Delta Property Fund Limited ($DLT)

Good morning, ladies and gentlemen, and welcome to Delta Property Funds pre-recorded results presentation for the financial year ended 28 February 2026. [Operator Instructions] Today's presentation will be led by Delta's Chief Executive Officer, Ms. Bongi Masinga; and Chief Financial Officer, Mr. Fikile Mhlontlo. I will now hand you over to Bongi to begin the presentation. Over to you, Bongi.

Good morning, ladies and gentlemen, and thank you for joining us this morning. Our theme this year is creating sustainable value. This follows the work we set out last year under focusing on fundamentals. Financial year 2026 was an important year for Delta. It was a year in which the business moved from stabilization towards sustainability with measurable progress in profitability, collections, vacancies, debt reduction, refinancing and the continued execution of our noncore program. I am sure by now, you will have had time to digest the results released last week. Notwithstanding the encouraging results, our immediate priorities remain focused on improving vacancies, renegotiating key leases on longer terms and continued cost-saving measures, combined with strong collections, all with a view of curing the covenant metrics in due course. The direction of travel has improved, and we believe it can be sustained, assuming no major macroeconomic shocks. We are a stronger, leaner and more focused business than we were a year ago. I will begin with the business overview before moving into the operational performance and the progress we have made on the turnaround strategy. Fikile will then take you through the financial results, including our income statement, balance sheet, debt position, liquidity and SA REIT funds from operations. I will return to the end to cover the conclusion and the way forward, after which we will open the floor for questions. Financial year 2026 marks a turning point for Delta. The business delivered financial, operational and strategic progress across several areas that matter directly to long-term sustainability. We exited our listed share exposure in Grit Real Estate Income Group, simplifying the portfolio and applying the proceeds to debt reduction. We recorded positive valuation gains for the first time in more than 5 years. We also returned to profitability with net profit of ZAR 127 million compared with a loss of ZAR 104 million in financial year '25. We have ensured that our tenants have water back up, especially in water crisis areas, improving tenant experience. We also reduced the overall vacancy rate to below 30% for the first time in 5 years. That is an important operational mark as it shows that the portfolio optimization and leasing strategy are starting to translate into measurable improvement. Taken together, financial year '26 was a year of recovery, resilience and renewed momentum. This slide summarizes the shift in the business. The first theme is earnings recovery. Delta moved from a ZAR 104.2 million loss to a ZAR 127 million profit, a ZAR 231.2 million improvement, supported by a positive fair value movement, strong cash generation and materially stronger collections. The second theme is balance sheet resilience. We successfully refinanced material facilities with Nedbank and Standard Bank, improved our covenant metrics and extended the maturity profile of our debt. This reduces refinancing risk and gives management greater scope to execute the turnaround plan. The third theme is unlocking shareholder value. The disposal strategy is progressing and the pipeline remains material at approximately ZAR 1 billion. Our objective here remains clear: recycle capital out of weaker, higher vacancy noncore assets and apply proceeds to deleveraging. The foundations are stronger than they were a year ago. Trajectory is emerging. Our focus is now disciplined execution and converting the progress made this year into sustainable earnings and sustainable distributions over time. I will now move to the operational overview. This section covers the operating environment, the year's performance highlights, the split between core and noncore assets, leasing activity and asset rationalization. We have been consistent throughout the reporting years. We are managing the business with discipline with clear separation assets that must be exited. The operating environment has improved in some respects while remaining challenging in others. have started to ease pressure on funding costs. Economic growth remains constrained, although the business sentiment and investor engagement across the listed property sector have improved. Looking forward, the recent shift in the interest rate cycle is expected to constrain the pace of recovery. Geopolitical uncertainty, including potential supply disruption could add pressure to fuel prices and inflation expectations. For Delta, that matters because sustained inflationary pressure can delay the rate of relief or contribute to further rate increases. While Delta's income profile is less directly exposed to consumer spending, higher interest rates materially affect our ability to amortize debt. Leasing pressure in the office market is moderating, although the market remains competitive, particularly in B and C grade office space. Tenants remain focused on value, service levels, location, building quality and operating costs. Cost pressures remain such as municipal rates, utilities, electricity reliability, maintenance needs and security costs continue to require active management. The conclusion is simple, that disciplined execution is critical. The year's performance shows that strategic execution is translating into financial improvement. Profit increased significantly by 222% year-on-year. Collections improved to 99.8%, supported by stronger collection efficiencies and focused arrear management. Debt reduced by ZAR 291.3 million, supported by noncore property disposals, the disposal of Brit shareholding and scheduled amortization payments. Covenant LTV improved to 56.7% from 59.5%, although it remains above 50% covenant threshold. ICR improved to 1.5x from 1.4x, although it remains below the 2x requirement. The disposal target remains material with approximately ZAR 1 billion of assets remaining to be disposed of. This is central to improving leverage, reducing income drag and strengthening the balance sheet of a sustainable position where the Board will be in a position to consider paying distributions. This slide gives a clear view of the portfolio split. Delta had 72 properties at year-end with 48 classified as core and 24 as noncore. The core portfolio generated approximately ZAR 1 billion of rental income compared with ZAR 145.3 million from the noncore portfolio. Net operating income, excluding straight-line adjustments, was ZAR 641.2 million from the core assets and ZAR 36.6 million from the noncore assets. The difference in quality is clear. Core occupancy was 83.4% compared with only 41% in noncore portfolio. The core portfolio had a value of ZAR 5.3 billion, while the noncore portfolio had a value of ZAR 1 billion. This confirms why the strategy is necessary. We are not simply reducing the size of the business, we are improving the quality of the business. The long-term delta must be centered around assets that generate sustainable income and justify further investment. Leasing remains one of the most important areas of management focus. During the year, we renewed 80 leases covering 139,666 square meters of GLA. Of this 65 leases and 126,122 square meters were related to the core portfolio. The average escalation achieved was 6.1%. Reversions were broadly