STGPFSTGPFOTC
Loading
Operator: Thank you for standing by, and welcome to the Scentre Group 2025 Full Year Results Update. [Operator Instructions]. Please note that this conference is being recorded today, Tuesday, the 24th of February 2026, at 9:00 a.m. Australian Eastern Daylight Time. I would now like to hand the conference over to Mr. Elliott Rusanow. Please go ahead.
Elliott Rusanow: Thank you, and good morning, everyone. Welcome to Scentre Group's 2025 Full Year Results Briefing. I'd like to begin by acknowledging the traditional custodians of the land I am on this morning and pay my respects to their elders, past and present. I'm joined on the call today by our Chief Financial Officer, Andrew Clarke; our Chief Operating Officer, Lillian Fadel; and John Papagiannis, Group Director of Businesses. At the end of 2025, we made some changes to establish a structure to effectively pursue our growth ambitions. Lillian was appointed Chief Operating Officer with her accountabilities expanded from customer community and destinations to also now include asset management, development, design and construction as well as data and analytics. Andrew's role and responsibilities were expanded to include leadership of our strategy to broaden the economic activities and usages across the group's substantial and unique land holdings as well as the development of Scentre Group's long-term strategic plan. Our strategy is to grow the economic activity that occurs at each of our 42 Westfield destinations located throughout Australia and New Zealand. This strategy continues to deliver strong operating performance with continued growth in earnings. Our focus is to attract more people to our destinations and give them reasons to stay longer when they are with us. By doing this, we continue to improve our ability to attract a broader range of businesses to partner with us at our Westfield destinations. Our strategy is also focused on how we better utilize our substantial and unique landholdings at our destinations to create additional long-term growth for the group. Our results in 2025 represent now our fifth consecutive year of earnings and distribution growth in absolute dollars and in per security terms, and we expect this to continue to grow in the years ahead. For the year, our earnings as measured by funds from operations increased by 4.9% to $1.18 billion. On a per security basis, funds from operations was $0.2282 per security and was ahead of guidance. I would like to thank and recognize our team for their continued focus on bringing our strategy to life each and every day and delivering these results, especially during a period where many of our team have been contributing to the careful and extensive work of the New South Wales State corridor as part of their inquest into the tragedy that occurred at Bondi Junction in April of 2024. In 2025, we welcomed 540 million customer visits, an increase of 14 million compared to 2024. This is the highest visitation we have seen since 2019. In the first part of 2026 up until last Sunday, customer visitation was 79 million, an increase of 3.1% compared to the same period in 2025. Our 42 Westfield destinations are already the most premium and highest quality portfolio in both countries. Our portfolio is irreplaceable. They are located in close proximity to 21 million people. Our destinations welcome on average, over 10 million visitors each and every week. A key driver for why people choose to spend their time at a Westfield destination is the approach we take to activations and events at our destinations. In essence, we work tirelessly to give people the reason to come and to stay longer when they do. During 2025, we held over 21,000 cultural and community events. A key component of this strategy is the partnerships we have with some of the world's leading consumer experience brands. Our strategic and very successful partnership with the Walt Disney Company now in its fourth year, continues to deliver popular events that appeal to multiple generations of our customers -- for our customers and drive even more visitations to our destinations. We are pleased to also partner with Sony Music to bring artists to Westfields for free live performances. We're continuing to build on the unique and compelling experiences we offer customers through our partnership with Live Nation. We have seen strong and ongoing customer appetite for music-led experiences, which extend the excitement and ability to purchase merchandise from major tours beyond the stadium. We also celebrate premier sporting events through activations in our destinations. So far in 2026, we have hosted live sites for the Australian Open tennis through Child 9 Summer of Tennis and events for the 2026 Milano Cortina Winter Olympics. This follows the successful -- the success of our activations for the Paris Olympics in 2024, again, giving people a reason to come and stay with us. And later this year, we have exciting plans to host similar fan activation sites for major sporting events, again, giving fans from all cultural backgrounds the opportunity to enjoy premier events in world sporting events amongst other fans and at the same time, do so at our destinations. We continue to strengthen engagement with our Westfield members and are pleased to see our membership grow by 11% to 5 million during 2025. Our targeted member-led strategies translates to increased frequency of visitation and dwell time. Our data shows Westfield members visit our centers significantly more often, spending more compared to nonmembers. Why giving people -- why giving people a reason to spend their time with us is so important is because it provides the opportunity for other businesses and brands the opportunity themselves to interact, engage and transact with our customers in the most efficient and productive way. For a business that interacts with consumers, our Westfield platform is the place where these businesses want to be. In 2025, our business partners achieved sales of $30 billion, a record for the group. This is $1 billion more or 3.6% higher than in 2024, with the second half of 2025 growing by 4.5%. In fact, the volume of sales our business partners generate today is $5 billion more than in 2019, pre-pandemic, highlighting the importance our physical destinations play in the lives of the customers we serve. And for the month of January of 2026, business partner sales grew by 5.4% on the same comparable period in 2024. As a result of the execution of our strategy, we are seeing continued strong demand by businesses for space in our destinations. With space becoming more scarce, we are focused on identifying and curating the most in-demand and relevant mix of brands, products and experiences to meet the dynamic needs of customers. In 2025, occupancy increased to 99.8%, representing our highest level of occupancy since 2013. During 2025, we completed 3,090 leasing deals with specialty rents increasing by 4.5%. For the year, new lease spreads were a positive 3.2%, and this spread increased to positive 3.5% in the second half of the year. Average specialty leases have a term of 6.8 years and 80% of our leases have annual escalations that are