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

Good morning, everyone, and welcome to the results presentation for Fortress REIT Limited for the year ended 30 June 2021. Thanks very much to Business Day TV for hosting us yet again, and we are also streaming live on the website. So hopefully, everybody can choose their medium for dialing into these results. [Operator Instructions] Just before I start, I think I want to just really have a sincere thank you to all the staff and the on-site staff, it's been a particularly trying 18 months, I think, to run a real estate company and in particular, to manage retail real estate. And in South Africa, I think our staff have done a fantastic job managing COVID and managing all the riots and looting. And in particular, the on-site staff who are actually not employed by Fortress, but by our property managers, just a sincere thank you for all the efforts you put in and really standing between the looters and our assets in the absence of any police assistance. But thank you. So I'm going to jump in now and just take you through a couple of highlights. I think during the year, when we look back beginning of 2020 calendar year, we pushed the button on a number of speculative developments in our logistics real estate pipeline. I think COVID hit and we were all a little bit scared about what the future was going to hold. And I think an exceptionally pleasing performance in that team was completing 163,000 square meters of new logistics developments, all of which were let by year-end. I mean that is really a herculean task by Jason Cooper and his team. We also commenced prelet developments of 244,000 square meters, that's not included in the 160,000, including 164,000 square meter distribution center for Pick n Pay, which we're very excited about. We sold 29 properties at a 2.8% premium to book, and that netted us proceeds of ZAR 1.65 billion. The LTV ratio pleasingly came down a little bit. Ian will touch on that. Retail trading density growth was up on 2019 as a base year. Obviously, we used that because there was no COVID, and we were looking at adjustments for 2020, and we thought let's rather use 2019 as a base. We acquired 3 logistics parks, 2 in Poland, which we announced at our interim results, that was in December. And just after year-end, we acquired another logistics park in Romania, a little over 50,000 squares, which brings that GLA just about to 110,000 with an equivalent pipeline of about another 110,000 square meters. Something that I think we've been excited about for a while is our solar PV rollout. We installed 8 for the financial year. And I think at the moment, we have about 15 installed. We also repurchased, after year-end, some of our shares, roughly in the ratio of issued shares, FFAs and FFBs. We looked at the combined equity. And given the discount to NAV, it looked like a very attractive investment to us. And we were sitting with quite a lot of cash and liquidity. So we repurchased some of our shares to deploy that into an attractive investment in ourselves. I think also pleasingly, Level 4B rating. This time, 2018, we were noncompliant. So I think also another great achievement to get to a Level 4. This is the overview of our portfolio. As we've been showing for a number of years now that noncore little line, which is now the SA Direct Offices, SA Direct Industrial. We did previously have some listed securities in there that were noncore. Those are all gone. So I think we are trying to simplify our asset base and get more focused, really being the focus of logistics, rolling out the pipeline, building the top structures. So that whip off ZAR 2.6 billion we will use the cash from the disposals of the noncore. And if I flip forward to the target, that's really where we want to go. So we're going to have our 2 core portfolios, Fortress Logistics, Fortress Retail, roughly ZAR 20 billion to ZAR 25 billion in assets in each component, and that will be NAV of ZAR 25 billion to ZAR 30 billion. So we don't envisage needing extra additional equity to get there. It's really just the recycling that we've been doing and been doing quite well of selling roughly ZAR 1 billion, ZAR 1.5 billion of noncore assets each year and using that to roll out our pipeline, which was 1 million square meters, not so long ago. Just in terms of the strategic focus, I think this has been pretty constant for the last few years. It's really asset disposals. As nice as it would be to look at portfolio transactions, we just haven't seen those materialize. We look at them often, but the pricing we get, the terms, often the funding, raising equity on the buyer side for those just hasn't happened. So I think day by day, we really meet that requirement by selling asset by asset to owner-occupiers, single investors. And we're managing to actually get pretty good transaction terms on those and a premium to book value. So we'll continue doing that. Obviously, using the funds then to roll out our development pipeline. We've got about 400,000 square meters left post the completion of our pre-let developments, roughly 80,000 that we've pushed the button on and then we'll have a pipeline of another 400,000 square meters left. Core asset performance. Again, what the whole team wakes up and does every day, which is sweating the assets. I think just 1 bullet point there at the top, which is repairing all of the damage from the civil unrest and the looting. We've got damage of ZAR 450 million to ZAR 550 million is covered by our insurers, but it is going to need a lot of effort by the team and the development teams to get those up and running and make sure the tenants are back in the centers and settled down. Again, opportunities. We'll remain opportunistic on acquisitions where we feel that they're attractively priced in the logistics and retail space as well as possibly indirect acquisitions, if that makes sense. So just a brief overview of a couple of highlights. I mean this is obviously on our portfolio. Total GLA by vacancy was down on June last year. It was marginally up on December. But I think a more meaningful figure, which is something that we've been putting in for a number of years is the vacancy by value, which is down and actually at the lowest we've seen it in the last few years. That's just more meaningful in terms of an economic vacancy as opposed to just GLA, where you've got, for example, big industrial units with lots of square meters, but not so much rental income. The in-force escalations down a bit. I think that trend will probably continue for a couple of years as we see inflation moderate and the tenants asking us to sort of lower those contractual escalations. But we aren't seeing any pushback or any move to have a more internationalized type of consumer price index escalation embedded in the lease. We're still getting 6% to 8% really on our escalations. Portfolio change in our SA portfolio, pretty close to flat year-on-year, minus 0.7 across the board, and we'll touch on those stats at the end of the results presentation and in each of the slide. The lease expiry marginally up from this time last year, 3.4 years. So these are the vacancies. As you can see, the vacancy by value has come down quite nicely to 4.6%. SA Logistics still pretty well managed. Retail has come off nicely following the sale of one of our high vacancy assets, which was an old Edgars box in Durban and West Street. Sea Logistics, 1.5, that's now 0. There was some tenant reshuffling going on at year-end. And then again, the one which is of concern is the offices, but fortunately, it's very small for us. So we're looking to dispose of that portfolio. I'm going to hand over to Ian, who's going to run you through some of the financial performance. Thanks.

