Emirates REIT (CEIC) PLC (REIT) Earnings Call Transcript & Summary

Anwaar, the floor is with you.

Thank you, [ Marwan ]. Good afternoon, ladies and gentlemen, and thank you for joining us today. Thank you for joining us today in the Emirates REIT FY '19 Earnings Call. My name is Anwaar Khaled, Equities Research Officer at Al Ramz Capital. And today, I will be the moderator of the session. I'm joined here by the management of Emirates REIT. Please welcome with me Mr. Sylvain, the Chief Executive Officer; Mr. Alain, the Group Head of Real Estate; and Mr. Sheikh, the Finance Director. They will deliver a presentation of the latest results of Emirates REIT, then we'll open the floor for a Q&A session. [Operator Instructions] So without further ado, I'll hand over the floor to Mr. Sylvain. Please go ahead.

Yes, hello. Thank you, everybody. Thank you for attending this call at this strange time and with this new format. So because of the current situation, I mean, I guess you are also all probably working from home, we'll give you the presentation on the results for 2019 and also an update on the current situation in the UAE and on the REIT. And we'll try to keep it factual because the situation is moving a lot at the moment. And therefore, we'll really try to give a clear picture of what's happening at the moment. We'll have 3 participants. Sorry. So we'll have 3 participants, myself, Sylvain Vieujot; Alain Debare, who is in charge of all the property portfolio; and Moeen, who is in charge of the finance. First, on the UAE market. This is the last update on the -- from Asteco and Knight Frank on the market on the office supply. This data is a bit updated at the -- needs to be updated at the moment. But you know that the performance has not been great. The vacancies have increased. And overall, the real estate market is quite challenging. So we found a few slides on the update of the market. But we will try to concentrate on what's happening at the moment. The outlook is really uncertain. We are in 3 markets at Emirates REIT. We are in the offices, in schools and in retail. The 3 markets have very different dynamics. And again, we'll touch on that right after the numbers. So for the financial highlights for 2019. In terms of rental income, we had a good growth in the rental income of 5.1% year-on-year, which led us to a total rental income of $64 million or AED 236 million. The year before, we were just above that AED 200 million, so it's a good increase. Total property expenses have also decreased 15% year-on-year, down to $14 million or AED 52 million. And the total property income, which is mostly the rent, the service charges and a few other incomes, have increased also by 4.2% to $73 million or AED 267 million. The net property income, which is our total property income minus our costs, has increased also by 10% year-on-year, so close to $60 million now or AED 215 million versus just below AED 200 million the year before. And the EBITDA has increased by 2.5% with $33 million or AED 122 million, that in spite of a very significant increase in the provisions that you will see on the next -- on this slide now. So this year, the provisions accounted for close to $7 million, which is more than double the provisions we had the year before. This is dictated mostly by 2 things. First, we had, one, the school -- one of our large schools, the Jebel Ali School, that didn't fully pay its rent over the year. And because of the market and the current circumstances, we have to be very cautious in assessing our provision. And therefore, the provisions have been quite extensive. Therefore, the profit before the fair valuation amounted to $4 million versus $11 million a year before, again mostly because of those extensive provisions. Then the valuation losses. You see we have fair valuation losses of $30 million or AED 114 million. And the net loss after those valuation is $25 million. Here, the loss on the portfolio is mostly again dictated by the market and the adjustments to the market value of the properties. If you look at the yields that have been used for portfolio versus the prevailing yields on the market, we have a small chart here where you see the yields according to Knight Frank on prime Dubai assets in office, education and retail. So you see they would today capitalize office properties, for example, at 7.5%. Our portfolio is capitalized at 8% to 9.5%, so quite a healthy headroom and very conservative valuation. Education is the same. Usually, it's 8.5%. We're at 8.4% to 9.75%. And in retail, we are in line with the market. But retail is again a very small part of our portfolio. So significant fair valuation adjustments but also fairly conservative ones. The net asset value, therefore, stands at $470 million or AED 1.7 billion, which equates to $1.57 per share. The liquidity has increased during the year. In 2012, we ended the year with $38 million of liquidity. At the end of last year, we ended up the year with $48 million of liquidity, which is a quite nice thing to have in the current market and the loan-to-value roughly stable at 48% loan-to-value. So now I will give the microphone to Alain, who will talk about the portfolio highlights and the performance of the portfolio.

