Attacq Limited (ATT) Earnings Call Transcript & Summary

Good evening, everyone, and welcome to the interim results presentation for the 6 months ending 31st December 2001 (sic) [ 2021 ]. It seems like quite a while ago, and it's only 2.5 months ago. I would like to say good morning to all my colleagues, analysts, shareholders attending here this morning in person as well, everyone online. To our Board, our Chairman, shareholders, colleagues from all various reasons -- regions. Good morning. And then also my colleagues sitting here the exco members: Janine, our Social Executive; Michael, our Asset Executive; Raj, our CFO; and Pete, our COO. Good morning to everyone. This morning, we're going to kick off with an update on the strategic update. Raj is going to give us an update on the financial performance. Michael will go into the South African portfolio. Pete will give us an update on MAS in Africa. And then I'll give us an update on Waterfall City, ESG and then what's to come in the next 6 months and the outlook for the year for Attacq. If we stand back and we look at what the last reporting 6 months, I actually reflected, and I said this morning when we had a media interview, we started off this year with a very depressed year with the riots and the looting in South Africa. That's how we started off this year. Then we went on to the third lockdown of the Delta virus. We -- everyone -- we were all at home working. We came back and then South Africa detected the Omicron virus, and I just thought you know what, they can't lock us down again. But anyway, a lot of -- we were encouraged by government not locking us down over December, which started illustrating to us the Omicron variant, not being a severe, but then also instilling a lot of business confidence back into South Africa. With that, we -- and then also having no lockdowns over the last 6 months, I think, was great for us. We're very pleased with our results that we have achieved over the last 6 months. And I think it's a testament of not only a good capital structure, but as a team of Attacq, every ball that is thrown, the team catches it sometimes difficult, daily challenges from counsel, leasing challenges, but the team deal with it, and we optimize every challenge into an opportunity. So well done team Attacq. If we look at our precinct focused South African portfolio, as I've said, we've seen a marked improvement in operational performance throughout the year. Retail with no lockdown imposed over the last 6 months, we're seeing trades coming back to 2019 levels, which is very encouraging for us to see. On our collaboration hubs, we've seen a little bit of a slower recovery back into the market where the headwinds for us and our portfolio sits at the moment is the exit of Transnet out of our Waterfall Circle building. The team is really working on reletting the space. Michael will give a bit of feedback as well as the Cell C recap that has also made this marked impact into our financial results. What can we disclose on Cell C? We have agreed a term sheet with Cell C, whereby we will take back the warehouse space and the contact walking center. Cell C will remain in the main building of the office premises and the rent that they owe us that has made a material impact, as Raj will go through on our financials. We've agreed an acknowledgment of debt, which they will pay off in a detailed payment plan. The detail we will disclose once Cell C has concluded their entire recap strategy. I think you'll note there was also a blue-label announcement earlier last week. We are definitely positive that Cell C has made the right business decisions for them as a business. And for us, as a business, we have assisted and almost minimized our exposure through this recap transaction. In our Waterfall City, we're extremely proud of welcoming the first residential -- residents into the city. And I said to the team, it's a transition phase for us. When we started Waterfall longer than 10 years ago, we started off at Maxwell Office Park, we -- our offices as a business node. Then the Mall of Africa opened up 6 years ago. So then we transitioned into work and shop node. And now we're transitioning again into a live, work, play with the first residents in Waterfall and really bringing the life and the vibe into Waterfall City. Our capital structure, again, 18 months of a lot of deal making, a lot of difficult decisions, not paying out dividends, being very conservative with our capital structure to ensure that we've got a healthy, sustainable capital structure for the future. Raj will go into a lot of the detail of where we are positioned from a liquidity point of view. But I think it's very prudent from a results point of view that the decisions we've made over the last 18 months is reflecting into a sound capital structure. And then the last component of our business, the business diversification drive of where we, as a company, saying, we need to look at what's the future. Where do we invest our capital? Not only in our buildings, but also through enhancement and adjacent businesses to enhance our core portfolio. And today, we'll give you a small little glimpse of what Attacq energies that we will be launching and also where we will be future investing to future-proof our core portfolio, but also make sure that we are a real estate company of the future. When we look at our focus areas in Attacq, very important as part of our business strategy and our focus is to remain sharp and focused, understand who we are, what do we drive? And definitely, Waterfall City being the material big driver of our investment focus from a value point of view, 61% of our portfolio, which contributes 49.6% of our DIPS. Rest of South Africa portfolio, which is our dominant retail shopping centers, provides a fantastic platform for us for diversification geographically and also business point of view. So really, we love the interplay between having an investment centralized around Waterfall City, but then also the diversification with our other retail shopping centers. And there are now other investments being the MAS 6.5% share contributed significantly this year towards our DIPS, contributing 23.2%. But really focusing on a focused approach, understanding what exactly, there's a Waterfall Precinct city developer, retail precincts as well as our investments in MAS and Africa. I'm going to ask Raj now to give an overview on the financial performance.

