Mirvac Group (MJB.SG) Earnings Call Transcript & Summary

Welcome to Mirvac Group's 2025 Results Briefing. [Operator Instructions] Please be advised that today's conference is being recorded. It's now my pleasure to hand you over to Mirvac's CEO and Managing Director, Campbell Hanan.

Good morning, everyone, and thank you for joining us for our annual results presentation. With me is our CFO, Courtney Smith; our CEO of investments, Richard Seddon; our CEO of funds management, Scott Mosley; and our CEO of development, Stu Penklis. I'd like to begin by acknowledging that we're presenting today from Gadigal land, and I'd like to pay my respects to elders past and present. This time last year, we talked about FY '25 being a challenging year, but also a trough year for earnings. So it's great to stand before you today and to say that we've turned the corner. The initiatives executed in FY '25 put us in a great position to deliver growth into FY '26 and beyond. Two years ago, we set a clear strategy to reposition the portfolio and improve our returns. We have a strong competitive advantage with a combination of leadership in living across the housing spectrum, our best-in-class investment portfolio with high-quality sustainable assets, combined with our unique creation expertise, which is important to our customers and our capital partners who invest alongside us. We've made great progress delivering on the targets we set out at the start of FY '25. And now we have momentum and a clear line of sight for delivering growth into FY '26 and beyond. We expanded our living sector exposure with development completions and significant restocking across our living platforms. Our investment portfolio is best-in-class with strong leasing success and new completions in both the living and industrial sectors driving income growth. Our residential sales volumes improved with a meaningful 40% pickup in sales activity and presales of $1.9 billion. We made great progress across our committed commercial developments. We've appropriately revalued our pipeline, and we have clear value creation to be realized over the years to come. It's also been a great year for capital partnering with $1.3 billion of capital raised. This accelerates the velocity of our development capital across our CMU and residential projects. We also raised the equivalent of $350 million in our [indiscernible] fund, a clear signal of global appetite for offices returning. We delivered all of this while maintaining a strong balance sheet following the sale of $340 million of older office assets and the proceeds received from capital partnering and all of our segments now have visible growth profile in the years ahead. Turning to guidance. As a result of the successful period of execution, we now have a more positive outlook for earnings into FY '26 and with our EPS expected to be between $0.128 and $0.13, reflecting 6.7% to 8.3% growth and a dividend of $0.095, which is up 5.6% on PCP. I'll unpack this guidance further at the end of the presentation. FY '25 was about doing what we said we'd do. This execution means we're now delivering on the visibility of growth we've been highlighting. Turning to the numbers. We delivered group EBIT of $736 million and an operating profit of $474 million with operating earnings per security of $0.12 in line with guidance. Our distribution per security was $0.09 and our NTA stands at $2.26. The investment portfolio is performing strongly. Elevated leasing success lifted occupancy to 98% with average positive leasing spreads of 8.6%. EBIT from our living and industrial sectors is up 50% year-on-year. We've made strong progress in the living sectors. We now have the largest operating BTR portfolio in Australia with almost 2,200 apartments, and our next site has recently been secured. Land lease continued its positive momentum with 390 new home settlements and we added a further 3 communities to our development pipeline. We are now selling on 7 more fronts since the acquisition in March '24. We also expanded our build-to-sell pipeline, securing a new 1,200 lot MPC site in Western Australia with first sales targeted for FY '26. We settled just over 2,100 residential lots with presales rising to $1.9 billion following a number of successful launches. And for the first time in 3 years, we're now selling more than we're settling, providing an encouraging start to FY '26. Sustainability and culture remains at the heart of our strategy. We recently reaffirmed our decarbonization target to be net positive carbon by 2030, which includes working through our program to electrify our investment portfolio. This is becoming a key requirement for our customers and for our capital partners. We're investing in our people and building on our capability. We reported a strong employee engagement at 77%, and we continue to be a leader on gender equality with 47% of senior management roles held by women and a 0 gender pay gap on a like-for-like basis. Our investment in the Mirvac Masters program is providing ongoing learning and development for our people. It's also been accredited by the University of Sydney. These initiatives are driving strong engagement and help to ensure we can execute our strategy into the future. Mirvac Construction was recently awarded a 5-star gold [indiscernible] rating for the third year running, recognizing our long track record for quality construction. And finally, we've continued commitment to best-in-class governance, ensuring alignment of our priorities with those of our investors and broader stakeholders. In summary, we've delivered meaningful execution across the business this year. giving us a strong line of sight into FY '26. Today's presentation will unpack the drivers behind this momentum. So to take you through the financials, I'll now hand over to Courtney.

