Centuria Capital Group (CNI) Earnings Call Transcript & Summary

Hello, and welcome to the Centuria Capital Group Half-Year 2024 Results Presentation. [Operator Instructions] I will now turn the conference over to Mr. John McBain, Joint CEO of Centuria Capital Group. Please go ahead.

Good morning, and thank you for joining us. I'm John McBain, Joint Chief Executive of Centuria Capital and together with my fellow joint CEO, Jason Huljich; and Chief Financial Officer, Simon Holt, we have pleasure in presenting Centuria Capital's interim results for the 2024 financial year. I'll present an overview of the Group, the half-year highlights and some comments regarding strategy and outlook. Our CFO, Simon Holt will give an HY '24 financial update. And my fellow CEO, Jason Huljich, will present the real estate and funds management information. Centuria pays its respects to the traditional owners of the land in Australia and New Zealand, to their respective cultures and to the elders past, present. Turning to Slide 5 provides an overview of the Group and illustrates how Centuria has increased its scale and diversification throughout Australasia. Group assets under management of more than $21 billion recorded during -- as at the close of HY '24. The slide also shows our diversification by fund types and asset sectors. Approximately 70% of the real estate platform is weighted towards unlisted funds, balance comprising 3 listed REITs. Our unlisted real estate is characterized by long-standing relationships across an extensive distribution network, complemented by expanding institutional management partnerships. Throughout the period, we have maintained key stakes in Centuria's REITs, our joint venture partners as well as institutional mandates and open-ended funds. Slide 6 shows the breadth and depth of Centuria's diversification by geography, real estate sector, fund type and capital sources. It illustrates how management and the wider in-house Centuria team support the diversification through its operations. Our treasury and finance team continuously provide proactive, conservative capital management to support our funds management business. And so we leveraged our in-depth market knowledge and favorite sectors to access capital and grow funds under management. Turning to Slide 7, financial highlights. As at 31 December '23, the Group assets under management totaled $21.1 billion, 96% of which comprise real estate funds. Notwithstanding the higher inflationary environment, the half saw our Group expand its alternative verticals across real estate finance and agriculture real estate funds. During the half, we executed $831 million of total real estate transactions, comprising $399 million of acquisitions and real estate financing and $432 million in divestments and real estate finance repayments. A key benefit of Centuria's diversified platform is the ability to activate multiple growth levers simultaneously. In an effort to generate value for security-holders over future periods, the Group's development pipeline has expanded to $2.3 billion. $1 billion of this pipeline is focused on the strongly performing industrial sector, currently characterized by a high supply/demand imbalance, particularly in the Last Mile or infill markets. The Group secured a new $500 million mandate during the half known as Last Mile logistics partnership on behalf of Starwood Capital and has quickly set about filling its requirements in terms of this mandate. Jason will speak about this shortly. Capital management is a clear focus during the half. And I can report the Group operating gearing of 13.9% was achieved and recorded. Simon Holt will provide more detail on our capital management during his presentation. Our focus on countercyclical funds, namely our real estate finance funds, together with industrial and agriculture real estate investments has contributed to Centuria delivering operating earnings of $0.061 per