stable with a reversion of only 0.3% across the portfolio. Importantly, the core portfolio recorded a positive reversion of 0.4%, while the noncore portfolio recorded a negative reversion of 6.0%. The renewed weighted average lease was 1.3 years. This reflects the short-term nature of several sovereign renewals, particularly where leases are renewed for 12 months. Extending lease duration remains a priority because longer lease commitments will improve income predictability, support future valuation stability and have a direct bearing on our ability to refinance debt over longer periods at better interest rates. Major tenants renewed during the period include DPWI, SARS and [indiscernible]. In addition to renewals, we concluded 44 new leases covering approximately 20,881 square meters of GLA. The core portfolio accounted for 34 of these leases and 836 square meters of GLA. The noncore portfolio accounted for 10 leases and 12,045 square meters of GLA. These leases contributed ZAR 11.5 million of signed annual rent with average escalation of 7% and signed weighted lease expiry of 1.4 years. The average rate achieved was ZAR 120 per square meter. In the core portfolio, the rate was 121.2 per square meter and in the noncore portfolio, it was ZAR 114.4 per square meter. The new lease activity confirms that there is still demand for well-located space where the product, price and service levels meet tenant requirements. Our task is to convert that demand into lower core vacancies and longer lease commitments. Post year-end, we signed the Rosebank -- we signed with Rosebank College to take up an initial 6,000 square meters of office space in Durban. Asset realization remains central to the turnaround strategy. During the year, 16 properties were disposed off or transferred, generating property disposal proceeds of ZAR 318 million. These assets represented approximately 12,100 square meters of noncore GLA exited from the portfolio. The quality issue is visible in the vacancy data. Around 70% of the disposed GLA had vacancy above 50%, and the average vacancy of disposed properties was 71%. These were assets that placed pressure on income quality, cost recovery, management focus and future capital allocation. By exiting them, Delta reduces operational drag and redirect management attention towards the higher quality core portfolio. We also disposed of Grit shareholding, realizing ZAR 18.7 million of proceeds. This is disciplined capital recycling. We are moving from larger noncore portfolio towards a focused core portfolio that can support sustainable value. I will now move to the turnaround strategy. The strategy has remained as agreed by the Board. We are focusing on 5 key pillars: portfolio and capital optimization, leasing and business development, operational efficiency, people-centered and rebuilding trust with our stakeholders. Financial year 2026 shows that the strategy is gaining traction. The pillar of portfolio and capital optimization. This means focusing on core tenanted assets, executing disciplined disposals, applying proceeds to deleveraging and improving overall portfolio quality. The second pillar is leasing and business development. Here, the focus is on improving occupancy, renewing leases, enhancing tenant satisfaction. The third pillar is operational efficiency. This includes tighter cost controls, improved recoveries, better use of digital tools and embedding appropriate ESG practices into day-to-day operations. These pillars are practical and interlinked. They are designed to transform Delta into a resilient, sovereign anchored REIT with a balance sheet that can support sustainable distribution. The turnaround also depends on people and trust. On the people side, we are building a performance-driven and accountable workforce. The business needs employees who are skilled, empowered and rewarded for delivery. On rebuilding trust, we continue to engage transparently and ethically with funders, tenants, shareholders, employees and other stakeholders. This is especially important given Delta's legacy issues and the period of balance sheet pressure the business has experienced. Rebuilding trust is not achieved through messaging. It is achieved through execution. That means delivering on collections, leasing, tenant installations, CapEx, disposals, refinancing and governance commitments year after year. The outcomes achieved during financial year '26 demonstrates solid progress. On asset sales, we disposed of ZAR 336 million in noncore assets, supporting the reduction in LTV to 56.7% from 61.4% in financial year 2023. On debt management, we refinanced ZAR 3 billion in loans, lowered funding costs and extended debt maturities. On occupancy, the portfolio improved to 72.7%, driven by renewals, new leases and selective disposals. On cost control, administrative expenses reduced by a further 8% despite inflationary pressures. We installed water and backup generators to improve operational continuity and reliability. We also maintained our Level 1 BBB rating and continued to strengthen stakeholder relationships. The strategic benefit is clear. Exiting low growth and high vacancy assets reduced operational drag, frees up cash flow and support lower leverage over time. This slide captures the journey from Delta before to Delta now and ultimately to the Delta we are building. Delta is now a more stable business. Leadership is in place, and we are building a high-performance culture. The governance framework has been strengthened. Refinancing has been achieved with major lenders. Covenant metrics has improved. The business has returned to profitability. Positive valuation movements have been recorded for the first time in more than 5 years. Core portfolio vacancy has been reduced to below 20% and collections have recovered strongly. Future Delta must be built on sustainable covenant compliance, extended debt maturities, lower leverage a higher-quality core portfolio, stronger recurring cash flows and the restoration of sustainable distributions. The transition is not complete. The foundations have been laid and momentum is building. This slide sets out the target shape of the business. Delta today has an asset portfolio value of ZAR 6.3 billion and ICR of 1.5x, 72 assets, debt of ZAR 3.6 billion and LTV of 56.7%. We are now working towards a more focused business with an asset portfolio value of approximately ZAR 5.3 billion, ICR of 2% or better, 48 assets, debt of approximately ZAR 2.5 billion and LTV of 50% or lower. The levers are clear: cost optimization, leasing, working capital discipline and people. These are the operational actions that will determine whether the financial targets are achieved. The consequences are equally clear. If we execute, Delta becomes a smaller, stronger and more sustainable business. That is why management focus remains disciplined and practical. ESG remains part of how we manage the business, particularly given Delta's position as a black-managed REIT and one of the most empowered funds in the sector. Three ESG-specific policies have been adopted an environmental policy, a corporate social responsibility policy and a sustainable supply chain policy. A risk materiality assessment and its impact has been completed to inform ESG priorities. Our commitments include environmental efficiency, energy management, transformation and ESG must be practical and linked to operations. Energy resilience, resource efficiency, tenant experience, transformation and ethical supply chain practices all support the long-term sustainability of the business. I will now hand over to Fikile to take us through the financial results.