Thanks, Campbell, and good morning, everyone. Three messages for me today. We have delivered the FY '25 result in line with expectations. With active management, the balance sheet is in good shape, and we have strong visibility of earnings growth into FY '26 and beyond. Our full year result is in line with expectations with operating profit after tax of $474 million or $0.12 per stapled security. . The Investments segment contributed $602 million, which was down 2% on the prior year due to the impact of asset sales in office and retail. This was offset by completions in industrial and living with a full 12-month contribution from land lease. The Fund segment contributed $33 million, in line with the prior year with asset devaluations in funds management, offset by increased CapEx fees in asset management. The Development segment contributed $178 million, down 40% on the prior year. Within this, commercial mixed use was $46 million. which includes contributions from our committed projects such as Seven Spencer Street and Aspect and profit from the sell-down of a 49% interest in Seed Stage 1. These contributions were partly offset by an increased construction loss [indiscernible], which is now completed and a lower contributions from 55 Pitt Street due to the insolvency of the facade contractor. Residential contributed $179 million, $33 million lower than the prior year, driven by lower settlement volumes and the impact of impaired projects including 9 at Willoughby and the now completed Carton House in Key in Brisbane. Our disciplined focus on cost management and the completion of an enterprise-wide system implementation in December resulted in lower overheads when compared to the prior year. Financing costs were down on the prior year, driven mainly by lower development interest due to the impairment of selected residential projects. Statutory profit for the year of $68 million included development devaluations on 7 Spencer Street taken in the first half and Harborside office and retail. Investment revaluations were positive in the second half, marking a turning point in the valuation cycle and other nonoperating items include impairments across the select projects. Overall, we have delivered the FY '25 result in line with expectations. Importantly, we have accounted for the impact of our challenged apartment projects and these have been appropriately valued and the impact contained to FY '25. Moving to the balance sheet. We've maintained a highly active approach to managing the balance sheet with asset sales and capital partnering initiatives helping to manage our capital commitments. This year, we've raised or refinanced $2.2 billion of debt on favorable terms, completed $340 million of asset disposals, supporting the shift in our capital allocation and through our capital partner initiatives raised $1.3 billion, growing our capital partnerships and unlocking value from our development pipeline. We have a range of funding sources, and we'll target further asset disposals and capital partnering in FY '26. The balance sheet has weathered the storm of rising rates and is now well positioned to benefit from falling interest rates and a stabilization in asset values. Gearing is within the target band. We have $1.2 billion of liquidity and a strong credit rating. The average cost of debt was 5.4%, down from 5.6% as we capture the benefit of interest rates falling. So overall, with our highly active approach to managing capital, the balance sheet is in good shape, providing us with both the capacity and flexibility to take advantage of future opportunities. Now moving to the visibility of earnings growth. As outlined in February, we are building momentum by leveraging our integrated model and activating our development pipeline, giving us strong visibility of EPS and NAV growth into FY '26 and beyond across the entire platform. We have secured capital partners and therefore unlocked value from our commercial mixed-use development pipeline with committed projects expected to deliver $540 million over the next 3 to 4 years, realized through development profit and NTA uplift on the completion of the assets. The Investment segment will also benefit from the committed development pipeline with new income of $100 million to come on progressively as those assets complete. Additionally, in investments, we are unlocking earnings on the delivery of the land lease development pipeline. And the existing pipeline and in the existing pipeline, we see growth through positive rental reversion across all asset classes. In the Fund segment, the completion of the committed developments will bring $2.7 billion of new funds under management. This, along with improving asset values, gives us good visibility of earnings growth in this segment. In residential, we have good visibility of earnings, with $1.9 billion of secured presales, which will contribute to earnings over the next 3 years, and we are well placed to benefit from a step up in new launches, improved market activity and margins returning to our through-cycle range in FY '26. Underpinning all of this is potential further tailwinds of lower debt costs stabilized and now improving asset values and a continued focus on cost management. With all of these drivers in play, we have a strong visibility of earnings growth, and the team will share how we're delivering on it. With that, I'll now hand over to Richard.