Good morning. Thanks, Steve. Appreciate it. So we'll be paying a dividend of ZAR 0.747 on our Fortress A share. Unfortunately, that's still under the A benchmark of ZAR 0.7914, which means that there won't be a dividend to the B share this time around. That's also in line with the MOI amendment that we received from shareholders in July of this year, allowing us to pay less than the entitlement for the 6-month period. Pleasingly, our NAV per share has increased by 12.8% from 10.94% June last year to ZAR 12.34. I'll touch on that shortly. We've introduced the REIT best practice metrics for the first time this year and reported on those. So our LTV based on our management accounts, 36.7% and on REIT best practice metrics, 36.6%. Our simplified distributable income slide. If we have a look at this, this is really the slide that shows the nature of what goes into our dividend or our amount available for distribution and then the nature of whether it is cash or not cash backed. So if I just start at the top and touch on some of the bigger numbers. Obviously, the NOI, that's the direct portfolio return, rental, less costs. Our dividends accrued from NEPI Rockcastle all in cash. That would be the dividend that we received in March of 2021 and the dividend that we will receive come September 2021. It excludes the cap issue that was given to us in September of 2020 with reference to last year from NEPI. Interest paid, all in cash. We still have a small amount of cross-currency income, ZAR 61 million. As we mentioned previously, we exited the cross-currency position in full -- or sorry, we had negated that position at half year and at 30 June last year. But we've now exited in full cash settled the amount owned and so on, on expiry, which was in March of this year. Just some adjustments there to mention: we still don't distribute the portion of our historic or legacy staff scheme interest received, that is not cash backed and that's an amount of ZAR 16 million. And a debit that we take or a deduction in the distribution, the amortization on our caps of ZAR 97 million reducing the dividend. We've included now a recon to SA REIT FFO and primarily the Fortress distribution methodology is the same as that of SA REIT FFO, but for really 3 main adjustments: capitalized interest, which is not in our distribution would come into the FFO number; the portion of the staff scheme adjustment that I've mentioned would come into the FFO number; and then FFO requires that you deduct your IFRS 2 noncash charge, which attaches to staff incentive schemes and so on. So it's very similar. And as you can see, mostly cash-backed earnings in our dividend. How we made that distribution or that amount available for distribution, ZAR 1.7 billion, earned in the first half of the year, ZAR 820 million. We didn't pay a dividend as that was under the AA benchmark. In the second half, ZAR 892 million also under the AA benchmark, but we will be paying an amount of ZAR 870 million which is 51% of our dividend -- or sorry, 51% of our distributable amount that translates to 76% of distributable profit as defined by the JSE, and that's primarily as a result of the cap issue that I previously mentioned falling outside of the JSE's definition of distributable profit. Our NAV bridge. This slide really shows what has happened to our NAV from June last year. So the increase in our NAV is driven primarily by an increase in value of our NEPI stake and retention of profits in the current year and then where it's been applied. Just note were the adjustments there, the -- sorry, the development pipeline slightly down, and that's with as a result of movement of completed buildings into our direct property portfolio and then our direct property portfolio up also as a result of the acquisition of our Polish -- our new Polish assets. Post year-end, we did the buyback, as Steve has already mentioned, of 20 -- sorry, 26 million -- 26.8 million A shares and 25.4 million B shares at a discount to NAV and that results in a slight uptick if we were to measure the NAV per equity share at today's date. Funding and liquidity. As mentioned, we are at 36.7% LTV based on our management accounts. We have available facilities of ZAR 2.8 billion. Our portfolio collections through the year, this was very topical last year given the COVID adjustments and so on, but our portfolio collections of amounts billed in the current year, 98.9%. Our see-through LTV, 44.9%, and that's bringing in NEPI's reported EPRA NAV. All our cross-currency swaps have been closed out and cash settled, and that's now reflected in the 36.7% LTV that's mentioned. All of our maturing debt in the current year was refinanced, and we early refinanced ZAR 3.4 billion of expiring debt in November of 2021. We've been more active in the DMTN market. We placed ZAR 680 million of new notes in the financial year, ZAR 541 million would have been seen as refinancing. And then post year-end, we did our first sustainability -- sorry, sustainably linked note -- 2 notes, in fact, a 3-year, and a 5-year, ZAR 495 million in a 3-year tenure and ZAR 405 million in a 5-year tenure. This note has a ratchet up and down if we meet certain KPIs attached to our solar program -- our solar rollout program, and we're very confident that we'll meet that. As a result, our exposure to that market now, the debt capital market, approximately ZAR 1 billion up on last year, which is starting to reach our targeted sort of 20% of our total debt requirement against the primary fund as being the banks. Credit spreads in that market, very similar to that of our secured debt providers. And then, of course, we're well within all covenant levels. Exposure to interest rates, variable interest rates. We make a number of adjustments to our debt position at 30 June to bring into account the economic position or the true economic position of what our exposure would be and notable adjustments there would be, the capital commitments contracted and approved. The problem with that number now is it's getting quite big with our development rollout, and it extends sort of beyond the 12-month period. Historically, we'd only reduced our exposure by our committed sales that were subject only to transfer. We now look at bringing in sort of on a probability -- weighted probability basis, those sales that are included in our pipeline, which is the reduction of ZAR 544 million that's noted at the bottom, which keeps us well within our hedge policy and comfortably hedged. Our hedges, as I've mentioned, we still favor caps over swaps. We're sort of 55% capped and 45% swapped with a very comfortable profile -- maturity profile being weighted to the 2025 to 2028 year. Our debt slide, this shows our expiry profile of our existing drawn positions. As I've mentioned before, with the debt of approximately ZAR 19 billion in the fund with tenures of between 3 and 5 years, we'll always have sort of ZAR 3 billion to ZAR 4 billion of expiring debt in any 1 period, which is not dissimilar to any prior period. And you can see that, that's exactly what we have here. But again, very comfortable relationships with the banks and no foreseen issues on refinancing that. I'm going to hand over to Vuso now. Thank you very much.

