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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Group 2026 Half Year Results Briefing. [Operator Instructions] Please note that this conference is being recorded today, Thursday, the 19th February 2026. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group Chief Executive Officer. Thank you. Sir, please go ahead.
David Harrison: Good morning, and welcome to Charter Hall Group's First Half FY '26 Results. Joining me today are Sean McMahon, our Chief Investment Officer; and Anastasia Clarke, our Chief Financial Officer. Today, I will provide an overview of the highlights of a very active last 6 months and then cover the usual funds under management, equity flows, valuations, operating environment and finish with our property investment balance sheet portfolio. Sean then will take you through development activity and our sustainability initiatives, followed by Anastasia with the financial highlights. We'll conclude with our outlook and Q&A. Turning to the group's highlights. Operating earnings for the half were $239 million or $0.505 per security, reflecting continued momentum across every segment of the business. This strong performance underpins today's upgrade to FY '26 guidance to $1.00 per security, representing 23% growth over FY '25. Return on contributed equity continues our multiyear trend of generating above 20% returns, which has increased to 23.1% post-tax and over 28% pretax. FY '26 also marks the 15th anniversary of consistent dividend growth. Over that period, dividends have grown at 7.8% CAGR, well ahead of historic inflation in the REIT peer group. Group FUM increased from $84.3 billion to $92.2 billion on a pro forma basis, which includes additional FUM created post 31 December, while property FUM rose from $66.8 billion to $73.6 billion. During the first half, we had a very active total transaction volume of $9.8 billion. Acquisitions and development activity more than offset divestments, supported by positive net valuations, largely driven by rental growth as economic growth and increased tenant demand met with a severely reduced supply across all of the markets we operate in. Our balance sheet remains exceptionally strong with balance sheet gearing of just 7.7% and $1 billion of dry powder providing for accretive acquisition capacity, which contributes to the more than $7.8 billion of total platform deployment capacity. Importantly, we also recorded the strongest level of gross equity flows in our funds management business in our 3.5 decade history. On Slide 5, the Investment Management business secured $4.8 billion of gross equity inflows during the half. Inflows over the past 6 months have accelerated materially exceeding the prior full 12-month period. We also are pleased to report average annual inflows over both the last 5- and 10-year period at close to $4 billion annually, highlighting our consistent capacity to attract inflows through cycles. Total transactions were $9.8 billion, comprising $6.6 billion of acquisitions and $3.2 billion of divestments. Acquisitions, development completions and valuation growth, as I said earlier, comfortably outweighed divestments. Turning to Slide 6 and our strong earnings growth history. Operating EPS has tripled over the past decade, delivering a 12.6% CAGR while distributions have grown at over 10% per annum. Around half of our post-tax earnings are reinvested back into the business, funding growth in property and development investments. This enables us to invest alongside capital partners, expand our funds management earnings and generate strong return for security holders without the need to issue new public market equity to grow. This is a key competitive advantage we retain, and we will continue to organically grow the business through the retention of earnings via our payout ratio policy. Given our capital-light business model, this is a powerful and sustainable driver of organic earnings growth. Slide 7 highlights the long-term strength of our distribution profile. Over the past 16 years, Charter Hall has delivered consistent dividend growth higher than the growth rate of U.S. REITs currently included in the U.S. S&P 500 Dividend Aristocrats Index. Slide 9 provides a deeper look at our property funds management platform. Institutional investors contribute over 76% of total platform equity, while more than 82% of our property funds under management is across the unlisted wholesale and direct channels. Investor demand for unlisted property remains strong, reflecting the safe haven characteristics of Australian real estate and the diversification benefits unlisted assets provide amid a heightened listed/liquid asset class market volatility. Turning to Slide 10. Property FUM increased from $66.8 billion to $73.6 billion on a post balance date acquisition-adjusted basis, driven by acquisitions, development completions, positive valuation movements and of course, our previously announced Challenger mandate, which was secured during the half. Growth was led by the wholesale unlisted platform. This reflects early signs of valuation recovery and the benefits of disciplined portfolio curation across all 3 of our listed REITs, which has helped deliver meaningful earnings and NTA value growth for those REITs. Property FUM has now surpassed the peak achieved in June '23 before the devaluation cycle the market experienced. With $7.8 billion of available investment capacity, we expect further growth through acquisitions, valuations and ongoing develop-to-hold strategies over the remainder of FY '26. Our property platform, as highlighted on Slide 11, comprises over 1,600 assets, spanning 11.5 million square meters of lettable area with 97% occupancy and a market-leading 7.5-year WALE, or weighted average lease expiry. Our integrated property management team secured more than $3.6 billion in net rent each year, a critical metric as rental income underpins everything we do. I&L or industrial and logistics is our largest sector exposure at 37% of the platform, whilst convenience retail continues to grow and now represents over 20% of the platform. Our office platform at over $26 billion is the largest in the country. We are seeing encouraging early signs of recovery and are actively planning increased development and deployment in high-quality CBD asset locations, whilst we're also repositioning opportunities such as the recent acquisition of 1 O'Connell Street and the adjoining assets in the core of Sydney CBD, which on a combined site area basis of approximately 6,800 square meters is one of the largest site consolidations in Sydney CBD alongside our 7,500-meter Chifley site. which, as you're