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Operator: Welcome to Mirvac Group's First Half 2026 Results Briefing. [Operator Instructions] Please be advised that today's conference is being recorded. It's now my pleasure to hand over to Mirvac's CEO and Managing Director, Campbell Hanan.
Campbell Hanan: Well, good morning, everyone, and welcome to our half year results call. Joining me is Courtenay Smith; Richard Seddon; Scott Mosely; and Stuart Penklis. I'd like to begin by acknowledging that we present today from Gadigal land, and I'd like to pay my respects to elders past and present. At our full year results in August, we spoke about the momentum that was building across the business. So it's pleasing to present our results today having delivered a strong half year performance and even greater visibility of earnings growth in FY '26 and beyond. What you'll notice in these results is a material pickup in residential sales in both build-to-sell and land lease, like-for-like income growth in all of our asset classes, positive leasing spreads in all of our asset classes, and valuation growth in all of our asset classes. You will also notice that we've made significant inroads in securing future development pipeline opportunities beyond FY '28. And we have continued our strong track record of capital partnering, completing a major 50% joint venture with Mitsubishi Estate at Harbourside, a key objective at the start of the year. We've recapitalized our LIV BTR fund with Australian Retirement Trust, positioning the fund for growth. And we've completed a $430 million capital raise within MWOF. It's been a very busy start to the financial year. You can see the solid progress across all parts of the business with every business unit contributing to the 10% growth in group EBIT. EPS was up 5% and NTA growth has returned, increasing $0.04 to $2.30 per security. It's also pleasing to see headline gearing moderate to 25.8%. We are also executing against our key strategic objectives. Two years ago, we outlined a focus on enhancing the quality and cash flow resilience of our investment portfolio, and we've made excellent progress with our industrial and living EBIT up 15% year-on-year. Our office portfolio allocation has reduced from 65% to 51% today. And importantly, we've almost doubled our exposure to premium-grade assets over the past 6 years to now sit at 60%. Premium grade is the most resilient asset type in office, and this is reflected in our consistently lower vacancy rate. Our repositioned portfolio is now delivering strong operating metrics. As mentioned, each asset class has positive re-leasing spreads, positive like-for-like rent growth and positive valuation growth led by build-to-rent, which illustrates our confidence in the growing capital demand for this asset class. We have a strategic objective to be the leader in the living sector, and we've made excellent progress here. We now have one of the largest operational BTR portfolios in Australia and recent development completions are leasing well. The fund's recapitalization will support future growth with 2 new BTR projects identified. Our growing land lease portfolio secured another 2 sites, bringing the platform to over 7,500 lots, with sales in the first half up 50%. This is becoming an increasingly important part of our strategy and provides future opportunity to accelerate our MPC business. And our creation capability is a key differentiator, and we're unlocking value and improving returns with residential sales up 38%, margins increasing to 22.5% and positive leasing in all of our developments. The execution of these initiatives is providing enhanced visibility of earnings growth in FY '26 and beyond. Our existing investment portfolio continues to grow its earnings contribution with a further $100 million of future NOI currently in production to be realized over the next 3 to 4 years. We also have additional NOI to be realized from our land lease and uncommitted commercial development pipeline. Our committed developments will also drive a $2.3 billion increase in our funds under management across our established growth platforms as they complete, generating new recurring management fee streams, with further fund growth to come from the deployment of recently raised capital across MWOF and further expansion of our LIV BTR fund. Our commercial development pipeline will unlock development profits and development management fees in coming years, along with NTA gains as the projects complete. Our residential growth outlook is supported by a significant step-up in active MPC projects, where we expect to move from 11 communities last year to 16 over the next 12 to 18 months and a step-up in apartment completions on normalized margins. This year, 2 new MPC projects have had their first releases with near sellouts of both. Our recent restocking initiatives support the next wave of value creation opportunities beyond 2028. Sustainability remains important to our business. With 80% of the largest corporate tenants having net zero targets in place, we remain focused on reaching our net zero goals by 2030. This month, we launched our first ever integrated Mirvac brand campaign, which you may have seen at the start of today's webcast. This campaign highlights our amazing brand and celebrates our imagination as our unique competitive advantage. We've been keeping our brand a secret for too long, and this campaign will make sure that we share that story more broadly to raise awareness and enhance value across the group. I also want to call out our recent efforts in learning and development with the continued rollout of our Mirvac Masters program. This is a series of university-style modules across development, asset management and investment management that have been accredited by the University of Sydney. This investment in our people has been recognized as the best learning and development program in Australia. Our employee engagement has returned to top quartile and is an important reflection of our culture and ability to attain and attract talent. With that, I'll now hand over to Courtenay to talk through our financial results.