Thanks, Ian. Good morning, everyone. Thank you for joining us. This is Evaton mall in the south of Joburg. It's our biggest shopping center in the portfolio. It's about 35,000 square meters in size. Last year, we had about an average of about 840,000 people per month visiting this center. It employs over 800 people, and it was one of the centers which was recently affected by the looting. So what you see in the picture is what was before the looting, just operations before the looting. We tried to do a before, during and after, meaning whilst we're doing the rebuild, that will come up just now. So most of the damage of the center happened between the 12th and the 13th of July, all the shops in the center were affected. And this is what it looked like during those days. The cleanup happened quickly. Some of the community members assisted us and some of the tenants were very proactive to get the rebuilding done. About 50 shops are opened -- 51 shops were opened yesterday, actually, I was there. We're expecting more to open this coming weekend. So most of the shops now are open at the same center. Incidentally, when I was there yesterday, I just asked the guys to do a quick foot count in terms of how many people were in the center yesterday versus the first Thursday last year. So the first Thursday last year, we had 29,000 people in the shopping center. And yesterday, which was the first Thursday of September, again, we had 26,000 people. So you can see that people are starting to come back to the center, although a little bit slower than last year, but I think this will pick up as more tenants open. So most of the shops have been handed over to the tenants. As I said earlier on, 51 are opened currently, we're expecting more this weekend. Just feedback from some of the tenants that I spoke to yesterday, some of the store managers: shoppers are coming back to the center. Feedback in terms of trade has been good. I think some of the retailers have benefited because a lot of the competing shopping centers in the area were affected. So they're getting -- because we opened earlier than most in the area, we're getting a lot of the customers who used to go to our competitors. So I think that's a bit of a positive. I think where the guys are struggling, particularly at Evaton and I assume it's the same for other township centers, is that the banks have been slower to open. So ATMs and banks are not yet fully functional. So what we're seeing is that there's a lot of queues at the ATMs that are open. And what people are doing is they're going into the likes of the anchor tenants, your Pick n Pays and ShopRite to actually withdraw money from there, and that's causing a lot of queues. So that's a bit of an issue. But I think that's a temporary thing that will get resolved. In line with our strategy of selling our noncore assets, we sold 6 shopping centers during this period. We have a further 3 on which offers have been signed for sale. So the portfolio is currently at ZAR 9.9 billion. We are continuously trying to improve the quality of this portfolio through redevelopments and through sourcing new acquisitions. During this period, 589 leases came up for renewal. We renewed 369 of those, and we signed new deals of 146. It's obviously a tough time to be doing renewals due to the uncertainty caused by, firstly, the pandemic and the most recent social unrest. But our reversions are negative at 5.6. I think the main focus for us at the moment is on tenant retention. And I think that's a strategy that's worked for us during this trying times. Our in-force escalations are sitting at 6.5%. As Steve mentioned earlier, we are getting between 6% and 8%, although some of the tenants are starting to push more for the 6% level, but I think we're doing well at maintaining this type of escalation rate. Our vacancies came down during the period. By value, our value -- our vacancies are now sitting at 2.6%. By GLA, we came down from 5.3% at December when we reported to 3.7% now in June. Most of that, as Steve mentioned, was due to 409 West Street, which was sold. That building at a vacancy of 9,000 square meters. But we also had good lettings at buildings like Pineslopes, where we had a big office vacancy that we let. We also had good lettings at Equinox in Jefferies Bay and Monument Centre in Standerton. Our collections are sitting at 98%, which I think is good in the context of the times that we're in. The COVID discounts that we granted to tenants this year, which is -- was granted to mostly restaurants, liquor stores and places of gambling was ZAR 12 million. This is good compared to what we did last year, which was ZAR 75 million that was granted to tenants. Pleasingly, the trading has been strong this year, when we compare it to the 2020. The 2021 trading figures are 7% -- 7.3%, up from last year. Obviously, last year had COVID. So it was coming off a low base. But if we compare the performance of the 2021 figures, to pre-COVID levels, which is 2029, is still positive. We're 5.1% positive on the 2019 figures, which I think is very good. I think the trends that we saw well, even before COVID, are continuing. More and more people are spending money on essential items. So your grocers and your pharmaceutical companies continue to benefit. What the pandemic has done has been that more and more people are working from home. So you're seeing a lot of people investing in their houses and homes. So that category is also performing well. You would have seen cash results or update a few days ago, which was positive. It talks to exactly what I'm saying that the homeware and DIY category is doing well. The trend where there's been a shift from more formal and smart way to more casual way has benefited retailers that are focused on value retail and guys that are focused on at leisure retail. If we look at the performance -- trading performance by category, meaning by township, CBDs, suburban centers and rural centers within our portfolios, you'll see that suburban centers and rural centers continue to lead the recovery. It's actually been quite strong. Even when compared to 2020 and 2019, those 2 categories have been performing rather well. Obviously, the suburban centers are following the global trend where people are looking for more convenient centers. So those centers are benefiting from that. The rural centers, I think the social grant support is very important there and the recent extension of the social relief grant, the ZAR 350 per month has also assisted this market. Just talking to some of the shopping centers that were affected by the pandemic. Steve will talk later on, on Cornubia Ridge which is the first building on the list there. But our priority at the moment is obviously to redevelop and open as many shopping centers that were affected as soon as possible. Six of our centers were affected. The most affected or the most damaged out of the portfolio was 336 in West Street and Biyela Shopping Centre in Empangeni. Now those shop -- those centers suffered fire damage. We anticipate that they will take at least 9 months to be reopened. And our project team has already commenced some of the work on those. Evaton I spoke earlier on, on the slide, it says 45 shops, but that has been updated to now 51. We're expecting more to open this week end. So most of the tenants there are open. Palm Springs, we expect most of the tenants to open in September, that suffered a little bit of fire damage, 3 shops had fire damage there. So those particular shops may take longer to open. And then the last 2 shopping centers, which is Yarona and Tembisa Mall have already opened. The damage there wasn't so severe. But as I mentioned earlier on, most of the feedback from tenants has been positive thus far. People are going back to the shopping centers. I think some of the tenants have faced delays in reopening and most of those delays have been caused by shortages in stock and shortages in infrastructure, things like commuters, things like points of sale. But I think that's all going through the wash at the moment. And it's a temporary thing that will be resolved in the short while. As Steve mentioned, our staff that is on site worked very hard during this period. So we're very grateful for their dedication and their hard work. We're also looking at methods of improving or beefing up our security so that we're better prepared if something like this happens again. Looking forward, we continue to try to improve the quality of our portfolio, and most of this will be done through redevelopments and extensions. So all the buildings that you see there are at various stages of the planning or actually implementation processes with regards to redevelopments. With Crocker we are awaiting council approval or local authority approval. We want to expand the center from about 7,000 squares to about 14,000. Palm Springs, we have commenced with the extension there we bring in Pick n Pay, fixing up the parking and sorting out the taxi facility there. Making we've completed Phase 1, we will do Phase 2, hopefully later this year where we'll bring an additional anchor to the center. Freight rate again, we're waiting there for municipal approval, which we think will receive sometime this year. But there, we want to extend the center from about 8,000 to about 16,000 squares. That will be a nice project for us. And then lastly, at Marroni Centre we'd like to add an additional anchor there, ShopRite. Again, we await council approval there. So we think early next year, we'll be able to bring ShopRite into the center. We are looking for acquisition opportunities in the commuter and convenience market. We like this market, and we think that there's growth in there. I'll now hand back to Steve to do the rest of the presentation. Thank you.

