Fortress Real Estate Investments Limited (FFB) Earnings Call Transcript & Summary

Good morning, everyone. And welcome here to Summer Place in Johannesburg to our Interim Results Presentation, and welcome to everybody who's online and watching us on Business Day TV. These are our interim results for the period ended December 31, 2019. I'll take you through just an overview of Fortress for those of you who aren't particularly familiar with the company. We're an SA listed REIT, Real Estate Investment Trust. We have about ZAR 53 billion worth of assets. Sorry, I think I'm clearing my throat a lot. So just maybe it's the virus concerns kind of in the back of my mind there. Anyway, I'm glad to see not a lot of handshaking in the room this morning, which is positive. Really, our largest investment is 23.3% in Epiroc Castle, the Central and Eastern European retail mall owner. Very, very strong business there, gives us a hard currency euro debt. Then our second biggest part of our portfolio is our SA direct retail, which is run by Vuyiswa Reitumetse, it's about ZAR 10.5 billion, 60 shopping centers in and around SA. The second largest component of our direct SA portfolio is our ZAR 9.5 billion of logistics assets. And really, that's become a big focus of ours going forward. We've got about ZAR 3 billion of land and work-in-progress in that portfolio, and we're hoping to add roughly between ZAR 4 billion and ZAR 5 billion to those top structures. And if you look on the right-hand side there you to get it to circa ZAR 17.5 billion of SA direct logistics, most of which would have been developed by us. We also have the noncore assets, which is our SA direct offices. It's a small portfolio, just under 200,000 square meters, around about ZAR 2.4 billion and our SA Industrial, and we classify the industrial, which is really the older assets, many units, anything that's manufacturing focused. And then our shares in Resilient REIT. The other portfolio is pretty small with some hotels, motor dealerships and a few residential properties that we developed and acquired as part of portfolios. So really, the target asset base and our journey over the next 3 to 5 years is to get out of that circa ZAR 9 billion to ZAR 10 billion of noncore assets and to recycle that into our logistics development pipeline, settle a little bit of debt, and then we'll have ZAR 3 billion to ZAR 4 billion of dry powder for opportunistic acquisitions or possibly some more logistics parks if the market warrants it in the future, which at this time, I think we've been a bit more conservative on the land bank. By year-end, post the distribution, which is an in-specie distribution of the Resilient shares for this interim period, by year-end, we think that, that noncore will probably drop from about ZAR 9.3 billion to probably circa ZAR 6.5 billion to ZAR 7 billion. So I think it's -- we're getting there in terms of getting that portfolio a lot more focused. Just an update and a strategic focus. It's not on the slide, but I took over from the ex-CEO in July last year, and I think the new executive management team and the Board had -- has spent a lot of time in strategy sessions really saying, well, taking a look at the business and what we like about it and what we don't. So I think what we like about it is the portfolio. That core portfolio is -- it's strong. We like our logistics assets, our retail proved its defensiveness. We just really do need to cut that tail, and cut it as quickly as we can. We've also looked at the policies of the business. And I think one thing that we identified, which really was highlighted in the results that we submitted yesterday, was that the dividend policy was just uncomfortably high given the market. So that's something that we scaled right back on, removed the capitalized interest and scaled back on the cost currency, so I'll touch on that in a minute. So I think that was one thing that we've addressed. And the other thing is the capital structure. I think there's a structural discount in the 2 shares, which we will also get to a little bit later. So really, that's been our focus over the last 6 months, to address what we felt was urgent, which is a dividend policy, give the market certainty, get the dividends to a much more sustainable, stable level of which we're pretty certain we can grow. And then also looking at optimizing the capital structure, so if we can really get Fortress back onto a growth path. Up on the slide there, so asset disposals, which is really cutting off our tail, that's critical in order to fund our pipeline, ZAR 420 million for the 6-month period, ZAR 620 million, held-for-sale, which we're pretty confident we'll get done. And some of those have transferred after year-end. Our target of ZAR 1.2 billion for the full year. I think that's comfortably in hand. I think we just need to do another ZAR 200 million of sales. Unfortunately, the portfolio sales, which we mentioned at our pre-close, one's fallen over and one, it looks like it's in the process of falling over. It's just the investors on the portfolio deals, I think, have got -- are spoiled for choice at the moment in terms of other investments. So it's just -- it's looking unlikely that we do it on a portfolio basis for full cash in, the guys who just don't have the equity at the moment or the guys that do have the equity don't have the appetite. So I think it's really back to what we've always been saying, which is asset by asset to smaller investors, owner occupiers, putting them on auction. So really, that's the process. And we're fortunate. I think a lot of the other REITs have got these big, chunky assets, billions of rands of retail portfolios and single assets, which are difficult to move. We're fortunate that ours is quite -- it's quite bite-sized for owner occupier. So we actually are able to trade out a lot of -- out of a lot of those. Just -- this is our biggest logistics development, Eastport on R21. We've got 65% of this park. It's been amazingly successful that building at the end there on the left is Savino Del Bene. They've actually just bought the building, which was the agreed deal upfront. Teralco, we've got 13,000 squares -- 14,000 squares on the highway there let to Clippa, pre-let and another 13,000, and 22,000 squares behind that will be leased out before completion. That Savino building, the one closest to us, we