Thank you, Sylvain, and good afternoon, everyone. It's been a good and busy year for us, and we've had a strong focus on commercial operations. So we've been working hard with the team, and we've been working really hard to secure new leases. So during the year, we have signed 71 new leases for about 120,000 square feet of commercial space. We have also been able to renew 93 leases for 155,000 square feet. And also quite importantly, since January 2020, we've been successful in renewing 2 of our largest tenants, which is Boehringer at Index and Cerner at Office Park. So this has led us to an increase of 5.1% in rental income and 4.2% in property income, which is a very good performance in an environment that's quite tough. So just moving on to the -- yes, this one. So just during this time, we've also worked really hard to optimize the costs. We are closing the year with a reduction of about 15% in property expenses, and we have improved the operating margins from 76% to 80% in 2019. So essentially, we have renegotiated -- no, backwards. We have renegotiated our facility management contracts, and we'll continue to optimize how we operate in our properties. We have achieved significant savings and increased efficiency by directly managing Index. And we are really closer to our clients and to the market. So it's important on our largest asset. And of course, we continue to monitor all the expenses. And we work to improve maintenance, safety and the appearance of the properties. So as a result, the net property income has increased by 10.2%. The following slide, yes. So the following slide shows our exposure to commercial, education and retail. So commercial is 49% of our areas for 72% of our revenue. And in terms of impact, we have direct relationships with our tenants. And whilst everyone is certainly affected with the current situation, we believe that commercial is more resilient. So currently, we're just working with a few tenants to defer some payments. But it's a sector that's kind of isolated. The schools is about 41% of our leasable area and 27% of our income. And likewise, the schools haven't been affected from a financial perspective. KHDA is regulating the market and the school fees have remained. You can see our smallest sector is retail, which is really the most affected sector. And we're speaking to our retail tenants, of course, and seeing how we can support them through some flexibility in payment schedules and seeing how we can help them out. Okay. In greater detail and moving on to our key properties. Index Tower is now at 50% occupancy. During 2019, we have signed 33 new leases and 44 renewals and we're working actively on 15 leads at the moment, mainly on core and shell space, which equals about 30% of our remaining vacant space, which is 60,000 square feet of leasable area. So that's very encouraging at Index. At the European Business Centre in DIP, the building continues to enjoy good occupancy at 71%, which is very good considering the building has been totally isolated in the middle of the metro works for almost 2 years now. And we know single trains pass by on the bridge, so the opening on metro station is imminent, I would think. And it's a strong opportunity for us to reposition the property. We're looking at repositioning all the ground for retail, which would then drive different types of tenants and probably higher rates on the office floors. At the Office Park, our property in Knowledge Village, we enjoy strong occupancy at 89%. It's a desirable property. We've got -- we have signed 8 new leases for 45,000 square feet there. And we are working currently on 10 active leads for 65,000 square feet. And at the Lofts, so the Loft is in Media City, we've got an occupancy of 56%. And we're currently working to repurpose the Loft 3, so we have about 160 small offices. And the Loft 3, we're basically converting 42 small offices into 6 larger units, which will enable us to compete on the larger office segment with some offices of about 1,000 square meters. The Loft 1 and 2 are currently 68% occupied. And the Lycée Français, so the Lycée Français is actually doing very well. It's operating at full capacity. So we have commenced an extension, which should see some secondary students join in and secondary education some September 2020. On the following slide, the stacked-up chart really shows the breakdown of the portfolio. It shows that the portfolio is well balanced. It shows the additional income also coming from both the Lycée Français and the school in DIP. So that will ramp up and obviously take the income to the next level. And thank you very much. I will now hand over to Moeen for the finance section. Thank you.