inflation-linked. Portfolio-wide, 45% of consumption occurs on site via experiences, making our destinations extremely productive and profitable for the businesses that partner with us. We remain focused on pursuing more experiential and lifestyle-focused businesses to continue to drive customer interest, engagement, dwell time and ultimately, sales. The group continues to repurpose existing space to enhance the customer experience and productivity of our destinations. During the year, the group completed the expansion of Westfield Sydney, featuring a 2-level Chanel boutique, Moncler and Omega. On behalf of Cbus Property, the group has completed construction of the adjoining commercial space and expects to complete the residential component of that same project in the first half of 2026. We have taken the opportunity to strategically downsize a further 3 David Jones stores, unlocking space that we can then redeploy to more productive brands that consumers want. We completed the $72 million redevelopment at Westfield Southland in Melbourne and the $48 million redevelopment of Westfield Burwood in Sydney, with visitation up 6.5% and 9.3%, respectively, in 2025. We also completed the $28 million redevelopment of Level 1 at Westfield Bondi in Sydney, repurposing existing space into health, wellness and fitness. This contributed to destination visitation growth of 8.5% in 2025. Today, we are excited to announce the commencement of a $240 million investment at Westfield Bondi to redevelop Level 6 into a world-leading lifestyle, entertainment and dining destination. This continues our ongoing reinvestment into our destinations to ensure they remain not only the places where people choose to spend their time, but also having a great experience when they do so, thereby increasing their propensity to spend even more time with us. Importantly, we are able to undertake these investments, continually enhance our Australia and New Zealand's most premium portfolio and experiences and at the same time, continue to grow earnings and distributions for our security holders. The group is one of the largest landholders in the most densely populated areas across metropolitan centers in Australia and New Zealand. Our Westfield destinations are located on more than 670 hectares of land close to major transport hubs and where millions of people live and work. Our destinations have the opportunity to play a far bigger role than retail. We are focused on generating greater economic activity in and around our destinations through the better use of our strategically located land for a multitude of potential usages, residential, student accommodation, health and education, just to highlight some of these potential usages. During the year, the group launched planning proposals at a further 6 Westfield destinations. Carindale, Mt Gravatt, Maringa, Woden, NOx and Southland with the potential to deliver more than 16,000 dwellings. I will now hand over to Andrew to present the financials.
Andrew Clarke: Thanks, Elliott, and good morning, everyone. Net operating income for the period was $2.1 billion, reflecting a strong 3.7% increase over 2024 and demonstrating our ongoing growth momentum. On a like-for-like basis, net operating income grew by 4.8%. This figure excludes the partial divestment of Westfield Chermside and the release of the expected credit charge in both 2024 and 2025. Management fee income grew by 6.3% for the period, driven by growth in property revenue and additional fees following the joint venturing of Westfield Chermside. Overheads rose by 2.5%. Net interest expense has increased by 0.6%, reflecting the part period benefit of the various capital management initiatives that we executed during 2025. The increase in tax from $39 million to $44 million is primarily due to our higher management fee income, growth in ancillary income and the impact of higher tax on New Zealand income due to lower interest rates. Project income for 2025 is approximately $2 million. As previously discussed at the group's half year results, this has been impacted by the higher-than-expected construction costs on the commercial and residential project on behalf of Cbus Property at 121 Castle Ray Street. Overall, funds from operations for the 12-month period was $1.18 billion, which grew by 4.9% compared to the prior corresponding period. Operating and leasing capital was $167 million for the year. The group has made significant progress in its capital management, funding and interest rate strategy. During 2025, the group successfully refinanced $2.4 billion of senior notes and subordinated notes, significantly improving the group's weighted average credit margin. In March, the group completed the make-whole redemption of all the remaining non-call 2026 subordinated notes totaling $1 billion, which had a margin of 4.7%. This was funded through a combination of a new issue of $650 million of subordinated non-call 2031 notes at a margin of 2% and $350 million of bank drawings. In September, the group issued $1 billion of 10-year senior notes in the Australian domestic market at a margin of 1.38%. In October, the group issued EUR 500 million or approximately $900 million of 8-year senior notes at a margin of 1.295%, marking a return to the European market. During 2025, the group has executed $3.2 billion of interest rate swaps, increasing hedge coverage to 99% as at January 2026 with an average base rate of 2.98% and 82% at December 2026 at an average rate of 3.01%. Our distribution reinvestment plan continues to be in effect for the February 2026 distribution. The DRP will continue to add to the group's various sources of capital. These capital management initiatives have enabled the group to achieve a weighted average interest rate of 5.6% for the year. Included in this was an average base interest rate of 3.1% and an average margin of 2.5%. This is a significant improvement in the average margin when compared to 2.8% in 2024. At 31 December 2025, the group had $5.2 billion of available liquidity. Following the successful joint venturing of Westfield Chermside in Westfield Sydney during 2025, raising $2.2 billion of funding, the group has today announced its intention to utilize some of this capital to redeem the USD 750 million or approximately $1.15 billion of 2030 senior bonds, which have a credit margin of 4.2%. In addition, the group has announced its intention to increase its investment in Carindale Property Trust with any acquisition of units subject to the prevailing market conditions and governed by the creep provisions of the Corporations Act. These transactions are in line with our capital management investment strategy to deliver long-term growth to our security holders. The statutory result was a profit of $1.78 billion, which includes an unrealized property revaluation increase of $456 million. All properties were revalued during the year. Overall, property valuations increased by 2.5% during the 12-month period, primarily driven by growth in net operating income. The weighted average capitalization rate for the portfolio remains at 5.43% at December 2025. Thank you, and I will now pass you back to Elliott for closing remarks.