Thank you, Courtney, and good morning, everyone. In investment, our strategy is clear to sharpen our focus on premium offers and increase our investment in living and logistics, and we're executing on this strategy with discipline and conviction. This will further enhance our modern, high-quality portfolio, which achieved 98% occupancy and 8.6% average leasing spreads over the year with clear visibility of growth. The key drivers are new net operating income from committed developments underway, capturing positive rent reversions over time. and an improved valuation outlook as we enter into a cyclical upswing for quality assets. In office, our focus on premium well-located assets is delivering and our modern, high-quality, sustainable portfolio is clearly resonating with customer demand. We executed another standout year of leasing with close to 7% re-leasing spreads across over 70,000 square meters. Secured major lease renewals, including a 200 George and Riverside Key derisking forward expiry, maintained occupancy at 95% and sold $340 million of older lesser quality assets. Flat valuations in the second half demonstrate we've moved past the inflection point for quality assets and the signs of a recovery in office are very clear with positive net absorption now in all CBD markets and a restricted supply outlook. The chart on the bottom right of the slide illustrates quality is a clear beneficiary of absorption, and our portfolio is very well positioned to respond. In Industrial, our strategy to increase the quality and scale of our portfolio through development is delivering exceptional results. Portfolio occupancy improved to 99.8% with re-leasing spreads at 49%, and net operating income has increased by 12% following development completions at Aspect where we're delivering market-leading sustainability credentials. And we have multiple drivers for further growth, including under-renting of approximately 17% across the portfolio. The continued delivery of our secured development pipeline, which benefits from proximity to major committed infrastructure, including the Western Sydney Airport and robust Sydney demand from both customer and capital with vacancy at 2.5%, the lowest on the Eastern Seaboard and among the lowest globally. In retail, we're leveraging strong catchment fundamentals in our urban portfolio to drive value through targeted active management. We're refining our retail partner mix to maximize sales productivity and bringing in and collaborating with top-tier partners such as the recent launch of Rebel's flagship House of Sport redevelopment at Broadway. This focused strategy is delivering with occupancy at 99%, leasing spreads up 2.8% and positive sales growth. with specialty sales productivity rising, low occupancy costs and strong catchment fundamentals, we're confident in the growth outlook and committed to unlocking further value across the portfolio. In living, Mirvac has a clear competitive advantage and aligned with our strategic objective of leadership in living, we're accelerating our investment in the sector. The benefit of this is clear with earnings up 184% to $54 million in the financial year. In build to rent, we've grown the portfolio to almost 2,200 operating apartments with stabilized occupancy at 96% and encouraging lease-up progress for both LIV Anura and Albert following completion last month. In land lease, we've grown our stabilized portfolio to now 5,000 sites up 18% since acquisition just under 2 years ago and grown our secured development pipeline to 2,500 sites following new project acquisitions with active due diligence on further sites currently underway. Both of these established platforms have significant potential for scale, a demonstrating momentum in undersupplied markets and provide us with clear pathways for further growth. I'll now hand over to Scott.

