KKR. Just prior to the end of the financial year, we formed a 50/50 partnership with John Boyd Properties to develop a world-class logistics hub at the Kogarah Golf Course site, which is adjacent to Sydney Airport. Following the end of the financial year, we entered into an exclusive arrangement to form a 50/50 partnership with EdgeConneX, a leading global data center operator backed by EQT Infrastructure, to develop, own, and operate a portfolio of Australian data centers. Subject to documentation and approvals, this collaboration marks a significant step forward with a high-quality operator to activate our substantial data center pipeline in future years.
As we increase our rate of production and progress new value-enhancing opportunities, we are focused on calibrating our capital settings with our growth objectives. This includes utilizing Stockland's capital and that of our partners, recycling assets, and leaning into our strong balance sheet position. In light of the significant incremental growth opportunities we have secured at attractive expected returns, the target distribution payout range has been amended. For FY 2026, we expect the distribution to be in line with FY 2025 at $0.252 per security. With our strong balance sheet, retained earnings, and demonstrated access to third-party institutional capital, we are in a strong position to fund our growth. Two other essential elements for sustainable growth are our comprehensive ESG strategy and our focus on building and maintaining a high-performing, collaborative, and innovative workforce.
We made further progress during the year in implementing our ESG strategies in areas such as low-carbon materials, partnering on renewable energy delivery, and social value creation, and we remain on track to meet our net zero Scope 1 and 2 target this year. Today, as you would have seen, we released our operational update for the first quarter of FY 2026. Our investment management portfolio is performing well, with continued strong performance across our logistics assets and consistently positive results from our town centers portfolio. In the development segment, our MPC business achieved more than 2,000 sales for the quarter, which is a strong result as we target higher settlement volumes for FY 2026. Our land lease business recorded net sales of 206 homes, which is our strongest quarterly result to date, as we work to create scale for that business.
After four years of disciplined execution of our strategy, our goal of providing sustainable growth for stakeholders is coming to fruition. We have positioned the business for a step change increase in production from FY 2026 across our MPC , LLC , and logistics development pipelines. We have also established multiple drivers of sustainable growth in future periods, including capital-efficient, longer-term residential and logistics projects secured during FY 2025. We have good flexibility in line of sight of multiple funding options to support our growth. With these pillars now in place, FY 2026 marks an inflection point for Stockland. Our focus is on high-quality execution and driving sustainable growth. With a clear strategy and a commitment to the people and communities we serve, Stockland is well placed to capture the opportunities ahead and to truly create something better.
I'll conclude by thanking the Stockland team for their contribution to this year's results and by thanking you, our security holders, for your ongoing support and investment in Stockland.
Thank you, Tarun. As noted at the start of the meetings, for those security holders joining us today through the online Lumi platform, the polls are open to enable security holders and proxy holders to vote by clicking on the bar chart icon. You may submit any questions on the Lumi platform by selecting the messaging icon, selecting the item your question relates to, typing your question in the box towards the top of the page, and pressing the send button. To ask your question verbally, click the request to speak button and follow the prompts. Security holders that have joined the meetings by phone have the option of asking questions using the moderated phone line by following the prompts on the teleconference facility. As mentioned in our notice of meetings, participants who are dialed into the meetings are not able to vote using this facility.
As I mentioned earlier, I'll be moderating the online questions from security holders during the meetings, and questions may be amalgamated if there are multiple questions on the same topic. As mentioned previously, only security holders may ask questions during the meeting. As noted by the Chair, we will address the questions during the formal business of the meetings, as is our customary practice, and while we may not be able to address all questions during the meetings, we will make every effort to follow up with responses to any outstanding questions as soon as practicable after the meetings close. Before Tom takes us through the formal resolutions set out in the notice of meetings, I will run through the voting procedure. Voting on all resolutions will be by poll.
As mentioned by Tom, the polls are now open in respect of resolutions two to five, and you may cast your votes at any time from now until the close of the polls. A representative of Computershare Investor Services will act as a returning officer and determine the results of the polls. For the security holders in the room today, you will be invited to ask questions when we move to each item, and at that time, I would ask that you please come to the standing microphones in the aisles, state your name, organization, or association, and show your electronic voting device. Please direct all of your questions to Mr. Pockett as Chairman. The results of the polls will be made available to the ASX as soon as we have concluded the meeting, and I expect that this will be later this afternoon.
