Centuria Capital Group (CNI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Centuria Capital Group FY '21 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would like to hand the conference over to your first speaker today, Mr. John McBain, joint CEO. Please go ahead.

Good morning, and thank you for joining us. I'm John McBain, Joint Chief Executive of Centuria Capital, together with my fellow CEO, Jason Huljich; and Chief Financial Officer, Simon Holt. We've the pleasure in presenting Centuria Capital's 2021 financial year results. Centuria is a relatively complex group, and to operate the business efficiently, each member of the senior team specializes in a specific area. Accordingly, this presentation will reflect the manner in which we run the business. Simon Holt and I will present the corporate financial information, and my fellow CEO, Jason Huljich, will present the real estate and funds management information. Starting on Slide 2. We have an acknowledgment of country. Our group manages property throughout Australia and New Zealand. Accordingly, it's appropriately we pay our respect to the traditional owners of the land in each country and, of course, to their respective cultures and elders. Beginning with Slide 4. FY '21 has been a transformational period for Centuria, and our platform has benefited from maintaining very clear strategies, specifically to grow Centuria both organically and, from time to time, to enter the corporate acquisitions. Notably, group assets under management increased by 98% during the period to $17.4 billion, and this is a direct consequence of the strategies I've outlined. Our real estate portfolio has significantly expanded as we've grown our Australasian footprint. The acquisition of Augusta Capital in New Zealand, followed by the recent merger with Primewest funds management business, together with a record $2.5 billion acquisitions, real estate acquisitions across Australia and New Zealand have been the driving factors of this growth. The Centuria platform continues to grow its geographic presence, its distribution networks and wide inventory of capital sources. Our highly effective capital transactions teams have investment opportunities across these asset classes and fund types and offering them to an ever-wider range of investors. Throughout the period, listed real estate AUM increased by 37% to $5.5 billion and unlisted AUM by 175% to $11 billion. Joint CEO, Jason Huljich, will provide further detail regarding what has been a record period for the real estate and funds management area of the business. Moving to Slide 5. Our larger platform generated strong results for Centuria securityholders, and FY '21 strong performance was achieved despite the COVID-19 backdrop. Operating earnings of $0.12 were delivered in line with the midpoint of guidance, and distributions of $0.10 per security were made. We also are pleased to report 12-month total securityholder returns just under 62%, outperforming the S&P/ASX 200 Index by 27.8% and the S&P/ASX 200 A-REIT Accumulation Index of 33.2% -- or by 33.2%, I should say. Our FY '21 achievements, whereby we have significantly expanded the business and management fee revenues, have laid solid foundation for providing FY '22 operating EPS guidance of $0.132 per security, a distribution guidance of $0.10 per security, both up 10% on the prior corresponding period. Turning to Slide 6. As mentioned, Centuria has delivered a strong performance despite the backdrop of COVID. During the period, the group finalized the integration of the Augusta Capital and Primewest businesses, substantially increasing AUM distribution capacity and earnings line too. These growth initiatives culminated in Centuria Capital's inclusion in ASX 200 Index effective 16th of July 2021. Operating businesses acquired over the past 3 years are contributing strongly to AUM growth over the year as follows: Centuria Industrial REIT, increasing by 48% to over $3 billion; Centuria Healthcare, increasing by 50% to $1.1 billion; Centuria New Zealand, increasing by 35% to $2.3 billion; and Primewest, starting strongly and growing AUM 12% to $5.6 billion since the merger was announced in April this year. Along with increased scale in equity capital market levels, the real estate platform delivered sold gains, which Jason will take you through shortly. Turning