Dipula Properties Limited (DIB) Earnings Call Transcript & Summary

Good morning, investors and colleagues. My name is Izak Petersen. I would like to welcome you to the Dipula Pre Close for the First Half of 2024. We thank you for making time to be with us. I hope that I'm audible, if not, kindly just sent a message on Teams, and we will do something about it. I will be taking you briefly through the status of Dipula at the moment ahead of the close period. We start on the 1st of March. I hope you can see the shared screen. Our presentation is in 3 parts. Just a brief business update, and then we'll take you through a portfolio update and then basically just deal with a bit of information around how we see the immediate future. And please bear in mind, obviously, that a lot of what we're presenting on today will be fleshed out at the half year presentation in May. Starting with a business update. We are still engaged in our disposal program, which obviously I think, under the current circumstances, will take us some time to do. And the market is not awash with liquidity at the moment in terms of properties being acquired by third parties, but we certainly still are seeing some of the smaller properties being acquired by a whole lot of owner occupiers, but also investors that are looking for smaller properties as part of their other commencement of an investment journey or just as part of their investment strategy. On a year-to-date basis, until the end of January, we had sold about ZAR 52.5 million worth of properties. Just bear in mind that last year, we did about ZAR 160 million of transferred properties. And of the ZAR 52.5 million properties, ZAR 29 million were awaiting transfer. We will be taking a number of properties to auction in March and April this year. And we're hoping for success there. I mean it is obviously, I think, important for us to filter these assets through the market, so we can execute on some of our CapEx and sort of remain on path of continuously improving the balance sheet and assets. Our debt restructure, which we're anticipating to complete in November, December last will be effective 1 March this year. Very pleased to announce that. I think it's important to appreciate the complexity of a process like this. Just for some of you that might not know, what we did is we basically transferred all of our debt security into an SPV that entails registering brand new bonds for each property, and in addition to that, moved some of our properties into Pty limited subsidiaries out of the trust for better tax efficiency. And what that process entails is basically getting rates clearance from various municipalities and then basically registering the properties as new from the one entity to the other. Again to just give you a sense of complexity and effort, we registered -- are in the process of registering a total of 148 bonds in 9 provinces dealing with 9 deeds offices and basically a total of 41 municipalities. So I mean, that's no easy task, but I'm pleased that we're now finally at the end of this process and we'll start to reap the benefits thereof. Our balance sheet remains strong with our gearing sitting at 36.6% currently. We'll flesh that out a little bit later and just talk a bit about that in a separate slide. And I'm also pleased to announce that our Phase 1 solar is out on tender as I speak and that project is commencing in March and we will give you more color later on. The average monthly collections over the 5 months amounted to 98%, so we're still getting that money into the bank and a significant amount of our FY '24 renewals have already been concluded. We will take you through that just to show you how that all looks like. Our vacancy increased slightly from the last reporting period and this is due to a large industrial tenant vacating one of our properties and one large office tenant also vacating. So you will see that there's an increase in the office vacancy and an increase in the industrial vacancy, but a reduction in the retail vacancy. We'll talk about that. And basically, at this stage, we're sitting at a 64% -- 61% hedge level for our interest rate. The challenges in office sector persist and I think we also see that due to service delivery-related issues, some CBDs have become or continue to be fairly challenging where we're holding sort of smaller, low-rental properties. But [ we're getting ] our way through this and we'll talk a bit about what we are doing on our office side to try and move this along in a positive way. Pleased to also announce that our office portfolio has been significantly derisked in that we've concluded most of the government renewals effective from December last year. We will show you how that all played out in a later slide. And our core retail portfolio, as I said earlier on, remains very resilient, good trading numbers coming out of there and decent leasing activity. We continue to seek off-grid solutions to sort of just lower our dependency on Eskom and our dependency on municipalities as much as possible. And obviously, this is all done on a cost benefit basis, so it has to make sense financially and economically and otherwise. But that's really the plan is to say if we