If you are joining online and you need assistance with voting, please refer to the instructions available in the user guide, which is available on our website by going to the Investor Centre page, clicking on the Annual General Meting link, and then clicking on the online meeting user guide located towards the bottom of the page. If you are in the room today and you require assistance with voting, please ask a Computershare staff member for help. A simple majority will be required to pass resolutions two to five and must be passed by more than 50% of the total votes cast on these resolutions by security holders present in person or by proxy and entitled to vote. Any open votes given to the Chairman of today's meetings will be voted in favor of all items of business.
I will now hand over to the Chairman for the formal business of the meetings.
Thanks, Katherine. We now move to the first item on the notice of meetings, consideration of the 2025 Financial Statements in the Annual Report. The Corporations Act requires that the financial report, the Directors' Report, and the Auditor's Report for the year ended 30th June 2025 be laid before the meeting. No formal vote is required on this item. Ladies and gentlemen, this is your opportunity to ask any questions you may have about Stockland's performance and outlook. I ask that questions about resolutions two to five be deferred until we get to those resolutions. As noted by Katherine, for those security holders in the room wanting to ask questions, please come to the microphones holding your electronic voting device, state your name, and direct all your questions to me as Chairman. Are there any questions, please?
Thank you, Tom. I didn't want to disappoint you.
First up, well done.
Firstly, I'd like to congratulate the Board and the Stockland team for an outstanding result. I can understand the logic of moving to logistics centers and you've announced your agreement, or the arrangement, I should say, with EdgeConneX for data centers. Because it's a build, own, operate, to what degree have you built in enough flexibility? Because data centers, as you're aware, are huge consumers of electricity and water, and the thing is, the demand isn't linear. It's somewhat exponential. We don't want a situation where the assets effectively become obsolete or we're limited in a few years' time, as it seems the data or the energy requirements go through the roof. That's the first question.
Oh, that's all right. Let me get that one. We've already built a data center out at Macquarie Centre, just for information. Basically, we built the box. We're not the operator out there. We have an emerging data center strategy. I think Tarun would be best to answer that, and he can explain how Stockland and the joint venture partners are going to work together. Tarun, why don't you take that question?
Yeah, it's a strategy that we are at the early stages of executing. We have a strong endowment in our logistics portfolio and the land positions we have in our business, where we have some very strategic pieces of land that are in key availability zones that can support the delivery of data centers. We wanted to see how we can optimize the returns from that endowment. As Tom said, we have developed a data center already at Macquarie Park, but as your question entails, you know, our model ideally will be to develop, own, and operate. It's the operating part that, you know, we don't have that deep experience. That's why we have partnered with EdgeConneX, which is really one of the leading data center operators in the world.
They have 80 centers operating around the world, and they have very deep customer relationships with the top five or six hyperscalers, which are the big, large technology companies that we'll be looking to bring into our data center pipeline. In terms of your question on the electricity, water, and the sustainability of these data centers, that is a key area we are focused on. Obviously, EdgeConneX brings a lot of expertise in that. They have, on the water side, developed over the last five to 10 years data centers that use very little water except for just potable water. They have some very interesting technology that's being developed where we can deliver that in a much more sustainable way.
On the energy question, yes, they're very energy hungry, these data centers, but our strategy working with the hyperscalers would be to access renewable energy, which is something we're still working on. We are in the initial phases really looking to extract the development upside because we're a developer. We have the land positions. In terms of long-term ownerships, we will have a more smaller stake in the long-term ownership as the returns come down in these data centers. We are at the early stage of the execution of this strategy, and with the Board, the Management will be very focused on the risk positions we take as we execute the strategy.