Thank you, Alain. Welcome, everybody. I will start from the total property income slide. Total property income, as Sylvain mentioned at the initial part of the presentation, has gone up by 4.2%. We are -- we posted $72.9 million versus $69.9 million last year. And you can see it is a pretty steady trend of this total property income over the last 2 years, the -- which is truly representative of the strong deal flows in terms of tenancies that we are booked. The range that we are seeing is around $18 million to $19 million quarter-on-quarter, which is reflecting the strong position going forward as well. Next slide. On net property income, this is after taking into account the cost side as well. The initiatives that we were taking during the year to put strong controls on cost side have resulted in improving efficiencies. We've managed to, as Alain mentioned, we managed to convert a lot of contracts this year. And as a result of this, the overall increase in the net property income has gone by 10.2%. Our overall contribution in terms of the efficiency has improved. So the net property income for the year is $58.7 million from $53.2 million. And as you would see, there's a trend followed over the quarter-on-quarter basis. There's a movement, which is driven by the new leases that have been booked in the last 2 years. So again, it's been steady flow of overall income, which is a positive sign overall. If we move on to the next slide, we will see the FFO, which has gone down and which is predominantly because of the booking of the provisions over the year-end. And last quarter of 2018, we had a booked provision for the first school that we were facing challenges in terms of recoveries. This year-end, as Sylvain mentioned, we have booked the conservative provision on Jebel Ali School and some more provision on the -- considering the going-forward position of the overall receivables. And overall, FFO is positive, which is a very positive sign despite the challenges faced by us and the market. If we go back to -- go front in the EBITDA slide, you will see that despite booking of the -- if you can move the slide ahead. Yes. So the EBITDA -- net EBITDA movement is 2.5% from $32.5 million to $33.4 million, which is again reflective of these strong revenue flows. And despite booking of the one-off provision, we are able to ride on a $30 million-plus EBITDA this year as well. So -- and also, there will be a trend seen in the movement on the last 8 quarters that we have seen. In the fourth quarter, it's always a dip and the mid-quarters, mid-year is a positive movement. So that is reflective of the market movement and that we are riding the curve pretty well. So if we move on to the next slide now, so this slide shows you the overall position in terms of the balance sheet. Investment property, where we have closed at $919 million, down by 2%, which is a result of the revaluation done by valuators, which is reflective of the market. Total assets have gone up on the contrary because we have adopted IFRS 16 this year. And as a result of this, we have booked a right-of-use asset. And the same thing is visible in the total liabilities as well, where the similar amount of liability has been booked. Islamic financing has shown 9% increase, which is reflective of the new borrowings that we did within the approved facility limits and which has been a good source of liquidity towards the end of the year. We are sitting at a strong liquidity position right now, which is a very good thing to have in the current situation. So our LTV is reflective of the overall borrowing increase over the year. And the NAV is also reflecting the overall movement in the net asset value from $1.74 to $1.57. So the next slide will show the summary of the total net leasable area that which Alain mentioned. And the net asset value standing at $470 million, though year-on-year return is 5.7 -- 5.1% negative, which takes into account the dividend which was declared -- which was paid in this year for last years. We are standing at a healthy WAULT of 7.6 and the portfolio of 11 properties backed by 331 tenants. And the overall position seems solid as of right now. And if we move on to next slide, then I hand over to Sylvain to take it on from here.

Yes. Thank you, Moeen. So just to conclude on the financial part, I think we had a healthy growth in the revenue. We had a good decline in the costs. We had, however, a one-off event with the nonpayment yet of the Jebel Ali School. We think this is going to be resolved. We are in talks with them. We, unfortunately, had to engage legal steps to speed up things. But ultimately, this is one of the oldest school in Dubai and we have good faith this is going to ultimately be resolved. The school is doing quite well. But looking at the circumstances, we have to take significant provisions because of the market, so hence the unusual level of provisions and also the mark-to-market of the properties that was really impacting us significantly. Now I will talk about the impact of the virus. For the ones of you that are not in Dubai, you know that Dubai acted quite quickly. Now we are under complete lockdown. This means that our offices are closed. Again, everybody is working from home. And the retail is completely closed, except the pharmacies and the supermarkets. So they actually are doing very well at the moment. And the schools are working from home as well. On our side, we acted quite quickly by adopting the sanitation into our properties when they were still open by doubling the cleaners, the thermal scan of all the visitors. And we will reenact that when the building will be open. At the moment, we reduced the teams because most of the offices are closed. It did bring a lot of changes in our daily operations. Again, as I said, everybody is working from home. So the work is actually fairly efficient, except for new tenants. And it's quite difficult to secure new business or new tenants in this market, but the rest is fairly fluid. We also implemented some years ago a software that we used at Equitativa that's called Properti.es, where we manage all our assets, all our portfolio, all our communications, all our accounting. And this has helped us a lot because it led to very, very little disturbance in the organization because all the information was there, so all our staff could continue to work very efficiently from home. If you look at our portfolio, we have some tenants that are in fairly defensive sector. The largest tenant in Index Tower is Boehringer, for example, which represents 11% of the tenants. In Office Park, we had also Cerner, which is 16% of the area, and Bayer, which is 10%. Nokia and Coca-Cola are also in fairly defensive sector. In the schools, so we have an issue that was pre-COVID-19 situation with 2 schools that we are in the process of resolving. The other schools are doing quite well. GEMS is okay. Lycée Français, as Alain said, is actually doing very well. And we are working on the extension of the Lycée Français at the moment. For the other tenants, we look at it really on a case-by-case basis. The team has called most of our tenants, so is in contact with them. Many are doing fine, don't require special support. We're not flooded by requests. For the ones that have issues, mostly in the retail sector, again we look at it on a case-by-case basis and we try on one side to help them and at the same side, same token to also secure our relationships with them, so by offering flexibilities in payments with longer-term leases and things like this. But again, it's on a case-by-case basis. So far, it didn't have a big impact. But we want to be very cautious in doing any [ promise to you ] because as all of you know, the situation is very fluid at the moment. But so far, I think the relationship with our tenant is doing quite well. We are in good contacts. They appreciate the support we give them. And that leads to stronger cash flow in the future for us. So I think this is it for our presentation. We will now take a few questions for the one who have some.

