Centuria Office REIT

ASX:COF

Q2-2026 Earnings Call

[Operator]

Thank you for standing by, and welcome to the Centuria Office REIT Half Year '26 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Jesse Curtis, Centuria, Head of Funds Management. Please go ahead.

[Jesse Curtis, executive]

Good morning. Thank you for joining Centuria Office REIT's half year 2026 Results Presentation. My name is Jesse Curtis, Head of Funds Management for Centuria Capital. Presenting today with me is Belinda Cheung, Fund Manager of Centuria Office REIT and Cameron Mullen, Senior Fund analysts. Also in the room today with us is Grant Nichols, Head of Listed Funds, Tim Mitchell and Peter Ho from our Investor Relations team, and Jason Huljich, joint CEO of Centuria Capital Group.

Starting on Slide 3, I would like to commence today's presentation with an acknowledgment of country. We are joining you from the land of the Gadigal people of the Eora Nation. Centuria manages property throughout Australia and New Zealand and pays its respects to the traditional owners in each country to the union culture and to their elders past and present. Over the past year, we have seen compelling signs that many of Australia's metropolitan office markets are moving beyond the cyclical trough and entering a renewed phase of recovery. Constrained future office supply, combined withdrawal of space for alternative uses such as residential mixed-use, life sciences and data centers is expected to drive stronger occupancy and rental growth.

These tailwinds reinforce our confidence in the recovery of domestic metropolitan office markets and position us well to the next stage of the cycle. COF's performance is a strong reflection of this shift. And in today's presentation, Belinda and Cameron will cover an overview of COF's half year performance, COF's financial results, specific portfolio highlights and conclude with a market overview guidance.

Moving to Slide 4. The Centuria Office REIT is managed by Centuria Capital Group, which has over $21 billion of assets under management. COF unitholders continue to benefit from Centuria's deep real estate expertise, including a fully integrated property facilities and asset management platform. Synergies across the group's office, real estate portfolio and strong alignment as Centuria is COF's largest unitholder and the manager's interests are strongly aligned with yours as unitholders.

Moving to Slide 6. COF's long-standing vision and strategy remains unchanged. We aspire to be Australia's leading pure play office region. We are focused on generating sustainable and quality income streams and executing initiatives to create value across our portfolio of high-quality office assets, within metropolitan and near city markets that are differentiated by sustainability, amenity and connectivity. The results the team present today reflect the execution of this strategy, supported by the deep real estate capability of the broader Centuria team to drive value for unitholders. I'll now hand over to Belinda.

[Belinda Cheung, executive]

Thank you, Jesse, and good morning, everyone. Coming into this financial year, COF had clear priorities outlined across leasing, capital management and portfolio quality. I'm pleased to share the strong outcomes that COF has achieved for the first half, with key highlights, including a near record period of leasing, effectively addressing the majority of FY '26 lease expiries, providing additional income security over almost 11% of the portfolio's total net lettable area, achieving a strong premium on a B-grade office divestment, which will not only improve the existing portfolio metrics and strengthen the balance sheet by reducing gearing, but it also further supports asset valuations across the broader portfolio and significantly stabilizing valuations.

We have reported a second consecutive period of valuation growth, which has been underpinned by positive market rent growth, some of which is captured in recent leasing executed. These are all indications of the turning point in the metropolitan office sector reinforcing improved conditions as we move past the valuation troughs and into a new cycle of recovery. COF reaffirms FFO guidance range of $0.111 to $0.115 per unit and distribution guidance of $0.101 per unit, with distributions expected to be paid in quarterly installments. Based on COF's recent trading price, the distribution guidance equates to a yield of 9.5%.