Okay, thank you. The next question is concerning the property valuations. You mentioned that you've sort of banked $191 million in revaluations, and I realize you've got a range of different methodologies for valuing the properties. I suppose one thing that struck me is you use a benchmark if you're using the discounted cash flow method of sort of between a 7% and 7.25% discount rate, which seemed somewhat high. I asked you to justify that given long-term bond rates are sort of like 4.25% on 10-year rates, and of course your cost of borrowing would be a little bit higher than that, but nowhere near 7%, I would imagine. When you come to the process of valuing, do you take a range of different methodologies and average? I suppose it's justification for using the 7%, and how do you check that against the other methodologies?
No, we do, Natasha. We actually have a methodology that requires us to, or policy, which requires us to have external valuations done on our properties on a three-year rotating basis. Quite often we do more than one third a year if certain factors in the economy say we should check these valuations. We basically use external values. We use a range of different methodologies, including DCF, to come up with those valuations. That's how the board gets comfortable. For those assets that aren't independently verified, we utilize the information that the external people have told us, plus our own internal benchmarks, and do an internal valuation on that. That's the methodology. I won't comment on the seven and the four. That's too hard for me to do it standing up here at the moment. That's the process. Very much independently verified by external parties.
Okay, yeah. The next question concerns auditor remuneration. Apologies, Jane, but the basic audits actually increased by about 20%, which seems excessive. I know there are changes going on in the business, but it's not to that extent. Can you justify why the fees have gone up significantly?
I knew you'd ask that question.
I know you guys workshop and think, what am I going to ask?
I know you're pretty good at keeping an eye on Jane's audit fees. I'm very glad about it. The main reasons are the increase in the size of our business and the increase in the forward workload that we have put in place and the partnerships that we've put together. They're the key drivers. Now our auditors have to, or are required to, audit some of the partnerships or all the partnerships that we have to ensure that they're all correctly accounted for. It's a whole new piece of work. There's been a range of other things that go along with that, some compliance matters and so forth that we've had to do because of a bit more complexity in our business. That's basically the reason. The rates increase is just in accordance with the auditors' moderate salary increases.
Okay, I don't entirely agree, but we'll accept that. Thank you. I'll let someone else have a go.
Thanks, Natasha.
Hello, Mr. Chair. Alan Golden, Australian Shareholders Association, holding proxies for 157 unit holders, about 2 million securities. As you mentioned and the CEO mentioned, you've recycled about $3.6 billion worth of assets since 2022. At the same time with your third party, you've done about $3 billion worth of third party equity. Fantastic. As you said, your business has changed. Your business is changing fundamentally, and as you said, this is the inflection year for that. You're now going to become, you're going to do a major expansion in logistics. In the next couple of years, your whole logistics portfolio will double the size of where it is today. I know you have partners with that, but it's still going to be a lot of expenditure. You're becoming a major player in the apartment buildings, not just with Waterloo, but also with the other ones.
You're also happily expanding your masterplan and land lease communities. At the same time, your debt level has been increasing. I saw in your operational update today, you said that the debt, the gearing level will rise in the first half, but by the end of the year, it's going to be moderate. That's the beginning of it. We're looking at the next, not just the next year, but the next two years in particular. You have very big capital commitments that are going to come up. What I want to know is, are you going to do a capital raising?
No.
No. Is that a guarantee for as long as you're here or as long?
No, it's a good point, Alan. I mean, we do have an excellent portfolio of assets to develop over the next two, three, four years. We'll do that with our debt levels and with our capital partners. We have strict guidelines around where our debt levels we want to be within that context. We model out the cash flows of our business over that period of time, and we model out the downsides that if certain things don't happen, how will we cope with all that? We do manage debt levels and sensitivities to those debt levels quite tightly. Tarun, do you want to add anything to that?
No, Chair. I think we have a very disciplined capital management strategy. We don't commence developments or other initiatives before we can have a secured debt and equity capital strategy like we've been doing progressively in our logistics pipeline, land leases. We've got now seven blue-chip capital partners, very large institutions from around the world that are supporting us in our pipeline. We'll remain very disciplined. Our main source of capital, as you noted, $3 billion of equity capital raised from institutional capital, which is our capital partners, that remains our number one priority. It's being supported by asset recycling because we are continuing to improve the quality of our portfolio. You'll always see us recycle the assets that have reached their optimum investment thesis, and we'll divest those. That's the second lever we're pulling.