Thank you, Sylvain. So we're going to go now for the Q&A session. I'm going to give you a couple of minutes for everyone to be able to put in their questions, and we're going to start the Q&A as soon as we have enough questions. Thank you.

We're going to start with the first question. So we have -- the first question says as far as Jebel Ali School, what was their outstanding receivables in 2019 and 2020 to date? And what is the latest from them? Why are they not paying? Is there a dispute at the moment? Sylvain, can you please take that question?

Yes. Thank you. Yes. So I will start by answering as there is a legal -- we had to take legal steps. So yes, there's a legal dispute at the moment. Unfortunately, because there's a legal dispute, I'm bound by some confidentiality to not put us at risk in this dispute. So the -- there is a significant receivable for the thing last year. But that's all I can say. We've been discussing since a long time with them. We are still discussing with them. We are still trying to find alternative means to resolve the situation. Unfortunately, that's all I can say. But as I said initially, this is one of the oldest schools in Dubai. We believe that the situation should be resolved. The school is doing well. It's very different from the school we had at DIP, which had real challenges and which had to close because of issues in another country. Here, the school is doing pretty well and we think we are going to resolve this.

Thank you, Sylvain. As far as the sukuk maturing December 2022, are you confident that they will not default on this?

We are fairly confident at the moment. Or I would say we were very confident before the virus hit. It's very difficult to know where things will go. I think between now and 2022, the situation will change a lot. We don't foresee any major issue. We actually see an opportunity at the moment in buying back some of those debt and canceling it. But 2022 in the current market is very far ahead. But our LTV remains quite low. The properties are, apart from those 2 schools, are doing okay. And we think by 2022, our income will be significantly higher. And as of now, I believe we should not have any issues at that time.

Okay. We have another question. Is there any plans to unlist the REIT, knowing that the price is impacted and lack of liquidity?

Today, there is no plan to unlist the REIT. We would really like to keep the REIT listed. We need to clearly solve the issue of the share price. But today, we would like to keep the REIT listed, either here or potentially in another market if we can't find a good solution on this market.

One more question about the sukuk payment, which is due to mature on December '22. Are you planning any refinancing?

Yes, we are looking at refinancing, either before or at maturity through different means. So yes, we are working on this. And as I said, it raises an opportunity at the moment because that sukuk, like most of the region, that sukuk is trading at a significant discount.

Can you please comment on how management fees are calculated and what percentage of the rental income do they account for?

The management fees on the portfolio value on the total assets, it's 1.5% of the total portfolio value.

There's one more question, which is you have secured new leases at Index, but occupancy remains at 50%. Where are these -- were there leases canceled as well?

There were some leases that have been hesitant to renew, which one of our large tenant was Afghan. They are not in a very good shape at the moment and they reduced significantly their area. So yes, it was a combination of both.

On a previous note, you declared that Emirates REIT will be purchasing new properties in the market decline instead of share buyback. Is this still the plan? Or share buyback will be considered now after the major decline in share price?