all aware, we're well progressed on developing a second Chifley Tower, which on a combined basis will generate over 110,000 square meters of lettable space in 2 adjoining premium-grade towers. Turning to equity flows. During the half, Funds Management secured $4.8 billion of equity inflows, a record for a 6-month period across the history of the group. Inflows were broad-based, spanning all 3 wholesale pooled funds, CPOF, our office fund, CP Industrial Fund and of course, our recently launched CCRF or convenience retail fund. Partnerships have also been a strong contributor, including the Challenger mandate I mentioned, and we have seen a notable uplift in fund or equity flows for Charter Hall Direct, which in 6 months has exceeded all the flows generated in the whole of FY '25. Slide 13 summarizes our industrial platform. We manage over 7.2 million square meters of lettable area, representing $27 billion of funds under management and importantly, close to a 20 million square meter land bank across that portfolio, making this the largest third-party industrial platform in Australia. The portfolio is modern, most of which has been developed by Charter Hall, attracting a high occupancy and is underpinned by Long WALE, strong leasing renewals during -- achieved during the half. And importantly, we still believe the portfolio has got a 17% discount to market rents, providing positive rental reversions over the course of coming years. Our development pipeline sits at $6.5 billion in industrial. This is underpinned by a significant land bank of over 223 hectares. And I also note our recent media announcement on a new 20-year lease on a 100,000 square meter facility to ALDI at one of our largest states in Melbourne as an example of the ongoing pre-committed development activity we are completing within the industrial platform. Slide 14 outlines our office platform. Clearly, Australia's largest at $26 billion with 2.1 million square meters of lettable area. Leasing momentum was strong with 124,000 square meters leased across 134 transactions during the half. Net effective rents outpaced face rent growth and 93% of tenants were retained in their existing or expanded footprints. Occupancy remains high at 95% relative to peers and clearly relative to the market, well ahead of our broader aspirations for occupancy. And I also note that in a strongly improving net effective rental market, it's also helpful to have a bit of vacancy so you can capture those positive market rental growth reversions. I anticipate that you'll be hearing a lot more from us on various office activity as we move forward. We are positive on the outlook for our assets and also deployment as this market is clearly at least for quality CBD holdings in the early phase of what could turn out to be a sustained and attractive recovery for office landlords. Our convenience retail platform on Slide 15 manages around $15 billion of assets or over $17 billion, including our Long WALE Bunnings assets. The sector represents a significant long-term opportunity given limited institutional ownership and the increasing difficulty of replicating well-located assets in inner and middle ring metropolitan markets. Last year's successful take private of HPI was just another example of us expanding our Long WALE convenience retail platform, and recent acquisitions of Bunnings portfolios such as the $290 million sale leaseback acquisition we closed with Bunnings in the last half is further evidence of our conviction to grow into the convenience net lease retail sector with the market-leading tenants in each of those sectors. When we think about barriers to entry in this submarket, including land availability, zoning, scale and capital, we do believe that Charter Hall has a durable competitive advantage in securing further growth for our investors. More importantly, it's also providing another string to our bow when we talk to our tenant customers around curating their existing lease portfolios, but also being able to fund sale and leaseback transactions if that suits these major retail customers. Slide 16 and social infrastructure remains a core strategic focus. These assets provide essential services, exhibit low correlation to economic cycles and are among the lowest risk property sectors. With Australia's growing population, demand for these services will only increase, and Charter Hall is well positioned to play a leading role across all aspects of social infrastructure from government leased essential service assets through to childcare. The portfolio is 100% occupied, supported by Long WALE and predominantly triple and double net leases. Now just looking at our tenant relationships on Slide 17. Our top 20 tenants contribute 53% of platform income. We manage over 5,300 leases, collecting more than $3.6 billion in net annual rent. Over 69% of tenants hold multiple leases, enabling deep long-term relationships across assets, locations, states and sectors. During the half, we were highly active with renewals, expansions and sale and leaseback transactions virtually across every one of the sectors that we operate in. Long-term tenant partnerships remain a cornerstone of our broader strategy. Slide 18 and our transactions. As mentioned earlier, we completed close to $10 billion during the half with net activity up strongly. Office and convenience retail were the largest contributors to acquisition growth during that 6-month period, whilst we continue to actively curate our industrial portfolio. Slide 20 provides an overview of our property investment portfolio, which those of you who are not familiar with the terminology represents the Charter Hall on-balance sheet investment portfolio. The $2.8 billion portfolio spans over 1,500 properties, 97% occupancy and an 8.2 year WALE and a 3.3% weighted average rent review. That is reflective of our co-investments predominantly in all of the funds and partnerships we manage. In addition to that, we also have curated property investments on balance sheet generally for warehousing to provide assets that will attract further external capital. Cap rates compressed by 10 basis points over the half with the weighted average discount rate now at 7%. Geographically, New South Wales or Sydney represents close to 40% of our exposure. Brisbane, predominantly Brisbane or Southeast Queensland and Victoria, each around 20%. Our balance sheet exposure to office is deliberate. We believe these assets offer most attractive prospective IRRs, will attract external capital and provide income uplift potential across the platform over the next 3 to 5 years. With that, I'll now hand over to Sean to cover development activity and sustainability.
