Good morning and thank you for joining us for Vicinity Center's results call for the 12 months ended 30 June 2021. Before we begin, I'd like to acknowledge the traditional custodians of the lands on which we meet today and pay my respects to their elders past, present and emerging. I extend that respect to Aboriginal and Torres Strait Islander peoples on the call today. Joining me on today's call are Peter Huddle, Vicinity's Chief Operating Officer and Adrian Chai, our acting Chief Financial Officer. And I'll start today on slide 4.
2021 was obviously a challenging year for Vicinity, but also in many ways a year of solid progress and execution. That being said, our headline financial result demonstrates the heavy toll which COVID-nineteen has indeed had on our business. In total, we have provided some $231,000,000 of rental support to retail tenants since the onset of the pandemic and in many cases that support extended beyond our regulatory obligations under the respective SME codes. However, while retailer confidence continues to remain fragile, we observed a strong uplift in the number of leasing deals completed, particularly in the second half of the financial year. Retailer demand for our premium CBD centers was particularly encouraging and this further supports our favorable long term outlook for these assets.
And despite the constant disruption to trade for our customers, Australians displayed an overwhelming preference to return to their favorite retail destinations when able. We delivered on our strategy to keep our centers full with 98.2 percent occupancy, which is up 20 basis points since our interim result. And despite the distractions and challenges, we maintained strong financial stewardship and a prudent approach to capital management. Consequently, we enter FY 'twenty two with the capacity to withstand further COVID disruptions, while taking steps to drive a renewed growth agenda, and we will expand on that theme later. Turning to Slide 5, and adding to our cautiously growing optimism is the favorable macroeconomic environment in Australia.
Despite the challenges of the past 2 months, the Australian economy has had a strong recovery overall, evidenced by near record high consumer confidence, rising house prices, the unemployment rate being below pre pandemic levels and job advertisements at close to 13 year highs. Additionally, consumers have begun to draw down on the high level of savings accumulated at the height of the pandemic. Turning to Slide 6. And in order to manage the constantly evolving landscape in 2021, we took the necessary steps to ensure our centers remained safe and open. Our targeted support of retailers, which extended beyond the requirements of the SME code, resulted in more than 6,700 COVID lease variations.
Adding to this, our leasing executives completed over 12.50 new leasing deals, mostly in the second half of the financial year, which was well ahead of the prior year. Of all new leases, more than 3 quarters were on standard terms of 5% fixed rental growth. Additionally, after strengthening the balance sheet with the equity raise in June 2020, we maintained our investment grade credit ratings with Moody's upgrading their outlook for Vicinity from negative to stable in June this year. While being prudent with our capital, we nevertheless accelerated mixed use and retail development planning and approvals to put ourselves in the best possible position to advance high priority development projects when the market recovers. We also met retailer demand for flagship stores in premium CBD centers as retailers consolidated their networks.
Additionally, our recently formed insights and innovation team delivered a data driven leasing optimization tool, which has already enhanced our leasing capability and provided insights into other key business initiatives. In summary, while we navigated the short term challenges of COVID, we also managed and planned for the longer term, and I will share a refined strategy later in today's presentation. Turning now to Slide 7, and fundamental to Vicinity's strategy is our approach to sustainability. Vicinity continues to be recognized and highly ranked by independent sustainability agencies. This year, Vicinity was one of only 3 Australian companies included in CDP's Climate A List.
We were also ranked 3rd of all Australian retail companies in the GRESB survey, which includes unlisted funds. And we ranked 7th amongst our global real estate peers in the Dow Jones Sustainability Index. We published our 1st modern slavery report this year and further enhanced our approach by identifying and addressing modern slavery issues in our supply chain. Additionally, we furthered our commitment to stamping out modern slavery by becoming a signatory to the United Nations Global Compact. We are also now well progressed towards our 2,030 net zero target and strengthen our commitment to managing climate related risks and opportunities with our formal support of the TCFD.
Could I also note that the health and well-being of the communities in which we operate has never been more important to us than they were over the past year. To ensure customers were able to buy essential goods and services during periods of lockdown, we kept our centers open and COVID safe. We also assisted in the broader health response by leveraging our assets to facilitate 8 COVID testing clinics. And last month we opened a vaccination hub in Victoria. I'm also pleased to announce our recent partnership agreement with the Australian Red Cross.
This is an important alliance as we focus on community youth engagement and employment. I'll now hand over to Peter Huddle to take you through our operations this year.
Thanks, Grant, and good morning, everyone. I will start on Slide 9 with a review of the key market trends and our portfolio performance. While the prolonged Victorian lockdown and to a lesser degree, multiple state based sporadic lockdowns did cause some portfolio disruption throughout the year, I am pleased to report that in all instances, our customers have been quick to return to their favorite shopping centers post lockdown. Shopping, however, has become more purposeful since the onset of COVID-nineteen. Consumers are doing more research online and while they are visiting with less frequency and are less inclined to dwell, their spend per visit is much higher.