Thanks, Ian. Thanks so much, Vuso. So we're just going to showcase -- put a little video on because I know most of you at home in your Johnny's on the cart. So you can just grab a cup of tea. We'll get the videos going here. This is our South African logistics portfolio. Obviously, the big ones here are Clairwood and Eastport. This is 1 of the smaller ones, Long Lake, but we've had a lot of success. If you look in the background there with Sterkspruit, that's our Linbro Logistics building, which we developed about 5 years ago. These 2 were developed, and this was the old land that was acquired by M&T from Zendai. We did 24,000 square for Zest and about 15,000 squares for Cargo Carriers, 10- and 5-year leases. It's a really great location, eventually that road to the right there on your picture will go all the way through Midrand to the N1. We've also, as you'll see as these videos go past, we've got a lot of our new -- sorry, Cargo Carriers 12,000, our new logo and branding on the buildings. We had billboards up, but it gets confusing with is Fortress a broker or is -- you get all the broker billboards up. So it's -- obviously, if it's on the building permanently, it's there. That's the new site, which we can develop 60,000 squares on just on the left. We've pushed the button on just under 20,000 squares on a spec box. This is the big 1 in Durban. Clairwood, fortunately unaffected by all the civil unrest, which was in and around this Durban south area. We've just completed these 2 buildings on the left-hand side there. Now on the right. For African Sugar Logistics as a tenant. They have taken the whole of the first building and about 2/3 of the second -- sorry, 1/3 of the second, the other 2/3 has been led to Super Group. These little minis are what we call the finger, which is just the back end of Clairwood. We had some space to do some smaller units very close to signing a deal with a big French logistics company there who need a smaller building. I think those will let quite well. There's a lot of demand in this area. So Super Group are at the moment doing their fit out and moving in. Something quite exciting where you see all these boxes is a container yard for Kings Rest. That's the temporary one. We are building them a permanent yard about 56,000 square meters right at the back of Clairwood behind Sammar I think that's quite exciting for Clairwood. Eastport, our big 1 up in Joburg on R21. Teralco are building Africa's largest data network there. We've had tremendous success at the site. You would have seen this video just a year ago, we had the 2 buildings. Now we've got another 3. This building here is let to take a lot on a relatively short lease, 14 months, but it gets us a good rental. The smaller box, 13,000 let to on the dot, also part of the Naspers Group, that's on a 7-year lease. Clippa's on a 10-year lease. And again, this is one of the deals that we did with the tenant. They were looking to own. We said, let's JV. You take 50%, we'll take 50%. We make a bit of a margin on the development. And I think it binds them into the portfolio. So it's something that we're very comfortable doing as a strategy, also allows us to recycle some capital, bank some profits. We don't pay those out. The exciting one at Eastport is the new Pick n Pay distribution center, just over 160,000 square meters on about 360,000 square meters of land. That one is going to have a coownership by Pick n Pay. They will be taking 60% on completion. Very happy with that. It's a long-term lease. We do then do the development, which I think we're quite capable of doing and funding, and we get an appropriate compensation for taking all of that on. So Eastport is -- I mean, it's really turned out to be a fantastic park. And there's certainly a lot of interest stemming from the Pick n Pay distribution center being there. So I think it's going to act like an anchor for the whole park. A few stats here just on our Direct logistics portfolio. I mean, if I can sort of just highlight 2 things at the bottom right, the value of new developments. That's the value of the new developments completed during the year, ZAR 1.3 billion. I mean I think that's really -- when we started this process saying we wanted to build spec, we wanted to roll it out and the fact that we've delivered ZAR 1.3 billion of developments by value for the year, I think, is really fantastic. The other one on the bottom left is the work in progress, that's ZAR 2.6 billion. I think something that the market does miss is that historically, this is sort of pre-Jan 2020, we did pay out the capitalized interest on that. We now don't. So we have an asset on our balance sheet, which -- on which we expense all the interest, all the bank interest we expense, that one sits on the balance sheet and has no yield until we get rental income on it. Obviously, the market dynamics and just I think our perception of the way the market prices things without a yield or without something that's flowing through to the dividend as it assigns no value. But I think as we'll show you and have demonstrated, there is a lot of value there, and we're unlocking it and actually unlocking it quite quickly. Just if you look at the valuation change, it's marginally up year-on-year, obviously driven a lot by some negative reversions. There were a handful of leases there. But as we go through the cycle of these long-term leases expiring with high escalations, the market rental hasn't changed that much. So those are unfortunately suffering from some negative reversions as they come back down to market. Vacancy by value, not by GLA, as you can see, is quite low. In the middle block at the bottom there, we've got like-for-like NII growth, 1%, but also NOI growth, which is just a -- it's a little bit meaningless, but it's just the NII from this logistics portfolio last year versus this year, and that's 5.4% up. Why do we present that figure? Because if we don't pay out capitalized interest on our development pipeline, that's actually what flows through down to the distributable income and ultimately up to the shareholders. So this slide, I think, is one that we were -- are immensely proud to present. And I think we were quite nervous about how this would look last year when you pushed the button. But as you can see, 163,000 square meters delivered during the year, 163,000 square meters let, 5- and 10-year leases, all except that short 14-month lease, would take a lot, but it's going to be very expensive for them to move. So we would expect that to be renewed. So I think that is just a testament to the fact that the strategy of developing is really paying off. These are ones that are currently under construction. If you look down there at those ones that have been let, Clairwood Pocket 4C, B and 2B, those are imminently about to be tenanted, occupied. In fact, I think the tenants are moving in, and those leases are now effective. That does push up our well quite nicely. Pick n Pay will be Feb to May 2023. So that's quite a big one for us. And then the rest are really in the early stages of development, as you can see, they are only going to be delivered late next year. Sorry, 1 thing I missed that. So the estimated yields on the unlet portion there is between 7% and 8%. But again, that does include the capitalized interest, all of the historic costs. So that's just a recon of how we started with our 1 million square meters of pipeline in terms of GLA, what we've completed, what's available. And then if we take off what's currently pre-let, 244,000 squares; what's currently under development, 80,000, we're left with a little over 400,000 squares of pipeline. If we continue at the pace that we're going, hopefully, it's 3 to 4 years away until we roll out the bulk of that pipeline, and obviously, that's going to be tremendously enhancing on the distributable earnings. Just something that we wanted to highlight here is of that ZAR 1.3 billion that I mentioned, we just -- well, is that a profitable business for us to undertake? Does it compensate us for the risk? It is profitable and not as profitable as probably in the past, but I think for us to add ZAR 51 million of value does mean that we're adding value by taking on this risk. So that's up 4.1% on our cost, which I think is very pleasing. Pick n Pay, just the terms that we did previously announced it's a net initial yield of 7%. They will take 60% on completion, and we will get compensated for taking that development risk. This is a little markup there of the Pick n Pay. D.C. I mean you can see it's actually on the site. I mean it's massive. That whole site is the equivalent of 36 full-size rugby fields. So it's really big. And I think it's -- what is nice is that the tenants, the big and important tenants are trusting us to undertake that development. And I think when we look at the IP that we have in-house by undertaking these huge developments, that's also enormously valuable to Fortress to be able to roll out these developments in-house rather than simply acquire them. So what's our focus going forward for this logistics portfolio, same as it always has been: develop, build and let. And that's really something that we're going to continue doing. We will consider additional land, if it's complementary to our current sites, and we can structure it so that it's not an enormous drag as we've sort of been labored with of these huge sites in the past where it's an enormous drag on the balance sheet. So we'll try and structure it a little more capital light, if we can. We still have some offices in our portfolio. It's roughly 4% of our total assets. So it is quite small at ZAR 1.7 billion. The reversion is minus 26%, short whale, high vacancy. I think our strategy of just focusing on getting out of our office portfolio as quickly as we can is paying off. So that's really what we're doing, not a demanding valuation. I think if you look at that value per square meter sub-ZAR 10,000 a square across the portfolio on average, really not demanding. And I think when we look at what we want to do with it, that kind of range does open up the door for some residential conversions. But as we've said in the past, that's going to be at the margin. We're not going to see the whole of the office oversupply sucked up by residential conversions, that's highly unlikely. One highlight for the year was that one of our southern vacancies at Oak Avenue and Centurion, the Department of Public Works on behalf of the Department of International Relations and Cooperation for the United Nations went out to tender, took them 3 years, but eventually, it was won and it was won at our building, but it was won under a tender where we have agreed to sell the