developed at about a 9.4% yield, and we sold that to them at a 7.4% yield, so we made a profit on cost of about 25%. And all these assets are easy to -- relatively easy to replicate in the park. We can just go and build another box. So that's the structure, which is the tenant sales and preferably the tenant JVs, which I think we'll do a lot more of in the future. Just a portfolio overview of our portfolio. So vacancies did arise to December. Fortunately, we had a -- we sold a vacant office block and had some lettings just after in the months of January and February, so that actually came down to 7.1%. It's a little over 5% by value. So vacancy really sits in our industrial portfolio to a larger degree, which is a very big space, but doesn't get us a lot of rental income. Total weighted average in force escalations of 7.3%, a little bit of a South African unique thing where we just still do the contractual escalations. I think when you chat to the Europeans, they don't really understand it. And I think more and more, we've seen a lot of the international retailers who've got guys here who are pushing back. So I think the escalations are coming under a bit of scrutiny, especially when CPI is sprinting south of 4%, but it’s part of our total return. And I think a lot of the tenants and the landlords work out, but actually, this is part of the total returns. So those are going to come down, I think, hopefully, the yields that we get from the tenants, will go up. The other problem that we're seeing in the portfolio is the total reversions, which is negative 1.8%. It is a bit misleading for 6 months. That sample size is quite small for 6 months. So I think it's better to look at it over a year. But again, it's been exactly what we've been saying for a while, where tenants are -- the rentals are just under pressure. And we see that particularly because we're building these new logistics boxes and the asking rental here has been pretty static at ZAR 65 for a couple of years. And build costs are not increasing. So we're still undercutting the market and a little bit of undercutting our own portfolio with these new boxes, which are higher spec, better quality, better located, at lower rentals. The weighted average lease is 3.2 years, still below where we would like to see that. As I touched on earlier, the vacancies, we've seen a big spike up in the industrial portfolio. It did come down after year-end, we let a big box for 10 years to Libstar Holdings at a -- I mean a really great rental for them. The -- that is likely to go up again from the 13.4% as it stands today. We've had another tenant go into business rescue. I mean it's quite a sad state of affairs. They manufacture cables for Eskom and municipalities but can't manufacture without the power. So Eskom is kind of getting them on both sides. So it's just a sad set of affairs at the moment for those industrial tenants and manufacturing. So that's why we really need to reposition some of those assets and exit where we can. So one of the big, I think, news points, which we announced, yes there's a revised dividend policy. So as I mentioned, we -- if we look historically, the dividend policy has really been in line with what SA REIT best practice has said. So it's always been standard for SA REIT best practice and what they call now the funds from operations, the FFO, and that's being standard. But because we've moved away from really buying portfolios to developing our own, we do have this large land bank. And in that, it created a problem for us because of the capitalized interest. So we were capitalizing interest on the land. And as you would have seen, if you followed the results last year with Clairwood, we ended up impairing that. And that was largely a result of the capitalized interest over a long period of time, which we then have to write down. Come December this year, we looked at it. And unsurprisingly to us, that value hadn't gone up, but we capitalized ZAR 100 million. So we have to impair it back down to what we considered fair value, which is ZAR 100 million. So you can see that over time, you're going to get capitalizing an impairment and further policy which we had communicated in June, which was paying out capitalized interest on the lower of fair value or cost. So obviously, Clairwood was below cost, and that was the lower fair value. But we just thought, let's just -- we'll just get it done. We'll rip the Band-Aid off and we'll just turn off capitalized interest until the market changes. It's really -- I mean the commercial logic behind it doesn't make a whole lot of sense because that money is just coming from the bank and going to shareholders. So it just puts pressure on our balance sheet and on our LTV. So we've stopped that until the market gets a little bit better, which I don't think we foresee happening short term. For this dividend, as I mentioned earlier, we are paying it by way of Resilient shares as a dividend in specie. We price those Resilient shares at the 5-day view, I think, close of business 2nd of March, less the full dividend so it's about ZAR 52.69, which is significantly below the close yesterday. I think, really, it's a stepping-stone for us. I think it accomplishes a couple of things that Resilient stake has been noncore to us, but we felt that it's been undervalued for a while. And we didn't want to destroy the value for the shareholders. So we thought it was better to give them the Resilient shares so that they decide if they like the Resilient, so they can hold them if they need cash. I think there's enough buffer that they can exit and sell. And given the, I think, the discomfort by the management team and the Board on borrowing to pay the dividend, we thought it was a much better solution in this interim period not to borrow to pay this dividend, but rather to do the distribution of assets, so everybody gets what they were expecting, but it's in the form of a liquid share at a good price. So it's a bit of a stepping-stone for us. The other big change which we made, I think it was around about mid- to late Jan was we just also felt that our cross-currency swap position was not uncomfortable on a percentage basis, but it was quite a big position for us at EUR 464 million. So I guess, why do we do the cross currency swaps? We've got approximately EUR 1 billion investment in NEPI, and we like to match some of that in