Mirvac Group (MGR) Earnings Call Transcript & Summary

I'd like to begin by acknowledging the traditional owners of the land in which we meet, which for us, it's the Gadigal people of the Eora Nation, and I pay my respects to elders past and present. We're really excited to have you all here today. To push a little deeper into the Mirvac business, and in particular, the Living and Logistics sectors, 2 sectors where we see particularly strong long-term structural growth drivers where we have competitive advantage and that we expect to be a much bigger part of our asset allocation plan over time. Courtenay will provide an overview of some of the structural reasons driving our pushing for Living and Logistics, followed by a review of our build-to-sell and unique design capabilities from Stu. We'll also give some further insights from our sector leads, Angela Buckley and Stephen Gould into how our build-to-rent and land lease exposure is progressing alongside the CEO of Serenitas, Rob Nichols is also here to provide some additional perspectives. Finally, our CEO of Investments, Richard Seddon will run through our unique industrial exposure strategy before we'll conclude with the group Q&A session. Following this, we'll proceed to 2 or some of our exciting major progress across Sydney, including our Harbourside project right next door to us. We see 3 distinct qualities that sets Mirvac apart from our local real estate peers, which we believe will drive value for security holders over time. Firstly, we're a leader in the Living sectors. We develop, we sell, we own and manage residential properties across Australia and across the entire housing spectrum. This is a sector where we have deep operational capability and experience and supported by solid structural tailwinds, including strong population growth, a restricted supply outlook and robust rent growth. Secondly, we have a unique asset creation platform that provides our competitive advantage. Our integrated design development and construction capability across living and commercial real estate sectors means we're able to create modern, sustainable, fit-for-purpose assets, driving earnings and delivering new resilient income streams for our investment portfolio. Finally, these assets that we create form part of our high-quality investment portfolio, a collection of sustainable modern cash flow resilient assets with high occupancy, low CapEx, low incentives and a steady recurring growth profile for investors. These assets are expected to attract strong tenant and capital demand throughout the cycle and have delivered consistent financial outperformance. All of this is underpinned by a strong balance sheet, aligned capital partner model and deep focus on sustainability and culture. Looking forward, we see Mirvac is well positioned to deliver earnings growth in the future with multiple levers to create value. Our modern investment portfolio continues to deliver resilient positive like-for-like income growth and we see this supplemented by our development completions, which will add over $90 million of future income. Our successful capital raising initiatives with aligned capital partners in recent years also provides strong visibility of funds under management growth. The recovery of our residential division will be supported by an expected improvement in residential sales volumes from current depressed levels. A pickup in project launches, including our flagship $2 billion Harbourside project and launches across 6 new MPC sites and 5 land lease sites over the next 18 months. And finally, a return of margins to our through-cycle 18% to 22% range as the impacted apartment projects roll off. The building blocks are in place. There is also a significant value to be selectively unlocked from our $10 billion commercial and mixed-use pipeline. We're looking forward to sharing with you a bit more of what makes Mirvac special, and our team today, and I will now pass on to Courtenay to outline why we are leaning into the Living and Logistics sectors and how they play to our existing capabilities.

Thanks, Campbell. A little bit tall for me. Hi, everyone. It's great to see so many people here in person. I think it's a while since we've had people in the room like this, which is pretty great. This morning, I'm going to cover a few things where we're allocating our capital, how our asset creation capability is a competitive advantage. And why, in particular, we are allocating more capital to Living and Logistics. So firstly, at an enterprise level, as we talked about before, we manage the business with a clearly defined portfolio management framework. And it's really about optimizing shareholder returns. A key element of this framework is where we allocate capital with reference to risk and sectors, which is based on our medium- to long-term outlook of both. From a risk perspective, we target an allocation of at least 70% to investments, and no more than 30% to development. This allocation allows us to deliver secure recurring income, whilst driving outperformance from our value-creating development activities. The balance between these activities is determined with reference to our targeted split of recurring income, achievement of required returns and with reference to our credit ratings and debt availability. This allocation supports our integrated development capability and flywheel model, which is a critical point of difference and has created significant value for investors over time. Moving to the next slide and the key strategic bets we have made. Recognizing that the structural environment had evolved, we set targets a year ago to sharpen our focus to optimize returns for shareholders. These targets involve lifting exposure to the Living and Logistics sector, which we'll talk about today as well as sharpening our office and retail exposure towards premium CBD and urban retail, respectively. These decisions are based on where we see positive medium- to long-term structural tailwinds and better cash flow resilient returns and growth. But also importantly, where we see Mirvac has competitive advantage using our existing platform and scope for significant market scale over time. As you can see at the bottom of this slide, we have already made strong tangible progress on these initiatives over the past 12 months, and we have good visibility and clear objectives to continue progress in the year to come. Moving to the next slide and our rationale for the expansion of the Living sector exposure. Firstly, we have deep existing capability and a proven track record in residential development with a deep platform across design and delivery and a loyal customer following. Our expansion into build-to-rent and land lease and natural adjacencies to existing apartments and master planned community land offerings. Secondly, for shareholders, the addition of build-to-rent and land lease deliver attractive new sources of cash flow resilient income with greater than inflation annual rent growth along with development earnings and fund management fee streams. Thirdly, Living as a sector is significantly undersupplied, and we see an opportunity to deliver our existing product into that undersupply, but also to expand our offering to a broader customer base where the market opportunity is significant. Fourthly, affordability remains a key issue in the housing sector and our well-located apartments, townhouses and rental offerings are active ways for us to be able to address customer demand for relatively affordable accommodation. And finally, we continue to see strong aligned capital partnering demand for Living, attracted to the potential market scale and resilience of returns. These partnering initiatives helped to lower the burden on the balance sheet and enhanced returns on invested capital for shareholders. Moving to the next slide and our integrated flywheel business model. Mirvac's unique integrated asset design and creation capability is an important competitive advantage, delivering new, modern, sustainable assets for our security holders, capital partners and customers along with development earnings and asset value appreciation. The in-house construction capability also helps us manage our risk, particularly valuable in the current market environment with current elevated costs. Our asset curation capability is also critical in driving superior long-term investment performance and increasingly higher fund management income streams. This unique flywheel model remains a key differentiator of our business compared to traditional REITs. This slide illustrates some of the significant tangible benefits this flywheel model has delivered over time. And as Campbell outlined earlier, we see this capability delivering attractive future NOI, development earnings and new funds under management into the future, which will deliver enhanced earnings and NTA growth for shareholders going forward. Moving to the next slide. One of the biggest benefits of our creation capability and development pipeline is the modern sustainable, well-located investment portfolio that it delivers. Mirvac's $11 billion investment portfolio has delivered consistent outperformance versus its benchmark aided by this development capability. Our modern investment portfolio has high occupancy of 97% and generated a 3% like-for-like net operating income growth last year. Despite this, last year, our maintenance and CapEx incentive bill was $130 million, which represents almost $0.03 a share of cash flow leakage illustrating the extent of the opportunity we have to play for over time as we improve the cash flow resilience of the portfolio. Moving now into some of the structural tailwinds supporting our allocation strategy. Our increased allocation to Living in Logistics is well supported by strong underlying fundamentals and supportive structural trends. As you know, Australia has one of the fastest-growing populations of the developed market with around 1.5% growth expected over the next 5 years, almost triple the rate of the U.S. and significantly higher than most of Europe. This, combined with the shortage of supply, is driving consistent demand for housing and underpinning tight vacancy and rent growth across the Living sectors. The Living and Logistics sectors continue to be seen as an attractive destination for global capital, drawn to the consistent attractive risk-adjusted returns, over half of the global real estate transactions since 2021 focused on Living and Logistics. And recent surveys of unlisted investors intentions suggest this trend is likely to persist. Part of the appeal, like us, they like the lower CapEx and incentive leakage in both sectors compared to other forms of real estate, as illustrated here with global examples in the U.S. and Europe. While residential sales volumes and valuations in Australia have had to overcome a surge in interest rates over the last 2 years, encouragingly, most economists are now predicting the most likely next moving rates will be down, which we expect to be supportive. Moving slides, we see overseas migration driving demand. Growth in the Australian working age population has been supported by a surge in offshore migration. And whilst this has moderated, it remains above long-term averages. Most of these migrants are skilled workers and history has shown almost 50% choose to live within 15 kilometers of the CBD when they first arrive and overwhelmingly initially reside in Sydney and Melbourne, which bodes well for our asset locations. As the chart on the right illustrates for Sydney, migrants have a strong preference towards renting in apartments initially with almost 60% doing so in the first year of arrival. As these migrants settle, they typically look to buy over time and with 50% having bought 8 years after arrival. We expect to see an increase in the attraction and preference for well-located apartments and townhouses close to amenity going forward, given affordability constraints as these migrants settle into Australia over time. Moving now into supply. As has been widely communicated across most news outlets, dwelling completions in our major cities and nationally across both apartment and detached housing are falling due to a combination of rising construction costs, restrictive planning controls and limited access to finance for developers. On the current trajectory, completions of detached houses across our 3 largest cities are expected to fall by more than 30% from peak 2018 levels. Whilst volumes of apartments are at half the levels of 2018 despite a substantial pickup in population. Our capability to deliver into this undersupplied market will be critical. And finally, we are seeing demographic and affordability changes shifting household behaviors. The increase in mortgage costs and house prices are shown at the top-left chart, has restricted home ownership affordability, changing the way households are behaving. The number of years required to save for a deposit has increased to 16 in Sydney with the average age of the first homebuyer now around 35, which is seeing households and families rent for longer. Apartment Living has become more accepted as it has been globally for some time. Almost 60% of renting families in Australia now live in apartments. This is up from 30% in 2011. With a record gap between apartments and established house pricing, we expect to see more demand for apartments over time, helping to address the affordability challenge. We are also seeing consistent growth in the percentage of retirees across Australia, most of which are asset rich and cash pool. Our expanded Living sector across build-to-rent -- build-to-sell with land, townhomes and apartments as well as build-to-rent and land lease is well placed to benefit from these ongoing structural themes. I'll now hand over to Stu to provide more detail on how our build-to-sell capability and explain how we are well placed to benefit from all of these things.