Jumping to leasing in more detail on Slide 8. Leasing has been a major focus for the management team. And pleasingly, over 70% of the leasing completed this period were renewals with existing tenants, which minimized potential downtime across the portfolio. We have successfully negotiated 21,500 square meters of renewals and 7,800 square meters of new leases. Significant lease transactions include at 8 Central Avenue, Eveleigh, 9,700 square meters across a renewal and a lease to a new tenant. At 101 Moray Street with 2 renewals across 4,700 square meters, at 100 Brookes Street, 2 renewals across 3,500 square meters and 825 Ann Street, where we did 2 renewals and 1 new lease across 3,300 square meters. This leasing has contributed significantly to extending the WALE of the underlying assets, capturing rent growth in the market and specifically for the Eveleigh and Fortitude Valley assets have generated significant valuation growth this period.

As announced in December, COF has exchanged contracts to sell 9 Help Street, Chatswood with settlement anticipated in June this year. Proceeds will be used to repay debt and reduce gearing, supporting the REIT's capital management strategy. Addressing gearing levels of the fund is a high priority for COF. And in the past, we have acknowledged that while asset sales are a more direct way to reduce gearing, we also need to assess the impact to earnings and alignment to our long-term portfolio strategy. This sale will achieve a 12.5% premium to book value and over 12% of ARR through our COF's ownership period. It also enhances portfolio metrics, reducing exposure to secondary assets mitigating exposure to near-term leasing and downtime risk for upcoming expiries and has minimal impact on the REIT's earnings given the passing yield of the asset is relatively in line with COF cost of debt.

This transaction also provides market evidence, underpinning asset valuations and support COF's net tangible assets. Let's look more broadly at the Australian metropolitan office markets on Slide 10. New office supply remains highly constrained across Australia's metropolitan and fringe markets, with construction costs still outpacing CPI and continuing to push replacement costs to a higher level, new developments become increasingly unfeasible as economic rents rise to levels far beyond prevailing market rents. This economic rent gap is expected to significantly limit future supply, particularly in metropolitan markets where feasibility pressures are most acute.

For context, market rents offered by existing buildings in Sydney Fringe are estimated to be circa 64% below the required rent for new development. At this rate, market rents could take up to a decade to catch up to replacement costs. This price disparity discouraged tenants from choosing office developments, shifting demand to established office buildings like COF's assets, which already offer high quality office space accessible to amenity and transport, while offering superior value in comparison.

And on the topic of value, we move to Slide 11. We estimate the cost to replace a metropolitan A-grade office to be over $15,000 per square meter, over twice the current book valuation of COF. At the current trading price, the implied value per square meter drops to 63% below replacement costs. The implied cap rate for the portfolio is 8.66%, which is 174 basis points softer than our current weighted average cap rate and implies a greater and further softening on top of the 141 basis points of expansion that the portfolio has already enjoyed since peak valuations in 2022. We believe this is widely misaligned to current market evidence and where recent comparable sales have traded. We have provided a sample of comparable sales in appendix H of the results presentation. I will now hand over to Cameron to take you through the financial results and portfolio overview.

[Cameron Mullen, executive]

Thank you, Belinda. Moving to our financial results on Slide 13. COF delivered funds from operations of $33.4 million or $0.056 per unit. Gross property income increased, driven by 3% like-for-like income growth year-on-year. Finance costs increased by $1.8 million to $24.7 million over the first half. The average all-in cost of debt incurred for HY '26 was 5.2%. COF's expected all-in cost of debt for FY '26 is 5.4%. COF declared and paid distributions of $0.505 per unit across the period in quarterly installments, representing a payout ratio of 90.2%.

Slide 14 details COF's capital management. As Belinda mentioned, COF has exchanged contracts to divest 9 Help Street, Chatswood for a gross price of $90 million. The net proceeds of the transaction will be used to repay debt, reducing pro forma gearing to 42.5%, as 31 December 2025, COF remained 78.5% hedged, refining a defensive position as the RBA lifted the cash rate to 3.85%. This high level of interest rate protection will help shield COF's earnings from further rate-driven volatility. The REIT has a weighted average debt expiry of 2.9 years and no near-term expiries, with the first tranche maturing in FY '28.