Courtenay Smith: Thank you, Campbell, and good morning, everyone. Today, we're pleased to share financial results that reflect the effective execution of our strategy with increased contributions from every part of the business and a strong balance sheet that positions us well for future growth. Firstly, to the earnings result. We delivered a strong first half with operating profit after tax of $248 million or $0.063 per stapled security, up 5% on the prior half. The investment segment contributed $307 million, up 2%, driven by development completions in living and industrial and improved leasing outcomes in retail. These were partly offset by office asset sales. The funds segment contributed $19 million, up 38%, driven by the completion of 2 further assets in the LIV BTR fund, along with improved asset valuations and increased leasing activity. The development segment contributed $111 million, up 37%. Within this, commercial mixed-use was $27 million with contributions from our committed projects such as 7 Spencer Street and 55 Pitt Street as well as development management fees from Harbourside. Residential contributed $110 million, up 9%, reflecting higher settlement volumes, improved average sale prices, contribution from the sell-down of Harbourside and development management fees from joint venture projects. Net financing costs were $129 million, an increase of $19 million compared to the prior half, primarily due to lower capitalized interest. This was partly offset by a decrease in gross interest expense, we are seeing -- where we are seeing the benefit of reduced debt levels and lower cost of debt. Our statutory profit for the half was $319 million, significantly higher than the prior half and includes $120 million of positive investment revaluations across all sectors. In summary, strong execution over the past 6 months has yielded increased contributions from every part of the business. Turning to the balance sheet. We've continued to actively manage capital, and our balance sheet is in a strong position. Gearing has reduced to 25.8%, well within our target range, and we have maintained strong credit ratings and have interest cover of greater than 3.5x, well above our covenant requirement. Our average cost of debt is 5.3%. And after refinancing $1.3 billion of bank debt at average margins of around 115 basis points this half, we have a further $3 billion of existing long-term debt with average margins of around 180 basis points, representing an opportunity to capture upside as these facilities mature in coming years. Following the creation of the Harbourside partnership with Mitsubishi and the sale of 25 (sic) [ 23 ] Furzer Street now completed, we have clear pathways to fund committed projects and are now focused on future growth opportunities. New opportunities acquired this half have been achieved on capital-efficient terms, ensuring that we maximize returns and make the most effective use of our capital. To support these and other future opportunities, we have multiple sources of funding available to us, providing flexibility as we grow. We have $1 billion of available liquidity with no maturities in the next 12 months. We have a distribution policy of between 60% to 80%, balancing distributions with retained earnings to fund development. And our team has built a strong and consistent track record in active capital management with over $9 billion raised over the last 5 years, $6 billion from capital partners, improving the velocity of our development capital, unlocking value, strengthening returns and generating management fees, and around $3 billion of asset sales, which have reweighted and improved the shape of our investment portfolio. In summary, as a result of active capital management, our balance sheet is in a strong position, and we are set up to support future growth. I'll now hand over to Richard.
Richard Seddon: Thank you, Courtenay, and good morning, everyone. We continue to execute our strategy with discipline and focus. We've up-weighted living and logistics through development completions, while sharpening our office exposure through the sale of non-core assets. This has further improved the quality, sustainability and resilience of the portfolio. The outcome is clear, 98% occupancy, 4.4% like-for-like growth and positive valuation movements in every sector. What I'm most excited about is how this positions us for the future. We have clear visibility of growth with further opportunity for rental reversion, $100 million of future income from our committed development pipeline with strong delivery and pre-leasing momentum and a resilient valuation outlook underpinned by robust fundamentals at a time in the cycle where quality and location matter. In office, we've fundamentally repositioned the portfolio for a market recovery that rewards quality. 