building to the successful tenderer. So we just now need to bid that down and ensure that, that sale goes through and that we get paid for our asset and that the United Nations is comfortably moved into Oak Avenue. The industrial portfolio, I think if you remember our comments last year, we were a little bit concerned with COVID and some of the tenants, are they going to be able to make it? I think we've actually been pleasantly surprised by this portfolio. The smaller mini units, which is actually the bulk of our industrial portfolio actually being quite well let and surprisingly, very well bid in the investor market. We've sold quite a few of the mini unit complexes. I think people are seeing some demand and also demand from the end users to sectionalize and sell these. So good luck to them. We hope they make money. Something that we are doing with this portfolio, which is quite exciting is we've done 2 assets within our space in terms of cutting them up and letting them manage their assets. I think we will look to do quite a few more. We've had a lot of success from those trials. It's a highly administrative, operational type of business where you have a lot of tenants, and they're specialists in that. So we would rather do it alongside them. And we'll do more of that and then eventually exit this portfolio. Another big highlight for the year, property disposals. So we disposed off a lot of properties this year, ZAR 1.65 billion, a 29 properties at a 2.8% premium to our book value. All of these was asset by asset. And like I said, that's going to be -- that's our base case, that's our MOI, that's what we're used to doing. So that I think is a fantastic result by the sales team. A couple of held-for-sale assets, 2 of which have actually transferred and we've got the cash in the bank there of around about ZAR 130 million from those 2 assets. NEPI, if we look at that, we've gone up in shares. There was obviously a capitalization issue. So we have a slightly higher shareholding at this year-end compared to last. And pleasingly, the share prices also went up. So we've sort of -- the gain on that is about ZAR 2 billion. I mean when we look at NEPI, I've obviously just released their results, I know many of you do follow them and own their shares. It's a fantastic business, low LTV, very, very rock-solid balance sheet. And I think we're getting that at a discount to NAV. So they've got a lot of runway in that business and it's got a sound, understandable, best-in-class portfolio. So I think we're very comfortable. Obviously, the announcement by Alex and Murillo of them stepping down is disappointing. But I think when you look at it, the fact that they are in a position to step down with no disruption really is credit to them in terms of what they've done, getting NEPI into such a stable position that the captains of the ship can change, and there's no disaster. There's nothing to be concerned about. And I'm sure a business of that size and scale with that type of balance sheet will attract the best talent globally. Something that we embarked on a little while ago was our Direct Logistics investments into Central and Eastern Europe. Obviously, there's a discount in retail, so the entry there via the listed space is cheaper, that there's a massive premium on entry via the listed space and the logistics. So going direct, I think, makes more sense. This is in Stargard. If you look at the back there, that building behind our site is actually the Lidl I'm not sure you pronounced it the big German discount retailer, they've got a big DC there. So this is Stargard. We've just pushed the button on another hall, another box. It's called the hall there, hall D. The existing tenant in hall A, the smaller one on the left, they need box and needs more space. So we're going to move them into that site there. Hopefully, CEVA Logistics will take the rest of that box, and then we can do another 4 boxes there. So that -- this Stargard is actually when we went there a couple of years ago, it was quite new, but it's really starting to gain traction being in the west of Poland right on the German border. Another exciting acquisition which we made actually on the 30th of July this year, Le Parks. We had announced it was conditional. We acquired just over 50,000 square, newly developed. On acquisition, there were some vacancies on the newly developed space. So we've agreed with the developer that they've got until the end of December just to let that up. We have signed a lease for actually, I think, the bulk of that vacant space with the German company for 5 years. So also, again, exciting. The location of this, I think, is only going to get better in time as they start to build that bigger ring road around Bucharest. So it's a nice asset acquisition for us. Difference between Poland and Romania, I think Romania, you're still getting great acquisition yields of 8%. Whereas Poland, probably leaning more to the development side because the acquisition yields have really compressed so much. So if we look at those, the valuation change there, that block in the middle right, that was just a valuation change from our Polish acquisitions where the price we paid in December versus the formal valuation at the end of June. So you can see the evident cap rate compression in that market. The vacancy by GLA is currently 0, and we've got 60,000 square meters there. It is indexed in accordance with, what is that, harmonized index of consumer price, basically euro CPI, which is actually sitting at 2.2. So there may very well be some escalations there. As I mentioned, that's the logistics in Romania. Just touching on ESG. I think the 1 aspect in terms of the environment, which was disappointing and heartbreaking to see was the right to looting in our site. We have just finished a building that got torched, a company called UPL South Africa. It's part of a big Indian-based agricultural products distributor was in the process of moving in. We were in the process of building them a flammable store for anything that they wanted to store there in terms of flammable toxic materials that wasn't complete yet. And unfortunately, the fire completely destroyed the building and there was some evident environmental impact in terms of the water and some of the products that they were storing of which we haven't had site yet of the full inventory list seems to have gone down into the river. So at the moment, I mean, the department has been quite vocal in their policy that the So they have issued directives to UPL to lead the cleanup. So the tenant and the department are really driving that process. However, just in terms of making sure that everything is mitigated, we have appointed our own panel of independent environmental consultants led by and just to make sure that no balls are dropped, nothing is missed, everything is mitigated. And post the mitigation, we can then ensure that there's a proper remediation done by UPL. On a slightly more positive note, the renewable energy, as I mentioned, 15 solar PV plants currently in operation. It's really going well that business, and I think is actually gathering more momentum. If you look at the top there, all of the scores are actually better Sustainalytics lower is better. So I think we've done very, very well there in terms of those scores. We're getting a battery storage plant installed at Klumb Valley Moutain we'll see how that goes. On the social side, we've got a Level 4 broad-based BEE rating, which is, I think, a fantastic achievement. And we continue with our partners in terms of social development. We continue to provide some support to property point to obviously support the a lot of suppliers and enterprise initiatives as well as the charities in and around our centers. On the governance side, we've had a number of board changes. We welcome Ben Kodisang and TC Chetty who've been involved in the property sector for a long time as well as Bram Goossens, who was the CFO of Equitus for a long time from listing. So I think we're very pleased that we've got some very good deep knowledge and skills and fresh thinking coming into the board. We did bid farewell to Djurk Venter, and I'd like to really say a huge thank you to Djurk. He was on the Board from the listing of Fortress and did see us through some fantastic times, some challenging times never left was a very strong and solid sounding board. So thanks very much to Djurk. Just in terms of the industry challenges. There's a list there. None of it is new. I think we face a number of challenges, municipal rates, no end in sight to the lack of service delivery from the municipalities, which is a problem. I think we also need expropriation without compensation to be put to bed. I think we -- I'll just fly through this because we're running out of time a little bit. So the prospects section, unfortunately, with our associate being NEPI Rockcastle withdrawing their guidance completely as well as our challenging capital structure, what we've done is we've had to say, well, how do we give the market some sense of where our distributable earnings are going to go rather than just being completely silent? So what we did was we said, well, for our coming 12 months, let's just assume that NEPI earns, on a distributable earnings basis, what they earned for the comparable periods last year. So if we look at the actual numbers for the 6 months, July to December, we've said just put in EUR 0.1876 and assume that's paid out, then from January to June, put in EUR 0.1764 and assume that's all paid out. So we've just used the historic guidance so we can give the market some sense of what our distributable earnings will be. That number then turns out at roughly ZAR 1.79 billion. Obviously, there are a lot of caveats and please, do go and read those caveats in our formal results announcement, which is on our website and was released on SENS yesterday. So that gives us growth on a like-for-like basis because obviously, we had some cross-currency swaps and other things in our base for FY 2020 of about 5%. When we forecasted though, we're forecasting that we'll be below the H1 FFA dividend benchmark as we were for this period and as we were for the previous period. So that's what our forecast is telling us. So for July to December, we'll be below the H1 dividend benchmark. For January to June, we'll be above it. Obviously, the dividend benchmark is slightly higher in the first period of our financial year. So at the moment, that's what our forecast is telling us. Portfolio stats are all there. You'll see it's quite comprehensive if you have any questions, please feel free to ask. Do you want to -- if there are any questions, I'll answer them now.