Thanks, Rich, and good morning, everyone. Our funds business continues to attract capital to the platform and it's great to see institutional capital more broadly start to deploy again now that we've got more confidence around the point in the cycle and the cost of debt. But this cycle will be different to last cycles, where we saw long periods of cap rate compression benefit all assets. Asset and portfolio selection will be key. And so those that can create or gain access to quality assets in the best locations, together with driving value through operational expertise and understanding your customer will outperform. And so capital is rightly being more selective in where they're deploying and they'll continue to deploy to managers that have that in-house creation capability, in-house asset management capability, those that have balance sheet alignment, leading governance and an investor first culture. Our funds platform at Mirvac diversifies our capital sources. It helps us pursue a higher velocity of capital and it drives a higher return on invested capital. Our approach is resonating with capital as reflected in the $12.8 billion that has come on to the platform in the last 3 years. FY '25 was another great year of execution with $1.6 billion of capital raised, taking our third-party capital under management to over $16 billion, representing 22% per annum growth rate for the last 9 years. We continue to see the strongest demand from capital for those that want exposure to the living sectors and also the industrial sector and more recent pickup in demand for premium grade office. Our business is well established, and we have vehicles in place that we can scale significantly. [indiscernible] focused on the best assets in the best locations together with disciplined capital management through the cycle, saw us raise $350 million over the period. and the fund is now one of the lowest geared funds in the sector. It's outperforming the benchmark and is positioned to deploy capital at the right point in the cycle. We achieved over 84,000 square meters of leasing and 33 Alfred Straight reach practical completion 94% leased. In industrial partnership with Art continues to grow. And our most recent partnership at Seeds Stage 1 sees that venture grow to an end value of $1.7 billion. Our BTR fund is now the largest operating fund in Australia with 5 assets and an end value of $1.8 billion. Our funds wholesale status, our in-house management experience and our stabilized assets generating resilient income position us well to pursue further growth opportunities and capital. In closing, we've got great visibility of embedded growth with $2.7 billion of funds under management already in our existing vehicles and underway. And we've got further opportunities across the broader market and for Mirvac's pipeline. Thank you, and I'll now hand to Stuart.

Thank you, Scott, and good morning. FY '25 was a challenging year with a number of COVID impacted projects completed and related subcontractor failures. Encouragingly, this is now behind us and contained to FY '25. Having dealt with these challenges, momentum has significantly improved. Residential sales were up 40%, and we've seen cost escalation ease across our construction activities. We now have clear visibility of growth and improved returns in our development business. . Our decades of experience and depth of delivery capability across commercial and the wider housing spectrum, will be critical in unlocking value in the next part of the cycle. -- and we are seeing a number of opportunities emerging to grow our pipeline. We made significant progress across our commercial and mixed-use pipeline. As you can see, we have an estimated $540 million in value creation to be realized over the next 3 to 4 years across our committed projects. 55 Pitt Street is progressing well and is now 42% leased with strong active inquiry from prospective tenants into an undersupplied market. We completed our second and third warehouses at Aspect North with all warehouses expected to be completed by the end of this financial year. We unlocked value from the sell-down of our seed stage 1 in Batteries Creek with all -- with our existing partner, Australian Retirement Trust and we will look to sell down Stage 2 over the course of FY '26. At Harborside, we are progressing towards securing a capital partner. The project is ahead of program and to date, has secured over $800 million of residential presales. With a clear line of sight to CME earnings over the next 3 years, our attention is now turning to replenishing the pipeline into FY '29 and beyond. We have a number of sites identified, including a significant industrial development adjacent to our Menangle residential project in southwestern Sydney. It has been pleasing to see a stabilization across the New South Wales and Victorian construction markets with increased competitive tension amongst our subcontractors. Together with an inflection point in asset valuations, this provides a more favorable backdrop for project commencements. Turning to residential, we have seen a real step change in sales momentum with 2,100 lots exchanged and presales of $1.9 billion. At our unique middle ring built form projects at High Forest and Riverlands and luxury harborside apartments, we have seen great demand from upgraders, downsizes and investors. It is also encouraging to see the momentum building across a number of our MPC projects, as you can see on the right-hand side of the slide. At our MPC projects in Queensland and New South Wales, sales volumes were up 100%. While across our 3 Victorian MPC projects, sales were up 55%. These projects are winning market share with buyers attracted to our upfront amenity, product diversity and certainty of delivery. Our 2,122 lot settlements were driven by MPC projects in Queensland and Victoria, and defaults remained low at 1.2%. Our FY '25 gross margin was 15% when adjusted for impaired apartments at 9 in Sydney, Charlton house in Brisbane that are yet to settle. Importantly, the financial impact of these projects have been contained to FY '25, and we expect the adjusted gross margin to return to our through-cycle range of 18% to 22% in FY '26. These improved margin this improved margin outlook and continued sales momentum sets us up for growth. We have significantly restocked our pipeline, securing around 10,000 master planned community lots in the past 2 years. This includes a new 1,200 lot site in Perth near our award-winning Henley Brook project. We now have a deep pipeline of shovel-ready projects to launch over the next 18 months across more fronts than ever before. These projects span across key growth corridors, the middle ring and inner-city apartments -- including the next stage of our extremely successful Harborside residences scheduled to launch later this year. I'm particularly excited about our development optimization initiatives, leveraging modern methods of construction, including volumetric prefer, strategic procurement and design optimization with the potential to drive up to 10% in cost savings and significant improvement in build times. We are rolling these initiatives out in FY '26 across a number of projects with the intention of implementing more broadly thereafter. Turning to the outlook. market fundamentals have improved significantly with constrained supply, strong population growth and low vacancies. Further interest rate easing is expected to support affordability and drive demand for Mirvac's unique built-form housing and apartments. With 6 new project launches and an increasing velocity of sales at our established projects, we are well positioned to take advantage of these strengthening tailwinds. I'll now hand back to Campbell to conclude. Thank you.