Elliott Rusanow: Thank you, Andrew. Our strategy to grow the economic activity at our Westfield destinations by attracting more people to our destinations, broadening the businesses that partner with us and better utilizing our substantial land holdings is expected to continue to deliver long-term growth in earnings and distributions. Subject to no material change in conditions, the group's FFO is targeted to grow by at least 4% to more than $0.2373 per security for 2026. Distributions are expected to grow by 4% in 2026 to $0.1843 per security. Thank you, and I will now open the call for questions.
Operator: [Operator Instructions]. Your first question comes from Howard Penny at Citi.
Howard Penny: Congrats on the results. Just my first question about the subordinated note buybacks. I know you've done a lot of them and refinanced to cheaper versions of the subordinated notes. But could you just give us a little bit of an explanation of what subordinated notes would be potentially something you would consider buying if market conditions were more favorable?
Andrew Clarke: Howard, it's Andrew here. Look, I think what we've demonstrated over the last number of years is our strong intention to find opportunities to use the tailwind of refinancing both the subordinated notes and senior notes to provide growth for the group. And we've been very active in terms of doing that. We don't want to be telegraphing transactions in advance of executing on those transactions. But I think if you look at the past and the history and the proactive nature as to how we've gone about that, I think it's fair to say that we have a strategy over the coming years to continue to execute upon that opportunity. The fact that we raised $2.2 billion of funding through the joint venturing of Westfield Chermside and Westfield Sydney last year really creates a very strong balance sheet and credit metrics for the group and provides capacity to look at other opportunities in this space. Today, we've announced the make-whole of our 2030 senior bonds, $1.15 billion worth. So yes, I think it's -- you can see by our actions over the last number of years. And what I'm saying now, we have a strong intention to continue to execute on that tailwind for the group.
Howard Penny: And just a second question. Congratulations on your new role and part of that is unlocking the value of the land. Could you please give us just any updates on the residential opportunities that you see playing out in the portfolio?
Andrew Clarke: Look, I'll start, Howard, and I'm sure Elliott will have some comments as well. I think the first part is that the opportunity is really significant. And we've got 670 hectares of land, high-quality land located next to transportation nodes where people live and work. So we're really excited by that opportunity. The first part that we're focusing on at the moment has been around seeking planning permissibility changes and rezoning. We've had significant success in the lodgement of those planning permissibility changes. We've spoken about 16,100 potential dwellings that could be added to the sites where we've submitted those planning permissibility lodgements to date, but that opportunity is significantly more than that. I think the other part is that and Elliott highlighted, this is not just about residential. This is about the master planning of the landholdings that we have and how do we maximize the economic activity that's happening on those land holdings over the long term and thinking about densifying that land with much more -- much broader usages. And the other part that's really important is we see this as an opportunity not only to create additional land on the landholdings, but also how does this create this ecosystem that further drives better economic activity within the Westfield destinations as well. So we're really excited by it. We've had significant progress in terms of the planning process that we spoke about. We're also making a lot of progress in terms of our strategy at a group perspective, but also the strategy that we're looking at on an individual asset-by-asset basis.
Elliott Rusanow: Yes. And maybe just to add to that, and Andrew has adds to it probably the way I answer as well. So it's not much more to add. The part that I think -- and we purposely use the language of economic activity because it seems that when we talk about densification or anyone talks about densification, people jump to residential. And the reality is that our centers are located at the hub of economic activity, of which residential could be part of, but so many other usages. And so we're looking at how do we bring those economic usages into our landholding, which surrounds and is adjacent to our destinations. So whereas today, we have destinations surrounded by car park to have destinations that are not only surrounded by car park, but other economic usages, which could include -- which will include residential, but could also include other usages as well given their unique location and where they are. So the point being that we all recognize that residential or particularly build-to-rent is a nascent industry in this country and in New Zealand. And the opportunity of focusing on economic activity in a more broader sense, I believe, can actually bring forward the unlocking of those opportunities far quicker than relying purely on a build-to-rent market maturing to a state which becomes economical across the portfolio.