Sure. Good morning, ladies and gentlemen. Thanks for dialing in. [Operator Instructions] We do have quite a few questions already. So the first one, Steve, just regarding disposals. You mentioned that you sold these at a 2.8% premium to book, was this the 2020 or the 2019 book values?

It was June 2020 book values as assessed by the independent valuers. And just on that, we get 100% of our portfolio independently valued every year.

Great. Thanks. And maybe moving to a question to Ian. You can use the speaker here. Why would you maintain interest rate caps in this environment? Are you anticipating any rate cuts? And what's the strategy around that?

So previously, we liked caps on the basis that we did see -- or we felt that there could be rate cuts. At the moment, it's more a case of the steepness of the curve. So what you would be doing if you take a longer-term view on swaps as you lock in, in a potential interest rate increases that may not materialize. So whilst you pay -- you pay up on a cap premium, you at least have the ability to not capture those increases if they don't materialize, and that's -- it's primarily as a result of the steepness of the curve. And what we've seen is the curve has simply shifted to the right as opposed to flattened or steepened, in fact, over the last 9 months.

Thanks, Ian. Back to Steve. Just talking about the share buyback a little bit more and thinking about the various avenues where you can invest capital, how do you see share buybacks versus developments and acquisitions? And what's the justification there?

Sure. So I think we've been quite consistent that our best allocation of capital is to make sure that we've got the capital to build out our logistics development pipeline because the land is largely a sun cost. So as long as we've got the capital to do that, which we do and we've been doing it successfully, that's going to be our priority #1. Obviously, priority #2 is, well, can we acquire at attractive yields and ensure that our strategy of being a relevant player in logistics and retail is there. So those, I think, will come and those are opportunistic and need to make sense. And then obviously, buybacks, we had stored some capital. We've only paid out 51% of our distributable earnings. So it's also, I think, in our view, a way of returning some value to shareholders. And we did it roughly in an equal ratio so that we're not favoring SOB. We're just saying, look, let's just buy back a portion of our equity. We're trading at a big discount. And I think we still got a lot of value to unlock in our business.

Thanks, Steve. A question for Vuso. First of all, thanks for showing the reopening of your mall and the various before, during and after. But what measures have you taken to mitigate such an issue as far as possible in the future?

Thanks, Howie. I think there's various measures that have been taken, and that's all a shopping center dependent. Obviously, the biggest measure is on security. And there's various ranges there also because one of the things is you've got to secure your boundary. So we're beefing up on that. You've got to make sure that you've got access to riot guards which was a problem in the recent riots, and you've got to ensure that actually the shops themselves are better secure. So yes, it depends on a center-by-center basis.

Thanks, Vuso. Another question for Ian. Just thinking about the tax and with the forecast, do you anticipate that there'll be any tax paid if there's a lower distribution? And has this tax been included in your forecast at all?

So fortunately, we receive a fair amount of exempt income in the fund in the form of our NEPI dividend. So if we look at 2021, no, there will be no tax suffered primarily as a result of the cap issue and the exempt income. And for the coming year, probably not as well as a result of the exempt income. Of course, it's caveated by to what extent there isn't a dividend paid, but probably not.

Another question for Steve, and it's talking to -- there's a couple of questions just generally on the prospects section. So would you mind just elaborating a little bit further on how you balance effectively the dividend, the SA REIT status that you mentioned in the commentary that you want to retain? And just maybe just to elaborate a little bit more how you think of that and with the A and the B in the 2 income periods?

