Abacus Storage King (ASK) Earnings Call Transcript & Summary

Thank you, and good morning, ladies and gentlemen. I appreciate it's a busy morning. Welcome to the Half Year Results Presentation for Abacus Storage King. I'm joined here today by the fund manager for ASK, Nikki Lawson; our CFO, Evan Goodridge; and the Investor Relations team. Storage King business continues to perform well with ongoing RevPAM growth supported by our sector-leading operating metrics. Shortly, I'll give an overview of our half year achievements. Evan will then update you on our financial results and capital structure, and Nikki will address in detail our portfolio and platform progress before I wrap up with our outlook and guidance for the balance of the year. Turning to the business key metrics in summary for the half year. Our net tangible assets increased to $1.76 per security, up from $1.74 at June last year and up from $1.60 at this time last year. This continued uplift reflects the strong demand for self-storage assets, consistent with the elevated levels of institutional investor interest we've seen across the Australian and New Zealand markets over the past 12 months. Our balance sheet remains conservatively geared, giving us the flexibility to add profitable net lettable area over the medium term. That will come through our committed development pipeline, some expansions of existing assets and selective acquisitions in what remains a highly fragmented market, although recently, we've seen fierce competition for acquisitions, both here and in New Zealand. In total, the group now manages a portfolio of 130 trading stores, and a number of future development pipeline assets with gross value over $3.7 billion, an underlying real estate land bank of more than 1.2 million square meters across Australia and New Zealand, primarily income-producing metropolitan locations alongside a number of future development sites, all managed under the Storage King brand. The sales process of Storage King continues to drive market-leading occupancy, level of rate, rental rate and RevPAM performance. The HY '26 results once again demonstrate the resilience of the self-storage sector through a range of macro conditions, and we believe the industry continues to benefit from both cyclical and structural tailwinds. Finally, we're pleased to deliver the $0.031 distribution for the half year. Turning now to the highlights from what has been a very active period for both ASK and the broader self-storage sector. As announced on the 4th of February, ASK has commenced discussions with Abacus Group regarding the potential internalization of its management function. These discussions remain at a very early stage, and there is no certainty that a transaction will eventuate. However, with total assets now rapidly approaching $4 billion, we believe the group has reached a scale and level of maturity, where the Board believes it's appropriate to assess whether an internalization structure would better support our long-term growth ambitions. In considering internalization, the independent Board committee will be focused on aspects, including operational efficiency, capital flexibility and stakeholder management, and we will keep the market updated as appropriate. From an operating perspective, and Nikki will touch on, we continued to deliver solid performance. Our 104-store established portfolio recorded RevPAM growth of 1.5% on half year '25 and maintained a high occupancy of 90.5%. Every Australian region delivered positive RevPAM growth with only New Zealand remaining softer, reflecting the macroeconomic conditions and more cautious household spending in New Zealand. However, when we exclude New Zealand from the overall number, RevPAM growth for Australia alone was 2.9%. Importantly, this growth cycles off several strong years of performance, which makes the growth this half even more pleasing. Our platform continues to enhance its capabilities, now supported by the rollout of our proprietary revenue management system, which Nikki will touch on. We have that implemented now across all established stores following on the success of the trial in 2025. The strength of our portfolio continues to come from its locations. Our development pipeline remains on track with nearly 120,000 square meters of new lettable area expected in the short to medium term. And these new sites, which are typically much larger than our existing average footprint are forecast to enhance RevPAM performance, as they mature. During the half, we opened 2 new stores from this development pipeline, Knoxfield in Victoria and a satellite facility that we've integrated into our high-performing Chatswood store here in Sydney. We expect 2 further openings of developments in the second half being in Wollongong in New South Wales and Mordialloc down in Victoria. And finally, we invested $58 million across 2 trading stores, 1 in Coburg in Victoria and Morayfield up in Queensland, plus 2 development sites, Port Melbourne and St. Albans, the high-quality assets that we expect to deliver strong returns, as they're integrated into the platform and for the projects for the development sites as works are completed. I'll now hand over to Evan to discuss the financials from the period.

