Property For Industry Limited (PFI) Earnings Call Transcript & Summary

Good morning, and welcome to Property For Industries FY '26 Annual Results Briefing. It's Simon Woodhams speaking, the CEO of PFI. And on the line with me today is Craig Peirce, our Chief Finance and Operating Officer; and Nick Maloney, our Head of Investment Management. This morning, Craig and I will speak to the topics outlined here. As usual, Craig and I will take you through the presentation, and then there will be an opportunity for participants on the call to ask any questions they may have. So if you turn now to Page 4 of the presentation, where we lay out the highlights for FY '26. PFI's FY '26 result reflects the resilience of our industrial property portfolio with strong leasing outcomes and high-quality cash flows driving double-digit earnings and dividend growth. Highlights included valuations across our $2.3 billion industrial property portfolio remained stable despite ongoing economic and geopolitical volatility, while portfolio cash flows were supported by 7.7% growth in contract rents and occupancy of 98.7% at year-end. We achieved key Green Star development milestones during the year, including completion of Stage 2 at 78 Springs Road, commencement of Stage 1 of Totara Creek Estate in Whenuapai in the second half and the advancement of lease negotiations that would enable commencement of Stage 1 at our Harris Road development. Our capital position remains robust with over $200 million of available liquidity following the post balance date refinancing of our bank facilities and gearing remaining comfortably within our target range at 34.2% at year-end. This activity combined to deliver profit after tax of $77.7 million for the year, with funds from operations or FFO, increasing 20.7% to $0.129 per share and adjusted funds from operations, or AFFO, increasing 14% to $0.1093 per share. Strong earnings growth has supported a fourth quarter final cash dividend of $0.029 per share, taking FY '26 cash dividends to $0.095 per share, representing a 10.5% increase on FY '25 dividends. We are also pleased to guide to further dividend growth in FY '27 with dividend guidance of $0.0975 to $0.0985 per share, representing expected growth of approximately 2.6% to 3.7% on FY '26 dividends. Now turn to Slide 6, headed strong stable returns. Before we get into the annual result itself, we wanted to take a moment to reflect on longer-term measures. Delivering strong, stable returns has always been a core focus for PFI, and it remains central to how we manage and grow the portfolio today and into the future. Providing investors with exposure to a diversified portfolio of hard-working industrial property through shares listed on the NZX is fundamental to that approach. Across a wide range of market conditions, PFI has consistently delivered dependable outcomes for investors, reflecting the quality of the portfolio and the discipline applied to its management. Since PFI's inception in 1994 through to 30 June 2026, this focus has translated into an average annual total return of around 9.24% -- that long-term track record continued in FY '26 with PFI delivering a total return to investors of around 10.22% over the 12 months to 30 June 2026. In practical terms, a $10,000 investment made at inception with all dividends reinvested would today be worth more than 16x the original investment. Turn to Slide 7. Delivering regular and growing income has always been fundamental to the PFI investment proposition. Our policy is to distribute 90% to 100% of AFFO on a rolling 3-year basis with a clear objective of providing investors with a reliable income stream that grows over time to protect the real value of that income. Since 1994, PFI has paid a dividend every year. And importantly, that dividend has grown steadily over time with dividends per share increasing at an average rate of 1.9% per annum since inception. FY '26 continued that trajectory with cash dividends of $0.095 per share, an increase of $0.009 per share or 10.5% on FY '25 dividends. Looking ahead, FY '27 guidance of $0.0975 to $0.0985 per share represents expected growth of approximately 2.6% to 3.7%, reinforcing our commitment to delivering growing dividends to investors. If you turn to Slide 8. Growth in net tangible assets, or NTA, is another key measure in terms of how we create long-term value for investors. While valuations will fluctuate with market conditions, since listing in 1994, PFI has grown NTA per share by remaining disciplined through multiple cycles. That discipline starts with a clear focus on industrial property, where we acquire, develop and actively manage high-quality assets, driving rental growth and maintaining high occupancy. We recycle capital where appropriate, divesting assets to reinvest in opportunities with superior returns, including developments where we will also capture development margin. This is supported by a prudent balance sheet with diversified funding sources and disciplined