Stockland (SGP.AX) Earnings Call Transcript & Summary

Welcome to Stockland's FY '25 result briefing. [Operator Instructions]. I'll now hand over to Tarun Gupta, Managing Director and CEO, for opening remarks.

Good morning, and thank you for joining Stockland's FY '25 Results Update. I'm Tarun Gupta, Managing Director and CEO of Stockland. Before we begin, I'd like to acknowledge the traditional owners and custodians of the land on which we meet, the Gadigal people of the Eora Nation, and pay my respects to elders past, present and emerging. Joining me today is Josh Mchutchison, our CFO; Kylie O'Connor, CEO of Investment Management; and Andrew Whitson, CEO of Development. I'd like to welcome Josh to his first Stockland result, having joined us only 2.5 weeks ago. Josh joins us at an exciting time in our journey. I'd also like to take this opportunity to thank Alison Harrop for her contributions to Stockland. Alison played an integral role in the establishment and implementation of our strategy during her 4 years as CFO, and we wish her all the best. As you're aware, we have been focused on the disciplined execution of our strategy over the last few years. Our strong financial and operational performance in FY '25 has been driven by this strategic execution and the establishment of new growth drivers for Stockland. As we discuss the results, you'll note 3 things. First, we are positioned for a step change in production from FY '26 onwards across our development business. Second, we have put in place significant pillars to support longer-term growth. And third, we have increased financial flexibility to fund our growth plans. Turning to the FY '25 results. Funds from operations for the period was $808 million, with FFO per security of $0.339 at the top end of our guidance range. The result reflects a material lift in settlement volumes from our MPC business, higher fee income from partnerships and a strong performance from the Logistics portfolio. Our balance sheet metrics remain sound with gearing sitting around the midpoint of our target range and positive revaluations driving an increase to NTA per security. And we have delivered returns on invested capital within our target ranges for both recurring and development income. While delivering a strong financial result, we're also making significant progress in executing our strategy. The portfolio of 12 actively trading master planned communities that we acquired in November last year is now fully integrated and performing ahead of expectations. Across our MPC and LLC businesses, 80% of our development pipeline is now activated, underpinning future growth. And we expect new project launches to drive further activation of our residential pipelines in FY '26, alongside a higher level of production across Logistics, Town Centers and Communities real estate. In addition to activating more of our pipeline, we also accelerated our MPC development expenditure in Victoria in anticipation of our recovery in that market. As Andrew will discuss, that recovery has now commenced. While driving near-term growth, we have also secured several longer-dated capital-efficient opportunities that we expect to contribute meaningfully to earnings in future periods. In April, we finalized contractual terms to deliver alongside our consortium partners, one of Australia's largest and most significant innercity renewal initiatives at Waterloo and Sydney. As you may recall, we formed 2 new significant capital partnerships in the Logistics sector in the first half of '25 with M&G Real Estate and KKR. In June, we formed a new 50-50 partnership with John Boyd Properties to develop a world-class multi-story logistics hub at Kogarah Golf Club site, adjacent to Sydney Airport. And we're pleased to announce today that we have entered into an exclusive arrangement to form a 50-50 partnership with EdgeConneX, a leading global data center operator backed by EQT Infrastructure to develop, own and operate a portfolio of Australian data centers. Subject to documentation and approvals, this collaboration marks a significant step forward with a high-quality operator to activate our substantial data center pipeline in future years. We will update you as we progress the partnership. As we increase our rate of production and progress new value-enhancing opportunities, we are focused on ensuring that our capital settings are aligned with our growth objectives. We have both flexibility and line of sight of funding options, utilizing both our own capital and that of our partners. Since we announced our refreshed strategy in November 2021, we have raised $2.9 billion of third-party equity to fund our growth, and we continue to engage with high-quality institutional investors on new opportunities across our platform. We have also been active in recycling our own capital with approximately $3.6 billion of workplace logistics, retirement living and Town Center assets sold over the last 4 years. In light of the significant incremental growth opportunities that we have secured at attractive expected returns, we have reviewed Stockland's payout ratio range and determined that from FY '26, we will target a distribution payout of between 60% and 80% of FFO compared to the previous target range of 75% to 85%. For FY '26, we expect the distribution to be in line with the FY '25 distribution at $0.252 per security. With our strong balance sheet, retained earnings and demonstrated access to third-party capital, we are in a strong position to fund our growth. Along with our capital management settings and capital allocation framework, 2 other essential elements for sustainable growth are our comprehensive ESG strategy and our focus on building and maintaining a high-performing, collaborative and innovative workforce. We made further progress during the year in implementing our ESG strategy in areas such as low-carbon materials, partnering on renewable energy delivery and social value creation. And we remain on track to meet our Net Zero Scope 1 and 2 target this year. I'm particularly pleased to see us maintain a high level of employee engagement and a high level of employee security ownership with over 80% of Stockland employees now owning securities in Stockland. FY '25 was a big year of focused execution for the Stockland team, and I'm proud of their achievements. I'll now hand over to Josh to take us through the financial results in more detail.

