Q4 2026 Abacus Storage King Earnings Call

August 14, 2026

Speaker #1: Thank you for standing by, and welcome to the Storage King Group FY26 results. All participants are in listen-only mode. There will be a presentation, followed by a question-and-answer session.

Operator: Thank you for standing by and welcome to the Storage King Group FY2026 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phone, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. I would now like to hand the conference over to Ms. Nikki Lawson, CEO. Please go ahead.

Speaker #1: If you wish to ask a question via the phones, you will need to press the star key, followed by the number 1 on your telephone keypad.

Speaker #1: If you wish to ask a question via the webcast, please type your question into the 'Ask a Question' box. I would now like to hand the conference over to Ms. Nikki Lawson, CEO.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to the 2026 full-year results presentation, in what has been a strategically significant year for Storage King Group, with the successful internalization of the business being completed on the 30th of June.

Nikki Lawson: Good morning and welcome to the 2026 full-year results presentation in what has been a strategically significant year for Storage King Group, with the successful internalization of the business being completed on 30 June. I am joined here today by our CFO, Evan Goodridge, our COO, Inara Gravitis, and the investor relations team. To provide consistency with half-year SKG results, we plan to cover our results in a format familiar to all of you. Going forward with the consolidation of systems under the group, we aim to leverage this into an updated pack for the February's half year results. Onto our highlights. FY2026 saw strong progress across our key growth drivers with highlights spanning operations, platform enhancement, development, capital deployment, and dare I say, the crowning achievement being the internalization of the business.

Speaker #2: I'm joined here today by our CFO, Evan Goodrich, our COO, Inara Gravetas, and the investor relations team. To provide consistency with our half-year ASK results, we plan to cover our results in a format familiar to all of you.

Speaker #2: Going forward with the consolidation of systems under the group, we aim to leverage this into an updated pack for the February half-year results. On to our highlights.

Speaker #2: FY26 saw strong progress across our key growth drivers, with highlights spanning operations, platform enhancement, development, capital deployment, and DIC. The crowning achievement was the internalization of the business.

Speaker #2: Operationally, it was Australia who delivered a resilient performance, with 2.7% gross PAN growth and occupancy remaining above 90%, despite competitive market conditions. We strengthened the platform through the rollout of our proprietary revenue management system, greater analytics capability, and continued investment in the Storage King brand.

Nikki Lawson: Operationally, it was Australia who delivered resilient performance with 2.7% RevPAR growth and occupancy remaining above 90% despite competitive market conditions. We strengthened the platform through the rollout of our proprietary revenue management system, greater analytics capability, and continued investment in the Storage King brand. Development was a standout, with 34,500 square meters delivered and a further 110,000 square meters in the pipeline, creating a significant source of future earnings growth. We deployed AUD 78 million into strategic acquisitions and replenished the development pipeline with three new sites aligned to our network strategy. But it is internalization that represents a significant milestone for Storage King Group. Today, SKG is the only ASX-listed, vertically integrated self-storage platform in Australasia, owning, operating, and managing its portfolio. The transaction immediately strengthens alignment between management and security holders.

Speaker #2: Development was a standout, with 34,500 square meters delivered and a further 110,000 square meters in the pipeline, creating a significant source of future earnings growth.

Speaker #2: We deployed $78 million into strategic acquisitions and replenished the development pipeline with three new sites aligned to our network strategy. But it's internalization that represents a significant milestone for Storage King Group.

Speaker #2: Today, SKG is the only ASX-listed, vertically integrated self-storage platform in Australasia, owning, operating, and managing its portfolio. The transaction immediately strengthens alignment between management and security holders.

Speaker #2: It retains key leadership capability and simplifies the group's operating structure. It's already earning, with forecast cost savings and cultural integration. Most importantly, it fundamentally improves the way security holders participate in future growth.

Nikki Lawson: It retains key leadership capability and simplifies the group's operating structure. It has already been accretive with full cost savings, and cultural integration. Most importantly, it fundamentally improves the way security holders participate in future growth. While internalization is not the growth strategy itself, it creates a stronger platform and allows us to capture more of the value generated by that growth over time. Turning to our key business metrics. The group now manages 132 trading stores and a growing development pipeline, with gross asset value increasing 8.1% to more than AUD 3.9 billion. That is up from AUD 666 million just eight years ago. Underpinning this is a high-quality land bank of over 1.2 million square meters across metropolitan Australia and New Zealand.

Speaker #2: While internalization is not the growth strategy itself, it creates a stronger platform and allows us to capture more of the value generated by that growth over time.

Speaker #2: Turning to our key business metrics, the Group now manages 132 trading stores and a growing development pipeline, with gross asset value increasing 8.1% to more than $3.9 billion.

Speaker #2: That's up from $666 million just eight years ago. Underpinning this is a high-quality land bank—over 1.2 million square meters—across metropolitan Australia and New Zealand.

Speaker #2: Across the portfolio, the weighted average capitalization rate tightened three basis points to 5.42%, reflecting the quality, resilience, and growth prospects of the asset base.

Nikki Lawson: Across the portfolio, the weighted average capitalization rate tightened 3 basis points to 5.42%, reflecting the quality, resilience, and growth prospects of the asset base. This contributed to NTA increasing to AUD 1.77 per security, up from AUD 1.74 a year ago, and up from AUD 1.57 on de-stapling 3 years ago. Our balance sheet remains strong with gearing at the midpoint of our target range, providing capacity to fund our development pipeline and pursue selective acquisition opportunities. Operationally, the Storage King platform continues to deliver market-leading occupancy, achieve rates, and RevPAR performance. Finally, we delivered a full year distribution of 6.2 cents per security in line with guidance. Overall, these results demonstrate the resilience of both our business and the self-storage sector. While near-term market conditions remain competitive, we continue to see strong long-term fundamentals and a significant runway for future growth.

Speaker #2: This contributed to NTA increasing to a dollar 77 per security. Up from a dollar 74 a year ago and up from a dollar 57 on destapling three years ago.

Speaker #2: Our balance sheet remains strong, with gearing at the midpoints of our target range, providing capacity to fund our development pipeline and pursue selective acquisition opportunities.

Speaker #2: Operationally, the Storage King platform continues to deliver market-leading occupancy and achieve great RevPAN performance. Finally, we delivered a full-year distribution of 6.2 cents per security, in line with guidance.

Speaker #2: Overall, these results demonstrate the resilience of both our business and the self-storage sector. While near-term market conditions remain competitive, we continue to see strong long-term fundamentals and a significant runway for future growth.

Speaker #2: As the only listed self-storage REIT on the ASX, it's worth taking a moment to highlight why we remain so positive on the sector's long-term investment fundamentals.

Nikki Lawson: As the only listed self-storage REIT on the ASX, it's worth taking a moment to highlight why we remain so positive on the sector's long-term investment fundamentals. First, self-storage has a highly responsive revenue model. Month-to-month customer agreements allow us to reprice quickly and adapt to changing inflationary and market conditions. Second, demand has proven resilient across economic cycles. Our customer base is highly diversified, spanning personal and business users with no material customer or asset concentration. Third, we continue to see a compelling structural growth runway. Penetration rates in Australia and New Zealand remain materially below the United States, which in itself still continues to grow. While population growth, urban densification, and smaller living spaces continue to support demand. Fourth, the sector benefits from attractive operating economics. High margins, low incentives, and relatively modest capital requirements support strong cash flow conversion. Finally, the market remains highly fragmented.

Speaker #2: First, self-storage has a highly responsive revenue model. Month-to-month customer agreements allow us to reprice quickly and adapt to changing inflationary and market conditions. Second, demand has proven resilient across economic cycles.

Speaker #2: Our customer base is highly diversified, spanning personal and business users, with no material customer or asset concentration. Third, we continue to see a compelling structural growth runway.

Speaker #2: Penetration rates in Australia and New Zealand remain materially below those in the United States, which itself continues to grow. Meanwhile, population growth, urban densification, and smaller living spaces continue to support demand.

Speaker #2: Fourth, the sector benefits from attractive operating economics. High margins, low incentives, and relatively modest capital requirements support strong cash flow conversion. And finally, the market remains highly fragmented.

Speaker #2: This creates ongoing opportunities for consolidation. With Storage King's scale, brand, and reputation, we have strong access to future growth opportunities. Taken together, these characteristics make self-storage a resilient, cash-generative sector with multiple avenues for long-term growth.

Nikki Lawson: This creates ongoing opportunities for consolidation with Storage King's scale, brand, and reputation, providing strong access to future growth opportunities. Taken together, these characteristics make self-storage a resilient cash-generative sector with multiple avenues for long-term growth. The group is uniquely positioned to capitalize on these attractive sector fundamentals. We combine scale, sector-leading operating metrics, significant embedded growth opportunities, a market-leading platform, the most recognized brand in Australia and New Zealand, and deep experience in the sector. These competitive advantages give us confidence in our ability to continue creating long-term value for security holders through the cycle. With that, I'll hand over to Evan to discuss the financial results.

