Centuria Industrial REIT

Good morning.

Thank you for joining Centuria Industrial REIT's 2026 four-year results presentation. My name is Grant Nicholls, CIP's fund manager. Also presenting today is Kate Mitchell, Centuria Capital Group Data Centre fund manager, and Michael Ching, CIP's deputy fund manager. Starting on slide three, I would like to commence today's presentation with an acknowledgement of country. We are joining you from the lands of the Gagel people of the Eora Nation. Centuria manages property throughout Australia and New Zealand and pays its respects to the traditional owners in each country, to their unique culture, and to their elders past and present. In today's presentation, Kate, Michael, and I will provide an overview of CIP's 2026 financial performance, an update on our data center progress and opportunities within this subsector, analysis of the CIP's operational performance, an update on our development projects and pipeline, a summary of market conditions, and conclude with an outlook and guidance statement. Moving to slide four. Centuria Industrial REIT is managed by Centuria Capital Group. Centuria has over $22 billion of assets under management, and CIP is the largest fund managed by Centuria. CIP unit holder is Sanford Brom. Centuria's deep real estate expertise, including a fully integrated property, facilities, and development management platform, synergies across the group's broader industrial real estate portfolio and strong alignment as Centuria is CIP's largest unit holder and the manager's interests are strongly aligned with yours as unit holders. Onto slide six. CIP's longstanding vision and strategy remains unchanged. We aspire to be Australia's leading domestic pure play industrial REIT with a primary focus on delivering income and capital growth to investors from a portfolio of high-quality Australian industrial assets. We believe we have distinguished CRP through this strategy by creating a portfolio focused on Australian urban insular industrial assets that maintains high levels of tenant demand in markets with limited or no land supply. We believe one of the defining features of CRP today is the disconnect between direct market evidence and its listed market valuation. The portfolio continues to be validated through leasing outcomes, independent valuations, and realized asset sales, yet the REIT continues to trade at a material discount to NTA. As management, we remain focused on converting operating performance into earnings growth, value creation, and ultimately improved recognition by capital markets. Going to FY26 highlights on slide seven, it has been another impressive year for CIP marked by near record-breaking leasing activity. The high volume of leasing, along with consistently strong releasing spreads, enabled CIP to achieve significant net operating income growth, which is translating into tangible growth in funds from operations. Throughout the years, CIP has continued to capitalize on persistently strong investment demand for Australian urban infill industrial real estate. In FY26, CIP divested $200 million of assets at an average 17% premium to book value. Importantly, these outcomes are not isolated as CIP has consistently realized sale prices at or above book value. We view this as powerful third-party validation of the portfolio's carrying values and further evidence of the disconnect between direct market pricing and CIP's listed market valuation. In FY26, CIP completed three developments securing strong leasing commitments for two and achieving an excellent internal rate of return from the sale of another. These results underscore the benefits of developing in constrained markets, as well as the expertise of Centuria's in-house development team. On the capital management front, CRP refinanced $450 million of debt on competitive terms, with margins secured between 10 and 20 bps lower than previous terms, while the weighted average debt maturity was extended to four years. The REIT also settled $320 million of exchangeable notes at an increasingly attractive fixed annual coupon of 3.5%. Turning to slide 8. FFO and ZPU were delivered in line with FY26 guidance and the portfolio maintains 95.2% occupancy and an attractive 7-year whale. FY27 guidance implies earnings growth, with FFO expected to be up to 5.5% higher than FY26. Importantly, that growth is expected to be driven predominantly from embedded rent reversion, leasing execution and operational initiatives rather than acquisition-driven expansion. We believe this highlights the strength of CIP's internal growth profile. Looking at this in more detail on slide nine, We estimate the portfolio is approximately 17% under-rented on average, providing a significant runway for future earnings growth beyond FY27. Put simply, a meaningful proportion of existing leases remain below prevailing market rents and provide a visible earnings growth opportunity. Approximately 55% of leases expiring over the next three years are currently under-rented, creating a clear pathway to future earnings growth without requiring additional balance sheet deployment. Further, the Australian industrial market has relatively low vacancy rates and we anticipate that future supply will decrease. This creates an excellent environment for medium-term rental growth, further enhancing the potential for future earnings and valuation growth across the CRP portfolio. These solid market conditions should also support increased occupancy, driving further like-for-like earnings growth in future years. We believe this embedded rental reversion remains one of the most unappreciated drivers of future earnings growth within our portfolio. Considering the disconnect between CIP's divestment metrics and its trading price, along with the positive earnings potential that could be generated, we believe the value of CIP currently offers is very compelling. Moving on, CIP continues to progress its data centre strategy. I will now pass over to Kate to take you through that strategy and the opportunities that lie ahead.

