Charter Hall Group (CHC) Earnings Call Transcript & Summary

[Audio Gap] [Operator Instructions] Please note that this conference is being recorded today, Wednesday, 17th of February. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group CEO. Thank you, sir, please go ahead.

Good morning, and welcome to the Charter Hall Group Half Year Results for the Financial Year '21. I'm David Harrison, Managing Director and Group CEO of Charter Hall. Presenting with me today is Sean McMahon, our Group CIO; and Russell Proutt, our Group CFO. Slide 4 highlights the continuation of growth and resilience, which has characterized our results for 10 years. First half operating earnings post-tax was $129 million or $0.278 per security. For the 12 months to the end of December '20, that equates to an operating earnings return on contributed equity of 13.1% post-tax, generating a higher pretax return of circa 15%. The group's property investment portfolio remains stable at $2 billion, despite realizations of $80 million due to the positive impact of net revaluation increases. The group has delivered a 10.9% investment return inclusive of an attractive 6% property investment yield. Fund growth continues to be strong with 14.4% growth in the period or an additional $5.8 billion of FUM, taking total funds under management to $46.4 billion. The growth is a result of our ongoing partnerships with tenant and investor customers, delivering positive outcomes for them, which ultimately translates into attractive returns for securityholders. That growth saw us undertake $6.2 billion of gross transactions as we continue to actively curate our portfolios to drive performance via net acquisitions and development deployment. The group's balance sheet remains resilient, with 0% net gearing and significant investment capacity and liquidity, whilst the 3.8% growth in NTA reflects the quality of our long-leased investments, particularly industrial and triple net sectors. Finally, the group's investment capacity of cash and undrawn debt stands at $6.4 billion, up from $5 billion at June. We note this does not include committed but uncalled equity commitments, which further increases this capacity significantly. Our focus remains on delivering sustainable growth to securityholders, replenishing dry powder, strengthening resilience and a vigilant focus on property fundamentals. Slide 5 outlines our strategy, which has been consistent for many years. We use our property expertise and customer relationships to create value and generate superior returns for our investors. Access, deploy, manage and invest has not changed for nearly 10 years as we execute upon these strategic pillars. We deployed $2.8 billion of gross equity during the period. All equity sources delivered net inflows, but it's worth calling out the success of our Wholesale Partnerships and the ongoing strength of our Direct business, where continued outperformance of these strategies is attracting further equity flows. Of the $6.2 billion of gross transactions during this period, we acquired $4.9 billion of assets and divested a further $1.3 billion. Our focus remains on ensuring we manage portfolios to preserve capital and drive resilient income returns, optimizing the earnings growth from the assets we manage. Finally, we continue to focus on investing alongside our capital partners. The CHC property investment, or PI, portfolio delivered a 10.9% return this half for CHC securityholders. Slide 6 highlights pre- and post-tax OEPS growth, but we also highlight growth ex the CHOT performance fee. Our full year FY '21 OEPS guidance of $0.55, or no less than $0.55, continues this trajectory on an ex CHOT performance fee basis, illuminating the growth of annuity earnings that is complemented by transaction and performance fee revenue, following the 37% growth in OEPS ex CHOT in FY '20 over FY '19. Turning to Slide 7. The history of delivering consistent OEPS growth has also translated into significant outperformance of total shareholder return for shareholders in CHC compared with the AREIT Index over all-time periods. We're proud to have delivered our securityholders outperformance over every time period since our listing over 15 years ago. And we thank you for the ongoing support of Charter Hall. Turning to Slide 9, where we summarize activity in the group's fund management platform. We remain well diversified by equity sources and by sector, where we have selected and curated portfolios which have captured the strong growth in logistics and triple net assets, whilst the sector-leading WALE of our national office portfolio, fast approaching the largest in Australia, has driven resilience in asset valuations. The strength of our Long WALE retail and convenience shopping center retail assets has also demonstrated the team's focus on relatively low occupancy cost retail assets and the benefits of cross-sector tenant relationships. The PFM platform comprises over 1,300 properties and delivers more than $2.3 billion of net rental income across the platform. The group's fund management WALE has increased to 9.1 years despite the inflection of time, through lease extensions and new assets that have combined to drive growth in this key metric. The weighted average cap rate across the portfolio were platform-firmed to 5.11%, reflecting the quality, improvements in the portfolio, exposure to logistics and triple net sectors that have shown the greatest yield compression, a trend we expect to continue. Now to Slide 10. We see our customers as investors and tenants, many of whom are also ownership partners or potential vendors of sale and leaseback assets. Our top 20 tenants make up almost 60% of platform net rental income. These tenant customers are heavily concentrated in nondiscretionary industries and sectors. 