The interest cover ratio for 31 December 2025 was 2.1x and the loan-to-value ratio was 46.1%, providing comfortable headroom to our covenant requirements, 1.75x and 60%. COF's portfolio comprises young quality assets positioned in Australian metropolitan and near-city office markets. COF's portfolio of 19 assets is truly diversified with no single state exposure greater than 26%. Importantly, the portfolio is underpinned by the quality tenants, posting over 75% of portfolio income being derived from government, multinational corporations and listed entities. The ability to attract quality tenants is reinforced by a large proportion of 65% of our talent base being larger corporates, occupying space exceeding 2,000 square meters. I will now hand back to Belinda to take you through the leasing and valuation summaries for the period.

[Belinda Cheung, executive]

Thank you, Cameron. A significant reduction in FY '26 lease expiries was achieved through the leasing efforts through the first half, derisking this year's expiries by 9.6% to have 3.9% remaining. We continue to focus on leasing existing vacancies and upcoming expiries across the portfolio especially for the more challenging markets in Docklands and St Leonards. Achieving high portfolio occupancy remains a key management focus, and we are actively seeking outcomes to further improve COF's lease expiry profile, focusing on improving tenant engagement, unwinding asset strategies with market conditions and providing compelling cost-effective solutions to our tenants.

The results we have achieved with leasing completed this half has contributed significantly to the portfolio valuation, which I will talk to on Slide 18. I'm pleased to report a like-for-like valuation gain of $42.8 million this half. This marks the REIT's second consecutive period of positive valuation gains indicating a stabilization trend across at least 72% of the portfolio. Our portfolio's weighted average capitalization rate now stands at 6.92% and reflects a minus 3 basis point expansion from the last reporting period. Despite cap rates pushing out further, market rental growth averaging 4% adopted in valuations have underpinned our valuation gains again this period. We recorded notable valuation gains at 8 Central Avenue, 100 Brookes Street and 825 Ann Street following the strong leading outcomes I spoke to earlier.

Now turning to sustainability on Slide 21. COF continued to demonstrate progress in sustainability initiatives this half, reporting solid progress towards both of COF's environmental targets, maintaining strong building and portfolio credentials through NABERS which achieved a 5-star rating and GRESB, which achieved a strong 4-star results and an improved score from last year and ongoing commitments to its valued stakeholders focused on tenants and a wider community through social enterprise organizations such as Two Good and Social Traders. The FY '25 sustainability report and environmental data for calendar year 2025 has been published on the Centuria 2025 sustainability report, which is now available on the Centuria website.

While Australia's prime office markets continue to demonstrate resilience in the short term, on Slide 21, we highlight key drivers that are expected to propel the sector to sustained growth over the medium term. Face rents for prime grade assets are expected to remain on an upward trajectory, supported by strong occupier preference for modern, high amenity workplaces further expanding the rent differential between prime and secondary stock, reinforcing the value and effectiveness of well located A-grade assets. The strength observed in some CBD leasing markets is also beginning to flow into their adjacent metropolitan precincts, signaling market recovery beyond core CBD locations.

At the same time, new office supply will remain tight in metropolitan and fringe markets, in particular, constrained by rising replacement costs, as I touched on earlier. Compounding this, the market is seeing acceleration in obsolescence driven withdrawals as older office buildings are repurposed for alternate use such as residential or life sciences, and these withdrawals are expected to contribute meaningfully to reducing vacancy rates, tightening market conditions and supporting further rent growth for existing high-quality stock. Relative to global peers, Australia is also expected to benefit from high population growth forecasts driving a larger contingent of white-collar workers and the shift in occupier sentiment towards office-centric workforces, reinforces demand for office space.