terms of synthetic euro debt through the cost currency swaps. And that was sitting at about 42%. We thought it was much better if we look at the balance sheet, look at our target LTV to try and get that down to about 30%, which matches our rough target loan-to-value of Fortress. So that really, when we're taking ZAR 1 out of our treasury, which is 70% equity, 30% debt, we should match that on the euro side. So 70% euro assets, 30% euro debt, which we get through the cross currency swaps. So at year-end on that NEPI price, it was circa 28%. We were quite fortunate we managed to close that at a reasonably good rate. If you look at spot today of ZAR 16.10. So we avoided a further impact to NAV. And I think it's just a more comfortable position for us. We've also restructured that. We used to roll it short term. So we would face this unknown liquidity risk. We've managed to solve that. We've got approval from the start to extend it for 5 years, and we have extended it now for more than 12 months post our reporting date and we get settled quarterly in cash so that, that cross-currency position is now a far more comfortable level for us. It's lower and it's settled in cash. And I think what that does is it's also -- we are now less long the rand so it also gives our asset base far more exposure to euros. I think -- I mean as a sector, I think there was a -- there seems to be an awful lot of hard currency borrowings and we spend a lot of time with the guys in NEPI in that Central and Eastern European market, and you get to the real estate guys who really did blow themselves up with Swiss francs and Japanese yen borrowings during the crisis. So I think it's something that we are aware of and acutely aware of because we've got a rand balance sheet. We can access rands, but we can't access hard currency euros that easily. So this is a bit of a -- apologies, a bit of a Christmas tree. Ian will take you through the detail. This was something that we started presenting in our results for June 2018. It's really because IFRS is so confusing for a REIT, we decided to kind of unpack it and say, look, this is how we come to our distribution. Ian will take you through all the numbers, but the ones that I just wanted to highlight were really the changes in our policy. So that capitalized interest, as I mentioned, the ZAR 164 million, which is included in this period's distribution to get to the circa ZAR 1.7 billion, now comes out. So if you follow that through down to that ZAR 164 million at the bottom, we just do a recon there, you can see that coming out. And you can see the reduction in the cross-currency swaps for the second half of the year of ZAR 111 million. So for -- going forward, about ZAR 170 million. So that ZAR 1,421 million at the bottom would have been this period's distribution under the new dividend methodology. I think the interesting thing to note is the number below that, that ZAR 1.34 billion would have been the last interim periods distribution for the 6 months. And if you look at the growth there at 6.1%. So by rebasing it, we actually are adding growth, and that's real growth, that's rental income from tenants. So that's -- I think once we rebase it, suddenly, you get a real picture of we're getting the growth from NEPI, we're getting the growth from the new logistics portfolios. Our like-for-like growth for this period on our standing portfolio wasn't that bad, it was 1% like-for-like NOI growth. So off the correct base, you can see that growth starts to come back. We did also have this little recon at the bottom of our results yesterday. Also, a bit complicated, you can see in the account and put that together. The second column, the year ending ZAR 3.388 billion, that was the dividend that we paid end of June last year for the full year. And that compares to 3 2 4 9 for this year. Why the trend, why less 4.1? Well, it's because of the cross currency swaps. That's the majority of that. So we've unwound the cross currency swaps, and Ian will touch on the fact that, that also then, under our policy, necessitated us taking up more interest rate protection. So we've done a lot more caps. We think that the SA rates may stay lower for longer and maybe forced to cut. So we spent quite a lot of cash, and expensed a lot of premium on buying that interest rate protection this year. The adjustment one is then the capitalized interest coming out for the full year. Adjustment two is the effect on the cross currency swaps, why is it 111 this year, 286? Because we've already taken that adjustment for H2 in the 3 2 4 9. So that gets us on the new policy if it had been in place for the full year, which it hasn't, it's only been in place for half year from 1 Jan 2020, ZAR 2.8 billion, and last year's comparative would have been ZAR 2.7 billion. If we then look at the 6 months, we get back to that 6.1% that I mentioned. So that -- you can see that as we start to roll out the developments, that adds to the bottom line, and we get that natural growth through from the portfolio. Dividends for the full year was the -- is 3 0 7 9, which is the total at ZAR 1.697 billion for this period, plus a forecast of ZAR 1.38 billion for the second half of the 2020 financial year. A quick look at Louwlardia Logistics Park. I think something that we've done here is -- it's been enormously successful, WeBuyCars exercised there, has bought 50% Goldwagen, will buy -- the blue one will buy 50%, you've got Vodacom and the next one coming up. That piece, which is actually just south on the N1, which is kind of on the bottom left of your screen now, is going to be Louwlardia Phase 2, but we've done it in a slightly different model. It's about 13 hectares. It's not huge. But what we've agreed with the landowner is we've pegged the price now escalating at 5% going forward. And we will then use the land as we see fit. So should we find a tenant or decide that the market's ready for a spec building, we can do it on the land, but we'll only pay for that land on completion of the building and just for the land that we used. So rather than putting a land bank onto our balance sheet, we've sort of created a bit of an option for ourselves. And I think we will probably do more of those structures with landowners going forward. It then doesn't place the burden on our balance sheet in terms of our land bank going forward. I'll hand it over to Mr. Vorster.