Thanks, Steven, and good morning, everyone. ASK has delivered a solid HY '26 result with FFO of $41 million or $0.0312 per security. We maintained our distribution at $0.031 with 25% of this delivered by way of a fully franked dividend. Whilst the $0.031 distribution is near the upper end of our 90% to 100% payout ratio range, we are forecasting a positive second half skew. This will mean that for the full year, our payout ratio will be closer to the midpoint of the 90% to 100% range. Our reported FFO is down 5.3% on HY '25. However, adjusting for the one-off $3.9 million gain from last year's sale of our remaining investment in a listed peer, this equates to delivery of stable underlying earnings period-on-period. Looking at our earnings in more detail. On revenue, our established portfolio delivered growth of 2.8%, a particularly solid result given the aggressive discounting by our competitors and the weaker economic conditions we are currently experiencing in New Zealand. What is particularly pleasing is that our Australian portfolio grew revenue by 4.4% on a like-for-like basis, a clear demonstration of the pricing power we gained from operating in strong metropolitan locations under the Storage King banner, being Australia's most recognized self-storage brand. Revenue in our acquisition portfolio increased by $0.3 million and our stabilizing portfolio by $2 million, reflecting the income acceleration we deliver as these assets transition to Storage King management and lease towards maturity. Our operating expenses increased by $4.1 million, driven primarily by noncontrollable costs, land tax up 27% and other statutory expenses up 13% like-for-like. Despite these significant increases, our operating margin has held steady at 61% since the second half of FY '25. We continue to invest in initiatives that will support margin improvement over time. Notably, our data-driven revenue management system is now fully rolled out across the established portfolio, and Nikki will provide more detail on the early results we're seeing from this important platform investment. Our corporate costs have remained largely constant. And as Steven mentioned, we are evaluating the possible internalization of ASK's management structure. If implemented, the outcome will potentially achieve both operational efficiencies and future cost benefits to ASK. Turning to the balance sheet, which remains conservatively positioned to support our growth strategy. Approximately 3/4 of the portfolio comprises our established stores, providing stable, reliable income growth. We have strategically increased our capital allocation into the higher-growth acquisition stabilizing and development assets. While this shift has weighed on near-term margins, as these assets lease up, it represents a deliberate choice. We are acquiring high-quality assets in supply-constrained metropolitan markets, transitioning them to Storage King management and capturing material value uplift as they mature. For our development sites, these continue to be carried at cost despite our track record of delivering approximately 20% value uplift once completed and stabilized. As Steven mentioned, our net tangible assets ended the period at $1.76 per security, up 1.1% on FY '25, reflecting both income growth and the underlying quality of our portfolio. This figure excludes the significant value generated by the Storage King brand, management rights and platform across our network of 205 stores. Our capital management remains disciplined and the key enabler of our growth strategy. Pleasingly, we refinanced our $1.25 billion unsecured debt facility in December 2025, reducing margins by circa 15 basis points to 1.2%, whilst extending tenor by 1 year across all tranches. This reflects the quality of our portfolio, the experience of our management team and the strength of our banking relationships. ASK's HY '26 reported weighted average cost of debt was 3%. This reported figure reflects interest expensed in our P&L and excludes approximately $6 million of interest capitalized into our active development pipeline. Including capitalized interest, our marginal cost of debt for the half was approximately 4%. The interest rate environment has shifted materially since we last reported. Rather than interest rate cuts anticipated 6 months ago, we have witnessed one rate increase with the market pricing in a further 1.5 rate rises over the next 12 months. ASK is currently hedged at 74% and will, therefore, be partly insulated from future rate rises. Even so, we expect our full year cost of debt to trend up higher, up approximately 50 basis points to around 3.5% on a reported basis or around 4.5% when including capitalized interest. While this represents a headwind moving into FY '27, we are well positioned to manage it given the income growth embedded in our maturing asset base. The group's gearing is 31.9%, comfortably within our target range of 25% to 40% with funding capacity of around $500 million. Our total store asset value has increased by $137 million to $3.5 billion, driven by $58 million from acquisitions, $52 million from capital expenditure and $27 million from valuation growth. We are seeing the capital markets for self-storage remain highly competitive. Over the past 12 months, we've witnessed increased institutional capital flows into the Australian self-storage sector, resulting in cap rates compressing another 2 basis points to 5.43% despite the rising interest rate environment. This reflects strong market validation of the asset class and together with the scarcity of high-quality metropolitan portfolios such as ours, is expected to continue to support portfolio pricing. With that, I'll hand over to Nikki, who will provide further detail on the portfolio's investment performance and our platform initiatives.