So we think about that a lot. That's complicated. That's a complicated question. But look, obviously, we focus on the business and making sure that the assets are well managed and that the business is as sound as possible. The next step is, do we want to be a REIT? And I think at the moment, we do want to be a REIT, so we want to maintain REIT status. Obviously, part of maintaining REIT status is making sure that you comply with the JSE listings requirements, which says you must pay out 75% of the JSE defined distributable profit every year. We have a problem because if our distributable income is below the FFA minimum benchmark, we can't pay it out without amending the MOI. And so we do have a couple of challenges. Fortunately, for the previous year, we had that capitalization issue from NEPI, which was not distributable income for -- distributable profit for the JSE or taxable. So that gave us a lot of flexibility. We may or may not have that flexibility for next year. And I think we'll have to -- we may have to then cross that bridge when we come to it in terms of do we have the requirement to amend the MRI yet again to pay out a dividend to maintain REIT status, how does that work, in which period, who does it go to? So I think we've got a number of potential challenges for the year coming, but we'll have to see how it plays out. And I think we've got, we've certainly enhanced our middle tool set to deal with our challenging capital structure.

Just following on that, you've used the historic NEPI Rockcastle dividends as part of that forecast in the guidance. Could you just elaborate why you use that? And is that an expectation of the future for NEPI?

So it's not at all an expectation of the future for NEPI. I think that's why we use the historic numbers. They haven't provided guidance, and we certainly would never want to be seen to be providing guidance for them. So we've just said, let's just make an assumption so that the market can put their own forecast in, of which I'm sure the analysts have probably made several. We just thought it was the soundest way for us to actually give the market some sense of where we think we're going to go.

Talking about the capital structure. Do you expect any sort of engagement between the shareholders and management or any sort of updates in the next sort of short to medium term at this stage?

Look, I think we've been quite consistent with what we need is the biggest and most critical item that we need is a willingness on the part of shareholders. So if we feel that shareholders are willing to engage again, then we're happy to engage. But if they're not, then there's absolutely no point because they will ultimately have to vote on anything. So I think we're all ears. We manage the business, we manage the capital structure. But if the shareholders are still not willing to engage and engage on a proactive fair basis, then there's no point in us doing it because they're not going to vote for it.

Talking about like-for-like NOI numbers, do these include a boost from the reduced rental discounts? Or how does that work?

Yes. So that's -- sorry, that is a good question. What we did was we just took the like-for-like NOI numbers. We ended up trying to adjust for this and adjust for that and adjust for COVID last year and adjust for COVID this year and then where did the cost go? So we said, well, then we're going to have to adjust for the base next year. So we just took a pretty raw like-for-like number, obviously, excluded all the sold buildings. So that's it. That's -- so what you see is really the like-for-like. So as you can see in Vuso's retail portfolio 7.7 because there was COVID in their base, some COVID in this base. So next year, I would expect that to moderate a little bit. But we just thought let's just ignore it and give everybody a more transparent number.

The next question is a question for Steve and Vuso. And it just talks to how are you differentiating your retail offering to take on the kind of the threat of online versus brick-and-mortar retailers, both at a retail level and I guess, at a logistics level?

Yes. I don't think we necessarily need to take on the online. I think where we've had sort of online, it's actually proved to work to the benefit of the shopping centers. I'll use 1 particular shopping center where a big tenant has gone online. And that -- his online business has actually gone up, but so has the turnover of the shop. I don't quite know how that works, but that's what we've seen and that's a shopping center here in Joburg. I think online and physical retail can work complementary with each other. It does make the market bigger for the shopping center.

Yes, if I can add to that? I think the overall strategy as well, the bigger impact certainly in South Africa of the online offering is probably going to be the large metropolitan malls. We have distribution centers and logistics parks in all of the large metros. So I think we will see some increase in tenant demand for that. And then the convenience offering and certainly in the rural areas, I can't see DC is going up in the rural areas because there's already a footprint of a retail center, which is close to people, which will act probably as the last mile delivery point. So I'm pretty sure that our retail infrastructure will get used even to enhance our tenants' online offerings.

Moving over to quite a big topic for the whole industry. The statutory claims, how do those work? And I guess it's also a question for Ian. How does the statutory insurance claims work? And have you heard anything more on these? And what's the expectation?

Well, how do they work? You take out covered by quantum. It's not an insurance that you insure a specific building, you insure for an amount of money. How they work is statutory outsource the administration of and acceptance of those claims to the primary insurers. There's a loss adjusted, et cetera appointed to have a look and make an assessment of what the amount is that can be claimed. And then that claim is recommended to statutory to be paid. So we are in the middle of that process with the damage that we've suffered at our malls -- sorry, just 1 other point on statutory the loss of income or rental income is also covered under that claim and it attaches to the time taken between the damage to the building and the time that it is -- or at the point in time that it is then available to be relet. All of that is wrapped up in 1 claim that faces seizure. What have we heard? We've heard that seizure has the ability to pay, it has the funds to pay and has the intent to try and settle these claims as quickly as possible as it's in everybody's interest in the country. So yes, that's where we are.

Thanks, Ian. Coming back to development profits. So the guidance of the -- your yields that you're achieving of 7% to 8%. How do you guys think about that on a profit of development at those -- at that kind of range? But also maybe just elaborating a little bit more on what you said in the slide on that uplift from the sort of cost of land and what's coming through on the dividend?

Sure. Yes. Thanks, Howie. So I mean, would we go and acquire land if we expected the development yields to be 7% to 8%? Probably not. I think it wouldn't be a good use of our capital. The reality is we've bought the land and we've started developing the parks, and we put all the infrastructure on there. So when we look at capital allocation and we take the land out and you say, well, that's a sun cost. So what's the yield on the top structure. You're probably sitting at anywhere between 10.5% and 13% initial yield on that additional CapEx on the top structure. Now when you're not capitalizing the interest, that's actually what drops down to the bottom line, when you're not paying out the capitalized interest. So that drops down to the bottom line. And I think is then enormously enhancing on our distributable income, which is why we showed that 5% growth in NOI, which is taking that into effect, that's actually what happens from a distributable profit perspective. So I think we obviously want to maximize the rentals and not do anything stupid. But we're still going to roll it out. It's the best use of our capital in the absence of being able to sell the land. And if you can imagine, Eastport, we've now got 5 boxes there, Pick n Pay under development. Can we sell the land to other investors? Probably not. Can we sell it to end users like Teralco at a profit? Well, we can and we have. And if we get those offers, well, fantastic, we'll take them. So we're not going to be slaves to the strategy, but we need to make sure that we're maximizing the profit and the value and not shooting ourselves in the foot by selling it little pieces of Eastport or Clairwood to competitors who are going to build boxes and compete with us.

There's a few questions on inflation and in different ways. So just thinking about inflation, the first sort of impact is how is that impacting the cost of development, such as steel prices? A second impact is what are you thinking about that for the Fortress A growth? And then I think also just thinking about generally inflation at a property management level from government, et cetera?