Good morning, everybody. It's going to feel a little bit like [ a teaching ] lesson today. Steven has already started. But I'll get right into the numbers. So Fortress A share has delivered ZAR 0.7767 per share, which is 3.94% up. In terms of the MRR, the arrangement with the A share is the lower of inflation or 5%. Inflation for this period has been slightly lower than the 5%. The Fortress B share, ZAR 0.7484. Now this is on the old policy that Steve has already spoken to. And that will be -- that's roughly 3.4% down on last year for the equivalent period. That difference of 3.4% is primarily as a result of the policy that we adopted at June 30, which was to reduce the capitalized interest or calculate capitalized interest for purposes of the distribution on the lower of cost or fair value. So really what that is the reduction on that impairment that we took from Clairwood. We've introduced a new metric to measure the net asset value per share. We refer to it as a net asset value per equity share on a going concern basis. Again, in terms of the MRR, the -- historically, the way that we've shown a NAV per share has been on sort of a contract value for the A share, which is the 60-day VWAP in the event of -- sorry, I'd like to just take a step back. The MRR speaks to, in the event of either a winding up or a liquidation, the A share will receive the 60-day VWAP and the balance will go to the B share. Given that we are not in a winding up or liquidation scenario, we've recalculated a NAV on a per equity share basis and introduced this new metric. As you can see, that's ZAR 15.59 at December 31, and then we've included the previous metrics for comparative purposes. Our LTV has ticked up slightly from 32.2% to 33.3%. And this really is as a result of our 2 sort of big assets coming under pressure in the second half, and that's our NEPI position. Although we equity account for it, we do have to pass a mark-to-market adjustment. So effectively, it's valued at market price at balance sheet reporting date at 30 June 2019. It was at ZAR 129 per share versus ZAR 123.50 at 31 December. We also have exposure to our own B shares via our BEE new transaction. And obviously, with the B share coming under a bit of pressure from ZAR 8 and to -- sorry, 12 0 8 at 30 June to roughly ZAR 8 at December 31, the asset base has come -- well has reduced, which has obviously resulted in an uptick in the LTV. Steve has already spoken to the dividend in specie that will be paying out for this period. In terms of a ratio, for every 67.84 Fortress A shares a shareholder holds, they'll receive 1 Resilient share. And for every 70.4 B shares they hold, they will receive 1 Resilient share. What we've also done then is elected that we will pay any shareholder that receives -- or sorry, that holds less than 1,000 shares in cash as opposed to a shareholder with, say, a 100 shares receiving 1.5 Resilient or 1 Resilient and a bit of cash. Just by way of example, the way it would work, if you run down the FFA column, if you were to hold 1,000 shares, you would have been entitled to a rand amount of ZAR 776 annual dividend. The price at which we've pegged the Resilient share for purposes of the dividend in specie is ZAR 52.69, which means that you would have been entitled to 14.74 shares. Clearly, we can't distribute a portion of the share we round down. You'll receive 14 Resilient shares and the balance in cash, back to the total value that you entitled to of ZAR 776. Just for noting purposes on the 4th of March, I think the closing price for Resilient was ZAR 56.37. Yes, you've seen this slide, as Steve has mentioned, you have seen, but I just want to unpack some of the numbers for you just to explain, is absolutely right in trying to reconcile from IFRS to the distribution is quite tricky, especially if you're not well versed in IFRS. So we built the distribution up from the direct income, less costs from the property portfolio and that's the 1 1 4 9. To that, we add our dividends received and accrued on our Resilient and NEPI positions. You will read that we elected to take script from NEPI -- well, at our half year period from NEPI that subsequently turned into cash and hence, I've included it in the cash line of this recon. Interest paid, ZAR 718 million. That value is what we pay. Our IFRS accounts will have a higher number because of the consolidation of some of our subsidiary entities, but that is the portion that we are in for. Capitalized interest, noncash but distributed on the old policy. That's the number that will disappear, ZAR 164 million and obviously, less than the half year portion for last year given the limitation of the Clairwood impairment that I've already mentioned. Interest on the cross-currency position, ZAR 288 million. I think we've spoken about that one already. Just for noting purposes as well, the interest on the staff lines, we still have the limitation in place for the historic or the legacy scheme. It's quite small now, ZAR 2.4 million, and what that is really is, to the extent the interest on those, that line position is not cash backed, we don't distribute it. And another point to note on this line -- sorry, on this slide, if we scroll down to interest rate derivatives and swaps and caps, the portion in the cash line of ZAR 21.2 million is the swap position, that's actually cash settled on an ongoing basis. And the ZAR 14.1 million is the amortization, is a noncash amount, but amortization of an existing premium on the caps. We expect that number will be quite a bit higher come year-end. We've entered into circa ZAR 2.5 billion of additional caps, and it comes at a significant premium, but I think the correct thing to do in an environment where we may see some cuts. Admin costs, we capitalized a small portion, that's the 5 5 9 9 of our development business into the developments, and that's really how the distribution is made up of. This slide, we introduced the 3 reporting periods ago, this is our NAV bridge and