gearing and hedging. Together, these elements have worked across cycles to grow NTA to $2.90 per share as at 30 June 2026, including growth of $0.064 per share or 2.3% in FY '26. Turning now to Slide 10. We will start to take a look at the last 12 months. Our portfolio has continued to benefit from strong re-leasing outcomes and structural rental growth. Here, we have a summary of the portfolio statistics as at 30 June. You can see that the company now owns a portfolio of 94 properties leased to 124 tenants. Through structured rental growth and asset management initiatives, contracted rents grew 7.7% to $121 million at the end of June 2026. Despite the addition of the speculative component of Stage 2 at our 78 Springs Road development in East Tamaki, the portfolio remained 98.7% occupied at year-end with a weighted average lease term of 5.04 years. Turning to the next slide. During FY '26, the team completed leases on approximately 85,800 square meters of area or 11.5% of the portfolio by rent for an average lease term of 6.9 years. Of the $11.5 million relating to stabilized contract rents, rents were agreed on $8 million of this with those rents settling 22.1% above previous contract rents. The remaining $3.5 million of stabilized contract rents secured during FY '26 is subject to a market review on renewal. After factoring in review caps, those 4 leases have been assessed at being around 14% under-rented at the end of June 2026, with a weighted average review date of October 2026. Moving over the page to Slide 12. As I mentioned earlier, the portfolio finished the year at 98.7% occupied with vacancy largely reflecting the speculative component at Stage 2 of our Springs Road development. Excluding development opportunities, $9.5 million or 7.8% of contract rent is due to expire in FY '26. Expiries are weighted towards the second half with 2 larger lease events accounting for almost half of FY '27 expiries. The white bars in the lower chart represent the development-related opportunities, including lease expiries at Springs Road and Neilson Street that are expected to facilitate future redevelopment activity. If you turn to Slide 13, we'll take a closer look at the 2 most significant lease expiries. The 2 most significant FY '27 expiries represent approximately 3.9% of contract rent with both tenants indicating they intend to vacate. At 670-680 Rosebank Road, the current lease expires at the end of this month, contributing approximately $1.8 million of annual rent and accounting for around 70% of income at the dual tenanted site. While the current rent is modestly above market, a targeted refurbishment program is expected to support re-leasing at around current rental levels while maximizing the value of the existing improvements. At 7-9 Niall Burgess Road, the current lease expires at the end of March 2027 and is currently around 25% under-rented. Following a modest refurbishment program, management expects to re-lease the property at improved rental rates, capturing rental growth. Importantly, FY '27 guidance assumes no income is generated from either property in FY '27 following the expiry of the existing leases. Moving now to Slide 14. 123 rent reviews were completed during FY '26, resulting in an average uplift of 7.2% or 6.9% annualized on $92.1 million of contract rent. Almost 90% of our portfolio is subject to some form of lease event during FY '27, with $24.6 million of contract rent or 20.2% of the portfolio subject to a market review in FY '27. Those leases are around 10% under-rented as at June 2026 after factoring in review caps. If you could turn to Slide 15. During the year, we recorded an increase in the value of our portfolio from independent valuations of $16.1 million or 0.7% to $2.3 billion. The valuation outcome was primarily driven by realized rental growth across the portfolio, together with an increase in land values at Totara Creek Estate relative to the initial acquisition price. As a result of portfolio and valuation activity, excluding our active development sites, PFI's passing yield increased 18 basis points to 5.41%, while the portfolio market cap rate firmed slightly to 5.73%. An independent market rental assessment of the entire portfolio was completed as part of the valuation process. This assessment estimates that PFI's portfolio is around 7.1% under-rented. Turning to Slide 16. PFI's portfolio continues to deliver rental growth by structured rental growth -- rent review, sorry, and capturing re-leasing spreads. The portfolio was 11.2% (sic) [ 11.5% ] under-rented as at 30 June 2025. Market rents continue to grow over the year by 1.6% on a like-for-like basis. However, PFI achieved a 6.5% growth in those same rents. As a result, PFI's portfolio under-renting gap closed by 4.4% to 7.1% as of 30 June 2025, and this under-renting gap continues to provide a tailwind to earnings. I'm now going to hand over to Craig, who will speak to several topics, including a review of the annual results. Craig?