60% of our office portfolio is now premium grade, up from 34% in 2019, and the benefits are evident in the numbers. Occupancy is strong. Like-for-like growth is positive and successful leasing progress has reduced our forward expiries to just 12% over the next 2.5 years. Market conditions are improving. We're seeing positive net absorption in all major CBDs, double-digit effective rental growth in Sydney and Brisbane and the lowest supply outlook in 30 years, potentially on record. Our committed office developments provide clear visibility of future income and further uplift portfolio quality. In industrial, our strategy to up-weight to the sector through development continues to deliver. NOI is up nearly 80% in the past 7.5 years. Occupier demand has clearly shifted towards quality, and our 100% Sydney focus positions us extremely well as evidenced by strong leasing performance and recent completions at Aspect. Further growth is underpinned by around 17% of under-renting to play for, continued delivery of our secured pipeline with the first stage of SEED, now DA approved and construction set to commence ahead of the Western Sydney Airport opening later this year and structurally low vacancy with constrained supply in Sydney. Industrial remains a long-term growth engine, and our Sydney-focused portfolio is exceptionally well placed. In retail, we continue to benefit from the strength of our urban catchments as highlighted in the operating metrics on this slide. The metric I'm most focused on is driving improved sales productivity through active management of our assets. In fact, of the 34 new partners we've introduced in the past 18 months, we've already seen a 50% improvement in turnover. With resilient trading conditions, extremely tight occupancy and a continued decline in retail floor space per capita, we're confident in the opportunity for further growth. So retail is not just about the footprint, it's about driving productivity and our centers are delivering. Our living exposure continued to expand and perform with EBIT up 15%. Our build-to-rent portfolio of around 2,200 completed apartments is delivering exactly the resilient performance we expected with 6% like-for-like growth and the strongest valuation uplift in the portfolio at nearly 4%. LIV Anura and Albert are leasing up strongly with Anura already at 76%. In land lease, momentum remains very strong. New home settlements were up 21% in the period. Sales are up 50%, comparable EBIT growth is up 50%, and we expect to be selling across 7 new projects over the next 18 months. We've increased total platform sites by 23% since acquisition just over 2 years ago with a further 580 sites secured. So living is performing very well and provides significant runway for further growth through these 2 established market-leading platforms and will continue to be an increasingly important part of our portfolio. I'll now hand to Scott.
Scott Mosely: Thanks, Rich. Good morning, everyone. We've had an amazing period of execution in our funds business, which continues to attract quality institutional capital to the platform, which is attracted to our asset creation capability, our deep sector expertise, our alignment model and our strong fiduciary mindset. Our third-party capital has grown to $17 billion with the funds under management component growing by over $1 billion in the 6 months, reflecting our BTR completions and broader valuation growth. Capital demand for our established vehicles across living, office and industrial remains strong, with all 3 vehicles completing equity raisings or asset acquisitions over the last 12 months. All have visible growth opportunities and importantly, have capacity to invest. The recapitalization of our BTR fund with Australian Retirement Trust marks an important milestone, not just for our fund, but for the entire sector. Our LIV BTR fund now has 5 income-producing assets, generating core to core plus inflation-linked low volatility returns. ART's investment reflects the unique quality of our platform and the attractiveness of this living asset class to sophisticated domestic investors. ART is aligned to our 5,000 apartment medium-term target, and we now have 2 new opportunities in exclusive due diligence since closing the recapitalization in December. MWOF's $430 million equity raise from a broad range of investors demonstrates there is capital demand for office portfolios with the highest quality assets in the best locations. The fund is extremely well placed to assess investment opportunities at this point in the cycle, having no redemptions in the queue, no secondary units being marketed, gearing at 26%, a reaffirmed A- credit rating and further inbound equity interest. Over the period, the fund was the #1 performing fund in the MSCI Index and transacted on over 100,000 square meters of leasing deals at greater than 8% spreads. Our Mirvac Industrial venture has grown to $1.7 billion over the last 3 years, and we've got clear visibility for further industrial partnering opportunities now that Aspect Central and SEED Stage 2 are set to introduce capital over the next 12 months. We have embedded FUM growth of approximately $2.3 billion as our development assets reach completion, but that is before we consider on-market opportunities and our replenished development pipeline. So there is clearly momentum in the business with $13.9 billion of high-quality institutional capital coming on to the platform in the last 3.5 years. This ability to continue to attract highly aligned capital not only provides us with diverse funding sources to expedite our development pipeline, but it is also generating recurring management fees and co-investment income across our development, asset management, investments and our funds business. I'll now hand to Stu.