Thanks, Tarun, and good morning, everyone. I really do feel I'm joining Stockland at an exciting time given our strong financial position and the opportunities ahead of us. I'm pleased to present my first financial result as Stockland's CFO, and I'm looking forward to meeting many of you on our results roadshow. Turning now to the result. Funds from operations of $808 million was up 2.8% with FFO per security of $0.339 at the top end of our guidance range. On a comparable basis, the investment management portfolio delivered growth of 3%, underpinned by positive leasing spreads across the Town Center, Logistics and Workplace portfolios. The overall contribution from the Investment Management segment was reduced due to strategic capital recycling over the last 2 years to fund our growth. Development segment FFO increased by 11.6% on the back of strong settlement volumes from master planned communities, which came in above our target range and higher development management fee income from partnerships. Unallocated corporate overheads were down by almost 7%. On a combined basis, overheads across the investment management, development and unallocated lines were up by less than 2%, reflecting disciplined cost control as we scale the business. Net interest expense was down compared to the previous period. Cash interest costs were up slightly, reflecting a stable weighted average cost of debt and marginally higher average net debt. However, a step-up in the level of project activation across our MPC and LLC development books has resulted in a greater proportion of interest costs being capitalized. These costs are expensed in cost of goods sold in FY '25 and future periods. The effective tax rate was 8% for the period, up slightly compared to FY '24 due to a higher proportion of development and fee income. Moving on to capital management. We have maintained a strong balance sheet position. As expected, our gearing finished the year just above the midpoint of our target range at 25.2%. Similar to FY '25, we expect gearing to increase in the first half of FY '26 before moderating back toward the midpoint of our target range by 30 June 2026. This reflects an expected weighting to the second half for MPC settlement volumes and group operating cash flow. Our weighted average cost of debt for the year was 5.3%, in line with FY '24, and we expect this to trend down slightly to 5.2% for FY '26. Our fixed hedge ratio averaged 76% for the full year, down slightly from 79% in the first half. We finished the period with $2.9 billion of liquidity, comfortably covering approximately $900 million of drawn debt maturities over the next 12 months and providing funding flexibility. We also continue to take advantage of opportunities to term out our debt, issuing $400 million of 7-year domestic medium-term notes during the year. The distribution reinvestment plan was in operation for the December and June distributions, and we are actively managing our capital settings to support growth. As Tarun mentioned, we have recalibrated our target payout ratio range, and we expect the FY '26 distribution per security to be in line with FY '25. Now on to cash flows. Operating cash flow for the full year was positive $328 million. This reflects a significant turnaround for the second half, which was largely driven by the timing of MPC settlement receipts and development spend. We expect operating cash flow to be stronger for FY '26. However, it is again likely to be weighted to the second half given the anticipated timing of MPC settlements. Overall, we have delivered a strong result for the year and invested for future growth while maintaining a strong balance sheet and funding flexibility. As Tarun mentioned, we're in a good position to fund our growth given the strength of our balance sheet and access to third-party capital. I'll now hand over to Kylie to take us through the investment management result.