Obviously, our balance sheet capacity, 20%- 30%, we are going to be within that target. Why it's going up in the first half is because, again, a lot of our settlements in the MPC are coming in the second half, but it should come back to the midpoint of our gearing range. We've also got, we are raising some shareholder capital, and we are very thankful for that through our DRP, which is very well supported, and some of the retained earnings as per their payout ratio. For us to get retained earnings, we have to grow earnings. If we don't grow earnings, we don't get retained earnings. That's how we think about it. There are multiple levers, but the main one is institutional capital partnerships.
Just on that, I do have a second question, a different one. Just on that, on the asset recycling, is there going to be a lot of recycling this year?
You should expect us to always look at the, you know, we've got 200 assets around the country. The ones at the bottom, as a good investment manager should, we are constantly looking at those. You should expect us to recycle some assets we would sell. We don't want to sell the assets we have low conviction on to our capital partners, so they will be sold on market. You should expect some. Last year, we sold about $200 million- $300 million, similar number this year. We'll recycle capital into partnerships. Last year, we did about $1 billion. I won't say how much it'll be this year, but we're targeting a substantial number again. You can see the business model's very active on those activities.
Right. Okay. My second question, as the CEO mentioned, your largest MPC exposure is in Victoria, and that there was good progress in what was happening in Victoria at the end of last year. In the update today, it said that has continued, that it's strengthened, which is wonderful, which is fantastic. The comment that I didn't quite understand was right after that, where it said that New South Wales is constrained by supply and affordability issues. I wondered, what supply issues are you talking about? Your access to land, or is it applications, or?
No, it's the supply of housing to the Australian community. It's getting enough properties zoned for housing into the pipeline so that the supply of housing is sufficient to meet the needs. That's basically what the supply is.
Is that a delay in approvals or just getting?
No, it's actually quite, the settings now are quite favorable for us, particularly in New South Wales and in Queensland. The governments there have realized they have to generate enough supply. The settings, and you would have seen it in those numbers that we released today, the settings for our MPC and land lease communities are quite favorable.
Okay. The affordability issue?
The more supply, the more affordable housing becomes. That's the key.
All right. Okay. Thank you very much.
There's a question on the back.
Good afternoon, [Darius Petschek.] I just have one easy question. One might be more difficult. The easy one, what's the average cost of debt at the moment?
It's about 5.3%.
5.3%. Okay. I was on a Transurban AGM last weekend. They had it at 4.5% just to compare.
We have a long-dated, it's not spot. We can get spot rate at that rate or lower, but we have a long tenure. The average expiry is five years. We have some long-dated bonds as we should to manage our risk.
You got some luggage along the way. Okay. My second question is in regards to the communities business, which we are doing a very good job trying to promote, which is great. I'm just trying to figure out the logic behind it because, like, if I look at Victoria now, it's some out west areas where Stockland is building houses, correct? Like Wyndham Vale. You can buy a brand new house, four-bedroom, for around $600,000, $650,000, right? If you want to buy one of those things, it actually costs you more money, like $100,000, $200,000 more. You don't buy the land here. What's the, like, I understand, I mean, the more you can sell it at a higher price, the better for us. How does that work? If I can.
I think that, yeah.
Yeah, you raise a good point. It really depends on trade area by trade area and the amenity we offer for the land lease communities that you're referring to. Typically, the Halcyon brand, which is a brand in the land lease communities business, is more upper to premium brand. We are targeting that price point. It has our communities positioned with a lot of facilities that wouldn't be there if you're just buying a house in a normal development. We have swimming pools and cinema houses and yoga rooms, etc. People pay a premium for that. Also, the houses are of a certain quality that we develop. It's where we position the product. Typically, we're selling at around somewhere between 85%- 110% of the median house price in that local area. You really got to look at suburb- by- suburb to see what the relative pricing is.
We have good demand coming through, as you saw in our quarterly report this quarter for land lease product.
I see. Thank you. You almost convinced me to buy one.