Speaker #2: And the group is uniquely positioned to capitalize on these attractive sector fundamentals. We combine scale, sector-leading operating metrics, significant embedded growth opportunities, a market-leading platform, the most recognized brand in Australia and New Zealand, and deep experience in the sector.

Speaker #2: These competitive advantages give us confidence in our ability to continue creating long-term value for security holders through the cycle. With that, I'll hand over to Evan to discuss the financial results.

Speaker #3: Thanks, Nikki, and good morning. FY26 was a year of continued operating growth and a significant strategic transition to Storage King. Operating revenue increased 3.3% to $236 million, and operating profit increased 2.4% to $145.3 million.

Evan Goodridge: Thanks, Nikki, and good morning. FY2026 was a year of continued operating growth and a significant strategic transition for Storage King. Operating revenue increased 3.3% to AUD 236 million, and operating profit increased 2.4% to AUD 145.3 million, while our operating margin remained steady at 62%. Breaking the operating results further. Established revenue grew by 1.2% to AUD 193 million, despite a tougher backdrop including cost of living pressures, subdued housing turnover, and a more competitive environment with heavier promotional discounting from our competitors. Importantly, our Australian established RevPAR increased 2.7% with positive growth across every state. New Zealand was the exception, with established RevPAR down 11.7% or 2.3% excluding the impacts of foreign exchange and disruption from capital works. Those works were completed in May 2026, meaning that operational disruption is now behind us and the portfolio enters FY2027 in a materially better position.

Speaker #3: While our operating margin remained steady at 62%. Breaking down the operating result further, established revenue grew by 1.2% to $193 million, despite a tougher backdrop including cost-of-living pressures, subdued housing turnover, and a more competitive environment with heavier promotional discounting from our competitors.

Speaker #3: Importantly, our Australian-established RevPAN increased 2.7%, with positive growth across every state. New Zealand was the exception, with established RevPAN down 11.7%, or 2.3% excluding the impacts of foreign exchange and disruption from capital works.

Speaker #3: Those works were completed in May 2026, meaning that operational disruption is now behind us, and the portfolio enters FY27 in a materially better position.

Speaker #3: The composition of earnings is also changing, as we allocate more capital to assets earlier in their earnings life cycle. Revenue from acquisition assets increased 7.3% to $9.1 million.

Evan Goodridge: The composition of earnings is also changing as we allocate more capital to assets earlier in their earnings life cycle. Revenue from acquisition assets increased 7.3% to AUD 9.1 million, and revenue from stabilizing assets increased 27.2% to AUD 21.5 million. These assets have lower initial yields while they lease up, but they provide a substantial earnings pipeline as occupancy and rental yield move towards established store-level metrics. Our proprietary revenue management system is now active across every owned store and will expand its capability further in FY2027. FY2026 was also a record year for new developments, with 34,500 square meters net lettable area delivered from next-generation stores and expansions. For FY2027, we are forecast to deliver a further 50,000 square meters, including two of our largest and highest quality assets at Sydney Olympic Park and Mascot.

Speaker #3: And revenue from stabilizing assets increased 27.2% to $21.5 million. These assets have lower initial yields while they lease up, but they provide a substantial earnings pipeline as occupancy and rental yield move towards established store-level metrics.

Speaker #3: Our proprietary revenue management system is now active across every owned store and will expand its capabilities further in FY27. FY26 was also a record year for new developments, with 34,500 square meters of net livable area delivered from next-generation stores and expansions.

Speaker #3: For FY27, we are forecast to deliver a further 50,000 square meters, including two of our largest and highest quality assets at Sydney Olympic Park and Mascot.

Speaker #3: Operating expenses rose 4.9% for the period, driven by the addition of six new stores and like-for-like non-controllable statutory costs, which again grew at double-digit rates for the year.

Evan Goodridge: Operating expenses rose 4.9% for the period, driven by the addition of six new stores and like-for-like non-controllable statutory costs, which again grew at double-digit rates for the year. For FY2027, we expect this statutory cost pressure to ease with growth returning towards more normalized levels. Our 62% operating margin is a whole of portfolio measure. It includes not only our established stores, but also our acquisition and stabilizing assets that are still building occupancy and earnings. We expect that the margins will broadly remain stable in FY2027, despite approximately 50,000 square meters of new development completions. Maturation of the existing acquisitional stabilizing portfolios, further revenue management capability, and centralization of specialist functions should largely offset the initial drag from new stores coming online, with operating profit continuing to grow. As Nikki Lawson mentioned, internalization also gives us, for the first time, one integrated operating and data ecosystem.

Speaker #3: For FY27, we expect this statutory cost pressure to ease, with growth returning towards more normalized levels. Our 62% operating margin is a whole-of-portfolio measure.

Speaker #3: It includes not only our established stores but also our acquisition and stabilizing assets that are still building occupancy and earnings. We expect that the margin will broadly remain stable in FY27, despite approximately 50,000 square meters of new development completions.

Speaker #3: Maturation of the existing acquisition and stabilizing portfolios, further revenue management capability, and centralization of specialist functions should largely offset the initial drag from new stores coming online, with operating profit continuing to grow.

Speaker #3: As Nikki mentioned, internalization also gives us, for the first time, one integrated operating and data ecosystem. We will use that capability to reconsider how best we present portfolio performance in our HY27 results.

Evan Goodridge: We will use that capability to reconsider how best we present portfolio performance in our H1 2027 results. FY2026 was the last year in which Storage King carried the full cost of external management. The increase in overheads from AUD 21.9 million to AUD 23 million is mainly attributable to these external management fees. Internalization removes that structural drag, and we expect approximately AUD 7 million of annualized savings, with a little over AUD 5 million through lower P&L overheads and the balance-reducing costs that would have otherwise been capitalized into our development pipeline. During the period, net finance costs rose to AUD 39.7 million, up from AUD 33.8 million. For FY2026, the group earned FFO of AUD 82.1 million or 6.24 cents per security and paid a distribution of 6.2 cents. Over recent years, the group has benefited from a relatively low cost of hedged debt.

Speaker #3: FY26 was the last year in which Storage King carried the full cost of external management. The increase in overheads from $21.9 million to $23 million is mainly attributable to these external management fees.

Speaker #3: Internalization removes that structural drag, and we expect approximately $7 million of annualized savings, with a little over $5 million through lower P&L overheads, and the balance reducing costs that would have otherwise been capitalized into our development pipeline.

Speaker #3: During the period, net finance costs rose to $39.7 million, up from $33.8 million. In FY26, the group earned FFO of $82.1 million, or 6.24 cents per security, and paid a distribution of 6.2 cents.

Speaker #3: Over recent years, the Group has benefited from a relatively low cost of hedged debt. As those hedges progressively mature, finance costs will increase and remain a material earnings headwind in the near term.

Evan Goodridge: As those hedges progressively mature, finance costs will increase and remain a material earnings headwind in the near term. The operating growth initiatives that I have discussed, together with the benefits of internalization, are important to help cushion this near-term headwind but do not fully offset it. As we enter FY2027, there are therefore three important moving parts. First, we expect the existing portfolio and maturing assets to continue to grow operating profit. Second, internalization removes approximately AUD 7 million of annualized costs. Third, finance costs will rise materially as our historical hedges mature and drawn debt increases to fund the growth pipeline. Our FY2027 cost of debt is guided to be no greater than 4.75% or 5.5%, including capitalized interest.

Speaker #3: The operating growth initiatives that I have discussed, together with the benefits of internalization, are important to help cushion this near-term headwind but do not fully offset it.

Speaker #3: As we enter FY27, there are therefore three important moving parts. First, we expect the existing portfolio and maturing assets to continue to grow operating profit.

Speaker #3: Second, internalization removes approximately $7 million of annualized costs. And third, finance costs will rise materially, as our historical hedges mature and drawn debt increases to fund the growth pipeline.

Speaker #3: Our FY27 cost of debt is guided to be no greater than 4.75%, or 5.5% including capitalized interest. Against that backdrop, for FY27 we have chosen to widen our payout ratio range, lowering the bottom end to 80% of FFO, down from 90%, and set FY27 distribution guidance at 4.5 cents per security, with at least 25% expected to be paid as a fully franked dividend.

Evan Goodridge: Against that backdrop, for FY2027, we have chosen to widen our payout ratio range, lowering the bottom end to 80% of FFO down from 90%, and set FY2027 distribution guidance at AUD 4.5 cents per security, with at least 25% expected to be paid as a fully franked dividend. This will continue the planned distribution of our AUD 36 million franking credit balance to security holders over the medium term. These expectations are subject to no material deterioration in current business conditions, and Nikki Lawson will cover the group's outlook, guidance, and FY2027 priorities in more detail shortly. Turning to the balance sheet. Total assets grew 8.1% to AUD 3.9 billion. Our total store assets were AUD 3.6 billion, with our stable, mature established portfolio representing 71% of the total, down from 77% a year ago.

Speaker #3: This will continue the planned distribution of our $36 million franking credit balance to security holders over the medium term. These expectations are subject to no material deterioration in current business conditions, and Nikki will cover the group's outlook, guidance, and FY27 priorities in more detail shortly.