Thanks Grant. Starting on slide 11. To set the scene, Australia's data centre market is being shaped by three forces. First, supply is generally constrained, with limited new large-scale power capacity realistically deliverable over the next few years. Second, Australia has real structural advantages. A competitive cost base, sovereign and regulatory positioning, a strong renewable energy pipeline, land availability, and subsea connectivity, providing low latency access to Asia and North America. Third, Australia is well positioned to capture the next wave of AI-driven demand. AI is creating incremental workload growth, not simply replacing existing compute demand. Capital is already flowing, with major global platforms including Amazon and Microsoft committing substantial capital to their Australian AI infrastructure rollout. In this context, the greatest strategic risk is not oversupply, but that AI value is created offshore, leaving Australia a consumer rather than a producer of digital intelligence. For owners of industrial land with proximity to power and connectivity infrastructure, increasing scarcity is materially enhancing the strategic value of suitable development sites. In our view, the value creation opportunity increasingly sits not simply with the operating data centre, but in controlling scarce power-enabled real estate. That gap is precisely the opportunity SIP is positioned to capture. Turning to slide 12. CIP's strategy is to generate real estate returns from the data centre opportunity without operating risk. CIP does not operate data centres. It owns and leases the underlying data centre assets. The strategy has two core pathways. The first is existing operational data centres which provide long, secure income streams without exposure to operating performance. The second is asset conversion, taking large land holdings and unlocking their highest and best use through obtaining power allocations and planning approvals, then taking advantage of tenant-led demand. These assets can then be structured as powered land, powered shell or fully fitted leases, depending on the risk return profile and the end tenant requirements. CIP already has multiple development opportunities capable of delivering new operational capacity over the next few years, with further upside beyond. From a funding perspective, the approach is deliberately flexible, ranging from powered land leases and asset sales post-approval, through to capital partners, joint ventures with operators or hyperscalers, and potentially a future demerger of CIP's data centre assets. This optionality allows CIP to fund growth in a disciplined way without overextending. Importantly, management believes a significant portion of this future data centre option Optionality is not reflected in current carrying values or in the REIT's current market value. Our objective is to unlock this value in a disciplined manner while retaining flexibility around funding structures and risk allocation. Slide 13 shows a map of the national platform CIP is building. CIP already has live capacity today. 10 megawatts in Western Australia, 12 megawatts in Victoria and 2.5 megawatts in Queensland. Sitting above that existing capacity is an identified substantial development pipeline of more than 250 megawatts across Australia. Final capacity remains subject to design and approvals, but the message is clear. This is a geographically diversified footprint, combining income-producing assets today with significant growth optionality. This footprint provides the platform for CIP strategy and leads directly into the asset level opportunity that support the investment thesis. Slide 14 provides tangible proof points for the strategy. The Telstra data centre has a triple net lease over existing data centre through to 2050. A partial surrender of underutilised land has created opportunity for a standalone second facility. with a development application already lodged for circa 40 megawatts and approval expected in the near term. The site also benefits from the ability to leverage Telstra's existing connectivity ecosystem. Thomastown is arguably the largest prospect, a 10 hectare holding less than 100 metres from a terminal station with existing capacity. Power applications have well progressed on the site for what we expect to be a significant power allocation. The Centuria DC asset in Toowoomba is operational today, leased to 2041, with 2.5 megawatts of land capacity and room to expand within the existing facility and adjoining CIP-owned land. Yarraville and Hazelmere are early-stage industrial holdings, both close to terminal stations and leased through to 2028 and 2027 respectively, providing future conversion optionality. The Fujitsu asset is a live 10 megawatt co-location facility leased to late 2030 with additional power and densification upside after expiry. Across all six assets, the common thread is proximity to power and connectivity, secure income today and staged leasing expiries that allow data centre value to be unlocked in a disciplined way over time. I will now hand over to Michael, who will run through the FY26 financial results and operational highlights.