As a result, this trend in consumer behavior appears to favor retailers with strong omni channel businesses, which are typically national retailers. In addition, the luxury and premium retailers are benefiting from spending being diverted from overseas travel. These trends are reflected in our sales and visitation numbers throughout the year. At a total portfolio level, whilst visitations in the June 2021 quarter sit around 20% below 2019 numbers, sales were only 3.3% down. Outside of Victoria and our CBD assets, where the COVID impacts have been comparatively low, visitations are down around 7%, but sales were up 11.9% for the same quarter.
Turning to Slide 10. With conditions improving, particularly in the second half of the year, we saw a consequent improvement in our cash collection rate with the June quarter reaching almost 100% for majors and national retailers and there is minimal outstandings remaining from the first half of FY twenty twenty one. Following the cessation of the commercial code of conduct, the industry was able to focus on tailored assistance for retailers who generally required it and remove the element of commercial opportunism experienced under the code. Retailer debt for the second half that is rent that has not been received or waived largely relates to retailers that continue to be impacted by the lockdowns and we are actively working with them to manage through this period. Where COVID variations have been executed with retailers, there is a higher cash collection rate of 96% of agreed billings.
Whilst for retailers where we are still negotiating or finalizing the COVID variations, the collection rate is lower at 85%. As retail conditions improved, particularly in the second half of the year, only 10% of leases had COVID rental assistance in place in June. This is down from 73% back in April last year. Our focus has always been on supporting retail categories and geographies most impacted by this pandemic, and we will continue to provide a balance of support measures to our retailers that require assistance regardless of government legislative intervention. We are carefully monitoring the present impacts of the Delta variant and are in constant dialogue with our retailers regarding its effects.
Turning to Slide 11. Despite COVID disruptions during the year, we have enjoyed a very active period of leasing that saw the team complete almost 350 vacant shop leases and negotiate a substantial number of key national retailer lease renewals for stores previously on holdover. The team executed in excess of 12 50 leasing deals for the year, which is more than 50% higher than FY 2020. For the second half of the year, we completed 15% more leasing transactions compared to the same period in FY 2019 despite numerous sporadic lockdowns across the country. If you included the non standard leasing deals such as lease extensions, tenant remixes and project leasing agreements, the number of deals for the year jumped in excess of 2,000.
This increase in leasing activity was part of our strategy to maintain strong occupancy levels and keep our centers vibrant. Occupancy rates improved 20 basis points since December 2020 to close the year at 98.2%. Whilst leasing spreads have softened compared to FY 2020, pleasingly, we have largely maintained our standard lease structure with 3 quarters of all new leases achieving 5% annual reviews. In addition to high leasing activity for the period, the team also concluded over 6,700 short term COVID lease variations across the portfolio, which saw approximately $230,000,000 in rental support to our retailers. To date, the level of retail administrations remains low with 24 stores in the portfolio impacted this financial year.
This, of course, was assisted by government stimulus, temporary changes to insolvency laws and retailer support from landlords under the SME code and beyond. Subsequently, we remain cautious around potential for future administrations as we take into account the most recent outbreaks of COVID and associated lockdown periods. Turning to Slide 12. I want to quickly touch on the performance of our portfolio outside of Victoria and our CBD assets where the COVID-nineteen impacts have been comparatively low. Note this analysis is for the 2021 financial year and hence does not reflect the impact of the more recent COVID-nineteen Delta outbreaks.
What this analysis does show is that strong sales strong growth in sales in the second half of FY twenty twenty one is reflective of the recovery in retail in non CBD locations once the pandemic risks have passed, the benefit of higher discretionary spending with limited ability to travel and the continued attractiveness of bricks and mortar retail in COVID normal states. The key takeaway is that while visitations remained 8% below pre pandemic levels, a higher spend per visit is delivering strong sales growth and importantly was delivered despite 25 days of sporadic government enforced lockdowns in Western Australia, South Australia and Queensland. By contrast, on Slide 13, we acknowledge that the pandemic has had and continues to have a material impact on our CBD centers. Like the rest of the portfolio, visitation improved in the second half of the year, but momentum slowed during these lockdown periods, all when significant restrictions remained in place, including limits on commercial occupancy and the mandatory wearing of face mask. Whilst commercial workers and international tourism remains important for our CBD business, our research identifies that domestic day trippers are actually the most important customer segment.
We believe this segment will recover far quicker as more CBD events and activities return even with some restrictions in place. In addition to this, the concerted and aligned push by the federal and state governments to accelerate the rollout of the COVID-nineteen roadmap should lead to the return of the commercial CBD worker en masse, an increase in domestic tourism to CBDs and in time the opening of international borders. Our assets are extremely well placed to thrive in this environment. With this in mind, our focus has been on maintaining and securing a best in class leasing mix for our CBD assets. And turning to Page 14, we see this as a unique opportunity to partner with domestic and international retailers to secure a prestige and new to market concept, which will position ourselves to maximize opportunities during the recovery of CBDs.