Speaker #3: Turning to the balance sheet. Total assets grew 8.1% to $3.9 billion. Our total store assets were $3.6 billion, with our stable, mature, established portfolio representing 71% of the total, down from 77% a year ago.

Speaker #3: In FY26, we deliberately shifted our capital allocation towards assets with higher growth potential, increasing our exposure to more than $1 billion of acquisition, stabilizing, and development assets.

Evan Goodridge: In FY2026, we deliberately shifted our capital allocation towards assets with higher growth potential, increasing our exposure to more than AUD 1 billion of acquisition stabilizing and development assets. This saw acquisitions grow 10% to AUD 133 million, stabilizing assets grow 24% to AUD 563 million, and development sites grow around 64% to AUD 352 million. For FY2027, we expect the stabilizing portfolio to grow further as the additional 50,000 square meters I mentioned comes online. Goodwill and intangibles increased to AUD 96 million at the end of the period. This balance includes the Storage King brand and operating platform, plus an additional AUD 19 million associated with acquiring the responsible entity and management rights to effect the internalization.

Speaker #3: This saw acquisitions grow 10% to $133 million, stabilizing assets grow 24% to $563 million, and development sites grow around 64% to $352 million.

Speaker #3: In FY27, we expect the stabilizing portfolio to grow further, as the additional 50,000 square meters I mentioned comes online. Goodwill and intangibles increased to $96 million at the end of the period.

Speaker #3: This balance includes the Storage King brand and operating platform, plus an additional $19 million associated with acquiring the responsible entity and management rights to effect the internalization.

Speaker #3: Net tangible assets ended the period at $1.77 per security, up 1.7%, reflecting both growth in market income and the underlying quality of a portfolio that comprises our new next-generation, purpose-built assets. It is overwhelmingly metro-located and has 66% of our Australian stores located in Sydney, Melbourne, and Brisbane, the country's three biggest markets.

Evan Goodridge: Net tangible assets ended the period at AUD 1.77 per security, up 1.7%, reflecting both growth in market income and the underlying quality of a portfolio that comprises our new next-generation purpose-built assets, is overwhelmingly metro located and has 66% of our Australian stores located in Sydney, Melbourne, and Brisbane, the country's three biggest markets. As part of the internalization, we upsized our unsecured banking facilities by AUD 300 million while pricing, tenor, and covenants remained unchanged. We now have AUD 1.65 billion in debt facilities with a weighted average term to maturity of 2.3 years. Our weighted average cost of debt for FY2026 was 3.1% or 4.2%, including capitalized interest, benefiting from hedges put in place when rates were considerably lower.

Speaker #3: As part of the internalisation, we upsized our unsecured banking facilities by $300 million, while pricing, tenor, and covenants remained unchanged. We now have $1.65 billion in debt facilities, with a weighted average term to maturity of 2.3 years.

Speaker #3: Our weighted average cost of debt for FY26 was 3.1%, or 4.2% including capitalized interest, benefiting from hedges put in place, and rates were considerably lower.

Speaker #3: At 30 June, the group was 72% hedged and our interest cover ratio was 3.3 times, against the covenant of 2 times, providing headroom even as finance costs rise over the next few years.

Evan Goodridge: At 30 June, the group was 72% hedged, and our interest cover ratio was 3.3 times against a covenant of 2 times, providing headroom even as finance costs rise over the next few years. Gearing was 33.7%, comfortably within our target range and provides us approximately AUD 400 million of additional capacity. We nevertheless intend to manage capital prudently as the development pipeline arrests. Our capital management options include organic valuation growth as acquisition of stabilizing assets mature, capitalized structures, selective asset recycling, and other funding initiatives. We will continue to assess each source of capital in light of security holder returns. Storage King's portfolio values increased 2% during the period, up AUD 71 million. Importantly, the principal drivers were income growth and value created through completed developments rather than cap rate compression.

Speaker #3: Gearing was 33.7%, comfortably within our target range, and provides us approximately $400 million of additional capacity. We nevertheless intend to manage capital prudently as the development pipeline progresses.

Speaker #3: Our capital management options include organic valuation growth as acquisition-stabilizing assets mature, capital-light structures, selective asset recycling, and other funding initiatives. We will continue to assess each source of capital in light of security holder returns.

Speaker #3: Storage King's portfolio values increased 2% during the period, up $71 million. Importantly, the principal drivers were income growth and value created through completed developments, rather than cap rate compression.

Speaker #3: Separately, we invested a further $78 million in acquisitions and $168 million in capital expenditure during the period, reflected in the portfolio at cost.

Evan Goodridge: Separately, we invested a further AUD 78 million in acquisitions and AUD 168 million in capital expenditure during the period, reflected in the portfolio of that cost. The portfolio weighted average cap rate tightened by only 3 basis points from 5.45% to 5.42%. Transaction activity across the sector remains very strong, with multiple portfolios being acquired or marketed. The weight of capital that is seeking high-quality self-storage assets underpins our confidence in the value of our portfolio. Finally, I wanted to put our reported NTA of AUD 1.77 into context. NTA captures the carrying value of our tangible assets under accounting methodology, but it does not capture all of the economic value that we see in Storage King. First, there is property value not reflected in the NTA. Each property is valued as if individually owned and externally operated.

Speaker #3: The portfolio weighted average cap rate tightened by only 3 basis points, from 5.45% to 5.42%. Transaction activity across the sector remains very strong. With multiple portfolios being acquired or marketed, the weight of capital that is seeking high-quality self-storage assets underpins our confidence in the value of our portfolio.

Speaker #3: Finally, I wanted to put our reported NTA of $1.77 into context. NTA captures the carrying value of our tangible assets under accounting methodology, but it does not capture all of the economic value that we see in Storage King.

Speaker #3: First, there's property value not reflected in the NTA. Each property is valued as if it's individually owned and externally operated. Developments are held at cost rather than completion value, and portfolio transactions can attract a premium to the value of assets considered individually.

Evan Goodridge: Developments are held at cost rather than completion value, and portfolio transactions can attract a premium to the value of assets considered individually. Recent comparable portfolio transactions have occurred at cap rates approximately 50 to 100 basis points tighter than the rates applied to individual assets in our portfolio. While those transactions are not directly comparable in every respect, they do provide useful evidence of the premium the market attributes to scaled self-storage portfolios. Second, there is platform value. Storage King brand, our proprietary revenue management system, our management rights, the responsible entity and associated licenses, and the approximately 25,000 new customer inquiries generated each and every month. Third, there is strategic value.

Speaker #3: Recent comparable portfolio transactions have occurred at cap rates approximately 50 to 100 basis points tighter than the rates applied to individual assets in our portfolio.

Speaker #3: While those transactions are not directly comparable in every respect, they do provide useful evidence of the premium the market attributes to scaled self-storage portfolios.

Speaker #3: Second, there is platform value: the Storage King brand, a proprietary revenue management system, our management rights, the responsible entity and associated licenses, and the approximately 25,000 new customer inquiries generated each and every month.

Speaker #3: And third, there is strategic value: our people, our integrated operating capability, our managed and licensed store network and associated preemptive rights, and the ability now that we are internalized to allocate capital and operate the platform entirely for Storage King security holders.

Evan Goodridge: Our people, our integrated operating capability, our manage and license store network and associated preemptive rights, and the ability now that we are internalized to allocate capital and operate the platform entirely for Storage King security holders. NTA tells us what our tangible balance sheet is recorded as. It does not tell us the full economic value of a vertically integrated, owned, operated, and managed self-storage platform listed on the ASX. The strength of our people, portfolio, platform, market access, and now internalized structure positions us well to drive long-term value for our security holders. With that, I'll hand back to Nikki Lawson.

Speaker #3: NTA tells us what our tangible balance sheet is recorded as. It does not tell us the full economic value of a vertically integrated, owned, operated, and managed self-storage platform listed on the ASX.

Speaker #3: The strength of our people, portfolio, platform, market access, and now internalized structure positions us well to drive long-term value for our security holders. And with that, I'll hand back to Vicky.

Speaker #1: Thanks, Evan. Before discussing earnings growth from the portfolio, it's worth reflecting on the significant capital growth achieved in the underlying portfolio itself. Over the past eight years, the value of our self-storage assets has grown from approximately $666 million to almost $3.9 billion.

Nikki Lawson: Thanks, Evan. Before discussing earnings growth from the portfolio, it's worth reflecting on the significant capital growth achieved in the underlying portfolio itself. Over the past 8 years, the value of our self-storage assets has grown from approximately AUD 666 million to almost AUD 3.9 billion, representing a compound annual growth rate of 25%. More importantly, this growth has been achieved through the deliberate creation of a high-quality, predominantly metropolitan portfolio located in densely populated markets across Australia and New Zealand. These assets are increasingly difficult to replicate. Planning restrictions, land availability, and development costs continue to rise, reinforcing the strategic value of the portfolio that we have assembled. Looking closer at the composition of that growth, an important trend is emerging. The value of our stabilizing and development segments has nearly doubled since de-stapling in 2023 and is forecast to exceed AUD 1 billion in FY27.