Thanks, Evan. Before we step into our detailed results, it's worth reflecting on the unique leadership position that Storage King has built in the attractive Australasian self-storage sector, a sector, which has the benefit of multiple structural tailwinds. Our leading portfolio is irreplaceable. 130 trading stores strategically located in prime, demographically strong, predominantly Eastern seaboard locations within tightly held property markets. Our stores already come from a position of strength, beating the market with sector-leading operating metrics, both in occupancy and rental yields. With organic growth upside, we also have step change growth embedded in our 26 acquisition and buildup stores as well as 19 quality development sites, which are well progressed, contributing to sustained momentum over the longer term. Our leading platform already benefits from investments in technology initiatives and still has further upside potential through enhancing systems and processes. Our iconic brand is the most recognized in both countries and efficiently drives our ability to keep attracting a strong pipeline of customers. Finally, people. They remain the foundation of our success and our combination of experience, capabilities and strong engagement across the property and operating businesses underpins our long track record of delivering results. It's this leadership in the compelling self-storage sector that gives us high conviction on the ongoing performance and long-term value creation for shareholders. Turning to the half results, on top of the property values growth that Evan shared with you earlier, the portfolio experienced yet another half of income growth, driven by strong growth from our newly opened developments and pleasing growth in our Australian portfolio, considering the lap from our strong first half in '25. As we've done in previous periods, we break the portfolio down into our key segments, established acquisitions, stabilizing and development sites. Starting with the established segment, where we target our reliable, stable returns. The 1.5% RevPAM growth from this segment was achieved through a 2.9% RevPAM growth in Australia and offset by a 7.1% RevPAM decline in New Zealand. I'll go into more detail on the temporary headwinds in New Zealand shortly. But in Australia, the 2.9% growth, while slightly diluted from satellites and expansions is driven by continued strong existing customer rate increases, which are driving rental rate growth, offset by the decision, given the strong occupancy position we've built over the last few halves to give up some occupancy amidst the aggressive discounting that's been happening in the market. This steep street rate discounting started last financial year and continued well into the half. Pleasingly, while incentives continue, face rents have started improving since September. It's worth noting that consistent with prior reporting, all our rental yields are calculated as effective rents, inclusive of any incentives. Turning to the acquisitions and stabilizing segments, these segments drag on our returns today, but represent the step change returns to our portfolio tomorrow. Needing no additional investment, these sectors continue to grow strongly in the half with upside from our recent acquisitions clearly visible in the 27% average rent per square meter gap between the acquisition segment and the established segment, as you can see on this table. But it's the stabilizing segment upside that's particularly compelling, valued at $486 million and representing 14% of our portfolio. This is the largest value we've ever had in this segment. And with RevPAM trading at a 55% discount to our established portfolio, the incremental growth upside is significant. To play this out further, if we purely look at the NLA from these 2 high-growth segments, acquisitions and stabilizing, and conservatively apply our established portfolio occupancy and rental rates, there exists potential upside within the current cost base to grow total revenue by an additional 9%. Looking at our total portfolio, the combination of resilience and growth upside in this strategically curated portfolio continues to position Storage King strongly for growth into the future. Looking at the growth by region within the established portfolio, South Australia, Queensland, Victoria and New South Wales delivered our strongest RevPAM growth in the half. The Queensland and New South Wales underlying results being even stronger when the additional drag from satellites and small expansions are removed. Our strongest growth continues to come from our