Stuart Penklis: Thank you, Scott, and good morning. We've had a strong first half with significant momentum in the development business with sales up 38%, a strong recovery in margins and significant restocking of our pipeline. This momentum gives us clear visibility of earnings and the recovery of returns. The success we've had in restocking our pipeline includes securing 3 major opportunities at the right time in the right locations and in the right structures that will drive the next wave of value creation and growth for Mirvac. These transactions are aligned with our strategy and leverages our core capabilities and are expected to deliver above hurdle returns with future capital partnership potential. At the upcoming new Hunter Street Metro in the heart of Sydney CBD, we expect to deliver approximately 70,000 square meters of premium state-of-the-art office space with an end value of around $3 billion and a yield on cost above 6%. With expected completion in 2034, Hunter Street will deliver into a deeply undersupplied market, positioning us extremely well for the next commercial cycle. At Blackwattle Bay on the site of the former Sydney Fish Market, we expect to deliver approximately 800 apartments in a precinct we know extremely well in close proximity to our successful Harold Park and Harbourside developments with first settlements targeted for 2030. Finally, at Karnup in Western Australia, we expect to deliver approximately 1,500 new homes in partnership with the WA government in one of the fastest-growing catchments in Australia. Turning to commercial and mixed-use. We have good visibility of earnings over the next few years, underpinned by significant progress on our committed projects. Construction costs are stabilizing with stronger competitive tendering and programs returning to normal, creating a more supportive environment for new project commencements. Pre-leasing momentum is also encouraging, particularly given the tightening market conditions. At 55 Pitt Street in Sydney, we have AFLs in place for 40% of the building, including Baker McKenzie, Aon and MinterEllison and discussions on the remaining space are progressing well. Construction is advancing with the new iconic terra-cotta facade installation now well underway. At 7 Spencer Street in Melbourne, construction remains on track with practical completion expected in the half. A new heads of agreement has increased leasing to almost 25%, and we're in advanced discussions that would take pre-leasing towards 60%. At Aspect Industrial Estate in Western Sydney, we completed Aspect North and Aspect South to follow this half. These precincts are now 91% leased. At SEED, adjacent to the new Western Sydney Airport, we've received Stage 1 DA approval with construction to commence in the coming weeks. Across these major projects, including Harbourside, these projects will generate significant and valuable development management fees during construction. Turning to residential. We delivered a strong first half with momentum building across all key metrics. Sales were up 38% year-on-year, supported by particular strong growth in our masterplanned communities with Victoria up 99% and New South Wales up 141%. Leads were up significantly with the December quarter delivering the highest level of inquiry in 4 years, overcoming market sentiment around increasing interest rates. Settlements were up 22% year-on-year, and we're now 90% secured for full year with a notable improvement in gross margins. Our focus on design, quality and investment in upfront amenity continues to differentiate Mirvac and win market share. Our projects are attracting upgraders and downsizers who have built up significant equity, ensuring demand across our portfolio remains resilient through the cycle. We continue to focus on innovation and modern methods of construction and completed our first volumetric prototype prefabricated home at Cobbitty. Capital partnering will remain a key feature of our strategy, helping us unlocking earnings, recycle capital and enhance portfolio returns. A good example of this is our recent JV with Mitsubishi at Harbourside, which unlocked value and created capacity for investment into future opportunities. Our restocking efforts over the past 2 years have been significant with more than 12,000 lots secured in capital-efficient structures and on above hurdle returns. We've made strong progress on rezoning and planning across our residential business, including at Wantirna South in Melbourne, the largest infill housing development in Victoria, which will deliver more than 1,700 built-form homes. At Green Square in Sydney, we have converted proposed commercial to residential with the project expected to deliver over 1,300 homes into this new town center. The underlying market fundamentals remain supportive, including strong population growth, continued undersupply, resilient house price and rental growth expectations and an increasingly supportive state planning process. And it's important to note that we remain uniquely positioned across the full residential spectrum: growth corridors, middle and inner rings with the capability to deliver land, built-form housing and apartments. This is a major competitive advantage in this point in the cycle and allowing us to provide diversity, which allows us to respond to the market swiftly changes in demand. Finally, our restocking success sets us up for a material step change in project activity. Over the next 12 months, we expect to launch 5 new developments, including our trading projects from 11 to 16. This activation is already underway with strong releases at Mulgoa, followed by the near sellout of our first release at Bullsbrook in WA just 2 weeks ago. First sales at Monarch Glen in Queensland are scheduled to take place in just a few weeks' time. We will also see a significant increase in apartment completions heading into FY '27 with 4 projects settling in the year. These are already over 60% presold on average, providing strong visibility of earnings. So with a material step change in sales activity, a recovery in margins and more new project releases to come, we are well placed to deliver continued momentum and growth across our development business. I'll now hand back to Campbell to conclude.
Campbell Hanan: Thanks, Stu. As you've heard this morning, Mirvac is in great shape, and we have now a balance sheet that can fund our growth. Our repositioned investment portfolio is well placed to outperform. In an environment of higher bond rates, the quality and location of what we own will become increasingly important for future total returns. We've made great strides in our capital allocation strategy and stand to benefit from organic like-for-like growth and new quality investment income as developments complete. We're seeing improved returns from our development business with a stabilization in costs, higher margins and strong sales volumes across our residential build-to-sell and land lease businesses, providing near-term confidence around earnings growth. Restocking our future development pipeline for FY '28 and beyond has been a key focus area. Securing opportunities at better than hurdle returns and on capital-efficient terms will be important contributors to future earnings. And finally, we continue to attract capital to invest alongside us, improving the capital efficiency of our business and boosting returns through the corresponding fee streams. We're pleased with our strong progress to date and are focused on executing our key objectives in the second half, particularly around residential settlements and capital partnering initiatives. We reaffirm earnings guidance of between $0.128 and $0.13 per stapled security and a distribution of $0.095. I'll now open up for questions.