security during the period in addition to declaring an interim dividend of $0.05 per security. CNI reaffirms our FY '24 operating earnings guidance of $0.115 to $0.12 per security and full year distribution guidance of $0.10 per security. On Slide 8, looking across our real estate platform, Centuria continued to manage its diversified portfolios across Australia and New Zealand, encompassing more than 400 properties and close to 2,500 tenant customers. Our portfolio management is led by an active in-house management team to provide a hands-on approach to ensure high tenant satisfaction and well-performing assets. This team contributed to a high average occupancy exceeding 96% and a 5.7-year weighted average lease expiry across all our real estate funds. Turning to Slide 9. Centuria continues to implement its ESG framework. We recently announced new sustainability targets, including targeting zero Scope 2 emissions by 2035. Portfolio plans to source 100% of its electricity from the renewable sources through a combination of on-site solar and large-scale generation significant deals matching our consumption as well as electrification of the portfolio where practical, eliminating gas and diesel in our operations, where CNI has operational control by 2035. During the half, we delivered 589 kilowatts of solar energy across the portfolio and expect to deliver a further 1.2 megawatts during the remainder of the financial period. We further demonstrated our commitment to diversely broadening the Board's gender balance, which now has a 43% female representation, welcoming Joanne Dawson to the Centuria Capital Board and as Chair of the Group's Audit, Risk and Compliance Committee following Peter Done's retirement. In terms of our commitment to governance, Centuria staff completed more than 4,000 cybersecurity training courses during the half, totaling approximately 600 hours of learning. Finally, we are extremely proud to be ranked in the top 10 AFR best places across Australia and New Zealand, property, construction and transport category during 2023. Our unique culture is embodied across our organization by our hardworking and talented staff. Slide 10 deals with our alignment with investor capital allocation. Our platform caters to a broad range of investment opportunities. Now these closely align with investor intentions for the coming year, as shown in the research prepared by CBRE. Our platform is exposed to both the high-demand traditional real estate sectors and the alternative sectors investors seek. I'd like to highlight a significantly high preference for real estate debt. Within this sector, our range of Centuria capital investment options target this preference. This research reaffirms throughout Centuria's platform diversification and fund diversification is extremely well placed to capture investment appetite. Slide 11, strategy. At the beginning of FY '24, we set out our vision and execution strategy for the group. So whilst these overarching guidelines remain in place, security-holders can now evidence their execution during the first half. For example, Centuria Bass, our real estate financing venture, has performed exceptionally well during the first half. We've added to the Centuria agriculture fund, following a $21.5 million Glasshouse in South Australia. And we intend to continue to acquire targeted agriculture assets during the second half. Industrial has been a key component of our portfolio with CIP experiencing very high re-leasing spreads. Centuria Select Opportunities Fund was commenced in the first half. And its first acquisition was in the industrial sector, where our team sees many value-add opportunities. In closing, Centuria management team remains cohesive and focused. We are alert to new opportunities as global interest rates unwind. I now have pleasure in handing you over to our Chief Financial Officer, Simon Holt, who will walk you through our financial results. Simon?