Well, thanks, Simon, and good morning, everyone. We appreciate you taking the time to tune in this morning as we share with you PFI's FY '26 annual results. At a headline level, profit after tax of $77 million was down $28 million on the prior year, driven by fair value gains on properties in FY '26 of $16 million as compared to gains of $71 million in FY '25. However, FFO was up 20.7% on the prior year to $0.129 per share and AFFO was up 14% to $0.1093 per share, with both measures buoyed by $15.2 million increase in net rental income. As a result, cash dividends for the year of $0.095 per share have been declared, representing an increase of 10.5% on FY '25 dividends. So let's dig into those numbers a bit. Please turn to Slide 18. On this slide, we take a look at net rental income, which at $123.2 million is up $15.2 million or 14.1% on the prior year. A key contributor during the year was additional income of $3.6 million from the early lease surrender at 92-98 Harris Road. The other main drivers were positive leasing activity across the portfolio, contributing an increase of $9.4 million and the completion in the current and prior years of 5 Green Star Rated development projects at Bowden and Springs Road, contributing a further $1.6 million of additional rental income. Moving now to Slide 19. On this slide, we can see how the activity over the financial year has translated into adjusted funds from operations or AFFO. On the positive side, AFFO level net rental income was up $14.1 million or $0.0279 per share on the prior year, driven in part by the aforementioned early lease surrender. The largest offsetting factors were an additional $4.7 million or $0.0093 per share of maintenance CapEx, equivalent to around 36 basis points as well as a $0.0030 per share increase in tax driven by higher taxable earnings. After normalizing FY '26 AFFO for the early lease surrender payment at Harris Road, underlying AFFO earnings were up $0.0085 per share or 8.8% on the prior year. If you could turn now to Slide 20. If we turn our attention to dividends, the PFI Board has today resolved to pay a fourth quarter final cash dividend of $0.029 per share, with the dividend reinvestment scheme not operating for this dividend. This fourth quarter dividend will take cash dividends for the FY '26 financial year to $0.095 per share, a 10.5% increase on FY '25 dividends. After normalizing FY '26 earnings for the early lease surrender payment at Harris Road, dividends of $0.095 per share represent a payout ratio of around 90% based on PFI's dividend policy range and approximately 91% of AFFO on a 1-year basis. Looking ahead, the PFI Board has provided FY '27 dividend guidance of $0.0975 to $0.0985 per share, representing expected growth of approximately 2.6% to 3.7% on FY '26 dividends. FY '27 has commenced in line with the expectations, supported by high cash collection rates, resilient portfolio performance, embedded rental growth and strong portfolio fundamentals. Based on current forecast, FY '27 guidance is expected to result in a 1-year AFFO payout ratio of approximately 95% before normalization or 92% after normalization, while remaining towards the lower end of PFI's dividend policy range after normalizing FY '26 and '27 earnings for that lease surrender payment. Guidance assumes AFFO adjustments of $9 million to $10 million and the continuation of Investment Boost through FY '27 and as always, remains subject to events beyond PFI's control. Turning now to Slide 21. And looking at the balance sheet. Here, we provide more detail on the change in value of PFI's investment properties, now valued at $2.3 billion. During the