I will now take you through the financial performance for the year, including income statement, the statement of financial position, debt management, liquidity, NAV SA REIT funds from operation. The key message is that the business delivered a return to profitability, improved collections, reduced debt, lowered cost of funding and continue to strengthen liquidity management. At the same time, our ICR and LTV remain outside target covenant levels, which means that Delta needs to continue to strengthen its balance sheet. The financial highlights show improvement across metrics. SA REIT LTV improved to 58.2% from 61.1% in February 2025. Covenant LTV improved to 56.7% from 59.5%. ICR improved to 1.5x from 1.4x. The weighted average cost of debt reduced to 10.3% from 11.2%. Rental collections improved to 99.8% from 95.1%, reflecting better collection discipline and stronger arrears management. SA REIT funds from operations per share increased to ZAR 0.173 from ZAR 0.151 and NAV per share increased to ZAR 3.60 from ZAR 3.40 in the prior year. The renewal of debt facilities during the year was also quite important. It is reduced near-term refinancing pressure, demonstrated continued lender support for the strategy. The total revenue, excluding straight lining, increased by 0.9% to ZAR 1.15 billion from ZAR 1.140 billion. This was achieved despite property disposals, vacancies and continued rental pressure in the office market. Property operating expenses increased to ZAR 473 million from ZAR 422 million in the prior year, largely reflecting cost environment across areas like utilities, municipal charges, repairs, maintenance and building operations. As a result, net operating income was ZAR 674.9 million compared with ZAR 721.4 million in FY 2025. Administration expenses decreased further to ZAR 93.9 million from ZAR 101.7 million in the prior year. This reflects the benefit of cost-saving initiatives and our continued focus on operating as a leaner business. The group recorded a fair value gain of ZAR 5.1 million compared with a fair value loss of ZAR 222.5 million in the prior year. This is the first positive valuation movement in more than 5 years and underscores our transition to a smaller but high-quality, more sustainable portfolio. Expected credit loss was ZAR 27.4 million, broadly in line with the prior year. Net finance costs decreased to net ZAR 408 million from ZAR 460.4 million in the prior year. This was supported by lower debt and lower average interest rates. After taxation of ZAR 41.16 million, the group reported a net profit of ZAR 127 million compared to a net loss of ZAR 104.2 million in the prior year. This represents a significant improvement in profitability if one looks at the 2 years. Turning to the balance sheet. Investment property was ZAR 5.69 billion, while noncurrent assets held for sale, ZAR 611 million, combined balance, ZAR 6.3 billion compared to ZAR 6.4 billion in the prior year. This reduction is consistent with the progress made in disposals and the positive revaluation of properties during the year. The investment in listed securities was reduced to 0 following the disposal of Grit shareholding in November 2025. Total equity increased to ZAR 2.5 billion from ZAR 2.4 billion, supported by the profit generated for the year. Interest-bearing borrowings decreased to ZAR 3.6 billion from ZAR 3.8 billion in the prior year. This reduction reflects scheduled amortizations, repayments funded from disposal, the balance sheet and a large portion of borrowings remains current. This is why refinancing, covenant management and asset sales remain core priorities. This slide shows the balance sheet trajectory over the last 5 years. And the key point is that the direction of travel is now clearer. Total interest-bearing debt has reduced by approximately ZAR 950 million since FY 2022, representing a 21% reduction. That is meaningful progress, particularly against the operating backdrop of a listed property company in the office sector and sustained pressure from high funding costs. Covenant LTV improved to 56.7% and 61.4% in FY 2023. Although it remains above the 50% covenant threshold, it is now at its strongest level in 5 years. ICR improved to 1.5x from 1.5x last year and is also the strongest ICR level reported in 5 years. That improvement is important because it is achieved -- has been achieved with a weighted average cost of debt that remains materially higher than it was 5 years ago. The cost of debt was 7.5% in FY 2022, peaked at 11.4% in FY 2024, moderated to 11.2% in FY 2025 and has now reduced to 10.3% in FY 2026. The cost of debt has started to normalize. LTV and ICR improved and reflects a strengthening balance sheet. The work ahead remains clear. We need continued deleveraging, improved operational earnings, disciplined cost management and further execution of the noncore disposal program to