it really reconciles the NAV per share from opening to closing and the big movers. We don't need to spend too much time on it. Safe to say that the NAV per equity share, ZAR 16.07 reduced to roughly ZAR 15.59, again, mainly as a result of the reduction in our NEPI position or value of the NEPI position and the exposure that we have to the Fortress Bs via our BEE vehicles. You'll see movement -- another movement to note here is from the development pipeline, that ZAR 0.10 through to direct property. The reduction of ZAR 0.10 in the development pipeline is really the movement of completed assets into the direct property, but it doesn't quite reconcile because there's ongoing sales, et cetera, in the direct property. So which effectively recycles into cash. It looks as if our borrowings have increased, which is not the case either. We hold a bit of cash. We manage our funds on a treasury basis, and we'll look to place funds at the best rates from time to time, which may be in a cash product or may be in an existing facility. So it just depends on what's happening with the rates and what the effective parking costs could be on an existing facility as to where we could put the surplus cash, so one needs to look at those 2 lines together. Again, for noting purposes, we calculated a spot NAV at 3rd March. It's slightly lower because of the current pressure that some of the equity positions are feeling. Liquidity and funding. Touched on the slight uptick of the LTV to 33%. Available facilities at reporting day, ZAR 2.7 billion. Just to touch on the DMTN space. Since Jan last year, we've reentered the debt capital markets placing roughly ZAR 1.5 billion in private placements and in February this year, we did our first public auction where we raised ZAR 300 million, albeit on a shorter tenor, but at attractive pricing. And we intend on being more active in this space. The -- right now, the pricing is obviously very competitive and on an unsecured basis. Steve has already mentioned the cross-currency position. We've reduced it to EUR 302 million. With all the expiries being more than 12 months from our reporting date, the intention is to push them out further, but one has to measure that against the spread that it comes at. The product itself is a very good product. We like it, and it's come under a lot of fire as of late in the sector. It’s not really the product, that's the problem. It's the liquidity risk that attaches to it. So if you can manage that liquidity risk and the way one does that is by pushing its tenor out as best you can, you are able to have that sort of euro debt exposure without having actual euro debt on the balance sheet. Just again, our interest rate hedge ZAR 17.9 billion of debt at 31 December. The way that we look at that is to reduce that by our exposure in our cross-currency position, which is separately hedged. Some minor ups and downs, and that's really on the cash that we hold. One is to reduce that debt position by then and then commitments in our development pipeline that are either approved or contracted for. And those properties that are held for sale. As mentioned, we've increased our total swap position by way of caps, which will further increase in our next reporting period. Just for noting purposes, it looks at the moment that we overhedged on our foreign position, but that's really as a result of the reduction in the cross-currency position and not unwinding those foreign caps to sort of sub economic to do so at the moment, and we'll look at that and look at that in time. This just gives you an idea of what the profile on our swap and cap position looks like. And as you can see, it's pretty healthy, pushed out into 6, 7 and 8 year tenors. And on average, 7.9% swapped in rates on our swaps, caps of 7.56% and an average tenor of 4.4 years. Similar growth for our euro exposure and as I've mentioned before, slightly overhedged, but with an average tenor of 4.19 years. This slide is quite -- sorry, this slide is just really our debt expiry profile, with a fund of around sort of ZAR 18 billion worth of debt at any given point and expiries, the tenors of between 3 and 5 years, you'd expect that you'd have roughly ZAR 3 billion to ZAR 5 billion up for expiry on an ongoing basis, which is continuously rolling, which is exactly what you see here, roughly just under ZAR 4 billion this year and ZAR 5 billion in 2021. The dark blue portion is a component of a debt package that we've already agreed, which will push circa ZAR 4.5 billion out into tenors of 4, 5 and 6 years. So which we don't show here is where those land up, which is in the '24, '25, '26 buckets. So again, looking on the debt profile, expiring profile. Just to end off on our current equity positions. I've mentioned already the NEPI position, we hold 140 million shares from June 30 prices, slightly off to the reporting period 129 to 123, and our raised positioned slight uptick at that point from 61 to 68. Thank you very much.

I'll just briefly touch on Cornubia Ridge Logistics Park. We won't be too long with the videos. That's where we developed the macro. We've got another 25,000 square meters, which will be completed there in May. Some tenant interest at the moment. I think it's a very prime position. That bridge at the top of the screen there just connects you directly to really the back of gateway and the Steinweg Ridge development. We could do about another 40,000 to 50,000 square meters in the bottom sites. I mean as we've mentioned before, everything in KZN is either a swamp or a hill, so those retaining walls are going to come at an immense cost. So the rentals are a little bit higher, but there's still a lot of demand up North in this corridor. All the developments going up north, and people are moving to Stanger further north to Ballito. So I think that a lot of the logistics players are quite interested in the site. That's a 14-meter retaining wall. I think this costs us about ZAR 150 million. I hand you over to Vuso.