Sean McMahon: Thanks, David, and good morning to everyone on the call. Our development pipeline now totals $17.9 billion. Our development capability and track record has been a significant key strength of the group for over 30 years. Developed to own next-generational assets are highly accretive to long-term returns for our investor customers. Development activity continues to drive modern asset creation, providing property solutions for our tenant customers and enhancing returns whilst attracting new capital to our funds and partnerships to deliver on strategic objectives. Development completions totaled $1.3 billion in the last 12 months. Notwithstanding completions, the pipeline continues to be restocked and is currently $17.9 billion. There are currently $4.8 billion in committed developments with 74% of committed office developments pre-leased and 94% of committed industrial and logistics developments pre-leased, providing derisked adjusted accretive returns for our funds. We have generated a $5.5 billion pipeline with living and mixed-use projects that have now obtained strategic planning approvals, optimizing existing holdings and providing optionality to grow in the living sector. The successful said planning approval of Gordon Shopping Center that potentially delivers a mixed-use multistage project of $1.6 billion in value was the material addition to the pipeline in the first half. Noting David's previous comments on Australia's strong forecast population growth, we expect that the creation of new developed investment stock and opportunities for investment management platform will continue to feature prominently. Now turning to Slide 24. Over the first half, our industrial platform completed $515 million of developments for the WALE of 10 years. We currently have $2.3 billion in industrial development projects committed and underway. Our total pipeline of future industrial investment-grade stock now sits at a material $6.5 billion. There are 3 major projects driving the pipeline growth pre-committed by Australia's major supermarket retailers, Coles, Woolworths and ALDI that have a combined completion value of $1.5 billion. That will deliver state-of-the-art automated facilities to service their respective networks. There is also good momentum at our Western Sydney Airport joint venture site where there are multiple major pre-commitments secured or at advanced stages. Charter Hall has one of the largest industrial footprints in the nation, comprising over 20 million square meters of land, and we are focusing our efforts to maximize for our investor customers from the land we own. Given the scale and diversity of our land holdings, there are multiple key data center sites existing in with this industrial land bank. There are a number of data center sites in focus in our land banks that are located within availability zones, and we're in the process of unlocking significant power supply and associated planning approvals over the next few years. Importantly, we retain optionality to sell this powered land at a material premium to industrial land values or negotiate long-term ground leases with hyperscalers as we have done before. Now turning to Slide 25. The Chifley precinct, which includes the existing North Tower and the South Tower where construction is progressing well, will eventually have a precinct value of approximately $4 billion. The project is Sydney's premier office address and will be Charter Hall Group's largest asset with a combined net lettable area of 110,000 square meters. The project is scheduled to complete in mid-'27 and is owned by various Charter Hall managed wholesale investment vehicles. Our wholesale clients are participating in the investment with the objective of long-term retention of this iconic asset. As you can see, the group has been very busy delivering new high-quality office developments across Australia, anchored by government and Tier 1 tenant covenants. Now turning to Slide 26. We continue to drive our industry leadership across all facets of ESG, demonstrated by recent GRESB global and regional awards with 18 of the group's funds in the top quartile and notably, 5 CHC funds were ranked in the top 10 global funds. Our listed entities achieved an A ranking under the GRESB public disclosure rating and the AA MSCI rating. Pleasingly, we have now installed 89.7 megawatts of solar power across our platform, and this equates to sufficient power for approximately 20,000 homes. And our green loans now exceed $8 billion. From July '25, our whole platform operates as net zero through existing on-site solar and renewable electricity contracts. I'll now hand over to Anastasia to discuss the financial result in more detail.
Anastasia Clarke: Thank you, Sean, and good morning to everyone on the call. The first half of FY '26 delivered strong operating earnings after tax of $238.8 million, representing an increase of 21.6% on the comparable prior period. Top line revenue growth was driven across all 3 segments, comprising property investment income, development investment income and funds management revenue. Growth in property investment income was underpinned by like-for-like funds income growth of 4% on our co-investments, together with a material contribution from the incremental deployment of $290 million net equity investment over the past 18 months. This results in a full period contribution of the FY '25 investments and partial period contribution from the year-to-date investments to PI EBITDA, all on significantly higher equity PI yields. Development investment EBITDA has increased to $38.1 million, representing approximately 10% of the group's EBITDA, achieved through the successful completion of developments primarily sold down to funds. Funds Management EBITDA remains in line, which follows the usual historic pattern of strong equity inflows in the half, translating to fully annualized funds management fees in the following financial year post a period of deployment. Underlying FUM growth through valuations and net acquisitions and progressive funding of the $4.8 billion platform committed development pipeline is supporting growth in base fee revenue and transaction fees, offset by higher operating costs. Pleasingly, the group is reporting a healthy statutory profit after tax for the first half of $272.8 million, reflecting the combination of operating earnings and positive property revaluations. OEPS increased 21.6% to $0.505 per security, whilst DPS continues to grow consistently at 6%. This results in approximately half of the group's earnings being retained for reinvestment, primarily into higher-yielding property investments. As noted earlier, this reinvestment is meaningful in scale, underpins growth in property investment EBITDA and provides a pipeline of assets to create new funds. Slide 29 provides further details on funds management earnings. Funds management base fees increased by 5.3% in the first half, driven by higher FUM arising from valuation uplifts and net acquisitions. Transaction fees are materially higher at $32 million, reflecting large transaction volumes with net acquisitions supported by high equity inflows across the platform, most notably within CCRF. Property services revenue was lower in the first half due to elevated leasing fees in the prior period. Notwithstanding this, the group expects a sizable positive skew across all property services revenue in the second half of FY '26. Variable operating costs has increased in first half '26 to $73.5 million, reflecting employee and payroll tax accruals. Overall, this resulted in FM EBITDA of $142.3 million for the first half. Importantly, elevated net equity inflows lead to future deployment resulting in full contribution to funds management fee revenue in the following financial year. Turning to the balance sheet and total returns on Slide 30. The group's balance sheet investment in the property investment and development investment portfolio has increased to over $2.8 billion. And pro forma adjusted for post balance date deployment, including investments such as the O'Connell precinct in Sydney, exceeds $3 billion. Positive revaluations and retained earnings during the half has driven an increase in NTA to $5.54. Gearing remains low at 7.7%. And subsequent to balance date, the group has added $400 million of new undrawn debt lines, together with existing cash providing investment capacity of $1 billion, positioning the group well to pursue investment growth opportunities. Further refinancing across existing bank debt lines to extend tenor, combined with new bank lines results in a lower margin and line fee of 22 basis points in the second half. Total returns continue to grow with the group delivering an after-tax annualized return on contributed equity of 23%. Maintaining strong return metrics is fundamental to ensuring optimal deployment of both the group's capital and that of our partners. This continued focus on total return outcomes ultimately generates long-term earnings growth and sustainable value creation for our investors. On Slide 31, similar to the group's balance sheet, we had a highly productive half year, which continues, raising $10 billion year-to-date of new debt and refinancing existing debt across our funds management platform, supported by favorable credit market conditions. We expect the pace of refinancing to further accelerate in the second half through to 30 June 2026. Credit appetite from our lending partners, including both domestic and international banks remains very strong. This is evidenced not only by the significant new and extended loan volumes completed year-to-date, but also in wider covenant headroom and lower credit margins, averaging savings of 27 basis points. This debt financing activity has increased investment capacity to $7.8 billion, providing additional flexibility to deploy capital across a range of various real estate strategies and opportunities. Whilst the RBA cash rate and market floating rates remain higher than previously expected, we have progressively implemented hedging throughout the first half across funds, providing protection against earnings volatility in both FY '26 and FY '27. Overall, the group has achieved a 10 basis points lower WACD across the funds management platform as at 31 December compared to 30 June 2025. Before handing back to David, in summary, the first half of FY '26 represents a strong earnings result. The combination of elevated equity inflows and balance sheet capacity positions the group well to deliver ongoing FUM growth and sustainable future earnings growth.