Thanks, Courtenay and Campbell. Good morning, everybody, and I got a bit to get through, but don't worry, it's all very exciting. Mirvac has a 52-year strong track record of brand and reputation for residential design excellence. Our brand is closely associated with quality and trust and is reflected in the high number of repeat buyers we have across our projects, which often runs well above 30% as well as the high level of upgraders and rightsizers who currently represent about 68% of our presales. It is very pleasing to see early signs of buyer momentum in our portfolio, particularly at projects in Sydney's middle ring, which I will talk about shortly. Our unique in-house development design and construction capability continues to be a key differentiator driving the delivery of our award-winning projects, and this leadership has been recognized through the New South Wales government's iCERT rating with Mirvac, the only developer builder to be granted a 5-star gold star rating again for a second year in a row. Our ability to deliver across the full spectrum of housing and price points is another unique point of difference, enabling us to respond to demand across multiple parts of the housing market. Mirvac has around $2 billion of capital allocated to build-to-sell residential development, with a pipeline of over 28,000 lots and an expected end value of $19 billion. We are the only developer in Australia to offer apartments and master plan communities built form product across inner, middle and outer rings. This geographical diversity provides the opportunity to benefit from urbanization and a desire from our customers to be close to transport infrastructure and amenity. Our fully integrated in-house capability also allows us to offer turnkey housing and townhouse product built by Mirvac and delivered directly to our customers. This turnkey segment is gaining traction with customers in the current climate, given the uncertainty around third-party builders and developers. We also -- we still offer traditional individual landlord product with a strong emphasis on upfront and early amending provisions like schools, parks and community facilities. Our residential development business has delivered considerable value to shareholders with over $2 billion of EBIT created over the last 10 years. Settlements have ranged from 2,200 to 3,400 lots a year, and we have delivered consistent gross margins above our target range of 18% to 22%. While these dipped below target range in FY '24 and will dip again in FY '25 due to market delivery challenges on selected apartment projects, we see margins returning to our through-cycle range in FY '26 and beyond. It's important to call out that the material contributions from apartments have made to overall earnings over time. While representing just 25% of total settlements over the last 10 years, apartments have contributed around 40% of EBIT to the residential business. As we flagged at our full year results in August, weather delays, construction cost in materials and labor and a surge in subcontractor failures and productivity challenges have impacted apartment projects we commenced in FY '21 and '22. Many of these projects completing this financial year are between 1 and 2 years later than anticipated. To provide some context, this is the first time in 22 years that I've been at Mirvac that we have delivered a project behind schedule. Encouragingly, we are starting to see signs of stabilization in construction costs and increased price tension and labor availability in New South Wales and Victoria. Weather delays are also returning to normal. Our project assumptions have been reset to incorporate current costs with further escalation assumed in our feasibilities. We also have the majority of our total construction costs secured for our residential and commercial and mixed-use projects completing over the next 2 years. We are also taking lessons from the past few years to protect and safeguard our projects from future market shocks. Some of these initiatives include utilizing our design capability to increase the use of prefabrication helping us to save time, cost and reliance on third parties. An example of this is the increased use of bathroom pods across many of our apartments, projects and housing projects, which reduces labor required on-site, improved safety and speeds up the delivery process. Leveraging our scale to procure across asset types and drive competitive tendering outcomes. For example, we have done bulk procurement deals across asset classes for lifts, windows, concrete supply and steel. We're also preferencing tier 1 subcontractors, which have the most depth of capability and financial security to execute through the cycles. In construction, we are using our end-to-end capability to engage with contractors early and ensure challenges are identified and managed proactively, leveraging AI to monitor progress, productivity and manage risk during delivery. We have also altered our sales strategy, and we are now taking a more balanced approach to allow for sales over the life of a project to ensure we can better manage any unforeseen cost escalations and take advantage of revenue uplift over time, particularly in a supply-constrained environment. Finally, we are focused on developing for value, leveraging our capabilities to increase the standardization of our designs and in turn, drive cost efficiency to reduce build time and eliminate waste while maintaining Mirvac quality. A great example of this is the standardization of window frames, which has reduced waste, improved construction efficiency and achieved significant cost savings through leveraging major offshore supply channels. Apartments are in the DNA of Mirvac. Our first project back in 1972 was Montrose, a block of 12 apartments at Rose Bay in Sydney's Eastern suburbs. While some of our recently completed apartment projects or projects in delivery have been marginally impacted, it is important to remember the role apartments have played in earnings over the years, with many projects delivering margins well in excess of 20% over time. We remain committed to continuing to deliver quality apartments in setting the highest standards of living for our customers, and we're excited about the next wave of projects we have, either currently underway or ready to launch in the coming months. There is an undeniable shortage of housing in Australia and apartments will play a vital role in providing quality, relatively affordable accommodation close to amenity and transport infrastructure in inner middle ring locations where land is most constrained. As you can see on the slide, the outlook for the market is severely constrained with completions in the next 2 years, less than half of that in 2018. Despite this gap in supply, the relative affordability of apartments versus established housing is at its cheapest level in recent history. In Sydney, the price gap is now approaching 80% versus a long-term average of just under 40%. We are increasingly seeing downsizes attracted to the relative affordability and low maintenance of apartments versus established housing, freeing up equity for other lifestyle considerations. Buyers are also opting to upgrade to brand-new, well-located 3- and 4-bedroom apartments close to amenity, rather than compromise on location, quality and spec to buy a traditional detached house. This trend has been well established in offshore markets where land is constrained, such as Asia, Europe and major U.S. cities. And we expect this theme to follow here as our markets continue to mature over time. We have a disciplined approach to restocking our pipeline and all but turned off the tap when land prices became too elevated. However, over the course of the last financial year as competition has dissipated, we have materially restocked our residential development pipeline, securing around 8,400 lots on capital-efficient terms, dramatically increasing our pipeline by over 20%. We are actively in discussions to introduce capital partners to our projects which will help to accelerate the value creation and speed to market and capital returns. We have a number of new launches to look forward to in FY '25, offering diversity of product and affordability. This includes Western City University campus and Riverlands, both at Milperra in Sydney, where we will be delivering over 700 attached and detached Mirvac-built homes. In the coming months, we will also launch the highly anticipated Harbourside residences at the iconic site in Darling Harbour, which has also attracted significant interest. As you can see from the table, we have a healthy pipeline of master plan community lots and house and land lots available to deliver in FY '25 and beyond. Over the next 18 months, we expect to release 6 new projects and stage launches, predominantly in our infill middle ring Sydney projects, materially increasing the number of customers we can sell to and capture demand. We recently had sellout launches at our middle ring projects, Riverlands and High Forest in Sydney, and it has been fantastic to see buyer momentum start to return in this segment. It also signals buyer appetite returning, particularly amongst upgraders and rightsizers who are less sensitive to interest rate rises and are attracted to our track record of delivery, quality and built form product and upfront amenity. A great example of how we're able to unlock and create value is at Mulgoa master planned community project located south of the existing residential suburb of Glenmore Park within the Greater Penrith area. To pull this major parcel of land together, our in-house team directly engaged off market with 14 landowners for a period of over 7 years to option up the consolidated site. Our successful rezoning of this site through the New South Wales government has resulted in approximately 1,200 new lots with an estimated value of $1.2 billion secured in a highly capital-efficient manner. This master planned community will provide a mix of land lots starting from 300 square meters and a range of quality homes designed and constructed by Mirvac into a critically undersupplied market. Future residents will be able to enjoy extensive open space areas, including proposed parks with sporting facilities, playgrounds, a community facility and cafe. Another example is our Harbourside mixed-use project in Darling Harbour, which will deliver retail, office and residential and reimagining the waterfront as a connected urban hub to be experienced by all. This site was secured in 2013, providing recurring investment income as a retail center, while we worked on our development plans to maximize residential yield and end site value, designing a state-of-the-art mixed-use precinct with first-class amenity. With development approvals now secured, this world-class mixed-use project will include 263 luxury apartments with our first tranche of residences expected to be launched in the coming weeks. As you can see in the image taken just last week, we are making great progress on site, which is located just outside the windows here. Civil excavation and basement retention works are completed and the core jump form is now in place ready for its first climb. Our third of 5 cranes was installed yesterday. And in fact, the team even managed to get partially the fourth crane erected yesterday. So well done to the Mirvac team out there. You can see from the image, the fantastic views over Darling Harbour this site commands. And I'm extremely excited to show many of you through the display center, which has definitely set a new benchmark in experience for customers. And many of you will come along to display center after this presentation. Switching gears. We thought it might be interesting to delve a little bit deeper into our unique design capability. Some of you may know that Mirvac has an in-house architectural practice since its very beginning in 1972. Our co-founder, Henry Pollack, was a leading architect here in Sydney. This in-house capability has evolved over time. And today, we have a highly experienced integrated team of almost 100 people with skills across architecture, planning, digital engineering, interior design, urban design, and this capability remains within our DNA. Our in-house teams work across the full spectrum of our offering and at the heart of our reputation for delivering Mirvac quality. There are numerous benefits of this unique integrated in-house capability. Firstly, quality. With over 50 years of experience on the ground learnings, this creates a consistent feedback loop, which we incorporate into future designs. This ensures we deliver optimized and functional layouts for our customers to the exacting standards that Mirvac is well known for. The end result is a high level of repeat customers and a reputation for quality. Our customers often ask us, why does Mirvac product just feel so different. And our response is always the same. It's the thousands of little details that come together, many of which you can't see behind ceilings and walls that set our product apart. If you look online, you still see apartments that were built 20 to 30 years ago, marketed for sale today as designed and built by Mirvac. The tag line continues to demonstrate the respect we have from our customers. Secondly, flexibility. Having an in-house capability enables us to respond quickly and adjust our designs or plans to changing market conditions. For example, we have seen an increase in request to amalgamate apartments, and we have the flexibility to accommodate and price these requests accordingly. There are also sustainability and safety benefits. We can design for 7-star NatHERS rating design out of our waste before it has even been created and test and innovate with our materials to ensure resilience over time. Finally, design plays an important role in cost management. Unlike external design houses that act as profit centers, Mirvac design plays an important role, improving the efficiency of our construction processes. For example, effective designs are reused and the design team is actively engaged in designing our costs in construction while maintaining product quality and durability. Our extensive suite of in-house design capability shows up in many ways through our projects through the quality of landscaping at our projects, interior design, digital engineering, graphic design and services. These expansive design capabilities form part of our unique creation advantage and are highly valued by our customers. A great illustration of our focus on quality and care in every detail is in our material selection process, which ensures our designs are timeless. The images here reflect the rigorous testing we undertake with typical products such as stone benchtops; we test for the way that they may stain, chip, fade with regular use. And we maintain log books to inform our product selection on future projects. This was particularly valuable recently when regulations suddenly changed, prohibiting the use of manufactured stone. Our historical testing experience helped us to identify appropriate stone alternatives that have the longevity to match our customer needs and expectations. We are increasingly leaning into modular construction, which has numerous benefits. The bathroom pods that I spoke to earlier can be installed in a number of minutes rather than months when compared to conventional methods of construction. These prefabricated modules created in a controlled factory conditions, reduce cost, waste and safety risks while delivering higher standards of quality to our customers. Our integrated structure provides a platform to exploit the full potential of digital engineering across our projects from smarter construction planning to accurate costings and qualifications for 5D planning through to monitoring and managing asset performance post completion to improve cost efficiency and sustainability. Unlike our competitors, we can drive consistent standards through all stages in the asset life cycle and provide unique insights across the business to help drive quality, longevity and improved ROI over time. The digital model starts in design and is the heart of all these digital streams. When we design a building, we don't just think about how it will look and operate on completion. We think about it how it will operate into the future and the footprint it will leave. As you know, we have set ourselves a target to be net positive for carbon in Scope 1, 2 and 3 emissions. Net positive water and send zero waste to landfill by 2030. These ambitious targets are only going to be achieved by leveraging our in-house capabilities and by being innovative right through the value chain from initial design to construction and finally, in our approach to asset management. We have been addressing this by building all electric buildings, ensuring we have at least 5 kilowatts of solar on each house we create and ensuring our homes are energy efficient with all newbuilds targeting a 7-star NatHERS rating. We are also investigating and utilizing low-carbon materials in construction, such as low carbon concrete and recycled steel and working closely with suppliers to help measure the carbon content of these materials. Reducing waste is another important initiative. We are consistently diverting around 96% of demolition waste from landfill at our projects and actively using recycled water for irrigation. These initiatives are supported by our existing and prospective capital partners and are becoming expected by our customers and the wider community. We believe our performance here will remain important as standards continue to rise across all of our stakeholders. I hope that I've been able to provide you with a better understanding of what differentiates Mirvac. If I could leave you with one clear message, it would be that our unique integrated model spanning from development, design, to construction, right the way through to our management capability is a valuable point of difference and value creation for our customers and ultimately for you as our investors. I'll now hand over to Ang to run through our build-to-rent initiatives. Thank you.