Thanks, Josh, and good morning. FY '25 was another active period for the Investment Management business with strong operational and financial performance and considerable progress on strategy execution. We have again demonstrated our ability to effectively recycle capital to fund our growth ambitions and seed new partnership opportunities. The investment management portfolio delivered comparable FFO growth of 3%. Logistics was a standout with 7.1% growth, followed by Town Centers at 3.2%. We've achieved positive re-leasing spreads across all sectors and occupancy remains high for Logistics and Town Centers. FFO of $591 million reflects strategic asset recycling of $980 million of Town Center and Logistics assets over the past 2 years as well as the transfer of $800 million of Logistics assets into the newly formed partnerships with M&G Real Estate and KKR. Management fee income was up by 6%. Ongoing management fees from assets in partnerships continue to grow, and this year's result included a performance fee from one of our partnerships, partly offset by lower fees from M_Park. The Logistics portfolio generated comparable FFO growth of 7.1% and portfolio occupancy of 97.8%. We achieved positive leasing spreads of 29.4% on new leases and renewals with over 367,000 square meters of leasing activity. The portfolio remains approximately 17% under-rented compared with market rents. The result reflects strong leasing outcomes across several assets as well as the contribution from recently completed developments across the Eastern Seaboard. Having optimized value through active asset management, we divested 5 assets for a combined value of $289 million with the proceeds to be redeployed into higher returning opportunities, including our $10 billion logistics development pipeline. The portfolio WALE at 3.1 years reflects the net impact of leasing success across stabilized assets and shorter lease terms at several assets that are being positioned for brownfield redevelopment. Our strategy for the Workplace portfolio is to maximize operating income while preparing the assets for redevelopment. We see significant opportunities to create longer-term value through the master planning work being undertaken, including change-of-use strategies. While FFO declined slightly, we delivered solid leasing outcomes at Macquarie Park and Piccadilly with a 12-year lease at Giffnock Avenue boosting the portfolio WALE to 6 years and re-leasing spreads to 5.4%. Turning to Town Centers. We have delivered comparable FFO growth of 3.2% with positive leasing spreads of 3%, marking 4 consecutive years of positive spreads. The portfolio continues to benefit from its high weighting to essentials-based categories, while the discretionary spend in categories such as apparel, jewelry and homewares has continued to strengthen. Comparable specialty sales are considerably above benchmark averages. Occupancy costs remain at a sustainable 15.1%, and portfolio occupancy is high at 99%. Our Communities rental income derived from our established land lease communities and an emerging portfolio of childcare and medical centers rose 20% on the prior year. The uplift was underpinned by growth in the number of occupied land lease home sites, which is expected to increase in future periods, providing high-quality recurring rental and fee income. The portfolio delivered FFO growth of 3.1% for the year. Approximately 79% of the portfolio was independently revalued during the year, resulting in an increase of $197 million compared to FY '24. This reflects positive revaluation movements for both Logistics and Town Centers, partly offset by soft market conditions and assets held for repositioning across the workplace portfolio. In line with our strategy to scale our capital partnerships, we welcomed 3 new partners to the platform in FY '25. In the first half, we formed 2 partnerships in the Logistics sector with global investors, M&G Real Estate and KKR with a combined initial portfolio value of approximately $800 million. We also expanded our land lease partnership with Invesco, transferring 5 properties into that partnership. In late FY '25, we established a new joint venture with John Boyd Properties, also in the logistics sector, taking us to 8 partnerships across a variety of sectors and strategies. With the strength of our existing portfolio and significant development pipeline, we are well placed to expand existing partnerships and to attract new capital. Thank you, and I will now hand to Andrew.