premium metropolitan locations with stores like Cheltenham in Victoria growing rent roll at 13% and Macquarie Park and Woolloomooloo growing at 12%. All states in Australia continue to take healthy existing customer [ leases ], and we have not seen additional churn. The slower RevPAM growth rates on our previous results, a reflection of occupancy reduction in the face of excessive competitor discounting. As mentioned earlier, we are pleased to see that street rates have started to rise, Queensland being the first mover. And while some incentives continue, as general occupancy in the market rises, we should see a return to more modest and selective [indiscernible]. New Zealand, this is a market where our sector-leading metrics are strongest. And to put this in perspective, our rental rates are 30% stronger than our listed peer and occupancy 10% higher. However, it is a market, where we have some temporary headwinds. We have a weak economy there, particularly with weaker net migration, currency declines and remedial asset actions impacting our performance. On a positive note, we have also seen street rates start to lift in New Zealand this last quarter and remain positive on the underlying quality and long-term value of our New Zealand investment. In aggregate, existing customer rate increases remain strong, particularly in Australia, and we're excited to have the impact of our revenue management system in the second half. This impact, together with street rates now starting to grow, give us optimism about continuing to deliver sales growth in the second half outside of the remedial activities in New Zealand, which while temporary, will persist into the second half. On to our strong development pipeline, we continue to see value in developments and have replenished our pipeline, adding 2 sites from our recently refreshed network gaps, Port Melbourne and St. Albans joining the portfolio in the half. Our pipeline activity remains elevated with 18 development sites set to deliver an additional 17% of net lettable area in the short to medium term. We are well progressed on a number of these projects and with our strong track record of delivery, continue to forecast capital value uplifts of over 20%. Mordialloc in Victoria and our [ satellite ] site in Wollongong will open in the second half and deliver an additional 14,500 square meters of NLA to the business in this financial year. Our 2 largest projects under construction, the flagships at Mascot and Sydney Olympic Park continue to progress well with Olympic Park slated to open in July '26 and Mascot on track to commence trading in February 2027. More than 50% of our pipeline continues to be in our consistently strong New South Wales market, and each of these facilities are set in the priority gaps of our network plan, which has the predominantly Eastern seaboard SKU and targets in the urban and suburban metro locations. These state-of-the-art facilities are instrumental in helping continue to grow the category. Well positioned with modern amenity, these assets allow self-storage to appeal to a broader group of consumers, who are using storage for more and more reasons. And as we continue to evolve the self-storage product, the business is being rewarded with new developments that continue to fill ahead of expectations and at healthy rental rates. All 5 of our most recent developments reflected on the screen will be close to 50% occupancy at their first anniversary and are delivering equal or superior rental yields to where they were underwritten. Designed in-house by our tenured development team, these stores deliver on brand stature and superior customer experience, while maximizing net lettable area and being rightsized for the markets they operate in. Expansions also continue to deliver strong returns. We've recently completed expansions of 2 of our highest-performing stores, Miami on the Gold Coast, adding another 3,100 square meters and Bentley in WA, adding 1,700 square meters of NLA. With over 18,500 square meters in our expansion pipeline, this continues to be an important growth lever for the business. I referred previously to the transformative nature of our ASK proprietary developments. The scale and quality of these market-leading assets are set to deliver superior returns into the future and provide a halo to all the assets under the Storage King brand, driving brand preference and contributing to overall inquiry growth and further revenue growth. Starting in 2019, these ASK developments sit at 17% of the portfolio today and are targeted to steadily increase, accounting for up to 29% of our portfolio by