can get ourselves off the grid in some form, shape or the other, be it for water or refuse or electricity, we continue to sort of look for ways of doing that. Our priority remains pushing for higher occupancies, managing our business efficiently, and looking for pragmatic ways of recycling capital through sale of the portfolio and continuously improving the quality of this portfolio, as we've done for the past 10 years. And obviously, we always look out for something strategic that might reposition our business and take us to the next level. Just touching on the balance sheet, our LTV at the end was [ 36.6% ]. As mentioned earlier, ICR is still sitting at a healthy 2.6 times, obviously indicative of strong cash flow generation ability of the portfolio. And following the debt restructure that I mentioned earlier on, our longest dated debt will expire in FY '29 and shortest dated debt will expire in FY '27. So earliest comes up in 3 financial year ends and latest comes up in 6 financial year ends. So I think that debt profile will give us a lot of breathing space to focus on managing the business rather than worrying about refinancing. So I think I can confidently just say that Dipula has no refinancing risk following this in the short to medium term, even in sort of longer term, if you think about 5, 6 years following this debt restructure process, as painful as it might have been. Currently, weighted average cost of debt sitting at about 9.56% and that will reduce to 9.27%. And that 9.27% is all inclusive of the raising fees and whatever else goes with that debt. So it's not just -- it doesn't just only just embed the lower margin, but it also takes into account the cost of doing this whole exercise. And that average figure is based on the assumption that the hedge level remains the same. Obviously, it could move up or down depending on where we land new hedges, if we do actually put in place new hedges, and obviously, interest rates coming off would change that number also in some form, shape or the other. As things stand, and just based on that number, it would result in interest savings of approximately ZAR 10.5 million per annum. So probably, half of that would flow into the income statement for the coming year. Just touching a little bit on sustainability and briefly so. Our currently installed solar PV is really nothing to write home about. It's about 1.6 kilowatt peak. Just Phase 1 will add about 6.5 kilowatt peak. That's about 10 properties. I mean, we've got hundreds of these things. So it's 10 properties that we're rolling out that on at an estimated cost of ZAR 75 million. And our expected savings there are conservatively between ZAR 15 million and ZAR 17 million per annum. And that's predominantly on our retail and industrial assets. That first bunch of assets would be mainly retail and industrial assets. We are rolling out solar, obviously, also on a select basis on the office side, where the demand is tenant-driven, [indiscernible]. And then we also, in terms of this process, would not necessarily roll out solar on assets that we consider noncore. So this is purely based --- we're purely doing it on assets that we will hold long term, and also assets that present very minimal risk in terms of us not being able to on-sell that electricity. So preferably multi-tenanted retail, obviously, [Technical Difficulty] like this, like what we're rolling out on our rooftops, would not supply 100%. In an instance of your retail properties, anywhere between 15% and sort of 30% is the max that we can produce in this [indiscernible]. And I think that we're pretty confident that all of what we're producing will be on-sold. There are properties where we can produce more than what our requirements are, and that's mainly some of the industrial properties. Luckily, some of those properties are located in jurisdictions where there's good possibilities of on-selling that power back into the grid at a price. And a completion date for this Phase 1 is June-July. We've got plants of different sizes, and this thing will kind of trickle in and some plants will take you 3 weeks to build, some plants will take you 1.5 month to build. And basically, that's why we sort of put in there that June-July -- it may start coming in, in May. But I mean, it will be complete worst case scenario around July, which implies that full benefit will only start flowing in the following year. We will then start rolling out Phase 2, which might sort of just run into Phase 1 or get implemented in parallel with Phase 1. We just want to make sure that we're happy with the teams that we've appointed to assist us with this. So as soon as that is sort of ironed out and we're happy how it's rolling out, then we'll just start bringing the phases on. Backup-wise, we don't have a scenario where our centers are not trading at any given point in time, or our tenants are not doing normal course of business on the other sectors. And that's mainly -- the systems that we're now rolling out are going to be grid-tied, which means that limited battery. We might implement some batteries in certain of them, but we do link them to our generators, which would give us some sort of level of non-diesel sort