Thanks, Kylie, and good morning, everyone. I'm really pleased with the double-digit growth in FFO that was delivered by the Development segment in FY '25 despite the headwinds in some markets. We've delivered higher settlement volumes across our MPC and LLC businesses as well as a significant lift in the rate of production and leasing activity for our logistics development platform, and we expect this to translate into additional commercial development profits and rental income in future periods. We've also driven a significant lift in fee income this period, reflecting a higher volume of development being undertaken in partnerships. We anticipate this line will continue to grow strongly. Turning to MPC. We delivered just under 6,900 settlements, above our target range for the year. A key contributor to this result was the successful integration of the newly acquired portfolio, where we've delivered a better settlement performance than we've budgeted for. This portfolio is seeing strong customer demand for new releases and achieving pricing above our acquisition assumptions. Our development margin was largely in line with the prior year with solid like-for-like price growth in most markets, offset by a mix shift towards some lower-margin projects. We expect a further mix shift in FY '26 with some of our highest margin projects trading out. Importantly, we have good visibility into settlement volumes for the year ahead with over 4,000 contracts on hand. For FY '26, we're targeting between 7,500 and 8,500 settlements with a greater portion of settlements under joint venture or PDA arrangements. And the development margin is forecast to be in the low 20% range. We've seen good momentum in our MPC sales rate over the last few quarters, achieving over 1,800 net deposits in Q4. We're seeing an underlying improvement in both inquiry and sales in the Victorian market with other markets continuing to perform well. This positive sales momentum continued into July with just under 760 net sales secured during the month. We expect residential market fundamentals to remain positive in the year ahead, driving increased demand in most states. With the anticipated recovery of the Victorian market to accelerate and broaden, driven by relative affordability and a lower level of resale stock on market, we forecast a more favorable interest rate environment and ongoing supply constraints to support further price and volume growth in Queensland and New South Wales, notwithstanding affordability challenges. And while we believe volumes in the WA market will stay at around current levels, we expect to see further price growth in that market over the year ahead. Moving to our Land Lease business. We delivered 526 settlements for the year. While this was considerably higher than FY '24 settlements, it was below our original forecast due to the impact of weather events in Queensland and lower sales in Victoria. Increased settlement volumes drove FFO, but this was offset by lower gains from communities transferring into partnerships. We have good earnings visibility into the year ahead with 398 contracts on hand at a higher average price compared with FY '25 settlements. For FY '26, we're targeting 700 to 800 settlements at an average margin in the low 20% range. Sales volumes were up strongly for the year, reflecting a positive response to new launches and stronger purchaser sentiment in Victoria in Q4 on the back of improving conditions in the established market. We're now trading from 15 communities, and we're on track to launch 4 additional communities during FY '26, supporting further growth in settlement volumes as we continue to scale the business. Moving to our $10 billion Logistics development pipeline. We continue to see solid leasing demand for our infill and greenfield projects and have secured over 260,000 square meters of leasing over FY '25. This includes the first 3 stages at Kemps Creek and a lease to DP World at Yennora as we commence the first stage of what is expected to be a significant redevelopment of this intermodal asset. We expect to deliver between $1 billion and $1.2 billion of new product over the next 2 years, including around $300 million in build-to-sell projects in FY '26. We're currently delivering $230 million of neighborhood retail town centers that will all start trading in FY '26 and have identified a further $500 million of future opportunities across our MPC portfolio. Delivering retail and community real estate provides essential amenity for our communities, high-quality rental income for our investment management portfolio and product for future partnering opportunities. Overall, the Development segment had a strong year. and we expect to deliver materially higher production volumes from FY '26 across our MPC, LLC and Logistics platforms. With improving customer demand in Victoria, residential market conditions are now supportive in all states. Over the past 12 months, we've accelerated our development spend in Victoria, which positions the business to capture stronger levels of demand. I'll hand back to Tarun to close.

Thank you, Andrew. After 4 years of disciplined execution of our strategy, our goal of providing sustainable growth for stakeholders is coming to fruition. We have now positioned the business for a step change increase in production from FY '26 across MPC, LLC and commercial development pipelines. We have also established multiple drivers of sustainable growth in future periods, including capital-efficient, longer-term residential and logistics projects secured during FY '25. And we have good flexibility and line of sight of multiple funding options to support our growth. With these pillars now in place, FY '26 marks an inflection point for Stockland. Our focus is on high-quality execution and driving sustainable growth. We have positioned the business well to leverage the anticipated improvement in market conditions. For FY '26, FFO per security is expected to be in the range of $0.36 to $0.37 per security on a post-tax basis with a similar weighting to second half to FY '25. The distribution per security is expected to be $0.252 per security, in line with FY '25. We'll now open the lines for questions.

[Operator Instructions] Our first question comes from Tom Bodor at UBS.

I'd just be interested in some of the new things you're doing across the group, things like Kogarah Golf Club. I think I saw some stuff in the press around some land in Northern New South Wales, data center developments that could be quite material. Just be keen to understand how you're thinking about funding these projects going forward. Do you intend to keep them on balance sheet through the early phases of delivery? And what are the capital requirements? And would you consider raising equity at the Stockland level to fund this?