Thanks, Steve. Good morning, everyone. You'll see a slight change in our GLA. It's gone up to 615,000. We've added our portion of White River in Umhlanga and also the second phase of Sterkspruit Plaza, which we finished developing last year around September. Vacancies are in the spotlight at this moment. I think with raising cost for tenants, low economic growth, you're seeing a lot of uptick in vacancies in the market, we've been able to maintain them at 4.2%, slightly up from 4% in June last year. I think that will come down as we finish the redevelopment later on this year at West Street in Durban and also filling up another acres space in Standerton. We're pretty close to doing a deal with a national tenant there. The rentals are tough. You see that our reversion rate is still positive at 0.1%. But it is taking longer to do deals with tenants. They are pushing back expectedly. I mean we've had -- I was saying to someone earlier on, we had a period of 10 years of good growth. It's expected that it would wind down and that's what's happening now. We're still able to get 5-year leases from national tenants. We're doing about 3-year leases from non national tenants, and the escalations currently in the existing portfolio are sitting at 6.9%. Our comparable sales increased to 3.9% for the 12 months. I think what you're seeing there, there was a lot of improvements from grocers last year. So in total, we bill -- or we generate about ZAR 1.4 billion from our -- on a monthly basis from our portfolio. Grocers were a big part of the growth that we received. Also, the pharmaceutical tenants Clicks, Dis-Chem's and other non national pharmacy tenants performed very well. I'll talk to a slide later on. The festive season overall was very flat. In fact, it was a little bit disappointing even though Black Friday grew. So what you're seeing there or what we saw, if you compare November together with December, 2018 to 2019, growth was only 1.4% for that period. So I think Black Friday has either brought the festive season forward. There was also the effect of load shedding. I mean we had load shedding in our highest trading period. So that had a negative effect on sales also. What you see from the slide is that people are buying necessity goods. So the men are gambling less, the ladies are buying less shoes and the kids are buying less books and they're buying a lot more food. Howard tells me that 1 or 2 analysts phoned him earlier this year to find out how bottle stores are doing. You'll see that there's been good growth for bottle stores, I think it's a reflection of the times that we had. They had a good growth of close to 8% in total. The pharmaceutical sector is performing very well on a like on like basis in our portfolio. They are up 12.2%, which is very positive. As I mentioned, grocers are by far the biggest portion of our turnover. They grew in total by 4.4%. You would have seen ShopRite's results earlier on, I think, 2 weeks ago. Very positive. I think on a like-on--like basis, they were 6.6%. So they're our biggest tenants, so we benefited a lot from that. Incidentally, I think the clothing sector has got a lot of competition. So what you're seeing there is that a lot of people are looking for value. And thus, to some extent, buying down. That particular sector is also facing a lot more competition, particularly from informal traders. We're affected in our portfolio because we've got a lot of buildings in the CBDs and that's where you're seeing a lot of pain for guys in the clothing sector. Our suburban centers like Pineslopes and Tzaneen Lifestyle, which we own 25% of, have shown very good growth. Pineslopes was, I think, 6.2% growth, which was very good. Again, grocers were the main benefiters. Again, it talks to the trend of convenience retailing. So that we're seeing quite good growth from that. The rural centers, we did a redevelopment at Sterkspruit Plaza, as I mentioned earlier on. But that center, excluding the work we did on the redevelopment, grew very well, so did Nongoma. The picture you see there is Nongoma. It was one of those centers, it came from Penguin. I was one of those centers that, for a lack of a better word, it was a dog. We had high vacancies. It's been a lot of work for a number of years. Finally, we've got it full. Right at the end there, there's a Clicks box. That space used to be occupied by Jet who put Clicks in there and some medical suits, and that's brought a bit more energy to the center. So we're happy about this. So we've also just done a deal with Ackermans or actually we are waiting for Board approval for the deal with Ackermans, and that will strengthen the tenant mix. With regards to our CBD stores and townships, now those include centers like Evaton Mall in the South and also Park Central in the CBD, also showing good growth. I think what affected it sort of negatively was that we still had the historic figures of the Edgars West Street, which was quite a big chunk, and also the Jet in Midtown. Had we excluded those from the historic calculation, that part of the portfolio would have been up 4.4%. On an operational level, as of December, we collected 97% of what we billed. So we billed about ZAR 1.3 billion for the period. Normally, our collection rate is at 98%. So in January and February, we were back at 98%, December tenants tend to pay late because of holidays, et cetera. Our basic rents have gone up by 3%, is slow, an indication of the times that we're in, but we've managed to keep costs at 15% net of rental. And also, if you look at our like-on-like NOI growth, it's sitting at 2.3%. Now if you were to include the new buildings, which is [ 3rd Street ] and White River, that figure would have set at 4.4%. I think going forward, I think the conditions will remain tough. We are focused on tenant retention. There's some planned work, redevelopment work on centers like Vryheid Plaza, where will take the center from 8,000 squares to 16,000 squares. We're also going to be doing some work at our shopping center in Thrupps in Illovo. It's looking tight at the moment. We've got some plans for that. We'll be finishing off West Street sometime during the year. So yes, thank you.