Thanks, Steve. So turning to our FY '26 guidance and outlook. We're pleased to provide operating earnings per security guidance for FY '26 of $0.128 to $0.13 per share, representing growth of between 6.7% and 8.3%. And distributions of $0.095, which is up 5.6% on PCP. Supporting this guidance, we expect to execute on approximately $500 million of asset sales deliver between 2,000 and 2,300 residential settlements and execute further capital partnering initiatives across developments, including our Harborside project. . We start the year well positioned with both momentum and growth visibility into FY '26 and beyond. Across investments, we're capturing strong reversion opportunities with positive leasing spreads across the portfolio. We have great visibility of $100 million of new investment income from upcoming development completions underway with near-term contributions from BTR, land lease and industrial. Our recovery in residential sales is already underway. We stand to benefit from a step up in new launches across MPC into undersupplied markets alongside a recovery in margins. There's great visibility of seeing new earnings and value creation over the next 3 years and $2.7 billion of future FUM growth from the completion of competitive projects already underway. And if we combine this with improving asset valuation, interest rate tailwinds, our continued focus on cost, we're well placed to deliver improved returns to security holders in FY '26 and beyond -- so with that, I'd like to thank you all and open up the call to questions.

[Operator Instructions] Our first question comes from David Pobucky at Macquarie Group.

Good morning, Campbell, Courtney and team. The first one is just on pricing settlement guidance for FY '26. Campbell, you mentioned you're now selling more than you're settling and that's encouraging an encouraging start to I mean you sold 2,100 in FY '25. Shouldn't you pretty much be covered in FY '26 from those sales before any potential upside to what you've sold to date. So perhaps if you can just talk to contracts on hand and typical settlement periods, please?

Sure. Look, I'll pass that to Stu, but just remember that some of those sales are for projects that don't complete in FY '26. So particularly apartment projects in Victoria with Princeton Parade and Trial. -- also harbor side, they are all part of that presale number. But Stu, why don't you just talk through the profile for [indiscernible].

Yes. Look, we go into '26, obviously, with really good line of sight for settlements. We're approximately 50% secured in terms of contracts exchange that will settle in -- we expect by the time we get to the end of the first half, we'll be sitting at about 80% secured. That 50% secured as of today is about 10% higher than in '24. And importantly, from a delivery perspective, 70% of the lots that will settle in '26 are either under construction -- sorry, either completed or under construction. And over the next 6 weeks, we'll have balance of those lots under construction. So largely dominated by land lots, but also built form housing, which is a big contributor for the year. But we've got very good line of sight for completions and this financial year. .

And my second question is on commercial development. If you could please just talk to the key contributors to commercial mixed use earnings in your FY '26 guidance and just clarify that you've incorporated something for Harborside and how we should be thinking about that potential profit contribution from [indiscernible].

Courtenay, do you want to take it? .