Thanks, Kate. Good morning, everyone. Turning to slide 16 and the financial results. Net property income rose to $204 million for the year, an increase of $11.7 million on the prior year. Strong releasing spreads and capturing of rental reversion resulted in life-for-life net operating income growth of 5.2%, despite CIP carrying lower occupancy in FY26 compared to FY25. Finance costs increased by $6.9 million to $65.9 million, reflecting the higher average cost of debt. CIP delivered funds from operations of $114.1 million, or 18.2 cents per unit. representing 4% earnings growth on FY25, and declared distributions of 16.8 cents per unit in FY26, in line with guidance. Moving to capital management on slide 17. During the year, CIP completed a significant refinancing program with approximately $450 billion of debt refinanced on improved terms. Margins tightened by around 10 to 20 basis points compared to prior facilities, while the debt duration was extended. CIP continues to benefit from strong support from its lending group. This materially reduces refinancing risk and enhances financial flexibility entering FY27. Another key capital management initiative over the year was the issue of a new $325 million exchangeable note to fund the repurchase of the prior notes. The new issuance lowered the all-in coupon to 3.5%. a substantial discount relative to the current marginal cost of debt. CIP maintains substantial liquidity of over $450 million, which covers pending FY27 debt maturity. The $100 million fixed-rate facility matures in December, and at this stage, we expect to repay this facility using available liquidity. Approximately 54% of debt is hedged, and we continue to monitor interest rate movements and manage our interest rate exposure to balance earning stability with some flexibility as the interest rate cycle evolves. Moving on to slide 19, TIP's portfolio has been deliberately constructed to benefit from structural demand drivers. 86% of our assets are located in core urban infield markets in close proximity to population centers and critical infrastructure. These are markets which benefit from the deepest tenant demand while supply is most constrained and have historically demonstrated strong rental growth, low vacancy, and superior liquidity than broader industrial markets. BIP's average tenancy size of approximately 8,000 square meters aligns with the most active segment of the leasing market. Average portfolio site coverage of 44% provides opportunities for select redevelopment, generating earnings and NTA accretion, while improving overall portfolio quality. This portfolio composition continues to underpin CIP's ability to generate strong leasing outcomes through cycles, while also providing multiple avenues for future value creation through asset repositioning and select development. Slide 20 presents a case study on CIP's success within our Melbourne portfolio. Conditions in the broader Melbourne industrial market have been challenging, with vacancy increasing to approximately 4.7% during the year, the highest nationally. Despite these conditions, CIP completed nearly 125,000 square metres of leasing across its Melbourne assets, representing around 29% of the portfolio's by area and lifting Melbourne occupancy to 97%. As noted in the half-year presentation, a notable transaction was the new 10-year leased Tesla at 346 Boundary Road in Durham. This is an example of the flexibility our sites offer, where we pivoted strategy to defer a larger redevelopment project to lease the asset as is to a global covenant, delivering 130% releasing spreads and resulting in a $21 million value uplift. Another noteworthy outcome was the successful renewal of the tenant at 324 Frankston Dandenong Road in Dandenong South. This seven-year renewal across 29,000 square meters achieved a 45% releasing spread and materially mitigates our FY28 expired profile. These results highlight the benefit of CIP's in-house asset management capabilities as well as the benefits of a deliberately constructed portfolio focusing on smaller functional assets in established infill locations. Turning to divestments on slide 21. During FY26, CIP divested $200 million of assets at an average 17% premium to book value. Individual transactions included 67-69 Mandun Road in Girwin in NSW, sold for $98 million at a 15% premium, and 50-64 Mirage Road Direct in South Australia, a recently completed development which sold for $50 million at a 33% premium to total project costs. The opportunistic transactions completed during the year comprise both on-market and off-market deals. and were executed with a diverse range of counterparties. These divestments are not a one-off. Since FY23, CIP has divested approximately $460 million of assets, all at or above book value, achieving an average premium of 12%. This further demonstrates the underlying demand and liquidity for the type of assets within CIP. Despite repeatedly demonstrating direct market demand, liquidity, and pricing above book value, CRP continues to trade at approximately 25% discount to NTA. We believe this represents substantial disconnect between direct market evidence and listed market pricing. Looking at valuations on slide 22, approximately half of the portfolio by value was externally revalued in June 2026, with the portfolio recording a like-for-like valuation uplift of $116 million. This marks the fifth consecutive period of valuation growth, while the WIT average capitalization rate remained broadly stable at 5.8%. Importantly, valuations continued to be supported by direct market transactions. Recent sales were completed at an average passing yield of 4.9%, compared to the portfolio's weighted average capitalization rate of 5.8%. Slide 23 further reinforces this point. TIP's portfolio valuations remain significantly below estimated replacement costs. We estimate the current average portfolio value to be approximately 50% below replacement cost estimates, while around 60% of the portfolio's value is underpinned by land alone. In our view, it is increasingly difficult to reconcile the REIT's current trading price with either replacement cost estimates or recent direct market transactional evidence. We believe this valuation disconnect creates a compelling proposition for long-term investors. I will now hand back to Grant to talk through CIP's development pipeline.