Thanks, Jackie. And welcome to everyone that's joining us here in person at the Courtyard and those that are online who have just woken up and joining us in pajamas. Good morning, and welcome to you, too. If you look at the financial overview, I think a pleasing set of results. Our distributable earnings per, up 33.6%, ZAR 0.282 per share. I think what's important to note, that excludes the profits that we've generated from our sectional title developments, which we developed to sell that added another ZAR 0.0935 per share. And in another side of slide I'm backing that in a little bit more detail. Our interest cover ratio improved from 1.4x to 1.5x. In that interest cover ratio, we're conservative in how we approach provisions for bad debts. And we provided -- Jackie has alluded to it, we've provided ZAR 28.5 million for amounts due to us from Cell C. And had we excluded that, our interest cover ratio would have been 1.62x. So a significant impact in our results with regards to Cell C impacting not just our distributable income, but also our interest cover ratio. Our debt expiry profile, 4 years, extremely healthy, and we've concluded on about ZAR 1 billion worth of refinancing just prior to interim period end, and I'll chat to that in a bit more detail shortly. Interest-bearing borrowings reduced by 15.4%, a direct beneficially from our debt reduction plan and our disposals that we executed on in the previous financial year and that we used to pay down debt in the last sort of 6 months. That gave us a gearing ratio of 38%, down from 43.3% in June 2021. But if you recall, in December 2020, that ratio stood at 46.3%. So a significant de-gearing that's taken place over the last 12 months. And I think we're a lot more comfortable with where gearing is now at 38%. Available liquidity, ZAR 1.8 billion, and I'll show how that's made up in another slide shortly. And overall, from a net asset value per share perspective, ZAR 16.83, up 6.8% from the prior 6 months. So I think a pleasing result there. If you look at our distributable income per focus area, you'll recall that all of our Waterfall City operations are consolidated into this line item, Waterfall City. The rest of our South African portfolio, mainly comprising of our shopping centers as well as the Lynnwood Bridge precinct and the Brooklyn Bridge precinct sits in Rest of South Africa and our other investments comprised of our investment in MAS and our Rest of Africa retail investments. If you look at Waterfall City, producing ZAR 98.7 million, and Jackie mentioned it, this is about 50% of the total distributable income contribution. A number of factors impacted Waterfall City's performance. We sold a number of properties in the last 6 months, most notably the Deloitte head office. But towards the end of the year, we concluded on the Massmart 50% transaction as well as the Amrod 50% transaction to Equites. That's reduced NOI as well as the bad debt provision that I chatted about with regards to Cell C, ZAR 28.5 million and higher vacancies through our collaboration hub portfolio weighed on our Waterfall City results, but that was offset by significantly lower rental discounts across the portfolio. We only provided ZAR 8.5 million of discounts versus ZAR 54 million in the prior period. So that helped offset some of the downside on the portfolio. But then the reduction in the interest-bearing debt reduced our overall interest expense bill and overall, we were 5.5% down. Rest of South Africa. Similar, we had no disposals in that particular portfolio, but we had rental reversions in the Brooklyn Bridge Office Park as well as the Auditor-General building, which was previously led by Oricon, where we had some negative reversions. That's impacted that particular portfolio substantially. But again, rental discounts were lower, and the overall interest expense bill was lower. That portfolio is down 14%. Our other investments, that ZAR 46 million comprised solely of a dividend that we received from MAS in September last year. So we're received in cash. They've declared another dividend and people check to that, that will feature in our results going forward. But overall, distributable income at ZAR 199 million, a 34.1% increase from the prior comparative period. But that excludes like I said, the profit on sale of sectional title units. And we've excluded that from distributable income. The development of sectional title units is a more of a trading business we developed to sell and our distributable income is premised largely on annuity-type income that emanates from our rental income business. So we've excluded it. But you can see that's a significant increase in income, ZAR 65.9 million from ZAR 8 million about a year ago. And I suppose the residential strategy within Waterfall Cities is literally paying off now. And residential will continue to feature in how we will roll out Waterfall City. So total income, ZAR 264.9 million, up 69% from the previous period. On a per cent basis, that's ZAR 0.376 per share, a 69.4% increase. In this slide, what we've tried to do is show a comparison between distributable income in the prior comparative period to this period. So the movements between the 2 periods changes in those particular line items. So they're not total numbers. They're either the change between last period and this period. And I think it's a useful graph to show where we've seen some pain in the portfolio, but where we also potentially see an opportunity to make gains from that as we are full of vacancies and as we replace potential clients and tenants. But also seeing where some of the work around the capital structure is also bearing fruit in terms of funding costs and so forth. So if you start from the left, decrease in market rentals. So this is effectively the impact of reversions on the portfolio reducing like-for-like ZAR 25.7 million period-on-period. Sale of the properties. So I've mentioned those 3 properties that we've sold, reducing NOI by roughly ZAR 25 million. Increase in vacancies, largely relating to the Transnet building, but there are other collaboration hub vacancies that have weighed on the portfolio, negative ZAR 23.4 million. And then expected credit losses. It feels like I'm mentioning Cell C quite often, but ZAR 28.5 million of that, ZAR 34.7 million, it relates to Cell C. And then on the upside, a ZAR 57.5 million of lower funding related costs. So that's largely interest expense that we're saving on in our de-gearing efforts and then lower discounts offset by higher rental. So we've seen a marked reduction in rental discounts if you've needed to offer. And I think going forward, hopefully, that is sustainable. We won't -- the last time we provided discounts was in August of last year. And so I think really the -- hopefully, the hard lockdowns that impacted the portfolio in prior reporting periods are now through the system and we won't have to provide that going forward. But we've seen slightly higher arrears, and the way we approach our distributable income is extremely conservative. So if there's any amount that we haven't received from our tenants that we've build, we reduced our distributable income by that amount. And so that's how that net positive impact, but overall, I think a good story from a discount perspective. Reversal of share-based payments. So that's just over ZAR 23 million. Historically, we account or rather amortize our cost of share-based payments, which is linked to our long-term incentive scheme that gets amortized over a period of 5 years. The vesting percentage last year was quite low between sort of 13% and 20%. And as a result, we've reversed some of the amortization that we've taken through the income statement. The MAS dividend, I've shared too, the ZAR 46 million MAS dividend, a small amount of other ZAR 3.1 million brings us to a distributable income of ZAR 199 million. If you add the sectional title sale profits of ZAR 65.9 million, you get to the ZAR 264.9 million in total income. The balance sheet. If you look at total assets, that's reduced by 4.5%. I think as expected over the last 6 months, we've sold those 3 properties that I talked about. What's counted that is we've had positive fair value adjustments across the portfolio on a net basis. So I think about ZAR 190 million worth of positive fair value adjustments on the completed properties, each sector showing a positive like-for-like growth and some of the detail sits with Michael. We've also seen that the MAS share price has increased by just under 16% period-on-period, and that's given us about ZAR 130 million uptick in terms of that investment in MAS. So overall, an asset base of ZAR 21.6 billion, liabilities reducing largely relating to the interest-bearing debt that we've settled. Now total liabilities of ZAR 9.7 billion, giving us an equity base of ZAR 11.9 billion or NAV per share of ZAR 16.83. Like I said, that's a 6.8% growth. I think, quite pleasing for the 6 months. Interest-bearing debt, now totaling ZAR 8.6 billion. You'll see that we've settled all of our European debt -- European-denominated debt in the last 6 months. That as a result of proceeds coming from the MAS shares that we've used to settle. Weighted average loan term of 4 years. Gearing, like I mentioned, 38%, and I think a relatively healthy position to be in. Our hedges, 80.5%. So it appears in the face value that we've increased our hedges in terms of swaps and other derivatives from 73.8% coverage in the prior 6 months, but we haven't. And the reason why that hedge percentage has increased is because we've settled ZAR 1.6 billion worth of debt, but we haven't settled a pro rata percentage of swaps. And that's had an impact in our hedge percentage, but also in our overall cost of debt. So if you look further down on the slide, we have a weighted average cost of rand-denominated debt of 9.4%, up from 9.1%, so 30 basis points increase. A few factors. Like I mentioned, the fact that our hedges haven't been decreased or haven't been settled. So now you've got a bigger portion of your debt weighted towards higher fixed rate costs. That's had an impact. We've settled ZAR 1.6 billion worth of debt, but a big portion of that was the Deloitte funding, which was at a lower rate than our average cost of debt. So that's obviously had a negative impact on the overall cost of debt. And so we've also had an increase in the repo rate in the last 6 months, 25 basis points, which has increased our variable cost. So overall, 9.1%, increasing to 9.4%, still remains a focus for us in terms of reducing that average cost of debt. If you look at the graph below. What we've tried to do there is project where our cost of debt could end up at the end of this calendar year. So the 2 bars at 31 December 2021 showing the 9.4% average cost of debt and a hedge percentage of 80.5%, we're projecting roughly 4 interest rate hikes between now and the end of December, which will take our variable costs of debt up. But we also have a roll-off of our swaps, which will reduce our hedge percentage from current 80.5% down to 48.7%. If we elect not to add any swaps onto the books or any other hedges, our cost of debt should end up at 8.7%. So a significant improvement. And you can see really what's happening there is that the premium that we've paid for hedging coming off, and that will give us an average cost of debt of 8.7%. We do, however, have an internal policy to hedge at least 70% of our debt. And if we were then to increase the number of swaps that we had, we then take our average cost of debt from 8.7% to 9.1%. So again, reflecting the sort of insurance costs that you pay to get certainty on the funding. But this is a huge focus area for us, and we're looking at otherwise, that will give us similar protection, but without paying a significant premium. And that's hopefully something that we'll execute in the next 6 months. On the right-hand side, you'll see our liquidity, ZAR 1.8 billion. At balance sheet date, we just had under ZAR 850 million worth of cash, which was subsequently parked in prepaid access facilities. But at balance sheet date, ZAR 850 million in cash, ZAR 660 million in prepaid access facilities and then ZAR 310 million of committed working capital facilities as a backstop if we needed it. The team's refinanced, like I said, just under ZAR 1 billion worth of debt towards the end of the calendar year last year. And very pleased to report that, that was refinanced at 30 basis points lower than our weighted average margin. So that will help us going forward. I'm going to give this slide a skip, Pete is going to join us shortly to take us through this. I'm going to just chat to this last slide of mine around REIT status, dividends and guidance. So in our trading statement that we released last week Thursday, we provided a lot more detail around this. It was a big discussion point last year with analysts and investors around the REIT requirements. I'm not going to rehash the entire discussion. But in a nutshell, to meet all of our REIT requirements, both from a JSE and a tax perspective, we will need to pay a distribution for the full year of this financial year being FY '22. And that distribution will need to be paid before the end of October. Notwithstanding that for the interim period, our Board has taken a conservative approach to capital management, and they've resolved not to pay an interim dividend. They will, however, consider a full year dividend for the year ending June. And that dividend, if it is declared, will be paid off before the end of October. As a result, we haven't provided any dividend per share guidance for the rest of this financial year. But we have indicated an upper and lower range of our distributable income per share. And I think Jackie will share some of that detail shortly. I'm going to hand this over back to Pete, and he can chat about other investments.