to Slide 7. Since FY '17, CNI has generated a 46% compound annual growth rate in AUM. This result has been achieved through our focus on growth with organic acquisitions and fund generation as well as select corporate acquisitions. The integration of platforms such as 360 Capital Group's industrial platform, Centuria Healthcare, the Augusta platform since renamed Centuria New Zealand, coupled with high-quality real estate acquisitions, grew our platform considerably. And the addition of the Primewest funds asset business now provides us with an Australasian -- true Australasian platform, co-created by our newly accessible WA and New Zealand holders, together with distribution networks, which are highly scalable, and provide us with an -- will provide us with an increased range of corporate leases. On to Slide 8. As we expanded the platform, we have selectively considered merger opportunities that align to our stated strategy, that can provide access to increased capital sources, quality industry talent, have the ability to manage and contribute to the group's earnings. Each of these mergers in their own right has presented a new set of opportunities for Centuria. Along with achieving meaningful AUM growth, each has demonstrated its ability to contribute to the group's earnings profile, providing access to new asset sectors, distribution channels and geographic markets that advance Centuria's overall strategy. Importantly, these mergers provide us with additional quality chosen staff who are highly experienced in their field and capable of playing important roles in growing the Centuria platform, both in terms of scale and profitability. Slide 9. In addition to the 62% total shareholder return generated over FY '21, I'm pleased to report 130% TSR since commencement of FY '19. This is to demonstrate that the strategy and disciplined approach the Board and management have put in place demonstrated our performance against relevant indices over both a 1- and 3-year period as well as a clear performance differentiation relative to the majority of our A-REIT peers. More detailed information regarding this is contained in our financial report. Our investor and market relevance has also continued to increase since the turn of financial year, and our recent inclusion in the S&P/ASX 200 Index represented a milestone in which we can now plan further growth. Whilst we cannot guarantee the profile of future returns, we are firmly focused on strong performance to the benefit of our securityholders, coupled with platform expansion and, most importantly, our firm focus on long-term, predictable earnings growth. Slide 10. Centuria's growth is accompanied by an ongoing focus towards environmental, social and governance issues, and we will be releasing our first sustainability report later this year, part of the AGM. During FY '21, the Board established a Culture and ESG Board Committee comprising of nonexecutive independent directors and chaired by CNI Director, Susan Wheeldon. Centuria has an active, management-led ESG committee, and these 2 committees are charged to oversight modern slavery, diversity and inclusion, employee engagement, climate change and a raft of related issues. Initiatives throughout the year included the diversification of Centuria Capital's Board, welcoming Kristie Brown and the responsible entity Boards with the addition of Nicole Green to CPFL and Jennifer Cook to CPF2L. In addition to delivering 42 Hoepner Road in Queensland as one of Australia's first 5 Green Star (sic) [ 5-star Green Star ] industrial assets and COF's 4.7 and 3.2 NABERS energy and water ratings, environmental data has been collated and published for energy, emission and water data across COF's assets. Through our social means, employee engagement results are encouraging with 94% of employees enjoying work at Centuria. During the period, we confirmed our ongoing support of the Task Force on Climate-Related Financial Disclosures, or TCFD, as well as the Diversity Council of Australia. We maintain a special focus on staff working from home in affected states. Each staff in lockdown receives daily communication from senior management, and regular staff-wide social activities are arranged. Thank you. I will now hand you over to our Chief Financial Officer, Simon Holt, to present the financial results for the group.