26% of our office portfolio rent comes from government as does almost 5% of our industrial and logistics portfolio, which is anchored by all the major supermarket retailers. The sales growth in DDS customers has been quite strong, and these retailers also represent large logistics customers. Our focus on supermarkets, grocery and everyday needs is deliberate. And we are now the largest owner of industrial and logistics facilities for the major supermarket chains in Australia, with a total value of logistics assets leased to these retailers exceeding $4 billion. The focus on these tenants extends across our industrial and logistics portfolio, our Long WALE retail portfolio and of course, our shopping center portfolio. The resilience of our major tenant customers and our concentration towards these essential industries underpins the defensive nature of our portfolios and their ongoing performance. Slide 11 depicts the FUM growth, split by sources of equity over both the last 6 months and last 5 years. Portfolio curation is an important driver of FUM performance. We continue to be an active buyer and seller of assets, constantly looking to improve portfolios and deliver growth. Whilst acquisitions have exceeded development completions, the growth from development completions, new committed developments and the growing pipeline of captive development projects that remain uncommitted provides a pathway to deploy some of our considerable investment capacity. Our focus on well-located modern assets leased to high-quality tenants on long leases with in-built rental growth is a simple formula. Importantly, it translates into assets that provide ongoing capital growth. And this period was no exception, with net valuations again contributing to FUM growth of circa $1.2 billion over 6 months. As indicated in the graph on the right-hand side of the slide, we have seen a compound annual growth rate of over 24% in funds under management since June 2016. That growth has been consistent across all of our equity sources of Wholesale and retail unlisted equity, together with the Listed REITs we manage, providing all equity investors access to our growth opportunities. Turning to Slide 12 and transaction activity. Strong equity flows show us active in deploying equity into developments and acquisitions. Notwithstanding the challenges presented by COVID-19, we were active across all sectors, and we're quick to seize on opportunities that presented themselves. Sale and leaseback transactions continue to drive much of our activity as we look to actively partner with our tenant customers to create mutually beneficial outcomes. Examples include both of the ALDI distribution center portfolios acquired, totaling approximately $900 million; the expansion of the BP partnership into New Zealand; and the $280 million Telstra Telco exchange or exchange acquired in Pitt Street in the core of Sydney CBD. Repeat customer transactions are a healthy sign of delivering on our customer-centric objectives, many of which reflect our capacity to deal with customers across multiple sectors. Just turning to Slide 13 and our development book. The group continues to progress various developments across its portfolio, creating investment-grade properties and adding significant value through enhancing both income yield and total return. It's been a strong period of completions, with $1.8 billion of developments delivered during the past 12 months. Further, we have had major pre-commitments on new office projects to Amazon at 555 Collins Street in Melbourne and Services Australia of 60 King William Street in Adelaide. Industrial development continues to grow, with the total industrial pipeline now at $2 billion, complementing the $4.3 billion office pipeline of committed and uncommitted projects. The forward pipeline of committed projects will generate high-quality long-lease assets for our funds and partnerships, while providing attractive incremental FUM growth for CHC and enhancing our credentials to attract further capital. The team looks forward to talking in greater depth about our development capabilities, track record and exciting opportunities at our development showcase on Wednesday, the 31st of March, and I hope you can join us then. Slide 14 and our equity flows. Our strategy of accessing multiple sources of capital continues to deliver growth in all segments. As outlined in our November market update, our pooled funds continue to generate strong investor interest, with CPIF having closed 2 significant equity offers last calendar year, exceeding $2.6 billion. Our Wholesale Partnerships were also very active during the half, with a newly created partnership with a global sovereign wealth fund, GIC, for the acquisition of the Ampol portfolio; Allianz Real Estate, partnering with us on both of the ALDI distribution center portfolios; TFMC and Telstra Super, investing into a new $350 million portfolio of Bunnings centers; Dutch pension fund, PGGM, establishing a new logistics partnership; and QuadReal, investing in a future development opportunity at North Quay in Brisbane. As I previously mentioned, our Direct business also continues to enjoy strong support from investors, with net inflows having recovered to pre-COVID levels. In summary, we continue to enjoy the support of capital partners given our ability to successfully deploy capital in attractive acquisitions and development opportunities, investing alongside them to cement strong alignment of interest and generate healthy returns for both partners and CHC shareholders. I will now hand over to Sean McMahon, our Chief Investment Officer, for the property investment section.