Thanks, Tom. Yes, we've secured, as you pointed out, some significant long-term opportunities. First thing to note, all of them are -- the new ones we've secured are either staged land payments over periods of time or they have conditions precedent and it's sort of capital light initially, which allows us to get further planning approvals, secure where appropriate tenant pre-commits, et cetera, and third-party debt, including over time, bringing in capital partners into those deals. So they are very capital efficient. And then in terms of the funding requirements, when we look out the next few years, obviously, we've got very strong now support from institutional capital coming through, as I said, $3 billion raised in the last 3 years. But in addition to that, at the Stockland level, the retained earnings and the distribution reinvestment plan is providing more than ample funding for us to continue to fund our requirements over coming years. And that's how we're thinking about it. So we're well funded going forward.

And how should we think about those commitments? Are they really obligations for you to purchase the land if certain preconditions are met? Or do you generally retain optionality to not purchase if at a future point in time, the development doesn't work?

Yes, they're all different. But at a high level, for example, Waterloo is a payment in kind because we deliver social housing as part of the development. So it's going to be delivered basically the land payments in kind. On the Kingscliff project we've secured in Northern New South Wales, that has staged land payments pretty typical to what we've been doing as business as usual in our other acquisitions. And then the Kogarah Golf Club, we paid a small amount now. Future amounts, it's a stage development. There's going to be 3 stages and the land payments are tied to the activation of those stages, at which point we'll be bringing in third-party debt and potentially third-party capital as well. So there's a lot of flexibility in the way we have structured these deals.

Our next question comes from Lauren Berry at Morgan Stanley.

Just another question on funding. Looking at FY '27, obviously, you've got a lot of new projects coming through, Waterloo apartments, et cetera, and you've changed the payout ratio range to 60% to 80%. The guidance implies 70%. Can we assume that, that payout ratio will probably decline to the lower end of time as you've got more development CapEx going out the door? Or the other way to put it, will EPS continue to grow at a lower rate than FFO over the next couple of years?

Thanks, Lauren. So I won't repeat what I said to Tom before about the various options we have, but more on the payout ratio. We are flagging we are in a growth phase now. The repositioning of the strategy and the organization has given us some very strong visibility, not just next 3 years, but beyond. And the cycle, the residential cycle, including capital market cycle are becoming more supportive. So we will be activating more production across the pipeline. And really, the payout ratio, the way we think about it is our aim would be to maintain the absolute distribution, but the ratio -- if we keep growing FFO, the ratio will start coming down. Therefore, to get our retained earnings coming through to fund the growth, we will have to create the growth is how you should think about it. So if we create good earnings growth, then some of it we would like to retain to continue to fund further growth.

Great. And then my other one is on resi. You said a couple of times in the presentation that the Lend Lease acquisition is doing above your expectation. Can you just give us a bit more color in terms of metrics about what's performing at now versus feasibility, and maybe what you think you can get it to over the next 12 months, please?

Yes. Sure, Lauren. When we acquired it, we were talking about 2,500 net sales per annum. Over the last half, we delivered just over 1,200 settlements out of the Lend Lease portfolio. So we're at that sort of level. We thought it might have taken us longer to ramp up. And then the other area that we've seen has been revenue growth, particularly Southeast Queensland. We've seen strong revenue growth across those projects that we acquired there. WA, we've continued to see double-digit growth coming out of WA. And then while Victoria has been flat, we've seen rebates reducing in that market, and then New South Wales continuing at around that 5% range. So all of that has positioned that portfolio ahead of where we pro forma'ed when we entered into those contracts, which were back in December '23, even though we didn't settle on it until 12 months later.

The next question comes from Suraj Nebhani at Citigroup.

Just a couple of quick ones as well, Tarun. I guess on some of these larger industrial developments like the Kogarah side, you have announced a couple of new capital partnerships this year with M&G and KKR, are they likely to participate in that? And are there any first rights or something like that across those partnerships?

Yes. So yes, we did, as you say, announce the 2 partnerships. They are different strategies. So the KKR and M&G are more core plus style capital that they are deploying. So that's not for development capital. Obviously, we've done on Kogarah, it's a 50-50 joint venture. So our partner, John Boyd Properties will be funding their half of their requirements. On our half, initially, we're balance sheet funding it. But as I said before, as the stages start to take place, and we're still a couple of years away from getting all the planning approvals, et cetera, and pre-commitments in place, then we will have the option to either fund it ourselves or bring in capital partners. Now our existing capital partners, and there are others, who have appetite for develop to core style capital. But it's too early for us to get into those discussions given there's some planning and pre-commitments to go. And we generally don't have specific first rights in our platform. They're quite discrete. If we do it, it's quite limited with our capital partners.