Sign up on the way out. Any more questions? Any questions online?
Yes, Chairman. We've got three questions from Mr. [Main], [Stephen Main], that I'll read out for you. The first question, Chair, is could the CEO please comment on the huge $4 billion+ price that Living Co, backed by the Korea National Pension Fund, paid for Aveo's 67 retirement village land lease properties in 2024, 2025? His questions are, what does that suggest our land lease portfolio is worth? Did we participate in the [AVEO tender]? Does the CEO believe the ACCC would have allowed us to buy that business? Once the dust settles on the land lease exit from its stake in Caton, which is Australia's largest retirement living operator, where will we sit in terms of market share in this important growing sector? His final question to that is, is it fair to assume the ACCC would be unlikely to allow any of the three biggest players to merge?
Right. There's a lot in that question.
There are a lot of questions there, Chair.
A lot of that is, thank you, Stephen. The parts around speculating value, I don't think we'll comment on. Participating in the AVEO, no, we didn't participate. Yep. What was the last one?
The last meeting was in relation to the ACCC's view on the retirement living sector and whether it would allow any of the three biggest players to merge. Obviously, we're not participating in that market, so I don't think it would be appropriate for us to comment on the regulator's views there, Chair.
Did we get all the elements of the question?
Yes, I think that addresses those questions.
Yes, thank you.
Chair, the second question from Mr. Main related to, actually, we've had another question come through. The second question from Mr. Main is in relation to the meeting protocols today. He congratulated the Board in relation to hybrid AGMs in relation to our proxy disclosure. He's raised a question in relation to providing some scheme-like disclosure around the number of security holders that vote for each resolution, and I can confirm we'll provide that information to the ASX this afternoon. There's no further action required on that.
Thank you.
Two final questions I'll read out now. One relates to Mr. Newton. Mr. Main congratulates Mr. Newton on his nine years of service for the Board. His question was whether it would be possible for Stephen to comment on what he regards as best practice, on what he regards as the best two Board decisions made during the time on the Board, and does he have any regrets?
No, Stephen's indicated that no, he won't comment, but he thanks Stephen for the congratulations.
Thank you, Chair. Final question from Mr. Main, also relating to another director. The question is, after spending eight years as CEO of our competitor GPT, Bob departed the board last year. Mr. Main's questions relate to the remuneration for Mr. Johnston. How has relatively recently appointed independent director, Bob Johnston, managed the situation of having a large legacy equity position in one of our largest competitors? Has he sold down to avoid a perceived conflict of interest, and has the Chair taken an interest in this issue, or is it a private matter?
Oh, look, I don't think we're going to... O h, Bob's saying he has sold down. Thank you, Bob. You didn't need to comment, but yes, Stephen. Bob's indicated he sold down. I think they will leave it at that.
Thank you, Chair. Mr. Main did comment that he does believe Bob has been a great hire, but it is not common for CEOs to retire and quickly join the board of a competitor. That's the focus of his question.
You've got to snap up good people when they're there, Stephen.
Excellent. Chair, we've got no further questions online.
Great. Thank you, Stephen. Okay, I think we'll continue. No further questions. We'll note the Financial Report and Director's Report and Auditors' Report and move on to other business. We will now move on to the election of Non-Executive Directors. Resolutions two and three relate to the election of Non-Executive Directors for Chris and Penny. The biographies for each director are set out in the notice of meeting. I'll hear from each of them, and I'll propose a resolution for each of them in turn. Chris, would you like to come up?
Good afternoon, everyone, and thank you for your time today. My name is Chris Lawton, and I'm seeking election as a Non-Executive Director at Stockland following my appointment in January earlier this year. My prior career was in professional services, with the last 25 years spent as an audit partner at EY, focused on the real estate sector. During that time, I led EY's Oceania and then Asia Pac real estate sector teams. I've had the opportunity throughout my career to work with a broad range of real estate companies, both in an audit and a transaction role, who have been involved in most asset classes within the real estate sector.
