Charter Hall Retail REIT (CQR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Retail REIT 2026 Half-Year Results Briefing. [Operator Instructions] Please note that this conference is being recorded today, Friday, 6 February, 2026. I would now like to hand the conference over to your host today, Mr. Ben Ellis, Retail CEO. Thank you, sir. Please go ahead.

Good morning, and welcome to Charter Hall Retail REIT's Half-Year Results for FY '26. My name is Ben Ellis, and I am the Retail CEO for Charter Hall and an Executive Director of CQR. Joining me this morning is Joanne Donovan, Head of Retail Finance at Charter Hall. I'd like to commence today's presentation with an acknowledgment of country. Charter Hall acknowledges the traditional custodians of the lands on which we work and gather. We pay our respects to elders past and present and recognize their continued care and contribution to country. Now turning to Slide 4 and our highlights for the half. CQR's convenience retail portfolio has performed strongly across all metrics over the last 6 months. Our portfolio occupancy is 99.1%, an all-time high for CQR. And importantly, our same-property NPI growth continues to be strong at 3%. As we'll touch on later in the presentation, our tenants continue to perform strongly, with portfolio MAT growth of 2.9%. Over the period, we delivered positive leasing spreads of 4.1% and we recorded a portfolio-high specialty tenant retention rate of 88%. We expect our high retention rate and strong specialty leasing spreads to continue as the quality of our portfolio continues to attract an increasing level of demand from nondiscretionary tenants. The supply of new retail property in Australia is currently around 50% lower than levels seen a decade ago. As population growth continues, tenant and investor demand for convenience-based retail property is rising against the backdrop of limited new supply. This is evident when looking at CQR's portfolio with our NTA increasing by 5.8% to $4.91 per security. Pleasingly, this valuation uplift was driven predominantly through rent growth over the half. Post balance date, we have successfully agreed terms to refinance our entire $1.6 billion balance sheet debt platform, which will result in CQR's weighted average debt margin reducing by 40 basis points. The refinancing will also result in greater headroom to our gearing covenants and will extend our weighted average debt maturity to 4 years. In addition, we've successfully improved our hedging profile with FY '26 hedging at 60% and FY '27 hedging now increased to 68%. The continued curation of our portfolio towards best-in-class, dominant convenience retail assets, including our increasing exposure to CapEx-efficient net lease convenience assets benefiting from inflation-linked rental growth, has driven our strong outlook for FY '26 with CQR upgrading forecast operating earnings at our Annual General Meeting in November last year to not less than $0.264 per security, representing an increase of 4% over FY '25 operating earnings. Turning now to Slide 5 and the REIT strategy. CQR strategy remains focused on delivering the highest property income and earnings growth from the convenience retail sector. We achieve this by investing in dominant convenience retail property in strategic locations focused on nondiscretionary goods and services that are resilient throughout the economic cycle. Our tenant covenant quality is both market-leading and well-diversified. We have a diversity of rent review structures benefiting from inflation-linked rental growth and fixed rental increases, and an increasing exposure to CapEx-efficient triple-net and double-net leases, which maximize effective rental growth and, in turn, earnings growth. This highlights the strength of our strategy to invest in a diversified and well-curated convenience retail portfolio to maximize earnings growth for CQR unitholders. Turning to Slide 6. Charter Hall is Australia's largest owner of convenience retail property with $17 billion of assets under management across more than 900 properties. The portfolio is managed by Charter Hall's in-house convenience retail team, the largest in Australia with 167 people located across the country. Our team across property management, leasing, asset management, retail finance and investment management are solely focused on convenience retail and are dedicated to maximizing income growth, asset productivity and valuation growth for CQR's investors. Pleasingly, our tenant customers agree, rating Charter Hall as the #1 manager of retail property amongst our peers for the fourth consecutive year. I'd like to take the opportunity to thank our team for the strong performance they have delivered over the half. Turning now to Slide 7. Transactions during the last 6 months have seen the net lease convenience portfolio moving from 39% to 49% of CQR's total portfolio, in line with our articulated curation and diversification strategy aimed at driving sector-leading earnings growth. Back in 2015, CQR's portfolio consisted of only convenience shopping center assets with a total value of $2.2 billion. Today, CQR's portfolio is a truly diversified convenience retail portfolio, valued at over $4.6 billion, with close to 50% of the portfolio invested in net lease convenience retail property that will continue to deliver inflation-linked rental growth without the drag of CapEx. This has transformed CQR's portfolio and provides investors with an increasing diversity of major anchor tenants and rent review mechanisms that will underpin CQR's income growth throughout all economic cycles. As a result of our ongoing curation and the resulting diversification of our convenience retail portfolio, CQR today provides higher income growth potential coupled with lower risk due to our significantly enhanced diversity of major tenants, favorable rent review mechanisms, a sector-leading percentage of supermarkets paying turnover rent and an increased exposure to capital-efficient triple net leases. This blend remains unique to CQR within the retail sector. Turning to Slide 8. The first half of FY '26 has been an active period for CQR as we continue to curate our portfolio to optimize both the quality of the assets we own and improve the quality of the long-term and sustained income and earnings growth for our investors. As previously announced in August 2025, to assist the funding of the HPI acquisition, CQR divested 4 assets together with a 49.9% investment in RP1 and RP2 to the Charter Hall Convenience Retail Fund, or CCRF, for $679 million. As at 31 December 2025, the CCRF portfolio has grown to over $2.5 billion, comprising 17 metropolitan shopping centers and 12 metropolitan net lease assets anchored by Bunnings. As a result of this strong growth, CQR has increased its investment in CCRF to $435 million, reflecting a 17.2% ownership interest. During the period, CQR also acquired 4 Bunnings assets for $151 million, including Bunnings Toowoomba, Cairns and Airlie Beach in Queensland, and Bunnings Goulburn in New South Wales. The REIT further expanded its net lease retail portfolio with the acquisition of 2 metropolitan properties leased to AP Eagers in Kirrawee, Sydney for $56 million and Tesla in Red Hill, Brisbane for $59 million. These were acquired at an attractive average yield of 6%, have a WALE of 9.1 years, and both properties benefit from annual rent reviews being the greater of CPI or 3.5%. Importantly, these off-market acquisitions are CapEx-efficient, meaning they will provide consistent net effective rental growth above the CQR portfolio average, in line with the REIT's stated strategy of delivering the highest income and earnings growth from the convenience retail sector. During the half, we also divested $154 million of assets, being the divestment of 85% of the Gordon Centre in Sydney to CCRF and 100% divestment of Mareeba Square in regional Queensland. Turning to Slide 9. CQR's strong valuation growth has continued. Over the past 5 years, CQR's like-for-like valuation has grown by 28.5%, predominantly through the strong income growth generated by our properties. The record low level of new retail supply coupled with Australia's continued population growth will see both tenant and investor demand continue to accelerate. With this increasing investor demand and continued strong rental growth underpinned by the quality of our diversified portfolio, including an increased exposure to net lease convenience retail assets benefiting from annual inflation-linked rental escalations and CapEx-efficient leases, we expect to see CQR's valuation growth continue. I'll now hand to Joanne Donovan, who will run through the financials.