move ICR and LTV to sustainable covenant levels. Our capital management focus is designed to reduce balance sheet risk, strengthen covenant resilience and position the group for long-term value creation. The group's debt funding remains concentrated and refinancing diversification remains a priority. Nedbank represents 66% of debt funding, Standard Bank 16% Invest 14%, State Bank of India, 3%; Bank of China, 1%. Our relationship with funders remains supportive, amicable and positive. Renewals during the period have been successful. This lender support is important because it gives the business time to execute the disposal and deleveraging strategy. The Bank of China facility is expected to fully settle by December 2026 through monthly amortization. Over time, the objective is to improve maturity spread, reduce concentration risk and create greater funding flexibility. The debt maturity profiles remain an area of active management. 2.4 billion net bank facility, which represented the largest near-term exposure has been renewed through April 2027. ZAR 555 million Standard Bank facility has been renewed to November 2028. The ZAR 51 million Bank of China facility, as stated above, is expected to be fully settled by December 2026 through monthly amortization. The renewal process for ZAR 498 million invested facility is expected to commence in the last quarter of FY 2027 and ZAR 94 million State Bank of India renewal process is expected to commence in the first quarter of FY 2028. Our focus is to maintain constructive engagement with lenders, reduce refinancing risk and align debt maturities with asset disposal and operational cash generation. This bridge shows the movement in debt during the financial year. Operating debt was ZAR 3.8 billion. During the year, the group had advances of ZAR 15 million, capitalized fees, ZAR 15.8 million, net interest accrual impact, ZAR 1.4 million. Amortization payments reduced debt by ZAR 103.1 million. Repayments from disposals reduced debt by ZAR 188.2 million. The closing debt balance was ZAR 3.5 billion, rounded up to ZAR 3.6 billion. The key point is that debt reduction came from 2 sources: operational cash generation and capital recycling. Both are necessary. Scheduled amortization demonstrates that the business remains cash generative, while disposal proceeds accelerate deleveraging. Liquidity and cash management was in place throughout the year. Collections were maintained near historical levels with the strong collections are critical because they support cash conversion, reduce credit risk and improve working capital stability. The priorities remain working capital management, cost control, preserving liquidity flexibility and maintaining constructive lender engagement. This slide sets out cash movement for the year. Total cash collections were ZAR 1.3 billion. Sources included rental collections, revolving facility amount that have been accessed, disposal proceeds and other inflows. Uses of cash totaled ZAR 1.3 billion. Operating costs amounted to ZAR 684.9 million, finance cost, ZAR 408 million, taxation, ZAR 31.8 million, CapEx, ZAR 80.4 million and debt amortization of ZAR 103.1 million. The group maintained ZAR 36 million of undrawn facilities. The cash flow profile reinforces the importance of collections and cost control. The business is operationally cash generative, although finance costs and debt repayments continue to absorb a significant portion of cash generated. The NAV bridge shows the movement from FY 2025 to FY 2026. Opening NAV, ZAR 2.4 billion. Net operating income contributed ZAR 674 million and other income contributed ZAR 18.7 million. Fair value adjustment added ZAR 5.1 million. These positive movements were offset by expected credit losses of ZAR 27.4 million, taxation of ZAR 41.1 million, administration costs of ZAR 93.9 million and net finance cost of ZAR 407.8 million. Closing NAV, ZAR 2.5 billion. The key point is that NAV improved during the year, supported by profitability and positive fair value movement. The drag remains finance costs, which reinforces the need to reduce debt and improve the quality of income. SA REIT funds from operations increased to [indiscernible] from ZAR 108 million in FY 2025. On a per share basis, SA REIT funds from operations increased to ZAR 0.173 from ZAR 0.151. The number of shares in issue remained unchanged at ZAR 714.2 million. The calculation starts with IFRS profit attributable to the parent of ZAR 127 million after accounting for specific adjustments, adjustments for fair value, foreign exchange and hedging activities and income of a capital nature. SA REIT FFO result is ZAR 123 million. This improvement is encouraging. However, the restoration of distribution remains dependent on sustainable covenant compliance, lender alignment, continuity. I will now hand back to Bongi for the conclusion and the way forward.