And adding to that, deep discounts to the replacement costs and expectations of sustained rent growth have also contributed to increased levels of interest in the office sector from investors looking beyond the short-term volatility. We provide a few examples of comparable sales again in Appendix H which demonstrates the changing positive sentiment and returning investor appetite. COF's FY '26 priorities are outlined on Slide 22. Following through from the first half, we continue to focus on maintaining high portfolio occupancy, improve portfolio quality and preserve a solid balance sheet, maintaining sufficient liquidity and debt covenant headroom. I draw this presentation to a close on Slide 23, again, reiterating FY '26 FFO and distribution guidance. Thank you for your continued interest in Centuria Office REIT. I will now hand back to the operator and welcome questions you may have.

[Operator]

[Operator Instructions] Your first question, it comes from Lauren Berry with Morgan Stanley.

[Lauren Berry, analyst]

I was hoping you could give us a little bit more on the leasing that you did in the half just in terms of leasing spreads, please?

[Belinda Cheung, executive]

Leasing spreads for the period, pretty consistent with what we've reported in the past. They were at just over 2% across the average deal.

[Lauren Berry, analyst]

Sorry, 2% positive or negative?

[Belinda Cheung, executive]

Positive.

[Lauren Berry, analyst]

Positive. Okay. Yes. And just going back to when you gave guidance late last year, you said that there was no full floor leasing for FY '26 expiries assumed, like it seems like this result you've actually done quite a bit of full floor leasing for FY '26. So I was just wondering, was this ahead of expectations or to put it another way, is there any reason why you haven't been able to tighten your guidance since you have a lot more clarity on how the rest of FY '26 looks?

[Belinda Cheung, executive]

The guidance that we provided last year, the comment that we made to full floor leasing was, so full floor leasing of vacant floors, whereas most of the full floor leasing that we've done this period has been to renewed tenants. So that was -- that doesn't contribute to the range.

[Lauren Berry, analyst]

Right. So had you assumed the majority of your FY '26 expiries would renew previously?

[Belinda Cheung, executive]

That's correct. At the last reporting period, I think we mentioned that there were quite a significant number of deals that were under negotiation. So these negotiations were finalized in this financial period.

[Lauren Berry, analyst]

And just for the vacant space, do you have any offers out on any of those leases for the second half?

[Belinda Cheung, executive]

There's something -- when you look at the list of vacancies, most of it really is still concentrated in Docklands and in St Leonards. And in these areas, we've mentioned time and time again, that there are more challenging markets to lease in. Inquiries do come up every now and then. But at this point in time, we're still pretty far from agreeing anything with a tenant.

[Operator]

Your next question comes from Cody Shield with UBS.

[Cody Shield, analyst]

Maybe just a quick one on divestments to start with. I mean, 9 Help Street, fairly good outcome on the gearing front. But do you think you could be trying to do a little bit more here? How is the appetite from buyers?

[Belinda Cheung, executive]

Just generally speaking about the market, I think appetite from buyers is growing compared to the last couple of years. Speaking more specifically to the COF portfolio, 9 Help Street, we chose to sell because the offer that we received was really good. It screened really well on multiple fronts, including on gearing alleviation front, it also has minimal impact to earnings and selling this asset would improve the overall portfolio metrics. So to this line, it made a lot of sense, for any other assets, these are the types of considerations that we would need to make. I won't rule out selling assets, but at this point in time, we're not actively selling any assets.

When a good offer comes up, it's something that we will consider and we have to take more broadly within our management team to consider.

[Cody Shield, analyst]

Okay, sure. Just on property expenses there. I mean the growth year-on-year looks pretty elevated. Can you talk us through what's happening?

[Belinda Cheung, executive]

Yes. Across the broader portfolio, there are increases in statutory charges, including land tax and council rates, also some insurance costs. But more broadly, COF has got a slightly larger exposure to gross leases in the portfolio. So when there are inflated expenses or when there is inflation with expenses, it's a little more pronounced in this portfolio. At the same time, we are carrying a higher average vacancy just throughout the year. And so there's a bit of leakage of expenses from there, too, as we are recovering less.