Thanks, Stu. The BTR asset class is well supported by attractive structural drivers many of which have been touched on. With affordability constraints and lifestyle changes, the number of households renting has been growing strongly at 23% to 24% per annum across the target age cohort of 25 to 50. And as you can see on the chart on the bottom left, this is forecast to continue for the next decade. With the average age to buy a house now at around 35, people are renting for longer and at the same time, household incomes are also growing with more than 35% of rental households now on an income over $130,000 per year, increasing the household whose housing needs and choices are not being adequately addressed by the existing market and who are also able to service higher rental costs. The Australian build-to-rent sector is still in its infancy, with only 27 operating assets nationally and a total of almost 9,000 units. Whilst we are seeing an increase in development activity, much of the potential supply pipeline is yet to receive development approval or commence construction. Mirvac is pioneering the build-to-rent sector in Australia. Having commenced the asset class over 6 years ago, we are now very well placed with 3 operating assets and a secured pipeline well under construction. This operational experience and first-mover advantage will continue to provide great insights into site selection, design, creation and curation of our future assets as we grow our exposure to the sector. In 2025, Mirvac will be the only owner, developer and manager of BTR assets across the Eastern Seaboard, with operational assets in the key capital city markets of Sydney, Melbourne and Brisbane. We see great opportunities for growth in our portfolio through consolidation over time with many BTR operators in Australia subscale. We are also seeing existing development sites acquired by others in recent years, now coming back to market on more compelling terms. Our unique development and operating experience in this new asset class will be key as we underwrite these opportunities to help further accelerate our growth into the future. The BTR sector is well established overseas with penetration rates of overall rental stock above 40% in U.S. and parts of Europe, and 6% in the U.K., which was only being established just over 10 years ago. You can see that Australia's progress is following that of the U.K. but remains very low with the current build stock and pipeline of just 58,000 units, representing just 1.6% of the total rental market or 0.5% of the near $11 trillion housing market. The potential for this industry is enormous. If penetration of the total housing market would increase to 3%, this would represent a $330 billion sector, significantly larger than traditional existing commercial real estate sectors. We've made great progress in our LIV BTR portfolio. Our first-mover advantage have seen us deliver 3 completed BTR assets across 1,270 apartments with over 1,400 residents across the portfolio. We will have 5 operational assets by the end of 2025. Our latest operating asset LIV Aston in Melbourne opened just 10 weeks ago and is already more than 30% leased, and our next wave of developments are progressing well. We have 396 apartment, LIV Anura development in Brisbane and our 498 apartment development, LIV Albert in Melbourne planned to be complete within the next 12 months. The investment and operating returns from the asset class remain attractive on both an absolute and a relative basis, while many focus on the sector's tight initial cap rates, Often, what is missing from these observations is the other attractive characteristics, which more than compensate to deliver attractive, absolute and total relative returns compared to other established asset classes, particularly on a net cash basis. Our completed assets delivered strong operational performance last year, with almost 8% re-leasing spreads, low downtime of just 23 days, resilient occupancy and positive revaluations of 4.3%. The resultant total return of 8% performed very well versus traditional asset classes over the last 12 months, as you can see on the left bar chart. This strong rent growth outlook and modest levels of CapEx, incentive and downtime leakage helps the sector to deliver attractive cash flow returns to investors relative to other asset classes whilst our manager position also allows for the opportunity to earn development and investment management fees over time. The market also underappreciates how favorable the macro environment is in Australia versus the more established BTR markets offshore. As you can see on the table on the left, the Australian market stacks up very well against the U.S. on almost all metrics, including occupancy, rent growth, both historical and forecast, valuation resilience and population growth. On that point, the population growth in Australia is forecast to be 2 to 3x higher than the U.S. across most age cohorts. Market rent growth has slowed, but remains positive across all markets with vacancy across major cities remaining very tight, below 2% today. And with a constrained supply outlook, we expect future rent growth to be well supported. Now to our latest third generation of product at LIV Aston, which is located on the corner of Spencer and Flinders Street in the Melbourne CBD. This asset sets a new benchmark for build-to-rent developments in Victoria, and caters to customers that are seeking a frictionless lifestyle. The building is highly energy efficient, powered by 100% renewable energy, has 474 apartments, 20 of which are provided as affordable housing units and managed by LIV Mirvac. There is extensive amenity provision, including a 2,000 square meter amenity and wellness floor. As I said, the asset opened just 10 weeks ago. And we have a short video that we'd like to share to show you through. [Presentation]

We look forward to showing many of you through LIV Aston next time you're in Melbourne, and it's encouraging to see how well the site is resonating with our customers. As I said, leasing has progressed really well, we're more than 30% leased, just 10 weeks after opening, well ahead of the leasing rate of our previously completed projects. The strong success of Aston leaves us excited about the next wave of development completions over the next 12 months. Hopefully, I've left you with an appreciation for the enormous potential of this asset class into the future. And the role that it can play in the future housing provision here in Australia. This sector delivers attractive cash flow resilient returns. And fundamentals that is going very well against established offshore markets. We hope that you can recognize the opportunity Mirvac has to maintain its current leadership in this asset class as it grows to scale over time. I'll now hand over to Stephen, who's going to take you through our land lease business.