Thanks, Michael. Picking up on slide 24, a key feature of CIP's development strategy is flexibility. Our entire future pipeline are income-producing assets, allowing projects to be sequenced and delivered at optimal points in the cycle, rather than being forced by mounting holding costs. In addition to flexibility, all identified development projects are located in infill markets, where supply is severely constrained, supporting feasibility and future rental outcomes. SOP has one current project under construction, 51 Musgrave Road, located in the Brisbane infill market of Coopers Plains. This development is a multi-unit estate that will deliver high quality units between 1,500 and 3,000 square metres. This segment of the market maintains the deepest tenant demand and we expect to leverage strong leasing and rental outcomes. For all of our development pipeline, we aim for a minimum yield on cost of 6.5%. Our FY26 completed projects exceed this target, generally delivering yields of 7% plus. During this ESG on slide 25, under Centuria's management, CIP has established a flexible and relevant sustainability framework that includes a target of achieving zero scope to emissions by the year 2028, a goal to attain a five-star green star design for all future industrial developments, participation in the global real estate sustainability benchmark, an ongoing partnership with Healthy Heads, an organisation dedicated to promoting mental health, in the transport and logistics industries, and the continued evaluation of how to optimize roof space for solar panel installations across CIP assets. Moving to an overview of Australian industrial markets on slide 27. The ongoing Middle East conflict, which escalated in February, created uncertainty among tenants, particularly in relation to diesel and transport pricing. This curtailed the improvements in tenant inquiry and leasing activity evident from October 2025 to February 2026. As the uncertainty dissipated, we have seen an increase in tenant activity, particularly in Perth and Brisbane, and expect net absorption to improve in the remainder of calendar year 26, before normalising in 27 and 28. Despite the temporary blip in demand, the Australian Industrial Vacancy Rate remains anchored at a relatively low level below 4%, and supply is becoming increasingly constrained. Economic rents remain cemented above prevailing market rents for the majority of development sites, impairing development feasibilities. As a result, many proposed developments are being deferred, muting supply. Continuing on slide 28, these conditions present an optimistic outlook for Australian industrial markets. The expected improvement in net absorption and reduction in vacancy will in turn see incentives begin to contract, particularly in infill markets with limited supply markets consistent with the broader CRP portfolio. As a result, it is expected that effective rental growth will trend decidedly higher over the medium term, supporting future NOI and earnings growth. These conditions should support further earnings growth, valuation stability, and ongoing rental reversion opportunities across the CRP portfolio. Concluding on slide 29, For FY27 and beyond, CIP's focus is on maximising value add opportunities from leasing, development and asset repositioning while maintaining balance sheet capacity. Looking beyond FY27, we believe CIP is particularly well positioned given the combination of embedded rent reversion, active asset management opportunities, development potential and identified data centre optionality. We are pleased to provide FY27 FFO guidance at between 18.8 and 19.2 cents per unit and distribution guidance of 17.3 cents per unit. Portfolio evaluations continue to be supported by direct market transactions. The balance sheet remains well capitalized and management remains focused on converting operational performance into sustainable earnings and value growth to unit holders. This concludes the formal part of this presentation. We thank everyone for listening and for their interest in CIP. I will now hand back to the operator for any questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up a handset to ask your question. We ask today that you please limit yourself to two questions per person. Your first question today comes from Cody Shield with UBS. Please go ahead.

Morning Grant, Kate and Michael, thanks for the time this morning. So just starting with some of the vacancy there, Fairfield East and Badamba obviously been a little bit stubborn. You had an HOA on Badamba, I believe at the half, which looks like it's fallen over. So what do you think you'll need to see to get some of that vacancy filled?