of feeding of those generator systems or running that solar, even when Eskom is down. But I mean, in the main, we're utilizing very few batteries because we did the costing exercise and at this stage, it's very expensive. It goes from the systems costing twice to the systems costing 3x. So a lot still needs to happen in that area to make these batteries affordable. I also need to just highlight that a lot of the national tenants already have backup solutions throughout the portfolio. So there isn't really that much pressure to actually include battery solutions in rolling out the solar solutions that we're doing. But from an ESG point of view and a commercial point of view, it still makes a perfect sense to be rolling out grid-tied solar. Just to let you into our diesel expenditure for the year so far, 5 months to 31 January, we spend about ZAR 11 million on diesel. We recovered ZAR 9.7 million of that -- sorry, we recovered ZAR 9.6 million of that. In the prior year, for the entire financial year, we had spent ZAR 9.7 million. Just shows you the level of load shedding we've experienced this year relative to the prior year. And if you look at net under-recovery from that scenario, we've actually improved the way we recover diesel now in that in the prior -- for the whole year, on the numbers stated, we had under-recovered ZAR 1.8 million. And so far this year, we've only, on a higher expense, under-recovered ZAR 1.3 million. On the water side, continuous -- we look for water -- underground water wherever we can, wherever it makes sense to actually roll out. So we've got quite a few boreholes at various properties. We'll flesh that out a bit more when we speak to you again. We just -- It's not always easy to measure the kiloliters that we're pulling out of these boreholes because some of the metering solutions don't work because the water tends to clog up the meters and all that. But we're getting on top of that to just deal with it in a sensible way. And obviously we've also been looking at and installing backup water storage tanks in municipalities where we know that there's not so reliable supply of water. We then store that water to keep the centers going when the councils go off. And we've also been rolling out some rainwater harvesting at various properties. I mean, that picture there with the DSV trucks and a property on this particular slide shows your typical rainwater harvesting system. Nothing complicated. A few JoJo tanks pull water from the roof and then fill the tanks and then [indiscernible] pull water from the tanks and then from municipality, if need be. But whenever you go off, at least you know that you've got some water in that system. But if we're not pulling from the rain, then we also fill those tanks with our backup tanks in case the municipality is down. From a recycling point of view, we approach this more as a CSI sort of addition to our portfolio where we utilize local guys to do the sorting and recycling to the extent possible. I mean, we can't really do something massive and at scale here because our properties are scattered all over the place. I think it's easier if you've got a massive super regional shopping center, you can do it all there, utilize 1 guy. So we need to almost approach it in a decentralized way. So we need to standardize the way we approach the decentralized way that we're doing. And we're really busy doing all of that. We also find that we have to get involved in not just recycling within our own properties, but also around us because whatever happens around us obviously affect our properties, like the blockage of storm water systems, because the places are filthy and unkempt. So we often go out there, pay some locals and get some volunteers going and get our own people in the office here to go volunteer to clean up around ourselves. Looking at our portfolio in a bit more detail, starting with retail. We are pleased to report that our sales at the centers, training densities and so on, for December to December '23 -- '22 was 5% year-on-year up. This performance was positively driven mainly by the food and groceries part of the tenants. Health and beauty was also quite nicely up from the prior year. And then liquor was phenomenal year-on-year. And then restaurants and fast foods have also recovered quite -- in quite a pleasing way, especially compared to the COVID days. I mean people are getting out a bit more and people are actually ordering in quite a bit more. And I suppose that could also be linked to load shedding and so on and the fact that there's lots of very good delivery mechanisms that's been introduced across the board. I mean, you've got quite a wide choice of how you get your food to you nowadays. I remember times when we were limited to 1 delivery service in South Africa, but there's quite a few about nowadays. Just touching on Pick n Pay, because I know it's quite topical now at the moment. I believe that the risk of default there is limited, but the business obviously faced challenges. We already saw them going and announcing a rights issue. It wasn't unexpected, to be honest. And basically, at a moment, in terms of how we look in terms of our exposure there in gross rental terms