Thanks, David, and good morning, everyone. As David has discussed, our property investment portfolio provides a strong alignment of interest with our investor customers while also ensuring that securityholders benefit from our property expertise. Our property investment portfolio remains at $2 billion, and occupancy is broadly stable. Through active asset management, the portfolio WALE has increased to 9.1 years primarily driven by new acquisitions of Long WALE assets in the first half. Our weighted average rent review remains strong at 3%, and the weighted average cap rate has firmed to 5.15%, reflecting the quality of the assets we have invested in. The portfolio remains well diversified across sectors and by investment and has an 80% weighting to the core East Coast markets. We continue to allocate incremental group capital to investments in Long WALE retail, social infrastructure and industrial and logistics assets. The growth in the property investment portfolio reflects the group's desire to continue to invest alongside our investor customers and ensure a strong alignment of interest. Now turning to the property investment portfolio movement on Slide 17. During the period, our investment property portfolio was stable at $2 billion, with increased valuations offsetting a net reduction in investments. Our ability to recycle capital to support new fund initiatives and drive returns for securityholders is an important part of the success of the group. The chart on the right-hand side shows the growth of our total property investment. Pleasingly, despite cap rate compression across the assets we invest in, our PI yield remains attractive at 6%. Now turning to Slide 18 and our earnings resilience. As can be seen in the 3 charts on this page, our property investment earnings are characterized by the high quality of the tenants that provide that income; the diversity of sectors which produce them; and the lack of concentration risk or single-asset exposure in deriving them. With our largest single-asset exposure being 1.8% of the group's balance sheet property investment portfolio and our top 10 assets only representing 10.4% of the group's after-tax earnings, the CHC PI portfolio can be considered a very defensive, well-diversified core investment portfolio. More broadly, across the platform, we enjoy strong tenant customer relationships. These relationships often span asset sectors and multiple properties. 77% of our tenant customers lease more than one tenancy from us. And this also drives tenant retention, with 85% of tenants re-leasing in the first half. Naturally, it also feeds back into transactions, with our significant sale and leaseback activity providing off-market opportunities to also grow our funds. And as David highlighted, these transactions occur a result of our ongoing focus on tenant customers. Importantly, they also benefit Charter Hall's shareholders by producing earnings resilience across our property investment portfolio. Let's now move to ESG on Slide 19. Climate resilience, recognizing the role we plan in communities and responsible business are embedded in everything we do at Charter Hall. During the period, we became a signatory to the World Green Building Council Net Zero Buildings commitment, aligning with our net 0 emissions target by 2030. We've further advanced our solar energy rollout, and 64% of our retail energy needs are now being provided by our retail solar installations. And our industrial and logistics portfolio has increased by a further 3.3 megawatts since June. We've also been recognized in the 2020 PRI Leaders Group for our work in climate reporting. And we've further increased our Green Star footprint, with 234 Green Star-rated buildings, and this remains the largest Green Star footprint in the country. We also remain committed to engaging with the communities in which we operate, donating staff time and resources in support of initiatives that are of benefit to those in need and that directly benefit the communities in which we operate as part of our Pledge 1% commitment. Finally, we continue to focus on ensuring we operate with the highest level of governance, recognizing our responsibilities to our investors and the community. We are progressing with our alignment on TCFD reporting and have published our first modern slavery statement, outlining our efforts to prevent occurrences of modern slavery in our supply chain. I will now hand over to Russell to provide details on the financial results.