Yeah, thanks Cody. As mentioned on the call, the geopolitical uncertainty that occurred through February and March certainly curtailed tenant demand. If it was not for that, I would have been confident that we would have leased both Bundamba and Fairfield. If you recall at the half, we had leased half of Fairfield on a short-term lease. That tenant was expecting to grow into the facility in totality. Unfortunately, particularly the increase in diesel costs had an impact on their foresight and they were unable to make that commitment at that stage. As we have moved ahead, we have certainly seen an improvement in tenant demand over the last couple of months, particularly in Brisbane. We remain optimistic for the leasing prospect of both Fairfield and Bundamba of getting done within FY27. Just in terms of guidance, because this question will come up, so apologies for the equity analysts who are going to ask it anyway. The raise that we have provided for FFO guidance is pretty much dependent on the leasing of Bundamba and Fairfield. We have forecast that they'll be leased in the second half of FY27, which would enable us to meet budget, which is at 19 cents. Obviously, if we do better than that, we will be able to upscale that FFR guidance.

Okay, that's great. Thanks. Just on the buyback, so you've extended the timeframe there. Would you look to push that beyond $60 million if that gap to NTA persists?

Yeah, I think that's... The fact that we have extended the buyback, we are continuing to give consideration to it. Obviously, we did announce a $60 million buyback and we have completed $36 million of that. that was accreted up to $0.01 to NTA through the course of FY26. I think it remains one of the capital allocation options that we have available to us. Obviously, CIP is trading at a 25% discount, which makes it very attractive from a value perspective. The counter to that is that with the rise in debt costs, it is not as accretive to earnings as it once was when we contemplated commencing the buyback 12 months ago.

Okay, got it. Thanks Grant.

Thanks Cody.

Your next question comes from Richard Jones with JP Moore. Please go ahead.

Hey Grant, just on Wetherill Park development, can you again also just give us a bit more colour on leasing demand and when that may kick off pending pre-commitment?

Yeah, thanks Richard. Look, we'd certainly be hopeful that we have commenced construction through the course of FY27. We are seeking pre-commitments at this stage and we have got at least a couple of parties that are showing genuine interest in the site. So I'll certainly be hopeful that in the coming six months we get much closer to getting that pre-commitment done so that we can commence through the second half of FY27. I would make mention that TAD demand that we've seen across the country over the last 12 months, Sydney probably has been one of the weaker markets. We are certainly seeing improved market activity, particularly in Perth, then Brisbane. Melbourne has probably been superior to Sydney too in terms of tent demand. Notwithstanding that, Wetherill Park is an infill location within Sydney. There are very, very limited opportunities to get high quality industrial facilities of scale in that market. So we think that the proposed development that we have within CIP will do very well.

Okay and second question just for Kate. Just wondering if you can just talk us through kind of best case scenarios around both Clayton and Thomastown. When could conceivably construction commence?

Yeah they're on different paths at the moment. We're progressing power applications and DA on the two of them. going to be customer led on these so it will be dependent on those customer negotiations that we've got or tenant negotiations in the background just to confirm you know they have to be co-designed with those in customers so that's happening in the background but as an actual time to market we do have some forecasts on RFS that we can work to with the power supply which is around a 2028, 2029. But as I said, it's going to be a customer development.

And Richard, just to provide a bit more context on that, if you think about Thomastown, leases are in place until 30 June 2027. So we cannot commence construction until those leases expire. And in Clayton, Telstra are still decanting from some of the sites that form part of our development site. that will probably progress for the next 9 to 12 months. So again, I think both for Clayton and Thomastown, the construction is probably more of a FY28 thematic rather than FY27.

Right. Thank you.

Your next question comes from Lauren Berry with Morgan Stanley. Please go ahead.

Hi, guys. Thank you. Just a follow-up on Clayton. How are you thinking about funding this one? I know you've given a range of options but when do you think you'll make the decision whether to go ahead with a land sale, a JV or something a bit more dramatic like a demerger? How are you thinking about the timeline?

Yeah, thanks Lauren. I think Kate articulated this pretty well on the call in that at the moment there is nothing material to fund and we are keeping all options open. Now the point that these things become a decision in terms of what to fund. Firstly, we have to consolidate both planning and power outcomes on both Clayton and Thomastown before you get to a point where you need to make a decision on funding. Now, at the moment, our focus is about maximising the highest and best use of these sites and increasing the underlying land value. Once we do get further down the track, we will become more prescriptive as to what we do next. But at this stage, and as Kate articulated, all options are on the table. and there are a number of options we could explore that don't require significant funding from the CRP balance sheet.

Okay, sure. And second one is just the decision to reduce your debt headroom when you've got a data centre pipeline, you've got developments and you've also got the buyback as an option as well. Just can you talk about why you want to do that right now?