Thanks, Ang, and good morning, everyone. It's a real pleasure to be here today to talk about land lease and our investment in Serenitas which we're really excited about. The business is showing some really good early signs and strong momentum. This morning, I'm going to provide a bit of color on why we're so attractive to the sector. And then I'm going to hand over to Rob Nichols, CEO of Serenitas who's going to provide a bit more color on the business. And then we're going to drill in a bit deeper through an interview that we'll have with Rob that I'll moderate. So let's get into it. So first of all, we believe that the combination of low risk secure passive recurring income and embedded contracted rental growth, together with development profits and the recycling of capital through the sale of homes provides the basis of a very compelling investment proposition. The sector has strong tailwinds with an aging population and low penetration rate. Investment income is underpinned by government support of qualifying customers through Commonwealth Rental Assistance. And recurring income stream, this recurring income stream has virtually no vacancy, downtime, arrears, risks and incentives and with low CapEx leakage provides a favorable risk-adjusted return profile. The size of the market opportunity in land lease is significant with the population over 55 years of age expected to almost double over the next 40 years. And penetration in the -- is relatively low, estimated at around 6%, which compared to the retirement sector of village in Australia, which is estimated to be around 6%. As awareness of the land lease sector in Australia increases and the quality of the offering improves, we expect to see accelerating growth across the sector. As well as being a highly attractive investment proposition, land lease also offers a compelling customer proposition through lifestyle, financial and social benefits. A key aspect of the customer value proposition is the social connection on offer. Customers benefit from maintained community facilities, which open up opportunities to interact with their neighbors through organized social club events and casual bump ins. Land lease communities provide a safe, secure neighborhood and low-maintenance lifestyle, some with on-site storage for caravans and boats. And the resort like community facilities are generally extensive and can include swimming pools, gyms, spas, saunas and industrial kitchens to cater for large gatherings. Qualifying residents can access Commonwealth Rent Assistance, which will normally fund between 40% to 60% of weekly rent payable in our land lease community. And as the customers are not purchasing the land, there's also no stamp duty payable. Land lease homes are generally very affordable and normally sold at a lower price to the surrounding market, releasing equity from the sale of the family home to help fund spending through retirement. And on the housing supply side, when downsizers move from their family homes and into a land lease community, they're freeing up a home for first home buyers and upgraders. Whilst not 100% comparable to land lease in Australia, the manufactured housing sector in the U.S. provides some good insights for our local market here in Australia. In the U.S. context, manufactured housing has outperformed office, retail and industrial sectors since 2016 and even during the peak of the COVID pandemic in 2020 and 2021, manufactured housing capital values remained very resilient. I mentioned earlier the comparatively low penetration rate of land lease in Australia at around 2%. A doubling of this penetration rate would result in new homes required increasing to almost 12,000 per annum in 10 years from now compared to the current supply of around 2,500 homes per annum helped in part by the increasing population of over 55s. An investment in land lease provides Mirvac with the ability to generate attractive development returns in a capital-efficient manner, along with recurring, growing passive rental income supported by the Commonwealth government. In the case of Serenitas, from a development perspective, the number of new homes settled increased by 9% in FY '24, with strong customer demand, given the modest average selling price ex GST of around $500,000, delivering development returns for the business. On the rental side of the business, the portfolio of around 4,600 fully occupied homes delivers weekly rent income averaging around $205 per home, growing annually above inflation and partially underwritten by the Commonwealth government. This provides a gold-plated income return valued on cap rates around the low 5% mark. When residents exit a community, the home is sold to an incoming resident, resulting in no downtime and loss of rental income and often results in a positive upward reversion in rent. And finally, it's worth noting that unlike the retirement villages sector, land lease customers retain 100% of any capital gains on exit, are not charged refurbishment fees. Some operators in the land lease sector do charge deferred management fees. But as a whole, the land lease sector has generally avoided these. Serenitas has one community in Victoria, representing less than 2% of the portfolio with exit fees embedded in customer contracts. And it's the Serenitas policy not to introduce deferred management fees or exit fees into any new community developed by Serenitas in the future. In Western Australia, customers are offered the choice to pay a lower rent over the term of their tenancy in exchange for the payment on exit calculated as a percentage of the home selling price, which Serenitas has referred to as selected rent. These arrangements are enshrined in the WA land lease regulations and are known as voluntary sharing arrangements and are very popular with customers given the choice to pay a lower weekly rent or if they prefer the choice to pay higher weekly rent and no selected rent at exit. As I've mentioned, the key attraction of land lease is the capital efficient model. Our typical land lease development will start with the acquisition of the land and planning activities and then move into production of new homes for residents and the generation of rental income. During the production phase, development activities are staged with civil and infrastructure works matching the new homes that will be delivered in each stage to help with funding. At the time that the last home in the community is sold, the initial land costs plus all civil infrastructure and community facility costs will have been fully funded from net revenues earned from the sale of new homes. And as the new homes come online, variable recurring passive rent is generated, which continues to grow over time by annual adjustments embedded in customer contracts. This growing recurring income drives appreciation in value of the investment property. Serenitas is one of the leading pure-play land lease platforms with a national presence of Australia. The well-regarded team is led by Rob Nichols, and includes over 100 employees. In a couple of weeks from now, Rob will be handing over his CEO responsibilities to Von Slater, who is joining Serenitas from Ingenia. And Rob will remain on the Board of Serenitas, in the capacity of Executive Chair and will maintain close involvement with the business. The portfolio, which has grown to 30 communities following 2 recent acquisitions, which Rob will speak to in a moment, has around 4,600 occupied sites with a further 2,000 development sites. Serenitas is focused on the affordable middle market where demand is deepest and most robust. And Serenitas management estimate that 80% of customers qualify for Commonwealth Rental Assistance. Mirvac owns Serenitas alongside PEP and Tasman Capital. And as mentioned in prior March disclosures, Tasman has an option to dilute Mirvac and PEP down to 40% from a current holding of 47.5%. And it's the current expectation that Tasman will exercise its option in February next year. However, there are pathways agreed with PEP and Tasman to provide Mirvac with the ability to secure 100% of Serenitas in future. Serenitas is one of the largest land lease platforms in Australia based on the number of operational and derisked development sites. We're very pleased with the momentum within the business. Its national platform is well positioned with most of the current occupied sites and future development pipeline being weighted to WA and Queensland, 2 of the strongest residential markets in Australia today. The buoyancy in these states is driving strong customer demand and solid new home sales price growth and shows the benefit of a diversified portfolio. Before I hand over to Rob, it's worth pausing on the Serenitas development pipeline, which expands across 19 projects in WA, Queensland, New South Wales and Victoria. Most of these sites already have community facilities completed or are nearing completion. In FY '25, Serenitas will commence selling activities in 5 new projects with an additional 2 projects commencing selling from FY '26. These 7 new communities will replenish the development book as in-train projects come to an end. And will provide future development in earnings and new rental income over time. So on that note, I'll pause here and hand over to Rob.

Good morning. If I'm a bit nervous, I'm not really -- it's probably my first time public speaking in front of such an austere audience. So bear with me. Last time I spoke is that was at my sister's wedding and I managed to call her by the wrong name throughout my MC duties. And but you might ask, has she forgiven me? Well, not quite sure because that was 20 years ago. And she has not spoken to me since, but anyway. So thank you, Stephen, for introducing me. Pleasure to be here, everyone. Serenitas was established in December '17. And since then, we've grown to be 30 communities across Australia. We are Australia's most national business. Really exciting to have both Mirvac and PEP as well as Tasman on board to help us take advantage of the massive opportunities and the tailwinds within the land lease community space. As Stephen mentioned, we've had very good momentum in the business. Over the last year, we have grown settlements by 9%. And I guess that's part of the testament to the business model. We are very national. So we've been exposed to the growth markets that have been particularly strong within Queensland and WA. We absolutely target the affordable luxury market. That's our focus. Our average new home settlement price is around $500,000 and that's ex GST. This segment of the market, affordable luxury, is well supported by legislation, including the Commonwealth government with the rent assistance, which has been well supported last 2 years, particularly with increases well above CPI. So over the last 6 months, we've had some great acquisition growth. We have managed to increase the pipeline of development with 3 new communities coming on board. And these communities will add 800 new development sites -- 880 development sites over the next number of years. The 3 projects, Spring Lakes, in Avoca which is a suburb of Bundaberg. The community center is already in place. We have 60 occupied homes there with another 144 development sites to be delivered. Lakeview Springs is based in Hervey Bay in the suburb of Nicobar, and it's a pretty exciting development. It's got a beautiful Lake. I'll ask Stephen to actually color this blue rather than little green, also very rainy day, it is a very beautiful lake with 322 development sites. And then most recently, a number of weeks ago, we settled on the site of Karara Beach, which is up near Palm Cove in far north Queensland. That site is on a former golf course and it has 361 development sites. Due diligence continues to be underway on a number of opportunities, and most importantly, we are looking deep into Mirvac's MPC portfolio where we see a lot of opportunity for us to cut out a piece of land to have this modality of housing. Yes, this is a bit of a case study of Thyme Hervey Bay which is a fairly large development. The span of that map there is -- it's 1 kilometer from end-to-end, so it gives you an idea of the scale. The average housing lot on that is about 380 square meters, and the average -- the average house that we build there is effectively 180 square meters. The demand is very strong for -- in this particular community for RV housing, which involves basically a very large garage, which can be up to 70 square meters alone. And in that house, you can house boats, caravans, RV vehicles and 2 cars. So they're absolutely enormous. It's like an indoor basketball court. It's been a very good project for us since we did our first settlement, which was really a couple of days before Christmas 2021, we've settled over 166 homes, and we're looking to have a very strong finish to this year. The initial DA was approved for 333 lots. But most recently, we went back through a DA process, and we've added a further 26 lots to that site. This really is affordable luxury. The average price point here ex GST is 590,000, and that really positions us in a really sweet spot within the market. This community, because of the climate and the lifestyle of Hervey Bay, attracts retirees more around Australia. So the average temperature is between 22 to 30 degrees, and the water is seemingly warm. So it's an absolutely beautiful spot. It's got -- it's well supported by the Queensland state government with lots of health infrastructure. And the amenity, particularly for the retiree, is fantastic with lots of flat land with beautiful walkways along the waterfront. The key to our model is really activating community and that delivers a lot of benefits in terms of mental and physical well-being. So we provide amazing facilities, and I think there's some pictures up there. So we're about to open a pool house on Thursday, which is a 25-meter pool, with a gym and a yoga room, as an example. But our clubhouse, which is the main facilities we have delivered there, has an indoor bowling alley, which is pretty cool. It's got a bar. It's got a cafe. It's got an indoor cinema. It's got a large room to accommodate large functions, bowling greens. It's got everything. It's absolutely amazing. And the beauty about communities, it's like a neighborhood watch on steroids, it's people looking out for each other. So it's really -- a really good environment for retirees. And ultimately, that interconnection is good for your well-being. If you live in the suburbs and you don't see your neighbors because they're out paying the mortgage. This is a much better place to be connected and have meaningful relationships. So hopefully it gives you a bit of an idea of the communities we build and why we do this. Thanks.