Over the past 12 months, we've partnered with retailers and opened a number of significant flagship stores in Sydney, Melbourne and Brisbane. These are represented in categories such as luxury, athleisure, ready to wear fashion, beauty and technology with examples shown on this slide. Turning to Slide 15. Our DFO portfolio was also significantly impacted during COVID lockdowns due to their largely discretionary retail spend profile and natural link to the tourist economy. However, post lockdown periods saw strong rebound in visitations and sales as the DFO proposition became even more attractive to consumers.
So overall performance across this segment remains strong with occupancy of 98% being largely in line with our portfolio. Importantly, leasing spreads were positive highlighting the demand in this segment despite MHT being down by approximately 10% for the financial year, driven largely by lockdowns in Victoria. For consumers, there is a clear value proposition, which makes our DFO assets resilient through cycles. For our retail partners, DFOs represent not only a key component of their distribution channel, but also the inventory management, which has been of particular importance over the past year when supply seasonal supply chains were disrupted by lockdowns. As such, our portfolio strategy includes a focus on continuing to build on our strategic advantage in this space with plans to develop and grow our premium outlet portfolio exposure going forward.
Turning now to development on Slide 16. And while Vicinity made the conscious decision to constrain capital expenditure as it adjusts to operating in a pandemic this year, we still made significant progress on its development pipeline. Earlier in the year, we completed the expansion at Ellenbrook and saw Kmart introduced into this important Northeastern Perth growth catchment. And at The Glen in Victoria, we completed the final retail stage of the development and residents started moving into the 550 apartments above the center, which stem across 3 completed residential towers. During the year, our main focus was on fast tracking planning and approvals at both local and state government levels to progress the commencement of a number of transformational mixed use and retail developments.
We received 12 town planning approvals this year and we have now moved to de risk these projects by pre leasing a proportion of the income prior to construction commencement. With a large weighting to non retail development in the pipeline, we currently have planning approval for 5 office towers. Timing for these projects again remains subject to tenant pre commitments, which we are being actively pursuing. We have also commenced a number of retail reconfiguration projects, replacing dated majors offerings with a combination of either stronger discount department stores, on trend mini majors or creating precincts around new concepts, all of which are expected to generate a far more attractive consumer offering and therefore a superior commercial outcome. And finally for me on Slide 17.
This slide outlines a number of our major near term projects planned. At Chadstone, construction is well progressed on a major car park expansion. We are establishing required car parking first in order to accommodate imminent future development activity. This includes an expansion of our retail offering, entertainment offering and the construction of the proposed 20,000 square meter Middle Road office tower. The tower is shown on the top left of this slide and we are presently undertaking market pre commitment activities for both developments.
At the top right, we have received planning approval to develop 30,000 square meter office towers at Bankstown Central. We are replacing an existing supermarket, revitalizing the fresh food offer in Andean and creating a mini major precinct. These projects allow the execution of further major mixed use development activities at Bankstown in the future. At Box Hill, we have commenced consolidating retail into the South precinct, which includes the introduction of a new poles, mini majors and a restaurant offer incorporated into an aesthetically enhanced mall. This work is a prelude to the major mixed use development planned for the North Precinct, which is progressing through relevant planning approval assessments.
At Galleria, we plan to commence a significant ambiance upgrade of the entire center as well as an expansion of the food, entertainment and leisure precinct in this financial year, while at Bayside, we have plans for 2 office towers, which is subject to tenant pre commitment. We continue to work through plans for Chatsworth Chase in Sydney. Delaying the project at the commencement of the pandemic enabled us to work through both rescoping and resequencing of the project, which has significantly reduced the project costs. The project will acquire a lodgment of an amended DA, which we plan to submit during FY 2022. Concurrently, we continue to work on securing binding agreements with key retailers to enable its commencement.
I will now hand over to Adrian to provide an overview of our financial results.
Thanks, Peter, and good morning, everyone. I will start on Slide 19. And COVID-nineteen continued to have a material impact on our FY 2021 financial results. However, we were pleased to see a strong rebound in the second half as conditions improved. At the statutory profit line, the full year net loss of $258,000,000 was an improvement compared to last year as valuations this year progressed towards stabilization.
FFO was up approximately $39,000,000 or 7.4%. The key drivers of this increase were the $60,000,000 uplift in NPI and a reduction in interest expense of $32,000,000 The reduction in interest expense was due to the lower drawn debt following the equity raising in June last year and the interest rate swap restructure, which benefited the first half of this year. Cost control remains a key focus. Non salary related discretionary costs were flat against last year and was approximately 11% below pre COVID levels. The increase in gross corporate overhead this year was principally due to the reinstatement of the STI program and a material increase in insurance costs.