Thank you, Fikile. As we close, I want to return to the central message of this presentation. FY 2026 was a year of meaningful progress. Delta returned to profitability, improved collections, reduced vacancies, lowered debt, refinanced key facilities and continued to dispose of noncore assets. The progress is real. The work ahead is equally real. We remain focused on restoring sustainable covenant compliance and rebuilding the business into a more resilient sovereign anchored REIT. As we look ahead, our priorities remain practical and measurable. The strategy continues to be anchored by the disposal program, moving the group closer to sustainable covenant compliance. Our capital structure must support the next phase of Delta's recovery. The focus being disciplined cost management, strong collections and tenant retention. These are the levers that protect cash flow and support the quality of earnings. Our medium-term objective is to restore covenant compliance and resume distributions on a sustainable basis. Ladies and gentlemen, thank you for your time. This concludes our presentation, and we now open the floor for questions.

Thank you very much, Bongi. Ladies and gentlemen, thank you very much for joining us this morning. [Operator Instructions] The first question we have is from Twitter follower with a handle JSE Invest. He's asking, is there a specific trigger like clearing the 50% LTV covenant that will unlock debt extensions beyond a year? And then a follow-up question is LTV is close to 56.7%. Once the concluded disposals and Par will register, what is the pro forma LTV? And when do you expect to hit the sub-50% mark?

Thank you for the question. The timing in which one would expect the LTV to drop beyond or below 50% is really depending on the timing around the execution of disposals, the retention of key tenants and interest rate environment. So if we then use the last 3 years as an example and look at how we have performed on those, this is really -- it's difficult from a management point of view to say exactly when that would be, but it's depending on those kind of factors. But also the -- when you say unlocking the long term in terms of debt funding plan is also driven by the way -- the weighing is sitting at 12.9% and is really informed by the extent to which we've been securing some leases and what are the terms were applicable in those leases. So it's a difficult question to respond but the trends are informing that we are, in fact, moving in the right direction in terms of unlocking the funding term that is acceptable to the organization, but also dealing with overall strategic issues, inclusive of disposals.

Thank you very much. Second question is from Donald Richardson, a private investor. He's asking how much of the reported net asset value is genuinely realizable? What is the quality of the ZAR 1 billion disposal portfolio?

So the earnings number, which is informed by FFO sitting at ZAR 123 million is a genuine number. But in our environment, there is a fair amount of amortization repayment, which is in excess of ZAR 100 million that is being paid to the bank. So as much as one would have made or the organization has made that number in terms of distributable earnings is not in a position to distribute those purely because of the sort of funding obligations, which is inclusive of repaying amortization as a part of the obligation, of course, we also go above and beyond that number as we use the proceeds to repay debt, proceeds from disposals of noncore assets.