period, we completed acquisitions in Hamilton and on Mount Wellington Highway in Auckland as well as settling the land purchase at Spedding Road. We also deployed $55 million on capital expenditure with the majority of this being spent completing the company's Green Star development project at Stage 2 of Springs Road as well as early works at the Totara Creek Estate, which was formerly called Spedding Road. In addition, as Simon mentioned earlier, valuation gains resulted in a write-up of $16.1 million, and these increases were partially offset by divestments in Christchurch and New Plymouth, which settled in March of this year. So turning now to Slide 22, where we look at NTA or net tangible assets. NTA increased by $0.064 per share or 2.3% with the increase being the result of that positive valuation outcome, retained earnings and a small gain in the fair value of our swaps. So moving now to Slide 24 for an update on capital management. First, thinking about funding. The second half of FY '26 is an active period for us. We issued $200 million of 6.5-year senior secured fixed rate bonds in April. The proceeds from that issue replaced the $100 million of bonds which matured in the first half of FY '26. So on a net basis, we added $100 million from debt capital markets to our overall funding envelope during the period. And looking just beyond balance date, last month, we refinanced our bank facilities, introducing adjustable green tranche limits in the new facilities so that as the value of our Green Star certified properties grows, we can draw more green finance against it at favorable terms. More broadly, PFI's funding mix of liquidity, diversity and capacity puts the company in great shape to execute on its strategy. Moving over the page to Slide 25. On this slide, the top chart shows our bank and nonbank facilities as they stand after the April bond issue and July bank facility refinance. The effect of our recent capital management decisions is clear. We've extended the maturity profile of our debt and at the same time, diversified the makeup of this funding. The lower graph illustrates our hedging profile. Through interest rate hedging, an average of around 65% of the company's debt is fixed at an average rate of around 3.15% during FY '27, meaning a good portion of our interest cost is protected against interest rate movements. Turning now to Slide 26. Here, we provide a bit more detail on committed gearing. Following all currently committed acquisitions, divestments and projects and excluding any future revaluation impacts, development margins or general portfolio CapEx, we currently see gearing lifting to around 36.3%, remaining well within PFI's target range. PFI has sufficient capital available within our existing funding envelope for the company's near-term development pipeline with an ability to maintain gearing near the midpoint of the target range covered in more detail in Appendix 5 of this slide deck. Moving now to Slide 28. I'm speaking briefly about sustainability. This slide summarizes our progress against our sustainability targets. We've continued to make great progress on our Green Star, solar and LED lighting targets during the year. In particular, we're pleased to have achieved a 5 Green Star design rating for our new building as Stage 2 of 78 Springs Road, partly leased to MiTek. We also certified some of our existing portfolio under the Green Star performance tool, meaning that together with recently completed developments, around 20% of our portfolio is now rated Green Star. So that's all for me for now. I'll hand you back to Simon, and I'll be around for questions at the end. Simon?