FY '29, materially expanding their impact. Moving to our platform, as per our founder's original vision, we remain determined to continue to evolve Storage King to remain a world-class operating platform. Recent third-party research revealed that Storage King is the preferred brand in both Australia and New Zealand. Our secret sauce, a sector-leading brand that draws customers to Storage King, combined with an organization rallying behind delivering a superior customer experience. The strong foundation of 28 years of steady investment in Storage King continues to make us the most recognized and searched brand, keeping us efficient in our search spend. In addition, we continue to evolve our visibility strategies with the advent of AI and delivered almost 150,000 quality inquiries to the business in the last 6 months. Converting these quality inquiries is an essential part of the secret sauce, and we were particularly pleased that conversion remains strong at 25% despite a deliberate strategy of pulling our teams back from following the heavy discounting playing out in the market. Self-storage as an asset class remains -- requires attractively low ongoing capital investment. But as a key driver of customer experience, we continue to actively manage our assets to keep them contemporary, secure and to deliver on customer ease. Supporting these assets, our highly responsive team continue to deliver to customers' needs, achieving an NPS of 73, a pleasing result that is reflected in the stability of our churn and provides the foundation for future inquiries. However, none of this would be possible with our most important ingredient, engaged quality people. We know that companies with the best people win. We were really pleased that in our most recent people survey, 79% of people in the Storage King team considered Storage King a great place to work. Supporting our great people is our new revenue management system. As discussed over the last few sets of results, this has been a priority for the business, and we remain energized by the impact we believe it will deliver. Early results from the 22 Phase 1 stores have given us confidence to roll out to the entire portfolio. The first iteration of RMS will fully impact across the business from May 2026. With our Phase 1 stores, what we have seen is that base rates at these stores are widening relative to non-RMS stores, but there is some short-term volatility, as we address under-rented units. I think most pleasingly, there's now a clear logic behind the future increases that have been set and an underlying process, where our store managers with local insight are collaborating with our revenue management team to optimize both street rates and existing customer rate increases. This is an exciting step for the business, as we evolve to our world-class model of centralized data and analytics combined with best-in-class on-the-ground insight and ownership. We remain strategically focused on delivering results, not just for the short term, but sustainably into the future. Sustainability is now well embedded into our business processes from acquisitions to developments to established assets, and we continue to invest in the resilience of our portfolio against risk and inflation. Specific highlights for the period are our customer NPS improving to 73. Supporting this improvement is our Voice of Customer program, which now delivers constant feedback to our teams across the business from inquiry to move out, bolstering our customer proposition and our value in the market. Another highlight, our 20% reduction in Scope 1 and 2 greenhouse gas emissions intensity and the huge work that has gone into streamlining and understanding our emissions better. Then the launch of our partnership with Beyond Blue in Australia and the Mental Health Foundation of New Zealand. Our partnership with these 2 incredible organizations, who focus on a topic that is very close to the hearts of our people and our customers help us invest back in the local communities that we are a part of. Our new end-to-end employee life cycle system is now live and designed to make our employees' lives easier, while further increasing engagement with better communications via a single portal. We have a dispersed workforce and every single person impacts these results you have seen today. So I'd like to do a huge shout out to our over 500 strong team. As we grow the business, we are more determined than ever to keep our team connected and engaged, continuing to enhance the strong Storage King culture that we are so fiercely proud of. With that, I'll hand over to Steven.