So, look, in terms of, I think you're asking about our current hedge rate at 54%. We're happy to have a bit more exposure at this point in the rate cycle. We'll continue to look at opportunities throughout the course of the year and put hedging in place when we think it deems appropriate. I think through FY26, we did put in some hedging, but more personally, we also completed the exchangeable note, which fixes debt at 3.5% across $325 million. So it's something that we are continuing to monitor. We know where the yield curve currently is, but as mentioned, we're happy to have a bit more exposure at this point in the REIT cycle, but it's something we will actively manage through FY27.

Great, thanks.

The next question comes from Andrew Dodds with Jefferies. Please go ahead.

Hey, good morning, guys. Just one for me. Just if you look at the FY26 leasing spreads of 30%, it implies a pretty, I guess, sharp moderation in the second half. And you've also called out that spreads exclude a number of things, including a deal following an unexpected tenant liquidation. So are you just able to provide some colour around this and also what spreads would have been if you included everything?

Yeah, thanks, John. I appreciate this question because I think it's worth letting us out a bit We've been saying for a number of reporting periods that do not get fixated on the re-leasing spreads because it's going to be dependent on the geographic location in which leasing is completed. Now, across all of FY26, which was a near-on record leasing year for CIP, near-on 60% of that leasing was completed in Victoria, which hasn't had as strong a leasing spread as what we've seen in New South Wales and to a lesser extent in Queensland and Brisbane. So the fact that the concentration of the leasing that we completed through the course was in Victoria meant that our re-leasing spreads were not as strong as what we incurred in FY25. Looking forward, again, I think leasing spreads will bounce around. Obviously, we have a lot of under-renting still to unwind across the CLP portfolio. There is very, very good opportunity for very strong leasing spreads to continue into the future. Now, in terms of the question you asked, what would re-leasing spreads be if we included the other three deals that were excluded? They'll be slightly over 20%. which I think would still be a very, very good outcome when you compare to other commercial real estate vehicles out there at the moment.

That's great. Thanks, guys.

Your next question comes from Andy McFarlane with Bell Potter. Please go ahead.

Hey, Andy. How are you, mate?

We'll move on to the next question. This is from Tom Bedore with Jarden. Please go ahead.

Good morning, Grant, Kate, Michael. My first question is just around the level of distributions. If I sort of looked at your FFO of $114 million and deduct maintenance and leasing capex, I get to $102 million. And if I deduct rent freeze, I get to $79 million with distributions of $105 million. Have you considered lowering your payout ratio to match free cash flow?

Thanks, Tom. We've been starting on this vehicle for some time that we will slightly reduce our payout ratio. FY27 is another step in that direction. So the payout ratio will be closer to 90%. I think it was 93% in FY27. And just for clarity, maintenance capex across this portfolio in FY26 was about $9.3 million. which represents about 23 billion bits of gross asset value. In the context of commercial real estate, that, in my view, is quite low. And we don't see that changing in due course. So when you look at what we're holding back, we're preparing to hold back for FY27, which will be in excess of $12 million. In our view, that will more than cover our maintenance capex and also the capex required for incentives and leasing costs.

Sure, but you've got 22 million of rent free, or 23 million, sorry. So, I mean, is that something, and it's pretty consistent with where it was the year before, so you're comfortable paying out the rent frees?

Yeah, so rent frees and abatements will bounce around depending on how much leasing is completed in the course of a given year. Tom, as mentioned, this was a new on record leasing year for CIP. So the expectation that that will be consistent year in, year out, I think is probably a premise that we don't accept.

Okay, sure. The other question I had was around hedging. You know, your 27, 28 hedging dropped away from the first half. And there was a comment in the first half around assumes all extendable swaptions are exercised. Can you just talk through what's happened there? And is there any other sort of non-vanilla hedging across your book?

Yeah, pretty much all the hedging that remains is vanilla. What changed to the course is obviously the change in the yield curve. So the increase in the yield curve has meant that some of those extendable hedges have not been extended, which has contributed to reducing our hedge cover. As mentioned to Lauren's question, though, we are pretty comfortable with where we currently sit having exposure at this point in time, and it's something we'll continue to manage through FY27. Okay, sure.

Thanks.

Your next question comes from Callum Brammer with Macquarie. Please go ahead.