is Pick n Pay is about 3% of our exposure and Boxer another 2%. So between the 2 is 5%. I think a Boxer unbundled would be most welcome from our side because I think that business is actually thriving at the moment in our centers. And the Pick n Pay store split is roughly 75% franchised and 25% is corporate stores. And I think it's common knowledge that the franchise stores are outperforming the corporate stores across the board. However, all of our leases are underpinned by corporate. So it is imperative that corporate actually survives. And as I said, I think they will survive. And basically we've also got introduced about 3 Pick n Pay clothing stores in our portfolio. That's also a shining sign in the Pick n Pay stable at the moment. We are looking at rolling out more Pick n Pay clothing stores. For some reason, they're really doing very well. Just an update on the Atrium. We were about 70% -- even more than this pre-let before the previous street gas explosion. I think that really scared people off the CBD after it happened and the national retailers -- clothing retailers pulled out. I mean our [ bank ] is still committed to continuing with the scheme. But we've been rethinking the scheme, given the risk -- the short--term risk that's within that CBD environment now, the Joburg CBD environment. So there's a bit of a change of approach here that's obviously kicking the can down the road a bit further and hopefully not that much further. But we are going from major redevelopment to revamp and tenanting. And that tenanting will probably be with -- mostly with non-nationals. There's a lot of retail trade in the CBD; formal, informal, large, smaller businesses that aren't necessarily your shiny sort of national tenants. We think that we should rather go there because a lot of them has also been displaced from the neighboring street which still needs to be fixed. So this approach won't necessarily lead to adverse financial position for the pooler. But obviously it will substantially change the tenant profile and make it a lot more management intensive for us. But we believe that's the right approach for now, given the risk within that CBD. And I think it also leads us to allocating far less capital than what we would have allocated to the scheme. One can always revisit this at a later stage but right now, we're going to look for a quicker turnaround, leasing, cleanup of the property, et cetera. So looking at leasing and the retail portfolio for the 5 months to the end of Jan. We did about 9,000 square meters worth of new leases here. Average period about 3.5 years with escalations of about 7.3% and we renewed 51,000 square meters at a weighted average lease period of about 3.7 years, and a positive renewal rate of 3% -- 2.9% and average escalations were 6.5%. Mainly national tenants that we introduced to the portfolio that we renewed on, and hence that 6.5% escalation rate. If you look at the number in context and compare to what we reported the last time, that's about 45% of our FY '24 expiries. So we're fairly confident that we're going to renew most of these leases in this period, well, in the financial year. And when I say FY '24, that's obviously that in terms of leases coming up before Feb, I mean, most of those leases are spoken for. So there's leases that are coming up in the second half of the year. So very confident that there is very limited risk here of tenants leaving properties. And the vacancy has dropped nicely from about 7.4% to 6% at the end, with obviously our shopping centers being at 4% and below in terms of vacancies. Looking at our office portfolio. We entered into new leases of approximately 5,000 square meters here, 4-year weighted lease period and escalations of about 6.6%. And we did a substantial amount of renewals here. So just to take you through those, it's 44,000 square meters that we renewed here, weighted average lease period of 3.8 years, and the reversion rate was a negative 27%. And if we exclude government from that, our negative reversion in this portfolio is 5.6%. I don't think it's all gloom and doom. I think we've been coming to this forum and talking about being in negotiation with governments. We put the bullet here for certainty and took lower rentals and to build a bit of certainty into our lives here. And I'll tell you what that number sort of looks like in terms of this year, but the weighted average escalation achieved was about 6.1% for all of those renewals. And the impact on the FY '24 net income is approximately ZAR 15 million. It's just under ZAR 0.02 on the distribution. But obviously, we do make up that number in other ways someway, and we'll talk about that. And that's relative to our budget last year, this ZAR 15 million, and that includes Sterkolite, which is an industrial property that you'll see also dragged down our industrial renewal rate. And Sterkolite is a hangar that's occupied by the government out in Rosslyn area in the north of Pretoria. If we contextualize the renewal, we've now spoken for 81% of the leases -- the office leases that are coming up in 2024 financial year. And 81% of those renewed leases is government. And hence the sort of big drag down in terms of how that