Thanks, Vuso. This is our biggest -- our most expensive logistics park, Clairwood has been with us for a long time. Finally, we've got just some ongoing. You can see in the forefront there, that's roughly 50,000 square meter, it will be 2 buildings, 25,000 square meters each and we can subdivide it. The rail is coming along on the right-hand side, you can -- yes, on the right-hand side. Now you can see it. We've done all the soil improvements for those 2 sites there. Dealing with transit to get a rail siding there is a massive challenge, but it is gaining some traction. Our guys, our development team have been unbelievably patient for about 2 years. And that's all the new interchange. So I think this is really going to be an absolutely prime asset going forward. There's a very little stock in Durban and our Durban portfolio actually performs really well. So its direct logistics, 1.2 million square meters. Vacancy came down, as I mentioned. Reversions are under pressure and likely to remain under pressure. The market rental growth is not keeping up with those escalations. So they do revert down on expiry. Like-for-like NOI growth, negative 0.5% I think, really, what's driving that is administrative costs and things like municipal rates. Those have increased about 20% year-on-year for the last 2 years. Yes, I guess you could argue it's almost like expropriation by another means where they just keep hiking the rates. And the tenants eventually aren't able to take the increases as we usually push the increases through or it's either triple net, but on expiry, the tenant can afford a certain cost of occupation. And ultimately, that comes down to the landlord to give a little bit and the municipalities to take quite a lot, unfortunately. A number similar to the retail, we just have these in the retail logistics portfolio, just -- it is a bit of a nonsense number growth in NII. That's just an absolute growth. It excludes old buildings. It's not like-for-like. But I think as I mentioned, you can see that a lot more of our NII is now coming from these new logistics boxes, and that was all new buildings that we got, that 13.8% growth. The direct logistics, we had a few lettings. You can see there on the right Long Lake Logistics Park. On Tuesday this week, we signed a 10-year lease with Zest Weg for 24,500 square meters on that building. We've just started the earthworks, haven't built the building yet. And that lease will commence 1 Jan at approximately an 8.5% yield, including all costs and capitalized interest. We are finding the quality space, although the rentals are under pressure, very easy to relet. We're struggling with the older industrial space. That's a challenge. This is the logistics pipeline. Westlake View was completed in December, and the tenants now moved in. So you can see our pro rata share of that CapEx, approximately ZAR 1.7 billion. If you look just down there, those 3 little stars, incremental cash cost, that's money that actually goes out the door, about ZAR 730 million to roll out that pipeline. So really, that's what we're saying. We're selling, targeting roughly ZAR 1 billion, ZAR 1.5 billion a year. If we could do more on the asset sales, we would, and that then rotates quite nicely into our top structures, which give us a lot more rental income and chew through those landholdings quite quickly. The estimated yield on that is 8.2%. This is our logistics portfolio development pipeline unpacked and this is really just a target. We would like to roll it out at this pace, but we're not going to be reckless. We're not just going to start building absolutely everything on spec. So I think we need to just be cognizant of what we're building the product, but these are not specialized buildings. They're pretty generic, roughly 10,000 to 20,000, 25,000 square meters, high spec, in a secure park, nice office component. And as we mentioned, rentals that are well below the sort of ZAR 80, ZAR 90 that guys are expiring at in Joburg and sometimes touching ZAR 100 in Durban. So this is our pipeline. It does exclude some of the other lands. So you can see the historic cost in the light blue, that's money that's spent. It's out the door. It's in the ground. Incremental cash cost estimate of ZAR 4.6 billion. And a total GLA on that pipeline of 900,000 square meters. Hoping to roll it out in this manner. But as I said, if the market is soft, we will need to then just push out some of those spec boxes and be a bit more conservative with that. The office portfolio, I think -- I mean I don't want to say there's light at the end of this tunnel, but our reversions were positive for the first time in a long time. It was really one standout deal with Standard Bank where they renewed the Standard Bank for its crossing. But I think we have seen really the bottoming out. I don't think rentals can go much lower. But unfortunately, there are just a handful of office tenants looking for space. So the vacancies are quite sticky. As you can see, that weighted average lease expiry of 1.7 years is very low. Not looking to really change that because often, the buildings are easier to sell if they're vacant. But we do need to spend some CapEx as we did on 19 Girton Road, which was transferred just after year-end. We spent about ZAR 4.5 million, ZAR 5 million fixing that up, making it look like nice, attractive for a tenant and then someone came and they want to convert it into student housing. So that kind of ZAR 4.5 million, ZAR 5 million was a waste, but we wouldn't have sold it if the building was still in its old kind of nasty-looking, chatty state. So I think part of that is really getting the guys to asset manage the buildings so we can get them to the sales team and get them out the door. We -- that's just a little artist impression of our site office at the Sandton Gautrain. It's something that Fortress inherited from Capital. It is literally a hole in the ground. They started the basement and done all the lateral support. But we're getting closer to structuring an exit on that deal. We signed an MOU with a hotel operator and a hotel investor to really just play a role as a go-between developer, and we've submitted an RFP for a significant office portion. So if we pull those off, it will be a nice, neat exit. If not, we'll have to try and make another plan to get out of that position. As we said, the structural oversupply in the offices remains. There's a handful of tenants, and there's just too much office space at the moment. The industrial portfolio is taking some strain. Reversions are negative. Vacancy spiking. We can see tenants are struggling to pay. But fortunately, that's ZAR 5,000 a square meter, we're quite optimistic that we can actually sell these or reposition them and get them out of our portfolio quite quickly. That 60 North Reef Road was the one that we signed a 10-year lease with Libstar Holding. So that was very fortunate for us. Some repositioning opportunities. We've got a picture of Crocker Road there. It is Crocker. It's an old industrial asset in Wadeville, 62 units, which we got as part of the Lodestone portfolio, roughly value is about ZAR 40 million. With -- in partnership with the guys from