Thanks, John. Slide 13 shows our earnings and distributions for the year as well as guidance for the next financial year. It's my pleasure to report that the group delivered its FY '21 statutory net profit after tax of $143.5 million with operating NPAT of $70.2 million. An operating EPS of $0.12 per security was delivered along with distributions of $0.10 per staple security. Distributions were underpinned by continued growth in recurring revenues, accounting for 92% of group's total revenues. As John mentioned earlier, we're very pleased to announce the FY '22 operating EPS guidance of $0.132 and distribution guidance of $0.11 per staple security, both representing a 10% increase from FY '21. It's important to note that our FY '21 operating EPS, which remains consistent with FY '20, has been delivered with reduced reliance on performance fees as a source of operating revenues, reflecting our relentless focus on achieving scale and improving margins. Moving to Slide 14. During the year, the noted 40% increase in profits attributable to our Property Funds Management segment was underpinned by record real estate acquisitions as well as the increasing benefits from operating with a larger real estate funds management platform. The performance fee income of $17.9 million recognized for the year was in line with expected fund expiry dates across the group's unlisted real estate division. It's also important to note that a further $21.4 million of unrecognized performance fees remains latent within our unlisted portfolio. As an external fund manager, Centuria continues to maintain co-investment stakes with some of the funded managers. This brings strong alignment with our listed REITs' CIP, COF and APL in New Zealand, in addition to providing the business with another source of recurring revenue stream. I'm pleased to report that this co-investment segment yielded an operating profit up to $36.4 million from the $32.1 million in the prior year. We have split out and, for the first time, introduced the new development segment, contributing an operating profit of $4.5 million, representing 150% increase compared with the prior year. I'm pleased to report the development segment is now supported by a growing pipeline of $1.9 billion and is expected to be a pillar of future profitability and continued growth for the business. For the current year, we are also introducing a new property and development finance segment, and whilst it only is contributing $0.4 million this year, it represents the group's 50% share in earnings of Centuria Bass Credit, which was only acquired recently in April '21. The investment will bring further diversification to the group's recurring revenue base and, in addition, further expanding the suite of property-related investment opportunities provided to our investors. Staying with the segment profitability. It's also worth noting, investment bond division reduced profitability $2.9 million, which is reflective of the lower prevailing interest rates impacting our capital-guaranteed products. We expect that the impending transition of these capital-guaranteed products into a more modern, unitized offering will improve returns for our policyholders and increase margins for our investment bond division. Corporate expenses of $14.2 million increased in line with the strong AUM growth and as a result of a larger expense relating to the valuation of long-term incentives. I'd like to note that as a percentage of operating profit before interest and tax, these expenses have remained broadly in line with FY '20. As previously mentioned, operating EPS of $0.12 per security recorded for the year is reflective of lower performance fee contribution, the minimal income return due to considerable amount of cash sitting on balance sheet and the increase in the group's weighted average number of securities. All these factors reflect the group's shift towards a larger mix of recurring revenue streams and growing initiatives undertaken across the platform, including the acquisition of Primewest, and is positioning CNI as a leading Australasian real estate funds manager. Turning to Slide 15 and the balance sheet. We're pleased to report that with the acquisition of the Primewest Group, we have further strengthened the balance sheet, and the group net asset value per security has increased from $1.44 to $1.92 over the year. The group's cash reserves at the end of the year increased to almost $250 million and incorporated the cash consolidated from the acquisition of Primewest. The cash reserves will provide the group with added flexibility to consider future platform growth opportunities as well as the continued balance sheet support for our growing unlisted business. The noted increase in the group intangible assets reflects $196.8 million of management rights and a further $319 million of goodwill, predominantly arising from the Primewest acquisition. In addition, and in terms of recent developments around our capital structure, the group issued listed notes of $198.7 million and repaid a portion of its corporate bonds to the -- to extend out the majority of our debt maturity to beyond 4 years. As a result of the new listed debt issue, the group's operating gearing ratio increased slightly to 3.9%. However, our interest cover ratio has increased to 7x compared to 5.4x last year as the group benefited from increased recurring operating EBIT as well as the lower interest rate environment. Finally, on Slide 16, I wanted to take this opportunity to comment on the overall progress, which the business has made in integrating systems and processes across our growing platform. Supporting the growth and diversification strategy of the group has required forward planning and implementation of cost-effective but agile and scalable systems. With that background, I'm pleased to report that the corporate integration of Centuria New Zealand or Augusta and Centuria Healthcare deeply into the group's existing systems and processes, including Centuria's investor registry systems, are now complete. It's important to note that in keeping with our agile approach, we have already made significant progress on transitioning the Primewest and Centuria Bass Credit businesses onto the group's corporate systems and HR infrastructure. In addition, during the year, the business successfully completed the implementation of MRI, delivering an automated, end-to-end property financial management ERP system across the group's industrial and office property portfolios. MRI is an important pillar to the group's continued growth strategy, providing enhanced reporting and ensuring future cost savings for the benefit of our investors. In FY '22, our focus will be on fully integrating and onboarding Healthcare and Primewest properties on to our newly introduced MRI platform. I'll now hand over to Jason, who will take you through CNI's divisional highlights.