At a net overhead level, this was further impacted by a reduction in internal recharges due to the lower levels of development activity during the period. FY 2021 maintenance CapEx and leasing incentives increased by $13,000,000 This was mainly due to a strong momentum on leasing deals completed, as outlined by Peter. We continue to focus our maintenance capital spend on essential expenditure, but we do expect some catch up spend in FY 2022. The FY 2021 distribution per security of $0.10 is a 30% increase compared to last year. As previously announced, $0.025 of the FY 2021 distribution is attributed to one off items, which we don't expect to repeat into 2022.
Moving to Slide 20, where I will provide some further detail on our NPI, including estimated waivers and provisions. It was pleasing to see a strong rebound in NPI in the second half as trading conditions improved. Waivers and provisions reduced to around 8% of gross billings in the second half versus approximately 22% in the first half. We also recognized a $75,000,000 write back in FY 2020 waivers and provisions the full year compared to the estimated position at June 2020. This favorable movement was due to improved cash collections and reduced waiver requirements relative to our expectations last year.
On a full year basis, due to our portfolio waiting for Victoria and the prolonged lockdown experienced in that state in FY 2021, waivers and provisions were higher compared to last year. Now to Slide 21 and valuation outcomes. Overall, in the 6 months to June 2021, we saw a modest net valuation decline of 1.3% or 181,000,000 dollars This compared to a net valuation decline of 4% in the first half. Although we believe the long term fundamentals are favorable, the CBD portfolio saw a decline of 3.7%, reflecting the continued impact of COVID-nineteen in the short term. Conversely, the DFO portfolio increased in valuation, reflecting the strong ongoing demand from retailers and consumers for this product.
The neighborhood portfolio also increased in value, reflecting the continued resilience of non discretionary based retail assets in the current market environment. Slide 22 highlights the strength of the balance sheet. Gearing was 23.8 percent at June 21, and we have $2,400,000,000 of available liquidity. Our balance sheet strength enables us to navigate through periods of heightened uncertainty, and it also provides us capacity to selectively pursue growth opportunities. Our debt portfolio remains well diversified, and we have no debt maturing in FY 2022.
As you can see, the majority of FY2023 and FY2024 maturities relate to undrawn bank facilities, a number of which were favorably repriced and or extended during the period. Our weighted average cost of debt for FY 2021 was 3.62%. Excluding the swap reset benefit, which positively impacted the first half, our full year weighted average cost of debt was 4.35%. This is more representative of where we see our cost of debt going forward. We retained credit ratings that are stable with Standard and Poor's and A2 with Moody's, which recently changed its outlook from negative to stable.
Now to Slide 23, and given the ongoing uncertainty, we are not in a position to provide FY 2022 FFO or distribution guidance. However, I would like to provide some high level directional comments on our outlook for FY 2022. As I mentioned earlier, we have highlighted several one off items that benefited this year and we don't expect these to recur in FY 2022. Given the continued impacts from the Delta variant, both domestically and offshore, we anticipate continued uncertainty until the threat of lockdowns diminishes. So we do expect a continuation of challenging trading conditions for our centers while lockdowns are in place, which will require continued support for our COVID impacted retailers.
Although we continue to navigate through the impacts of the pandemic, we see the importance of investing for future growth. This includes some additional investment in organizational talent to drive our growth strategies, and we are forecasting a modest increase in net corporate overheads. For FY 2022, we are forecasting AFFO capital in the range of $110,000,000 to $120,000,000 This is elevated compared to previous years due to an anticipated higher leasing deal count and some catch up main capital. Despite the current uncertainty, we're cautiously optimistic that once the Fed of lockdowns diminish, the rebound in consumer visitation and spending will be rapid. I will now ask Grant to take you through the summary.
Thanks, Adrian. And turning now to Slide 25. And as we've discussed, FY 2021 was a challenging year, but also one of progress across the organization despite the challenges of the pandemic. Of course, even before the pandemic, our industry was facing a number of structural shifts. These included the increase in online and omni channel retail, retailer preference for flagship stores in premium centers and the need to invest in data, digital and technology solutions.
Of course, in many respects, the pandemic accelerated these shifts. And so, while our vision of creating market leading destinations remains unchanged, Vicinity now also requires a refined strategy, which will both drive our existing vision and also address the structural shifts, which are clearly occurring. Indeed Vicinity must adapt to these structural shifts by transitioning from a pure retail REIT to a forward thinking real estate business. To achieve this, all of our 59 retail assets must be leveraged more creatively and effectively to deliver additional income streams and ultimately greater value for security holders. Moving forward, our definition of assets will expand to include under leveraged and in many cases unacknowledged assets and capabilities.
These unacknowledged assets and capabilities include over 1,500,000 square meters of developable area, which today is used primarily for on-site parking. More than 340,000,000 visits to our centers in FY 2021 alone. A growing customer database of over 1,000,000 members, sector leading data and digital technologies and platforms, and 23 strategic partners representing approximately 9,000,000,000 in external assets under management. Turning to Slide 26. By leveraging these unacknowledged assets, we expect both to grow our core business and create new revenue streams from adjacent opportunities.