Thanks, Nikki and Evan. To conclude, Abacus Storage King remains on a very focused path to delivering stable and growing distributions for our security holders. The multipronged growth strategy, spanning organic growth, acquisitions, developments and ongoing platform enhancements, as discussed by Nikki, positions us extremely well to create value over the medium to longer term. As I mentioned earlier, the Board is currently assessing the potential internalization of its management structure. And while discussions remain at an early stage, there is no certainty a transaction will proceed, and the process does reflect the scale, maturity and quality of the business today. We will continue to update the market as appropriate. And finally, we are pleased to reaffirm our FY '26 distribution guidance of $0.062 per security supported by the positive sector fundamentals and the high-quality portfolio and strength of the Storage King operating platform. That concludes the prepared remarks for today's presentation. Thanks for your attendance. We look forward now to taking your questions or also meeting with you during our post results roadshow.

[Operator Instructions] Your first question on the phone lines today is from Adam West with JPMorgan.

I'm just wondering if you can talk about how you're thinking about evaluating the internalization just in terms of your cost savings, capital flexibility and strategic control.

Thanks, Adam. Yes, at this moment, we're only in early discussions. So it's too early to give any quantitative numbers at this stage. As soon as we know those numbers, we'll disclose them to the market.

Yes. No, that's fair enough. I guess my next question just following on for that is if the internalization didn't proceed, like what would be the alternative courses of action the Board might consider to close the valuation gap? Or is it just you're just considering the internalization rate?

Yes. I think you're talking hypothetical. I think what we've disclosed to the market is that we're discussing the possibility of internalization. So that's the plan as it stands.

No, that's clear. And I guess probably my final question, just on development. I guess you guys are sort of at the lower end of the gearing range and there's a fair bit of funding capacity. Is there any sort of state you should be targeting to ramp up in development activity? Or where would you like to see growth take place?

Yes. It's something that we've contemplated. I think what we're seeing is that as Nikki outlined, the stellar results that we get from our developments and have done since the first development completed back in FY '19 gives us enormous confidence to put money into that segment. And the counter to that is we do see a very aggressive acquisition market for existing trading stores. So it is something that we have a positive skew towards. And I think we've demonstrated that we've got the most -- I think we've got 10 or 12 projects underway as we speak, which is certainly a heightened level. That's the highest level of activity we've ever done in the business.

Yes. No, that's clear. I guess just on the aggressive acquisition front, could you just call out if there's any new entrants in the market? Or is it just coming from existing operators?

Existing operators, but I think what we're seeing is there's a chase from capital, particularly offshore capital looking to invest into the sector. So yes, I don't think it's anybody new, but I think there's been a light shine on the sector, and there's been an enormous volume. I think our value as we were saying, we've had, I think, the highest level of capital transactions undertaken in the last 12 months on history for self-storage in Australia.

The next question is from Howard Penny with Citi.

Just on that finance cost shift into 2027, you mentioned potentially a 50 basis points headwind. Is that just also reflective of where hedges are rolling off on to? And do you see that normalizing -- when do you see sort of peak rates being in '27 or '28, as that rolls off at the moment?

Yes. Thanks, Howard. I see peak rates stabilizing in calendar year '28 at this moment. So we've got a little bit of headwind in '26 and '27, offset by obviously the stabilizing growth of the portfolio.

And you made some comments, but just a question around, are you seeing any notable impact on the consumer after the recent rate increase? Any changes in behavior? Or is it still sort of quite a strong operational market?

Howard, we -- generally still a strong operational market. We're seeing existing customer rate increases at a similar level, if not a little bit stronger going through and not causing churn. It's more the market street rates, where facilities are looking to fill up that there's strong incentives in the market and the consumer has choice. So where we see that there's a little more consumer shopping around. But apart from that, no, we remain confident that the market is strong, and it certainly seems to keep growing. If you look in aggregate, the total market continues to grow.

Next question comes from Connor Eldridge with Bell Potter Securities.

Just first one from me. Since the guidance back in August, we've obviously had some adverse moves in the rate curve. I'm just curious, reaffirming guidance now. Can you maybe talk to if you've had some wins somewhere else to offset that? Or is it more just a higher payout ratio than originally thought to get us to that 6.2% distribution guidance?

Thanks, Conor. I think it's 2 things. One, we've been really pleasantly surprised by the stabilizing portfolio growth. And so, we're seeing that sort of kick into the second half. Obviously, operating expenses are high, particularly those non-controllable costs, they will have to slow down at some stage. And so when we take those 2 things into account, we're still seeing that positive skew into the second half and hence, while we were happy to point to the midpoint of our distribution guidance payout ratio range.