I believe through my experience in financial reporting, controls, risk management, and compliance, together with an exposure to a broad range of business models within the real estate sector, I can make a meaningful contribution to Stockland as it pursues its strategic objectives. Since my appointment, I've had the opportunity to visit a number of Stockland's assets and ongoing projects and met with local teams and management. That's given me a great insight into the culture of the organization and the alignment to the group's strategic objectives. I'm excited at the opportunity to contribute to Stockland and look forward to representing the security holders in my role as a Non-Executive Director. Thank you.
Thank you, Chris. Penny, would you like to come up?
Thanks, Tom, and good afternoon, fellow security holders. My name's Penny Winn, and today I'm seeking your support for election as Non-Executive Director to the Stockland Board, having joined earlier this year. I've had the honor of serving as a Non-Executive Director for over 10 years on many publicly listed companies such as Ampol, CSR Ltd, Coca-Cola Amatil, and the Goodman Group. I've recently joined the Boards of Endeavour Group and Super Retail. The experiences I've gained through my non-executive career have taught me valuable lessons, lessons that I believe will serve me well, help me serve you well, whatever challenges and opportunities may come along. Prior to commencing my non-executive career, I had a 30-year career in retail, leading business divisions with specialization in logistics, information technology, customer engagement, business transformation, and online retailing. I've worked for Grace Bros, Big W, Woolworths, Myer, and Walmart.
Stockland's a great Australian company with over 70 years of history developing and operating assets and communities that are an integral part of life for so many Australians. The strategy developed by the current leadership is both exciting and attainable, and its execution is being very well supported by a hugely talented team. Indeed, since joining the board in February, I've had the privilege of visiting many of our sites and projects and have met with many of our great team members. I've been truly impressed by both the professionalism and the passion for the business at all levels of the organization. I believe I'm strongly placed to support this business during its next stage of its journey, given my experience in the important logistics and retail segments.
I hope with your endorsement today to be able to provide sound advice and good stewardship to the Board and senior leadership of Stockland as it navigates what can only be described as a very exciting future. Thank you.
Okay, we'll start with Resolution 2 . It's for the election of Chris Lawton to the Stockland Board. The resolution is shown on the screen. The election of Chris is unanimously recommended by the Board. Are there any questions?
Yes, Mr. Chairman. We'll be voting our own directed proxies in favor of this nomination. It's an ongoing problem, and this nomination just highlighted it. The lack of transparency of companies about the experience of their existing directors, their gaps that they have in their Board, it just seems to be getting worse. I mean, here we have a good example to my mind, of course, as you know, because we've discussed this. If the company had been transparent and said that Mr. Newton is leaving this year, which we knew, that yourself and Mr. StevenB are going to be leaving next year, therefore your board is going to have a requirement for a chartered accountant with real estate experience. Mr. Lawton fills that perfectly. Why wasn't it said? The simple words. No one would have been upset about anything. I just don't understand.
There's always this idea that the Board knows best, and you know, you guys are very knowledgeable, and ladies, I'm sorry. You're very knowledgeable, and you're very professional, but just share some more information. That's just a comment or whatever.
Okay, thanks Alan. We try and be pretty open in the, you know, the directors have a term at Stockland for three periods, nine years, and then the preference is that they stay the nine years and then they retire. There's been an exceptional circumstance in the past where that wasn't the case, but that will, going forward, I would suggest it would be the process. The Board spends a fair amount of time thinking through what it needs going forward in terms of director skills, and that allows for people that will be retiring at different stages into the future, and that's really the Board's responsibility. We try to be as open as I can. I told shareholders a while ago that this would be my last term, and it will be.
I'll be retiring in 2026, I think I told the AGM two years ago or whenever it was. We try to be pretty open, but I think the discussion about skills and where we need new director skills, that's a Board matter, and once we conclude on it, we're quite open about telling shareholders what it is. We can't do it too far in advance because we still have people on the Board that are still there. We may not be able to find a replacement for them in the market, so we are cautious. Any other questions on Chris? Any questions online?
No, no online questions, Chair.