Thank you, Sean, and good morning to everybody on the call. Slide 21 presents a summary of earnings for the period compared to the first half of fiscal 2020. What is evident from the comparison is that the first half of 2020 was a very active half and included the contribution of nearly $100 million of the CHOT performance fee in the earnings. The business also had a very strong start to the year in the first half of fiscal '21. Property investment earnings increased to $60.4 million as the investment portfolio continued to generate a 6% earnings yield. This is notable in both the context of the current interest rate environment, but also the active management of the portfolio. The development investment EBITDA continues to be a feature of our reported segmented earnings. The differential from last year is largely related to timing across the portfolio of projects. And the funds management platform, at about 60% of total EBITDA, had a very strong first half. And I'll go into greater detail of the PFM segment's performance on the next slide. Overall, for the half, operating earnings were $0.278, and distributions were $0.186 per security. We continue to size our distributions based on a target growth rate of 6%, which resulted in an earnings payout ratio of 67% for the period. Turning to Slide 22 and looking at the PFM business in greater detail. The funds management segment continues to drive organizational growth. The base management fees increased more than 25% from the first half of last year, reflecting the growth in fee-bearing capital between the periods. Transaction and performance fees were in line with expectations. However, the comparison to last year is impacted by the performance and transaction fees of that period. Excluding transaction and performance fees, the EBITDA margin for the segment expanded 57%, whereas property service revenues were also up nearly 17% as the scale of the business grows and activity levels increase, including the provision of development management services to our funds. With consideration for operating in a COVID environment, the business has been very focused on cost control. This focus has resulted in an overall cost reduction of nearly 11% compared to the first half of last year. Though I would note that while this is a positive financial outcome, we are all very focused on ensuring that there's adequate investment in our people and systems to enable further growth of the business. Now moving to Slide 23 and our operating cash flow. First of all, distributions were fully covered by operating cash flow in the period. The only notable item in the bridge from operating earnings to operating cash flow is a relatively large tax payment of $32 million. This relates to the timing of tax payments from earnings previously reported in the FY '20 year that were paid in this period. If adjusted for these payments, the operating cash flow were 1.4x the half's distributions. And on the next slide, Slide 24, shows the balance sheet as at 31 December. As you can see, it remains largely consistent with last year, with a $2 billion property investment portfolio and a substantial cash balance, again resulting in net 0 gearing at 31 December. Most importantly, the returns on capital metrics remain strong. Maintaining strong return metrics are fundamental to ensuring the business employs capital effectively to generate both earnings and earnings growth. Moving forward to Slide 25, we provide an update in relation to the debt funding across the business. At more than $18 billion of total facilities and $3.7 billion of transactions executed in the half, we have grown our borrowing capacity in line with equity flows. The business has also actively worked to diversify sources to ensure that further FUM growth is also supported. At this point, we have 7 entities with investment-grade credit ratings, and it is a priority to access the foreign and domestic debt capital markets. In the first half, domestic medium-term notes were issued for 2 funds, and we are currently in market with a third new issue and hope to bring more in the next year. We tailor the financing of our investment vehicles in a manner appropriate for investments as well as the equity source, typically to investment-grade credit metrics, if not formally rated by a credit rating agency. Across the group, the average cost of funding reduced to 2.3%, and the debt maturity was maintained at 4.2 years. And has been referenced earlier, the business now has more than $6 billion of available liquidity, which excludes uncalled equity. Thank you. And now I will turn to David to provide an updated outlook and guidance for the fiscal '21 period.