reversion rate looks. We're only left with about 10,000 square meters of renewals for this upcoming year. And of that, there's another about 5,900 square meters of government, with only 1 property being a single tenant, which is about 4,500 square meters, well advanced there with negotiations, we're just waiting for rezoning papers that we've now secured. I think that lease will be in the bag by the time we report again. So I think that's significant movements in that office portfolio in terms of just derisking it and building uncertainty, as I said earlier. And then we've got little rats and mice all over the place that add up to about 4,000 square meters I think. These are massive movements in this office portfolio in a long time. Active vacancy now at the moment, sitting at about 19%. As I said, that's a result of a tenant having moved out in one of our properties that was occupying about 3,500 square meters. And just bear in mind that our office exposure is about 15% of our entire portfolio. And basically, when you look at those numbers in context, although at an office property-level, they look quite scary, they actually, in the bigger scheme of things, aren't all that scary. And we are following up on various leads. I think we will probably move back towards that 15% mark, hopefully, if we close out on some of those leads in a few months time. Our focus is on moving the space, even at lower rentals and continuing to try to see if we [ can't ] recycle these office portfolios through sales and we obviously still have our properties that are earmarked for redevelopment and repurposing into areas such as storage, et cetera. Industrial, we did about 2,000 square meters of new leases there. That's all in a mini unit side of things. That was about 1-year average period. That's tactical. And on the renewals, we did [ 30,000 ] square meters, [ 769 ] at weighted lease period of 3.7 years. And the reversion rate there was minus 32%. If you exclude government, reversion rate was 0.6%. This particular property was actually quite over-rented. So I mean, there's no surprises there that it would have actually gone backward. And weighted average escalation is about 6.2%. I think, again, it's a correction for Sterkolite. We've got stability. And now going forward, the impact of this negative reversion is sitting in that ZAR 15 million that I explained under offices. And the reason we put the entire amount there is we put all the government properties together to get to a [ globular ] number for you. From an industrial point of view, as I mentioned again earlier, vacancy increased to 5.2%. Really a lot of train smash from about 2%. There's good activity in this market. I mean, this vacancy happened in December and it was mainly coming through from 12 and 14 Bunsen in industrial. About 6,675 square meters were vacated here and at 289 Granville Road. 12 and 14 Bunsen was occupied by a previously [ Bidvest ] family company. They've gone out of business after being sold to an entrepreneur. But I mean, the nice thing about that particular property is that it's got power supply that you will not get if you applied for that power right now. So we're getting inquiries coming through of people looking for that sort of power usage. So, fairly confident that we'll move that space. And we think that, that will be addressed relatively quick. So, in terms of this, about 29% of our expiring leases have been spoken for by [ Blitz ] by 31 January. And we see very limited risk in terms of upcoming leases here. And 42% of this number that was renewed is obviously the Sterkolite building, which was government. And from a residential point of view, just to give you color on that, vacancies are stable at about 6%. In conclusion, I think the government -- having dealt with government, gives us a lot of certainty for the next 5 years, which is great. So we're literally now stuck in a 6% escalation on those -- on that component of the portfolio and the distributable earnings line for the next 6 months, because these leases came through in December, will be affected by those government leases. And obviously, we still are affected by increases in interest rates that came through late last year -- into the middle of the last financial year, which are now going to play out fully for this financial year. And then we've also got this loss of income that's related to the disposals of ZAR 160 million in the prior year. That number amounts to about ZAR 14 million for the year. Obviously, there's a saving in interest that comes through and there's a redeployment of that capital into CapEx that's either defensive or enhancing. But I mean, that is a number that disappears from our base. The benefits of solar will start kicking through, as I said, towards the end of this financial year and fully in '25 and beyond. And lower funding costs are also coming through in H2 and fully in FY '25. Our expectation for half year is that we will do a similar number as last year with distributable earnings per share at between ZAR 0.26 and ZAR 0.28. Thank you very much. I will now open up the floor for questions. You can drop the questions in the chat room and Sudesh will deal with those. Thank you very much.