So I think -- is it on? Yes. Okay. Rob, why don't you -- don't run away. I promise I won't forget your name. So we thought we'd just might dig a bit deeper and ask Rob a few questions and putting on the spot a bit. So Rob, you've been in and around the land lease sector for quite a long time. Can you tell us what initially attracted you to the sector?

So my background has been in private equity for 25 years. And during that period, I've always tried to focus on the aging demographic as an investment theme and invested in funerals, home care, nursing agencies and other similar businesses, and always had a curiosity about how do you house the aging demographic within Australia. So the predominant model has always been the RV model, it's a retirement villages model. Whenever I look to that sector, there was always some fundamental issues I have with it. So -- and typically, around consumer equity or the fairness of contract. So -- but having said that, I looked at it post GFC when cap rates are at 15%, right? It's really tempting to go into it. But the reality was, I still have this fundamental concern that wasn't the right model or an appropriate model. So avoided. But serendipity, I met some broker, a guy called [ Tony Bowden ], and he introduced me to the sector. And as soon as I went into that community, the lightbulb came on. It was transparent in terms of contract. It was CPI plus in terms of rent. It was a really good alignment between capital growth for the homeowner and ultimately, the operator as well. So it's pretty exciting. So I went out and spoke to a bunch of institutions, and I sort of got some interest. And then when it came to a crunch, I couldn't get on to a line. So I have to go home to my wife and say, "Selena, do you mind if we remortgage our house?" And that's what I did. So I bought my first community personally. And then after about 2 years, I went back out to the market and so to institutions again and then ended up building a business called Tasman Lifestyle Continuum. So first time. And then that is now part of Hometown Australia. But then a couple of years later, I had the chance to jump back in with the opportunity that presented with Serenitas.

Thanks, Rob. So how do you see the sector growing over time in Australia? And how do you think it compares to the established global markets, for example, with the U.S.?

Yes. I think the stats we saw earlier about the demographics. The growth in the other 55 demographic is -- it's very reassuring for this business. The penetration here is very light. So Stephen talked about increasing penetration to 4% from the current 2%. I think 2% is probably slightly generous. So if that occurs in this 12,000 homes a year, that's going to be significant growth for definitely Mirvac and Serenitas, but also for the wider market. And I think ultimately, in a horizontal setting in an out of metro area, this solution for affordable accommodation is the right solution. So I can definitely see us moving towards the U.S. sort of penetration levels. And I think the advent of all ages, communities will occur probably in Australia, and it's a big part of what happens in the U.S., but there are some differences between the U.S. and Australia. In U.S., you have chattel financing. That's not really available in Australia. There is a small player that provides some support, but the reality is in America, that's a fundamental difference. The cost to build in the U.S. with the different labor markets is also much cheaper than what it is in Australia. And then -- but conversely, the rents in America are up to 2x what the average house in Australia would be. So I think we're -- the sectors probably are being dominated by development emphasis in the past. But over time, I do think we'll see it move towards more of an operating focus where the rents will move more in sync with the resi market.

Great, Rob. What about cap rates? What do you think the outlook is for cap rates in the land lease sector in Australia?

Okay. Yes, that's an interesting question. So we obviously had a bit of dislocation in the general markets over the last couple of years. And what we saw in land lease was reassuring because I always had a view that with greater institutional focus on this asset class in Australia with, say, a re-rating in the sector. So this sector in the U.S. has always been the premium sector over A-grade office even. So whereas in Australia, a grade has always been the sort of the benchmark, and we've been well adrift. So I think with the advent of what happened in the market where there's a greater focus on occupancy and cash, cash yield, this business model is a very transparent model. We're not using incentives, right? We're collecting cash 2 weeks of advance. And again by direct debit, there's no default, right? This is real cash-on-cash yield. So I think a lot of that quality has come through, and I think the advent of larger property groups, such as Mirvac coming in the sector really does put the focus back on what is -- what we believe is the premium asset class, particularly for this aging demographic.

Thanks, Rob. We've had some legislation changes in Queensland and Victoria and potentially some changes coming -- sorry, we've had in Queensland and New South Wales, I should say, and potentially some changes coming in Victoria soon. How do you think in respond to these changes? And how do you think that they impact the Serenitas portfolio?

Yes. I think that increased sort of legislative focus is good because it means that the sector is finally coming out of the shadows in terms of people, consumers and regulators have seen the model, and that's because there's a great awareness. So with the larger marketing budgets of our competitors and ourselves, we're definitely bringing a lot of awareness to the sector consumer-wise and that obviously comes with responsibility and that's where the legislation comes in. So in terms of the impact on our business model, we think it's good because it's going to build consumer confidence within the sector. And of course, what that brings is transparency and that's always been a highlight of this sector relative to the alternatives. In terms of specific parts of the legislation, Stephen, the -- in Queensland, there's a cap now of the greater of CPI or 3.5%, which is I think an unfortunate sort of event of capping rents, but the reality is the government has had the sense to see that we can re-rate our rents on a resident departing and a new homeowner coming in. So that gives us an ability to rebase to market, so it doesn't impair the asset. Down in New South Wales, they've just tried to simplify the rent increase mechanism by getting rid of -- previously, you could have 2 basis, like a calculation, say, CPI plus 2, they sort of said that's not allowed going forward, but you can basically choose what your rental base is or you can do by notice, which is effectively giving a rent increase each year, but our preferred mechanism in that setting is to go with a set percentage.

Thanks, Rob. So Rob, why do homes in land lease communities appreciate in value over time, notwithstanding that the customers don't own the land and theoretically, the homes are a depreciating asset.

Yes, I've been asked this question for the last decade by many people, and I guess the good thing I can give you, I guess, some real numbers today. So if we look at our WA portfolio over the last year, our prices have increased by 28% year-on-year. This is our established home. This is our new home. This is the homeowners that have been in our communities and have sold. On average, it's gone up by that percent. The average increase in, say, the Perth metro market is around 25%. So you can see that actually, it does happen. And similarly up in Queensland, we've had similar levels of growth. In terms of why, ultimately, the agreement we put in place of our homeowners guarantees them longevity of occupancy, right? So it's almost a lease that goes in perpetuity, depending on which state you're within. So in Victoria, typically, the leases are up to 99 years. In WA, our leases are typically 60 years, but with a right to renew -- right to renew on behalf of the operator. But in New South Wales, it's basically a perpetual right. So as long as you pay your rent and you keep within the policies of the community, which is how we regulate behavior and presentation of the community, then you have the right to have your home on site. Obviously, no one lives forever, unfortunately. But effectively, it gives you the right to sell your house or the estate to sell their house to an incoming homeowner. So you end up with this beautiful model of 100% occupancy once you sold through, but you end up with a great secure position. But in some ways, Australians have a fixation about owning the land, and that's understandable. But in England, for example, in London, most of the real estate in London is leasehold, right? In Canberra, it's all leasehold belief, in ACT. And even in Manly, like in the Bower Street precinct, again up to St. Pats, that's all leasehold, but that stuff sells for $36 million, right? So I don't think the fact you don't own the land impairs the value, but it gives you a chance to release more equity because you don't have to buy the land, right? So our model is about releasing equity for homeowners to live better and live longer.

Thanks, Rob. Great answer. So with the Serenitas portfolio, would you say it's under or over rented relative to market?

I didn't see that in my list of questions.

I can't give you the answer.