Then Gerald McIntosh, also a private investor is asking how durable are the earnings when the weighted average lease expiry is only 13 months.

So one could read the way the investor is reading this, but the WALE is informed or has a reason because most of the leases that were concluded were for a 12-month period. We are -- our reading of our environment in terms of our tenants, in terms of how they renew the leases, it is durable. And just contractually, one can't be saying it's durable 100%, but it is indeed durable.

If I may add as well, thanks Fikile for that. I mean I do agree that because we are overweight sovereign, and we all understand what's been happening within sovereign, especially DPI, some of the things that the minister are trying to align, all they've done is extend leases by 12 months. Hence, our weighted average will also mimic that or look towards that. However, currently, we are being offered 3 years, 5 years, some 9, 11. So definitely, we are hoping for this weighted expiry to improve.

Then Daniel Renard from Harvard House Please, may you provide more color on capital expenditure spend throughout the year? As feedback from tenants -- has there been any feedback from tenants after capital expenditure?

So our capital expenditure at the end of the financial year, I think, set at ZAR 80 million. And a lot of it was spent towards upgrades of the look and feel of the building. Notably, if people have been to Cape Town, they will see that the MTA building looks quite different. We did a revamp from ground to the top floor of our building that houses the National Police in Nelspruit. We have revamped all our military buildings in Nelspruit. And interestingly, yes, tenants have come back, they're very grateful. In fact, they've even made us push forward some of the CapEx that we thought we would have delayed towards because they've seen what's happening in other buildings. And so definitely, it's paying off. And I think some of the upward valuation also talks to that.

[indiscernible] Capital is asking how soon before Delta pays a dividend? What is the difference between the carrying book value versus the fair value versus the selling price? He's asking are the values being written down to fair value before selling because the sales price per square meter does not approximate the ZAR 8,700 per square meter as indicated.

So I can take some of it and some of it will come to you. So definitely, in terms of our disposal, it does become a -- like in any business, willing buyer and we are always a willing seller, especially in our noncore, but we do not adjust our pricing. We use our investment valuation to market the price. And that's why even though sometimes we do see or we sell at a discount, it's not a discount too far removed from the valuation of that investment. But how soon we then pay -- Fikile...

So when it comes to how soon dividends will be paid, it's dependent on the timing and the pace of our disposal program. That's one element because that will allow us to reduce debt substantially. Some of the loan agreements are inclusive of a clause that says in the event that you assume distribution, there would have been a consultation with the financial institution being the funders. So it's important that we will progress our disposal. That's one part of this. But also the second part is the extent to which amortization would have reduced. They are sitting just over ZAR 100 million, which is our annual obligation towards amortization of debt. So we are seeing in terms of the plans is that the Bank of China debt will be fully settled by December 2026. We are also looking at how to optimize our own CapEx given that we've been spending a fair amount of CapEx up until now, which will continue to do so. So it's difficult to pinpoint to a specific date, but there are indications that things are coming together that in the medium term, there will be an indication of how are we addressing this particular question.

I think I must add, Fikile, if you don't mind, is that the biggest pressure that we had are these amorts. And the minute we finished or we clear Bank of China, as said, end of December this year, we should really see or we will be able to see ourselves building up a bit of a cash reserve, which now is a plan going forward.

A follow-up from Donovan is why was the change in shareholding under a nominee company, which was based offshore. We subsequently through the access to information, obtained the details, which was then held under the brokerage and subsequently engaged with the brokerage. So is in the process of releasing the necessary TRP documentation, which means we will publish it on SE as soon as that has been received from the company. Then Trinity from Anchor Stock Brokers asked several questions. I'll just run it piece by piece. First one is, congratulations on the evident progress towards the turnaround. What margins did you achieve on the Nedbank facility that was refinanced in April?

The Nedbank facility continues to be on margin of 3%, which is somewhat expensive relative to other facilities. But as we go into the future, as we also do the disposals, we keep engaging with Nedbank in terms of improving pricing and the relationship has matured and is quite supportive and good. We are hoping that in some future times, our future renewals will get a better margin.

And then given the mix -- sorry, given the mix changes during the year, can you indicate what the core portfolio NPI growth was?

The core portfolio in terms of what we call net operating income has stayed relatively flat to almost a small decline of about 1.8% to ZAR 641 million. Last year, it was ZAR 653 million. The reason for this is really linked to operating expenses, very specific areas where we spent more than in other years, improving and doing repairs and maintenance on HVAC on lifts. And so those costs were a bit higher, but also inclusive of the municipal costs that tend to increase above inflation. So that has been the impact. But we still believe in the core portfolio is the answer in terms of where this business is going.