Thanks, Craig. We're back on Slide 30 now. So turning to current market conditions. CBRE expects Auckland industrial vacancy to increase throughout 2026, reflecting the well-signaled completion of a significant volume of speculative development that is currently under construction here in Auckland. Importantly, while vacancy is expected to continue increasing from historic lows, it is forecast to remain within long-term averages and below levels typically associated with a materially weaker leasing market. Looking ahead, a gradual recovery in New Zealand's economy is expected to support improving industrial demand and net absorption from 2027 with forecast absorption expected to outpace new supply over the medium term. Consistent with these conditions, CBRE expects industrial base rents to remain stable throughout 2026, although high vacancy is expected to result in increased incentives and some softening in net effective rents during the current calendar year. From a PFI perspective, however, recent rent reviews and leasing transactions continue to settle above market rental estimates with limited incentives required outside newly completed or vacant space. This is supported by the quality of our portfolio and tenant base as well as our proven leasing capabilities with lease renewals historically accounting for around 75% of our annual leasing activity. Turn to Slide 32. On the slides that follow, we've set out our priorities for the year ahead. As many of you on the call will already know, when we look at our portfolio, we split it into 4 categories, and these are listed on this slide. Turning to Page 33. On this slide, we provide a little bit more detail on the 4 categories. Our core generic holdings remain the backbone of the portfolio, providing resilient income from well-located, highly liquid industrial assets with a broad tenant appeal. Development opportunities provide a pathway to deploy capital into higher returning modern industrial facilities while also supporting the ongoing improvement in the quality and sustainability of the portfolio. Specialized assets offer stable income streams, typically underpinned by more bespoke tenant requirements, longer lease terms and higher replacement costs. And finally, non-core holdings are assets that sit outside our long-term focus with asset recycling remaining an important part of our capital management strategy. Taken together, these categories provide a clear framework for capital allocation, supporting portfolio quality, earnings growth and long-term value creation. Turning now to Slide 34. On the horizon, we have several near-term development opportunities. FY '26 saw practical completion of Stage 2 at 78 Springs Road and the commencement of our construction at Totara Creek Estate, while we continue to progress development opportunities at 92-98 Harris Road and across our remaining brownfield sites. In the next few slides provide a closer look at 4 of these opportunities. We have a number of other development opportunities within the portfolio with more detail on these provided in Appendix 4. But today, I'm going to focus on the near term. So moving through to Slide 35. Here, we provide a closer look at Stage 2 of 78 Springs Road, which was completed in April 2026. Stage 2 has delivered approximately 16,000 square meters of 5 Green Star rated industrial space with around 70 -- sorry, 60% leased to MiTek on a 12-year term. Leasing inquiry for the remaining speculative component has been encouraging. And based on current lease-up assumptions, Stage 2 is expected to deliver a yield on cost in excess of 6.5%, including land. Looking ahead, demolition and asbestos removal of the final existing warehouse is expected to be completed in H1 FY '28, enabling future Stage 3 development works, which are expected to be tenant-led stage. Turning now to Slide 36. This slide provides an update on Stage 1 of Totara Creek Estate in Whenuapai, formerly referred to as Spedding Road, where construction commenced in March 2026. The project is progressing in line with program and budget with completion targeted for Q4 FY '27. On completion, it will deliver approximately 8,500 square meters of 5 Green Star rated industrial space and is targeting a yield on cost of around 6.5%, including land. Importantly, the flexible design allows us to accommodate a range of tenancy requirements, positioning the project well to respond to market demand during the planned lease-up period. Future stages at Totara Creek provides opportunity to progressively develop a further 4 hectares of land over the next 3 to 4 years, supporting total investment of around $140 million across the estate. Moving to Slide 37. This slide outlines the proposed first stage of the redevelopment of 92-98 Harris Road. Following GrainCorp's early lease surrender, the site has been prepared and positioned for redevelopment with advanced negotiations now underway with a leading international occupier regarding Stage 1. If progressed, Stage 1 will comprise approximately 5,600 square meters of warehouse and 1,300 square meters of office accommodation, requiring around $25 million of incremental capital expenditure and targeting a yield on cost of approximately 6.5%, including land. Importantly, the current master plan provides flexibility for a further tenant-led stage, allowing the site to respond to future occupier demand and maximize value over time. Moving now to Slide 38. where we outlined the redevelopment opportunity at 304, 316 and 318 Neilson Street in Penrose. The site benefits from PFI's successful aggregation of a number of contiguous properties and provides the opportunity to deliver a significant new industrial facility in one of Auckland's premier industrial precincts. Given current market conditions, the development will be tenant led, while current master planning indicates the site could accommodate approximately 14,000 square meters of 5 Green Star-rated industrial space. We retain significant flexibility to tailor the scale and the configuration of the project to occupier requirements prior to commencing redevelopment. Moving through to Slide 39. Including the projects just discussed, we currently have 11 planned projects across Auckland's key industrial precincts, representing around $335 million of capital investment, excluding the value of the land already owned by PFI. These projects are expected to deliver embedded value progressively over the next 6 years or so as they reach completion and leasing activity captures market rents and development margins. Lastly, since the start of 2024, we have completed over 70,000 square meters of 5 Green Star rated industrial space, all delivered on time and on budget, a strong track record we intend to build on. Moving on to Slide 41. So to summarize, FY '26 was another strong year for PFI. We delivered double-digit growth in FFO, AFFO and dividends, reflecting the quality of our portfolio, strong leasing outcomes and the disciplined execution of our strategy. At the same time, we continue to grow the business, completing Stage 2 of 78 Springs Road, commencing construction at Totara Creek Estate, progressing development opportunities across the portfolio and enhancing funding flexibility through a successful bond issue and the refinancing of our bank facilities post balance date. With a high-quality, well-leased portfolio, embedded rental growth and a significant development pipeline, PFI is well positioned to continue delivering sustainable earnings growth and growing returns for our shareholders. Thank you for your time. That concludes the presentation, and we're happy to take any questions you may have.