Yes, I think we've got mechanisms, which led us re-rate the book over time. So I think it's definitely under rented. We do look at that each budget cycle, which we'll be looking at shortly. But I do think the market is under rented personally. I think that's an opportunity, which needs to be taken over time. But we always keep a very close eye on what is affordable. So we use definitions around affordability, and we look at the percentage of our rent per community compared to what income you drive from the government, which can be pension, veterans payments. It can be rent assistance. So we're trying to keep -- make sure we keep that percentage at a level that continues to be affordable for both singles and couples.

Great. Be careful how you answer this one, Rob. But have you found the experience dealing with Mirvac to date and any benefits you've derived from it?

That's right. I'm going to have to read this verbatim. So good to me. No, I think it's been a really good experience. Mirvac, obviously, with the reputation they've established over 52 years of delivering quality, it's a real -- gives us a halo effect as a business. So it's a real positive. There's a lot of areas to share on innovation. So you guys put up some modular construction there. We've been doing modular for 2 decades now as a business. So there's lots of areas of cooperation. I think on the supply chain, there's also opportunities for us to tap into volume-based benefits for the business over time. And there's obviously a lot of synergies in terms of how you guys market/present yourselves and grow business. We -- I'm going look at what else is on -- the other thing which has been helpful during this period of re-legislation or legislative focus has been to access government relations resources within Mirvac as well. And I covered it, Stephen?

I think that will do, Rob. I appreciate you spending some time with us today and sharing your insights into the business. We might leave it there and appreciate that. And I hand over to Richard to talk about Industrial.

Thanks, Stephen, and thank you, Rob, and good morning, everyone. It's great to be with you today. You've heard today why we're focused on upweighting our investment exposure to living and the great progress that we've made to date. I'll now expand a little bit more on our strategy for upweighting to industrial. As you're aware, the industrial sector has experienced exceptionally strong rental growth, up 63% in the past 3 years, with Sydney outperforming all other markets by about 19%. Whilst growth is moderating, it remains positive, supported by robust demand drivers, including growth in e-commerce with up to around 3x as much industrial space required for each additional dollar spent online versus dollars spent in store. Continued population growth will require around 3 to 4 square meters for each additional person. Occupiers will continue to invest in automation and supply chain enhancements to improve convenience, cost and reliability of distribution with an emphasis on new developments to achieve this, and more sustainable buildings are increasingly nonnegotiable with 60% of the top 100 occupiers committed to explicit net zero targets, which will drive further demand for modern buildings. We're often challenged about the risk of a surge in supply. Despite the availability of potential supply, actual supply delivered continues to remain constrained. Sydney has one of the tightest vacancy rates in the world at 2%. Economic rents have risen considerably due to construction cost increases of around 50% in the last 3 years and expansion in cap rates as illustrated on the chart on the right-hand side. Planning delays continue to persist as do delays to enabling infrastructure. And we'll continue to see stock withdrawals to make way for higher uses such as housing and data centers over time. We've made great progress upweighting our exposure to the industrial sector already, with our allocation up 75% since 2018 and clear line of sight to our target weighting of around 20% via our secured development pipeline. Whilst we're not the only group planning to lift our exposure to the industrial sector, our strategy is targeted, disciplined and focused, leveraging our deep asset creation capability to deliver brand-new, high-quality, highly sustainable and highly functional assets that are future-focused and resonate with customer demand, delivering yield on cost to cap rate margins that enable development returns and cash flow resilient, low CapEx investment assets. We're not growing by competing on market for existing sites varied quality on tight cap rates. We're also targeting select markets, such as Sydney, that we believe have the best longer-term supply and demand fundamentals and locations set to directly benefit from the substantial committed infrastructure pipeline underway. And we're doing so with an aligned partner in Australian retirement trust who are attracted to our unique alignment model, where we retain around 50% ownership alongside them and developed a core focus. Our 100% Sydney portfolio is outperforming benchmark returns and delivering strong operating metrics across $1.5 billion of assets. Around 65% of the portfolio has been developed by Mirvac. And in these assets, there's not been a single day of downtime in the last 15 years post initial leasing with average precommitment levels at practical completion, standing at 99.4%. Future performance is supported by under-renting of around 20% quality, with around 86% of the portfolio prime grade, of which 30% is super prime. Location, with around 30% located in infill markets that may benefit from higher and better uses over time, supporting inflation in rent and future intensification optionality. And a $2.5 billion secured development pipeline with Aspect North and South under construction for completion over the next 2 to 3 years and the balance of Aspect and Elizabeth Enterprise set to commence construction progressively over the next few years. And we believe we're now at the end of the cap rate decompression cycle with capital seeking to upweight to the sector and a very strong preference for modern assets located in Sydney. On this slide, you can see our focused location strategy on a page with around 70% of the portfolio located within 1 kilometer of a major arterial road or Motorway. Our recently completed Switchyard is benefiting from the Stage 3 WestConnex project, which will reduce travel time to and from Port Botany by around 20 to 30 minutes bypassing around 54 sets of traffic lights. Aspect will benefit from the $1 billion Mamre Road upgrade, set to commence construction this year, later this year, whilst Elizabeth Enterprise is located just 800 meters from the new Western Sydney Airport and M12 Motorway set to commence operations in just 2 years' time. Our pipeline is not only strategically located, it was also secured early in advance of material rents and land value appreciation and on attractive deferred terms. This has allowed us to leverage our development capability to secure upfront planning and delivery milestones and provided resilience in margins with escalation in economic rents now putting pressure on land secured later in the cycle. To be blunt, sites secured in the last 2 to 3 years will find it much more challenging to deliver development profits to their owners in the current environment. And the portfolio is already benefiting from our development-led strategy with new developments supporting NOI growth of 46% since 2018 with completions at Calibre, Switchyard and the partial completion of Aspect. The outlook for future NOI is supported by the completion of the remainder of Aspect and the upcoming development at Elizabeth Enterprise. Our development completions represent the best of next-generation premium industrial assets leading the market in quality, flexibility, functionality and sustainability and a future proof for customer demand. Caliber located directly adjacent the M4-M7 intersection comprises of around 110,000 square meters and completed in 2019 is widely regarded for setting a new benchmark for industrial estates across the country. You'll see the quality of this asset on the tour today, which is resonating with customers with second-generation leasing completed across 65% of the estate with 100% retention, 16% leasing spreads and a further 26% of underrenting to play for, reflecting the forward thinking incorporated in the design and specification of the initial development ensuring it remains relevant today. Switchyard set a new benchmark for the last mile orientated industrial estates in the Inner West of Sydney. Comprising 62,000 square meters and completed in 2023, this state is also 100% occupied and was recently recognized by Urban Developer as the Industrial Development of the Year. We'll now play a short video of this recently completed development. [Presentation]

Moving on to Aspect. Aspect is a $700 million in value estate, which is now 50% complete and fully leased across 100,000 square meters for CEVA and winning group. This development is the first to achieve completion under the new planning controls in the Mamre Road precinct as part of the Western Sydney Aerotropolis and demonstrating great momentum with a further 50,000 square meters due for completion this year, 50% of which is precommitted. And it was pleasing to also receive DA approval for a further 40,000 square meters last week. We'll continue to advance a speculative led development strategy for this estate to capture the improved market rents delivering modern assets with broad future customer appeal, staying ahead of the limited direct completing supply. In addition to the third stage of Aspect, our Elizabeth Enterprise development located in Badgerys Creek next to the new 24-hour Western Sydney Airport is an exciting future development, with 90 hectares of development area capable of delivering around 40,000 square meters of GLA. The Western Sydney Airport and associated infrastructure has the potential to be a game changer for this precinct, the only international airport in New South Wales with 24/7 operations, making it more suitable to dedicated air freight, a forecast of 10 million passengers by the year of 2031 and a global reach of more than half of the world's population within a 14-hour flight. Our site is located just 800 meters away has direct frontage to Elizabeth's drive and connectivity to the new M12 motorway. Rezoning and precinct planning has been concluded and the first development application submitted. We're targeting first buildings by 2026, in line with commencement of operations of the airport. We'll now play a short video to give you a perspective of what this new precinct will look like. [Presentation]

Well, I hope that gives you some insights as to why we're excited, so excited about the expansion of our industrial exposure and the quality of our existing portfolio and our unique opportunity to grow to scale organically. I look forward to showing you some of these assets later today. And I'll now pass you back to Gavin, who will moderate our Q&A session.

Thank you, Rich. And we're now going to move to a Q&A session. So we can invite to the speakers to the floor. So today's session is going to be -- we'll be recording this session and posting it to the web overnight. So if you do remember that these questions will be on the market afterwards. [Operator Instructons] Ben, in front of you.

Ben Brayshaw, from Barrenjoey. I was wondering maybe this is a question on just land lease to start whether you could talk about that, Stuart or Campbell. Just on margins and return on capital, how are you seeing the outlook within Serenitas?

So in terms of margins, the development returns we've been targeting a greater than 30%. So that will give you a sense of the profit on sale of assets. And I think if you jump into our accounts, you'll get a sense of the return profile for the business. I think we announced $13 million of EBIT for the 4-month period leading into 30 June, annualized $40 million on about a $238 million investment. So call it, 16%, 17% cash-on-cash returns.

And just on -- also on the leasing up of LIV Aston. You mentioned in the presentation, it was in the order of 30% let with 12 -- sorry, 10 weeks post completion. I was wondering how that compares to past projects that you've undertaken and whether you're doing anything differently or are you seeing anything different player out in the market to support the letting up?