Thanks, Ben, and good morning. Our operating earnings and distributions can be found on Slide 11. CQR achieved same-property NPI growth of 3%, driven by like-for-like shopping center NPI growth of 3.1% and like-for-like net lease retail growth of 2.7%. Finance costs increased during the period, largely driven by growth in acquisitions. Operating earnings are $75.6 million or $0.13 per unit for the half, delivering growth of 3.4%. Distribution per unit has increased to $0.128 per unit, providing our investors with DPU growth of 4.1%. Turning now to Slide 12 on the balance sheet. NTA per unit increased by 5.8% to $4.91, driven by strong net valuation growth. Our tenants continue to be in a positive position to pay their rent with arrears of less than 0.3% at 31 December 2025, highlighting the resilience of our tenant covenants. Our key valuation metrics are shown on Slide 13. 100% of the portfolio was externally valued at 31 December 2025. Shopping center net valuation growth was $87 million or 3.8%, driven by strong rental income growth and cap rate compression of 12 basis points. The net lease portfolio also saw a positive net valuation growth of $66 million or 3%, driven by strong inflation-linked rental growth together with cap rate compression of 10 basis points. CQR's portfolio cap rate is 5.55% as at 31 December 2025. Slide 14 highlights our capital management. Post balance date, we have successfully agreed terms to refinance the entire balance sheet debt platform, securing a new $1.6 billion facility across 8 lenders. The refinancing extends our debt maturity to 4 years and provides increased covenant headroom. Our weighted average debt margin will reduce from 165 basis points to 125 basis points, a saving of 40 basis points, which offsets the impact of higher interest rates. The REIT also entered into new hedges over the period, resulting in average hedging of 60% over FY '26 and 68% over FY '27, providing interest rate stability. At 31 December 2025, balance sheet gearing is 29.2%. I'll now hand back to Ben to provide an operational update.