Great. For those that have not as yet placed their vote, please take a minute to cast your vote for resolution two via the online Lumi platform or the electronic voting device. There's no more questions, so I'll refer to the proxy meeting on the screen. Congratulations, Chris, on your election. Well done. Resolution 3 is for the election of Ms. Penny Winn to the Stockland Board. The resolution is shown on the screen. The election of Penny is unanimously recommended by the Board. Are there any questions from the floor of this resolution?
Hello, Mr. Chairman, Natasha Lee again. Firstly, I'm happy to support Penny, but I saw there was a bit of a hit against her, 5%. It's not huge. Was that one proxy advisor or institution, or what was the...
We don't normally detail who's voted for and voted against, but yeah, it's only 95% for. Yeah, yeah. That's the key metric.
Okay, you're being a bit cagey, but the other thing is, look, I understand the argument about skills and things like that. You try and have a reasonable amount of gender diversity on boards, but you know, not only you, but most of the Boards do lack other forms of diversity, and I think that really you should be making more of an effort to having a board which better reflects the Australian community, which are your customers and security holders.
Yeah, no, I agree. In fact, I think I've raised...
I think I've raised...
No, you have, and rightly so. On gender diversity, the Board will have an opportunity. We'll have a few directors retiring just through the normal course over the next two to three years, and I think the Board will have an opportunity to, I think we're about 30% now, to get to 40%, 40%, 20%, which is our goal. That will be, I think that's a good opportunity that the Board shouldn't miss. On other diversity, we were discussing that at the Board today and saying, you know, it's very hard to get more diversity on the Board, but it's certainly in the back of our thoughts, on the front of our thoughts, because we're looking for new directors.
Okay, thank you.
Alan, yeah.
Mr. Chair, I like the idea of a director who's got actual operational experience. I think that's fantastic, and I congratulate Ms. Winn for that. I do have a problem, and I will be adding all of our undirected proxies to that small number against this resolution. The reason is, as Ms. Winn said herself, she's an experienced director. She's been a director for over 10 years. She's been a director with a number of large companies in this area. When she joined the Super Retail board, it was at the beginning of the complaints made about the CEO. I know she just arrived virtually, but I would say as an experienced director, when she comes into a situation like that, she's going to ask why. Why was it done this way? What was the situation?
As the situation expanded over the next 20 months, again, as an experienced director, I would think that she'd be questioning. We're talking about the complaints coming from the senior person in the company responsible for governance. If that senior person and another person are saying there's a governance issue, going and having a hurried outside external examination isn't really going and acting as a director in the interests of everyone. That's why we're going to vote against it. I'm sure that if I asked Ms. Winn, hopefully she would tell me she's learned a lot from that experience and, you know, that it was a very helpful learning, but we just have that problem.
Okay, thanks, Alan. Obviously I can't comment on that experience in Super Retail. It was complicated, messy, all sorts of things, but anyway, thanks for your question. Are there any other questions from the floor? Okay, for those, there's nothing online.
No questions online, sir.
For those that have not as yet placed their vote, please take a minute to cast your vote for resolution three via the online Lumi platform or the electronic voting device. If there are no more questions, I'll refer to the proxy voting, which is shown on the screen. Congratulations, Penny, on your election. Well done. Resolutions 4 and 5 relate to remuneration. Our executive remuneration framework is designed to reward executives where strategy delivers results in value creation and superior long-term security holder returns. The Board spends considerable time each year assessing the performance and remuneration outcomes for the group and senior executives and considers a range of quantitative and qualitative factors in its decisions, which we have set out in detail in our remuneration report.
The Board is pleased to see that the reward framework and outcomes are aligned with security holder returns and that it is working as intended. Resolution 4 seeks your approval of the remuneration report for FY 2025. The resolution is shown on the screen. As security holders will know, this is an advisory non-binding resolution, but your Board gives great consideration to the views of our investors on the important subject of executive remuneration policy. Are there any questions from the floor? Nope. Have we got any questions online?
Chairman, we have no questions online in relation to the remuneration report.
Okay. If you have not already cast your vote, please take a minute to cast your vote for Resolution 4 via the online Lumi platform or by using the electronic voting device. If there are no more questions from the floor, I'll refer to the proxy voting, which is shown on the screen. As you can see, over 97% of the proxy votes have been cast in favor of the resolution. Our next resolution, Resolution 5, relates to the grant of performance rights to Managing Director and CEO, Tarun . The resolution is shown on the screen.