Vicinity is in fact already achieving solid performance from existing adjacencies such as solar, media and car parking, But an opportunity also exists to pursue more products and services in the areas of logistics, data, automation, artificial intelligence and energy. In addition to these new adjacent opportunities, our mixed use development program is by now well established and will be an increasing contributor to valuations and MPI over time. Similarly, our existing funds management platform includes a network of 23 strategic partners, providing a solid foundation to build our 3rd party capital platform. Providing the bedrock for all of this is our strong balance sheet, which will be we believe enable us to withstand ongoing COVID disruptions while repositioning our business for future sustainable growth. Turning to slide 27.
And as we transition from a retail REIT to a forward thinking real estate business, we will continue to optimize and grow the core retail portfolio, continue to increase our exposure to premium and DFO assets, continue to execute on significant mixed use opportunities, continue to invest in data, insights and innovation to support existing and newly identified adjacent opportunities deepen and expand our relationships with strategically aligned capital partners and most importantly invest in our organization creating a high performance culture. Turning to slide 28 and in conclusion. Our near term focus is on the delivery of our refined strategy, which to reiterate will include optimizing the performance of our existing retail assets, recommencing development activity and increasing our focus on funds management and adjacent products and services. The success of all of these will be underpinned by maintaining our strong balance sheet and continuing to invest in our organization and people. However, while our medium to longer term outlook is optimistic, our short term outlook remains uncertain as some states continue to grapple with lockdowns and COVID outbreaks.
Therefore, we are not presently in a position to provide earnings or distribution guidance for FY 2022, but we'll continue to monitor prevailing conditions and provide further updates as appropriate. We'll now open up the lines for any questions and we would appreciate if you could limit yourself to a maximum of 2 questions to allow time for others.
Thank Your first question comes from Lou Parank of Jardan. Please go ahead.
Yes, good morning. Two questions, Siadette. The first one, just on this new strategy or refined strategy,
what does that mean in
terms of are you going to hire more people, different people, replace people? And what does that mean for the cost base and for your CapEx plans just in the next 12 to 24 months?
Yes. Thanks, Lou. Grant here. What we do already is actually incubate new ideas and we've done so probably successfully in 3 areas already, which is solar energy, digital sales of media and also car parking. The incubation program is now formalized in an innovation team, which is led by Justin Mills.
They are tasked with actually developing these new ideas and scaling those. And that has actually been established, I think, since November of last year. In terms of your question on overheads, we are actually adding additional resources in that innovation and funds management team. But also I might add in mixed use. And so we will see some increase in cost through the FTEs that are being allocated to those new areas that are designed for growth.
And I think you had a second question, Lou.
Yes, sure. Second one, I'll take it for everyone. I mean, just current trading, kind of what percentage of income is currently not operational in the portfolio? And what is what our gross collection for July and maybe the 3rd August?
Sure. Perhaps I'll ask Peter Huddle or Adrian to pick that up.
I'll jump in first. Adrian, it's Louis. It's Peter Huddle here. So in terms of impact on the portfolio for New South Wales and for Victoria, we presently have somewhere between 75% to 80% of our stores closed fundamentally, obviously, in New South Wales for up to 8 weeks now. In terms of impact, obviously, it will have a material impact on sales for these particular months.
We don't have headline sales results for July until later this month. In terms of collections, from a rent collection point of view for the month of July, we were approximately 80% in terms of rent collection and August is a week by week proposition, but we're currently lower than July's collection for the same period in August that we anticipate it will be similar levels to similar lockdown periods of last year, which will be around the 60s somewhere in the 60%
Right. Thank you.
Thanks, Lou.
Thank you. Your next question comes from Sholto Makanosi of Jefferies. Please go ahead.
Hi. Just following up from Lou's question, asked a different way. What percentage of your income would qualify for the New South Wales and ZIP code of conduct? I appreciate New South Wales and it came out Friday night. Do you have that sort of number?
Yes. Thanks, Cholto. Peter or Adrian, do you want to pick that up?
Yes. Sorry, Cholto. In a broad sense, it's about 30% of income.
Okay. That's good. Great. Thank you. And then just looking at your holdovers, it went to I think it's 8%, if I read that slide correctly.
Is that due to a lot of predevelopment centers in the portfolio? Just trying to understand because the well went down to 3.3 years. I'm just trying to understand why the holdovers were 8% of what they were in the previous period?
Shofar, yes, it went to 8% at the end of June. We actually a couple of months before, it was probably in the mid to high 6%. We had quite a number of leases expire towards the end of June. Some of them are a significant portion of those are in the predevelopment centers, which we're holding obviously for development. Some of them are still with national retailer networks as well, which we're working through.