David Harrison: Thank you, Anastasia. Turning now to Slide 33 and our earnings guidance. I'm pleased to advise that due to strong performance within our investment and property services business, today, we are providing a further upgrade to earnings guidance for FY '26. Based on no material adverse change in current market conditions, FY '26 earnings guidance is for post-tax operating earnings per security of approximately $1.00 per security, which represents 23% growth over FY '25 earnings and an additional $0.05 above the AGM upgraded guidance provided of $0.95. This earnings guidance excludes any expectation for performance fees. FY '26 distribution per security guidance is for 6% growth over FY '25, continuing a 15-year history of annualized DPS growth. That now ends the prepared remarks, and I now invite your questions.
Operator: [Operator Instructions] Our first question comes from the line of Suraj Nebhani with Citi.
Suraj Nebhani: Great results, guys. A couple of quick questions from me. Firstly, on the CCRF fund, you called out $2.4 billion of gross equity. Can I just confirm how much of that -- how much of that has been filled in terms of transacted upon? And what capacity does that give you in the second half, please?
David Harrison: Thanks, Suraj. The -- well, the answer is that there's another $1 billion of acquisition capacity over and above what we announced or issued in the media today with another $360 million portfolio acquisition. The other part of that capacity is we're continuing to raise equity in CCRF. So I think that dry powder will accelerate over the next few months with further inflows. And what typically happens with these open-ended funds is that particularly with the scale and diversity of the LPs that have supported that fund, I think we're going to see an acceleration in both domestic and offshore wholesale investor inflows into that fund. So whilst it might be $1 billion of dry powder now, I'm sort of expecting that to continue to grow even as we deploy further. So I don't sort of really give guidance on how much I expect to acquire further in the second half, but it's fair to say with today's announcement of $360 million and various other acquisitions, I expect it will be a pretty strong contributor to further FUM growth in the second half.
Suraj Nebhani: And maybe just one question for you around your -- you obviously called out a very favorable backdrop and record inflows, yet we have seen 10-year rates move up pretty strongly and even the longer-term rates in the U.S. are up pretty strongly in the last, let's say, few months. Is that having any impact on the discussions you're having with capital partners with respect to property investments?
David Harrison: Well, I think it'd be naive to say that movement in bond yields doesn't have an impact. The only thing I'd say is before we even went into this almost historical view on multiple interest rate rises, there was already a pretty strong gap between bond yields and unlevered IRRs and levered IRRs that we can deliver to our capital, both in core value-add and opportunistic. So I think the demand still exists. I've said it before, even though there's been some corrections in stock markets around the world, the reality is that most of the capital we talk to are underweight, their strategic allocation to property. A lot of our capital have experimented in various forms of alternatives, some of which have blown up completely, some of which have been highly disappointing in terms of the return you should be getting when you're going into sort of new sectors. So I think there's both absolute underweight pension capital. And I think we're also going to see further reallocation away from some of what I call the alternative experimental investments we've seen in the last few years back to really good quality core, particularly when in all core sectors, office, retail, industrial, you're buying existing buildings way below replacement cost. And I'll call out things like office where we went through a period of quite elevated rising incentives and incentives are coming down. And so effective rental growth is outpacing face rental growth. So it will become a strong deliverer of good total returns. And as I've said before, because cap rates in office are virtually 150 bps above where they were pre-pandemic, whereas other sectors have more or less got cap rates back to pre-pandemic cap rates. The total return proposition for prime office is pretty strong. So I think we'll continue to get good demand in convenience retail, logistics. And I think, as I've said on a couple of occasions, I think office might surprise everyone over the next 2 or 3 years. So overall, yes, I don't really see the latest sort of gyration in long-end bonds sort of material having an impact for all the reasons I just outlined.
Suraj Nebhani: And if I can just ask one last question from Anastasia, please. Around the costs in the funds management division, the $73 million, that seemed reasonably high compared to first half last year. Is there a skew Anastasia there to the first half this year or maybe expectations for the full year, please?
Anastasia Clarke: Thank you, Suraj. Not a particular notable skew to call out. I did say that it's variable costs, employee costs and payroll tax, and it's really associated with the outperformance we've achieved in the business. You've seen 2 earnings upgrades and associated with that outperformance, obviously subject to Board discretion, but there's an accrual there for further short-term incentive and the payroll tax that goes with that.
Operator: Our next question comes from the line of Solomon Zhang with UBS.