So for all 2019, we were looking at buying properties. We were looking at a significant number of properties. We've been very cautious in assessing them. And ultimately, none of the deals we were working on went through. I would say that at the moment, it's not necessarily a bad thing because I don't think the property prices have increased in the meantime, and we end up with a significantly more cash at the end of the year. We are looking at all opportunities at the moment, buying properties, buying back our shares, buying back our sukuk. The only thing we want to be careful in buying back our shares is that it can potentially have a knock-on effect on our sukuk and therefore prevent us from refinancing it properly. And also, we didn't see that as a real adequate measure for the other REIT in the market, which is Emirates NBD REIT that launched a buyback program without significant effect. So we looked at other alternatives, we didn't deploy at the moment. But with our Oversight Board and Advisory Board, we talked about such measures a lot. And as soon as we'll implement one, we'll notify the market. But at the moment, we didn't want to trigger a share buyback, even so the share rise is very attractive. But again, the market is very volatile and we don't want to end up in a short cash position.

There's a question about your views on the Dubai commercial real estate market valuation bottoming. And what's your outlook on the real estate market in light of coronavirus 19?

That's a very tricky question. I think you have to be very careful with the kind of assets we are looking at. I think we've always been very careful with retail. I mean that's why we have only 10% of our portfolio in retail. Even before the virus, we saw that the online markets, like the Amazons and the like, is going to do a lot of damages to the retail. So most of our retail are at the bottom floor of our office buildings, usually. But that market, I would be very cautious about. The office market is already quite cheap, I believe. It might continue to go down. We talk to our valuers that are embarrassed by the questions at the moment. They also don't know if the value should go up or down. Sometimes, we have mixed reactions, like the valuers looking at yields that are quite low. You saw the yields on the market are lower than the yields we use for capitalizing our commercial portfolio. And that's what we saw also last year on the market. When we wanted to buy property, we didn't find ones that completely matched our criteria. So there might -- on one side, there's a scarcity of good assets and they trade at a fairly high price. On another side, what's happening in the market at the moment will have an impact, which is very difficult to assess. Many people say, "Everybody works fine from home," many, "We don't need to work from home." And equally, we have a lot of our staff that are in small apartments with their children. And I think as soon as the door will be open, they will rush to the office. So again, very difficult question to answer to at the moment.

One more question is that how much undrawn facilities do you have at the moment? And when is the RCF facility maturing?

So we have approved loans with another AED 150 million that has been approved by our shareholders with Dubai Islamic Bank. And we are talking to most of the bank at the moment. The situation with the bank is also a bit confusing. But potentially, we can have another AED 150 million. We can also talk to other banks and add new facility. We are engaging with those discussions at the moment, we are talking to a few banks. As far as the maturity of other debt is concerned, it is usually post the sukuk. So they are usually 10-year loans, amortizing loans but 10-year loans. So there's no big significant maturity before the sukuk. Our next significant maturity is one of the sukuk.

There's a question about a clarification. In your presentation, you said that -- can you clarify which school other than the Jebel Ali had payment issues? Are we talking about the DIP school?

Yes, we are. So a clarification for the ones that are new with us, we had a default in this school. So there is no operator in this school at the moment, and we are in discussion with other operators to take on the school. We have active -- very active discussions at the moment. I would have -- was pessimistic when it was the start of this virus pandemic because it's difficult to start discussions of leasing a school in the current market. But we have 2 or 3 very active discussions at the moment, where we are even drafting head of terms for DIP school.

Despite the drop in operating costs, it still stands at 14%. How are you addressing that?

Sorry, I didn't get the question.

The question is about the operating cost, which stands at 14%. And they're asking how are you addressing this going forward?

Well, I don't -- again, I don't fully understand the question. I think we are reducing the cost of running the properties. Every year so far, it goes down, which is a good thing. I think we, at the moment, have a good level of cost in the fund overall. What is lacking is really the increase in the occupancy. As soon as we have income from those 2 schools and we have a higher level of occupancy in Index, it will be reduced very significantly. But we are at a level now where further reduction of costs is a very heavy work.

Okay. So we're going to give it a couple more minutes for -- to get more questions and try to answer them. So I'll put it on mute for a couple of minutes. Okay. So we have a question about the sukuk. Do you have the ability to buy back your sukuk?

Yes, I didn't know I was muted. Yes, we do have the ability to buy back the sukuk.

Have you offered any kind of discounts to your customers due to the current situation? If yes, what is it?