Thanks, Raj. Probably you got one slide, but I'll try to keep it into off now. Other investments comprise our investment in MAS and our Rest of Africa retail investments. Diving into MAS, our position in MAS unchanged over the 6 months, still just under 46.2 million shares, which is about 6.5% of the company. The accounting is very straightforward, simply the closing share price down to the number of shares. So at 31 December, that's ZAR 971 million, and the growth is obviously clearly just on the increase in the share price from -- to ZAR 21.03 from ZAR 18.18 at 30 June. Raj has already mentioned that all of our euro debt has been settled. So our MAS position is totally unencumbered. Looking at the chart on the right, we've taken MAS's recently announced guidance and earnings targets and translated that into what it means to Attacq from a MAS dividend flow perspective. So the small little red box on the bottom left of the chart, that's the recent dividend declaration by MAS. We'll receive that 4th of April. The gray box above that, that's based on the earnings guidance for the remaining 6 months. That's EUR 0.037 per share. So the only thing that can really tougher for the red box is what is the exchange rate land at. And then -- but we've used a rate of ZAR 16.50 for all of these bars across the -- on the chart just to able to compare what the growth is organically in MAS dividends in euro terms. For FY '23, they've guided -- we've used the mid of their guidance, I think, is EUR 0.0895 per share that just under ZAR 66 million for us in terms of dividend flows. And they put out quite a long-term earnings target, which turns into ZAR 114 million for us, and that's, in euro terms, that's EUR 0.145 to EUR 0.15 per share. So we do get a lot of questions as to what's our stance on that. But as you can see, there's a significant earnings potential still in the share. So we're quite happy to sit on our remaining position for some time. We will obviously reevaluate on a regular basis to what our other earnings opportunities are, but the earnings potential in the stock is very apparent just based on the targets that they have set themselves. If we look at Rest of Africa retail investments, comprises our cash on hand in our [indiscernible] subsidiary of just under ZAR 40 million. Our investment in AttAfrica Limited, which is invested into 3 Ghanian assets. And then our 25% interest in Ikeja City Mall, which comes in at just under ZAR 202 million. So the total that of ZAR 490.1 million. The uptick from last year is largely on the back of the change in the exchange rate. The rand has depreciated against the dollar over the last 6 months. Our strategy, as we've stated numerous times, to dispose of these assets and to recycle this capital into our South African debt and our Waterfall development pipeline. That strategy is unchanged. We're fully aligned with our current shareholder Hyprop in that regard. We have recently commenced discussions for the disposal of the Ghana assets held in AttAfrica. That will take some time, but discussions are underway. We'll update the market in that respect when there's more concrete news. And then our disposal to Ikeja City Mall has been delayed for a long time now. That's largely on the back of continuing USD liquidity problems. So we'll continue to reevaluate the disposal and also update the market as and when there's news to share. And with that, I'll hand over to Michael Clampett.