Speaker #1: Representing a compound annual growth rate of 25%. More importantly, this growth has been achieved through the deliberate creation of a high-quality, predominantly metropolitan portfolio, located in densely populated markets across Australia and New Zealand.

Speaker #1: These assets are increasingly difficult to replicate. Planning restrictions, land availability, and development costs continue to rise, reinforcing the strategic value of the portfolio that we have assembled.

Speaker #1: Looking closer at the composition of that growth, an important trend is emerging. The value of our stabilizing and development segments has nearly doubled since de-stacking in 2023, and is forecast to exceed $1 billion in FY27.

Speaker #1: This reflects the increasing contribution of our development pipeline and highlights the growing role these assets play in the future growth of the group. With strategic locations, significant scale, and increasing barriers to entry, we believe the quality and scarcity of our assets represent one of Storage King's greatest competitive advantages.

Nikki Lawson: This reflects the increasing contribution of our development pipeline and highlights the growing role these assets play in the future growth of the group. With strategic locations, significant scale, and increasing barriers to entry, we believe the quality and scarcity of our assets represents one of Storage King's greatest competitive advantages and a powerful foundation for long-term security holder value growth. Beyond that capital growth achieved, during the year the portfolio continued to deliver income growth. As in prior periods, we break the portfolio into four segments: established and then our high-growth segments, acquisitions, stabilizing, and development sites. The established portfolio is best analyzed by region, and I will cover this shortly. The most important takeaway from this slide being the shape of the portfolio and the meaningful change that has occurred.

Speaker #1: And a powerful foundation for long-term security holder value growth. Beyond that capital growth achieved during the year, the portfolio continued to deliver income growth.

Speaker #1: As in prior periods, we break the portfolio into four segments: established, high-growth, acquisitions stabilizing, and development sites. The established portfolio is best analyzed by region, and I'll cover this shortly.

Speaker #1: The most important takeaway from this slide is the shape of the portfolio and the meaningful change that has occurred. Today, 29% of the portfolio, or 48 of the 151 company assets, sit in the high-growth segments.

Nikki Lawson: Today, 29% of the portfolio or 48 of the 151 company assets sit in the high-growth segments that have yet to reach their full earnings potential. Within this, it is the stabilizing portfolio that grades most on current yields. Day 1, when we open a new store, we open with zero customers or revenue, but the full cost of operations, marketing, and borrowings are expensed. This moderates current overall portfolio yields substantially, but it also represents the group's most significant source of embedded growth. As acquisitions are optimized, stabilizing stores mature, and development projects are delivered and leased up, these assets provide a substantial runway for future earnings growth. By way of a simple arithmetic illustration, utilizing the established portfolio metrics as seen on this slide, the organic growth opportunity within the acquisition stabilizing and development sites represents a potential incremental revenue uplift of approximately AUD 71 million per annum.

Speaker #1: That have yet to reach their full earnings potential. Within this, it's the stabilizing portfolio that grabs most on current yields. Day one, when we open a new store, we open with zero customers or revenue.

Speaker #1: But the full cost of operations, marketing, and borrowings are expensed. This moderates current overall portfolio yields substantially, but it also represents the group's most significant source of embedded growth.

Speaker #1: As acquisitions are optimized, stabilizing stores mature, and development projects are delivered and leased up, these assets provide a substantial runway for future earnings growth.

Speaker #1: By way of a simple arithmetic illustration, utilizing the established portfolio metrics as seen on this slide, the organic growth opportunity within the acquisition, stabilizing, and development sites represents a potential incremental revenue uplift of approximately $71 million per annum.

Speaker #1: And given the significant operating leverage inherent, particularly in the acquisition and stabilizing segments, the $26 million from these stores already trading should flow directly to FFO, with the majority of the development site revenue flowing to FFO too.

Nikki Lawson: Given the significant operating leverage inherent, particularly in the acquisition and stabilizing segments, the AUD 26 million from these stores already trading should flow directly to FFO, with the majority of the development site revenue flowing to FFO too. Understanding that this does not happen overnight, it happens over years, and there are many factors that sit between a development site and successful maturity. In summary, the portfolio today contains a larger pool of embedded earnings growth than at any time in the group's history. Moving on to the established portfolio, which provides the foundation of the group's earnings. The portfolio continues to deliver market-leading RevPAR of AUD 341 a square meter, and that is up 0.7% on FY25, with occupancy remaining strong at 90.2%, but down 3 basis points on prior year. Rate growth was driven by continued ECRI performance, partially offset by lower street rates.

Speaker #1: Understanding that this doesn't happen overnight—it happens over years—and there are many factors that sit between a development site and successful maturity. However, in summary, the portfolio today contains a larger pool of embedded earnings growth than at any time in the group's history.

Speaker #1: Moving on to the established portfolio, which provides the foundation of the group's earnings. The portfolio continues to deliver a market-leading rate PAM of $341 per square meter, and that is up 0.7% on FY25.

Speaker #1: With occupancy remaining strong at 90.2%, but down three basis points on the prior year, rate growth was driven by continued ECRI performance, partially offset by lower street rates.

Speaker #1: As we highlighted at half-year, market conditions remain competitive, with street rates exhibiting periods of both pressure and recovery throughout the year. Looking at this established portfolio by the regions, FY26 was characterized by resilient operating performance, with every Australian market delivering positive rate per available meter (PAM) growth.

Nikki Lawson: As we highlighted at the H1, market conditions remain competitive, with street rates exhibiting periods of both pressure and recovery throughout the year. Looking at the established portfolio by the regions, FY26 was characterized by resilient operating performance for every Australian market, delivering positive RevPAR growth. Importantly, the largest markets continued to perform well, with underlying rent roll growth of 5.3% in New South Wales and 7% in Queensland after adjusting for Stash acquisitions and expansions. Western Australia and the ACT remained more challenging, with elevated levels of new supply directly impacting our portfolio. In Western Australia in particular, a meaningful portion of the portfolio has been impacted by new competitor facilities entering the market over the past 18 months. The intensity of the impact is typically greatest in the early years following opening, and we expect this to moderate as these new facilities reach maturity.

Speaker #1: Importantly, the largest markets continue to perform well, with underlying rent roll growth of 5.3% in New South Wales and 7% in Queensland, after adjusting for satellite acquisitions and expansion.

Speaker #1: Western Australia and the ACT remain more challenging, with elevated levels of new supply directly impacting our portfolio. In Western Australia in particular, a meaningful portion of the portfolio has been impacted by new competitor facilities entering the market over the past 18 months.

Speaker #1: The intensity of the impact is typically greatest in the early years following opening, and we expect this to moderate as we see new facilities reach maturity.

Speaker #1: Turning to New Zealand, FY26 was impacted by three factors. First, the depreciation of the New Zealand dollar reduced earnings. Second, trading was disrupted by roof strengthening works across five stores.

Nikki Lawson: Turning to New Zealand, FY26 was impacted by three factors. First, the depreciation of the New Zealand dollar reduced earnings. Second, trading was disrupted by roof strengthening works across 5 stores, which were completed in May. Third, softer macroeconomic conditions weighed on underlying performance. As Evan mentioned, with the first 2 stripped out, New Zealand was still negative at -2.3% for the year. The capital works are now complete. The affected stores have moved into recovery mode and are focused on rebuilding occupancy and revenue performance through FY27. While competitive conditions are likely to remain a feature of the operating environment, management remains focused on the factors within our control. Alongside strengthening revenue management capability, we are placing increased emphasis on productivity and cost discipline across both Australia and New Zealand to support earnings growth through this cycle.

Speaker #1: Which were completed in May. Third, softer macroeconomic conditions weighed on underlying performance, and as Evan mentioned, with the first two stripped off, New Zealand was still negative at 2%.

Speaker #1: Negative 2.3% in the year. The capital works are now complete, the affected stores are moving into recovery mode, and our focus is on rebuilding occupancy and revenue performance through FY27.

Speaker #1: While competitive conditions are likely to remain a feature of the operating environment, management remains focused on the factors within our control. Alongside strengthening revenue management capability, we are placing increased emphasis on productivity and cost decisions across both Australia and New Zealand to support earnings growth through the cycle.

Speaker #1: Development remains one of our most attractive avenues for growth and value creation. Our focus is simple: develop in markets where we see strong long-term demand.

Nikki Lawson: Development remains one of our most attractive avenues for growth and value creation. Our focus is simple: develop in markets where we see strong long-term demand and where acquisitions are either unavailable, overpriced, or unlikely to meet our quality and scale requirements. During FY26, we continued to replenish the pipeline across 3 new sites identified through our refreshed network strategy. Today, 16 of our 19 development projects are well advanced and are expected to increase portfolio capacity by around 15% over the short to medium term. Importantly, these projects are underpinned by our proven development model, and we continue to target capital uplifts around 20% across the pipeline. We've mentioned that FY27 will be a record year for development delivery. You can see that more than 50,000 square meters of NLA scheduled to open, including our flagship Sydney Olympic Park and Mascot stores.