Thanks, John. Just on Slide 13 shows our statutory and operating earnings and distributions for the half, together with the confirmation of the Group's FY '24 guidance. Today, we report that despite the continued higher inflationary interest rate environment, the Group has delivered a half year '24 statutory net profit after tax of $45.2 million and operating NPAT of $49.4 million. This has translated into an operating EPS of $0.061 per security for the half with the distribution per stapled security of $0.05 aligned with our FY '24 guidance. Our FY '24 earnings guidance remains in the range of $0.155 to $0.12 with an unchanged distribution guidance of $0.10 per stapled security. Moving to Slide 14, which outlines the key components of our operating earnings. Operating profits attributable to our Property Funds Management segment are broadly in line with halfway '23, a pleasing result considering the subdued transactional income and in spite of the observed decline in property valuations experienced in the half. Performance fees of $4.8 million recognized for the half are lower than the prior period, reflecting reductions in property valuations and fund extensions. Despite the observed reductions in property valuations, I'm pleased to report that the business continues to have $111 million in latent unrecognized fees based on current valuations. The current investment operating earnings prior to the impact of fair valuation gains and losses have remained largely in line with the prior period with lower distribution income arising from the investment of our underlying property funds and have been offset by an increase in earnings from the balance sheet support provided to Centuria Bass offerings. The Group's development earnings for the half have decreased to $0.6 million as a result of a number of existing projects completing early in the period and our desire to keep key capabilities with a slower ramp-up of new projects. Despite the observed decrease in development earnings this period, with the recently announced $1 billion 5-year industrial development pipeline announced by CIP, this business line is well positioned to contribute to the future earnings or profitability of the Group. As previously guided, the Group made no development profits this period. Moving on to the Property and Development Finance business segment, which represents the Group's 50% interest in Centuria Bass Capital. The business contributed $7.4 million of operating profit for the half, a 95% uplift from the prior period. Centuria Bass benefitted from investor appetite, growing its AUM from $1.12 billion at the end of half year '23 to $1.58 billion at the end of this period and benefiting from Centuria's distribution expertise and balance sheet strength. While market conditions are expected to continue to be conducive for this business line, the Group expects consistent earnings for the second half. The investment bonds management segment continued its reliable contribution to the operating profitability of the Group, delivering a segment profit of $1.8 million, which reflects improved management fee revenue due to FUM increases of 3.8%. In terms of corporate overheads, continuation of our cost management initiatives introduced in the second half of last year are expected to maintain corporate overheads at a rate slightly lower than the full year '23 result despite the noted increase in timing of expenditures for the first half of the year and the presence of inflationary pressures in the marketplace. Finance costs have increased from $15.6 million in FY '23 -- sorry, in HY '23 to $16.6 million in this half with this result shielded by the Group's mix of fixed rate borrowings, reducing the impact of market interest rate fluctuations on the Group's earnings. The decrease in operating tax expense from $10 million in half Y '23 to $4.8 million for the current period reflects the mix of earnings, including lower performance fees and an increase in interest deductions associated with the higher funding costs of the Group's cross-stapled loan balance. Moving on to Slide 15. This slide outlines our transaction fee revenue mix across our diversified platform, including acquisition financing, underwriting and sales fees. It is especially pleasing to note that reduced property transaction fees resulting from the subdued nature of the property market for this period has been substantially offset by the increased Group's earnings associated with the lending activity of Centuria Bass Capital. Our 50% interest in the business contributed $7.4 million. And this was achieved by additional financing of $220 million extended to the property developers as well as successful completion of approximately $120 million in real estate financing from prior periods. This outcome does demonstrate the benefits of the Group's recent strategy to diversify its revenue sources. In all, Centuria is reporting $830 million in total transaction activity in what has been a challenging economic environment. Moving to Slide 16. We are pleased to report the group's balance sheet has remained resilient during the first half of FY '24, with the net asset value per security remaining stable at $1.78, up from $1.77 at 30 June. As shown by the Group's co-investment earnings for the half, Centuria continues to utilize its strong balance sheet to support the underlying business with $184 million of cash realized from the sale and recycling of balance sheet assets during the half. The operating gearing ratio of 13.9% remains within the long-term tolerances of this metric and reflects our focus on capital management, while utilizing a flexible balance sheet to provide support to the business as required. This flexibility is further demonstrated by the extension of the group's revolving loan note A to FY '27, which brings the Group's total available cash and undrawn debt to $255 million for the half year or at 31 December. Another important metric, the operating cash inflows of $56 million on an operating after-tax -- compared to an operating after-tax profit of $48 million further demonstrates our cash-generating capabilities of the business. Now turning to Slide 17 which is talking about the platform's debt and managing it. Centuria continues to diversify and recycle its sources of debt capital across the platform with the introduction of new lenders and the recycling of existing exposures with supportive finances. The Group continues to actively manage debt across the platform to ensure optimal financing outcomes are achieved demonstrated by the platform topping up hedging profiles over the half as market opportunities have presented. Pleasingly, the average margin for the Group, including New Zealand, is 175 bps. And we continue to take a conservative approach to the early extension of debt maturities and taking tenure wherever possible. I'll now hand over to Jason, who will take you through CNI's divisional highlights.