Thanks, Pete. Good morning, everyone. I will take us through the operating metrics for the South African portfolio. Six months ago, when we switched over for our full year results presentation, we introduced the concept of hubs to our stakeholders. Subsequently, the finance cost wrote a really interesting an entertaining article about our strategy. But I'm here to tell you more about the success that we have had with the implementation of the strategy. First of all, I'd like to recognize and commend all our asset and property management staff who have, in the last few months, not only done the basics of property really well, but have really taken a strategy that was something on paper and given it life and a big thank you to all of you. So just to recap, Attacq own and manage precinct hubs that are smart, safe and sustainable in the communities in which we operate. Those are broken down into retail-experience hubs, collaboration hubs and logistics hubs. At a high level, if we look at our retail-experience hubs, we've seen an increase in foot traffic and trading density growth over the last 6 months. For collaboration hubs, we've definitely seen an increase in demand for green spaces, and those are client-led requests. And we will tell you a little bit later about the first green-rated base building that we've launched in the Nexus building. And in the logistics hub, we keep seeing that Waterfall is a prime location in Gauteng for our logistics hubs. And of course, with the very exciting opportunity that Waterfall Junction brings, we should be able to continue leveraging that opportunity. As mentioned in the past, we have underlying principles in our asset management philosophy. And what we've done is we've -- in this case, I'm just giving you some examples of practically where we've implemented some of those operating principles. If we look at the retail-experience hubs for operating sustainability or -- sorry, for operational sustainability, I'll refer to collaboration hubs, and I've mentioned this earlier in the first zero-based building. It's really exciting for us. From a community focus point of view, also collaboration hubs, excited to announce that we've had reached an agreement and a partnership with Spaces that was announced last week. That's both for our Lynnwood Bridge precinct as well as further opportunities in Waterfall. And what that really does is it helps us to extend the reach that we've got to potential clients. Spaces as an offering is more flexible, been a traditional collaboration space. And that means that we can serve a broader base of clients. Under the integrated digital platform in retail-experience hubs, we've now given some of our teams' access to a data-driven leasing tool. In past, you would refer to retail leasing as kind of an art form. And we like to think of it as a bit more of a science these days, and we're really excited to see some results in the utilization of that data-driven tool. And also, from a client experience point of view, under retail-experience hubs, we've launched shopping at Mall of Africa and without really spending a lot in advertising, we've seen some great traction for end shopper adoption. From a South African portfolio perspective, just the high-level metrics on our like-for-like value change, up 1.4%. If you look through to the specific asset classes, retail and logistics holding up well, more certainly in those sectors, but we do see that collaboration hubs still affected by the view of long-term market rentals, and that's putting some pressure on the valuation. From a collections perspective, 94.5% collections for the 6-month period, affected by the Cell C. So the provision for the Cell C debt that we -- that they have not serviced in the short term, while we reached an agreement of terms, is in that number and that creates the collection percentage not being closer to 100%. And from an occupation perspective, 92%, that includes the Waterfall Circle building, which is 24,000 square meters. And in our portfolio that is quite significant. At the bottom left, Block 5, client retention rate at 34.6%. If we exclude Waterfall Circle with Transnet vacating that building, the retention rate jumps to 77%. From a reversion rate perspective, we've seen reversions of 8.3% in our total portfolio over the last 6 months. 10% on average for collaboration hubs and closer to 8% for the retail-experience hubs. This is also a number that's really stabilizing in our portfolio. And hopefully, it will decrease even further in the next 6 months. Escalation rates holding up really well. We get a lot of questions about this. Holding up well for those renewals that we do at 6.2% for the entire portfolio. And in trading densities once again, not being locked down during the Omicron variant, had a significant impact on the trading conditions in our retail assets, and that led to the significant trading density growth of 8.7%. At a total occupancy level, we've disclosed previously the numbers of 92% for the entire portfolio as of the end of December. Maybe just looking forward a little bit. So between 31 December and today's date, we've had subsequent lease. And unpacking those in Waterfall City that 1.6% relates to a 4,400 square meter lease that has been signed. It's in the Allandale building. And I think that proves the quality of our deal-making team. And when I get questions about the Waterfall Circle building, I think that type of deal proves that we've got the capacity and the ability to close off these big deals. From a Rest of South Africa perspective, you'll see that, that occupancy level also became better by 1.5%, mainly related to the Spaces transaction in Lynnwood Bridge and also a new Cotton On that we opened in MooiRivier Mall in March. From a collections perspective, Raj touched on this earlier in the presentation. Our discounts and relief provided for the 6 months down to only ZAR 10 million versus the ZAR 85 million for the previous reporting period. And that related only to July and August, once again, a clear indication of the impact of not having the severe restrictions on trade in our portfolio. We've given you a little bit of a breakdown of the collection percentage, as I mentioned earlier, the 94.5%. And if you look at the bad debt provision, of which the bulk would be Cell C, that brings it down by 3.7%, and that provides you a bit more context as to the 94.5% number. Quickly stopping at the retail-experience hubs. Client retention rate close to 80%. And we've seen that those deals also happen quicker. There's a lot more certainty these days in terms of the ability to generate turnover. Our ability to generate turnover, of course, translate to a rental and it's easier for retailers and landlords to get to an agreement on what the rental level should be. Occupancy at 96.2%. We're still adding new clients to our portfolio. And the trading density, as I mentioned before, up 8.7%. Just anecdotally, we had the start of our property management meetings this week again or last week. And [indiscernible] whole for the month of February was up 38% in turnover on February last year. So certainly, we're hoping that this strength does continue. Just looking at some of the new clients that we've added to our portfolio, in line with our retail-experience hub strategy, where we try and include locally recognized businesses, you'll see that Forti Too has opened at Lynnwood Bridge, that's owned by Forti Mazzone, is a very well-known restaurant here in Pretoria. And so he's got a following. So by the time that he comes into our precinct, you already have a well-recognized base. Cotton On, as I said, opened in MooiRivier Mall in the month of March. They had opening weekend that was twice their set target or budget for that weekend. That was the feedback from Cotton On, so we're very excited about the further economic activity that would bring to MooiRivier Mall. Trek Bikes opened at Lynnwood Bridge, exciting to have that U.S. brand as part of our stable and in other brands like Fireroom and ARC coming to Mall of Africa. If we look at the evolution of turnover and foot count over the last 2 years, you'll see that we've added 2 lines just indicating the line for 100% of the 2019 turnover and foot count and 80% of the 2019 turnover and foot count. And what you will clearly notice in the bars, which are the turnover numbers, is that we are above the 2019 numbers, especially where we are not restricted by any lockdown regulations. And what you will also clearly see is that the foot count is now tapering around the 80%, and we definitely believe that this trend is permanent. It's a structural change in the way that people visit retail assets. Stopping over collaboration hubs quickly. Average age of 7.4 years. Of course, this is affected by the sale of the Deloitte building. So there was newish building or very new buildings, so they would take the average age up. Client retention rate of 9.9%. If I exclude the Waterfall Circle building, that number jumps to 67% in terms of client retention and the occupancy rate at 82.7%, once again, including Waterfall Circle. Currently, there are a number of offices out on that building, ranging between 1,500 and a 10,000 square meter offer all of these deals are out in the market, and we hope that the teams will close out some of these deals soon. Maybe just stopping at some of the clients that have come to our collaboration hubs in the recent past. Both Wood and Accenture are new clients at corporate campus. Accenture is actually an existing client that take more space. Once again, showing that there's growth in existing portfolio and that they are definitely happy to take more space within Waterfall and Cisco also coming through the Waterfall node. Our logistics hubs and hotel portfolio holding up really well, not stopping on any of these metrics because they're quite clear. The occupancy level from a customer point of view at both our Lynnwood Bridge and Waterfall City Lodge Hotel are really encouraging. That comes from them to be lodged as a group. And that shows that our leases with that hotel group should be a fairly consistent and robust in future. I think it's Jackie.