Yes. Thanks, David. So I think probably the best thing -- the way to think about development for this year is I'd guide everyone to a number of a round in total post M&A costs of around $270 million. We've given the resi guidance component of that. So a lot numbers return to the through-cycle margin range. There is an increased volume of house and land at a higher price point to factor into the resi -- in the commercial mixed-use earnings, we've got committed projects rolling off. So Pet Street is still contributing 7 Street and aspect. And then the new capital partnering that we'll be targeting for FY '26 includes See, Stage 2 and AspecCentral. -- and then also the residential book, which does include Harborside, David, to answer your question specifically, -- as Stu said, we've made good progress on progressing capital discussions on Harborside, and we'll provide an update at the appropriate time. . I've indicated before that the earnings are in the residential component of that project, and we'll look to unlock that through some version of a development JV. And we do expect to recognize some earnings, give or take, how it lands on the sell-down of the land, which would happen in FY '26 or going according to plan.

The next question is from Lauren Berry at Morgan Stanley.

[indiscernible], can you elaborate a little bit more about what's happened with that project and achieve the profit impact is an FY '25 issue alone or if it will be impacting your future profits? And also if there's any, I guess, additional subcontractor issues you might be working on other projects in your portfolio, please?

Thanks, Lauren. I'll take that and then perhaps pass to Stu. Look, the biggest challenge in 55 Pitt Street later in the end of financial year, our facade contractor went into insolvency. This -- for those that were reported in the press was working on the fish market side in Sydney and unfortunately, went into insolvency. The impact of that has been 2 things. Firstly, we had to pivot and find a new supplier, which we've now done. That's cost us more to replace that contract in the existing contract. It's also cost us time sort of in that 3-month range, which pushes now some of the profit into a third financial year, which means that we're going to be pushing profits over a slightly longer period of time and a lower volume. So in terms of your questions about insolvencies, look, maybe if I just take a step back, everything we're seeing in the construction side right now is looking fundamentally better than this time last year. I think for the first time, we're now finishing projects in Victoria ahead of schedule. Insolvency risk is largely behind us. I have to say you can never say that's the case forever, but it certainly feels that the health in the construction environment is substantially better. And I think for the first time, we're seeing some -- some changes in pricing coming through. as the workbook that many subcontractors have been working on is coming to an end, and we're starting to see some competitive tension return again, which is really encouraging. Stu, did you want to add anything to that?

Look, I might just firstly acknowledge the Mirvac team who have had to navigate obviously, a very challenging environment with the failure of of a major subcontractor like that. But importantly, we pivoted to very quickly secured a new subcontractor and expect to see Facade arriving on the project later this year. The one thing I'd have to say is that across our projects, we've got good line of sight of the health of our subcontractors. This was a subcontractor that as Campbell said, impacted by other projects that unfortunately rolled onto the 55 Pitt Street project. But importantly, we are seeing good productivity on our New South Wales and Victorian sites. We're seeing subcontractor tendering very competitively now. There is certainly a gravitation to Tier 1 builders, that run safe sites, productive sites and those subcontractors really wanting to work with those Tier 1 developer builders.

Sorry, just to confirm, this subcontractor was not working on [indiscernible] as well. .

Correct. So it was a was a separate contractor. And again, importantly, the team made the very disciplined decision early on, probably 2.5 years to go to make sure that we had 2 separate contractors on each of those jobs to mitigate risk, and that has proved to be valuable in the current environment.

Great. And then just my next question is just around funds management. Obviously, there's been a lot of press lately about Mirvac's potential involvement in going up to more pooled including funds that you don't have 4 fund sectors in at the moment. Can you just talk a bit about what you're thinking about your strategy for the funds management business as well? And if you're targeting more scale or profitability of your funds management platform, please? .

Yes. Thanks, Lauren. Look, I'm not going to comment on press speculation. What I will say is we've had a pretty successful funds platform growth over the last 3 years, roughly $12 billion over the last 3 years. I think as Scott mentioned, -- we've got almost -- just under $3 billion of projects which are completing over the next little while, all of which will add to our FUM growth. But deep-down there are some things that the market's attracted to. Our governance is strong. We've got independent Boards that act very independently in that space. We have good co-alignment of investing alongside each other. . They're certainly attracted to our development capability and the fact that we create a beautiful product, which is the product that they want to own. We've got competitive fees -- and so I think all of those things all go well for us over time. I think one of the things that we've really been trying to do in the last 2 years is improve the velocity of our development balance sheet. And that really means doing more partnering over time because it allows us to do more projects with the final amount of capital that we have on our own balance sheet to do the things we want to do -- so funds management is certainly going to be become a bigger feature of our business in coming years.