Thanks, Russell. Now turning to Slide 27 and our operating earnings guidance. We started this financial year with earnings guidance in August of post-tax operating earnings per security of approximately $0.51. Given activity in the insuring period, we're able to upgrade that guidance to approximately $0.53 per security in November at the AGM. Based on no material change in current market conditions and assuming the COVID-19 operating environment does not deteriorate materially from here, FY '21 guidance is upgraded to post-tax operating earnings per security of no less than $0.55 per security, excluding any accrued performance fees. FY '21 distribution per security guidance is unchanged at 6% growth over FY '20. That now ends the prepared remarks, and I now invite your questions.

[Operator Instructions] Your first question comes from James Druce of CLSA.

Firstly, just on the guidance, is there any reason why your second half won't be better than your first half? I appreciate it's no less than $0.55 guidance, but obviously, if you're just annualizing the first half, you're already at $0.55.

Russell, you might want to give some guidance?

Yes. Sure. Look, the swing factor in all of our -- between half skew is -- relates to transaction activity, particularly in this year and without the presence of large performance fee measures, so it really depends on transaction activity. If you look at prior periods, our H2 this year will be built 30% higher than last year. So we had much stronger skew last year than we did this year. We would expect to be much more even. So I don't think it is -- it can be characterized as a deterioration, much more just a continuation of the business in the second half like the first.

Okay. That's clear. And then maybe just on FUM growth. Obviously, pretty strong with developments this half. Can we talk about the timing of the committed development, so the $2 billion that you have in office, how that comes through over the next couple of halves and maybe just the outlook for asset values generally and just the visibility that you have on sale and leasebacks?

That's 3 questions, James. The development pipeline in office, specifically, has been converted from uncommitted to committed with the announcement of the Amazon pre-leased 555 Collins Street project in Melbourne. Projects of sort of 50,000 square meters typically take about 2.5 years. So that will be spread over that period. The other major project that we announced was a 45,000-meter new office building in the Adelaide CBD called 60 King William Street, which is 70% pre-committed to the federal government for Services Australia. That is of a similar size and will take a similar time frame. The committed industrial developments are a range of projects. And as you're -- I'm sure you're aware, a typical sort of 40,000-meter industrial project might take 12 months to complete. We have some larger, more automated projects on the go, with 15-year pre-leases to Coles for their Ocado strategy, which could take a couple of years. But as you've also seen, we've had quite an uplift in development completions. And with the fairly significant growth in the scale of both committed and uncommitted developments, we would expect that sort of annual run rate of completions to continue that growth trajectory. The other couple of questions you asked, I think, were around sale and leaseback. We're clearly the market leader, having completed about $8 billion of sale and leaseback in the last 6 years. We had a significant number of transactions in the half, which I called out, like the Ampol portfolio, the Telstra Exchange acquisition for $280 million in Sydney CBD and the $500 million David Jones 20-year triple net lease -- sale and leaseback transaction we announced in December. So there's no doubt in my mind, I've been calling this out for a few years now, that the trajectory of sale and leaseback will continue for both corporates and government. And we're continuing to source those. You're probably aware, we're able to do a couple of attractive long-lease social infrastructure investments in CQE, with leases to the state government in Adelaide and the Mater in Brisbane. So we would expect that to continue. And we've seen the benefits of that strategy play out in our net valuation growth, which is predominantly being weighted towards logistics in the triple net lease sector. So probably 70% of the $1.1 billion of total net valuation growth has come from those sort of Long WALE resilient sectors. And I think the third question was about valuations. I think I just answered it. And look, ballpark, our industrial valuations averaged just under 6% across a large portfolio. As we add assets each half, that's not quite like-for-like. But as a general guide, that's sort of what we're seeing in industrial. Long WALE retail has had similar, if not higher growth on some of our strategies, like our pub strategy and some of the Long WALE retail that has already been announced by both CQR and CLW. We're pleased that we were still able to get sort of close to $250 million to $280 million in net valuation uplift across our office portfolio through a combination of curating Long WALE strategies and also recognizing development margins as projects completed, like the very successful Wesley project in Melbourne, which was 100% pre-leased prior to completion. So hopefully, that gives you some color around valuations and our view that the direction of differential asset growth that we've seen for the last 1.5 years, I see no reason why that's not going to continue. And as Greg announced in CQR's results, it's very robust, the demand for convenience shopping center retail. And whilst that's been stable, I think you're going to start seeing some strong demand driving growth in that sector as well.