Thanks, Ben. Look, I think it is a very robust leasing momentum. It's -- generally, we've guided to about 15 to 18 months as a stabilization phase for our new developments. And we're constantly learning with each new project that we deliver, how to iterate and optimize and accelerate the velocity of leasing. So we're very, very pleased with the momentum at about 30% now. It is tracking broadly in line, in fact, slightly better than expectations. But obviously, the focus now is to continue to keep that momentum going and focus on leasing up the balance of the asset.

And sorry, just final question on BTR. Are you referencing around a 5% cap rate, if I'm not mistaken in the commentary. I was wondering if there's been any transaction activity in the market that you perhaps could point to recently to benchmark pricing for a completed and stabilized asset?

I think the reference was actually relative to the yield on cost is stabilized cap rates are actually in the low 4%, and that is supported by some transaction evidence that we've seen. It's also supported by independent valuations that we procure on an annual basis.

There was a portfolio from [ Arklife ] that recently traded about 3 months ago, which supports those kind of cap rates.

Question from Tom just back here.

Tom Bodor, from UBS. Just a question on land lease. I think you talked a bit about regulation in the presentation, but I'd be interested in how you think about reputational risk. You're obviously dealing with an older more vulnerable cohort of residents. What are you doing on that front? And how do you view it?

Sure. It's tempting to invite Rob to the stage given he is here within the room. But look, we are very aware of that. And what we have seen is with the recent legislative changes that does kind of regularize some of the expectations for customers around growth in the context of an escalating rent environment. So for us, we understand that there is potentially vulnerable cohort, and that's something that we're sympathetic of in terms of how we -- how the rental growth process is managed within the business.

Tom, what I'd add is, again, all the capital growth belongs with the customer. So the proposition is one of equal risk where upside is theirs, and we certainly support that. So I think the -- it's really no different from us selling a residential apartment to someone. It's got a similar risk profile.

I guess the question is you've got sort of media report, 7.30 report. There's a bit of a duty of care there because you're managing the communities. Is there something that you're sort of thinking -- is it something you're thinking about and trying to be proactive about? Or is it -- do you feel like it's sort of a relatively minor risk in the scheme of things?

Look, there's always risk. And one thing is for certain, the regulators will always ensure from a legislative perspective that they'll protect those sectors. Again, the risk that you're talking about on 7.30 reports was Victoria only. And I think, as we mentioned, that's about 2% of our portfolio. So with -- we're very mindful of creating environments like reported on the 7.30 report.

Great. And then just one follow-up on the build-to-rent side. The portfolio hasn't really grown in recent history. Just be interested in how you're thinking about restocking that portfolio?

I think the time is now for us. So certainly, as we've lived through and expansive growth in construction costs. That has, in all asset classes, put anything bought the last 2 or 3 years under pressure in terms of generating any kind of development return, forget the asset class, it's all the same. So now ideally, we start to see a repricing in land values, which gives us an opportunity to start growing again. But we've been just as we were through the residential cycles, post 2014, we were very slow to build our land banks because of the cost and return profile. We've done exactly the same in build to rent. We think we're now at that point, where we can start to look again because some of that's been priced in.

Thanks for the questions, Tom. Next question, Kim.

Kim Wright, from CPP Investments. So I just had a question on industrial. I think Page 58, if I remember correctly, showed economic rents being materially ahead of market rents, yet you then talked about your development pipeline in industrial. Can you just help me reconcile the two?

What we're suggesting is that economic rents have increased. And what that means is that and -- but we've referenced the fact that with land value appreciation, the fact that we've secured our pipeline early with earlier in the cycle on more attractive deferred terms and lower land prices has provided shelter for what we've otherwise seen with this escalation in economic rents. So we think we're, therefore, well positioned to continue to develop out that pipeline in the context of elevated economic rents, which we think will challenge competing supply, particularly those sites bought later in the cycle at higher underlying land values.

So you're not revaluing up the land values?

No.

And maybe a related question on the seed project. How do your land value or how does your land value for that project compared to the other land owners in the area?

Again, I'd reference that we did purchase early. We acquired that site in 2 stages, the first stage of which was back in 2018 and then the second stage was in 2020. So therefore, as you saw on the chart, land values were a lot lower at that time, and they've since increased. We've also seen the benefit of increased certainty of infrastructure in that precinct planning. The planning resolution has now occurred. Most of the major infrastructure is under construction, and there's more clarity as the completion time frames, et cetera, which has supported the underlying appreciation of that location and in turn, our sites. So we're very encouraged about the momentum that we've achieved to date. And frankly, we're very excited about continuing to expedite delivery through the remaining gates and getting the first shovels in the ground.

Thanks, Kim. A question here from James.

James Druce, from CLSA. Maybe a question for Stuart to kick off. I think you referenced getting back to 18% to 22% project margins in a year or so. Is there anything that we should be thinking about below the line in terms of looking at interest expense through cost of goods sold? Is the margin going to increase in line on that net basis back to normal levels? I just noticed the last result, if you adjust for that line item, margins are well down.

Yes. I think Stu indicated the pathway back to the through cycle, which is a gross margin. The impact on the cost of goods -- the interest capitalization and unwind has got to do with the delays that have impacted the gross margin as well as the net margin ultimately. So that we don't expect to be continuing to capitalize as much interest, but then for it then to unwind over time because the projects will launch now will hit the ground running. The pricing, Stu can talk to the pricing you're seeing in the market now that if we launch, we're very confident, that they're within the through-cycle target range, and therefore, they won't carry the interest bill that they have previously, which is what these projects are getting impacted by.

And just importantly, like out on the tour today, I think, obviously, Harbourside will be the first project. But going up to Riverlands, you'll see the pace in which we're delivering that project now and getting productivity back on target will, as I said, deliver through-cycle range gross margins with that next wave of projects starting to contribute, particularly in that middle ring built form where we're seeing the most demand at the moment for -- from our customers.

All right. So we should see the net margin moving up in line with...

Yes, that's right.

Okay. Maybe one for Rob Nichols, it he's brave enough. I was curious about the sort of life cycle CapEx of [ MHE ]. In particular, you're pumping a lot of money into the clubhouses these days. And I was just wondering how you think about the replacement cycle of that CapEx?

It's a good question. It sort of links back in some ways to the rent model as well. So it is important we get a fair economic rent to be able to reinvest because ultimately, we're talking about the sort of reputation issues around the business. The reality is we manage about $2.3 billion of senior retirees assets, and it's the biggest asset being their house, rights? And we have to take that very seriously and you -- and the only way we'll preserve the value of those homes for next to kin or for the retirees who need to go to high care is by maintaining our facilities well. So we definitely have a -- we have a -- I can't remember the exact dollar, but we have a certain dollar per maintenance CapEx we dedicate per annum, and we generally spend that, but some years, we might have something, which spikes it. But effectively, we do have a 5-year maintenance budget per community, which we try and smooth over the life cycle of the asset. So it's something we're very conscious of, and it's -- frankly, we can see ourselves a fiduciary for our homeowners, which is a bit odd, but that's our background is fund management. And effectively, if we do our job right in terms of reinvestment, having the right staff, having the right systems process, then we can maintain the value of those assets, which ultimately is our retirees and maintaining our facilities is so important.

Maybe you could touch on an example for some of the older assets that you've looked at?

Yes. So there's a real wide spectrum within the land lease community market. So it's from old caravan parks that have been converted to long-term sites. In those sorts of communities, we'll pursue a renewal cycle. So for example, we'll be converting a toilet block to a clubhouse effectively. But then we'll be looking to as homes come up as people move out, we'll be trying to buy those older homes and then replace them with a new home, or we might buy an older home, which might be 30 years old and then refurb that. And that's really important over time to be able to keep that process renewal in a community because if you fast forward 20 years and you haven't touched that old van and annex for the last 20 years, it's going to be a very unpleasant place to live. So we did have a very asset-specific approach on every community. If it's an older sort of purpose-built community, there might be a refurb program rather than a rebuild program of community facilities. But yet trends and tastes change over time, too. So we're replacing, for example, tennis courts with pickleball courts, which is, I think, the biggest participation sport in the U.S., right? So we try to do that. And over time, people might not bowl and they might want to [indiscernible]. So we've got all that going on as well.

Lauren, your question here?

Lauren Berry, from Morgan Stanley. Just back on land lease, again, I understand why it's a very good investment class. But I think you open up the AFR in every week there's someone you're getting in. Is there any concern about the pickup in competitors potentially, I guess, eating away at future margins or sales rates?

No. I think probably the way I'd answer that is it's pretty undersupplied as an asset class as is. It's got all the tailwinds of population growth and aging population, which will help it, and building club facilities are expensive. And so institutional capital is certainly helpful. There's not a lot of institutional capital playing in the space right now. And the other thing I'd say is we've got a very, very large portfolio of land that we own, which by its nature is something which is adjacent to this activity, which we can play into overtime.

How many sites across the Mirvac portfolio would be looking at potentially vending into land lease?

I think there's probably 6 or 8, which we've looked at over time, but we will deliver those over time. We've already restocked the pipeline recently with the acquisitions that Rob and Stephen spoke to. We'll certainly start deploying capital into those, but we know that there is a long-term opportunity seeing in our own land bank.

And just on developments more broadly. I think if you rewind the last time interest rates, where were they are now. You look back in Mirvac's old presentations, everything would have had a yield on cost of about 7%. Now build-to-rent, like you said, is probably under 5%. Industrial is lucky to get 6%, right now. Are the returns compelling right now to be just developing in general?