At the moment, we didn't offer any discount. We offered more rescheduling of the rents than discount. So we offered 1 year or [ something ] like this. But again, it is done on a one-to-one basis. It's also done on a means basis. As an example, we have 2 supermarket operator. Both of them contacted us. I don't want to give names. But one of them, we approached them, we said, "Okay, what do you want? What issues do you have and so on?" And they came back very genuinely and said, "Okay, we are very happy you come back to us. We are very happy you are here to support. But actually, we are doing very well and we don't require anything at the moment. We only want to take more supermarket if you have some more available." The other one was more tricky and trying to take advantage of the current situation, said, "I'm in a very dire situation and so on," whilst having record sales. So that's why we really do it on a one-to-one basis. And at the moment, it didn't lead to any discounts.

Okay. Is there any plans to reduce your exposure to Dubai REITs and expand in Abu Dhabi?

There was always plans to expand all over the Emirates. We are, from time to time, looking at opportunities in Abu Dhabi. So far, we didn't find one that matches our criteria. But potentially, we were looking at some -- we looked at some office buildings, we looked at some schools in Abu Dhabi all this time. And yes, we have no problem going in Abu Dhabi. We also manage another REIT that is a residential REIT based out of Abu Dhabi that has most of its assets in Abu Dhabi. We have a team in Abu Dhabi. So we are very keen to look at assets in Abu Dhabi. We just need to be sure that again, they match our criteria in terms of quality of assets and yield and acquisition price.

There is a question about a consideration for dual listing on an exchange with better liquidity.

Yes. As I said, I cannot elaborate too much on this until we have something we can announce that has been agreed by everybody by our Boards, by regulators and so on. But definitely, the current market is an issue. And as I said, we are looking at ways to solve this, either with this market or with dual listing or listing on another market. So we are actively looking at all those situations.

Do you have a chance to buy industrial property?

We can buy industrial properties, indeed. We looked at it in the past. We are looking at the moment at the properties that is halfway between commercial and industrial. The reason why we don't have a lot of industrial properties at the moment is we felt that the yield of the industrial properties were a bit high compared to the value of a property. Most of the industrial property are either on leased land or depreciating properties. This means you need to amortize the value of the property over the life, usually 20 years. Because after 20 years, the warehouse is worth less, you have to rebuild it completely. Whilst an office building after 20 years still have some value. In some times, the value can even increase. So you need to factor that into yield and spread, we found, between industrial properties and commercial properties today didn't justify in our view buying those properties. But we have no issues buying industrial properties.

With regards to the sukuk, again another question about do you need Board approval or shareholder approval to buy back the sukuk?

We need the Board approval.

Can you elaborate on your plans for the management fees going forward and their impact on your earnings?

Well, the impact of the management -- first, with our management fee, we kept on adding costs that were normally cost to the REIT. So as we said, we had the marketing -- most of the marketing costs now are in-house and are part of our management fee. Management of some of the properties, all of the schools we manage directly. Index, now we manage directly. Whilst before -- and usually the REIT outsourced all of this. So we did that without changing our management fee. And we keep adding to this and try to see how we can support in -- on one side, support, and at the same time, get the best service because the management fee is important. But ultimately, the service to the REIT is the most important how we improve the occupancy of the REIT and how many properties we look at before acquisitions. So it's an all-in, and we'll keep on looking at how we can improve our service to the REIT and the cost to the REIT.

Okay. We're going to try -- and obviously, we apologize for everyone. I know that -- we're trying to take as much questions as possible. But you appreciate that this is not an easy task. So we're trying to be as fair as possible by taking questions that address most of the questions. Okay. So there is a question about the distribution. Is there any expected distribution for 2019?

So we -- usually, we pay a dividend in January and in June. We withheld the dividend in January because of the issue with Jebel Ali School. We -- now we have to present to our Oversight Board the situation for the dividend in June. We didn't want to give any guidance at the moment because of the market. But potentially, we have a positive FFO. So we technically can distribute a dividend. So again, this is a question we want to ask ourselves again in a few weeks when the current situation in the market is more clear. But definitely, this is a question we'll answer before the end of June.

There's another question about access to bank financing for the sukuk and the share buyback, if possible. Can you elaborate on that, please?