Operator: Your next question comes from Tom Bodor with Jarden.
Tom Bodor: I was just interested in the plan for the CapEx, $240 million at Westfield Bondi, how should we be thinking about returns on that spend?
Elliott Rusanow: Yes. So the way we should be thinking about it, and I think you should be thinking about this for all developments when it comes to retail, not just us, but all our peers. And that is that when often people talk about a stabilized yield of 6% or somewhere in that vicinity, they only have a focus on the new incremental spend and the return you generate on that new incremental spend and for some reason, conveniently forget about the impact on the remainder of the existing center. And we look at it as the total net operating income that we can generate from the entire site, not just the incremental CapEx that we spend. And so yes, we're targeting a very strong addition and a needed addition for Bondi in order to forge into a greater, again, use of economic activity in this state -- in this instance being longer trading hours, entertainment, lifestyle, wellness, food and beverage, obviously, is a big component of that. But the ultimate aim of that is to ensure that Bondi continues to generate superior long-term NOI growth year after year after year because it is the premium asset in Sydney. Arguably, the next one would be the Sydney CBD. So as a suburban center, there is absolutely no question that Westfield Bondi is the best asset from a suburban point of view. And the development on Level 6 will further enhance that, particularly its location in that demographic area. And the point out of that, and I think the proof point out of that is to see what you've witnessed at Carindale whereby the downsizing of David Jones and the repositioning of that has seen very, very strong compound annual growth of net operating income post that redevelopment, which was a downsizing of David Jones, but we've been adding on more and more food and entertainment to that. Obviously, it's a very easy case study to look at because it's a public company as a case study of one. But that notion of what return you're getting over a longer period of time is far more relevant than me telling you should be expecting to get a stabilized 6% yield at some time in the future, which somehow seems to get knocked out year after year after year. And there is no -- there is a reason why when you go back in history, we are able to generate significant growth in FFO per security. I think if you go back to 2022, when we did change leadership roles, our compound growth is in excess of 6% per annum versus our closest competitor who is spending a lot of money doing very large developments, who is actually generating less than 0 growth and is forecast to continue to be generating very low growth in earnings per security. And the reason for that is because we are focused on how we spend our capital to enhance the total growth and income that's generated from the asset so it remains relevant to the customer. So customers come more often, they spend longer with us, and that makes it more attractive for businesses to come. It's a very different strategy that we are undertaking, and it's a strategy that is designed to ensure that we're able to refresh, forge into new territories in terms of where we are taking our business away from traditional inverted commerce retail into other areas, which is businesses to consumer and at the same time, continue to grow in a far superior way our earnings and our distributions to security holders.
Tom Bodor: That's great color. If we were to sort of think about that maybe then in terms of numbers, is it fair to say on that spend in a holistic sense, double-digit IRRs on un levered. Is that the way you think about it?
Elliott Rusanow: That's absolutely, yes. So we would be expecting to deliver an IRR out of that total investment in Bondi. So if you were to take Bondi today, what's going to look like in the next 5 to 10 years, we should be expecting very healthy double-digit IRRs coming out of that asset.
Tom Bodor: Okay. Great. And then maybe just another one on capital. Obviously, there's some moving around refinancing senior debt, redeeming hybrids and other initiatives ongoing. How should we think about the balance between really optimizing the debt stack and also preserving financial flexibility and liquidity to execute on these growth plans? Like how do you sort of weigh that balance there?
Andrew Clarke: Tom, Andrew here. Look, we -- the way we look at it is that, firstly, every year, we would invest in the operating and leasing capital of the portfolio. That's a fundamental part of the business to make sure that we're maintaining the assets and all the equipment that we have within the centers, plus the leasing of new merchant sites where we do provide -- occasionally provide capital. The other part is that we expect to invest around the sort of $250 million, sometimes up to $300 million in redevelopment opportunities. And so that sort of capital investment, we expect to happen year upon year upon year, and that's how we look to not only maintain the strong performance of our portfolio, but also provide that underlying growth that Elliott just articulated. The second part to your question in terms of capital management initiatives, we look to find ways to self-fund those capital management initiatives through the initiatives that we execute in themselves or other opportunities. So for example, last year, we've raised $2.2 billion from the Westfield Chermside and Westfield Sydney joint venturing. We're looking to use some of that capital to refinance and make whole the 2030 senior notes that we spoke about, and we'll look at other opportunities as well as how do we then maximize the return on that capital as it comes in. So they're sort of looked at separately.
Tom Bodor: Great. And can you just confirm what leasing and maintenance CapEx was this year, please, [ Steve? ]
Andrew Clarke: It was $167 million for 2025. And for 2026, we expect it to be around the $170 million mark.