And then
final follow-up on that. Like if you look at your blocks, you got higher maintenance CapEx, higher overheads and lack of the $0.025 of 1 offs. It's sort of hard to see the distribution really be about $0.07 Is there anything you could say to that?
I might take that one, Sholto. I think what we're looking to do is invest for longer term growth. So although there is uncertainty in terms of overheads, we're looking to invest in those growth strategies so that when we do recover, which we know happens quickly post lockdowns, that we've got great momentum in terms of growth going forward in terms of those income streams. In terms of CapEx, I think there's 2 components there. 1 is FY 2022, there's a bit of catch up maintenance capital coming in because we were focused on essential capital for 2020 2021.
I think in terms of leasing incentives, we are expecting a high deal count in FY 2022. So that is slightly elevated into 2022.
2. Your next question comes from James Drus of CLSA. Please go ahead.
Yes. Hi. Good morning, Grant and Tim. Just pursuing that sort of maintenance CapEx and tenant incentive line of questioning, it's fairly big jump, obviously, even from FY 'nineteen levels from $80,000,000 there to $110,000,000 to $120,000,000 So looking at the actual incentives, yes, there's more deals to be done, but what rent freeze or how much of incentives as a percentage of the lease actually moved over the last 12 months?
James, I'll pick that up. It's Peter. It's essentially, it is purely on deal count. So what we're anticipating is that we'll have more deals to do. What we're forecasting is a lower retention rate, so more replacements of retailers.
The average incentive per deal has not changed materially at all since FY 'nineteen. It's fundamentally the answer, and that's what we're forecasting in.
Okay, good. That's clear. And then just on the comment that you made, so 75% of leases getting 5% rent bumps. How does that compare to, just to get a sense, pre COVID? Is it about the same number?
It is about the same number. And it's also about the same average length of term. So the average length of term on the non short term lease is about 4.8 years. When you throw all leases together, it's about 4.3 years, which is only a point lower than pre COVID.
Okay. And what was that number in terms of the percentage, was it 75% pre COVID or was it more like 70% or
do you have that?
James, it was broadly the same number.
Okay. All right. Thank you.
Thanks, James.
Thank you. Your next question comes from Grant MacAskill of UBS. Please go ahead.
Good morning. I'm just trying to get to sort of more of an underlying run rate for the second half on NPI. You called out a number of sort of one off adjustments. Is there anything in the second half worth noting? Because it looks like there's sort of an add back of the FY 2020 waivers.
Is there anything else worth noting in the second half?
Graham, Adrian here. I'll take that question. You're right. There was an additional 19,000,000 of waivers that we wrote back or waivers and provisions that we wrote back into the second half. And there was probably a couple of million of additional surrender payments into that second half, but nothing more than that.
Okay, great. And then just maybe touching on one of your pivotal longer term value drivers around funds management. That's been core to your longer term strategy for some time. How is it evolving? And I guess you made comments to say that you're employing people that suggests that there's products or initiatives being undertaken shortly.
Are you able to elaborate on that in a bit more detail?
Yes. Thanks, Grant. I'll pick that up. Great question. You're right.
It has been a strong central element of our strategy since September of 2018. I think in fairness, and we've talked about this a lot, we probably had a misstep with the Keppel JV, which was poorly timed, although I think the concept was one that could actually have succeeded perhaps in a more buoyant market. And the evolution of the funds management business thereafter was really slowed by the pandemic. We now think that the timing is better. And yes, we are in the process of looking at professionals to staff a dedicated function that will report into the CEO focused on building that business.
So is it like similar to like a capital fund structure or is it a development partner strategy?
It's evolving. So I think at the end of the day, and if you look at our competitors, there's a multiple of funds. And if you take a 5 term view, not a 1 year view, to me, it's conceivable that we could be in several different asset classes. I referenced the Keppel Fund purely to acknowledge what is in the market, which is that we didn't have the strongest outcome from that venture, but also to deny that we have learned from that and we are, I think, evolving into a better spot in terms of how we think about funds management strategically.
Okay. Excellent. Thank you, Grant.
Thanks a lot, Grant.
Your next question comes from Stuart MacLean of Macquarie.
Questions just revolve around the strategy as well on a go forward basis. Are you able to provide any quantitative timing of positive impacts to the P and L from these items announced today? Are you able to provide any quantitative dollar impacts that you see as potential upside? I think it was 2018, there was $1,000,000,000 of mixed use upside was mentioned. But can we wrap around some quantitative metrics around any of this?
Maybe I'll pick that up, Stuart. So 1st and foremost, our objective here is to shift our income, if you will, split, which is currently 90% rental, 10% other to something closer to 80% with approximately 20% coming from other activities, the majority of which will be the new initiatives we've outlined today. But that is a 10 year objective. And clearly, as we've acknowledged elsewhere, we're not guiding as part of this presentation. So we won't be giving firm numbers today on any of those initiatives.
Suffice that we have aligned our Board and our organization in the last several months to these programs and we do expect and will drive towards extremely energetic work towards those objectives and the financial results should flow in time. But there'll be no numbers today.