Thank you, Simon. I will start on Slide 17, which illustrates the diversity of our $16.5 billion real estate platform by geography, asset sector, fund type and capital source. Real estate assets under management have more than doubled within the past 12 months, and growth is a key theme across Centuria's FY '21 results. Our real estate platform skews towards more than 60% of unlisted real estate with a unique Australasian focus, attractive fee cash and ability to generate new growth opportunities for the group. Our New Zealand portfolio grew by 30%, and the Australian portfolio expanded by 125%, resulting in both the recent Primewest merger as well as real estate acquisitions by our underlying funds. Decentralized office. Industrial and health care remain the backbone of our real estate platform. Together, these asset classes make up close to 80% of our real estate AUM. Our focus and expertise in decentralized office markets span 25 years, and we continue to look for relative value in this asset class, bringing select opportunities to our investors during FY '21. I'd also like to highlight the significant growth of our industrial asset base, which has more than doubled over the period. This is an asset class we ended in 2017 and now accounts for almost 30% of our entire real state portfolio. We've been pleased to expand our industrial offering across our listed and, more recently, unlisted funds to provide our investors with exposure to the sector, which has been experiencing strong tailwinds. Our health care platform grew during FY '21 as we benefited from the launch of our flagship Centuria Healthcare Property Fund and continued to partner alongside quality operators as they roll out their innovative operating models. Due to our recent merger with Primewest, we further diversified our asset classes, expanding to 3 compelling, new sectors: agriculture, large format retail and daily needs retail. Together, these now comprise 17% of our AUM. Our capital sources have also expanded across that platform, benefiting from the Centuria Healthcare, Centuria New Zealand and Primewest mergers of recent years. Our distribution network continues to transform, providing us diverse capital sources from suite of institutional, wholesale, direct retail and advisory channels. Along with a range of asset classes, our platform also services our investor base with a range of fund types to suit a variety of investor profiles, risk return appetite and investment preferences. Slide 18 is a close examination of the 6 asset classes we invest into. As mentioned, our office assets are predominantly in decentralized, fringe and metro locations. These locations have been more resilient markets throughout FY '21 when compared to some of the largest CBD. Though we've acquired a few office assets in previous years, the most significant commercial acquisition during the year was the launch of the Centuria Government Income Property Fund, a $224 million A-grade office building located in Footscray, Melbourne. Pleasingly, this launch was Australasia's largest, single-asset retail real estate fund within the past 15 years. This initiative provides further evidence and underlying demand to select commercial office assets underpinned by quality tenants. During FY '21, our industrial properties benefited from strong tailwinds, and we now invest across a board spectrum of submarkets, including data centers, cold storage facilities, transport logistics, distribution centers and manufacturing facilities across Australia and New Zealand. Both daily needs retail and large format retail are exposed to domestic or housing-related markets, which have shown to be extremely resilient during FY '21. Importantly, our recent entrance into these sectors is backed by deep capital sources such as the $930 million GIC daily needs mandate as well as our expertise from within the -- within the Primewest team that joined us as part of the merger. Our health care real estate portfolio continues to expand as Centuria Healthcare partners with top-tier operators to deliver state-of-the-art, high-quality, specialized assets. Again, our exposure to this maturing sector benefits from deep operator relationships and niche real estate expertise. Like health care, agriculture is a sector emerging as an institutional asset class, providing sale and leaseback opportunities to high-quality tenants on strong, compelling lease covenants that are backed by large macro trends. Slide 19 illustrates our market-leading transaction capability. It was a record year for the business as we acquired 50 assets worth $2.5 billion, more than doubling our acquisition successes in FY '20. In fact, our industrial acquisitions alone eclipsed our total acquisitions from last year. Leveraging our transaction expertise and deep market relationships, 75% of our acquisitions were secured by off-market or select campaigns. Through our corporate acquisitions of Augusta Capital and Primewest, we are well positioned to accelerate our transaction velocity, leverage deeper market relationships and supply further investment opportunities to our distribution network across a broader range of sectors. Slide 20 outlines Centuria's ability to effectively manage its assets within the portfolio, thanks to our integrated commercial property services and active management approach. Our rent collections were extremely strong, totaling almost 99% during the year. Our ability to collect rent was also supplemented by our leasing success with terms agreed across more than 437,000 square meters, representing 215 individual leasing deals and more than 17% of the total portfolio's leasable area. The portfolio strength is underpinned by high-quality tenant customers, including federal, state and local governments as well as household names such as Woolworths, Telstra, Arnott's, Visy, Healius and Channel 7. Our Australasian platform is supported by a 6-year weighted average lease expiry and portfolio occupancy of approximately 95%. Turning to development on Slide 21. We continue to build out our development pipeline in both Australia and New Zealand. During the year, we delivered