Speaker #1: And where acquisitions are either unavailable, overpriced, or unlikely to meet our quality and scale requirements. During FY26, we continue to replenish the pipeline across three new sites identified through our refreshed network strategy.

Speaker #1: Today, 16 of our 19 development projects are well advanced, and are expected to increase portfolio capacity by around 15% over the short to medium term.

Speaker #1: Importantly, these projects are underpinned by our proven development model, and we continue to target capital uplifts of around 20% across the pipeline. We've mentioned that FY27 will be a record year for full development delivery.

Speaker #1: You can see the more than 50,000 square meters of NLA at our flagship Sydney Olympic Park and Mascot stores. These next-generation facilities not only create future earnings growth, but continue to strengthen the quality and relevance of the portfolio.

Nikki Lawson: These next generation facilities not only create future earnings growth, but continue to strengthen the quality and relevance of the portfolio, helping to expand the appeal of self-storage to an ever-broadening customer base. In short, the development pipeline represents a significant source of future value creation, an important driver of the embedded growth opportunity across the portfolio. Importantly, our recent developments continue to validate our strategy. All 4 developments shown on this slide are performing at or ahead of underwriting expectations, demonstrating the quality of both our development model and operating platform. Expansions are also delivering attractive returns with a further 23,000 square meters in the pipeline. Strong execution gives us confidence in our ability to continue converting development capital into future earnings growth. Moving to our Storage King platform. At Storage King, growth starts with customers.

Speaker #1: Helping to expand the appeal of self-storage to an ever-broadening customer base. In short, the development pipeline represents a significant source of future value creation and an important driver of the embedded growth opportunity across the portfolio.

Speaker #1: Importantly, our recent developments continue to validate our strategy. All four developments shown on the slide are performing at or ahead of underwriting expectations, demonstrating the quality of both our development model and operating platform.

Speaker #1: Expansions are also delivering attractive returns, with a further 23,000 square meters in the pipeline. Strong execution gives us confidence in our ability to continue converting development capital into future earnings growth.

Speaker #1: Moving to our Storage King platform—and at Storage King, growth starts with customers. We attract more customers by being the most recognized and most searched self-storage brand in Australia and New Zealand.

Nikki Lawson: We attract more customers through being the most recognized and most searched self-storage brand in Australia and New Zealand. This generated more than 300,000 quality inquiries for the business in FY26. We then convert the demand through a superior customer experience, reflected in the 24% conversion rate, NPS of 72, our quality assets, and our engaged workforce. The combination of customer attraction and customer experience has again resulted in Storage King being recognized as the number one preferred self-storage brand across Australia and New Zealand. We believe this leadership position is a significant competitive advantage and a key driver of long-term revenue and earnings growth. One of the most important organic growth initiatives for the group is our proprietary revenue management system. FY26 marked a key milestone, with deployment now complete across the portfolio and the business transitioning from implementation to optimization.

Speaker #1: And this generated more than 300,000 quality inquiries for the business in FY26. We then convert the demand through a superior customer experience, reflected in the 24% conversion rate, NPS of 72, our quality assets, and our engaged workforce.

Speaker #1: The combination of customer attraction and customer experience is a gain, resulting in Storage King being recognized as the number one preferred self-storage brand across Australia and New Zealand.

Speaker #1: We believe this leadership position is a significant competitive advantage and a key driver of long-term revenue and earnings growth. One of the most important organic growth initiatives for the group is our proprietary revenue management system.

Speaker #1: FY26 marked a key milestone, with deployment now complete across the portfolio and the business transitioning from implementation to optimization. While market conditions have remained competitive, our confidence in the system continues to grow.

Nikki Lawson: While market conditions have remained competitive, our confidence in the system continues to grow. The data on the left demonstrates that stores operating with RMS generated pricing that delivered EPR outcomes approximately 2.5% higher than non-RMS stores during the measurement period. More importantly, the system is creating a disciplined, data-driven approach to revenue management. It combines centralized analytics with local market expertise, enabling more informed pricing decisions at unit, store, and market level. Looking ahead, our focus shifts to value capture. We have established a dedicated revenue management team, are preparing to launch value pricing capability through our digital channels, and will continue to enhance the platform through machine learning, testing, and optimization. For us, the significance of the RMS is not the technology itself, but the capability that it creates.

Speaker #1: The data on the left demonstrates that stores operating with RMS-generated pricing delivered ETR outcomes approximately 2.5% higher than non-RMS stores during the measurement period.

Speaker #1: More importantly, the system is creating a disciplined, data-driven approach to revenue management. It combines centralized analytics with local market expertise, enabling more informed pricing decisions at the unit, store, and market level.

Speaker #1: Looking ahead, our focus shifts to value capture. We've established a dedicated revenue management team and are preparing to launch value pricing capabilities through our digital channels. We will continue to enhance the platform through machine learning, testing, and optimization.

Speaker #1: For us, the significance of the RMS is not the technology itself, but the capability that it creates. By combining data analytics and local market expertise, we're building a more sophisticated and scalable approach to revenue management that sits at the heart of our ability to grow revenue across the portfolio.

Nikki Lawson: By combining data, analytics, and local market expertise, we are building a more sophisticated and scalable approach to revenue management that sits at the heart of our ability to grow revenue across the portfolio. We see AI as a meaningful opportunity for the business, but our approach is targeted, practical, and focused on measurable outcomes. Rather than taking a scattergun approach, we are prioritizing use cases across customer experience, productivity, and brand visibility where we believe AI can create the most value. Importantly, we are already seeing results. AI-enhanced security cameras have now been deployed across 45% of the portfolio, reducing security incidents while lowering after-hours call-outs and operational intervention. Our next major initiative is Alex, our AI customer support agent, which enters customer testing in Q1 FY 2027 and takes Cissie the bot, who has been our chatbot, to the next level. Alex is conversational.

Speaker #1: We see AI as a meaningful opportunity for the business, but our approach is targeted, practical, and focused on measurable outcomes. Rather than taking a static approach, we're prioritizing use cases across customer experience, productivity, and brand visibility.

Speaker #1: Where we believe AI can create the most value. Importantly, we're already seeing results. AI-enhanced security cameras have now been deployed across 45% of the portfolio, reducing security incidents while lowering after-hours callouts and operational intervention.

Speaker #1: Our next major initiative is Alex, our AI customer support agent, which enters customer testing in Q1 FY27 and takes Cisco, who’s been our chatbot, to the next level.

Speaker #1: Alex is conversational. He'll provide 24/7 customer support in multiple languages. He'll manage routine inquiries and seamlessly escalate sales opportunities to our team for follow-up.

Nikki Lawson: He will provide 24/7 customer support in multiple languages. He will manage routine inquiries and seamlessly escalate sales opportunities to our team for follow-up. I have had a few long conversations with him, and I can confirm he also has a great sense of humor. What excites us most is not any single application, but the ability to combine AI with our existing strength in brand, customer experience, and operating capability. Early results are encouraging, and we see AI becoming an increasingly important lever for customer growth, productivity, and value creation across the platform. Our approach to sustainability is practical and focused on long-term value creation. During FY 2026, we improved customer NPS to 72, reduced scope 1 and 2 emissions intensity by 5%, expanded solar so that we are now across 95 stores, and we have also retained our Great Place to Work accreditation in both Australia and New Zealand.

Speaker #1: I've had a few long conversations with him, and I can confirm he also has a great sense of humor. What excites us most is not any single application, but the ability to combine AI with our existing strengths in brand, customer experience, and operating capability.

Speaker #1: Early results are encouraging, and we see AI becoming an increasingly important lever for customer growth, productivity, and value creation across the platform. Our approach to sustainability is practical and focused on long-term value creation.

Speaker #1: During FY26, we improved customer NPS to 72, reduced scope one and two emissions intensity by that we are now across 95 stores and we've also retained our great place to work accreditation in both Australia and New Zealand.

Speaker #1: These initiatives strengthen the resilience of our assets, support our customers and people, and contribute to sustainable long-term returns. Further detail will be provided in our Sustainability Report later this year.

Nikki Lawson: These initiatives strengthen the resilience of our assets, support our customers and people, and contribute to sustainable long-term returns. Further detail will be provided in our sustainability report later this year. Before I move to the priorities ahead, I would like to take a moment to acknowledge the leaders and teams who laid the foundations for the business we are privileged to lead today. Michael Tate, together with Steven Sewell, the broader Abacus leadership team, and many talented people across both organizations, helped build one of the most respected self-storage businesses in Australasia. Their vision, commitment, and capability shape the brand, portfolio, culture, and operating platform that underpin our success today. As the new CEO, I have enormous respect for what has been built and a clear sense of responsibility for what comes next. Great businesses are built over decades, not years.

Speaker #1: Before I move to the priorities ahead, I'd like to take a moment to acknowledge the leaders and teams who laid the foundations for the business we are privileged to lead today.

Speaker #1: Michael Tate, together with Steven Seal, the broader advocacy leadership team, and many talented people across both organizations, helped build one of the most respected self-storage businesses in Australasia.