Operator: [Operator Instructions] Our first question comes from Tom Bodor at Jarden.
Tom Bodor: I was just interested in your development expectations of $270 million of earnings this year. And just considering that in light of your $3.2 billion of invested capital, that return being below 10%, how should we think about this normalizing? Where could it get to over time as your 0 margin projects roll off?
Campbell Hanan: Look, thank you. Thanks for the question, Tom. And yes, without doubt, the development returns in the business have been hurt a little bit by the increased costs that we noticed in the last couple of years, but we're now moving through that, as you've seen, and we're starting to get a much better return on our invested capital. But Stu, did you want to talk to that?
Stuart Penklis: I think to Campbell's point, we are seeing improvement in margins across the portfolio, and that's a key focus of the business to continue to improve those returns. We've done some great restocking, as we mentioned, at above hurdle benchmarks. And as those projects start to commence and coupled with the projects in the field, as I mentioned, we're moving from 11 to 16 projects, all of which are performing extremely well. We'll continue to see improvement in the returns from the development business.
Tom Bodor: But from a ROIC perspective, I mean, can you get to mid- to high teens? Is that realistic?
Stuart Penklis: Yes. Look, as we said, we will -- with the roll-off of those projects that were heavily impacted by COVID over the last few years, we expect to get back to our through-cycle returns.
Tom Bodor: And then on the Serenitas minority or sort of JV partners, how do you think about funding the buyout of those partners and the timing of that intention you might have?
Campbell Hanan: Look, that's probably a little bit of a hard question to answer because it's obviously not our asset to sell. Yes, we are interested in the opportunity of increasing our exposure to Serenitas. Look, I think as we get our balance sheet in better shape, which has been a key focus for the last 2 years, it starts to open up opportunities. I think as liquidity in office markets and investment property full stop starts to improve, it gives us optionality. So to that extent, we'll just continue to monitor and respond to any opportunity that may present itself at a future time.
Operator: The next question comes from Lauren Berry at Morgan Stanley.
Lauren Berry: Just another one on land lease. Like you said multiple times how important this segment is to you going forward. I was just wondering if you've given any thought to potentially doing some land lease on balance sheet rather than in the Serenitas venture?
Campbell Hanan: Yes. Look, we have. We've got a really great platform in Serenitas as is, and we certainly have lots of future opportunity with our own land bank. And that's things that we'll consider over time as we understand the ownership opportunity.
Lauren Berry: Okay. And -- there's obviously been a change in the interest rate environment as reported. Could you please give us a little bit more color on how your January and February sales have been tracking and whether there's any incentives placed across the projects?
Campbell Hanan: Look, I might start, and then I'll hand to Stu. Look, I think our inquiry levels were similar in January as they were in December, and they're certainly similar again in February. Look, I just can't stress enough, there is a chronic undersupply of housing in Australia. And that chronic undersupply is going to be there for a while, and there is a lot of pent-up demand that is looking to find a solution to this housing problem. So to a certain extent, one interest rate movement is probably not enough to move the needle. We certainly haven't seen any evidence on the ground. And Stu, in particular, spoke to a recent release where we had 100% sellout in our Bullsbrook first masterplanned release in WA. Stu, did you want to add to that?
Stuart Penklis: Yes, Lauren, the only thing that I'd add to that is really sentiment around interest rates going up really occurred in September and October. And as I mentioned in my speech, we've seen just continued momentum across our projects, particularly from a leads perspective, leads are obviously the strongest they've been in 4 years in the December quarter, and that has continued in January and February. I think the resilience of our portfolio, particularly obviously not heavily reliant just on first homebuyers and that focus on upgraders and rightsizes, particularly the contribution coming through from the middle ring and particularly the contribution coming through from New South Wales exposure has just demonstrated, I think, the resilience of the portfolio that we have.
Operator: The next question is from David Pobucky of Macquarie.
David Pobucky: Strong first half result implies a 49%, 51% oEPS skew across the halves, so a bit better than we had expected. Did anything land in the first half versus your prior expectations of landing in the second half, particularly around CMU?
Campbell Hanan: Courtenay, do you want to take that?