Thank you, Mike. Great update, and thank you too to Pete and Raj as well. All right, developments at Waterfall City. So another question that -- before everyone asks me, will we replace Giles, our Chief Development Officer that -- him and his family currently immigrating to the Middle East. Yes, we will. We currently looked at the optimal development structure, what is the business needs of Attacq. We have identified 2 new roles, which we will now conduct interviews from a search point of view. And hopefully, between in the next 30 to 60 days, we will have 2 new bums on seats anchoring the development team. So with that, you're going to need to be with me for a while. And with that, maybe also a really word of appreciation and thanks to the development team. The day that Giles resigned, I had a phone call from with our shareholders to say how strong is the bench. And I said, I've got no sleepless nights. The team is strong. They know what they do. They get the deals done. And once again, thank you so much to the gents and the 1 lady in the team. We need to definitely get more female representatives in the development team, but you guys are remarkable. And these results really represents of why I did not get any sleepless nights because of our really strong bench in our development team. So we've completed 1 building, Corporate Campus - Building 6. And as Michael has said, it's led by Wood -- leased by Wood and Accenture. We're currently busy with 28,000 square meters of effective GLA. But if you look at the 100% GLA that we're busy developing in Waterfall, it's close to 60,000 square meters of GLA. Coming out of the pandemic, we are building 60,000 square meters of GLA in Waterfall City. And of that, 78% is pre-let. If we conclude the lease at building Corporate Campus - Building 7, it would be over 80%. And I think that is just a remarkable stat. Moving over to the Waterfall City bulk. Our bulk is 1.9 million square meters, of which we've got just under 45% left to develop. Of that, that represents about 840,000 square meters of bulk. Of the 840,000 square meters of bulk, 580,000 square meter sits in our office and our collaboration. And then a lot of people are asking us how are you going to build office? It's a depressed market. What are you going to do with all of your bulk? What we have done as a team and we're currently busy doing is we're looking at an Attacq Waterfall bulk reallocation plan. Our team and our development team with conjunction with the landlord, which is the Mia Family looking at how do we take certain pockets of our development right and convert it potentially into other uses, for instance, residential use, and we'll show you a little bit today in a video where potential new residential units can be developed in Waterfall. So really looking at responsibly at what is the urban design, what do we need in Waterfall and how do we fast track certain of our commercial bulk into potential residential bulk, bringing the city to life with the residential units servicing our mall and also being very close to office. Then a big other focus for us in our development activity is Waterfall Junction. You can largely say the development team's activity would be rightly centered around residential development and also logistics development, more largely centered towards Waterfall Junction as the balance of our bulk in our logistics precincts are fully developed barring 2 to 3 sites available. And I'm looking at Dave now, looking at me to say I need to quote the right numbers here today. So really a focus. And then what will be the commercial strategies? We've got a lot of success in our multi-tenanted office bulk, corporate campus, 35,000 square meter, pretty much fully led development. We're currently busy with Nexus Office Park. We've got the Eglin Office Park, and we will continue to bring in net-0 office buildings of the future into the market, but on a very much a client development need basis point of view. So we're going to show you a little bit of a video. So if you could kindly transition over into the video. This video was taken last weekend. So it's nice in green. This is a south to northern view of the city. You can see the open areas -- all the open areas of bulk that we've got available. Then we transition over the -- into highway. The logistics hubs, you can see the -- most of the logistics hubs been fully developed. Certain pockets, isolated pockets that are still available. But in Waterfall, I said earlier this morning, we probably sit with the best land in Africa. And why do we say this is because all roads lead to Waterfall. And this is an illustrative picture showing you in a panoramic view, all of the infrastructure that has been put into Waterfall, and we are situated in the middle of [ hutting ]. So for supply chain and distribution, you can't get a better site being -- having all of the road networks to support as well as, as you can see, illustrated all of the road networks closely situated in the middle of [ hutting ]. Then if we move over -- I'm sorry, this video scrolls a bit longer than my words this morning. You can see the Pretoria main road, let me go back. If we go over to Waterfall City. And we've always said this is a northern view. We're going to start where the bulk infrastructures are really developed, and we're going to move over to where we need to still install some bulk infrastructure, really to be prudent about our capital allocation. There is a lot of capital that we put into building roads, filling up the city from where we've already serviced the city. This is a view of Ellipse. You can see there, we're busy with the high tower at the moment, Phase 2 being 76% pre-let. And then hopefully, towards the middle of this year, we'll launch the Phase 3 of the development. This is our micro apartments, the mix that is currently under sale, 31% bankable sales, and this is the future development bulk that I've still spoken about of residential development, buffering the city from the Century City residential development, moving then into a more commercial space of the offices. This is Nexus 1, completion almost. Part of this presently standing in today, and this is the net-0 building we've spoken about and a 50% pre-let achieved on this building. Corporate Campus, 35,000 square meters, last building and completion phases, excellent covenant leases in place and just illustrative of where the market is. And we would love continuing building and delivering these type of office parks within the city. This is the distribution campus. The Waterfall distribution campus being completed, Waterfall logistics precinct being all spoken for with the Waterfall data center. Please, can you maybe just pause there for me. Now it's going too fast. I've got now too many words. So the Waterfall logistics precinct being spoken for with the data center, you can see the Phase 1 of the data center going really fast. By mid this year, the first Phase 1 will be completed and operational, and then we'll move over to Phase 2 and 3. We've got the Waterfall commercial district. We set the further part LP 22. That's with a plumbing facility will be built. And then we're transitioning now over into Waterfall Junction, if it continue. Slide -- then Waterfall Junction, a 6-phase development co-owned with Sanlam. We own 23.5% -- maybe you can pause there for me. Phase 1, about 2 years ago, we commenced with the infrastructure development of the land at [ cost to stop ] building the K113 Road. A big water ply development that has given some of my development teammates gray hair, no hair, but it is executed and then also an upgrade to the Eskom pipeline. Phase 1 of the development, we will transition now over into gatehouse, foundry and possibly a speculative development of mini warehouses kick starting the development. But really, the main focus from an Attacq investment point of view will be the further development of the 6-phase Waterfall Junction development. Also to note -- you can continue. As part of our agreements with Sanlam, we hold the right at the mid of this year 30 June, we can buy up to 50% of this development land. As you can see, the bulk for Phase 1 will be just under 160,000 of roughly 13 lettable IRFs. IRFs that we will bring into the market. But I think it's a blank canvas on the phases that we will transition them into whatever the client needs are. Okay. Then if we move over to ESG, technology and innovation. We've spoken about environment that we're completing our Phase 1 Nexus Building 1 and net-0 base building. And we'll go into a bit more detail on what Attacq energy will entail. We've started a waste initiative with a bigger Waterfall precinct. And I think the collaborative approach with a bigger Waterfall precinct bis such a big plus for us, especially on environmental management. It's not just Attacq, it's the bigger Waterfall pulling together and really creating a big economy of scale, environmental management systems that we'll be busy putting into place. And our carbon emission reduction target road map will be released by May 2022. Our community is a big focus for us, where we operate, we need to understand our communities. We need to invest in our communities. We've adopted a school on a 3-year program. We've kicked off the construction of 3 new classrooms and refurbishments of 10 existing classrooms and then also the financial assistance of 20 new bursary participants for the new financial year. And then on a governance point of view, towards the end of November, we've reviewed our gender and race diversity and a new commitment that has set by the Board for the year to come. If we move over to innovation technology, people ask us, what is Attacq energy, what does it entail? And in our business diversification strategy, we look at businesses that complement -- adjacent investment that complement our core portfolio. And we thought about the problems that we have in South Africa. It's not just being green, it's about operating in a stable environment, having reliable energy, being less reliant on diesel through generating power, a dirty power. And we conducted extensive research and work that we've done on what does the solar environment look at for Attacq. So we've got rooftop solar. And through the Phase 1 of Attacq energy, we'll further invest into further roughly 7 megawatts of rooftop solar on our existing buildings. But then we also will enter into a purchase power agreement with a solar farm producing power in the Northern Cape. Collectively, this will reduce our carbon emission by 40%. So again, talking to our corporate emission reduction targets. So it's very integrated, but then also provides us a revenue stream of around about a reduction of our energy bill of around about 14% to 20% reduction in our energy bill. So really looking at an integrated adjacent business, enhancing our business from an environmental point of view, but also providing a stable environment for our tenants to operate in. If you noticed in the annexures of our results presentation that our counsel bill roughly is just under 70%. So the main focus for us driving our business is understanding, driving that 70% of stability for our clients and for ourselves as well. Strategic outlook. So if the economy is really recovering from a post-COVID world. And I think we will come very custom in -- walking around with masks, sanitizing, washing our hands, but I think the near-term future, we -- in a inflationary hike environment -- interest rate hike environment, that will definitely put some consumer pressure and also pressure on new development activity for the medium-term pressure. And I think that's also as a Board, we have made the call not to get a clearer dividend, but really be conservative in our approach from a capital management point of view. In our precincts in South African portfolio, what will remain our big focus over the next 6 to 12 months is our space management; Waterfall Circle building; the Cell C campus, do we converting it into a multi-let campus; the development team as well as the asset management team is thinking about changing some of the uses of this Cell C campus. So really focusing on space management and unlocking the low-hanging fruit that already exists in our portfolio. Waterfall City bulk has said, we're going to focus on the bulk reallocation, being clever. How do we unlock the bulk, how do we change certain of the rights, increase the logistics rollout as well as the residential rollout activity with partnerships in Attacq. Capital management, again, as I said, a conservative approach with that having no dividend declared for the interim period. Our MAS shares remain a medium-term hold for us. We'll continue to pursue the exit of our African investment with Hyprop. We'll continue to unlock further partnerships within our business and also especially within [ 8 week ] in Waterfall. And our distributable income per share guidance for the year is around about ZAR 0.46 to ZAR 0.481. And just to highlight, it's a journey that we're on in Attacq coming out of a pandemic and transitioning back into where we think our guidance would evolve to in the next 2 to 3 years. So as the journey becomes more clear, as we see our capital structure ticking down, we'll be able to provide our shareholders with much more better see-through guidance come in with our June results. Then and our business diversification is concluding the Attacq energy initiative through the PPA agreements as well as in the rooftop solar that we will give the green light too for the team to start with the 7-megawatt implementation of the solar project. Our business, we will continue to lock these unique opportunities. I firmly believe that with the team, the quality of our assets and as well as the quality of our land, we are really well placed to meet the challenges that's up for us as well as the confidence and the capability of our people gives us the confidence as a Board to pursue these opportunities and unlock future shareholders' value. So thank you very much for your time this morning. We encourage if there's any questions. We'll open up the floor now for questions.