And just on New Zealand, obviously, comments around it sort of dragging down the rest of the portfolio. What do you think the key catalysts are here? And I guess, are there -- could there be logical divestment options given there is seemingly buyer interest in that market?

Yes. As I mentioned earlier, we still we still feel very positive in terms of the quality of our portfolio there and the underlying long-term fundamentals in New Zealand. There are a few short-term catalysts. The first being exchange rate, 2% of that result impacted by exchange rate.. We've got another almost 2%, which is being impacted by 1/3 of our portfolio in New Zealand is currently undergoing some remedial work, and we've gradually been reducing occupancy in those 5 stores to allow us to do the work. Now that unfortunately won't be over quick. So we do see that impacting us still for a few months in the second half. But once that comes back online, I think we feel really bullish about the market and believe we can get rental rates growing nicely there again.

And just one final one for me. Just around the revenue management system, which I think is now rolled out across the entire established portfolio. You mentioned base rates are widening at the stores that are on the new system. But I guess it's not an easy question, but is it possible to quantify kind of what that uplift looks like versus maybe a more traditional system?

Yes. It is -- it's a little early for us to say. We -- as I mentioned, we're almost seeing these stores behave like an acquisition store, whereas we're taking under-rented units and pricing them correctly, we're seeing some churn. So you're getting slightly elevated churn levels, but also slight higher rental rates going through. I think we want a few more months under our belt before we start giving more specific guidance.

Your next question comes from Larry Gandler with Shaw and Partners.

A few questions from me. I guess the first one is, Evan, again, coming back to the guidance for the full year being second half weighted. Can you talk to the cost side of that? Have you seen a stabilizing in inflation relating to insurance and the statutory taxes? So maybe just talk to that point first.

Yes, Larry, we're not really seeing a skew on expenses in the second half. We've sort of taken the pain, if you will, on the inflation in the first half. So for modeling, you shouldn't [indiscernible] that again by a CPI differential.

And anticipation for next year, do you think inflation will continue at pace? Or do you think we've reached a plateau, which I think is what you're intimating?

If I knew that, I'd be on an island somewhere celebrating, but I can just go off the best forecast that the ABS and RBA have.

Another question I have for Nikki is, Nikki, a couple of years ago, and Steven kind of alluded to this is we saw investment from overseas kind of catalyze growth in the industry. And if I recall, the expansion in sort of area kind of matched population over the last couple of years to 2026. I'm just wondering what you see for the next couple of years. Do you see -- how do you see supply-demand playing out? Is there still that sort of growth in NLA over the next couple of years as we saw the last couple of years?

Yes. Larry, it's hard to give an exact number. We have -- we've seen a ramp-up in supply over the last 3 years. And part of the issue with that is most stores take 3 to 4 years to stabilize. So it's during that stabilizing period that you see the aggressive discounting in the market. As we look forward, there's still -- there's even more muted supply. How much of that supply will actually go ahead will depend on the economics and the returns that people are predicting. And as the aggressive discounting in the market happens, I think you'll see more cautious step forward of supply. So that said, yes, there is more supply in the market, probably outstripping just population growth, but we think we will probably start to see that stabilize more in the coming years.

Last question for me, a financial question. I think there was something like $58 million of acquisitions in the half and then $50 million something of CapEx. correct me if I'm wrong there. But looking at the cash flow statement, I think there's about $140 million, $150 million of investment activities cash outflow. Just wondering what the difference would be between the CapEx and acquisitions as presented on the presentation versus the outflow in the stat accounts.

Larry, I don't know off the top of my head, and I'll come back to you.

Next question comes from Thomas Ryan with Moelis Australia.

Just the first question on -- actually just finishing off what Larry was just asking on the acquisition. So the $58 million, can we just get a bit of color around the entry cap rates? And also just around your comments in terms of where the book is sitting relative to market in that regard and noting you didn't have any divestments over the period, if you were to sell today, what would you look for?