Solomon Zhang: First question was just, I guess, in relation to the volatility in global capital markets that you referred to in your opening remarks and the result announcement. You've mentioned that, that's increased the institutional demand for Australian property. Just wondering if you've got any data points around this. Are you seeing an uptick in year-to-date inbound inquiry and appetite to deploy on the platform?
David Harrison: Look, as a broad statement and every pension fund or super fund is different. But what we're seeing is a reduction in allocations to international listed equities. The -- I'm not sure I'm necessarily seeing an absolute reduction in allocations to domestic equities. If you sort of think about the private markets and most pension funds have people running listed equities, fixed income and private markets. And within private markets, you've got property, infrastructure and private equity. We are seeing globally a lower new investment into private equity because it's well understood that private equity has materially increased their investment holding periods, and therefore, the cash coming back to investors out of realizations from private equity has severely been reduced. So we think we will be a beneficiary of incremental dollars not going into PE and sort of coming into property. Infra has obviously sort of performed pretty well, but it's often very lumpy, the new deployment opportunities that exist. So all of that sort of puts it into, I think -- property into a basket that will have demand. And then when you split the world into regions, I'm not sure we're seeing a lot of narrative around incremental CapEx going or investment into U.S. property from global investors who need to make a choice where they want to invest. We're certainly seeing a good acceleration in demand out of European pension funds wanting to sort of invest in Asia Pac. And the backup in bond yields in Japan is actually helpful because most Asia Pac core capital really doesn't see core markets outside of Japan and Australia. Most of the other options are sort of seen as a little more volatile and higher risk. And with the backup in bond yields in Japan, there's some question marks around whether or not the 30-year yield spread play where there's not a lot of capital growth and/or potential negative capital growth. Now a lot of people are starting to wonder whether there is going to be negative capital growth with the backup in Japanese bonds. So all of that sort of means we're getting accelerated demand for investment in Australia. And as the biggest player in the country across all the sectors, we're a natural port of call for this capital. And we just don't wait for them to walk into 1 Martin Place. I've got a team traveling the world regularly talking to capital. So I sort of feel that we're in a good position. Australia is generally in a good position. And I think we're going to see, as I said earlier, both core value-add and opportunistic risk capital wanting to get deployed in Australia.
Solomon Zhang: That's good color. And as a follow-up to that, would you have an estimate of where property allocations might sit versus their strategic asset allocation targets? I know we have good visibility into the Australian super fund data, but less into offshore.
David Harrison: I mean I think even the Australian super fund data is very different, whether it's a defined benefit fund and accumulation fund. But it's a broad cross-section, and this is all available on APRA. I'd say domestic super allocations to property could range anywhere between 6% and 13%. We've found global capital typically would have a higher allocation at the bottom end. And in some cases, I've seen allocations up to 17%, 18%. But if you want it at a rough rule of thumb, I'd say 9% in domestic and 10% or 11% to 12% for international capital. And then depending on the particular partner, whether European -- whether it's a pension fund or a sovereign wealth fund, some of them are very opaque in their weighting. So it's difficult. But all I care about is do people have incremental appetite and everyone I talk to has got incremental appetite. So that hopefully gives you the color.
Solomon Zhang: Maybe just a final question for Sean. Just on the $5.5 billion living and mixed-use pipeline. Can you just give us some math sort of how you've built up to that amount, i.e., maybe just how many lots rough area of value per square meter? And can you just confirm whether this is assuming -- you assume you hold 100% of the project equity at the end? Or do you assume that you bring in a capital partner for part of that stake?
Sean McMahon: Yes. Thank you. Look, that's the pipeline completion value on the assumption that we build out the strategic planning approvals we've delivered over the last year or so. So in terms of optimizing our existing assets, which is the real strategy, that's a big accomplishment, which leads to $5.5 billion. And that's more recently, a material addition was Gordon Shopping Center, where we just got a set amendment for a potential $1.6 billion mixed-use project. So we now have the optionality to bring in new partners to strategically develop these assets out or we can optimize the existing assets as they are and trade them for a premium. I think the main thing is we have optionality now to grow in these sectors, which is a new thematic, if you like, in the living space. But I might add that over the last 5 or 6 years since we've owned Folkestone, we've built out about 6 in global residential subdivisions, which has been very successful. So it's not a brand-new sector for us, but we're just optimizing the existing assets that gives us optionality to deliver future earnings in different spaces in the future. Do you want to add to that, David?
David Harrison: Yes, I'd just add, over 95% of the gross completion value is build to sell. So one of the reasons why pension capital likes build-to-sell is over the course of a sort of 3- or 4-year project, they know they're going to get their money out plus their profit because that's the nature of build-to-sell and there is absolutely no way we're funding any projects without majority external capital. So I think that answers your question. I think the other thing I'd say is that we're probably -- when you think about this pipeline, we've added value to assets that we already own in the platform. We're not going out there buying overpriced Sydney land, which has been the case for a lot of people trying to do residential. We're actually cultivating and adding value to our existing owned assets or managed assets. So it's quite a different model. But depending on market cycles and obviously, us attracting external capital when we're ready to go, that's how these things will get developed out.
Operator: Our next question comes from the line of Simon Chan with Morgan Stanley.
Simon Chan: David, you talked about pretty successful fundraising campaigns over the last 6 months. Just wondering if you think office market now has stabilized to a point where flow of equity could come rushing back into CPOF, because from memory, you're going to kick off a capital raise there, right? Have you got any insights for us?