InnerSpace, we really repositioned that. It cost us ZAR 1.5 million. It was 20% vacant, looking old, tired, rentals going backwards, tenants struggling to pay. Repositioned it, made it look really nice. Got the vacancy down to 3%. And now we're pretty sure that we can start getting those rentals up. So I think that is going to be part of this -- of getting out of this portfolio without taking an absolute path is to try and reposition some of these assets before we sell them. And we're seeing that in some of the retail assets that we sold from resource portfolio, it is better to sell and easier to sell the better assets. So if something's bombed out and vacant and looking terrible, we have to just take the pain, fix it up so we can shuffle it to the door. These are the disposals for the year-end, ZAR 420 million. A little bit of a profit on book. You'll see a few of those are exactly the valuation. That's because we hold them for sale at June last year. So we had already kind of showing that as a profit to book in the previous year. WeBuyCars and Shell and McDonald's and things like that. So we're quite pleased to say that we are still managing to sell these at above our book value. The held-for-sale assets, ZAR 620 million. A few of those have actually transferred after year-end. So we're pretty sure that ZAR 1 billion for this year is largely in the bag, and we can hopefully do a lot more in the coming 4 months to the end of June. As I said earlier, NEPI Rockcastle, fantastic results for them, I see they're trading at a bit of a discount to the EPRA NAV, but still good growth, good economic fundamentals in those countries, excuse me. So very happy with that. And distribution guidance of 6% is fantastic in this market. Just to touch on our ESG. Our ESG MSCI rating has gone from BB to BBB in the year. So very well done to that team. FTSE JSE Responsible Investment Index Rating, gone from 1.6 to 2.2, you need to get 2.5 to get into the index and then maintain 2.2. So we'll hopefully get there and our sustained analytics score average performance. So I think we need to do a bit better on those. And I think we actually met some Finnish investors who were doing a roadshow here who were really focused on companies with good ESG scores. And I think it is certainly gaining a bit of traction. So I think we need to get into these indices and just focus on getting those scores up. On the environmental side, we had the solar, we completed 3 installations, totaling 1,400 kilowatt peak. You'll need to ask an engineer what exactly that means, but we think in kind of megawatts. We generated 1,398 megawatts of solar energy in the period, substantially up from December last year given our rollout plans. We really like it. As we've said before, it makes sense on the retail. Until we can feed back in, we can't really use these huge spans on our logistics routes to roll out solar until we can actually get some kind of clarity on how we feed it back in. Eskom have informed us this week, we've finally got the hold of planning team for the Eskom direct connections, municipalities are much easier. The Eskom direct connections, they say that you can plan on 1 year, if you want to do solar and your property is fed by Eskom. So that -- that's kind of the challenge that we face with rolling solar out, is you do need to get planning approval and a lot of our buildings have got direct Eskom feeds. We saved a lot of water, and we're trialing with an online water management system, obviously, going through the process of water use licenses for a lot of our properties in the rural areas have got bore holes where we get a water use license, pump the water out, clean it, monitor that it is portable and supply the whole center with it. On the social side, very pleased to announce that we're BEE compliant. We've got a level 8 rating yesterday. So well done to that team, I think it's been 18 months of hard slog. Also, we supported Food & Trees for Africa, which has been a great initiative for us. It's -- I think it ticks a number of boxes. It gets our environmental score up. It fulfills the social needs, and it also activates a lot of the retail centers. We distribute the trees from the retail center. So we're getting a lot of feet to the retail center and really creating a bit of a vibe there. Various other initiatives, anchor stockbrokers, we partnered with them to sponsor some tertiary students as well as the South African Institute of Black Property Practitioners. We support a mass program for high school students in Alex. We are partnering with Property Point again for the second year in a row in terms of enterprise and supply development. I think they've done a lot of great work at the back end, so it's quite easy for us to plug in. So I'm just conscious of time. We sponsored 50 kids in the President's Award, and we also set up a vocational training program for electricians and plumbers. I think there's a massive skill shortage and tertiary education isn't going to plug that gap. On the governance side, we appointed a new director effective 1 Jan, Ina Lopion. She was the MD of the South African side of Vukile, so huge experience, very relevant experience in a listed property front for us. And Dr. Iraj Abedian, our Chairman, has informed the Board that he intends to step down at the end of the financial year. So by June end, we started a process under one of our nonexecutives on the Nomination Committee and [indiscernible], to find additional nonexecutives and another Chairman. On the capital structure, as we said right at the start, we've taken a long hard look at the business. I think the portfolio is great. We weren't a massive fan of the dividend policy, and I think the capital structure needs to be addressed. I don't think it's optimal at the moment. I think there's a structural discount. It creates a lot of distraction for us, for the Board. And I think we really -- if we're going to get back to growth and get back to actually adding value to the business, we need to somehow find some solution for our capital structure long term. Briefly touched on Long Lake. We just signed a 24,500 square meter lease there with Zest on that site that you see in front of you. There's a little building also, about 12,000 squares over there. This links up with Marlboro drive, it's the Marlboro drive extension. You can see our Linbro Logistics just in the background there and Sandton skyline further on. Also, a really nice node, this road will link all the way through to the N1 in Midrand. You're on the right side of the highway. In terms of traffic, you just jump on the N3, so all the trucks coming up from Durban. So we're pretty optimistic that this is going to be another successful logistics park. And these are just a summary of all of our portfolio stats. Thank you. Are there any questions?

[indiscernible]

Yes, [indiscernible]. I think it will probably be ended at about 3x roughly. Yes. That's sitting -- our bad debts for the period set at about -- I think it was between ZAR 6 million and ZAR 8 million. Yes, it's sub 1% at the moment. Okay. We are around for the next hour. And I know we're going to see a lot of the investors next week in one [Audio Gap]