And just one -- another one on the new partnership announced today with EdgeConneX. So can you just provide a bit more color on how that came about? And what's the sort of structure that you see, I guess, Stockland's ownership of data centers down the track? Or what's the sort of structure that you see in terms of realizing capital and profits down the track out of that opportunity?

Yes. So Suraj, firstly, today's announcement is really about aligning a high-quality global operator to come in together with Stockland's land positions we have, and they are very well located and it's a deep pipeline to combine those 2 skills of our land development skills with their technology skills to offer a compelling end-to-end solution to hyperscalers and technology firms to come into those precincts. So that's what today's announcement is about. Over the course of coming periods, we'll share with you more insights on the size of our data bank and how we generate, I guess, the long-term revenues from it. But the JV is a 50-50 JV. So EdgeConneX and ourselves will fund 50% of the capital. We will derive fees, which we'll share. It's flexible to bring in third-party capital as we go down the risk curve as we again get pre-customer commitments and get planning and construction contracts in place. So it's that similar technology we use in the rest of our portfolio. And we'll keep you updated. The first seed asset for this is likely to be the M_Park project in Macquarie Park here. It's 100 megawatts. We've already got zoning and power secured. We're working through further planning projects there. So that's how it's structured. But from a capital point of view, we're obviously only 50% of the stack. We'll put in off-balance sheet debt, say, 50%. We can gear this up above 50%. So we're down to 25% in terms of theoretical capital going into the JV. Then you put our land, which will go in at reasonable fair market value into the JV. So once you put our land as equity, the incremental capital required for Stockland is very manageable, and we've had regard for that over the plan period over the next 5 years. So we will share the data bank as we start to get more power secured. We've applied for power on multiple sites in Sydney and Melbourne. But really, it's once we start getting power, we will start talking about the size of the opportunity.

The next question is from Callum Bramah at Macquarie.

Maybe just while you're on it, Tarun, just around the treatment of the transfer of the asset, if you do transfer in M_Park, do you take a profit on that or it just moves through NPA? And then my second one, Andrew, I think you alluded to a mix shift in the MPC projects in 2026. I think that, I assume, weighs down the margin for otherwise what would have been, I guess, expected a higher margin given the volume you're doing? Are you able to just talk us through that?

Thanks, Callum. Yes, I'll just answer the land one. So generally, it depends whether it's held in inventory or investment assets. But generally, it will be in inventory when we transfer because it's development activity. And if there is -- the aim would be to order -- transfer it at fair market value of the land for its use, which will be data center. So in the future if that is above the inventory value, then there may be some land profits coming through. But again, those will become clearer as we start to get down the journey. The first project is still not this year, likely next financial year. So we'll share that with you. But yes, there could be some land profits, too.

That transfer won't occur in '26 or is not included at least in guidance?

No, no. The M_Park is the first seed asset, and that's likely based on current planning programs in FY '27. So there's nothing in '26. And Andrew, you want to take the other question?

So the mix shift in '26, you're going to see more settlements coming out of Victoria with the recovery in volumes that we're seeing in Victoria. That's a lower margin portfolio than New South Wales and Queensland. And we've got some specific projects in New South Wales that are nearing completion. So they're going to have lower settlement volumes because they're coming to the end of life. So that's the predominant mix shift that we'll see that would have a negative impact on the margin. What's going to positively impact the margin is the ongoing price growth that we've spoken about. We've seen Southeast Queensland 15% plus, WA around 10%, and then New South Wales sitting at about 5%. So that will continue over time to flow through to the portfolio and offset that mix shift.

Our next question comes from Ben Brayshaw at Barrenjoey.

Andrew, I was wondering if you could talk about market conditions for MPC in Victoria. Just what you're seeing insofar as demand from first home buyers and/or investors that may have contributed to the increase in the fourth quarter net sales?