David Harrison: Yes. No, we already recently raised $0.25 billion in CPOF. I think as I said before, Simon, when I look at like-for-like cap rates for prime office versus the other sectors, they've got the most cap rate compression just to mean revert back to pre-pandemic levels. I think all the hysteria around work from home is dissipating quickly. You only have to look at the occupancies, the vibrancy in both Sydney and Brisbane. Obviously, Melbourne is going to have a slower recovery, but it also has got very little new supply, and we're starting to see double-digit, unbelievably double-digit net effective rental growth coming through in the Paris end of Melbourne, albeit off high incentive levels. But -- so yes, I think I've been saying for 12 months, I think you might find over a 5-year period, offices are sleeper in terms of inflows. Do I think that's going to be the next 6 months, 12 months, 18 months? I don't know. I can say we're having a lot of constructive discussion with investors and the smart ones who realize you want to get in early in a recovery cycle, not at the later end of it to maximize your IRRs, having a really good look at jumping in now. If you look at our acquisition of 1 O'Connell Street, that's a pretty big statement about where we think really strong potential growth is going to come in the prime core of Sydney. And all I can say is that we're looking to play that office recovery across core value-add and opportunistic. And I think there's a bit like I was saying about build to sell on our existing assets, it's pretty hard to go out there and buy a block of land and make things work. So quite often, as we've done with Chifley, we'll cultivate what we've already got. In Melbourne, about 8 years ago, we built another 26,000 meters on an existing 30,000-meter building, effectively didn't know me anything on the land, and I created 2,500 meter floor plates on the bottom 10 levels. And so I think there's different ways that you can play that market. But yes, I think office will provide sort of outsized go-forward equity IRRs compared to other sectors. And there'll be some that are sort of smart enough to get in early, and then there will be others that wait for a couple of years of solid NTA growth before they sort of jump back in. So that's the sort of landscape we're looking at.
Simon Chan: Fair enough. If I think about your guidance, originally, you were guiding to $0.90 for the year and now you're guiding to $1. Essentially, over the course of the last 6 months, David, you found an extra $50 million somewhere, right? That's not -- that's a sizable number. Like what has driven -- I know in your prepared remarks, you kept saying our business is better, but $50 million is a big number. Like did you just completely misread the market back in August? Or like where is the bulk of the $50 million coming from?
David Harrison: Well, first of all, if you think about $4.8 billion of inflows in 6 months, which is probably higher than any full year inflow we've ever had, even with my optimistic outlook, I didn't think we'd sort of raise that amount of capital. And obviously, there's some wins in there that we wouldn't have necessarily anticipated at the start, like the Challenger mandate. There's a few other things that are happening in the second half that we'll eventually announce. We've also done, I think, a good job in further recycling equity we had, selling it down to capital partners and then redeploying into new investments that has helped drive the PI line. So look, I've said it before, Charter Hall has historically been able to deliver very, very strong and consistent multiyear earnings growth after a correction cycle. If -- you're an analyst, you have a look at the history of Charter Hall's earnings. So we're in a positive momentum situation, but the last thing I'm never going to do is over guide based on, I might raise $4.8 billion of equity in 6 months. I'd prefer to guide where we have visibility. And if we can deliver upside through further deployment, particularly further equity flows, that's the way we've run the business for 21 years since it was listed. The other thing I'd say is, and I've called this out before, there's a bow wave or delayed impact on revenue and hence, earnings from strong inflows. If we have $4.8 billion in the first half, you won't see an annualized impact on that until FY '27. So if we can have another strong inflow year in the second half, so we've got an even bigger record of inflows in FY '26. The bow wave effect means you're not going to see a full year annualized revenue and EBIT impact from that until '27. So this is why we're pretty constructive about the future. And obviously, myself and the rest of the 600 team are out there raising more equity, continuing to do active leasing and grow the business. So hopefully, that gives you the answer that you wanted. Like if you're asking me why I didn't know we'd be at $1 when we guided $0.90, well, that's the answer.
Operator: Our next question comes from the line of James Druce with CLSA.
James Druce: I just wanted to clarify something on [indiscernible] I mean you've done 11.5% return over 10 years. Since inception, it's probably better than that. Is that in performance fee territory for '27?
David Harrison: Mate, I don't give you 1-year forward guidance, let alone 2-year forward guidance on anything. So all I'd say is you'll recall, we generated performance fees out of Charter in FY '19 and FY '20. As you point out, there's another measurement period in '27, what I would say to you is we're going to need a decent level of cap rate compression to get that back to the high watermark because your IRR calculation on all performance fees always goes back to time 0 and has regard for previously paid performance fees. But -- so I wouldn't say it's out of the question, but I certainly wouldn't say it's in the money at the moment.
James Druce: Okay. All right. And then just second question just on the $5.5 billion mixed-use opportunity. How do we think about the timing of getting further go to market for that? I mean it sounds like you've got all the pieces of the puzzle together, the strong demand in that sector.
David Harrison: You're talking about residential?
James Druce: Yes.
David Harrison: It's all about market cycles. So some of those have got Stage 2 planning approval like 201 Elizabeth Street and would be ready to go. Similarly, at Westmead, Gordon needs to go through another stage before it's fully ready to go. They're all income-producing brownfields opportunities. So we're in no hurry. So what I call the planets aligning is, a, having vacant possession and planning approval; b, having external capital partners to fund it with us maybe doing a bit of a co-investment and more importantly, our team having conviction that's the right time to go. Now if you think about build-to-sell, you're not going to start construction on any build-to-sell without a significant level of presales. So if I sort of think about all of that, you need the planets to align, including presales, so you can get nonrecourse project finance to -- like anything, you've got to match the equity funding with the debt funding and presales for you to start construction. So that's how we're going to prosecute those development opportunities. Whilst residential, particularly luxury REITs such as 201 Elizabeth Street is strong. We think there will be very, very strong demand for something like Gordon. The reality is you've got to make all the planets aligned, including getting fixed price, construction contracts that makes sense. Fortunately, we're starting to see some deflation in construction pricing in industrial, where we've let a lot of building contracts well below what it would have been a year ago. But it's still -- it's not easy, as you probably heard from some of the on-balance sheet resi developers. It's not easy to sort of lock down decent pricing on construction. So they're all work in progress. And as I said, for the time being, we're getting good passing yields on those assets in the various funds and partnerships that own them.