And then are you able to give a high-level indication on who the buyers of your properties were? Do they buy with the intention to convert them into residential properties?

Sure, we can. So the majority of our buyers, as we are saying the noncore and the majority of our noncore properties are 50% vacant. So the majority of the buyers have been your nontraditional office buyers and they are buying for conversions. Our buildings that we sold in Bloemfontein, I remember way back when we started, they've all been converted into resi or student accommodation. And that is the buyer that we are attracting. And we are quite excited because some of the reports are saying the price of constructions have gone up. So to do greenfield in terms of construction is going to scale down a bit, and we are hoping that will benefit our conversion because the structure already exists.

Then a follow-up from Daniel from Harvard House is, has there been any significantly higher levels of inquiries from non-sovereign tenants?

Well, let me say, I mean, we did say in the report that we've attracted or we're able to land a very huge corporate client or non-sovereign tenant in terms of Rosebank College. And what we've done on top of that, which is getting us that dilution in terms of sovereign is we are working with API, and we are working with corporate brokers. And we are leveraging of their scale and we're leveraging of their -- what's the word that I'm looking for of their base of client pool, and that will give us that. So definitely, we are seeing a lot of inquiries. But we must also bear in mind that our offices are in the CBD. We are seeing that because a lot of the tenants do want access to transport for their employees, et cetera. So it is coming. And we know that the economy is also equally not booming. And a lot of that in terms of -- I mean, we're not seeing -- so the 6,000 that we have the offer from Rosebank College is great. The other offers that we're seeing are much smaller in terms of corporate. Though we know over time, they will expand in our properties, but a lot of it is also influenced by whether these interest rates are going and economic activity.

Thank you, Bongi. And then the last question from Trinity is it appears that all your debt is now floating. Does management still have confidence that ICR will improve in the light of the 25 basis point interest rate hike last week and possibly another one in July?

Indeed, our debt is floating, and we also have had comprehensive discussions with the banks in terms of assessing and looking at what's the appropriate strategy in terms of do we now pick up and hedge given that in the past, we were hedged. And when those hedges expired, it was at the point when interest rates were coming down. So we have seen the interest rate going up by 25 basis points. We still need to reflect more in terms of the outlook and so that we can then decide what's the appropriate strategy going forward. Having said that, the impact of a 25 basis point change is roughly around ZAR 7 million in terms of interest, in terms of cost, annual costs, then we'll further reflect what it means in terms of the ICR, but we don't believe the 25 basis points on its own will have a bigger impact on ICR. It will, of course, have an impact of -- it won't assist necessarily in terms of improving ICR, but that's what we're sitting with at the moment.

Then a question from Mr. [indiscernible] making a statement saying that there appears to be cost creep across the Board. He's asking 3 questions relating to that. The first one is on admin cost management, where Delta runs at twice the ratio to revenue. as its peers. What is your long-term target? And what containment strategies are in place pertaining to admin costs? Then on your -- would you like to respond to that first before I ask the others?

The admin cost has over the years been coming down. And I mean, if you reflect, look at last year, it was 101. If you look at the year before that, it was 103. We are sitting now at 93%. So we're also doing almost everything possible within the admin to say an employee has left, is that position still critical? Should it be maintained? Should it be done with all in an effort to reduce the admin costs. The area where there has been cost creep, it relates to operating costs but that cost creep is within what was expected in terms of budget, but is, of course, higher in relation to what it was last year. And the elements to this goes back to repairs and maintenance. Our repairs and maintenance are sitting -- general building sitting at ZAR 28 million, whereas last year was ZAR 24 million. But we also know there are issues of plumbing and various other issues, building issues given the age of our buildings that we needed to spend on. The other element was on the lifes was on HVAC and all of those and security. Those are some of the areas. But as we go forward, we will continue to monitor those costs closely. We'll continue to negotiate underlying agreements around the SLAs with those parties. and optimize those costs as much as possible. But again, that must be appreciated also in the context of the ages of our buildings.

And the second part of the question is on your disposal strategy, are your targets realistic? You have a ZAR 1 billion disposal pipeline with a ZAR 1 billion debt reduction, but your disposals appear to be done at a significant discount to book value. What is the time line on this taking into account the ZAR 200 million per annum historical run rate?