Yes, sure, Ben. Yes, you can see in the numbers in the pack, the increase in Victoria Q4 on Q3. And we've seen that continue through into those July numbers as well. But the recovery has been variable by corridor. The strongest corridor being the Southeast, followed by the North and then the West has been lagging. What's driving that is really the resale stock overhang. You've seen it absorbed largely in those other 2 markets where they're either at or below long-term averages, but we've still got a reasonable amount of stock in that Western corridor, which we think will be absorbed during the year, and you'll see that market improve. When you look at the buyer type, it has been the investors that have come back first in that market. We've seen a pickup in first home buyers, but your first home buyers are still sitting at 35%, around that number. Yes, long-term averages in Victoria are more around 50% plus. So we think first home buyers still -- maybe it's confidence, maybe it's timing, maybe it's resale stock, but we would expect to see them returning to the market over time as well. The strongest selling product is our more affordable product, single-story, double garage, your 300 to 350 lots. We're seeing demand for that product from first home buyers, investors, builders. So yes, that's where we're seeing the strongest demand.

The next question comes from Richard Jones at JPMorgan.

Again, sorry, but the question is for you, Andrew. Just in relation to the comment you made on, I guess, the sales mix changing in relation to fully owned lots and JVs and PDA in FY '26. Can you quantify roughly what the variance will be on that mix shift from '25 to '26?

Yes. So in '26, we'll see about 50% of sales by volume will be through joint ventures or PDAs. So the way to think about that, it's about 25% of the revenue going through that channel.

And what was that for '25?

It was in the 20s, the low 20s for '25. Obviously, the Lend Lease portfolio stepping up for a full year of trading is what's going to drive that larger volume flowing through.

The next question comes from James Druce at CLSA.

Tarun, you talked to a lot of growth opportunities. You talked to an inflection point. You've got a lot of confidence in the next 2 years and beyond. It sounds like you're sort of talking to an accelerating earnings growth profile. Is that the way we should be thinking about it?

Well, I think we've given guidance for FY '26, which is accelerating from FY '25. It's 6% to 9% range, which is solid. I won't talk about beyond that. We'll give you guidance for '27 when we get close to it. But I think the point is that -- we spoke earlier in the call about the long-term drivers. They are not the ones that are driving earnings growth in the next 3 years. Next 3 years is really the progress we've made in replenishing our masterplanned communities backlog, the Land Lease business that is scaling up, and the Logistics pipeline that is increasing its production on our existing land positions. They are the things to think about in terms of the trajectory of earnings growth, but also our settlements and production. So I think that's what we're pointing to. And of course, the market conditions in terms of residential are becoming more favorable on the back of interest rate declines. And in the other part of our business, which is, again, capital partnerships and management income is a key part of our strategy, as cap rates stabilize and valuations are starting to increase again, institutional capital will be more attracted to core, core plus strategies, which will provide opportunities through our non-resi development backlog as well. So they are the things that are more near term. And then we've got secured some longer-dated opportunities beyond 3 years, which I spoke about earlier in the call.

Okay. And it sounds like -- I mean, there is a lot there that you're working through. Are you still seeing sort of an acquisition-rich environment at the moment? Like how do we think about further opportunities at the moment in terms of acquisitions?

Yes. We're very selective on what we're buying. So it's usually what we've secured the apartments pipeline in Waterloo and the Logistics and other assets. We're generally not buying across the sectors. In MPC, we have to replenish our backlog because we are now starting to go through about 8,000 lots plus per annum. So that's why we looked at the Kingscliff opportunity, which is a corridor we don't have a business or project in. So that's attractive. So we'll be always doing something in MPC, but we do look at the cycle. MPC, we've got a lot on our plate, selectively here and there -- sorry, LLC, we might pick up 1 or 2 assets. So we're not particularly acquisitive. It's very targeted, very strategic on the right sort of deals where there's capital-light and longer-term earnings potential. Really, our focus is on the $56 billion development pipeline that is not long dated, that is zoned predominantly or getting close to zoning, so that we can get into production. And that's where most of the earnings momentum is going to come from the development business contributing to absolute earnings, but also providing product for capital partnerships to drive management income growth. You saw that jump from about $60 million to $100 million last year on the back of the deals we've done. And that line in management income is likely to continue to grow at a greater rate than our overall revenue growth.

Our next question comes from Suraj Nebhani at Citigroup.

Sorry, I just had a follow-up, but it's been answered.

Thank you. That is the last question we have time for today. I'll now hand back to Tarun for closing remarks.

Thank you again, everyone, for joining in. We're looking forward to seeing you on the roadshow commencing tomorrow. So thanks for joining the call.

Thank you, everyone. That concludes today's call. Thank you for joining us. You may now log out.