[Cody Shield, analyst]

So just in terms of trend then, I mean, should we assume that it's going to run at a similar rate moving forward? Or would you expect it to moderate?

[Belinda Cheung, executive]

I think it really depends on where inflation -- most of this is driven by inflation. If we do more incremental leasing, it will alleviate a lot of that.

[Cody Shield, analyst]

Okay. Cool. And the spread is at that 2%, that was fair. I mean, where are incentives sitting at the moment for you guys?

[Belinda Cheung, executive]

So for us, across the board, the average incentive is about 35%. So it's not too far from what we reported last financial year with new leases attracting a slightly higher incentives at about 36% and renewals at 33%.

[Cody Shield, analyst]

And then just the last one, if I may. Just looking at the balance sheet, you've got a derivative asset there and your 28 hedging has come up. Can I just make sure you haven't paid any capital for hedging or put in place any nonstandard hedges?

[Belinda Cheung, executive]

We haven't made any changes to our hedging portfolio. The way that it presented this period looks a little bit differently because of one of the options that we've chosen to -- well, we've assumed that the option will be exercised by the bank. So it's just presented a little bit differently, but all our hedges are exactly the same as FY '25.

[Operator]

Your next question comes from Daniel Lees with Jarden.

[Daniel Lees, analyst]

Just the maintenance CapEx and incentives in the FFO reconciliation on Slide 26. Does that include any CapEx associated with the reset data tenancy at Brookes Street?

[Belinda Cheung, executive]

No, it doesn't.

[Daniel Lees, analyst]

Okay. And just another one. Just the cash flow in the accounts, you've got about $22.8 million in payments for investment properties. What does that relate to?

[Belinda Cheung, executive]

That would be a number of different CapEx items across the entire portfolio. Maybe a slightly larger portion of that would be to do with reset data and to build that data center.

[Daniel Lees, analyst]

Okay. Got you. And just finally, with your WAC assumption within guidance the 5.4%, does that reflect the latest curve post yesterday's hike?

[Belinda Cheung, executive]

It does.

[Operator]

Your next question comes from Murray Connellan with Moelis Australia.

[Murray Connellan, analyst]

I was wondering whether I could just expand on Daniel's question from just now that $23 million of investing CapEx. Would you be able to carve out the difference between reset date for the periods at number 818 and the general sort of standard maintenance and fit-out costs?

[Belinda Cheung, executive]

Murray, it's actually quite an extensive list of CapEx items, I think, to list out in a call like this. Perhaps it's something that maybe we can discuss another time.

[Murray Connellan, analyst]

Sure. And then just maybe zooming in on the Docklands and St Leonards assets that, as you spoke to earlier, are now more than half of the vacancy plus near-term expiries. Can you maybe just talk us through what the bulk of those assets look like at the moment in terms of spec fit-outs versus cold shells, et cetera. And what the, I guess, the broader strategy for those looks like going forward? Are they sort of in a bit of a holding pattern waiting for a market improvement? Or are you sort of hoping to be opportunistic there?

[Belinda Cheung, executive]

The strategy that we're taking for the different markets will be different. So I'll probably speak to St Leonards first. We've had a bit more leasing success in recent periods at St Leonards, and that's because we've changed the strategy with leasing, instead of leasing out full floors, we've decided to chop up some of the floors and lease separate suites and we've had a bit more traction that way. So we'll be continuing to go down this path. With 818 Brookes Street in Docklands, that particular part of the market really is quite challenging because there is quite a bit of supply in that part of the market and demand isn't as strong.

So for this one, we already have space that is available at the spec. It's ready for tenant to move into. So I think there aren't too many other things that we can do at this point in time. Having said that, we're always on top of any new lease inquiry that comes to market, and we're actively canvassing the market for any new opportunities.

[Operator]

Your next question comes from Andrew Dodds with Jefferies.