Courtenay Smith: Thanks, David. Look, I think all parts of the business have performed well, which you can hear from the results. I think resi settlements performed a little better. The NOI uplift like-for-like growth was a little better. So I would say it's across the business, the performance has been strong, which is why we're indicating that all parts of the business is up.
David Pobucky: And just the second question on the office portfolio, 275 Kent Street and Westpac's 12-year lease there. If you can provide any update on that, please?
Campbell Hanan: Rich, do you want to take that?
Richard Seddon: Yes. Well, I think as we mentioned in the previous period, we've been busily leasing up a portion of the skyrise space, which was handed back. We've made great progress on half of that, which has contributed to the improved performance across the NOI line for our office portfolio. Westpac do have an expiry coming up in 2030. And naturally, we'll be progressing discussions on that one as we get closer to that time.
Operator: The next question is from Suraj Nebhani at Citi.
Suraj Nebhani: Two quick ones. Firstly, on the disposals, you called out $0.5 billion. Where are you looking to sell? And across the portfolio, should we see more potential for disposals? Or is this sort of the last year where we see a lot of disposals coming through?
Campbell Hanan: Look, I think so. Thanks for the question, Suraj. I think you'll continue to see sales as part of our longer-term strategy. But ultimately, we've got key strategy objectives in our asset allocation plan. And I'd just ask you to keep referring to that. You'll see that we want to keep trimming office, but certainly not premium grade office. We're probably slightly overweight retail at the moment. We're fast approaching market weight of where we want to be in industrial. So you'll still see a little bit of trimming on the edges. But the most important thing is obviously that we're adding a whole lot of new real estate to the portfolio, that $100 million of NOI we keep referring to is going to be an important ingredient in growing our investment portfolio. And we're focused on growing the investment portfolio contribution. This has been a part of the business that hasn't grown for a number of years. It's been a funding source to ensure that our balance sheet is in good shape. Now that the balance sheet is in good shape, for the first time in a long time, we've got a growth profile in the investment portfolio, which we think is very important.
Suraj Nebhani: Perfect. And one for Stuart on two specific developments. Firstly, on 7 Spencer, comfort levels on leasing that up before completion? And what sort of structure is there? Do you have to provide any guarantee? And then secondly, if you can clarify what happened on Green Square with the zoning conversion that you've talked about?
Stuart Penklis: Yes, certainly. So I'll start with 7 Spencer Street. As I said, during the period, our commitments have ticked up to 24%, and we've got good line of sight through negotiations at the moment to get us around 60% pre-committed as we complete that building in the second half. We're comfortable with the allowances that we have in the feasibility in terms of the balance of that space. Turning to Green Square. Green Square has obviously been a very successful and long-dated project with multiple stages. But however, more recently, that project has been called in or has qualified for a state government approval process. And essentially, as part of the original master plan, a segment of that site was earmarked for a 45,000 square meter commercial office building. We have been able to navigate through state government a pathway to convert that to residential. And ultimately, the next 2 stages of that project will deliver approximately 1,300 additional apartments to what has already been delivered into the precinct. So a very important and good outcome for Mirvac in terms of being able to pivot to residential and obviously respond to the need for critical housing here in Sydney.
Operator: The next question comes from Richard Jones at JPMorgan.
Richard Jones: Just in terms of the timing around proposed sell-downs of Aspect Central in Kemps Creek and Stage 2 at Badgerys Creek, do you envisage that will happen in the second half?
Campbell Hanan: We're targeting one of those for the second half. And then the other one is likely to drag into FY '27.
Richard Jones: Okay. And just in terms of the new BTR opportunities, can you comment on what yield on cost you would expect on putting new money into BTR and I guess, how you, I guess, justify that as the best use of capital?
Campbell Hanan: And I might turn to Scott for that, given it's a fund question.
Scott Mosely: Yes. Thanks, Richard. Firstly, I'd just say the recapitalization of the fund has allowed us to actually broaden the mandate of that vehicle. Previously, it was purely debt to core, and it's gone through a period of completing 4 developments, which is through, and now we're actually getting stabilized income. But with that new mandate, the vehicle now has the ability to consider not only debt to core, but stabilized income-producing assets as well as fund-throughs. And so the yield on cost will depend whether that's a fund-through deal or a full develop to core opportunity. And right now, we do see some opportunities to participate in fund-through deals where, as you'd expect, that yield on cost is lower, but we think that we can target in the range of 65 to 85 basis points yield on cost spread to core cap rate, which is making commercial sense for those investors.
Operator: The next question is from Ben Brayshaw at Barrenjoey.