There does not seem to be any questions. I'll give it another minute or so. We have a question. Okay. Yeah. So the question was whether SAPS VIP was part of the renewals. The answer is yes, that was part of the renewals.

[indiscernible]

Yeah. I think that ZAR 15 million has been made up by the savings in interest going forward, the solar and then obviously increased leasing activity that we're going to embark on. And that's basically where we're going to be. We have to make it up through leasing and we have to make it up obviously through the efficiencies that we're introducing in the business. To be honest, I'd much rather live with a ZAR 15 million gap in my income, which is not a big number in the bigger scheme of things than a potential vacancy of -- or the risk that some of those properties were representing at the moment. So I think that gives us a lot more certainty than anything else.

[indiscernible]

Grid-tied typically does not work during load shedding, but we've got sufficient backup, which is still cheaper than battery backup, which is basically the generators that we have at the various properties and obviously, the tenant backup systems that are at the various properties.

[indiscernible]

Property cost growth for a year, I think we're estimating that at anywhere between 7% and 8%. That's inclusive of electricity and rates, which we substantially do pass on to the tenants. So on a net basis, that number might be lower than that depending on how much we recover.

[indiscernible]

It will be substantially less than that. So, I mean, we've got our [ QSS ] working on that, but I mean, we think that from about the ZAR 70 million that we're anticipating, we will spend less than half of that, ZAR 10 million, ZAR 20 million, maybe ZAR 25 million.

[indiscernible]

So maybe we'll take the sectors one by one to answer that question. Retail, definitely, I think, although one would not like to comment on profitability of the various retailers because that's really not a number that we track, we can see that their turnovers are increasing across the board. We get, on the retail side, continued inquiry for space, particularly in the shopping centers. There's a second tier retailer that's growing and growing in a number of locations they're looking for. And basically from a retail perspective as well, we think that South African retailers are limited to South Africa at the moment in terms of where they can expand and there's far less development activity at the moment. So I think retail's fundamentals are looking much better. I mean, I know that that's countered by perhaps a constrained customer. But I mean, there is talks of social grants going nowhere and potentially even increasing. And I don't think realistically they can go anywhere. So that will underpin that market. And basically those are the fundamentals around retail in the short term. And coming back to industrial, I think not just us, but our colleagues across the board are seeing that sector remain fairly strong. I don't necessarily think that rentals are growing at like a massive pace, but I think demand for space there is still good. I think that the one other thing that also affects industrial is services, service land, which is not in abundance now at the moment. And I was just making the example of this property in industrial. It's not the prettiest property, but it's got electricity, more electricity than what you'd find elsewhere. So that makes it a good contender for potential tenants. And when we look at offices, by no means sort of shooting out the lights, I think things are still relatively slow there. But I mean, there are lots of anecdotal examples of people coming back to the office now. I can think of the likes of MTN that's gone public, saying all of their people must come back, the Aspens of this world. So I mean that -- if you compare that to the past 3 years, it's obviously a very positive development. I mean we touched a bit on that at SA REIT conference earlier this month in terms of how, as a sector, generally speaking, we're experiencing far better fundamentals there. I think tenants still know that it's a tenant market, so they obviously will push back on rentals. But at this stage, I think we need to push for renewals and occupancies and sort of almost make the rental secondary. And I think if we look at the Dipula portfolio on that side, but for government, our reversions are still relatively good. And then coming back to resi, there we're also not seeing a huge amount of development taking place now at the moment. And our properties have been very well supported because interest rates are high, people can't get bonds, so they rent. And particularly in the case of Joburg, it's also a question of where does a typical family or guy or youngster who comes out of rural South Africa put his money for an own property. I think they tend to [ culturally ] put that property where they come from and rent in this market. So I think there's definitely an improvement of fundamentals there. And I think all of that could be very quickly turned into phenomenal outcome if you had a bit of economic growth. And I think that one is all kind of -- I don't want to get into politics because none of us really understand it, but we're hoping for a better outcome, for a good outcome of this election, just -- at least just a stable outcome from the elections. And I think then you'll probably see even more positive news filter through. So we by no means negative about what's going on, especially compared to where we've come from. And if anything, I think now that we've derisked that office portfolio, you should see a lot more stability from our performance.

Next question. With the reversion on SAPS VIP, do you anticipate a notable impact to the valuation of the property?