It's Yesh from Anchor Stockbrokers. I have 2 questions. I'll start with the first one for maybe Michael. So with regards to the space that Cell C will be returning, how easy would it be to lease the space? And then maybe the second follow-up question. Could you maybe give us some color on the replacement for Transnet tenants?

Manisha, should I address them sitting or do we go to the podium to answer questions?

Just sit.

Just sit. Yesh, so first of all, to the question around Cell C. There are 2 main buildings in place. So remember the third one is the office section, which Cell C did retain. From a warehousing perspective, there are currently 2 offers in play. So [indiscernible] need to conclude on those offers. On the walking center, there are 3 interested parties. We're not an offer stage yet. But there are 3 different users looking at the walking center currently. Then with regard to Waterfall Circle, you wanted more detail?

Yes, Transnet. How is the progress on finding a tenant and where you are?

Yes. It's going really well. So as I mentioned earlier, there's not 1 offer of 1,500 square meters and 1 of 10. That's the range. In between that there sits a number of other deals that the deal team are running with, 4,000, 6,000 square meters. And once again, as I reflected earlier during the presentation, I think the conclusion of that big 4,400 square meter lease in the Allandale building is an indication that we have the capacity to close out some of these deals. So certainly, I am very confident that we will have something on the table soon.

Okay. Perfect. One question for Raj as well. So what levers can you pull to increase the ICR levels to a much more comfortable level and a more sustainable level going forward? Just some color on that.

Yes, sure. So Yesh, I think there's 2 components to the interest coverage. So obviously, the income side and then the cost of debt side. On the cost of debt side, I think we've got another question, so hopefully I'll answer it now, how do we improve our cost of debt? I think we've started already. So the team's refinanced, like I said, ZAR 1 billion worth of debt that closed out towards December last year at a rate that was 30 basis points lower than our weighted average cost. So I think through refinancing activities throughout the portfolio over a period of time, will hopefully reduce the weighted average cost of debt. The second element is the team is also busy on finalizing our sustainability finance framework. And we're seeing a lot of interest by the local banks and other institutions looking to deploy funds for specific either green loans or sustainability-linked finance. And I think the opportunity there is probably somewhere between 5, 10 and 15 basis points. So once we are able to finalize the framework, we can then go and implement that refinancing activity with a green angle to it. And I think we're very well positioned because if we look at the Waterfall portfolio, we've got a large portion of the buildings already green-rated initiatives already in place. So from a purpose perspective, we're already driving it. We just need to now marry that with the financing. So those are, I think, 2 elements on the debt side. And then the third element is around hedging and how we look to hedge. So I think there's other products other than your vanilla interest rate swaps that we can potentially look to mitigate our interest rate risk. Not provide us necessarily with the same level of protection, but give us a range of protection that I think meets our objectives around interest rate risk. But hopefully, we'll come in at the sort of lower cost at a lower premium. So I think that's on the interest rate or the denominator element of that. And then Jackie has mentioned it, I think, 2 big elements that have weighed in not just on the income or distributable income perspective, but also on the interest cover ratio is both Cell C as well as the Transnet building. I mean if we didn't raise the provision for Cell C, our interest cover ratio would have been 1.62x, so a significant uptick. If we fill up Transnet as well as more income and a better ratio. So I think we're obviously working from a deal-making asset management on the income side and then the funding team focusing on hedging and lowering our variable rate debt.

Perfect. Just a last question for Jackie. Maybe you can give us some color or a rough time line for the changing the lease or land rights to the alternative users from the office?

It's a journey that we're going to go on. So I think we, as a team, are looking at what is -- what will be the correct mix for us. And I think we're going to go through this again as the life changes. I think 10, 15 years ago when the initial master plan was done, we never envisioned where we will be today, trend is changing. So we will be coming out with a broad plan by June, July with our next results where the changes would be, I think there would also be some transactions we will announce in the market that would also provide you some full color on how we'll be transitioning with the changes of our bulk reallocation program. We've got quite a bit of questions online. Manisha, are you going to read them and then we answer? I think that's better.