[Operator Instructions] And our first question today comes from the line of Nick Mar from Macquarie.

Just on FY '26 AFFO. When you sort of upgraded earlier in the year, you talked about how there was a bunch of maintenance that was sort of deferred to '27. Kind of looking at the numbers, maintenance was still pretty high. So does that include the deferral -- did something else sneak in there? And then '27, the $9 million to $10 million of AFFO adjustment still sounds like there's some pretty high maintenance coming through. Is that partly the refurbishments on those 2 vacant properties? And -- or is there something else in there as well?

Yes, Nick, it's Craig speaking. I think the short answer is that, yes, that deferral is reflected in the higher number for '27. But I think at the same time, we still actually managed to get through a fair bit of it in '26. So it's kind of a yes and yes, I guess, I would say. And absolutely, the numbers for '27 include those 2 refurbishment numbers. There's some other roofs that we've got going on in there, these sorts of things. So as you know, sometimes that maintenance CapEx can be pretty chunky and the timing of it can be a bit pretty hard to handle because it often requires a tenant to be cooperating, getting on to the roof, those sorts of things like that. So certainly, in a sort of elevated period and hence, why we wanted to, I guess, give you a bit more color for FY '27 as to what those numbers in terms of AFFO adjustments would look like.

Yes. No, that's helpful. And just in terms of those 2 expiries, it seems like a reasonably long lease-up time on some of those. How much of that time is the time spent actually refurbishing it versus allowed kind of lease-up periods? And are you sort of adding extra caution at the moment given the tougher leasing backdrop?

So in terms of the Rosebank Road expiry, we get that back end of August, Nick. And so we've got a 3.5-month refurbishment period there, which obviously takes us very close to the Christmas period. So yes, there's a bit of conservatism in and around trying to lease something through that period. The Niall Burgess one, the lease expiries not until the end of April. So for FY '27, we're just assuming no income on either one of those given we're assuming there will be some incentives involved as well.

Now, that's helpful. And then in terms of the portfolio valuation, the second half looked a little bit kind of soft, especially if you had some of the uplift on Spedding Road land coming through. Could you just talk through some of those movements like the market rental growth of 1.6% would argue more than 7% uplift in valuation.

Simon, do you want to talk about that? Or you want to give it a go?

Do you want to give it a go?

Yes. Look, I mean, I think, I guess, coming into the beginning of calendar '26, there was a sort of fair wind in the sales of the market and things are going along quite nicely. And we obviously hit the sort of Middle East conflict and everything that entails. So that definitely has an impact -- has had an impact on leasing decisions and leasing things like that in the market. And so from a valuation point of view, I think we saw some sort of momentum coming into the back end of '26. A little bit of that momentum, I guess, has come out as people are a bit more cautious as we sit right now. So I think that's sort of where things are at when it comes to the sort of the valuation market I mean that said, we actually got some transaction summaries through just last week on some recent sales. There's a $25 million sale with an equivalent yield of 5.4% on -- I mean, that does have a long lease that's 20 years. There's a $39 million sale with an equivalent yield of 5.35% on a 4-year WALT. And there's a $15 million sale with an equivalent yield of 5.1% on a 2-year income. So I think it's fair to say that stuff is still transacting and there's some pretty good prices there. But that last 6 months certainly hasn't translated into any additional uplift of any great degree, and you can see that reflected in our numbers.