Speaker #1: Their vision, commitment, and capability shaped the brand, portfolio, culture, and operating platform that underpin our success today. As the new CEO, I have enormous respect for what has been built.

Speaker #1: And a clear sense of responsibility for what comes next. Great businesses are built over decades, not years. We are fortunate to inherit a business shaped by outstanding leaders and outstanding people.

Nikki Lawson: We are fortunate to inherit a business shaped by outstanding leaders and outstanding people. Our task is now simple: honor that legacy by building something even better. As I look ahead to FY27 and beyond, my focus is clear. Successful internalization. Internalization provides us with a foundation to capture the full value of the growth ahead. Enhance the platform through specialization and optimization initiatives. Execute with excellence, realizing the embedded value in the business. Controlled capital management, recognizing where the business stands in its investment cycle and return cycle, as well as the macro environment in which we are operating. Balancing sustainable security holder returns against disciplined reinvestment in our growth opportunities. Finally, continue to grow through value accretive capital allocation into new market opportunities.

Speaker #1: Our task is now simple: honor that legacy by building something even better. So as I look ahead to FY27 and beyond, my focus is clear.

Speaker #1: Successful internalization. Internalization provides us with a foundation to capture the full value of the growth ahead. Enhance the platform through specialization and optimization initiatives.

Speaker #1: Execute with excellence. Realizing the embedded value in the business. Controlled capital management. Recognizing where the business stands in its investment cycle and return cycle.

Speaker #1: As well as the macro environment in which we're operating. And then balancing sustainable security holder returns against disciplined reinvestment in our growth opportunities. And finally, continuing to grow.

Speaker #1: Through value-accretive capital allocation into new marketing opportunities and new market opportunities. As we look ahead to FY27, Storage King enters the year from a position of strength with the simplest structure, a high-quality portfolio, and substantial embedded growth opportunities.

Nikki Lawson: As we look ahead to FY27, Storage King enters the year from a position of strength with a simpler structure, a high-quality portfolio, and substantial embedded growth opportunities. FY27 is a year where the full cost of growth becomes visible in earnings. As developments open and move to the stabilizing segment, capitalized interest progressively moves through the P&L, while our stabilizing portfolio, now the largest in group's history, incurs operating costs ahead of reaching its full earnings potential. Rather than smoothing these impacts, we believe it is important to transparently reflect the economics of the business and the stage of the portfolio's evolution in today's higher interest rate environment. Accordingly, we are providing FY27 distribution guidance of 4.5 cents per security and introducing a revised payout ratio of 80% to 100% of FFO, expecting to be in the midpoint of the range.

Speaker #1: FY27 is a year where the full cost of growth becomes visible in earnings. As developments open and move to the stabilizing segment, capitalized interest progressively moves through the P&L, while our stabilizing portfolio, now the largest in the group's history, incurs operating costs ahead of reaching its full earnings potential.

Speaker #1: Rather than smoothing these impacts, we believe it is important to transparently reflect the economics of the business and the stage of the portfolio's evolution in today's higher interest rate environment.

Speaker #1: Accordingly, we are providing FY27 distribution guidance of 4.5 cents per security and introducing a revised payout ratio of 80% to 100% of FFO.

Speaker #1: Expecting to be in the midpoint of the range. We believe FY27 represents an important inflection point, where the earnings impact of our investment program is recognized ahead of the benefits.

Nikki Lawson: We believe FY27 represents an important inflection point, where the earnings impact of our investment program is recognized ahead of the benefits. Many of the assets creating an earnings headwind today are expected to become some of the strongest contributors to earnings, cash flows, and security holder returns in the years ahead. Our focus is now on converting that embedded potential into the next phase of value creation. Thank you for your continued support, and I look forward to updating you on our progress throughout FY27.

Speaker #1: Many of the assets creating an earnings headwind today are expected to become some of the strongest contributors to earnings, cash flows, and security holder returns in the years ahead.

Speaker #1: Our focus is now on converting that embedded potential into the next phase of value creation. Thank you for your continued support, and I look forward to updating you on our progress throughout FY27.

Speaker #2: Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad.

Operator: Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. Your first phone question today comes from Carl Braganza with Jarden. Please go ahead.

Speaker #2: If you wish to ask a question via the webcast, please type your question into the "Ask a Question" box. You're first. The phone question today comes from Carl Braganza with Jarden.

Speaker #2: Please go ahead.

Speaker #3: Good morning, Nikki. Evan, thanks for your time. A few questions from me. The first one is on guidance. Even at the low end of your new payout range, earnings are going back 10% in FY27.

Carl Braganza: Morning, Nikki, Evan. Thanks for your time. A few questions from me. The first one was on guidance. Even at the low end of your new payout range, earnings are going back 10% in FY27. Can you just walk me through the drivers of that change? Obviously, some large debt headwinds, but how much is a ramp-up in development and soft operating conditions playing a part?

Speaker #3: Can you just walk me through the drivers of that change? Obviously, there are some large debt headwinds, but how much are a ramp-up in development and soft operating conditions playing a part?

Speaker #1: Thanks for the question, Carl. I'm going to hand over to Evan to answer that one.

Nikki Lawson: Thanks for the question, Carl. I'm going to stick to Evan to answer that one.

Speaker #4: Thanks, Carl. So, when we're looking into next year, we continue to grow and stabilize the portfolio. We're going to see that operating profits will grow, and that operating margin will stay the same.

Evan Goodridge: Thanks, Carl. When we're looking into next year, we continue to grow the stabilizing portfolio, and we're going to see that operating profit will grow and that operating margin will stay the same. From an income receipts perspective, we're seeing that grow. However, it's not going to be enough in relation to the headwinds of the interest expense of those hedges rolling off. The other thing to make sure that you put into your modeling is the AUD 17 million of annualized cost savings from the internalization structure.

Speaker #4: So, from an income receipts perspective, we're seeing that grow. However, it's not going to be enough in relation to the headwinds of the interest expense. For those interest expenses rolling into your modeling, there's the $7 million worth of annualized cost savings from the internalization structure.

Speaker #4: And I'd just like to let Nikki guide us to the midpoint of that range as well in her speech.

Carl Braganza: No, it's okay.

Evan Goodridge: As Nikki guided to the midpoint of that range as well in her speech.

Speaker #3: And then also, just on the capitalized interest, what was the assumption going into FY27?

Carl Braganza: Just on the capitalized interest, what was the assumption going into FY27?

Speaker #4: The assumption going into FY27 is that any developments that don't come online will capitalize the direct debt associated with those transactions. But we're looking at FY27 as having a similar amount being capitalized as that of FY26.

Evan Goodridge: The assumption going into FY27 is that any developments that don't come online capitalize the direct debt associated with those transactions. What we're looking at in FY27 is a similar amount being capitalized as that of FY26.

Speaker #3: Okay, and then a final one on guidance was: what RevPAM growth were you assuming in FY27?

Carl Braganza: Okay, a final one on guidance was what RevPAR growth were you assuming in FY27?

Speaker #4: So, in relation to RevPAM growth, when we look across the established portfolio, stabilizing portfolio, the acquisition portfolio, and the developments coming online, they all have different forms of RevPAM growth.

Evan Goodridge: In relation to RevPAR growth, when we look across the established portfolio, the stabilizing portfolio, the acquisition portfolio, and the developments coming online, they all have different forms of RevPAR growth. It is not something that we directly guide to in relation to our analysis, but we hopefully have given enough other clues throughout the presentation to it.

Speaker #4: It's not something that we directly guide to in relation to our analysis, but hopefully, we have given enough other clues throughout the presentation to assist you in your modeling.

Speaker #3: Okay, cool. And then my final question was that the 80 to 100 percent is quite a wide payout range. Is FY27 guidance assuming a payout at the bottom end?

Carl Braganza: Okay, cool. The final question from me was that the 80% to 100% is quite a wide payout range. Is FY27 guidance assuming a payout at the bottom end? Just going forward beyond FY27, where do you hope to sit in that range?

Speaker #3: And just going forward beyond FY27, where do you hope to sit in that range?

Speaker #1: Yes. But we have provided guidance, Carl, that we're expecting to be in the midpoint of that range. The wider payout ratio just gives us flexibility, and given the nature of the environment that we're in, we think that's a good thing.

Nikki Lawson: Yes. We have provided guidance, Carl Braganza, that we are expecting to be in the midpoint of that range, but the wider payout ratio just gives us flexibility and given the nature of the environment that we are in, we think that is prudent.

Speaker #3: Okay, thanks, Evan. That's all from me.

Carl Braganza: Okay. Thanks, guys. That is all from me.

Speaker #1: Thanks, Carl.

Nikki Lawson: Thanks, Carl.

Speaker #2: Your next question comes from Howard Penny with Citi. Please go ahead.

Operator: Your next question comes from Howard Penny with Citi. Please go ahead.

Speaker #5: Thank you, Nikki and Evan. Just on the finance cost resets, there's a big jump in finance costs by 110 basis points between FY26 and FY27.