Your next question comes from Stuart McLean of Macquarie.

First question is just on guidance and the comment the guidance is excluding a potential for accrued performance fees. Is this more of a flagging of potential performance fees that could be accrued? Or are you kind of certain that this is going to be the case? Could you just provide a bit more color on that statement?

Look, Russell might answer, but I'll just give you some quick color. We've had several years of having to manage the communication on what I see as good news stories, the realization of performance fees. You'll recall that we had a situation where we had to accrue a CHOT performance fee when the payment date was imminent. And therefore, we had to accrue about $50 million in, I think, FY '19, even though that was paid in FY '20. Because we have, for many years, been signaling to the market the payment date for performance fees by partnership and by fund, I think the market knows that we have some imminent payment dates coming up in FY '22. And we're just making it crystal clear to the market that our guidance does not include any accrued performance fees. So that's the reason for that additional statement.

Okay. And then moving into the P&L. Property investment income seems to be down half-on-half, so $60.4 million this half, but close to $63 million in the prior half, and not Q-on-Q, but 2 half '20. Can you just give some color on why that moderated, please?

Yes. So the differential will be largely because of the timing of when our investments were -- when the capital was actually invested, as you saw over the last year, so we've had a little bit of velocity of investments in and out, including like, for example, the sale of Waypoint. So there was no real deterioration in returns for the year. We were at 6% yield on average across the invested capital. But we -- as you see, we -- our cash balance has been elevated, and you'll also see our interest expense is lower this year. Partially, that is because of our -- less utilization of our bank lines. So it really was affected by, in the second half of last year, how much capital we had at work during the period on average. You only get to see the reporting dates being June 30 and December 31. You don't get to see the kind of intra-periods of invested capital. That's why there is a difference.

I think the other thing I would add is if you look at the property investment portfolio movement slide, we sold $67 million of co-investment, so we realized cash. And the reason why the portfolio is at the same number is we had an equal net valuation uplift. So that's also driving the differential. And with our capacity, we will expect further growth in our property investment portfolio to provide strong incremental growth in EPS.

And maybe so one for Russell, just on the margins. How sustainable is the reduction in cost? Is this a new base? There's no need or there's not going to be kind of a surprise where there's going to be $5 million, $10 million of cost back in, in the second half of the year. So are we now at a bit more sustainable rate where we'll grow in line with the business?

Yes. It kind of went back and forth there a little bit. Let me -- so look, we were able to achieve this cost reduction largely because of the environment we're in and focused on making sure we are just focused on our core operations. And we also went through a period of investment in the last fiscal year in our processes and systems, or in the prior one to that. And so this level is supportable for the business in its current state, but I would expect our operating cost to expand as we need additional headcount and we need additional investment. But we did not starve the business this half. This is a level of operating expenditure that was sufficient to support the business in its current state. So I wouldn't say this is an abnormal period, but I would also expect us to invest further as we grow.