[Andrew Dodds, analyst]

I just wanted to firstly pick up on some of the comments you guys made back in August last year, you were sort of the view that FY '26 would be a trough year for earnings, just given everything that's changed, particularly with the vacancy rate across the portfolio, is this kind of still the view and the, I guess, the base case for the group?

[Belinda Cheung, executive]

Andrew, there's no change to our view of FY '26 being trough earnings. And the reason why I say this is because we've always viewed earnings with quite a conservative lens, especially in relation to the vacancies that we have in our portfolio. The vacancies are concentrated in Docklands and St. Leonards, and we've always taken a conservative assumption with let-up assumptions, and we haven't really factored very much income just to be conservative over the next few periods.

[Andrew Dodds, analyst]

Okay. And then just secondly, on the dividend. You sort of called out before that you're not actively looking to sell any assets going forward? I mean -- is this not -- or is a dividend cut not something that's being considered by the Board or the management team at the moment? I mean you sort of called out in your earlier remarks that the yield on today's prices just sub-10%. So the equity market isn't really rewarding you for it. Would it not be sort of prudent to cut the dividend, rightsize the payout ratio and sort of look to delever the balance sheet that way?

[Belinda Cheung, executive]

This is definitely something that's been discussed at length on multiple levels. And our view, also, we really do think that FY '26 is the trough for earnings and we're very cognizant of our long-term payout ratio aspirations as 80%. And at this point in time, we've got strong conviction in our forward-looking earnings but also with valuations, I guess, past the trough and picking up, stabilizing valuation gains that we recorded a second period in a row, that combined with the asset quality that we have and our strong conviction over the medium-term outlook for office markets.

I think it's -- that's just the position that we're taking on distributions. Looking forward, we are looking to grow our FFO at a higher rate than the actual distribution per unit. So we will come back down to our long-term aspiration of 80%.

[Andrew Dodds, analyst]

All right. That's very clear. And then just the final one for me. Just in terms of your inputs into guidance, I'm just curious as to the BBSW assumption, I guess today, assumed over the remaining -- the average rate, I guess, over FY '26 and potentially how that BBSW assumption has changed compared to August of last year?

[Belinda Cheung, executive]

So that one, I guess, the way that I would phrase this would be our all-in cost of debt assumed for FY '26 is 5.4%. And this has changed from where we're tracking right now of 5.2%. I think we've got our average hedges clearly disclosed in the pack, so you can probably calculate from that.

[Operator]

Your next question comes from Connor Eldridge with Bell Potter Securities.

[Connor Eldridge, analyst]

It looks like you had some good leasing wins in the first half. I'm just trying to get a sense on the level of leasing CapEx that was required to get these outcomes. And I guess would you say you're doing more or less spec fit-outs now than you were kind of 12 months ago?

[Belinda Cheung, executive]

Honestly, over the last few years, we haven't done too many spec fit-outs because we already have a lot of fitted out space, every time a tenant vacates from space, we will spend some CapEx to refurbish it. But what that means is it's a very cost-effective way of refreshing space and tenants these days are very happy to take a secondhand or even a third generation fit out. So it's very minimal with new deals we're doing these days. I think a lot of tenants are gravitating towards more of a value proposition.

So taking an older fit out and maybe a rent abatement along the way. And I think -- I guess all landlords are pretty cognizant of how much it costs. I talked a lot about economic rents during my speech, but at the same time, the higher cost of construction doesn't just apply to new developments. It also applies to fit outs. So a brand new fit out these days could cost north of $2,000 a square meter, a lot more, if you were to include all the trims and no one can really afford -- no one in the metro markets can really evolve that kind of fit out these day. So we've definitely been very -- we've been very persistent.

[Connor Eldridge, analyst]

That's clear. Maybe just one more from me. At the last result, you called out sort of record downtimes across the portfolio. I'm just wondering how you're seeing them currently and if there's any particular markets where they're sort of extending or perhaps shortening?