Operator: Your next question comes from Andrew Dodds with Jefferies.
Andrew Dodds: Tom Bodor has covered my questions [indiscernible].
Operator: Your next question comes from Adam Calvetti with Bank of America.
Adam Calvetti: Can you just talk through the makeup of guidance for 2026, if you're expecting any new JVs or divesting any assets, just like-for-like numbers and [indiscernible] That were expected?
Andrew Clarke: Adam, Andrew here. Look, the underlying portfolio, as Elliott articulated, is performing extremely well. We expect to see that level of growth continue in 2026. We're seeing strong visitation growth in early January and partway through February. Sales growth has continued as well. So we expect that momentum in terms of growth from the underlying portfolio to continue. We'd expect around circa 4% growth in NOI. We also have the benefit of the make-whole transactions and netting off against the joint venturing that we did last year. So that's a positive tailwind for the business. We do have -- the ECC was an amount, I think, circa $17.7 million in 2025. We don't expect that number to repeat in 2026. And those are probably the key parts. We have obviously developments that -- the smaller developments where we're repurposing space and bringing in more productive brands and retailers. We don't expect that to -- we have some of those projects completing, but we also have some new projects commencing. So we spoke about Level 6 at Westfield Bondi as an example. So those are probably the key moving parts at a macro level.
Adam Calvetti: Okay. Great. That's pretty clear. And then just on the 4,000 dwelling approvals that you have, I mean, what stage are you at in conversations with capital partners? Is that -- have you gone out to capital partners? How do we think about time line to actually putting shovel into the ground?
Andrew Clarke: Yes. I think the way that we're looking at it at this stage is the first part is we're looking to maximize the opportunity. And by going down the path of focusing on the rezoning focus and potential development approvals really maximizes the scale of the opportunity across the entire portfolio. It's fair to say that we've had a lot of inbound inquiries from potential capital partners that are very excited and interested in opportunities to partner with us. However, what we need to focus on first is maximize the opportunity while there's this window to work with the state governments and councils on these -- on the scale opportunity. And then the second part is we'll then start to look at, okay, well, how do we want to monetize that opportunity over the longer term. At the very least, the first phase is as you get rezoning and you get scale, the land value of the -- of the land that we're sitting on can increase quite significantly. So that's an opportunity that we're looking at in the South. The second part, which I think is where you're getting at is how do you then want to monetize not just the land value, but the overall opportunity. We're still working through that strategically. We want to make sure that we maximize the opportunity for the long term, not just try and realize a short-term benefit to the group.
Adam Calvetti: That makes sense. Maybe just to follow up with that. We sound like Hornsby, what -- when you talk about maximizing the opportunity, how much more, I guess, zoning or upside to FSR and internal floor space can you get?
Andrew Clarke: Well, we've spoken about the number of units or dwellings that potentially can be built on Hornsby, I think it's in excess of 2,000 potential dwellings across the site. If you have to extrapolate that across our 42 destinations, there are very few with the 42 destinations that cannot add that sort of capacity. So if you think through that, the scale is significant. So that's sort of the opportunity that we're looking to maximize at this stage. The other thing I should add to your previous point is one of the key parts of our strategy is we're not looking to use Scentre Group's balance sheet to necessarily build this. We see this because there is so much appetite from third-party capital to be involved in this opportunity. It's highly likely that we would realize the opportunities in a very capital-light manner.
Elliott Rusanow: Yes. I mean the reality of that is our capital is already invested -- it's just in the form of a car park. And so it's -- in many respects, the shareholder already owns that land and it's how do we utilize the shareholders' already invested capital in a way that sees this built out in a monetized way over a medium to longer term.
Operator: Your next question comes from Solomon Zhang with UBS.
Solomon Zhang: First question was just on NOI margins. Do you expect NOI margins to be flat up or down next year? And can you call out whether security costs would be a material drag in that number given, I guess, some of the security incidents in Sydney and beyond?
Elliott Rusanow: Yes. So thank you for the question. I think that what you've seen in this year is that our NOI margin has actually improved. We did have the uptick in security costs, which we called out in 2024. The reality is that we adopted what was already considered and stated by the New South Wales corridor as being world-leading security arrangements we had already started to improve that in light of what did occur, unfortunately, and tragically at Bondi in 2024. But we adopted those improvements in that hindsight very, very quickly. So we've done that. I think the better question would be to ask the others, what are they doing because we've already ingested that. You see that in our numbers. And I think that what you're now hearing is others are now having to play a bit of catch-up to get to a security posture, which is now, I would say, expected by the community in terms of these security arrangements in place at destinations countrywide.
Solomon Zhang: Maybe next question for Andrew. If you triggered the make-whole provision for the subnotes today, the original 2030 is noncore, what premium to par do you estimate you'd be paying today with the sort of 4 to 5, 4.5 years to run?