Okay. And then just in terms of that 80% to 80%, twenty percent split, is that driven by the growth in the 10% line item in isolation? Or are you looking to grow kind of the 90% growth, but as a proportion of earnings, it gets down weighted as you grow the other side of the business?
Yes, it's very much the latter. So I think what we learned, particularly as we incubated solar, was that we could, through our operational platform, leverage good thinking into new business opportunities that were nontraditional. And we see the suite of opportunities now expanding beyond purely solar and digital, and I might add car parking. In particular, we think there's a huge opportunity starting to emerge in logistics, which is driven by initially click and collect, but more recently micro fulfillment. We think there's a significant automation, artificial intelligence opportunity that we have learned from our success in developing a leasing optimization tool.
There's a potential on sale of that data into non competing industries or wrap around products and services for our retailers. And there's a range of other activities in between. In energy, for example, the logical extension of the solar program is battery investment. So I think what we're really trying to highlight today is that the company is pivoting towards the generation of non traditional income from areas in which we are already well versed and where we have a capability that we've demonstrated to build those businesses at scale as we've done particularly in the solar program.
And my second question, Ben, just looking through the mixed use slide deck, office of Bankstown, looks like there's office of Bayside, office of Box Hill, Just a comment on your outlook for office demand in metro markets?
Sure. Tate, do you want to pick that up?
Yes, sure, Grant. Stuart, so we're in pre leasing mode in all those markets presently. So from our point of view, we think that one of the opportunities resulting from the pandemic is a partial decentralization of CBDs, particularly for small to medium sized commercial buildings that are integrated to an entire place to bring that ambiance to those particular markets and particularly those centers that are well connected to transport. So whether it's Bayside or Bankstown, as good examples where we have DAs approved, they're very well connected to transport. So at this point in time, we'll progress in a couple of RFPs to secure commercial tenants.
They're not extremely large projects, but we're confident that subject to those executions, there'll be good value creating projects for Vicinity.
Thank you.
Thanks a lot, Stuart.
Thank you. Your next question comes from Richard Jones of JPMorgan. Please go ahead.
Good day, Grant. Just interested in kind of thinking about the outlook for the business prior to all the restrictions that have come into place. So if we look at the second half operating dividend was €0.041 and there's a bit of COVID drag, I think it was €47,000,000 in waivers and assistance. Should we be thinking about a stabilized dividend for the group at about $0.085 to $0.09 Is that kind of the numbers you think the business is going to generate?
Yes, Richard, look, obviously, if we answer that question verbatim, we'd be guiding the market and we're not prepared to do that. But suffice that, our strategy of paying out 95% to 100% of AFFO as company policy regarding dividends remains on foot and is something that we're heavily mindful of given that many of our investors are very yield orientated investors. Could I come back to the first part of your question now, which is outlook itself? And the reason we're not guiding is there is obviously considerable risk and uncertainty. And so what we've tried to strike a balance of today is to obviously talk about the longer term benefits of the strategy, which we're seeking to execute on, which is to increase obviously our non retail forms of income, but also to balance that with a level of conservatism, because it is true that we have some headwinds as we sit here today, particularly with the lockdowns that are in place in Victoria and New South Wales.
So I hope that answers your question. It's certainly as much as I'm able to answer specifically. And obviously, we appreciate that as you cover this sector, you'd be acutely aware of that uncertainty, which obviously impacts Vicinity as well as other corporates at the moment. Yes.
I know I appreciate the uncertainty given that the restrictions are in place at the moment. I guess I'm trying to look through that and conscious of the fact that consensus dividend is €0.105 It doesn't appear that what you're suggesting on a stabilized basis is anywhere near that.
Yes. Richard, maybe I might jump in there. Look, I think what we're trying to do in this presentation is and I think looking at the second half is and particularly the last quarter, I think gives a good sense of the strong rebound that we've had through the period, particularly when restrictions are lifted. And I think if you look at the last quarter, we're showing 96 percent of gross collectibles really that we're collecting through that period. So that should give you a good sense of in a normalized period, albeit still impacted by lockdown restrictions or at least border closures, etcetera, that we are collecting 96 percent of gross collectibles.
And that gross collectibles or those gross billings are not dissimilar to what we were in 2019.
So can I ask what the Q4 annualized dividend would have been then, AFFO?
I don't know that for you, Richard, in terms of the dividend. I'll just continue to reiterate. I think in terms of gross billings, we were collecting 96%.
Okay. Thanks.
Thanks, Richard.
Thank you. Your next question comes from Adrian Dark of Citi. Please go ahead.
Good morning, Grant and team. My first question is on strategy and apologies if this is repetitive. My line dropped out as you're going through one of those slides. Can I just clarify, please, what we should be expecting for Vicinity's acquisitions or disposals of shopping centers on the balance sheet?