[Belinda Cheung, executive]

Yes. So last period, yes, we were talking to downtimes extending beyond what they used to be. I don't think that has changed too much. I think larger users will still take a period of time to commit to large amounts of space. And that's probably one of the reasons why these renewals that we've done in this period have been so strong given the amount of volatility in, I guess, the external markets, it is a little bit tough for tenants to make big decisions that stretch for long term. So we've seen a bit more success in our renewals for that reason.

[Operator]

[Operator Instructions] Next question comes from Simon Chan with Morgan Stanley.

[Simon Chan, analyst]

My first question relates to your guidance range. Like you've had 7 months of the fiscal year out of the way now. Your range remains $0.111 to $0.115 per share, can you just remind us what's driving that range?

[Belinda Cheung, executive]

Most of that range is driven by leasing outcomes for vacancies in the portfolio.

[Simon Chan, analyst]

Right. But in your answer to one of the earlier questions, you pretty much flagged that those longer-term vacancies such as 818 and 203 Pac highway, that I don't seem to get the feeling that there's a lot of leases that are close to being done. That will then, therefore, contribute to the second half of FY '26. Am I putting words in your mouth? Or am I interpreting what you said correctly?

[Belinda Cheung, executive]

I mean you are interpreting it slightly differently to what I'd like to put it out. The list of vacancies and expiries that we have aren't just all full floor vacancies, it includes full floor vacancies, but there are also partial floors that remain to be leased. So those are the ones that we are referring to.

[Simon Chan, analyst]

Right. Okay. And that's because you've already delivered your first half results today, right, FFO of $33.4 million, your guidance implies FFO of $68 million for the full year there or thereabouts implies second half of $34.5 million, right? But then your guidance range is plus, has a $2.5 million range, it's just a very wide range of outcomes for -- based on the denominator of about $34.5 million. Hence, my question, are you expecting one massive lease to contribute to come in, in the final 5 months of the year that could swing it by $2.5 million?

[Belinda Cheung, executive]

There is potential, but it's too early for us to speculate on the leasing outcome.

[Simon Chan, analyst]

That's fair enough, Belinda, fair enough. I'll take that. Back on those cash outflows, investing cash outflows. Can you just remind us, what's the total CapEx build for reset data? And has pretty much all of that being spent now?

[Belinda Cheung, executive]

The resets data development, there's still more to spend, but the total cost is about $21 million, and we've probably got maybe 4 more to go.

[Simon Chan, analyst]

Okay. So the bulk has already gone out the door?

[Belinda Cheung, executive]

That's correct.

[Simon Chan, analyst]

Okay. Very good. And one last one. I didn't quite understand your answer in relation to the hedging question that you gave to one of the previous analysts. Can you just elaborate on what you mean by one of the options wasn't exercised, but no other changes were actually made to the hedge book?

[Belinda Cheung, executive]

Yes. Okay. So the way that I'd probably explain this is in our hedge portfolio made up of quite a few different hedges. We had one particular swap that had an option attached to it. The bank had the option to exercise shortening the swap by 1 year. So last reporting period when interest rates were still forecast to be fairly low or fairly moderate. It was likely at that point in time that the bank wouldn't exercise the option. And so we have a slightly longer term. But since then, perception of interest rates or we've really seen the first interest rate hike. We are assuming now that the bank will be exercising their option to reduce the term of the hedge. So we have displayed our hedge profile to reflect that.

[Simon Chan, analyst]

Okay. So the bank hasn't exercised it yet, but you think they would, and that's been reflected in latest presentation.

[Belinda Cheung, executive]

That's correct.

[Operator]

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

[Belinda Cheung, executive]

Once again, thank you for your interest in Centuria Office REIT. If you have any follow-up questions, please contact to Mitchell or myself. Thank you, and have a lovely day.

[Operator]

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