Our next question today comes from the line of Rohan Koreman-Smit from Forsyth Barr.

Firstly, Investment Boost, can you give us an idea of what sort of benefit to the current tax year that provided? And also maybe just trying to work out like an absolute underlying here without any of these tax benefits and the surrender payment, et cetera, because [ of these ] things coming in and coming out that may or may not be there in the future.

Yes. Sure. So Investment Boost, I think the kind of most significant part of that is when we completed development. So that second stage of Springs Road, that was where you saw that investment boost benefit be booked in H2 of this year. And off the top of my head, it's sort of a couple of million dollars of benefit in terms of that there. So I guess that's kind of -- at the highest level, I guess, the benefit of that to us. I mean, of course, every dollar we're spending when it comes to maintenance CapEx and those sort of things, you're also sort of getting that there. Yes, when it comes to the normalization side of things, I think we've talked about those in the various bits of paperwork that we've put out there, but I suppose just to try and make sure that we're clear here, in FY '26. It's roughly speaking, $2.5 million of additional income from that surrender payment there. Of course, you're getting the whole payment, but then you're getting -- you were going to be getting income anyway. And then as we unwind that in future periods, it's around $1.2 million, $1.3 million in future periods as that unwinds. So not sure if those numbers help.

No, no, that's helpful. That's helpful. And Simon, you spoke to higher incentives in new build and vacant space, given you've got a bit of new build space and vacant space coming up. Can you just give us an idea of where those incentives sit or where you think they sit?

I think if you look at the market, it's pretty common now for a minimum of 1 month per year of proposed term. So if you're looking to try and get someone in on a 10-year lease, you're looking at 10 to 12 months of rent-free period or the equivalent of. So it's quite markedly different to an existing tenant that is renewing. Typically, we give away very little. We might work with them to secure it early. There might be 1 or 2 months. But yes, it's really up to that 1 month at least is what we have seen in the market. And on occasion, depending on the asset, maybe 1.5 months. So yes, and I think we talked -- well, we talked about it in the presentation, whilst the face rents don't seem to be coming back, typically on new builds, they're sort of up around $240 to $255 a square meter. The net effect will start to track back slightly with those incentives.

And just on these expiries that are vacating, I think at the half, you talked to one of them, which I'm pretty sure is Rosebank that you were certain were leaving. You always talk to your kind of active tenant management. Was the Niall Burgess one a surprise? Can you just kind of go through what happened there?

So Niall Burgess, obviously, that doesn't expire towards the end of FY '27. We've been in active discussions with them. That's DHL, a large international occupier. They had a 9-month notice period. So we've been talking to them for 2 or 3 years around whether they'll stay or leave. So yes, at the half year, we've just been given no clear direction, even though that we've been working with them. And right up until the 9-month period, there was a chance that they would stay. But yes, obviously, they've said no. And so they have given notice that they'll be leaving at the end of the lease. So that was it really. Sometimes you get a tenant who will happily commit 2, 3 years out and as a business, they've got a lot of space in and around Auckland. So yes, they're just reducing their footprint around Auckland.

And just one last thing. It was a comment that you made, you said vacancy below the level of vacancy associated with material weaker industrial market rents where we see them have a tracking. In your experience do market rents weaken materially at what sort of level of vacancy?

I think you'd have to be up around that 5%, 6%, which we're going back to the early 2000s when a lot of development started back then and you had rents that was -- going back a while now, sitting around that $100 a square meter for new build. And there's a period where there's a bit of an arms race that went on and people started putting them up $85 to $90 a square meter. I don't think you'll see that this time. If you look at who's developing in Auckland, mainly institutional and high net worth owners or property owners. So you tend to see them building, taking advantage of lower construction costs, but holding on to those face rents. So yes, I don't think there'll be a material weakening in face rents.