Good morning. Grant, can you just go back to the guidance for this year and just give us a little bit more colour on that? So in 26, I guess you ultimately came in at the low end of guidance. I guess I'm trying to get the context of this at 18.8 to 19.2, and I think you referenced the budget being around 19. Can you just talk about those kind of key assumptions You've got the 2.7 expiring. Are you able to tell me where you're at with known outcomes on that 2.7 and maybe any known outcomes you've got on the 4.8 of vacancy? And if you're assuming anything in relation to the buyback, just weighted average cost of debt, et cetera, just other key assumptions that you've got in that guidance?

Yeah, thanks, Cal. So just to try and hit those sequentially, In terms of our cost of debt, we're forecasting cost of debt, our all-in cost of debt into FY27 of being about 5.2%, 5.3% based on a floating rate of 4.7%. Now, obviously, the floating rate at the moment is below that. If it continues to be below that, that will provide some earnings tailwind to CIP through the course of FY27. In regards to the budget, we haven't assumed it will complete anything further with the buyback. If we did, I don't think it would have a material impact on earnings. The $36 million buyback that we completed through FY26 didn't really move the needle in terms of earnings, albeit it did have some upside to NTA. Now, in terms of where we actually completed FY26 FFO at $0.182, that was at the lower end of our upgraded guidance. So our original guidance 12 months ago was $0.18 to $0.185 per unit. We obviously tightened that to 18.2 in February. When we tightened that guidance, we certainly weren't aware that there would be an Iran war, which had a material impact, as mentioned, on particularly diesel pricing, which has a huge implication on tenant demand within industrial markets. At that stage, we probably had a better outlook for tenant demand than what occurred through the second half of FY26. As we move into FY27, as mentioned on the call, we've started to see that concern moderate and dissipate. tenant demand has been improving in a number of markets and we have got a level of confidence that particularly Fairfield and Bundambil will be leased through the course of FY27. Depending on when they are leased, that is what is going to cause the variation in range in FFO. In terms of the FY27 expiry profile, you were quite right. It is relatively benign. It's a relatively small number for a portfolio as diversified as this. we don't foresee it as being something that we cannot work through but at this stage we haven't got any information that we haven't announced that we can provide.

Thank you and then so I guess ultimately just to check on one thing so the expectation in the guidance is that you'll finish the year with a higher level of occupancy effectively equivalent to the Fairfield and Bundamba ones?

Yes my expectation is that we'll have higher occupancy at the end of the year than we did at the start I think it's also worth reflecting on FY26 in that context. Through the first half of FY26, we completed about 140,000 square metres of leasing, including a lot of vacant space. If that had not been complete, occupancy would probably have been in the low 90s. So through FY26, we actually carried a lot more vacancy than we did in FY25 and what we project through FY27. I think there is certainly some opportunity for improved occupancy through FY27 compared to FY26.

Thanks. And then I just thought I'd follow up on the data center question as well. Just in relation to the data centers, I think Kate alluded to the idea that it's going to be customer led. Can I just clarify with that, does that mean you do go and seek a DA approval for design, et cetera, of the data center? Can you talk a little bit about the customer's willingness to pre-commit rather than the expectation of you starting the data centers? It would seem to me that the typical industry view is that you have to start these speculatively in order to ultimately convert into a legally binding agreement with a data center occupier or operator.

I'll start off answering this. If Kate's got any further comments, she can chime in as well. I think what Kate's articulating there is that we won't fully speculatively develop an entire data center. Now there are components of data center construction that you would probably need to speculatively start, primarily in relation to securing power. And I think that's where, once power is fully secured, that is when you can certainly seek pre-commitments for the remaining part of the development. As Kate also articulated at the moment, the demand for data centers far exceeds what we expect to be built within Australia. We think there is a really good opportunity for the next three or four years to get product into the market to feed that demand because there is going to be a scarcity supply. So that is obviously what we are trying to direct our opportunity set toward.

Okay. Thanks very much. I appreciate it.

Thanks, Cal.

Your next question comes from Murray Collin with MOLUS Australian. Please go ahead.

Good morning, everyone. Could I ask what the average incentive level was across leasing done by CRP in the past year and how that would compare to FY25?

Yeah, thanks, Mary. It was a slight tick up in incentives through the course of FY26. So the average incentive given for the entire year was about 19%. That was a slight increase from FY24 and FY25, which incurred average incentive about 15%. As mentioned on the call, the national vacancy rate is currently below 4%. We don't see that increasing materially from here. We think it will actually decrease from here. So as you go into calendar year 27 and 28, we think there is a really good opportunity for incentives to contract across industrial markets.