Thanks, Simon. Good morning, everyone. Slide 19 outlines Centuria's $20.3 billion real estate platform. The platform is diversified across 7 real estate sectors and I'll talk to each of those shortly. Let's begin on Slide 20 by examining the impact of the platform's diversification. This slide provides focus on the growth of our asset diversification by sectors, capital sources and fund type. Looking at the various real estate sectors, the first graph highlights the growth across our [indiscernible] including real estate finance, agriculture and health care. These alternatives in addition to our industrial portfolio make up close to half our real estate platform. This is a highly relevant point of difference. Centuria continues to benefit from a broad range of capital sources. Our historical strong retail and wholesale investor base remains another point of difference. And it's as these investors who continue to support Centuria's push into alternative real estate assets, in particular, real estate finance and agriculture. Our more recent focus on growing our unlisted institutional base will provide compelling opportunities going forward. Slide 21. As we've mentioned, our real estate finance business has delivered significant growth throughout the period. Throughout the past 12 months alone AUM has increased by 41% from $1.1 billion to $1.6 billion. This growth is largely attributed to the big 4 banks tightening their lending criteria against the background of rising demand for new homes to house Australia's growing population. Across the real estate finance platform, the vast majority of loans are first mortgages with an average LVR of circa 61%. During the half, Centuria Bass executed 13 finance transactions for $222 million and has just launched its first fund in New Zealand. We are also very excited to announce a circa $150 million credit approved term sheet for a new warehouse facility with a global bank. This facility will help accelerate the growth of the platform. Moving to Slide 22, our industrial portfolio. As John mentioned, Centuria is harnessing the strong industrial sector tailwinds. During the period, we secured a $500 million logistics mandate from U.S. private investment firm Starwood Capital, of which $147 million has already been deployed. Additionally, Centuria Industrial REIT has identified a $1 billion development pipeline across a 5-year horizon, capitalizing on supply-constrained urban infill markets that deliver outsized rental growth and continue to attract high occupier demand. This pipeline will provide Centuria with a strong ongoing development management fees over the foreseeable future. [indiscernible] a rental growth during the period at average 49% of re-leasing spreads for the portfolio, demonstrating exceptionally strong rental growth across our industrial platform. More than 1/4 of Centuria's industrial platform benefits from lease expiries within the next 2 years, providing further opportunities to capture rental uplift to the benefit of investors. Looking ahead, we believe industrial tailwinds will be sustained throughout the medium term, driven by record low vacancies and a growing domestic population. According to CBRE Research, an additional 4.5 million square meters of industrial logistics space is needed to service a net migration of 935,000 people between 2023 and 2025. Moving to our other alternative sectors on Slide 23. Our agriculture real estate expanded 31% year-on-year to $0.55 billion of AUM. It comprises 17 properties with 13 different irrigated crop types using best practice controlled environment farming methods. Centuria's focus on precision farming assets, particularly within its open-ended unlisted Centuria Agriculture Fund, which has grown to $360 million of AUM, Centuria remains Australia's largest large-scale Glasshouse landlord. Similarly, our health care platform provides occupancy exceeding 97% and a long-term 10.1-year WALE. More than 80% of its assets provide net or triple net lease structures with 60% of leases being CPI-linked. Centuria's health care funds have a committed gross development pipeline of $320 million from our new health care assets. And close to half of our assets comprise short-stay and day hospitals, making us one of the largest non-operator landlords in Australia. Slide 24 touches on our retail platform, which has totaled $3.2 billion of AUM. Our data needs retail assets capitalized on nondiscretionary spending and across the portfolio, provide an average 97% occupancy and 5.5-year WALE. Approximately half of our daily needs income is derived from supermarkets, providing immediate revenue streams. Our large-format retail assets aligned with household need, providing a 98% portfolio occupancy and 3.6-year WALE. The large-format platform achieved 6.9% re-leasing spreads throughout the period. Again, the population growth thematic provides tailwinds for the retail sector with an estimated 2.25 million square meters of retail floor place required to maintain current per capita metrics. Slide 25 details our office platform, which has a total occupancy of 92% and remain exposed to some of the better performing -- better performing office markets with 95% of the portfolio outside of the Sydney and Melbourne CBDs. Despite the uncertainty and challenges in some office markets, there remain a bifurcation regarding asset size, quality and leasing risk. With an average office value of less than $100 million, Centuria's assets provide exposure to a wider transaction pool. Additionally, a 4.1 year staggered WALE was supported by the leasing of 64,000 square meters of office accommodation across 80 individual transactions throughout the half. Despite flexible working