Thanks, Joanne. Turning now to Slide 16 and the portfolio summary. Our portfolio occupancy has reached a CQR portfolio high of 99.1% with a portfolio WALE of 7.1 years. Our commitment to earnings-enhancing portfolio curation is continued with approximately 50% of the portfolio invested in convenience retail shopping centers and 50% in net lease retail, which provides CQR investors with strong, CapEx-efficient net effective rental growth. Turning now to Slide 17. CQR's rental income is secured through market-leading major tenant customers, including BP, Woolworths, Coles, QVC, Bunnings, Kmart, Endeavor Group, Ampol and Aldi, sector-leading tenant customers with excellent covenant strength. This major tenant customer profile is unique to CQR and remains diverse and provides a range of rental review structures that will deliver growth throughout all economic cycles. Importantly, our increased exposure to net lease convenience retail will ensure we deliver stronger net effective rental growth than other traditional retail portfolios. Slide 18 outlines our net lease portfolio. We've continued to expand our exposure to convenience net lease retail assets with the material expansion of our exposure to high-quality, Bunnings-leased properties over the first half of FY '26. As a result, our net lease retail portfolio represents 49% of CQR's total portfolio by value. These assets are all triple or double net leased, meaning they're free of any material capital expenditure with strong rent review structures. The net lease portfolio provides true net effective rental growth for CQR investors. These convenience net lease retail assets continue to complement CQR's existing convenience space shopping center portfolio and deliver valuable diversification benefits, enhanced tenant covenant quality and security of income. No other REIT in Australia retains this compelling mix of true net lease, long WALE convenience retail assets alongside high-quality convenience retail shopping centers. Moving to Slide 19 and our supermarket anchors. Our supermarket mix remains well balanced between Coles and Woolworths, and we continue to partner with Aldi. Strong trading supermarkets remain the foundation of CQR's convenience-based shopping center portfolio. During the period, supermarkets delivered MAT growth of 2.6%, up from 2.5% at June 2025. Supermarkets in turnover within 10% of their sales threshold remain market-leading at 84%. Maintaining and increasing this percentage will ensure CQR generates greater rent growth on a long-term basis moving forward, once again supporting our strategy of delivering the highest property income and earnings growth from the convenience retail sector. Slide 20 talks to our specialty tenants. Over the period, our specialty tenant sales productivity remained strong and our tenants' occupancy cost remained stable at 11.5%, providing room for future rental growth. For the period, we completed 186 specialty leasing transactions, consisting of 70 new leases and 116 renewals, achieving positive leasing spreads of 4.1%. Most importantly, our specialty shop retention rate reached an all-time high of 88%. This high retention rate coupled with our continued positive leasing spreads will drive accelerating net effective rental growth for CQR's investors. We firmly believe that as Australia's population continues to grow and the supply of new retail property remains challenged, the productivity of our assets will continue to accelerate. Slide 21 looks at our ESG highlights for the period. CQR and Charter Hall recognize the important role our centers play in supporting the communities in which we operate. And we are pleased to report that this financial year, CQR has achieved net 0 carbon emissions, predominantly through our on-site solar generation and our offsite renewable energy supplied through our PPA with ENGIE. We have 17.4 megawatts of solar installed in our shopping center rooftops and 14.7 megawatt-hours of battery capacity in place installed across 8 sites. We have increased our waste diversion by 17% since FY '22 and achieved a ranking of second in Australia and New Zealand for listed retail entities in the 2025 GRESB report. Turning to Slide 23 for transaction update post half year end. The team has remained active in driving our strategic portfolio curation post 31 December. We've exchanged contracts to acquire a portfolio of 3 high-performing convenient shopping center assets located in Queensland and New South Wales for $251 million at an average yield of 6.7%. These assets, located in Airlie Beach, Gympie and Armidale, are all anchored by strong trading supermarkets and are dominant in their catchments with occupancy levels of greater than 99%. In addition, CQR is increasing its investment in the Charter Hall Ampol Partnership #1 from 5% to 50%. The portfolio is 100% occupied with an average WALE of 14.1 years, benefiting from CapEx-free triple-net leases, inflation-linked rental growth. And importantly, 83% of the portfolio is located in metro and commuter metro markets. To fund these portfolio-enhancing and accretive acquisitions, we've agreed terms to dispose of 3 shopping centers, being Arana Hills in Brisbane, Queensland, Kings Langley in Sydney, New South Wales, and Butler in Perth, WA to CCRF for $208 million at an average yield of 5.3%. And we've also exchanged contracts to dispose of Lansell Square in Bendigo for $110 million. All these transactions will be settling in the second half of FY '26. Turning to Slide 24 for outlook and guidance. Based on information currently available and barring any unforeseen events, CQR reaffirms our upgraded guidance for FY '26 operating earnings of not less than $0.264 per unit, representing a 4% uplift over FY '25. Distributions per unit are expected to be $0.255 per unit, a 3.3% uplift on FY '25 DPS. Based upon CQR's most recent closing price, this represents a distribution yield of approximately 6.6%. Finally, I'd like to add that the fundamental drivers of growth in the convenience retail sector remains strong. Record low supply of new retail coupled with population growth will drive both tenant and investor demand for the sector. This is evidenced by CQR's strong NTA growth of 5.8% to $4.91 per security over the half. It is reflected in CQR's highest-ever portfolio occupancy of 99.1%, our record specialty shop retention rate of 88%, our continued and strong leasing spreads of 4.1% and our sector-leading percentage of supermarkets paying turnover rental. Our net lease portfolio will continue to benefit from strong rental growth linked to inflation, sector-leading tenant covenant strength and CapEx-efficient net lease structures. When you combine this positive momentum with our debt refinancing announced today, reducing CQR's debt margin by 40 basis points, together with our increased hedging profile, the outlook for CQR's performance is strong. That ends the formal presentation. And with that, I now invite questions.