Benjamin Brayshaw: A question for perhaps Stuart. If you could comment, please, on the production outlook for the communities business, just with the 5 new projects coming online that you referenced in the presentation. Just wondering whether that implies that communities can operate at a sustainably higher volume? And could you quantify roughly when that might be reflected in the sales or the settlement rates for communities, please?
Stuart Penklis: Yes. Look, I think you're already starting to see the tailwinds of those projects starting to contribute to our sales numbers. Obviously, over the second half of '26, just with our existing projects, we propose to release around 800 additional lots. And then the new launches in projects such as Monarch Glen and Bullsbrook, you'll start to see those also contributing. So it is a significant step change in terms of what the MPC business will be contributing to the overall portfolio from a volumes perspective. And I think importantly, what we've seen in recent times is, as I mentioned earlier, obviously, Queensland and WA continue to perform extremely strongly. We've seen New South Wales and particularly projects such as Mulgoa, Cobbitty and Menangle contribute significantly to the sales numbers. And we've obviously also now seen Victoria start to improve, particularly in the Southeast corridor. And that's reflective of, obviously, some of the comments I made probably at full year last year in terms of the immigration and the significant immigration that's happened over the last 24 to 28 months. And those immigration numbers now starting to contribute to sales sort of as they've settled and started to buy. So we'll continue to see a strong contribution from MPC, both in land, but also in build for housing.
Benjamin Brayshaw: And could you just give a high-level update on how the 3 Victorian apartment projects are tracking? Just interested in how confident you are in those being delivered at the target margins for residential? And any feedback on presales over the last 6 months? And finally, just a comment as well on Prince & Parade. It looks like the timing might have been pushed out a little bit. So if you could clarify that as well.
Stuart Penklis: No, Prince & Parade, firstly is still on target to complete next year. Albertine will be completing in the next few months, and Trielle will be completing in FY '27. So all those projects have held program, held budget. We have seen a tick up in sales. And I think we've moved from -- across those projects in '27, an uptick from 50% to 60% on average being presold. Inquiry has improved and particularly as we've started to complete the first wave of display apartments, again, very heavily weighted towards owner-occupiers, upgraders, downsizes. So we are seeing an improvement in the Victorian market, albeit it has been a pretty tough environment down there for the last few years, but we certainly feel like we've turned a corner there.
Benjamin Brayshaw: I'll just clarify my question around Prince & Parade, the annexures show that the expected settlement is now spread across FY '27 and '28. Hence, my question as to whether it's been deferred.
Stuart Penklis: No, no. Sorry, that's probably just the allowance in the settlement tail extending into '28, but the practical completion date hasn't changed. In fact, we're hopeful that we might be able to bring it in a month earlier.
Operator: The next question is from James Druce at CLSA.
James Druce: Can we just go through how you're seeing the second half this year in terms of residential margin? I think you commented on sort of Richard's project, a question around which commercial development profits will be coming through second half. But just also just comment on the settlement skew and how secured that is.
Campbell Hanan: So just on the -- maybe start with settlement skew, 835 settlements in the first half. We've guided to sort of 2,000 to 2,300. So clearly, we've got a skew to the second half. The timing of -- just in terms of sales, kind of just over 90% sold. So really, that comes down to risks around weather or risks around titling, which are risks that exist always. So we're working through those. We've got stock on the ground, which is the last 9-odd percent that we need to sell, which will help us get there. But we're largely through it. We've sold more of those through January and February as well. So that sort of feels okay. Is there anything on the development pipeline that you want to call out, Stu?
Stuart Penklis: No. I suppose the point I'd make is that, that remaining sort of 9-odd percent and the projects contributing to that 9% are achieving the required sales rates to hit our target. So we remain comfortable in terms of, obviously, the settlement range that we've provided. And I think the other question that you asked just in terms of earnings from CMU in the second half. And obviously, we spoke about the SEED project, and we also spoke about contributions continuing from 55, 7 Spencer Street and development and construction management fees coming through on Harbourside.
James Druce: Okay. And just on the gross margin, how you're seeing that in the second half?
Stuart Penklis: In line with what we've stated in the first half.
James Druce: Okay. And then just a question for Stuart. How do we think about restocking for the high density or inner ring projects? I mean it still sounds like only really the luxury projects stand up at the moment. Are you seeing any change there?