arrangements having been come somewhat entrenched, many Australian office markets experienced positive net absorption throughout 2023. This suggests many tenants have already rightsized and tender may be finding an equilibrium. Many tenants have not decreased their footprints. And the office leasing distress predicted by some market speculators has not materialized. According to JLL Research, future of supply across the metro fringe and near city markets is expected to materially reduce over the medium term due to the rising construction costs, increased finance costs and softening capital market transactions. This should support markets Centuria's exposed to, particularly in light of forecast population and white-collar employment growth. Moving to Slide 26. Our unlisted platform comprises $14.1 billion or roughly 70% of our real estate AUM, providing a suite of investment opportunities for more than 12,000 retail, wholesale and institutional investors. During HY '24, the unlisted platform benefited from more than $300 million of capital inflows and $112 million of latent unrecognized performance fees were recorded. Centuria launched 2 new wholesale value-add funds in Australia and New Zealand respectively. In Australia, we launched an open-ended select opportunities fund and secured a $21 million industrial logistics facility as a seed asset post balance date. Centuria New Zealand launched a 2-year closed-ended fund raising $23 million for a single asset storage conversion investment. Our unlisted offerings also expanded throughout the growth of CAF Agriculture Fund and Centuria Bass credit mentioned earlier. On to Slide 27 and our listed A-REITs. Centuria continues to manage Australia's largest listed pure-play industrial and office REITs. During the period, CIP delivered record re-leasing spreads of 51% across 109,000 square meters of leasing. This leasing success resulted in upgrading FY '24 earnings guidance from $0.17 to $0.172 per unit. The REIT also reaffirmed its FY '24 distribution guidance of $0.16 per unit. To further capture strong tailwinds within the Last Mile market, CIP identified a development pipeline throughout the coming 5-year period with an estimated end value of $1 billion. Activating CIP's development pipeline unlocks embedded value and provides modern, sustainable industrial assets to complement its existing portfolio. CIP maintained a portfolio of 88 high-quality assets with a strong portfolio WALE of 7.5 years, complemented by 97.2% portfolio occupancy. Centuria Office REIT executed on a number of key full year '24 objectives during the period with a particular focus on leasing. During the half, occupancy of over 96% was maintained and the portfolio WALE increased to 4.4 years. Pleasingly, COF renewed its largest tenant with commonwealth government committing to a further 10-year term at 235 William Street Northbridge WA. Selective divestments of 2 noncore assets totaling $63 million improved overall portfolio quality, positioning COF to take advantage of the recovering conditions than decentralized office markets. COF reaffirmed FY '24 FFO guidance of $0.138 per unit and distribution guidance of $0.12, which provides a healthy, attractive distribution yield of 9.6%. On to our development slide on #28. We continue to progress our $2.3 billion development pipeline, comprising a committed pipeline and future pipeline projects with estimated values on completion of approximately $600 million and $1.7 billion respectively. We expect this pipeline to contribute to the Group's recurring revenues through development management fees and in some cases, development profits for balance sheet opportunities. Five projects worth circa $300 million were completed during the period. Moving on to valuation summary on page -- Slide 29. During the half year, near valuation movements impact to the commercial real estate industry and Centuria was not immune to this. Across the platform, total valuation movements during the half climbed 1.38% on average, forming part of a larger 4.32% reduction throughout the 12 months to 31 December '23. This decline resulted in an average 61 basis point capitalization rate expansion across the real estate platform throughout the previous 12 months, resulting in a 6.03% weighted average capitalization rate. Looking more closely at the much-talked about office sector. Valuations fell an average of 3.05% during the half and 6.64% across the 12 months. As at 31 December '23, our office platform expanded 48 basis points across the year, providing a 6.34% weighted average cap rate. We've talked a lot about the industrial sector throughout this presentation, which also has not been immune to cap rate expansion. Industrial cap rates expanded 91 points in the last 12 months to 5.67%. Despite the expansion, average valuation movement declined only 2.37% across the same period, reflecting strong rental growth offsetting valuation declines in many years. Turning to Slide 30, an overview of the property and asset management platform. The group managers seek 417 properties leased to approximately 2,500 tenant customers. Centuria partnered with some of Australia-New Zealand's largest corporates to provide effective real estate solutions as can be seen by the group's top 10 tenants. Our portfolio is in excellent shape with average rent collections during the period above 99%. This impressive result was complemented by 254,000 square meters of leasing terms agreed across 224 individual deals. Collectively, our Australasian platform provides a high average occupancy exceeding 96% and an average WALE of 5.7 years. That concludes the formal presentation. And I'll now hand back to the operator to commence Q&A.