Andrew Clarke: Look, the subnotes today are trading at a slight premium to par, and then the make-whole would be over and above that, any make-whole premium. So through today's lens, there would be a decent premium relative to some of the other transactions that we've done in the past where we've been able to buy the subnotes back at a discount to par. So you can -- it's not pretty obvious which type of market we would prefer to be executing those types of transactions.
Solomon Zhang: Yes. Would it be circa 10% given the 4.5 years to run and I guess, where the base rates are for the U.S.
Andrew Clarke: It's not as simple as that, and maybe the IR team can take you through later. But you've got to look at, firstly, the premium that you need to pay to where the notes are trading. And then you've also got to look at the cost to unwind the cross-currency swaps as part of that transaction. So there's 2 sort of key parts to the transaction, and they both can change depending on market dynamics. But I think I'll say it looks relatively more expensive through today's lens than what we've seen or what we've executed in the past. But the market... As you can see, the markets can change overnight very quickly. So our job is to monitor those opportunities.
Solomon Zhang: Great. But I guess if you look at the past 6 months, the AUD has appreciated versus the USD. So presumably, unwinding that cross-currency swap if you hedged at $0.73 per AUD has improved. So I guess, is it looking more attractive versus 6 months ago?
Andrew Clarke: No, I just said no before. So I think you're getting lost into the detail there. I think it's probably best to take it off the call. The cross-currency swaps that we enter into the time swap fixed U.S. dollar coupons into floating Aussie. So -- but I'll leave it there and the team can take you through that.
Operator: Your next question comes from Callum Bramah with Macquarie.
Callum Bramah: Just maybe going back to the assumptions around guidance. Are you able to just clarify, so the 4% NOI, was that like-for-like that you're talking about? And can you just give me an idea of where you see net debt at the end of the year maybe in dollars and your weighted average cost of debt trend as you've sort of benefited, I guess, over the last 12 months, what you're thinking weighted average cost of debt will be for fiscal '26?
Andrew Clarke: Yes. So the first part to your question, we would expect the underlying like-for-like NOI to be around that approximately 4% mark. The second part to your question is on the weighted average cost of debt. So we're forecasting around 5.4% weighted average cost of debt compared to the 5.6% that we had in 2025. And then the last part of your question, Yes. We -- basically, in terms of the amount of capital that we're looking to invest, as I said before, we're looking to invest about $170 million on operating leasing capital and then somewhere in the range of $250 million to $300 million for redevelopment capital. And then the add-on to that is any capital management initiatives that we execute on that. We obviously pay a distribution, which we've spoken about today with 4% growth in the guidance, plus any retained earnings that we have through the DRP and retained earnings from FFO less the distribution will help fund the majority of that CapEx.
Callum Bramah: And any assumption in relation to Carindale?
Andrew Clarke: There's nothing included in our guidance, no. As we said that we will be looking to execute that purchase of units under the creep provisions, which effectively means you can buy up to 3% every 6-month period. So I would expect it to be very gradual.
Callum Bramah: And maybe just one follow-on, just in relation to the development opportunity that you've talked about on the land. And if I heard correctly, and apologies if I didn't, a lot of that land is existing car parks. I just wondered how much of that is tied up in leases with anchor tenants?
Andrew Clarke: Yes. Look, I'd say that the opportunity is across the entire site. If you look at a typical Westfield shopping center. Some centers have vacant land, then they will also have on-grade parking. And then there's also air rights over and above the shopping center. In terms of ease of execution, it obviously starts with the vacant land. The next opportunity is then you'd look at on-grade parking and then the harder to execute is then looking on top of the shopping centers. So it's fair to say that if you look at the opportunities, that's the way -- it's probably the way that we'd look to prioritize it.
Elliott Rusanow: I think if you look at the compendium when it comes out, you'll see site by site, what's built form already versus the land parcel itself.
Callum Bramah: Okay. And so if you -- and apologies, maybe it doesn't make sense to ask it this way, but the 670, was it hectares? What portion of that is just vacant available land ready to go. And the [indiscernible].
Elliott Rusanow: So the built form is somewhere between 40% to 50% of that. So yes, so the residual is obviously -- it's used as car parts. So arguably, that's built for them. I think the point I was trying to make is today, its economic use is to house a car. In the future, we see it as housing a car and a lot more above it.
Operator: Your next question comes from Simon Chan with Morgan Stanley.
Simon Chan: Do you have a specialty occupancy cost number?
Andrew Clarke: Yes, it's 17.2%.
Simon Chan: Okay. So that hasn't changed over the last 12 months.
Andrew Clarke: No, we're seeing really strong specialty sales growth, which is fantastic. It's actually what our strategy is about is growing visitation and helping our business partners perform and grow, and then we're able to grow rents in line, if not better than that sales growth.
Simon Chan: Okay. Fair enough. And just a follow-up on your guidance. I think Andrew talked about all the positive points, right? Like comp NOI growth, I know you sold some assets, but then you're going to pay down debt, [indiscernible] is coming down. Why is guidance just 4%? It doesn't add up? It should be more than that.