[Operator Instructions] Our first question comes from the line of Solomon Zhang with UBS.

I'm just looking at Slide 11, just on your like-for-like shopping center growth. That accelerated to 3.1% from about 2.5%. But when you think about inputs, you're really seeing spreads have sort of moderated a touch and your supermarkets' turnover rent relatively constant. So what's driven that acceleration during the period?

I think one of the things, Solomon, that's really relevant is that you've seen we've got record-high specialty retention rate. We've talked about it quite openly that big remixing strategies where you have downtime, lost rent, cost of CapEx associated with it. It just shows the quality of our portfolio and the quality of demand for nondiscretionary retail tenants into the sector with this backdrop of limited supply and population growth.

Makes sense. And just on the debt margin piece, obviously, a good saving there of 40 basis points. Can you just specify where your debt margins sit today and when exactly those margins take effect?

Sure. We came from 1.65% to 1.25%.

All right. And maybe just a final one on your look-through gearing post balance date. You've got about 5 transactions that are settling post balance date. Where does that sort of get you from a look-through gearing perspective after those settle?

Sure. Look, we obviously don't report look-through gearing. We no longer have a look-through covenant. But our average portfolio gearing would remain within our target of 30% to 40%, as we've always talked about.

Our next question comes from the line of Tom Bodor with Jarden.

I just was interested in some of your valuations and the cap rates, particularly around the convenience assets, and just your level of comfort given the 10-year is around 4.8% and some of your cap rates are inside that, as low as 4.68% for sort of the Ampol portfolio and some of the other convenience assets?