Let me answer the first question. So both those acquisitions are at passing cap rates 1% or 2% below what we believe their mature cap rates will be because they all have rental rate upside in them. The one acquisition we refer to is Coburg, that's Brunswick East also has expansion potential. So the passing on those -- on that store specifically is significantly lower than what we want our mature cap rates to be. In terms of forward-looking, I mean, it will link to our cost of debt and where we think that will play out. So those -- that will change over time, but I think it's safe to say we always look at what's value accretive at the time.

And just a question on the development book as well, just noting the yield on that. Has that changed at all in the lease-up periods? Is there any color around that, please?

If we look at that, we're still targeting 20% development uplift. It's maybe safe to say that in previous years, we were getting higher than the 20%. We've always guided to 20% and been surprised on the upside on some of them. We're still comfortable we'll get those uplifts. And we have shortened the lease-up times. We think closer to 3 years lease-up rather than the 4 years we've maybe seen in the past, and we're not seeing that significantly change.

And just one last question around capital markets. I noted your comments before around the offshore capital. When we think about those sort of players and the sort of tendency to meet their IRR hurdles of 10% to 15%, they will need to tip into development. Has there been any approach or any sort of discussion with those partners to support your initiatives, if anything, or to approach you as a potential target?

I think most of the big players come and talk to us at various times. I think we've been very focused on our internal growth targets and activities without needing to talk to external capital. But it's pretty clear from the deals that have been announced and the transaction activity that occurred, particularly here in Australia and even more recently, the National mini process, sales process that occurred over in New Zealand, there is absolutely a heightened level of attractiveness and awareness of self-storage. And I think we're interested in the fact that come this time at the full year or this time next year, we'll be expected to be the only listed player in the Australian self-storage sector. So that's also something that we see listed capital coming to talk to us and wanting to get up the curve because of that possibility as well.

The next question is from Ben Brayshaw with Barrenjoey.

Just in relation to the NLA completions profile for development, it looks like FY '27 has come off a little bit. You're now forecasting approximately 7 stores to reach PC, whereas 6 months ago, it was a little bit more than that. Just could you just talk through what's happened there? And have they been pushed out into the following year?

We've had some minor delays and some -- I think we had Chatswood come off a little bit earlier, and we've had -- the big one is Sydney Olympic Park pushing out into July. So it will just miss the financial year,

It's pretty much at the margin, Ben.

But, it's not a --

We can probably come back to you with the numbers that were previous and what they look like now. But I think it is a first year, second year movement.

Understand. And just on, I guess, guidance for yield on cost for the development pipeline. Could you just, I guess, provide some color on your overall expectation and in the range that you're looking at the high and the low end across the projects that you're currently active on?

Yes. We've always guided sort of 6% to 8%. We're probably on the slightly lower end of the range at the moment, but it's still within that range, Ben.

And will the projects be as high as 8%?

It's location specific, Ben. We do see -- it usually swings on the initial cost of the land and where we've been able to own some land or buy some land at a very attractive rate. The construction costs, we're not seeing the continued ramp-up of construction costs. So we are pleased by the fact that, as Nikki mentioned, all the developments are leasing up quicker at rates higher than the original underwriting. So that's what sometimes gives us a super normal return yield on cost for those developments, particularly if we've got cheap land going in.

And apologies if you mentioned this on the call, but just the decline in the cost of debt over the last 6 months, is that attributable to refinance?

It's attributable to refinance. It's attributable to the capitalized interest because we've ramped up the developments [ of the remaining 2 ].

Ben, I can jump quickly just back. I just quickly pull the slide from last year. So this year, we're on track to deliver. We had 4 stores in the previous guidance. We've delivered 2. We're on track to deliver the second 2. So FY '26 will be on plan. FY '27, it looks like we've had one store slip there and a marginal store. So it's about 10,000 NLA less for FY '27, which has slipped into '28. But yes, as Steven mentioned, it's more on the margins.

There are no further questions on the phone line at this time. I'll now hand the conference back over.

Thank you. Thanks, everybody, for listening in, and look forward to catching up with you over the next few weeks. Good morning.