Andrew Clarke: Simon, so I spoke about the 4% in terms of net operating income growth. I did talk about we do have some dilution from the joint venturing of Westfield Sydney and Westfield Chermside. Obviously, we're more than offsetting that dilution with the make-whole transaction that we've spoken about. We do -- there's $18 million of ECC that we had in 2025. We're not assuming that any of that would repeat in 2026. We spoke about -- in my notes, I spoke about the New Zealand exchange rates. So we have -- I'm getting into the detail here. There's lots of moving parts, but things like the New Zealand exchange rate, the Australian dollar has strengthened significantly against the New Zealand dollar. So that's a bit of a drag. We are seeing higher tax expense. A lot of that's driven by lower interest rates in New Zealand, therefore, lower tax deductions. We spoke about some of the active projects, Westfield Bondi -- we've got Tuggerah, the David Jones replacement there. Those...
Simon Chan: Sorry. Is that lost rent you're talking about that [indiscernible].
Andrew Clarke: That's exactly right. So you have disruption to the existing space, whereby we're replacing it with more productive retailers over the long term. So those are some of the key moving parts. And it was at least 12%.
Simon Chan: So how much is the lost rent incremental in '26 on this year versus last year, about $10.
Andrew Clarke: Yes, maybe a little bit more than that, probably $10 to $15.
Operator: Your next question comes from James Druce with CLSA.
James Druce: Yes, similar to Simon's question on guidance, is there anything for project management income in guidance?
Andrew Clarke: No, we expect that to be relatively flat to 2025.
James Druce: Okay. And apart from maybe refinancing that long-dated bond you spoke about, is there anything else in the refinancing side of things in guidance?
Andrew Clarke: Look, we have assumed that we can do better than where the floating rate currently sits within that guidance number, but it's not -- the material movement is the make-whole.
James Druce: Okay. And you've got your cost of debt declining this year from 5.6% to 5.4%. I mean that does feel like a bit of a tailwind despite the ECC dilution we're talking about before. It does sound a bit light to me.
Andrew Clarke: Yes. I think the other part, what we've noticed with a lot of the sell-side analyst forecast is we're not seeing a regular updated floating rate curve within those forecasts. So the floating rate increase, although we're relatively highly hedged, that does have an impact on the unhedged part of our debt.
James Druce: Okay. I thought you were 99% hedged. What's your hedging.
Andrew Clarke: At the start of the year, and then that comes down to 82% at the end of the year. So the average is sort of in the higher 80s. So there is still a component of our debt that's exposed to the floating rates.
Operator: Your next question comes from Ben Brayshaw with Barrenjoey.
Benjamin Brayshaw: I was wondering if you could comment or perhaps it's a question for Andrew, just the expected credit charge of the lease that's come through, what that relates to, I thought that you might have been through that release of prior allowances that have been made. And just did that come through in the second half? Or how was that recognized over the course of the year?
Andrew Clarke: Yes. The expected credit charge release came through in the second half of the year. Really, what it comes down to is the strength of the collections that we've had from a rent perspective and the aging of our debtors. So what you've seen, which you can't see just with the headline numbers, but the quality of our debtors has improved dramatically, where we've been able to collect some of the long-dated debtors that were outstanding and resolve some of the outstanding issues that we had previously provided an expected credit allowance for. We've resolved the issues commercially, and we're able to then collect some of those debtors and then therefore, release the ECC. We're not assuming any further release looking forward. It doesn't mean that we're not pursuing more opportunity in that space. But at this stage, we're not assuming any further upside from that in 2026.
Operator: Your next question comes from Richard Jones with JPMorgan.
Richard Jones: Another question for you, Andrew, sorry. Just what was the write-down on project income booked in the Market Street development? And then why is there no growth expected in project income in '26?
Andrew Clarke: Yes. So we spoke about this at the half year results. There was around a $15 million loss or write-down that we were booked in the first half of 2025. We did have a bit more cost in the second half, but we've been able to offset that or more than offset that by other project income that we had come through on smaller bits and pieces of work that have happened across the portfolio. In terms of 2026 project income, we're not expecting a lot from joint venture assets. So if you look at the major development that we're talking about is Westfield Bondi, which is 100% owned. So therefore, there's no joint venture project income that we generate on that capital investment. And yes, so there's not -- that's why we're assuming that it's relatively flat to 2025.
Richard Jones: Okay. And then just a second question for Elliott. Just on Carindale, why would you not just take it out? It's not an overly material transaction for the group.
Elliott Rusanow: Try to answer that because I wear 2 hats. I think you could see with the creep provision, we see it as a good value long term for the group. Having said that, the -- it's probably lurching into areas that I shouldn't be talking about in terms of what our intentions may or may not be longer term in terms of whether Carindale remains as is or doesn't. So I am going to avoid that question and because it's probably not prudent for me to actually answer it in that way other than to say that what we've announced today is what we'll be doing, which is creeping.
Richard Jones: Okay. Can I maybe ask it another way? So it looks as though the ownership structure in terms of the joint venture partner is likely to change at some point this year. Do you think that provides an opportunity that perhaps wasn't there whilst [ Lendlease ] was the partner?