Operator: Our next question comes from the line of Adam Calvetti with Bank of America.
Adam Calvetti: Just trying to reconcile, I mean, first half, you've done $6.6 billion in acquisitions, transaction revenues, $32 million. I mean last financial year, you did about half the transactions and the same transaction revenue. So I mean, is there some unrealized acquisition fees there? Are they going to fall into the second half? I mean, have you had to give away just the structuring of the different funds, some are having acquisition fees? What's really going on there?
David Harrison: Well, first of all, when CQR put its seed assets into the core retail fund and swapped part of them as an equity investment in that fund, we were not charging CQR divestment fee. So it's a good question. But what I'd guide is that not all of the transactions are generating fees if there's that sort of related party transaction. The other thing is that there is a bit of a deferment on transaction revenue if something wasn't completely unconditional at 31 December, it will become a second half transaction fee. And of course, as you'd expect, it's hard to charge a client like Challenger gives you a mandate an acquisition fee when they already own the assets. So that's the reason why when you look at those transaction fee revenue numbers versus the volume, it looks a bit different than prior years.
Adam Calvetti: Okay. That's pretty clear. I mean on the $1.9 billion of post [indiscernible] acquisitions, will those be generating any fees?
David Harrison: Yes.
Anastasia Clarke: In second half.
David Harrison: In the second half, yes.
Adam Calvetti: Yes, correct. Okay. And then I mean, just thinking -- if you just double first half, you're probably going to see some growth in PI and FM. We're above 100. So what's going to be dragging it down?
David Harrison: This is my 21st year doing this, and you guys always do the same thing. You just double all the first half metrics to get to a full year number. It's not that simple. And there will be various items. But like it's hardly a first half, second half skew at 50.5 versus 49.5. So I wouldn't get too excited about why aren't you doubling everything to get to a higher number.
Adam Calvetti: Okay. That's somewhat clear.
David Harrison: It's about as clear as I'm going to be. But look, what I would say, and I said it earlier, we have an expectation for the second half, which has sort of guided our recommendation to the Board who signed off on the guidance. If like the answer I gave to Chan earlier, if we pull off some miraculously great deals or inflows that drive our revenue and EBIT above our expectations, then we might beat that guidance. But at this stage, we're pretty comfortable with that guidance. And as I said earlier, I think you guys should be thinking about the bow wave effect and what this sort of equity flow and FUM growth is going to do on an annualized basis into '27 and beyond.
Operator: Our next question comes from the line of Ben Brayshaw with Barrenjoey.
Benjamin Brayshaw: David, I just have a question on the operating expenses. Historically, there has been a skew to the second half. How are you and the team seeing the composition for this financial year?
David Harrison: Anastasia?
Anastasia Clarke: Yes. As I said earlier, we're not seeing a very significant skew. You should see it as fairly in line in terms of the expenses we've reported in the first half is indicative of second half.
Operator: Our next question comes from the line of Tom Bodor with Jarden.
Tom Bodor: I just was interested in your acquisition of 1 O'Connell post balance date. I noticed that's not in the development pipeline for office. I'd just be interested in your thoughts around that project, the potential to maybe take onboard the other 50% over time and what scheme you think makes sense for the site?
David Harrison: When you buy a site consolidation, that's cost a vendor a lot of money, and we're buying it well below what they accumulated for, I wouldn't necessarily think the highest and best use is bowling over 5 buildings and creating a 100,000 meter tower. So we like that because we effectively think that we've got optionality. The sum of the parts and the realizable value on each of those buildings once Charter Hall adds its active asset management, it may well be a much better outcome than doing a major development, whether it's a 100,000 meter single tower or 250,000 meter towers. So we and our partners are just looking at that with lots of optionality. Clearly, we have a preemptive right over the other 50% when and if that fund decides to sell. Given what's happening with that series of funds, I'd be surprised if we -- they don't go down a path of looking to sell it. And if they do, well, we've got a preemptive right to look at it at sensible pricing. So because of all of that and because it's a Stage 1 DA, not a Stage 2 planning approval, I wouldn't see any potential development scheme, as I said, whether it's 1 tower or 2 towers sort of coming into our uncommitted development pipeline until we went down that path, if, in fact, we even go down that path. So I think that's the best way to answer it. But there's no doubt we have a Stage 1 planning approval for 100,000 meter tower that virtually has to be worth $40,000 to $50,000 a meter. By the time it's built, it's $4 billion or $5 billion of built form. So that is the way I sort of look at it. But by the same token, if -- unless it beats an alternative strategy, which is our base case, we won't be doing 100,000 meters of development on that site.
Tom Bodor: Yes. That's very clear. And then maybe just a follow-on question just around the valuation cycle is clearly troughed, all the REITs have seen positive revals. But if you look in the sort of smaller and mid end of the sector, there's still some pretty significant discounts to NTA. Do you see that -- how do you see that evolving? And what opportunities do you see in the listed sector over the next few years?