Howard Penny: Thank you, Nikki and Evan. Just on the finance cost reset, there is a big jump in finance costs by 110 basis points between FY26 and FY27. Looking into '28, '29, that expected overall finance cost, it is still going up but looking a little less than the big jump we are seeing now. Is it fair to say that you are expecting operational earnings to outpace that headwind of finance costs into '28 and '29? I know you are not guiding those numbers, but this reset in '27, is that expected to be more a '27 issue and not move into '28, '29?

Speaker #5: But looking into ’28, ’29, that expected overall finance cost seems—it’s still going up, but it's looking a little less than the big jump we're seeing now.

Speaker #5: Is it fair to say that you’re expecting operational earnings to outpace that headwind of finance costs into ‘28 and ‘29? I know you’re not guiding those numbers, but is this reset in ‘27 expected to be more of a ‘27 issue and not move into ‘28 and ‘29?

Speaker #4: That's exactly right, Howard. We're looking at a near-term reset in relation to the interest expense, so that we can create medium to long-term growth going forward.

Evan Goodridge: That is exactly right, Howard. We are looking at a near-term reset in relation to the interest expense so that we can create medium to long-term growth going forward.

Speaker #5: Great, thanks a lot. And just a second question that comes up regularly on self-storage—the link between residential housing activity and turnover of houses as a driver for self-storage demand.

Howard Penny: Great. Thanks a lot. Just a second question, which comes up regularly on self-storage is the link between residential housing activity and turnover of houses as a driver for self-storage demand. I know it's more diversified than that. How would you answer a question for those that are saying, "We're under pressure here in this residential market and activity is slowing." How is that impacting your business operationally?

Speaker #5: And, but I know it's more diversified than that. How would you answer a question for those that are saying, 'We're under pressure here in this residential market and activity is slowing?'

Speaker #5: How is that impacting your business operationally?

Speaker #1: Yeah, Howard, look, residential turnover is definitely a factor. It's a fairly large factor, but as you’ve mentioned, it's one of many factors. And you could arguably say we’re in one of the very worst markets for residential turnover ever.

Nikki Lawson: Yeah, Howard, look, residential turnover is definitely a factor. It's a pretty large factor. But as you've mentioned, it's one of many factors. You could arguably say we're in one of the very worst markets for residential turnover ever. It does obviously provide us with a potential future tailwind as that pent-up demand changes. But in the short term, we do see that as a cyclical headwind that is affecting the business.

Speaker #1: It does, obviously, provide us with a potential future tailwind as that pent-up demand changes. But in the short term, we do see that as a cyclical headwind.

Speaker #1: That is affecting the business.

Speaker #5: Great. Well, thank you, guys, for the presentation.

Howard Penny: Great. Well, thank you guys for the presentation.

Speaker #1: Thanks, Howard.

Nikki Lawson: Thanks, Howard.

Speaker #2: Your next question comes from Richard Jones with JPMorgan. Please go ahead.

Operator: Your next question comes from Richard Jones with J.P. Morgan. Please go ahead.

Speaker #5: Oh, good morning. Just on FY27 earnings and distributions—obviously a big miss versus where market expectations were. Just wondering if you thought of updating the market around where your trajectory was heading as part of the internalization?

Richard Jones: Good morning. FY27 earnings and distributions, obviously a big miss versus where market expectations were. Just wondering if you thought of updating the market around where your trajectory was heading as part of the internalization?

Speaker #1: Yeah. Richard, when we were doing the internalization, we hadn’t yet sat down and updated all our budgets or done our budgeting for the year ahead.

Nikki Lawson: Well, Richard, when we were doing the internalization, we hadn't yet sat down and updated all our budgets, and done our budgeting for the year ahead. So, the right figures and what was available for us at the time we updated, we were still discussing, because there's obviously many ways for us to manage our interest rates and our interest rate hedge book. Those decisions we've only made recently as we look forward and set the strategy for the year ahead.

Speaker #1: So the right figures, and what was available for us at the time, we updated. We were still discussing, because there are obviously many ways for us to manage our interest rates.

Speaker #1: And our interest rate hit book, and those decisions were only made recently as we look forward and set the strategy for the year ahead.

Speaker #4: I think the other thing, Richard, to focus on is when we came out with our results at the half year and also at the full year last year, you saw a rising interest rate environment based on a certain amount of drawn debt at that stage.

Evan Goodridge: I think the other thing, Richard, to focus on is when we came out with our results at the H1 and also at the full year last year, we saw a rising interest rate environment based on a certain amount of drawn debt hedging then. We've invested over AUD 260 million in the last year in relation to our developments and acquisitions and those assets coming online. So you really have three parts to the headwind. One is obviously the hedges rolling off that have been forecast for a long period of time. Two is the increase in base rates that have happened over the last year and how that reflects into the curve. We've had three rate rises. The third one is just the sheer amount of drawn debt going forward.

Speaker #4: We've invested over $260 million in the last year in relation to our developments and acquisitions, and those assets coming online. So you really had three parts to the headwind.

Speaker #4: One is, obviously, the hedge is rolling off. That has been forecast for a long period of time. Two is the increase in base rates that have happened over the last year and how that reflects into the curve.

Speaker #4: We've had three rate rises. And then the third one is just the sheer amount of drawn debt going forward. So there are numbers there that could be calculated, unless the pace of the acquisitions and the pace of our investment pipeline wasn't balanced.

Evan Goodridge: So there is numbers there that could be calculated unless the pace of the acquisitions and the pace of our investment pipeline was not balanced.

Speaker #5: Okay. Evan, can you give us a guide as to where you see the ICR for FY27?

Richard Jones: Okay. Can you give us a guide as to where you see the ICR for FY27?

Speaker #4: Yeah, no, ICR is going to come down from the 3.3, but it still comes from above those two numbers. So we're looking at an approximate mid-to handle at this moment in time.

Evan Goodridge: Yeah. No, ICR is going to come down from the 3.3, but it is still comfortably above that 2 number. So we are looking at approximate mid to handle at this point in time.

Speaker #5: Okay. Thank you.

Richard Jones: Okay. Thank you.

Speaker #2: Your next question comes from Marie Connellan with Mollis Australia. Please go ahead.

Operator: The next question comes from Murray Connellan with Moelis Australia. Please go ahead.

Speaker #6: Good morning, Nikki and Evan. Just noting the tough macro conditions that you flagged, I was wondering whether you could give us a bit of an update on how you're seeing or thinking about lead-up times at the moment for the parts of the development portfolio that have been recently delivered and are still at that lower end of occupancy.

Murray Connellan: Morning, Nikki and Evan. Just noting the tough macro conditions that you flagged. I was wondering whether you could give us a bit of an update on how you are seeing or thinking about let-up times at the moment for the parts of the development portfolio that has been recently delivered and still at that lower end of occupancy.

Speaker #1: Yeah, Marie, I think what's interesting is that while we think it's slowed down in move-ins and market activity, it's almost like people are staying put more.

Nikki Lawson: Yeah, Murray, I think what is interesting is while we have seen a slowdown in move-ins and market activity, it is almost like people are staying more put, because we are actually seeing a decrease in move-outs as well. It is not affecting our new developments, and it is certainly not affecting the rate at which we are letting up. We ascribe that partly towards the locations that we have chosen and the quality of the assets, but also that the consumer is more rate aware. Traditionally, when you are leasing up assets, you do discount more to get those assets filled up quickly. So we may see towards the later end of the fill-up when we are trying to get the rate, pulling the rate lever again, we may see some challenges there. But we have definitely not seen any change or big change in terms of let-up of the new assets being developed.

Speaker #1: Because we're actually seeing a decrease in move-outs as well. It's not affecting our new developments, and it's certainly not affecting the rate at which we're letting up.

Speaker #1: Now, we ascribe that partly to the locations we've chosen and the quality of the assets, but also to the fact that the consumer is more rate-aware.

Speaker #1: And traditionally, when you're leasing up assets, you do discount more to get those assets filled up quickly. So we may see, towards the sort of later end of the fill-up, when we're trying to get the rate and pulling the rate lever again, we may see some challenges there.

Speaker #1: But we're definitely not seeing any change, or big change, in terms of let-up of the new assets being developed. There are a few of them where the assets are much larger.

Nikki Lawson: But we have definitely not seen any change or big change in terms of let-up of the new assets being developed. There are a few of them where the assets are much larger, so we expect those to fill up over a slightly longer period. But it is not because we are converting square meters of those new assets at a different pace. So they feel a little immune from the macros at the moment. Because you are right, that is almost the first place you would expect to see it.

Nikki Lawson: There are a few of them where the assets are much larger, so we expect those to fill up over a slightly longer period. But it is not because we are converting square meters of those new assets at a different pace. So they feel a little immune from the macros at the moment. Because you are right, that is almost the first place you would expect to see it.

Speaker #1: So we expect those to fill up over a slightly longer period, but it's not because we're converting square meters of those new assets at a different pace.

Speaker #1: So they feel a little immune from the macros at the moment. Because you're right, that's almost the first place you'd expect to see it.