a number of projects, including the delivery of our social and affordable housing projects here in New South Wales and CIP's first speculative industrial development, a 12,000-square-meter warehouse in Bundamba, Queensland. Our committed and future pipeline totaled $1.9 billion as underpinned by the expanded capability inherited with Primewest, our New Zealand business, as well as the existing Australian platform. Our New Zealand $147 million Munroe Lane development in Auckland continues to progress in line with expectations, and we continue to work on other opportunities across our tourism asset in New Zealand. We're also continuing to unlock our health care development pipeline through our strong relationships with operators and bespoke expertise, we are well placed to deliver state-of-the-art private hospitals, specialist facilities and medical centers and partnership with some of Australia's most reputable health care operators and insurers, including the recently announced private hospital in Kew with Medibank. Development fees and profits will provide a growing income source for the group. We will continue to work through our pipeline, identify opportunities to develop products for our underlying funds and to selectively generate development profits with the support of CNI's balance sheet. Let's take a closer look at our unlisted real estate platform on Slide 22. As we've mentioned, our unlisted platform increased by 175% to $11 billion throughout FY '21 and now accounts for 63% of our AUM. This platform has increased in size -- has increased its size, number of asset classes and fund types that service our unlisted distribution network of more than 12,000 institutional wholesale, direct retail and advisory clients. Our own listed funds generated $17.9 million in recognized performance fees over the period with a further $21.4 million in latent underlying performance fees. This part of the platform remains an important component of our overall business with very attractive fee cash and more than 30% of the unlisted AUM having no fund expiry review date and 50% of AUM with expiry review dates at or beyond 5 years. Slide 23 demonstrates the increasing breadth of product and asset offerings generated across our unlisted division. As I mentioned, the $244 million Footscray office acquisition was the largest single-asset retail capital raise within the past 15 years. It's the sole asset of Centuria Government Income Property Fund with more than 90% of the building leased to the Victorian government on long-term leases. The acquisition of Visy's glass manufacturing facility in Auckland for $178 million was the largest New Zealand single-asset fund today. The fund raised $110 million in equity from 820 retail investors. Significant multi-asset fund unlisted initiatives included growing the open-ended Augusta Industrial Fund by $127 million to over NZD 0.5 billion and 12 assets; launching the open-ended the Centuria Healthcare Property Fund and growing it to 9 high-quality health care assets worth $190 million; launching the fixed-term Centuria Industrial Income Fund, underpinned by $63 million of quality eastern seaboard industrial real estate; and launching the open-ended Centuria New Zealand Property Fund, underpinned by the NZD 55 million Anglesea Medical Centre. Slide 24 outlines our institutional mandates and unlisted debt funds. Through our merger with Primewest, Centuria now manages a $930 million daily needs retail mandate and a $587 million office mandate on behalf of Singapore-based GIC. A $272 million JV for the purchase of 140 St. Georges Terrace in Perth was also recently established with Blackrock. Along with the AXA and Grosvenor $500 million health care mandate, we remain focused on broadening our institutional relationships and capital sources. As John mentioned earlier, Centuria recently acquired a 50% interest in the real estate debt fund specialist resulting in Centuria Bass Credit. We believe the nonbank finance sector will continue to grow strongly, and we will be able to leverage Centuria's extensive relationships to scale up this business significantly. To date, the business has secured $448 million loan book, including a recently launched $176 million open-ended debt fund. The second capital raise for the fund closed oversubscribed with 67 million sourced from wholesale invested. 94% of Centuria Bass Credit's loans are secured with first mortgages. Finally, let's turn our attention to the listed entities on Slide 25. Centuria's listed platform expanded 37% in FY '21 to $5.5 billion across 3 REITs. First, the ASX-listed COF. COF is Australia's largest pure-play office REIT with 22 high-quality office assets and $2 billion of AUM. COF derives 82% of its income from government, ASX-listed and multinational tenants. It has continued to demonstrate excellent leasing momentum through the COVID-19 backdrop. COF is included in the S&P/ASX 300 Index and is well positioned for potential inclusion in the FTSE EPRA NAREIT Indices. ASX-listed CIP is Australia's largest pure-play industrial REIT with 67 industrial properties and $3.1 billion of AUM. CIP experienced significant growth throughout FY '21, acquiring close to $1 billion of high-quality assets as well as benefiting from a $587 million valuation uplift. During FY '21, CIP was included in the S&P/ASX 200 Index and FTSE EPRA NAREIT Global Index. Finally, the NZX-listed Asset Plus Limited is underpinned by 6 high-quality assets and AUM of $300 million. More than 70% of APL's income is derived from government, listed and multinational tenants. The portfolio's landmark Munroe Lane development is progressing well, with completion forecast in early 2023. Before I hand over to John, let me conclude by reiterating that FY '21 has been a transformational year for our real estate division, both in terms of scale and value creation. We remain focused on sourcing quality, real estate investment opportunities, utilizing our deep real estate expertise and leveraging our platform to create value for our investors. Thank you. I'll now hand back to John to talk through our strategy and outlook on Slide 27.