[Operator Instructions] Your first question comes from the line of Steven Tjia with Barrenjoey.

A couple of questions from me. Just firstly, in FY '23, you called out about $900 million of unlisted funds expiring in FY '24. If you could talk about retention requires and how the process is being managed so far, that would be great.

Yes, sure. Look, as you may be aware, we only have a small number of funds that actually have -- that have redemption facilities, being 3 of our Australian funds. The others are all fixed term funds and it's been a mix. As you will see in the presentation, we have divested some assets, including some of the older health care assets through the period. On the redemption side of things, the 3 funds that do have redemptions are our agriculture fund, our health care fund, our diversified fund. There is no outstanding redemption requests in the Ag fund. In the other 2 funds, the redemption requests range between 7% and 9% of units on the shoe. What we're doing on that fixed term funds is, particularly on the office, we're recommending fund extensions to the market sentiment in terms of a more positive. And the investors have been voting with our recommendation. So you are seeing most of those funds extend.

Great. And just secondly, just how you're thinking about gearing across the platform and I guess, particularly around the unlisted funds where your LVR might be a little bit higher. So if you can guide in relation to covenants as well.

Yes, sure. So average LVR gearing levels in the unlisted funds are sitting in the mid-40s. The vast majority of those funds had covenants at 60. I think on average, valuations would have to drop about another 20% on average to get to the covenants. On the ICR side, the unlisted funds average ICR covenants 1.75. And on average, we're above 3. So there's plenty of buffer there as well.

Simon here. I was just going to add. So I'm just going to add, I think the banks have been very supportive working through ICR covenants as we have reported 6 months ago. That hasn't changed where there has been pressure.

Your next question comes from the line of Tom Bodor with UBS.

Maybe just one for Simon on the topic of covenants again. There's a comment about covenant compliance for additional hedging. Can you just elaborate on that? And have you been paying for in the money swaps to ensure your ICR covenants submit?

No. Generally, what we've been looking at is ICR beyond 2 years. And in those positions, if there is some stress because of where a view of a floating rate note may be, we would look to hedge a portion, whether it's somewhere between 50% to 100%. Our main focus has been ensuring that we've been around the 50% hedged as a minimum across the majority of funds.

Okay. So can you confirm those swaps that are taken out are at the money? Or are you using capital to buy in the money swaps?

Sometimes -- look, it's a blend of both. The majority of them aren't brought down. And there's reasons that we've gone in and brought some of them down. But we're not doing it across the entire platform.

Okay. And then maybe just on Bass, are there any nonperforming loans there?

No is the answer to that. I mean obviously, there's always the ones that have some stresses in them. But that's when we make a better profit out of the outcomes.

Yes. A lot of -- some of them will be now have extended build times, things like that. But there's none in the portfolio that are giving us -- keeping us awake at night. The guys do a really good job of managing them. And as Simon said, they are probably the more profitable loans, the ones that time extensions and the like.

Okay. No, that's great. And then, maybe just a final one for me. Just the pipeline of transactions yet to settle into half that has sort of been agreed that's normally in your slide. I couldn't see it, but I may have missed it. I just wanted to double-check that.

It is there I think $34 million. No. No, we haven't put in it. I'll have to check, but I'm pretty sure it's very small.

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

Good operating cash flow, Simon. But I just got one question, re-performance fees. You booked $5 million or just south of $5 million this half and you collected $1 million. Last year, you booked $28 million, but collected $100,000. Just wondering when can investors start seeing some of these performance fees come through as cash?

Yes. I think it goes back to Jason's earlier conversation around unlisted funds and a number of those ones that have those embedded performance fees, those funds being extended, particularly around office. So those extensions have ranged from 1 year to 2 years from their expiries. So that's really what's happening. We are managing that through the process of revenue recognition. But we have -- in that context, our policies remain the same.

Great. Is there a limit as to how many times these funds can have their life extended? Or can you just keep kicking the can down the road as long as you see...

Yes. So for the fixed term funds, how it works is usually the second extension. So the first extension usually 50% or 75% fold. The second extension has to be unanimous unless the fund can take out those parties that want to get out. So you've seen some of our funds that have been extended more than twice where there might be a small amount of people they want to get out and we can use their capital within the fund to do that. So as long as you've got that, and then you can keep extending.

Great. And just a final follow-up there. So what proportion of your -- these limited life AUM in the time extension phase at the moment, whether it be first or second or subsequent extension?