Stuart Penklis: Yes. Look, I think that we've been very focused on unlocking value from not only our existing pipeline. So Green Square is a great example where a rezoning and state government pathway has given us ability to obviously achieve additional yield and through conversion from commercial to residential. So that sort of middle to upper market, we think, continues to be very attractive for our business. Obviously, we continue to see a number of opportunities, particularly as planning progress has been made with state governments and the state government here in New South Wales is obviously very, very focused on the delivery of additional housing. So we're seeing a lot of landowners looking -- coming to Mirvac to look to partner. So that's really great in the sense that there's an abundance of opportunities. We're certainly picking the eyes out of the right opportunities. And to my earlier point, being able to recycle capital out of projects, bring capital partners in to ensure we've got the capacity to be able to pick up these opportunities at the right time in the right location is a key focus of the business. So I think we've obviously had a very successful restocking program over the last few months, and we continue to ensure that we're well positioned to be able to secure that next wave of opportunities in the inner and middle ring.
Operator: The next question comes from Cody Shield at UBS.
Cody Shield: I don't want to labor the point, but just to be crystal clear around Aspect and SEED, which one of those projects will be slipping into '27 in terms of partnering?
Campbell Hanan: Look, it's probably likely that Aspect Central will and SEED Stage 2 is more likely to fall into this year is sort of the target.
Stuart Penklis: And I might just add with SEED, we've been able to secure our Stage 1 DA, obviously, ahead of many in the precinct with the M12 opening later this year and the new Western Sydney Airport also opening, we're well positioned, obviously, with earthworks due to commence in the next few weeks. So an exciting time in terms of our opportunity to be able to capitalize on demand in that precinct.
Cody Shield: That's great. And then just a small one. There's been a change in the treatment of DevEx for land lease. Could you just walk me through the change there?
Campbell Hanan: Yes. Courtenay, do you want to speak to that?
Courtenay Smith: Yes. Look, I think the first thing to say is the land lease business is performing really well, as Richard talked about, sales are up. EBIT is up period-on-period. We've had a change in ownership on a like-for-like period. So it went from 47.5% to 40%. And then we have had a change in the allocation of some of the development costs. And the way to think about it is we're allocating some of the civil costs to the development to unlock the value of the home essentially. Longer term, you'll see that value come back in the NTA even from next year. And we've done that because we think that's the most appropriate treatment of those civil's costs to unlock the value of the home. But otherwise, the business is performing well. Richard has talked about the sales, as I said, and we're really happy with the performance of it.
Operator: The next question is from Adam Calvetti at Bank of America.
Adam Calvetti: Look, just on -- you've moved your -- you had a slide that showed the value creation of profit energy uplift that's been moved and you haven't disclosed where that value that number is. I think it was $540 million for the full year. Any idea of how that's trended or what we can expect?
Campbell Hanan: Look, probably part of that movement is timing. So as we finish projects, clearly, the value is created. You see that come through the NTA line, and there'll be more of that this year, particularly as we finish. We stabilize BTR assets, you'll see that start to participate in the income line and certainly Aspect South, which is due for completion shortly. And I think as Stu mentioned, now 91% leased, you'll start to see contributions to both NTA and contributions to income, which really will lead into a slight second half, but predominantly an FY '27 contribution.
Adam Calvetti: I mean just looking at the future years, is it still safe to assume that $540 million is intact?
Campbell Hanan: It will shift because we're actually starting to work our way through it. And I think the most important thing we're trying to highlight in this set of results is that, that earnings expectation that comes from delivering new projects, we're now actually finishing these projects. And so with that, you'll start to see the development contribution start to diminish because we're actually finishing projects. Hence, the focus for us now on earnings contribution beyond FY '28. We've got a pretty full pipeline up until '28. The focus beyond '28 has been important to us, and we're seeing some really good opportunities, which we've executed on, which we've announced today.
Adam Calvetti: Okay. Great. And then just on 7 Spencer Street, I mean, you've got some -- you've done one deal there, and you've got a percentage that's in discussions. How does those incentives levels track versus underwriting? Are they in into any of the development profit that you're expected in the second half and going forward?
Campbell Hanan: So Stuart, do you want to take that? But maybe just to start with, we are always updating feasibilities to ensure that they reflect current market conditions. And certainly, there's nothing that we're seeing or dealing which is irrespective of that at this point. But Stuart, do you want to add any further color?
Stuart Penklis: Yes. No, it's precisely that. The feasibility reflects where current incentives are at, and we've got adequate allowance to see the letup of that building through.
Operator: The next question is from Sholto Maconochie at Millennium Capital. Hello, Sholto, please ask your question. Okay. It seems we can't hear from Sholto. So as there are no further questions, I'll now hand back to Campbell for closing remarks.
Campbell Hanan: Well, thank you. Look, thank you to all of you for taking time today to hear our half year results presentation. We look forward to meeting with as many of you as we can over the coming weeks. But thank you for your time.