Yes. Look, it's a good question. What I'd say is the convenience net lease market is dominated by privates. Privates do not look at bond yields and the things that we do. And we constantly see evidence in this market of assets trading in 3%, 2% type cap rates. And the one thing that's really relevant is these are rare assets. They're not building any more of this land. They're not getting more opportunities to put this footprint down. They have high underlying land value. They have very long lease terms. They generate great income growth. And I think that absolutely supports the valuation metrics. So we're really comfortable where they sit. And to be frank, I think they're going to become more and more valuable as that lack of supply plays through and investor demand increases.

Okay. Great. And then the other one for me just was around the CCRF investment bank, 17%. I think there was sort of, initially, it was going to be a little higher, sort of 22%. Is that just a function of new demand in that fund from third-party equity that's sort of diluting you back?

Yes. Obviously, the demand from wholesale equity both domestically and globally for convenience retail sector is very strong. And that's highlighted by the strong growth in fund from CCRF you highlighted today. But equally, the CQR board and ourselves as management will look at each individual investment as is appropriate. And one of the benefits about CCRF, we talked about at the half year, is that we have the flexibility to up-weight and down-weight their ownership stake depending on the best interest of CQR's earnings growth. So we're really happy where we sit in that regard. And we took the opportunity to upgrade our investment in CCRF in the half, and at $435 million and 17%, we're really pleased with where that's going.

Maybe just a final one. How sensitive is your guidance to the deployment of say CCRF capital?

Our guidance is not -- our guidance is not sensitive to the deployment of CCRF capital. We've been very proactive. Our portfolio has fantastic underlying, very secure income growth. We've done some great work around our debt book, which we touched on the presentation. And we upgraded guidance at the AGM to not less than 4%, showing the strength and conviction we have in regards to where that portfolio is going from an income perspective. So no relevance to CCRF deployment.

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

A pretty basic one to start with, guys. With all the transactions in the first half, what do you think is the yield differential between the investments you've made versus the assets you have divested across all the deals?

Overarchingly, Simon, the assets we've divested and bought back in are earnings accretive for CQR's look-forward income generation. So we're really pleased with that. And we see it as portfolio enhancing in terms of quality. The tenant roster we've compiled through our net lease portfolio, combined with our strong trading shopping center assets, is unparalleled in the convenience sector. And I think this has been articulated for a long time about our desire to get to something which is the most defensive, the most sure income growth in the sector. And we've really been able to achieve that through the continued work with the best and biggest transaction team in the market in Charter Hall to allow these opportunities to grow.

My back-of-the-envelope suggests it's about like 80 bps to 100 basis points of spread. Would that be right? I mean if it is, that's pretty good. But am I far off your own calculations?

80 to 100 is a pretty big spread. So I'm happy with that, Simon, and we'll work on that basis.

Okay. And Gordon, can you talk about why you decided to get rid of that one? Because that was a pretty good asset.

It is a good asset. What I will say, it was one of the tightest yielding assets that CQR had on books. And obviously, working with the Charter Hall team to unlock the upside in respect of a right value, that portfolio -- or that property created the opportunity for us to be able to divest of that and crystallize some gains, which have been reinvested into some higher-yielding assets like the portfolio we acquired at 6.7% during this half.

What sort of yield did you get rid of there? Will it have a full handle, you reckon?

We haven't disclosed what we've got rid of that. But it is the tightest yielding shopping center asset that we owned in our entire portfolio.

Cool. All right. To the refinance, you mentioned that the LVR covenant is now 65% or something like that, previously 60%. Why did you drive for the change in that covenant?

Obviously, more covenant headroom in a volatile market gives investors a lot more security and comfort around the portfolio more broadly. And secondly, this came as a benefit to us. But the most beneficial thing is we've been able to save 40 basis points of weighted average debt margin across our book, and that's really important. So I think this is another example of us working with our treasury team within the Charter Hall group to maximize earnings growth for CQR unitholders.

Were you close to breaching the previous 50% [ with the outcome ]?

No, we've never been close to it. And to be frank, Simon, our NTA growth is growing so rapidly and our income is growing rapidly. We're always in a good position in that regard.