And can margins continue to expand? So can revenue grow quicker than expenses and as the business grows?

Yes. Well, that is the objective. And that's one of the reasons why I often refer to margins, excluding transaction and performance fee, because transaction and performance fees, obviously, are much more subject to market conditions. And the margins you achieve ex those kind of variable levels of revenue is really the focus on where our sustainable margins will be. So I would expect us to continue to improve on that. But it's also subject to the nature of the FUM that we add to the business and the operating intensity around that.

And just a final one for me for David. You had some good equity inflows in the asset classes like industrial. Can you just give a bit of an outlook, maybe on what to expect from office equity flows?

You've got to split it essentially by our 3 segments of equity sources. In our Direct business, which is virtually getting its monthly inflows back to pre-COVID levels, should be no surprise that half of the inflows are in industrial logistics and the rest in office because the funds that we had open for investment are predominantly industrial and office funds, with a couple of smaller diversified funds. In Wholesale Partnerships, which is larger than our Wholesale Pool segment, those partnership inflows will be very dependent on the sort of developed core or stabilized acquisitions that we source. For example, 60 King William Street, we were able to simultaneously put a club of capital together to forward-fund that project once we got planning and the government pre-lease finalized. So that would be an example of equity flows going into office. The DVP partnership has already made investments in office, but as was announced, has also taken the opportunity to expand and invest in a partnership that bought the David Jones 20-year triple net lease opportunity, which is a prime CBD acquisition at about $15,000 a meter, which we think is extremely good value. And then on the Pooled Fund side of things, there's no doubt that the -- across the whole market, the flow of equity going into office funds has slowed, but we continue to attract equity into CPOF. I think as the sentiment around office stabilizes during the course of calendar '21 and there's a sort of greater visibility on where utilization rates will get to and the -- an effective rollout of a vaccine globally will change the landscape for office very -- to be a very different environment in 12 months, to one that we've got at the moment, so looking forward, I -- there's no doubt that the demand across all asset classes is stronger in logistics and triple net than other sectors. But it hasn't moved away from office. And as you've probably seen from some recent major capital transactions, there's pretty strong appetite for major office investments. And particularly from offshore capital who can't get their people into the country, they're going to partner with the best-of-breed managers that know what they're doing. And so whilst I won't make a prediction, I think when we sit here in 6 months' and 12 months' time, you may be surprised that inflows into office are more positive than the general market expects. That's sort of the color I would give you on equity flows. And the only other point on equity flows is there are a lot of office buildings that are still going to potentially broadly meet a social infrastructure definition, and there's pretty strong interest in that sector. So -- and even some of the major, frankly, not within Charter Hall, but within other groups, sort of health care-type assets that have been announced, they're basically office buildings used by health care users. So I think it's going to be a pretty interesting environment going forward. Certainly, Charter Hall's bias and tilt in office is going to be towards good quality assets with long leases to both government and very strong corporate tenants as evidenced by the sort of pre-lease commitments we've announced in the last 6 months.

Your next question comes from Suraj Nebhani of Citigroup.

Just a couple of questions. Can I check if the David Jones acquisition that's done in December is included in the FUM number, please?

Yes, it's included in the FUM number. The acquisition was not subject deferred for the purchaser because our capital was not foreign. It got caught in the new rules prior to 31 December that have now been repealed, that the tenant needed further approval for the grant of the lease. And we're just waiting on that to come through imminently, so I don't see that as an issue.

Okay. And just on the transaction activity over this year so far, David, are you able to make any comments on that, like how have you started?

No, I'm just telling all our competition that we're asleep and we're on holiday. So it's a pretty unusual month or 2 for Charter Hall not to be progressing transactions. And the first 2 months of this calendar year are no different. That's all I will say.

Okay. Maybe one for Russell. Were there any performance fees recognized this period? Or is that $27 million just transaction fees?