David Harrison: Well, as you know, we've been running prop securities money for a long time, ebbs and flows. But if you're sort of roughly -- say we've got roughly $1 billion in our various prop securities funds invested in the REIT sector. I think there's some dogs out there, and I think there's some really cheap buying. So as an investor in REITs on behalf of the balance sheet and our capital partners, I think there are some good buying. Just if you look at my 3 REITs, just because the market trades them at a discount to NTA, it doesn't mean that me or the rest of the direct buyers in the world don't think that NTA is real. You only have to look at how much money we've raised in our retail fund at NTA to show what the wholesale world thinks. So we're just going through a normal listed cycle where the listed markets are punitive on good quality portfolios for macro reasons. It doesn't mean I think the listed pricing knows what it's doing. And if you look at the history of this group, when the listed market is not pricing things correctly, we've taken opportunities to take REITs private. So I don't see that being any different over the next 10 years, for the last 15 years. So -- but we're not going to jump into something we don't like. And as I said before, the sort of planets have to align for that to work. But if listed markets keep mispricing things, well, yes, I think there's -- whether it's us or others, you're going to see a continuation of REIT take private. You've already got NSR on the block. We did HPI last year, a bit like virtually half of the listed infrastructure sector, it's all gone off the boil is because the wholesale capital is prepared to price the assets different to the listed market. So yes, I don't see it being much different, to be honest.
Operator: Our next question comes from the line of David Pobucky with Macquarie Group.
David Pobucky: Just the first question on Chifley South, if I could, 60% committed. Just curious to know how you're thinking about the pace of the lease-up and any anecdotes on current interest levels that you can provide, please?
David Harrison: I'm in no hurry. All of our internal forecasts suggest to me we're going to be getting well into double-digit net effective rental growth in the core of Sydney CBD, and we're really the only new top of the hill premium quality tower. There is one other, which I call down in Tank Stream is nowhere near the sort of level of what Chifley South is. And to be honest, the achieved face and net effective rents sort of prove that. So yes, we'll be patient about how we do deals in the rest of the tower. I think we'll probably get -- of the 20,000 still to lease, we'll probably get 10,000 done with sort of multi-floor tenants and the rest of it will be whole floor tenants who literally will have no other choice to go into a whole floor premium grade tower at the top of the hill. So I think we're going to get a very good result on both the rents and the end value of that new tower. So yes, I'm very relaxed about being where we are with 60%, but it's fair to say I think it will be higher than that in June and then higher again in December. And I'm not too much in a hurry given the strong growth in rents.
David Pobucky: Just a couple of quick ones for Anastasia. Just firstly, around tax expense. I think the rate was around 18% versus 23% in the PCP, just the driver of that and how you think about the tax rate going forward?
Anastasia Clarke: Yes. We've done some cross-staple capital reallocation, $400 million in the year prior and $200 million recently. And that certainly has particularly the prior one had a result in lowering our effective tax rate on CHL side of the staple by about 5 percentage points is our estimation for FY '26.
David Pobucky: And just a second one around where your weighted average debt margin currently sits and how much that's come down by versus last year, please?
Anastasia Clarke: For the head stock main balance sheet, it's come down from 1.65 by 22 basis points. I don't necessarily think it will land there. We've got some further plans around refinancing, which actually translates right across the platform. We talked -- we -- the result today was $10 billion of refinancing, and we're accelerating that pace all throughout the second half. And so across the platform, we reduced margins by 27 basis points, and we expect that to build as a number as we get through that refinancing program just because credit markets are very, very strong. And we're also wanting to lock in the higher covenant headroom that we're achieving across the platform.
Operator: [Operator Instructions] Our next question comes from the line of Richard Jones with JPMorgan.
Richard Jones: Just interested in your high-level views. So obviously there were market discussion about AI and the potential impacts for office. So just interested in your views and the associated views of capital as to whether that may delay potential office investment.
David Harrison: Look, there's a lot of theories out there. And I think there's an unnecessary focus on white collar employment versus all sectors of the economy. We're seeing a massive acceleration in automation going into warehousing. So whether you want to call it technology or AI driven, like the reality is we're seeing an acceleration of what I've seen for 20 years in terms of blue-collar workers being in warehousing, being replaced with automation. In terms of the office markets, our view is that if sort of processing type roles are going to be most at risk from AI, we think that's going to have an outsized impact on suburban office markets as opposed to sort of core CBD, which is virtually where most of our assets are. And look, right now, we're continuing to do lots of leasing with both whole floor and multi-floor tenants. And I'm not seeing any planned reduction in floor space when people are signing up on 10-year leases. So I think that just reflects that the whole corporate world is not quite sure whether headcount is going to be materially impacted or whether there's going to be a reallocation of roles and/or whether AI is simply going to augment productivity rather than replace human labor. So that's sort of how we're playing it and have a very strong view that the very best modern office buildings in the best core markets will prosper. Right now, who would have thought the net effective rental growth in Brisbane is higher than the Sydney CBD. But that's what's happening. It's tightening up very quickly up there. We're fortunately sort of be in high conviction on Brisbane in core CBD for a long time. So I don't have the answers. I don't think anyone's got the answers. But I think if you're going to shape your portfolio towards the very best locations and keep them as modern and as relevant as possible, you'll do better than a lot of other buildings. Our team have constantly reminded me that virtually 90% of all vacancy in most markets, but particularly in Sydney, sits in about a dozen buildings. And will be no surprise. Most of them are sort of older buildings that haven't had capital invested in them and aren't necessarily in the sort of absolute core locations. So I think each market will be very bifurcated by the quality of the building and its location, and we'll continue to see sort of, if you like, centralization. That's why I've never like North Sydney, we're seeing a centralization of relocation, tenants relocating into the city because the new metro basically has taken away the time advantage that used to exist for people to locate in North Sydney. We're also seeing a flight to modern quality. We've secured ING Bank to move from a pretty old boiler in 60 Margaret into a modern 1 Shelley Street building. So I think these are the sort of bifurcation trends we're seeing. And that's why you'll see us continue to have modern buildings in good locations that are going to attract the tenants. So -- and if anyone else can give you a better answer on the future impact of AI, please let me know.
Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to David for closing remarks.
David Harrison: Okay. Thanks once again for your time. And I'm sure we'll be meeting various people at investor meetings following the results. Thank you.