Okay. Cool. One final one for me. Hypothetically, given the really good refi result, if the base rate backdrop today was same as what it was back in August, would it be fair to say that you may have been in a position to further upgrade FY '26 guidance?

If the rates were changing, everything went well, then we'd be in a great -- in a better position. The whole market would be. So you can draw your own conclusions on that, but certainly, the fact that we reaffirmed our upgraded guidance of not less than 4% is probably a good indication on that, Simon.

Our next question comes from the line of David Pobucky with Macquarie Group.

Just another question on the refinancing, please. When do you see the margin reduction coming to effect?

It will be in this third quarter, of the half coming up now. So basically before March.

And perhaps just the weighted average cost of debt assumption that you have in guidance, has it changed at all from when you first provided guidance at the start of the year?

Yes. The market rate has increased since we first provided guidance, but then, obviously, the savings that we've received from the bank -- are from the bank debt refinancing. And also we've increased our -- and also our hedging of 60% over FY '26 makes us very confident in the guidance that we've provided.

So the margin reduction fully offsets the increase in floating rates and whatever change [ would stay ] on the hedge book.

Exactly right.

Okay. Perfect. And so just one last question. On the hedge book, I think at the FY '25 results, FY '26 hedging was quoted at 77%. And now you're quoting 60%. Would you mind just providing a bit more color on that?

Yes, we did blend and extend some of our FY '26 hedges into FY '27 to provide more protection into FY '27. And then we also entered into $800 million new hedges over the period. And that sets up really well with 60% hedging for FY '26, 68% for FY '27 and 51% for FY '28.

Our next question comes from the line of Ben Brayshaw with Barrenjoey.

Ben, just on CCRF, it seems like it's off to a good start. But it is lowly leveraged at the moment. Where do you see gearing levels getting to when the portfolio is stabilized?

CCRF has got a target gearing of up to 30%. And it's got great momentum at the moment, as you indicated. So that's what its target gearing looks like.

And could you talk about the total return since inception through to 31 December in CCRF? Any comments you have on where the unit price sits today?

No. I mean it's obviously all published in the MSCI index, and it's in a phase of growth and deployment. So we see that accelerating as the opportunities arise and we capitalize on positive opportunities to acquire things unlocked off market by the Charter Hall transaction team.

Our next question comes from the line of Richard Jones with JPMorgan.

Just to Ben's question there. So the investment change in CCRF, is that all reval or do you put more capital in?

No, we put more capital in pre 31 December, Richard.

We invested an additional $50 million.

Okay. Good result obviously on the refi. Can you clarify if the ICR covenant has changed? And if so, what to? And also where the fund sits on its ICR through to December '25?

Yes. So previously, ICR covenant was 2x. That has now reduced to 1.5x. And our ICR -- our actual ICR at 31 December was 2.6x.

Our next question comes from the line of Howard Penny with Citi.

Just thinking about the outlook for capital flows into convenience retail, and so you raised a considerable amount in CCRF. And I know it's a question that's a little bit adjacent to CQR itself. But do you see potential to raise even further capital into the sector and even greater interest or capital potentially coming in the next sort of 2 years?

I think, definitely. I mean we've talked a lot in the presentation today about the fact that we've got limited retail supply being created in this country, we've got population growth. And that's flowing through to increased tenant demand and investor demand. And I think the fact that CCRF being as successful as it has is testament to the Charter Hall team's ability to access and raise capital, but equally to look at the strong cash flow generation that the sector generates. I think it's absolutely a potential to keep growing. And I think it's a testament to the quality of the sector and the resilience of earnings and valuation growth that is coming through.

And you made a good point to say the NTA per share growth, as much as it's had a decent jump over the last period, it's been really driven more by rental growth and cap rates. So the question there is it feels like even despite the interest rate hike we had this week, probably the outlook is CapEx even compress further from here. Would you agree with that or can you comment on that?

It's hard to say, Howard. But definitely, investor demand is very strong for the sector. And obviously, demand and supply are big factors in driving valuations, and particularly a sector that's got some tailwinds of strong income growth coming through, an effective income growth. And we've got a great and well-balanced portfolio across net lease assets that have long-term lease duration, very strong rental growth linked to inflation, as well as no CapEx drag. I do think there's going to be increasing investor demand for the sector.