Thank you, Jason, and thank you, Simon. Despite the COVID backdrop, our platform has proved very resilient, and we're well positioned to unlock further growth and create additional value into FY '22 and beyond and consolidate our leading position in the Australasian funds management market. I want to call out the people as part of the Centuria business. We're extremely fortunate to have a tight-knit team of highly experienced, well-motivated individuals on whom the success of our group rests. We're also fortunate to have a highly stable senior leadership team, and it's the close relationship between these 2 groups and the security boards which enables our growth to be sustained. On behalf of Jason, Simon and myself, thank you all to these individuals. It's the leverage of their professional experience and their market knowledge, combined with this geographic diversity in our favorite sectors and our capital base, which will underpin the earnings and distribution growth we forecast for the current period and beyond. Strong tailwinds are expected to continue for the well-performing health care industrial sectors. These are expected to benefit our CIP REITs and unlisted industrial funds, along with our health care funds that continue to benefit from global trends associated, on the one hand, with logistics and e-commerce and the other with aging population seeking access to quality health care services. We see continued strong investor demand for unlisted property funds that have stable, high-quality income streams. And we also witnessed wide conviction that during FY '22, the equity capital markets will continue to support high-quality A-REITs such as COF and CIP as well as [ some clarity ] on new listed opportunities as and when these arise. We retain a positive outlook for the New Zealand industrial and commercial markets, where we're heavily invested, as well as keeping a close watch and brief on the tourism sector in New Zealand. We also believe the sector diversity offered by our entry into the daily needs retail and large format retail sectors will help promote a wider opportunity set for investors. Additionally, we believe the alternative sectors we operate in, including health care and lastly, agriculture, will be very well supported in the years ahead as they operate on sound, demand-led fundamentals and trends which are accelerating. Finally, Slide 28. To summarize, we remain committed to building the Centuria brand across Australasia and increasing market relevance in the direct and equity capital markets. Our unlisted business is expected to entertain further investment appetite throughout FY '22 as investors continue to take access to quality income streams and assets. This depth of demand has been evidenced by the completion of 2 of our largest single-asset Australian and New Zealand funds during FY '21, together with strong ongoing support for our open-ended funds. We now possess an extensive private investor base in Australia and New Zealand. We intend to service these loyal clients professionally and offer them a range of investment products, which is unique and highly rewarding. These clients are often invested at every level of our business, listed, unlisted and headstock, and they form the backbone of what has developed over 25 years into the group you see today. The $2.3 billion of institutional mandate capital, in respect of which over $1 billion is undrawn, we're well positioned to support these capital sources, and we believe this aspect of our business can grow quickly. We also retain the ability to identify and transact against select corporate transactions where these are accretive. So finally, we believe the recent ASX 200 Index inclusion is a signal of growth to a size which is now highly scalable. Alongside this comes a strong focus on long-term, predictable earnings and distribution growth. Before I open up the floor to questions, on behalf of Jason, Simon and our management team and our Board, I'd like to thank our investors for your continued support. That concludes the formal presentation. We will now hand back to the operator to commence Q&A.