There'll probably be an impact to the valuation of the property. I mean, I'm not in a position to comment whether that's going to be huge or small. I think that when it was valued in the past, it obviously had a short lease, now it's got a longer lease. So that might impact the discount rates and the cap rates applied to it, but that's a difficult one to say. But there may be a downward valuation that could stay stable, but obviously it is quite a sizable knock in the rental there. I don't think that the downward valuation necessarily be a -- just a linear reflection on the rental for the reasons I've just mentioned.

[indiscernible]

No, they haven't done that with us so far. And I suppose the number that we also monitor, most importantly, which is a relative number, is cost of occupancy. At the moment, our cost of occupancy is sitting at less than 5% across the retail portfolio. So even if they were to do that, I think that would probably still be relatively better off. And I suppose if you're in a market where there isn't more supply of what you're looking for as a retailer, your profitability actually becomes a little bit irrelevant if you are likely to lose good space. So we just need to make sure that the fundamentals around our properties, the properties that we hold long term, remain strong because then it's not just a one dimensional discussion about you not making money as a retailer, you would have to find other ways of making the money and not make your profitability issue ours. And I think that point is particularly important, because if you look at Pick n Pay versus Shoprite scenario, what's the reason why Pick n Pay's margins are so thin and Shoprite's margin's relatively better. That's an internal management issue. So I don't think that landlord should be held responsible for that.

Is the forecast of ZAR 0.26 to ZAR 0.28 [ interim distribution ] [indiscernible] your dividend?

We will retain the same dividend payout ratio, 90%.

What is the expected [indiscernible], given the change in the developments? And what is that space completion date?

Yes, look, this is literally just putting makeup and lipstick on this and reconfiguring shops now. So we could have shops ready in 1 month or 2 months, depending on how we need to reconfigure. And we could work on the painting of the building and things like that while stands are moving in there. So we are in a market marketing it. The point I was trying to make earlier was that we could end up realizing the same rentals that we'd have realized from the likes of national tenants with much lower [ tier ] requirements. So we're not necessarily going to be worse off. But I think that could also roll out a lot quicker because we don't have a scenario where a tenant comes in, provided that others come in, which is typically what the national tenants do, and you're held to a minimum sort of occupancy by certain tenants at the beginning and throughout the tenure of those leases. So, I've got the teams full out on poaching those tenants around us to actually try and get them into this property.

And how will the ZAR 15 million anticipated cost savings from Phase 1 of solar rollout project reflect in the income statement? And will the impact on distributable income also be around ZAR 15 million? First question. Second one is, will the yield of Phase 2 be similar to that of Phase 1, and will the impact on net rent be reflected in the property valuations around the average cap rate?

All right, so -- okay, so there's a few -- there's 3 questions there. The first one is what we show in there is a net saving. So that should drop to the bottom line. And as I said, it's a number that takes into account potential downtimes due to load shedding and bearing in mind that that's a grid-tied system. And then basically on the second question is, I think Phase 2, whether that will yield the similar yield or not depends on where we're rolling it out, because we've got different tariff dispensations, but it won't be less than that. There are areas where tariffs are much, much higher, and then you get a far better return than that, but it won't be worse than that. As I said, we have put forward a reasonably conservative number there. And then how that impacts on the valuation is, I think valuers have different approaches. It could just simply be capitalizing to the cap rate. We don't often see that approach, but one approach is obviously to do a discounted cash flow on the system itself. And given the sort of healthy returns that you're seeing from there and the fact that these things have 20 year lifespans, you should actually see a pickup in valuations relative to the spend. If that's all the questions, I'd like to thank you very much for attendance and your ongoing support. And we will see each other in May. And we're a phone call away. I think, although we can't necessarily speak specific to numbers during the close period, if there's anything else that you need clarity with, please give us a call. Thank you very much. Okay, one more question, I believe.

Is the ZAR 15 million [ emergence ] an annualized number? If not, what is the expected emergence for the full year?

Yes. So that number is based on this year. If those leases are running through for an entire year, then you'd have seen a number of roughly about ZAR 25 million on the old expiring leases, basically. But we are anticipating those leases to be renewed lower. So an [indiscernible] number there. Thank you very much.