Sorry, you referred to developing which particular asset class here?

Anything.

Yes. Look, I think that if you look across our portfolio, for example, we've been very disciplined in when we restocked the assets we hold. 55 Pitt Street is a great example of that. We're now delivering into a market where without question, that premium office segment is going to be undersupplied as we move into 2027, 2028. So I look at our activities in acquisition over the last 10 years and the disciplines that we've shown in buying at the right time in the cycle. And I think picking up on Kim's question, and we secured that land bank in Western Sydney. I think we were dealing with egg farmers back from 2014 securing land at the right time in the cycle to ensure that we've got coverage through the cycle. And that's paying dividends now. So Western Sydney around the airport, I think our average buying price was around $200 a square meter. So to Kim's question, I think many competitors over time have come in at up to $600 a square meter. So it's all about timing. It's all about buying at the right time in the cycle to make sure that we've got that embedded margin to protect our position.

Maybe just to add, I think undoubtedly, hitting development hurdles for everyone is harder, undoubtedly. Cost of capital has gone up. But to Stu's point, we've got particular projects that still stack up and meet our hurdles anyway. And we've talked about that a lot, 55 Pitt Street, the industrial land, even Harbourside in its own right, works for us. And I think that's important to differentiate generally how we think about development from everyone else or anyone else because we've got specific projects that work and hit our margins and our hurdle targets. And we won't be going ahead if they don't work, and you've seen us defer office pipeline because it didn't fit with the strategic direction we're taking and the returns didn't stack up in that point. So I guess I'll just build on what you're saying in the discipline and the project-specific outcomes we've got to be able to unlock that development capital because we want to -- we are a developer, and we want to continue to move forward. But because we've got opportunities in particular projects, we can.

And sorry, just further building on Courtenay's point. I think today, you'll see 3 projects in the resi space, for example, again, to the point of buying at the right time in the cycle in the right structure. So Western Sydney University, a PDA with the university securing it at the right time, taking it through planning and again, hitting the right hurdles through the cycle. Riverland's another good example of buying at the right time in the cycle, navigating planning, but again, now experiencing significant revenue growth an infill location in Southwestern Sydney. And then finally, the Highforest Project, which was obviously an investment, but turning that off at the right time, taking it through rezoning and embedded margin being accretive to the portfolio.

No more questions? Sorry...

Richard's also going to...

I might as quickly just to add to that as well. Can we take this momentum going. But also don't forget the value of the new assets we create, the value that they drive for our investment portfolio in terms of modern, brand-new low CapEx assets that resonate with evolving customer demand is that asset creation capability is extremely important for our ability to drive performance out of our investment portfolio. So that is the only consideration. I'd like to add to the earlier comments.

Thanks, Rich. Richard?

Richard Jones, JPMorgan. Courtenay, just a question for residential JVs that you talked about. Can you discuss at what point for each project in MPC and apartment separately is the best time to introduce JV capital?

Yes. Stu, I might tag team maybe on it a little bit. But I guess it again would be project-specific and where we see value and where we see capital demand. So we've talked about to the market and Stu highlighted today a project like Mulgoa. So the team spent 5 years accumulating the land under option at a low land value relative to today's land value. And we're able to unlock -- by bringing a partner into a project like that, we're able to unlock a huge amount of value upfront and then have them sitting beside us to fund capital of 50% or so, whatever we end up with of that project going forward, which takes a load off the balance sheet, but effectively drives the returns that we would have otherwise gotten from it. So that's an early stage project where we've passed through the planning or zoning risk essentially, which is what we're good at, and Stu can talk to it. But we've also done it later. Smiths Lane about 2 or 3 years ago, we invested in upfront infrastructure and community place making and that allowed us to extract more value again. So it does depend on where we see projects in their life cycle. And I'd also say we're also thinking about the balance sheet and where we see value. And if we can carry that value longer, and extract value later, then we will. But if we want to actually go and find new opportunities, we want the room on the balance sheet to be able to do that. And that you're seeing us manage the balance sheet in that context to be able to extract value where we can and release balance sheet capacity to go and find new things because that is -- we do see buying opportunities coming up. And Stuart and I talk a lot about the capital in his business and how do we actually get more room to move. I don't know if you want to add?

Yes, I'd probably just add a couple of points to that. Firstly, I think that the capability within Mirvac to get planning through government at all levels has matured significantly over the last few years. So firstly, Mulgoa is a great example of us optioning up farmland and creating value. I think one of the important things where we bring partners in and ultimately, we have alignment with those partners is certainty around planning outcomes. Many partners can be quite risk averse and want line of sight in terms of earnings. And I think that's where having that alignment and having that certainty around planning is important. So to Courtenay's point, Mulgoa rezoning through, that project is now ready to bring in aligned capital. But then something like a Smiths Lane, where the decision was made to create that place, create that community, deliver the upfront amenity, get the run rate around sales. So there's good line of sight of earnings for our partner was the decision we made at that point in time. And I think importantly, if you look at the partners that we have now and the partners that we're building within the portfolio, what we're looking for is alignment, we're looking for long-term partners that value our brand, that value our expertise and that want to see comfortably alongside us over the longer term.

And I'll just add, it's all about velocity of capital. And so the more that we can create value, bring in partners and allow us to sell on more fronts, that's exactly what we want to keep doing. So our aim is to improve the velocity of our capital rather than having big chunks of balance sheet sitting for long periods of time, generating returns, but it restricts our ability to replenish the pipeline over time if we do that, which is why this whole velocity thing becomes fundamentally more important to us.

And just to cover just Harbourside, what's the right time to bring capital in there?

Yes. So with Harbourside and again, looking forward to showing everybody that project today. We will look to introduce a capital partner over the course of this financial year. Importantly, again, it's about certainty. It's about line of sight in terms of planning outcomes, which we've now ticked, but also, we will have good visibility in terms of sales on that project as we introduce a capital partner into that project over the course of this financial year.

We're coming up on time. Just one quick question from Sholto, I think, and then I'll just finish up with Dave.

Just following on the Harbourside. Sholto Maconochie, from Millennium. Will that bring a capital partner in for the commercial and a separate partner because some capital on one living, someone's commercial? Or how do you separate the 2?

We're still working through that. We haven't made a decision. Obviously, the real interest in that project is from -- sorry, partners looking to come into the residential component. But there are partners that are looking at coming into the entire project. So we'll define that over the course of the next 6 to 9 months.

And just finally, on the build-to-rent, the legislation finally came through. It's got a 10% affordable component. It's not finalized. It's draft. But does that mean you do less amenity to put that affordable component in because it impacts the returns of it, but obviously positive changes, but not the best outcome? What's the sort of view on going forward on build to rent with that 10% affordable and the mix of how you build it with the amenity?

Look, I think what that does is plays to our advantage because the one thing that will need to happen is we're going to need to figure out a way to design and build these things more efficiently than we probably have in the past. And we've got a whole work stream internally focused on exactly that, and that is much harder for a competitor to do when you don't have that integrated design, build, develop capability. So you're right. It certainly is going to focus us even more into that whole relationship between design and cost.

David Pobucky, from Macquarie. One question on [ BTR ]. You spoke to the potential for that asset class attractive returns, attractive market dynamics. What do you think is preventing more capital from being allocated to BTR across the market to drive it out of its infancy?

Look, I think in the absolute short term, it's been the lack of definition around some of the legislation that we've been waiting on. Obviously, withholding tax has been a big part of that. So for foreign institutions, withholding tax on most asset classes is at 15%, but the current standing for build to rent is at 30%. So we want that equalized, and there's certainly a lot of noise that's in Parliament as we speak. So that's a big part of it. And I think like any nascent sector, people want to see long-term returns, capability, who are the right players before they make their decisions who they want to partner with. And I think now with 18 odd assets in the market, a track record in data starting to be established, assets now trading, setting values, all of a sudden, I think we're at that point where we're at the beginning of that opportunity.

And maybe to add, the domestic supers probably a super, which are not really in the sector. They're looking for more stabilized returns. And so we're not at that point yet of transition. So there's still debt to core risk in the return profile. And so once you get more assets stabilizing. Angela's presentation, there's now 27 assets complete in the country. You can start to see portfolios reweighting into a more stabilized return. And I think that will be more attractive, particularly to domestic capital, where they haven't been playing before.

Okay. We might wrap things up, if that's okay. I'll pass back to Campbell to wrap us up.

Okay. Well, look, just a quick thank you to all of you for taking time to spend with us today. We've got a really exciting agenda this afternoon as we inspect some of our projects. Hopefully, today, you've got a sense of where we're allocating our capital how we think about allocating our capital, what are those areas we're chasing that we think will give us the most resilient long-term cash flows, the safest cash flows and the development return profile that we expect. Certainly, for us, that's a real focus on living sectors in industrial as we've covered off today. So I would just finish in saying that it's been a difficult cycle to date, but we are seeing a momentum shift now. And so certainly, we're now starting to see this cycle starting to move a little bit more in our favor, which it's probably been a long time in coming, but certainly now we're starting to see the volumes coming back in residential that have been missing for the last couple of years, but certainly coming off a low base. Gav, do you want to just talk us through the statistics and logistics?

Okay. Thank you again for participation today. It's been a great session. As I mentioned, we'll have a recording of today's presentation up on our website, hopefully, this evening.