Elliott Rusanow: I don't believe it does because if you recall, Westfield back in when it purchased its interest in Carindale Property Trust bought an existing structure, which was set up by Suncorp and Suncorp had some preemptive mechanics within their documents, which don't mirror necessarily the preemptive mechanics that we would normally see in a Westfield joint venture or a Centre Group joint venture. And so the change of control of APPF doesn't necessarily result in a preemption action. It might, depending on how it's done or what happens. So it's hard to comment on speculation of what may or may not occur other than to say that it does -- that the arrangements that are in place because we were brought into a structure that was pre-existing is different to what you would normally see in a Westfield now Scentre Group joint venture arrangement.
Operator: Your next question comes from Claire McKew with Green Street.
Claire McKew: Just a quick one on capital allocation as a follow-up to Tom's question. I'm just curious more big picture, how you're thinking about that decision matrix. So clearly, Bondi Junction next have off the rank. Booragoons kind of been put on the back burner. Is that really just a function of the return profile? Or is there more to it? And how are you thinking about the future priorities in terms of opportunities in the development pipeline?
Elliott Rusanow: Yes. I wouldn't say that Booragoon has been put on the back burner. I think that the scale and size and how we do Booragoon probably has changed in the last 3 years where we've pivoted away from taking an entire center out of income production and then rebuilding it and hoping people come back and generating some return. Some say it's going to be not Booragoon, but where it's been done somewhere, particularly in Sydney, that it might get to a 6 at some point in time. Rather, we prefer to incrementally add and add to the offer whilst the center keeps trading. And so the opportunity at Bondi presented itself as a more immediate opportunity. We were able to actually make that occur due to the change of control that happened at David Jones that accelerated our ability to bring forward plans, much needed plans, I would say, to ensure that Bondi Junction retains its premium position, not only in our portfolio, but certainly in Sydney and one of the best in the country arguably the world. And so we're taking advantage of that. At the same time, we're still predeveloping work on Booragoon, and we would be expecting that, that would occur sometime either later this year or early next year. But again, in a way which maintains the existing center a little bit disrupted, unfortunately, but in the main with people still being able to come and spend time and transact with businesses during that redevelopment activity.
Claire McKew: That's clear. And just another one. Obviously, department store shadow supply is favorable for Centre Group. But just curious, just with David Jones continuing to rightsize their portfolio. Can you just provide -- I know you can't provide specifics on Myer and David Jones, but perhaps just a bit of color around David Jones sort of decision matrix. I mean their productivity is a lot stronger than Myers, generally speaking. Are the stores that they're closing materially underperformers? Or how do those stores compare to the general footprint of the department stores in your portfolio? Just trying to get a sense of the potential phasing of this shadow supply.
Elliott Rusanow: Yes. I think -- and the property [indiscernible] will have a lot more detail on this. But what you're seeing, this is not a new phenomenon. This has been going on for decades where department stores have been downsizing we can -- many of us, unfortunately, who have aged in life can remember department stores being somewhere between 25,000 and 30,000 square meters. The right size now is somewhere between 10,000 to 12,000 square meters, maybe even slightly lower. A lot of that has to do with the brands that they're selling, they're actually taking stores, stand-alone stores with us and paying a much higher rent to do so. So the economics for us as Scentre Group is a better economic outcome. What it also means is that we are getting space back, which allows us to redeploy for that higher and better usage. So what is the magic number, I don't think we all know. But what I can say is that the methodic way that this has been dealt with over a long period of time has meant that what might have been a concern around an existential or unusual event of everything going under and having to redo it is being played out differently, which is we're rightsizing and we're doing so in a very economic way that makes money for shareholders.
Claire McKew: I guess, obviously, there's a recap coming with David Jones. So just curious to see if we're going to see a much stronger wave of either full closures or reducing rightsizing the actual store size.
Elliott Rusanow: Yes. And I think you might part that to bear in mind is that our leases with David Jones are fairly long. So many years of duration is still to go. And unlike our peers, we actually have bank guarantees. So the -- not just a net asset value test. So the ability for someone to come in and Phoenix to get it out and effectively put a gun to our head is actually fairly limited in that scenario because if they -- by doing so, they'll be giving up real cash in the form of the bank guarantees coming back to us. That was something that was a major, I suppose, demands on the right work. A major component of why we gave our consent to the change of control to ensure that we had longevity of security that whoever was trading in that site continue to trade in that site. And if they weren't, it would cost. And so I think we're in a good position vis-a-vis that.
Operator: There are no further questions at this time. I'll now hand back to Mr. Rusanow for closing remarks.
Elliott Rusanow: Well, thank you, everyone, for making the time today. I'm sure we'll get to see a lot of you in the days and weeks ahead. And if there are any questions in the meantime, then please do reach out to us. And I know there were some very detailed questions on the call, which we will follow up immediately after this to help connect the dots. But thank you for your time today and looking forward to seeing you soon. Thank you.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.