I'd have to check. I'll confirm the number. If you look at the Prime West portfolio, for example, just before that listed, they extended nearly all their funds for 10 years as part of that. And the investors got some benefits. So I think they got some shares in the IPO. So that is a decent chunk that has already had one extension. Also a number of our older office funds have been extended either once or twice. So we can work through those numbers and get something to you.

Your next question comes from the line of Caleb Wheatley with Macquarie.

My first one was just a follow-up on an earlier question around the unlisted platform gearing. So you're saying it's about 45%. But can you just give us a sense for, I guess, the range around that 45%? Just conscious that some -- particularly those more recently potentially listed could be a bit higher than that 45% level, please?

Look, the ranges from early 20s up to very few, but 1 or 2 that they're up around the 60% or just under. So that's kind of the range on the lease gearing, 1 or 2.

Yes. Everything else will be in the range of 45% to 50%. Yes.

And other parts are below that, but yes.

Okay. And on that 1 or 2 more in the context of the overall platform, but what are discussions like with lenders, if it's getting close to that sort of...

Our monies. Our monies.

Okay. My second question, just on...

They've been great, there's just a couple of things sitting in companies we bought where it was high, always been high and the banks happy too.

Okay. I appreciate it. My second question, just on capital interest in some of the newer real estate equity subsectors. So health care and agriculture have been a bit of a positive new story over the past couple of years. Just keen to get an updated view on what's happening with how capital is viewing those areas of the platform.

Sure. Look, I think Ag is being very successful. As you've seen, that's been growing. We've got good demand. It's obviously gaining the assets. And we're working on a good pipeline at the moment of new assets and then we can raise more equity into the Ag fund. Our health care has been a bit quieter. It is lower yielding. We've had some inflows in, but it's been pretty quiet. A lot of the planning groups are sort of sitting on their hands at the moment, waiting to see, obviously, interest rate stabilization and the like. And then, obviously, on the credit side, we've had huge growth there, just managed to the high net worth investors, finding those shorter-term debt funds very attractive.

Okay. Great. And then just a final one for me, also solvency still being a fairly large portion of the overall platform. Based on your discussions with the investor base, what are they sort of waiting for and looking for before they get more comfort on deploying there? Is it more a fundamental issue or it's around work from home or is it around pricing or a combination of all 3?

Around the office side, look, it's -- there's just been so much negative press that really built up a story around office. It's not true. And if you go through the COP presentation, I think they done a really good job of dispelling a lot of myths around office. For example, in most of our areas where we invest, you've had positive net of absorption since over the last 3 years. Obviously, Melbourne and Sydney CBDs have had quite large negative, but that hasn't flown through the suburbs. The metro markets have actually been very strong. There's also some research there of every metro lease deal over 1,000 meters. And the amount of tenants increasing for plates footprints vastly exceed those decreasing. So obviously, you've got this reduction in large financial service groups like the banks, but across the board in a lot of our office markets, it's actually not quite right. So look, it is just turning that sentiment around office. And a lot of, when we talked about offshore investors, especially those based in the States, they've got a very different view of office and what's happening up there. And I sort of think that's happening everywhere around the world where it's not. U.S. is 40% more office space per capita than Australia, for example. So I've got some structural issues up there. As we've shown, leasing again has actually been pretty strong in nearly all the markets we invest in. So I think we just need some more positive news out of office, it means to me to stop beating it up and we'll get there. But yes, I think if you look at that office pack, there's some very, very good medium-term tailwinds for office. Like if you look at population growth and for example and what that means to white collar employment, based on the figures in the pack, you could need up to 7 million square meters of office space to accommodate white collar employment growth over the next 8 years, right? Put that in perspective, the Sydney market is 5.5 million square meters. So there's actually some really good news coming out. But it's just not flying through the press and investor sentiment as yet.

And you can see, why in North America in particular, yes, is a bit of a basket case. And over here, the facts don't make good news. And it's understandable. But we believe that work-from-home ratios are pretty well set now. Yes, there might be some change at the margin. But we wouldn't be getting these re-leasing statistics and the sort of rents we're getting if no one wants to ever be in an office. The problem is it's kind of -- the facts are unbelievable to the domestic market because of the weight of continued negative press. It will unwind. Like everything -- all these things will unwind.