[Operator Instructions] Your first question comes from the line of Richard Jones from JPMorgan.

Just in relation to performance fees, I think you've called out $22 million of accrued fees that you expect to book over the next few years. Just wondering if you can separate out FY '22 versus '23. And anything likely from any of the Primewest funds as well.

Yes. So I mean a simple way would be to divide it by 2 and put it between '22 and '23. I think in '23, it will be slightly higher because we -- the way we record revenue is on a hockey -- a bit of a hockey stick at the end as the assets get sold. In terms of Primewest, at this point in time, they do not have any funds that have underlying embedded performance fees, albeit we do believe that they exist into the future. We think that the GIC mandate and the timing of that will deliver some performance fees, most likely in FY '23 as opposed to FY '22.

Okay. Excellent. And just on the development segment. I know you've got a decent slide on it. Just interested if you could work through, Jason, just how the earnings contribution may come in terms of profit versus fees and whether you can kind of talk through balance sheet allocation to -- on balance sheet allocation to development capital. I think there is 4 assets COF has settled in July. So there's probably only 2 active still. Just wondering if you can explore that a bit further.

This is Jason here. You look on the development side, a lot of these assets will be developed within the funds, which will provide development management fees of sort of between 3.5% and 5% annual costs. As that pipeline expands, those development revenues will increase, we believe, quite significantly. We do select deeply developed part on the balance sheet as well and make development profits. The best example of those in more recent times have been the 4 social affordable housing projects, and as you see, 2 have completed, and 2 are completing in this period. We've also got a site down in Adelaide for a new commercial office building with a substantial precommit as well as a number of others. Also, the Kew private hospital is currently sitting on balance sheet as well. So it's going to be a mixture of both balance sheet development profit and development management fees coming from out of funds as well going forward. But you should see both of those sort of continue to increase over time.

Your next question comes from the line of Simon Chan from Morgan Stanley.

My first question, your guidance of 10% growth, can you perhaps walk us through what key assumptions or inputs you made to that one? I guess I'm looking in -- looking for, in particular, what assumptions you've made in relation to acquisitions, et cetera.

At a very high level, the acquisitions that we're looking at doing are obviously the key driver across the group, the continued expansion or opportunity of a number of capital raises in New Zealand where we get higher fees, particularly around the underwriting fees coming through as well. It represents in the order of about $2.75 billion of transactions coming through in the next year, so not too dissimilar to this year. But that's really the key assumption in what's coming through in those numbers. Sorry. And obviously, the full year at Primewest coming through and the impacts of that, Centuria Bass Credit, a full year for that as well. They are the key things that are the main drivers of increased earnings.

Yes. Yes. I mean I appreciate Primewest because that's a no known, et cetera. But just to -- so that I'm hearing you correctly, you factored in about $2.3 billion of transaction across the platform in your...

$2.75 billion. 2.75.

Sorry. Sorry. $2.75 billion. Okay. Got you. Got you. And just wondering if John could elaborate on one of his comments earlier about a potential for new listed A-REITs. Any insights as to timing, subsector, [indiscernible]?

Well, thanks, Simon. I think we've now got to the size of sufficient momentum that we've got to allocate the high amount of transactions that the cap trans teams are finding amongst the various sources of equity we have, sources of -- and our distribution [indiscernible]. And some marry up well with privates. Some marry up well with institutional mandates. We've got AXA and Grosvenor and lately, GIC. And some are so vast that, basically, they swap even our distribution capacity, which with Primewest private investors, Augusta or Centuria New Zealand, I should say, and the balance is pretty strong. So if you start thinking about it, it's the midrange being $180 million to $200 million, which we can easily do $250 million through our analyst close-ended syndicates, no one's been doing that. So you can see that midrange has built up considerably. What happens when we made the portfolio of $400 million, $500 million, $600 million, $700 million, $800 million? That really is -- we have to build that out through institutional or look at A-REITs. So we wouldn't enter an A-REIT suddenly or without a lot of research. But if you ask me, I think the sectors that are very popular at the moment, if one had enough assets, would be things like some of the alternative sectors, agriculture. You could look at, I think, large format retail. There are some offerings out there, but we -- I think we could design one that was discrete and unique. So we don't have a -- I think I really -- to put that comment in deliberately so people could see, well, we're not -- that's one sector we're not going to discount or disregard. But when we enter it or the way we [ operate ] COF and took over COF fee, we'll have high co-investments in it. So it becomes a big balance sheet entry for the group, and obviously, we're trying to keep our balance sheet relatively light. But if we think there are superior earnings to be earned through that method, we'll take them.

Your next question comes from the line of James Druce from CLSA.

Just to follow on Simon's question around guidance and FUM growth for next year. So you called out acquisitions. I just want to get a sense of some of the development completions for the next 12, 24 months as well, please.

Look, the main thing is obviously the 2 social affordable housing projects, which are basically just been completed in this period. Munroe Lane might be completed to early '23. We've got a number of health care development that will carry over to the next period. If you look at our committed pipeline of about $1.15 billion, the vast majority of that won't fall into this period. It will be the year and 2 beyond. However, development management fees will flow from those as they are progressing through construction. It's also got -- in New Zealand, we've got our Cook Street asset, which is the tourism asset which has got long-term lease to events that will be completed within the period and some of the other tourism-related projects such as Man Street in Queenstown and Lakeview further out.

Okay. That's good. And then I might have missed it, but just the Augusta underwriting fees contribution this year and next year.

Next year should be a little bit higher than this year. I think we've now got it into a bit of a routine leading into this FY '22 year, and the number that we believe we can execute over the course of FY '22 will be slightly higher than FY '21.

[Operator Instructions] Your next question comes from the line of Tom Bodor from UBS.