The Board proposes to offer participation in the performance rights plan to the Managing Director, Tarun Gupta, who is eligible to participate in the plan as an Executive Director. Tarun's participation in the performance rights plans forms part of his usual remuneration arrangements since commencing his role as Managing Director and CEO in June 2021. The Board, excluding Tarun, believe that his participation in the plan on the terms and conditions described in the notice of meetings is an appropriate equity-based incentive given his responsibilities and commitment. In line with the ASX listing rules, security holder approval is sought for the grant of these performance rights to Tarun, the details of which are set out in the explanatory statement attached to the notice of meetings. The directors, other than Tarun, unanimously recommend that security holders vote in favor of this resolution. Are there any questions from the floor? Alan?
Mr. Chairman, I'll be casting our undirected proxies in favor of this one, as I have with the remuneration. The structure is great. I still have a question about the hurdles. If we look at this particular one, where I have the problem, the idea of going and getting 300% of your fixed annual remuneration is very generous. I'm sure that you all believe that the CEO deserves it, and that's great. My question is, if you're going to give that amount of bonus, you've got to have some big hurdles. I have questions on both of your hurdles. That 8% actual TSR sounds nice unless you look at the record of the company. It's not that big. It's not that big for a lot of decent companies. It's big for a small company, but not for a company that's in the top 50. It's not.
That's first. The second one, you're doing a comparative group of other listed REITs. Yep. Great. I just have a problem with, yeah, I understand excluding Goodman, that's a nice one to exclude. This year it would have been good because he didn't perform very well as far as TSR, but there's a lot of differences. You're trying to do the same model in the way that you're funding now. It's very similar to what Goodman has been doing for years, and as Ms. [Windham] would know better than me even, this is very successful. It's different. A lot of their money is overseas. A lot of their developments are overseas. I understand those differences. A lot of the other ones, some of the other ones you have excluded, I don't see where the differences are compared to other ones you have kept in.
I just think that there's been a lot of little picking here and there to go and get a comparative group. Didn't like that. Okay?
Okay. Thanks, Alan. Let me cover the benchmarks eight t o 13, I think it is, on absolute TSR. Just bear in mind the LTI hurdles for Stockland for the five years prior to Tarun starting never vested. When Tarun and the new leadership team started, we needed a team and a strategy that would deliver strong TSR for Stockland. As I mentioned, it was 62% or 63% total shareholder return over the last three years. They are working. The higher incentives only kick in at the higher levels of return for both absolute and relative TSR. In regard to the index of companies, we spend a lot of time making sure that the comparators that are in there are relevant to our business. Some of the companies just aren't relevant, such as Tata Hall. Nearly all the other companies in the index are in. We do spend time on it.
We haven't changed it. It's been pretty steady over the time of setting those hurdles. I think we've got a pretty robust structure. It's working for shareholders. When I was on the roadshow, the majority, and all investors, were very comfortable with the structure and the way it worked. We do, and we'll review the hurdles every year as part of our RAM review. Any other questions from the floor? No? Online, Katherine?
No questions online, Chair.
Okay. Once again, please take a minute to cast your vote for Resolution 5 through the Lumi online platform or by using the electronic voting device. If there are no more questions, I'll refer to the proxy voting, which is on the screen. As you can see, over 98% of proxy votes have been cast in favor of the resolution. That was the last item of formal business. All persons wishing to cast a vote who have not already done so should now place their vote through your electronic voting device or the online Lumi platform. If you need assistance in the room, please speak to a Computershared staff member. For security holders joining online, if you need assistance with voting, please refer to the instructions available in the online meeting user guide available on our website.
I will just take a small pause in proceedings to fill out any final voting. There's a couple of people voting. I think we're okay. Thank you, ladies and gentlemen. The polls for voting will now be closed. The final results will be announced to the ASX later this afternoon. That concludes the business of the meetings, and I will now declare the meetings closed. Thank you for your attendance and good afternoon.