It's taking time. On the buyer side, what we're seeing is demand for the smaller assets is there, so sub-$100 million, mainly for privates and smaller syndicators. And what you see in this point of the cycle where a smaller syndicator can get time and subject to equity raising terms, you see them sort of come out of the woodwork. And we obviously sold a couple of assets and COPs through the period that are pretty close to book. And one was to a private one and one was to a smaller syndicator. And we sold some of our unlisted assets to newer syndicators as well. So you're sort of seeing demand in that sub-$100 million range.

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

Jason, are you able to just work through just the latent performance fees, obviously, down a little bit I imagine through the devaluations you booked in the period. Can you just discuss the time realization on these fees? And I guess the risk on I think it's $112 million.

Simon is probably best to speak to that.

Yes. Look, again, most of that relates to the latent fees coming through from the Prime West book now. And that, as we -- as Jason mentioned earlier, 10 years from 2019 is 2029. So it's a fair whack sitting in that range. It kind of spikes towards that back end of '29. There are some that comes through in the next couple of years of the $111 million. But again, just reminding everyone, it is a position based on current valuations as opposed to -- or actually gets booked over time. But in essence, we're still 4 to 5 years away of the big pieces of that.

Okay. And then the Last Mile Logistics Fund. Just in terms of the mandate there. Can you just discuss deployment opportunities and competition to deploy at the moment?

Yes. Look, it's -- we're seeing good pipeline for it. We've filled just under 1/3 of it. We're working on some other opportunities right now. We've got a very active industrial team. We've been one of the biggest buyers of that small style infill logistics over the last 3 or 4 years and obviously built the whole CIP platform around that. We've got very good intel, having 180 assets in the industrial space across the platform. We've probably got some of the best intel on all those submarkets and what's happening with rents and tenant demand and the like. So yes, we're definitely seeing opportunities there that meet the investment hurdles for Starwood. So yes, you'd expect to see more deals in that space.

Okay. And is there any other institutional discussions you have that are advanced on other mandates? And if so what asset classes can you...

Yes. Look, we're talking to a number of groups. We get approached by groups. And obviously, we're up in Asia and other places talking a lot of groups as well. So it's definitely a focus of ours to expand that industrial -- sorry, that institutional footprint, which was something we didn't focus on for a very long time, because we had such a strong retail and high net worth sort of base. So it's something guys focused on. We're in a number of discussions at different levels. But it is something the team is working on trying to grow further.

Your next question comes from the line of Alexander Prineas with Morningstar.

Apologies if this has been addressed. I wasn't on the call for the entire time due to a clash. Just on the fixed term funds. Can you provide a bit of color about sort of how conversations are going for fixed term funds that are expiring the remainder of this year and into 2025? Is there anything you can say about the outlook there for retaining or extending those funds or...

Sure. Look, we talked briefly about it. But yes, we're recommending in a lot of situations, especially on the office funds, to extend. The investors are backing our recommendation, which is good. We've been selling that assets in some of the oldest health care funds and the like, which terms are up. But all of the larger office assets we are extending and the investors are happy to go along with that.

Okay. And also I understand there's some big maturities around '28-'29 period. Is that similarly -- is that the Prime West stuff --

Yes. That...

-- that is coming off that 10 years from 2019?

Exactly, exactly right. And look, if you look at Prime West funds, again, they tend to hold them probably longer than the average Centuria fund. A lot of those, there's some very old prime [indiscernible] fund that have been around for over 20 years in that portfolio. So their investors historically had like to hold longer.

Are those investor groups in those Prime West funds, are they making other investments with you into other funds since that deal?

They've been [indiscernible] -- yes, they've been particularly supportive of the debt funds actually. Their investor base is sort of 800 pretty high net worth individuals and families. And yes, they definitely find those debt funds attractive.

There are no further questions at this time. I will turn the call to John for closing remarks.

Yes, I'd like to thank everybody for taking time to listen. And we'll close the presentation. Thank you very much.

This concludes today's conference call. We thank you for joining. You may now disconnect your lines.