So -- and I mean the numbers that she was stating are the numbers -- I mean, they're very factual. And we would love to do -- I mean, if we can do ZAR 600 million tomorrow because we get an offer, we'll do it. But this is in a market where we review offers and sometimes we do receive offers. But if the offer is going to erode shareholder value, we will not do that because we are very much aware of the fact that we also need to preserve shareholder value. But the other flip side of it is these buildings have debt behind it. So if for argument's sake, a building is ZAR 100 million, and I said it at what's going to happen to that ZAR 70 million. It becomes a vicious cycle in terms of how we get out of our debt trap. So those are things that we have in consideration. We'd like to this book tomorrow if we could. So if there's someone with a big check out there, please come forward and knock at our doors. We are a willing seller. But yes, I mean, we are also cautiously optimistic that things may tick up.

Is it a fair statement to make that the assets that have been sold to date are the more difficult ones to sell, the ones require significant CapEx or high vacancy?

So for example, there is someone who's interested in our Bloemfontein portfolio. We've sold all vacant buildings in Bloemfontein. So what's left now it's income generating. So you're right, we have -- we were fortunate enough in some regions to deal with the 100% vacant. We're out of East London. We've sold all our vacant buildings that were there. And yes, we are getting to the tail end. And that's why we're hoping negotiations will be better. Pricing should improve because not all of them that are left are 100% vacant. I mean in Pretoria, we did launch -- and I think it did transfer Besmed, that was 100% vacant building. So yes, we are getting to the creep where we are looking at partly tenanted buildings.

Great. And then the last question from Ashad is property expenses -- sorry, property expenses grew by over 12% despite a 5% reduction in the GLA in your disclosure. Again, repeat the statement around cost creep. Would you like to respond to that, Fikile?

Let me first, and then you can answer them the question. I mean part of our property costs and that creep is some of our buildings are partially vacant. We need security to support our buildings. that amount has gone up in what we put in. There's been some vandalization, especially in regions like Durban. So we make sure that even at nights, we do have some sort of surveillance and some sort of protection of our buildings for the long term. Fikile?

As I've indicated earlier on touching on this, yes, there has been cost escalations in as far as operating costs. But in terms of where we had budgeted to come up at is actually lower than that number. We had budgeted for about ZAR 490 million. We have come at ZAR 472 million and then the ZAR 472 million is higher again because repairs and maintenance is higher as a number this year compared to last year. The HVAC security work that lifts all of those elements where the money was spent on those. And we went through a process around lifts in particular, to identify a lift company that would help with our lift issues. And then if we then come back to say and given the level of involvement during this financial year, it will then -- we believe it will subside. But also included in this is a very specific interventions that our compliance orientated, whether there's fire and lift also part of the lift is actually part of compliance. So it's been done to bring our buildings to a particular standard so that we are able to produce the necessary paperwork that Department of DPI requires as they renew leases.

Thank you very much. And the final question is from Mandy Smith, who is asking a retail investor, why should investors believe that distributions can resume? And what are the conditions for this to actually take place?

So the distribution is depending on us progressing further the disposal of noncore, and that is quite fundamental if one looks at the -- where the funders are at in terms of renewing debt, in terms of the clauses that are part of their funding agreements that we need to engage with them at the time they have to look at distribution. So it's important that we progress the distribution. But also it's important that we also have some benefits coming out of our CapEx program, which in turn will then reduce the level of cash that needs to go into CapEx. It's important also that we make a dent in terms of our amortization. And part of the amortization is what I referred to earlier that the Bank of China, for example, which is part of what we are paying amortization towards is actually going to be settled. So it's a combination of various strategic initiatives that will yield availability of cash and that cash will then go into towards distribution.

Fantastic. And then one question that came through from Daniel at Harvard House. He's asking final question from his side. A sovereign tenants aggressively negotiating lower rentals? Or are they generally happy at these rates per square meter? And maybe for perspective, Bongi, you mentioned earlier 32 to 911 leases being negotiated. To what extent do you think that will impact on your current rate per square meter?

So I think we must remember that DPWI also open tenants before we using [indiscernible] had a particular cap in terms of what he would charge. With the new minister, he's talking market related. So we are very encouraged that our reversions will be kept. Our reversions will be capped. And we should see -- look, we will be impacted by reversions and the longer dated -- the longer the tenure of that lease, the more they enjoy in terms of the reversion. But if they still go for shorter, et cetera, it should keep our rates the same. But we are looking at market, and we're very excited about that.

Thank you very much. Then a final question from Donovan at [indiscernible], who is asking about any outstanding legal matters with some of the former executives.

I think we did state we state last year interims that, that case was done concluded and in varied degrees, they were found healthy in varied degrees and now they've gone for appeal. So we're waiting for that appeal to commence.

Thank you very much, Bongi, thank you very much for your time. Ladies and gentlemen, this then concludes our webcast for today. Please note that the recording of this webcast as well as the results presentation will be up on deltafund.co.za later today. If there are any additional questions, please do get in touch with us. Many thanks.

Thank you.