So the first one is from Gugu from TechFinancials. She says, how is Attacq using innovation and technology to reinvent shopping in SA? How is Attacq using data science and analytics to understand shopper behavior? How much money is the company spending on tech and innovation? Give us more color on your SHôPING app and My Building app? Give us more color on making Waterfall a smart city?

Sure. That's a mouthful. Mike, are you going to start with the shopping and retail? And then we'll -- I'll fill in the blanks.

Yes. Thank you, Jackie. I made some notes, but I made too many notes, so I'm probably going to get lost. I'm going to try to answer them as logical as possible. So the first one was related to reinventing shopping in South Africa and I don't want to fall into the track of speaking about technology and apps, et cetera. I think what's also important to understand is it's also being in touch with trends that are happening internationally and bringing them to South Africa. So that might include things like micro retailing. We've seen some examples of that in South Africa via Egg in Cabanis or SOKO District in Rosebank and certainly something that we are very aware of and also need to respond to. So having a good shopping experience does not necessarily just mean technology, and we'll talk about shopping and what we're doing there a bit later on. The second question related to data science and the use of data science and analytics. Certainly, I think Attacq was 1 of the front runners. We've been using data analytics in some of our retail centers since 2015 to understand how WiFi devices move through our build environments and then analyzing the behavior when we make a change, that might be a change to some leasing. It might also be just a marketing event. So I think we've been doing this for quite a while. But recently, we've gone beyond just the tracking of WiFi devices. We now, in the future, we'll also be able to use actual spend behavior of key customers, and there's a different way of defining what a key customer might be. But in future, we'll be able to make some leasing decisions based on where our existing customers spend their money outside of our retail environments. And certainly, we look forward to the results of that in the future. The next question was -- that goes to Raj or Jackie, as I am particularly responsible for that budget. And so I would say, it's infinite.

I throttles the budget and then Raj put on those my budget.

[indiscernible] is too much.

But what I can say in short, and we're not going to give a number, but I think that the internal attitude towards technology and the spend on digital and technology is certainly very positive. It's been very positive over the last 2 years. And so we've seen every year incrementally the amount that goes to that expense item has increased in line with our ambitions in that department. So probably best in there.

So maybe it's not about the money that has spent, but also as a company, as a Board, we've also transitioned into the fact that we need to have a digital journey that we're on. Transforming our business to understand our shopper, to understand the trends, but also to run just an optimal smooth business with great systems in place. So we've got a journey that Mike and his team is heading up to transition our business fundamentally into quicker decision making, understanding the trends and to pivot and be agile. And I think that's a business that we want to get to is it is an agile business that can make quick decisions, understand the analytics, understand the waste, understand the electricity that we produce in order to make intelligent decisions on the data we produce. So that's the mindset of the company that we have changed. With that, we will marry it up with a budget and then Raj will throttle the budget.

The next one related to SHôPING and My Buildings, Manisha?

Yes.

So maybe just more color there, Gugu, My Buildings is the tool that we use in the operations space. It started out really for us to manage occupational hub and safety, a lot of compliance stuff. A direct result for us is, if you look at -- we get externally audited on the occupational hub and safety in our buildings. And last year, we received an award will not -- we -- I should actually say the team that managed and received the award for the highest occupational hub and safety audit rating in that specific service providers portfolio. So we can certainly see that the use of My Buildings to track all these compliance matters has made sure that our portfolio sort of exceeds where the industry is at currently. If I talk SHôPING, SHôPING is our MVP, and I think it's important also to mention that it's a simple at the moment, a minimum viable product and we've put into the market to test some hypotheses that we've got around that. A quick way to summarize my point of view on that is that we sell access to customers to retailers, and this is just another way to in future, continue selling that access to customers. So on the one side, we've provided the digitization of gift voucher, so the ability to send and receive gift vouchers digitally. That could be in bulk or it could be individually on a one-on-one basis. But also what we've done is we've interviewed a lot of customers and 78% of them said, let's put navigation in the palm of my hand. And so we've done that via the SHôPING app as well. The final one was regard to smart cities, Manisha?

It was Waterfall. Give some color on making Waterfall a smart city?

Yes. And once again, I think I'm going to resist the temptation to fall into the technology trap immediately, yes. Certainly, there's a lot to do with technology. And technology is a big enabler, maybe to touch on what Jackie has said. Our journey on the modern data platform, really, that's our start to centralizing data, internal data, and we've started with a focus on reporting first. But certainly, the next steps will be integrating other data sets, creating analysis of that and enabling us to make better decisions. And that might include Waterfall City context, things like parking. We've got the parking data. It's just not integrated with anything today. We've got the car data. We know how many cars move around each road in Waterfall City. It's just not integrated with anything else yet. So certainly in future, we'll be hoping to unlock more insights as we join all these data points together. But I think it's also important to mention that from a practical perspective, a smart city could also be building design, it could be the way you do security. It could be multiple other factors that we really concentrate on that sits outside just pure technology. I don't know if there's something you want to add, Jackie?

No. You've done a really good job. The next question, Manisha.

The next question is from [ Anas Maadi from Migo ]. What reversions are you seeing in the retail-experience hubs? Please breakdown Waterfall versus Rest of South Africa?

So I've only got a couple of crypt notes here, so I'll just give you the numbers that I've got. Any of the other numbers requested, we can definitely provide after the meeting. So if you break up that number of minus 8% that I mentioned in the presentation earlier. In Eikestad, that number was minus 6.6%, reversions for the 6 months. [indiscernible] Mall was minus 3.8%. Mall of Africa it was minus 9.1%. And at MooiRivier Mall, the percentage looks terrible at minus 23.3% but it was only made up of 2 leases and 1 of that was Panarottis. So of course, in the restaurant sector, having retained that decline for another 5 years meant that we had to revise that lease. So in total, if you add all that up, you get to the 8.1% rental reversions for retail.

Thank you. The next 2 questions are from Paulo Almeda. He is from [indiscernible]. He wants somebody to please talk to reversions outside of Waterfall. What sort of figures are we experiencing? Maybe answer that or shall I give you the second question? In order to take up your interest in the Sanlam JV, how much would that cost upfront? I think it's the Waterfall JV.

Wonderful Junction, yes. Okay, maybe we can be quickly update.

Yes. This is [indiscernible] at my disposal immediately so certainly we can break it up. But I do have a macro number. So I can tell you that everything outside of Waterfall, the reversion rate was minus 7.2%. So certainly, we can break that up between retail and collaboration hubs afterwards just in the [indiscernible] e-mail.

All right. And then in order for us to stack up our interest at Waterfall from 23% up to 50% the current value -- total value of the property is around about ZAR 460 million. I'm looking at Raj here. So we own 23%. So that's another 27% of ZAR 460 million. That will be sum total of capital, including also the infrastructure that has been spent to date. The gents are nodding, they're happy.

The next question is from [indiscernible] from Tombo Wealth. He is asking, you mentioned increasing demand for green space. Who is looking for the space to be more detailed? Are these big or small corporates and from which sectors?