Yes. Thanks, Adrian. Look, we don't have any plans to dispose of assets at this stage. And we've obviously been highly selective in our acquisitions over the past few years. To the extent as always that there are quality opportunities available at reasonable prices, which most importantly we believe we can add value to via our management capability, then we would obviously consider those.
But as always, we're extremely prudent in our capital management decision making. So I hope that answers the question. We are alert to the increasing transaction velocity and we're always on the outlook for quality. But again, to reiterate, no plans to dispose of assets at this stage.
Okay. And the second question is more operational in nature. I think you've commented on lockdowns and the recovery that occurs after a lockdown. But Peter, I'd be interested in your take on whether a protracted lockdown is different to perhaps a shorter circuit breaker. I'm looking at Slide 9, and it would appear that foot traffic and sales in Victoria did bounce back quite significantly after the end of restrictions in calendar 2020, but they are lagging, I think, quite materially the rest of the portfolio.
So interested in whether that's had an impact on leasing in Victoria and whether you think, if so, that is a relevant guide for what could happen in New South Wales over the next 12 or 18 months, please?
Good morning, Adrian. It's interesting the second half of the financial year from leasing cadence or retailer confidence first and then I'll talk about consumer confidence was the strongest we've seen probably since about FY 2017. And that was across the board. So the first half, obviously, there wasn't a significant amount of deal making occurring in Victoria, primarily due to the extent of the lockdown until there were some positive government announcements that the lockdown would be removed in Victoria, which didn't occur until late September, early October last year. But that second half of FY 'twenty one, it was pretty consistent deal making activity across all regions, including our CBDs, to be honest.
So there wasn't any sort of repercussions associated with a longer lockdown or a sporadic one. Similar with customer returns to shopping centers, I mean, clearly, from an industry point of view, the short, sharp sporadic lockdowns are notionally more favorable for us as an industry and a society to be honest. But fundamentally, even after the long lockdowns, we saw the return of customers from the out experience in Victoria very quickly and not dissimilar to the sporadic lockdowns that occurred in other states. We can provide more specific details to you, Adrian. That's the general high level view.
No problem. Thanks, Peter.
Great. Thanks, Adrian.
Thank you. Your final question comes from Simon Chan of Morgan Stanley. Please go ahead.
Hey, good morning, everyone. Couple of simple ones for me this morning. Firstly, on Slide 20, this question is probably more for Adrian. The $178,000,000 of what do you call it, rent relief provided. Can you just give me the split of waivers versus provision, please?
Yes. Thanks, Simon. Yes, the split is $118,000,000 in waivers and provisions of 60,
Okay. That's very good. So is there a chance that the 60 provisions actually get written back in FY '22? Because looking at your track records, you took up $169,000,000 of waivers and provisions in FY 'twenty and you end up running back $75,000,000 So assuming you're stuck with your methodology, it looks like that the $60,000,000 in provisioning this year is conservative. Will that be correct?
Yes. Thanks for your question, Simon. I think the key thing to realize here is when we did provisioning back in June last year, things were very uncertain and we haven't really progressed a lot of the tenant negotiations this year round. We've had much more progress on those tenant negotiations, so a lot more evidence in terms of waivers. We've had better cash collection data as well, the benefit of 15 months of cash collection data.
So I think it is still uncertain. It is our best estimate at the time, and we think they're appropriate. So we're not expecting significant write backs, but things are uncertain. So we're also hoping to collect more debt than we provision for, but we feel that they're appropriate provisions at this stage.
Is that provisions coming from waivers you haven't given out yet or from outstanding debt that you don't expect to receive?
Yes. So in terms of waivers, about 2 thirds of them are agreed with retailers. And so 1 third are estimated waivers for that period.
And that's in the $118,000,000
That's right.
Okay, cool. Thanks. My second question is just on development. Looking very good, it looks like developments are back. I was just wondering if, Grant, you or Hudders could comment on the expected yields or returns on some of these office developments.
I'm assuming they'll be pretty juicy given you already own the land, etcetera. Any insights there?
Yes, sure, Simon. Peg, do you want to pick that up? No worries. Hi, Simon. No, you're right.
I mean, we actually just to ensure discipline, we actually allocate a nominal value of developments of the land associated with those developments. And even when they're built on our site, Simon, and even when we do that, the returns of our mixed use activity, which is forward running commercial development subject to pre leasing activities are reasonable. We think there'll be IRRs in the low double digits. They'll return better than cap rates on the centers and yields we anticipate to be in excess of 6%. So our work done to date on the small to midsize commercial developments in those regional centers.
Great. Just to confirm, the 6% is inclusive of a notional land value?
Notional land value.
Value. Okay, fantastic. That's all I got. Thanks, guys.
Thanks, Simon. And I believe that was the last question. So thank you to everyone for dialing in. And on behalf of Peter and Adrian, we look forward to seeing many of you over the coming days weeks. Thank you everyone once again and have a great day.
Thank you.