Speaker #6: Would you be able to quantify roughly what timing you're seeing at the moment in terms of, I suppose, getting from 0 to 50, and then 50 up into those 70s and 80s?

Murray Connellan: Would you be able to quantify rough timing that you are seeing at the moment in terms of, I suppose, getting from zero to 50 and then 50 up into those 70s and 80s?

Murray Connellan: Would you be able to quantify rough timing that you are seeing at the moment in terms of, I suppose, getting from zero to 50 and then 50 up into those 70s and 80s? What your expectations are in terms of number of years.

Speaker #6: And I guess, what are your expectations in terms of the number of years?

Nikki Lawson: So-

Murray Connellan: What your expectations are in terms of number of years.

Speaker #1: Yeah. Well, I mean, we look at zero to fifty as just over the one-year mark. We're sitting between forty and fifty in the fifth year.

Nikki Lawson: Well, we look at zero to 50 is just over the 1-year mark. We are sitting between 40 and 50 in the fifth year, and we do not expect that to change. It is the 2 to 3-year mark that we are hitting the 80%, probably a little closer to the 3-year mark. Then we start pulling the rate lever more strongly. So we bubble between that 80 before we get to our fully occupied 90, over the next year or two.

Speaker #1: And we don't expect that to change. It's at the 2- to 3-year mark that we are hitting the 80%—probably a little closer to the 3-year mark.

Speaker #1: And then we start pulling the rate lever more strongly. So we bobble between that 80 before we get to our sort of fully occupied 90 over the next year or two.

Speaker #6: Thanks. And then just the last one, if you wouldn't mind. Would you be able to tell us where the Auckland portfolio sits from an occupancy perspective, or, I suppose, just the broader New Zealand portfolio, and how long you expect that to re-stabilize post the refurb?

Murray Connellan: Thanks. Then just last one, if you would not mind. Would you be able to tell us where the Auckland portfolio sits from an occupancy perspective or, I suppose, just the broader New Zealand portfolio and how long you expect that to restabilize post the-

Nikki Lawson: Yeah

Murray Connellan: refurb?

Speaker #1: Yeah. So, across the five stores that were affected, they got down to sort of mid-60s in terms of occupancy, and that was April. May was the peak bottom of those.

Nikki Lawson: Across the five stores that were affected, they got down to mid-60s in terms of occupancy, and that was April, May was the peak bottom of those. Let me, I am just going to get the figure for overall New Zealand. We can get that and send that through to you, Murray. But one of the challenges in New Zealand is going to be you are opening those stores up in a tighter, more competitive macro environment. That is, we have got the space now, and we are free to fill it up, but it will happen over time because of the challenges in the broader market.

Speaker #1: So let me—I'm just going to get the figure overall for New Zealand. We can get that and send it through to you, Marie. But, yeah, one of the challenges in New Zealand is going to be you offering those stores up in a tighter and more competitive macro environment.

Speaker #1: So if we've got the space now and we're free to fill it up, it will happen over time because of the challenges in the broader market.

Speaker #6: Got it. Thanks, Nikki.

Murray Connellan: Got it. Thanks, Nikki.

Speaker #2: Your next question comes from Ben Brayshaw with Baron Joey. Please go ahead.

Operator: The next question comes from Ben Brayshaw with Barrenjoey. Please go ahead.

Speaker #5: Good morning, Nikki. Can you just talk about what happened with the five affected assets in New Zealand? Specifically, what brought about the disruption to the cash flow and the capital works program?

Ben Brayshaw: Good morning, Nikki. Can you just talk about what happened with the fire affected assets in New Zealand? Just what brought about the disruption to the cash flow and the capital works program?

Speaker #1: Yeah, so we had an incident at the beginning of last year where significant weather events affected the roof on one of our assets. Out of an abundance of caution, we then went and checked every single one of our assets to see if that risk was inherent in any of those other assets.

Nikki Lawson: Yeah. We had an incident at the beginning of last year where a significant weather event affected the roof on one of our assets. Out of an abundance of caution, we then went and checked every single one of our assets to see if that risk was inherent in any of those other assets. And we identified five stores, where there were potentially issues that we needed to go and rectify. And what that required is going into a large number of units and checking roof purlin works. And the requirement of getting permission from the customer, moving customers in and out. I think the logistics of that, we probably underestimated, and started affecting us in August when we were starting with the first store. We thought we could do it quickly and get through it.

Speaker #1: And we identified five stores where there were potentially issues that we needed to go and rectify. And what that required is going into a large number of units and checking roof purlin works, and the requirement of getting permission from the customer, access, moving customers in and out.

Speaker #1: I think the logistics of that, we probably underestimated. It started affecting us in August, when we were starting with the first door.

Speaker #1: We thought we could do it quickly and get through it. We had a number of issues in the execution of that throughout towards the end of the year.

Nikki Lawson: We had a number of issues in the execution of that towards the end of the year, and early this year. And eventually pulled new contractors on site and managed the program to get to where we were in May. But it just ended up being a far trickier exercise than we expected, and not because the actual structural work was that complicated. It was more because of the logistics of the customers and how you move them in and out and around in order to get that work done.

Speaker #1: And eventually, we pulled new contractors on site and managed the program to get to where we were in May. But it just ended up being a far trickier exercise than we expected.

Speaker #1: And not because the actual structural work was that complicated. It was more because of the logistics of the customers, and how you move them in and out, around in order to get that work done.

Speaker #5: And just on the aggression from the internalization, how much of the 7% benefit to cash flow is reflected in the operating earnings?

Ben Brayshaw: And just on the accretion from the internalization, how much of the 7% benefit to cash flow is reflected in the operating earnings?

Evan Goodridge: None for FY2026, obviously, because the internalization happened in 30 June. But for FY2027, we are going to have that AUD 7 million, approximately AUD 2 million go through the investing lines and AUD 5 million go through operating payments line.

Speaker #3: So none for FY26, obviously, because the settlement happened on 30 June. But for FY27, we're going to add that $7 million—approximately $2 million will go through the investing lines, and $5 million will go through operating payments lines.

Speaker #5: And so does all of the $77 million flow through to operating profit?

Ben Brayshaw: Does all of the 7 million flow through to operating profit?

Speaker #3: No. $5.0 million will flow through to operating profit, and the other $2.0 million will reflect future development valuation after this, going forward.

Evan Goodridge: AUD 5 and a bit million dollars will flow through to operating profit, and the other AUD 2 million will reflect future development valuation uplift going forward.

Speaker #5: Okay. Thanks, guys.

Ben Brayshaw: Okay. Thanks, guys.

Speaker #2: Thanks again. Once again, if you wish to ask a question, please press star one on your telephone or type your question into the Ask a Question box.

Nikki Lawson: Thanks.

Operator: Once again, if you wish to ask a question, please press star one on your telephone or type your question into the ask a question box. Your next question comes from Larry Gandler with Shaw and Partners. Please go ahead.

Speaker #2: Your next question comes from Larry Gandler with Shaw & Partners. Please go ahead.

Speaker #3: Hello, Larry.

Evan Goodridge: Hello, Larry.

Speaker #2: Larry Gandler, your line is live. Please proceed with your question. We'll move on. There are no further questions on the phone line at this time.

Operator: Larry Gandler, your line is live. Please proceed with your question. We will move on. There are no further questions on the phone line at this time. I will now hand back to Nikki Lawson.

Speaker #2: I'll now hand back to Nikki Lawson.

Speaker #1: Thank you. And I'll maybe just—Marie, to close off on your question—New Zealand occupancy is at 86%. That’s for the whole portfolio across New Zealand.

Nikki Lawson: Thank you. I will maybe just, Marie Turoszoff, on your question, New Zealand occupancy is at 86%. That is for the whole portfolio across New Zealand.

Speaker #3: Marie's actually sent her the written question. She's obviously had some technical issues. So Marie's question was: What is the impact of the new stores opening in FY27 on operating cash flow?

Evan Goodridge: Larry has actually sent through the written question. He has obviously had some technical issues. Larry's question was just what is the impact of the new stores opening in FY27 on operating cash flow. The way that we are seeing operating cash flow is we are seeing income fees grow quite a lot into FY27 as these stabilizing assets come online, as well as the fact that our maturing assets continue to grow. Surprisingly, we are not seeing operating expenses grow that much because we are saving on the internalization. It is that interest expense line which will more than offset both of those lines, so we see operating cash flow reduce next year. I think that is all the questions we can take.

Speaker #3: So, the way that we're seeing operating cash flow is we're seeing income base grow quite a lot into FY27, as they stabilize, the assets come online, as well as the fact that maturing assets continue to grow.

Speaker #3: Surprisingly, we're not seeing operating expenses grow that much because we're saving on the internalization. But it's that interest expense line, which will more than offset both of those lines.

Speaker #3: And so, we see operating cash flow reduce next year. And that's all the questions we can take.

Nikki Lawson: If there aren't any further questions, then, yeah, we look forward to catching up with many of you over the coming days and weeks.

Speaker #1: I'd say there aren't any further questions. Then, yep, we look forward to catching up with many of you over the coming days and weeks.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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