Do you want to take it or should I?

I'll kick it off, and you can fill in what I miss. So I think it's a general trend. So I think corporates all around have become more conscious of their footprint, and I don't want to refer to East in general, but I certainly created a lot of consciousness around a lot of our prospective clients. And they, in turn, come and have those discussions with us. So if you're in a dirty off-street building somewhere else and you can come to Waterfall City and there's an opportunity to build something new, certainly, those are discussions that we are having and comment that we are seeing more demand in that space.

Maybe just to fill on that, that's the green space, but I also think it's the functional space that our tenants want and the stability of what we are providing, especially in Waterfall City, having a working office always on WiFi connection, fiber connection and then also enabling to operate in a city where there is multiple levels of redundancy. I think that is rightly important, especially for international clients. And then the other component, and I'm looking at our asset manager here is the cost of occupancy. As I've said, 70% of our tenants cost is driven from a municipal cost rate point of view. And if we as a landlord can reduce or be give more certainty on some of that municipal costs through our green initiatives, we are definitely the landlord of choice.

The next question is -- sorry, another one from Paulo. He is asking on the escalation rate of 6.2% compared to 5.5%. Is that just on new leases or the entire portfolio? What has been the driver of that? Is there a funny lease in the like BMW?

Paolo knows our portfolio really well. Mike...

So it's on the renewal leases. And I can tell you that the prior year number was affected by -- let me just make sure I am correct. Yes, that is correct. That number is the portfolio leases renewed. And the prior year number was affected by the [indiscernible] lease. In that instance, we did a static, but we did a net present value calculation over the 3-year lease period. And there was a natural escalation built in. So that's why if you did the prior year number, you get to the 5.5%.

Then a question from [ 91, Lakman Hameed ]. He says, you're guiding to a sequential decline in DIPS for 2022. Apart from MAS income reducing, could you highlight the main drivers for this?

I can maybe answer that? So the one -- maybe a couple of key drivers for the next 6 months in terms of performance. We've made very conservative assumptions around the take-up of the Transnet building. So that was for the previous period was in for 4 months when it was let. So there's roughly a 2-month vacancy period. Going forward, we're forecasting a very conservative take up. So that's a big driver. The second element is the continued impact of Cell C, but that's impacting both 6-month periods. MAS is around ZAR 20 million in movement. And then some of this -- the impact of some of our debt reduction, we'll counteract some of that. So we'll hopefully see a better reduction in interest costs for the next 6 months. And then some of it is just back-ended expense. So a lot of our spend around BE and transformation, et cetera, we typically spend that towards the end of the financial year. And so that -- so it impacts the second 6 months more than it impacts the first 6 months.

Next question from Chris Reddy, All Weather Capital. Referring to Slide 43, the retail sector per segment, how has that trading density growth changed post period? Where are the areas of concern versus opportunities?

So I can't talk Chris. I don't really have the number at hand for January and February post period end in terms of the category, specifically. Certainly, all densities have trended upwards in the reporting period months subsequent to 31 December. But I think what we've seen in the past is we've seen electronics and we've seen homeware performed really well. You can also see that in the market, the acquisitions of Yuppiechef by Mr Price and acquisition of [indiscernible] by The PFG Group. So certainly, a lot of activity for these categories or corporate activities for these categories that trade really well. And I also think we have mentioned this in the past, growth is particularly affected by the strength of being able to transact with them using the apps, 60-60, ASAP and a number of others. And I think our attack strategy around localized retail, bringing them into our retail-experience hubs is a good counter. So certainly not too nervous about that.

Thanks, Mike. John Miller asks how many residential units have already been completed or in the pipeline at Ellipse all phases and the mix? And how many more resi units do you foresee bringing to Waterfall in the future? The second question she asks is what is the sales price, lowest to highest?

Okay. So the total amount of units collectively all phases Ellipse and also the mix would round about be 900. And why I'm saying 900 are not absolute? We are currently looking at the mix of a -- looking at sharpening of the design there, maybe reducing the floor to on the mix. So it's around about 900 units. The sales price, I think how many units will we bring into the market in total. So if we look at what we are planning it's around about, I would say, 2,000 to 3,500 square meters depending on where the bulk reallocation strategy will sit and land. And then the sales price for a micro apartment in Ellipse starts below ZAR 1,000,999, the mix, sorry. And then I was having Ellipse in my brain. And in the highest apartment that we've sold to date is a massive consolidated petals of [ 52 million acre -- 42 million acre ]. So it ranges from the mix being micro apartments, [ 9,700,000 ] to a big consolidated apartment of over ZAR 14 million.

Okay. And then the last online question is from [ Anas Maadi from Migo ]. They say, what does management plan to do with the profits arising from residential sales?

I'm going to leave that one for Raj.

Yes. So we're going to reinvest that. As Jackie mentioned, we've got a few residential developments that we've either launched from a marketing perspective. We've got a couple of ideas of other residential types of products that will make sense from a Waterfall City perspective. So all of those profits, we're going to reinvest into further residential projects.

Thanks. That's all the online questions. Any more questions in the room?

Last question for me. Maybe a question for Raj. So from a funding perspective, how do you plan on building Waterfall whilst targeting LTV sub-40%? And I know you mentioned earlier in the past presentations you're not tapping the equity markets because it might be expensive as such a big discount now. So I just wanted some color, how do you plan on that funding possibilities.

So Yesh, I think we've probably got -- or there's maybe 3 sources of capital. One is debt capital, which obviously then puts a lot of strain on the balance sheet. And I think we've done a good job over in the last 12 months, moving our gearing from 46.3% to 38%, a combination of disposals and a little bit of fair value adjustments coming through the last period. So there's the debt markets. From an equity side, you can obviously raise fresh equity through either a drip or sort of new equity issuance or you can retain distributions and not pay out dividends, which is obviously part of the discussion around REIT status with regards to the strategy around maintaining the REIT status and paying out the minimum 75%. But if you retain an element of that or you retain all of your internally generated profits, you then can repurpose that or reallocate that to new developments. And then the third element is joint venturing and partnering with other JV partners. And I think the latter is something that we do. And Jackie mentioned it, we'll potentially introduce more partners at various levels within the business. And that's sort of twofold if a JV partner comes in and purchases 50% of the land component, that's cash into the business. And then they fund their 50% of the cost of the development. So there's a sort of a benefit on both elements. And from a debt perspective, I think we'll always use an element of debt. We've prepaid facilities of roughly ZAR 650 million in the balance sheet which we can redraw, but we do that with the mindset of -- we're mindful of where the gearing ratio goes. And then I think the longer-term discussion and what the Board takes into consideration when they do or do not declare a dividend is it on how we use internally generate the plans going forward.

That draws us to the end of our results presentation. Thank you so much for everyone attending. Thank you for the online participants. If there's any questions, please reach out to any one of us or Brenda at any time, and we'll get, as soon as possible, back to you. So thank you very much, and have a wonderful day.