The next question comes from Tom Bodor at UBS.

Can just to pick up on that fund strategy comment. It's still 4.5% -- less than 5% of earnings for the group. So it's sort of not a massively meaningful contributor despite a huge amount of AUM. Where do you see that, in say 3 or 5 years? Could it be 20% of group earnings? Or is it more of an and enabler for other parts of your business like development to recycle capital?

Yes. Look, I think we don't set fund targets. We're not interested in setting FUM targets. How we do think about it is probably to your latter point, this is really a great opportunity for us to unlock value -- so you'll see it coming through the NOI line in the investment portfolio over time as we create $100 million of new recurring income. You'll see it in NTA growth across future completions of that development pipeline, particularly for the stake that we own on our own balance sheet. You'll see it in the asset management lines with increased leasing activity, capital management fees and the like. You'll also see it in the funds management line itself as we grow the fees on the back of the growing pipeline of product. So it's all very interrelated, but it's all part of our strategy of how we continue to fund the creation of a really strong development pipeline.

Okay. So with the comments around -- I think just picking up on Stuart's comments around construction issues being behind your sort of tenderings coming in at lower pricing in New South Wales and Victoria. I'd just like to reconcile that with, I think, something Courthouse to me in June, which is you're getting 2.5 days a week of productivity in Queensland. How do we think about development going forward? Because you had sort of impairment losses over recent times. Is it reasonable to assume stuff you're starting today will actually hit your target returns? Or are we genuinely past the worst of it if you're still only getting 2.5 days that we could productivity in Queensland?

Look, why don't I take that maybe past to Stu. Look, Queensland has been very challenging. It's a hot it's been a host of issues. It has been 1 preselling 3 years ago. There has been a substantial increase in pricing on the way through. So whatever we're selling today is certainly a higher value than what we were selling 3 years ago. Time and productivity has been a massive impact for us in Queensland. Part of that is industrial relations related. Part of it is is bad whether part of it's insolvency. It's been a series of things, but we're largely through our Queensland book. And so that's really important. The project that we still have underway in Queensland, which is a let instead we deliberately held back sales on a number of those apartments so that we could sell into stronger markets closer to completion, and that's something you should expect us to do. I think the really pleasing thing we're seeing in Victoria and New South Wales is -- we are actually, in some instances, well ahead of our expectation on completions. Our Albert BTR asset in Brunswick has actually completed about 3 months ahead of schedule. So we are seeing some really good productivity in other markets. And we just look at the at -- for those in Sydney in particular, if you look out the window and see how quickly Harborside is moving and how quickly 55 Pitt Street is moving, you'll get a sense that the health of that sector is actually pretty good at the moment. Stu, did you want to

Got one project still under construction up there, but we've actually seen an uptick in productivity in recent weeks on that project. But if we go back to our larger states in New South Wales and Victoria, all the built form projects are performing extremely well. We're seeing good productivity. We're seeing good labor numbers on site. . And importantly, we're seeing subcontractors competitively tendering for new work. There has certainly been in the residential segment of the market. a significant falloff in work and that is resulting in an increase in competitive tendering between subcontractors. Interestingly, what we've also seen in recent months is there has been a slowing in the amount of data center commencements occurring, which again, has created more capacity in the market, which is resulting in that tension between subcontractors. So projects like high forest, Harborside, 55 Pitt Street, Trial in Melbourne are all performing extremely well.

The next question is from Richard Jones at JPMorgan. Richard.

Question to Courtney. Are you able to give us a rough guide of how much you expect capital partnering will contribute in '26 from residential partnering? .

I think, Richard, probably I would take the guide that I indicated previously, across development of $270 million post M&A. The projects that we're looking or the initiatives we're looking to unlock in are on the industrial book, so seed stage 2, which will essentially follow the first that we've just completed this year. And then Aspect Central, which is the balance of the site in the aspect precinct. And then we will look to the residential book. The 1 project I would call out, which we've spoken about for some time is Harborside. And so the best guide, I think, for us to give you is that, that $270 million number across the whole development book. .