Thanks, Grant. And then just zooming into the balance sheet for a second, obviously a fair amount of divestment that's come through in the second half. Would you expect to remain a net seller of assets near term and I guess where would you like to see gearing in anticipation of the prospective capital requirement from the data centre build out in a few years' time?

We're pretty comfortable with where gearing currently sits. I think in that 30% to 35% range is where we're pretty comfortable. We note that we're currently at 34.9, but we've got a circa $100 million asset that's going to settle through the first half of FY27, which will reduce that by about a full percentage point. So we're pretty comfortable with where Gearing currently sits. As to further asset divestments, look, a part of this, the divestments we've completed in recent past has been opportunistic. People are offering us what we believe is above what we perceive to be value for those particular assets. We think those opportunities will continue across our portfolio, but as to how many and how much, look, we're not prescriptive at this stage. We haven't got a target that we're seeking to manage towards. A lot of it will be opportunity-led, either from getting off-market approaches or for some assets where we deem we've maximised the value opportunity set in the near term, we will seek an on-market opportunity to sell those assets as well.

Got it. Thank you, Grant. Cheers, Murray.

Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Claire McHugh with Green Street. Please go ahead.

Thanks, guys. Just a follow up on capital allocation acumen. So I just was wondering if you could clarify your comments around rising debt costs make the buyback less optimal. Are you saying that, like, deleveraging is preferred to drive earnings accretion over NTA accretion? And then maybe more broadly, can you just clarify what your current views are on the highest and best use of your capital as you continue to sell assets opportunistically?

Yeah, thanks, Claire. I think the comment in relation to the buyback is in regards to the all-in cost of debt. So if we had an all-in cost of debt at 5.3%, but then you think about the marginal cost of debt at the moment, which is close to the 6%, When we commenced the buyback 12 months ago, the marginal cost of debt was probably sub five. So obviously, we fund the buyback by drawing down on debt. Any spare cash we have, we utilize to pay down revolver debt facilities. So if you are obviously drawing debt at a higher cost, that is not as favorable to your, what it would have been if debt was one or two percentage points lower. So that's the comment in relation to that. In regards to the capital ranking allocation, Look, I think it's great to have multiple opportunities across the IP, which we think are all accretive. So the buyback, in our view, is still something that we would consider pursuing, given where we currently trade at a discount to NCA. Developing our existing pipeline where we're delivering stock in FY26 with yields in excess of 7 when we've been selling stock at a passing yield of 4.9%. And then, obviously, there is the data centre. opportunity set within CIP, which we think is very exciting, too, and could potentially provide an even greater return on capital. So at the moment, I wouldn't say there is a clear favorite. I think there is multiple opportunities across CIP, and the fact that we have that, I think, is a really good opportunity for you to tell us more broadly.

All right. Thanks. That's helpful. Yeah, just in terms of perhaps just pushing a bit more on the buyback, though, I mean, if you're continuing to sell assets and material premiums, is there no appetite to ramp up that divestment program for sort of non-core assets that don't necessarily have the IRR upside versus some other assets in your portfolio to fund the buyback as opposed to debt?

Yeah, look, I think it's something that we will continue to consider. We've obviously sold a bunch of assets, not only in FY26, but in FY25. So we've sold in excess of $400 million of assets over the last couple of years, all at strong premiums to book value. Now, obviously, putting that back when you're trading at a 25% discount to NTA is beneficial, and it's something we'll continue to see. I think one of the concerns that we had when we commenced the buyback in the first half was that it did create an escalation in gearing So if we did get a more significant bunch of transactions or divestments through FY27 and that reduced the gearing down to a level where we could continue that buyback, that is something we'd consider.

All right, thanks. And just another quick follow-up from me, just around the releasing spreads. Are you able to give us some colour around what they would be on an effective basis? And when you look at sort of the under-ending of the portfolio of 17%, how would that translate on an effective basis?

It's probably even greater on an effective basis because incentives have generally been lower in the current market than what they would have been particularly pre-2021. So we don't have that number to hand, but I'd argue that you're probably seeing releasing spreads in excess of what we are quoting.

Great. Thanks, guys.

There are no further questions at this time. I'll now hand back to Mr. Nichols for closing remarks.

Thank you everyone for joining today's presentation. If you have any follow-up questions, please don't hesitate to contact any of the team. That concludes today's presentation. We thank you for your interest in Centuria Industrial REIT and wish you a very good day.