As I said, we are talking -- we have very good relationships with our banks. We keep talking to them. The -- sorry. And we -- so sorry, my computer is about to shut down. So I have just to do something. We have very good relationships with our banks. We keep looking for them at what is the best solution to do a few things. First is to potentially refinance our existing debt because rates have gone down, and we think we could take advantage of this and also to buy back properties or shares of sukuk units. The situation with the banks at the moment is moving a lot, and you've seen a lot of banks announcing that they have had exposure to NMCs and others. But we keep talking to them. I think for the next couple of weeks, most of the banks have frozen completely their disbursements. But probably in a few weeks thereafter, the situation will be more clear and we'll be able to take advantage of it. And Moeen is, as I said, talking daily to our banks. I don't want this to -- more to place our excessive liquidity but also to see what we can do to improve our situation and how we can get more funds to do all those things.

So question about the provisions. Have you provided fully in terms of provisions for the schools? If not, does that mean that some of your reported revenues are not collected?

As I said, we are in a legal process with the schools. So I have some confidentiality clause that I have to be very careful not to break. However, I think we've provided more than adequately for the receivables with the schools and even with the other clients. We appreciate our auditors approved the account yesterday. And they had a lot of challenge on to be sure that the receivables were adequate even with the current situation. And they deemed them to be accurate and, I think, pretty conservative. So I would say the answer is yes, I think we have provided adequately. And I hope we'll be able to reverse many of those provisions when we'll get the actual payments.

Can you please let us know the average tenure of lease at Index Tower?

Yes, the average on the portfolio, which is 7.6 years. In Index Tower, it's mostly commercial leases. Usually, we sign 5-year leases for the retail or for the large offices, so smaller offices are 1-year lease. So I would guess, on average, are 3 years. We, however, just signed again with Boehringer, which is one of our largest tenants, for 5 years. So we recently renewed a lot of long-term leases. But an asset like this, normally, you would expect to have 2- to 3-year average lease term.

Okay. So a question or a clarification on the dividend comment that you had. Does holding of dividend means that the payment was canceled? Or that is it allocated but was postponed?

Neither of those. The payment we do normally in January is a payment in advance. When we are fairly sure that there will be a required payment in June from at least December on so that we cannot overpay the dividend in January. But the payment in January is never done fully audited accounts because they come usually in March or April. So it's only a voluntary, in-advance payment. It's not something that is mandatory in any shape of form. So that's something we've done in the previous years because the situation was more clear. Now with this issue with Jebel Ali School at the end of the year, we thought it was not reasonable to pay dividends then. And again, with the situation now, that's why I can -- I don't want to give you a clear answer on the dividend in June because things change a lot. But hopefully, we'll be able to deliver a dividend in June. But the fact that we didn't pay any dividend in January was just a precautionary measure. It doesn't mean anything by itself.

You're aging receivables that are aging or growing. Can you give more insight on that?

Yes. As I said, we have a significant receivable with Jebel Ali School that contributed to the bulk of this. The rest of the receivables are roughly in line with the previous years.

Have you provided fully in terms of provisions for the school? If not, does that mean that some of the reported revenues are not collected?

Well, that's the same question as before. And I mean again, I cannot give you a number from this answer. I think we have provided more than accurately for the risk represented by a nonpayment from the school. And that's why we have a significant provision in our receivables.

Sure. All right. We're going to take two more questions. We have a question here on your management fees. Are you charging management fees on nonperforming assets, like DIP school?

Yes. It's on the total asset value, so yes. But the value of those assets has diminished because they are not performing at the moment. It is -- we are charging on the value of the portfolio. There is some vacancies in the portfolio. We're at 76% occupancy. We -- this is reflected in the total value of the portfolio, but we're charging the value of the portfolio.

Last question. Can you explain in more details what's the noncurrent receivables you are reporting of close to $28 million?

I think I will need Moeen to give a better, accurate answer to this one.

Moeen, please?

Yes. These include the IFRS receivables that to be half the current portion of IFRS receivables on the valuation of property and the other receivables as well. So main portion of the receivables, which is a larger portion, is the receivable on IFRS valuation.

I'd like to thank everyone today for joining us for the call, for the earnings call for Emirates REIT 2019. I apologize if we did not answer your questions. Obviously, we had over 200 questions, so you cannot expect us to answer all the questions. But feel free to send us the questions by e-mail. We will be trying to answer them back and share them with management for the responses. Thank you, Sylvain. Thank you, everyone, and stay safe.

Thank you, [ Marwan ]. Thank you, everybody, for taking the time to listen to this call. And again, hope all of you will do good in this current situation. Have a good evening.

Thank you. Everyone can end the call now. Thank you so much.