And maybe last question, just on -- you used the term portfolio curation. And just thinking about looking forward, what are the most attractive ideas within your different options that you are currently invested in? Where do you think you'd put the next dollar at the moment?

It always, Howard, comes back to what's the best value and return for CQR unitholders. So we'll constantly look at opportunities to -- across the diversified sector. We've noted some transactions we've -- that's occurred during post 31 December. They've got fantastic rent growth, fantastic initial yield for CQR investors and accrue to earnings. So we'll continue to look at the diversified nature of our portfolio and invest where we see greatest opportunity for income and, obviously, valuation growth for CQR unitholders.

Our next question comes from the line of Murray Connellan with Moelis Australia.

Just one question on the balance sheet, please. I know that the balance sheet and capital flows have been discussed at length on this call. But I just wanted to query, obviously, a couple of more net acquisitions coming through onto the balance sheet in the current half or the, rather, 2H '26. That probably takes gearing on the balance sheet up to sort of early 30s and, yes, potentially look through gearing up into the 40s. I was just wondering how you're currently thinking about balance sheet comfort and those metrics relative to each other. Could you, as we stand today, look to continue deploying? Would you like to see that number higher or lower? And just how you're thinking about opportunities from that perspective.

I think I'd firstly say on that, that we asked the question earlier, but on an average portfolio gearing metric, we remain within our 30% to 40% band post all these activities in the second half. And with regards to a 30% gearing level on balance sheet, which is 29.2% at the half, we've got a covenant of 65%, we've got heaps of headroom in that regard. We're not going to move outside our targeted gearing band ranges. We still anticipate that. But we've utilized our gearing capacity at times, like the HPI transaction, which drives fantastic earnings growth for CQR unitholders, to access those sort of opportunities. So we are well positioned. We've got capacity. We've got a significant covenant headroom that has increased over the half. And I think we'll look at opportunities as they come up. But once again, it will all be about driving earnings and NTA growth for CQR unitholders.

Our next question comes from the line of Yingqi Tan with Morningstar.

Just wondering if you have a target breakdown between shopping center versus net lease retail. Like is there somewhere that you want to be in the medium to long term?

Yes. We've had a pretty detailed and articulated strategy for a while about getting to 50-50, and we've materially achieve that. And I think that's a fantastic result. It creates the most diversified convenience retail portfolio in this country. It's got the strongest tenant roster in this country. It's got inflation-linked rental growth free of any CapEx from our net lease portfolio, which is going to drive strong valuation growth and income growth for CQR unitholders. And our portfolio of shopping centers is well curated. We've got a fantastic exposure to metropolitan assets through CCRF. We've got the highest percentage of supermarkets paying turnover rent in this country. We've got continued strong leasing spreads, high retention rate. So for us, we think our balance is excellent and we're very happy that we've got to this level.

Our next question comes from the line of Andrew Dodds with Jefferies.

Thank you for taking my questions, most of which have already been asked. But just on hedge book, I mean, could you just talk to the strategy of running at sort of a 60% today? I mean it just seems quite an odd to what CQE, your peer, reported on Wednesday at 81%. So I'd just be interested to hear your comments here.

I think for FY '26, as I mentioned earlier, we did blend some of that into FY '27 and which give us higher protection in FY '27, because we're so confident of achieving FY '26 guidance. And for outer years, we think that 51% over FY '28 is a good measure to be, it's a balanced -- and with a balanced approach.

Okay. And then just in terms of the deals you did in the half, I guess, sort of intercompany style transactions with CCRF and on the Ampol partnership, number one, can I just confirm, did CQR pay any fees to Charter Hall for these transactions?

All of our fees are per our 25-year history. It's well documented within CQR's investment management agreement. It's all baked into our earnings, all baked into our NTA. So there's no material change to anything we've done for our entire history there.

Thank you. Ladies and gentlemen, at this time, I would like to turn the call back over to Ben Ellis for closing remarks.

Thank you all for joining today. I think you'll agree that the convenience retail sector is in excellent shape. And we look forward to meeting you on one-on-ones in the coming hours and days. Thank you very much.