Yes. Yes. I mean, obviously, the inflation on the steel prices is real. We have seen that on a number of our developments. I guess, broadly, inflation is generally pretty good for property. So I don't think it's something that we are scared of, but what we don't want is like stay inflation where we've got inflation, but our rental -- our top line is kind of not growing. And I suppose that has been what's happened -- what's been happening. So from a cost inflation perspective, we've been quite hard on our suppliers. The municipal rates, as I mentioned, is the tougher one, but we're working with Seppala to look at the various methods of the whole industry coming and lobbying against the expropriation of private property by the municipalities through rates.

One question, just talking about SA REIT status generally, and the question is posed as does REIT status actually still make sense for Fortress? And does it make sense for the A, B structure?

Sure. So I think at the moment, it does. It does complicate our life tremendously if we aren't a REIT. I think it's something that probably is slightly clearer if we became a property development company, what would the shareholders do? Who would hold the shares? Could we raise equity at fair prices? That's all -- it's all uncertain at the moment. So certainly, I think it's something that the Board has looked at. At the moment, they think it's in the best interest of the company. But that assessment needs to continue. And if it's not in the best interest of the company, I assume the Board would then relinquish it. But that we don't see at the moment. So I think we want to retain REIT status. We do have a complicated capital structure. We've gotten used to managing it, and that's just what we'll have to do.

Moving on to reversions and just across the board, what are your expectations across the various businesses on reversions moving forward?

Sure. So I think -- for example, industrial, probably seen most of the worst offices. I think it's really about letting the vacancy. The logistics, it really does depend on how long the lease was, what the escalation was, and that's coming back down to market. So it's coming back down to, let's say, circa ZAR 62, ZAR 65 in Hattingh. How do we know that's market? Because that's what we're asking for on all of our new developments in Hattingh of which we're probably the biggest developer. KZN, it's probably more like ZAR 70 to ZAR 75. So we are, in a way, setting the market, so we do know it's going to come down. Where does that change? Well, it maybe changes with inflation on construction costs where people stop building or if they're going to build have to ask for a higher initial rental in order to make that new build sensible. So maybe the inflation actually starts to put a bit of a level on the negative reversions. But it's going to continue because a lot of them are above market.

Great. Thanks. Just moving on to the UPL issue. And I know it's a sensitive issue, but is there -- do you have any sort of sense of the impact and the kind of range of impacts for Fortress at all? And do you have any further comments on that?

Sure. So when you look at the legislation, it's very, very broad. So yes, the land owner gets scoped in, whoever is involved in that pollution get scoped in, whether it was a failing on the half of the police for not protecting the warehouse or a variety of things. The legislation is so wide. But when we actually look at it and we look at the department and the reaction of UPL, which has actually been quite commendable in terms of what they've done post fact. I think they really have done absolutely everything they can in terms of environmental expertise in terms of mitigation, remediation, testing. We actually had a problem getting an environmental team together because they've pretty much hired all the top experts themselves, but we have got our own experts. So at the moment, we are really just assessing the situation and assisting where we can. But it is really the department giving directives to UPL and UPL acting under those directives. So at the moment, we don't think there's that much risk for Fortress. It's an unfortunate event. And I think we will make sure that everything is done in order to retain, firstly, our reputation and secondly, remediate whatever damage was done.

Just a question, clarifying the capitalized interest. Do you capitalize any interest on land holdings for your distributable earnings calculation? And can you give a sense of the distributable earnings gross of this, if it's the case?

Sure. So yes, we would capitalize on landholding to the extent there is development work taking place on that land. The amount is circa ZAR 83 million for the 12 months ended 30 June. So our distributable earnings of ZAR 1.712 billion would be ZAR 83 million higher for this period.

Okay. So if I can just add to that. In the past, we capitalized on everything. And there was -- it was much easier to raise capital then. So that was circa ZAR 350 million to ZAR 400 million of capitalized interest that we were paying out in the distribution every year. We have looked at it and as we go through developing these parks, we then start to -- for accounting purposes around it, capitalize the interest on the particular box, on that particular pocket. That's why the capitalized interest has reduced so much. Where we have land or pockets of land within a park on which we're doing no development, our feeling was, well, if you're doing no development, you can't actually capitalize the interest for IFRS purposes. So that was our starting point. The fact that it's now ZAR 83 million, we don't pay it out, but it has actually -- that number has reduced as we started rolling out the land and then only capitalized on each pocket as we were building there.

And just talking about market rentals and where we based at this stage. Where is Fortress generally, and specific to logistics, relative to the market rentals? And just thinking about that, what's the expectation on new leases and renewed leases moving forward?

So I mean, in terms of market rental for logistics, I think we're competitive, I would say, probably the most competitive in the market. We always say we want to do the best deal, but it's got to be the right tenant. So I think we're offering very competitive rentals at the moment in terms of logistics. When we break up the reversions, it's going to be no surprise to everyone that the renewals are far less negative than the new leases. So tenant retention is absolutely critical in terms of where we go there. But I think we are seeing a moderation in market rentals relatively flat. But if we look at, for example, at Lidl there is a little bit of growth. Eastport, there is a little bit of growth. So it's not keeping track with the escalations but it is going up annually, which is pleasing.

Just 1 little -- a bit of a specific question on COVID discounts. Do you -- could you please quantify what the COVID discounts were for FY 2021, if possible?

FY 2021 COVID discounts in total. Steve, you got to expand it.

Sure. It's ZAR 18 million in total. So Vuso was ZAR 12 million on the retail, ZAR 1.5 million on logistics, ZAR 3.2 million on industrial, ZAR 500,000 on office and ZAR 1 million on other getting us to a total COVID discount of ZAR 18.5 million for FY '21.

And no, there were no deferrals.

And just another sort of specific question on assessed tax losses. Are there any remaining? And are you able to share a quantum, if possible?

Yes. So the strange thing about a REIT is that it doesn't generally build assessed tax losses. The 25 BB deduction that it gets is its lost deduction. So you would have had to have had sort of economic losses prior to taking the 25 BB deduction. So no, not really. They are none.

And just ending off on an idea, it's an idea more than a question. What are the obstacles to issuing Fortress B shares and buying back Fortress A shares with the current structure and rules?

Capital. So I mean we could do that. It would be quite challenging for us to issue ZAR 18 billion worth of Fortress B shares to retire all of the A shares. But if those shareholders are willing to give us the money, we could entertain it. But we can issue Bs. So I think we previously had, I think, put out there sort of in the history of Fortress that it was issued in lockstep, it's actually not you can issue Bs. On their own, you just can't issue As on their own. If you issue an A, you have to issue a B. But at the moment, I think it's -- the Bs are bombed out, so issuing Bs at this price to retire A is probably not the smartest move, but I guess we could look at it if people are willing to throw that much money at us.

I think that captures most of the questions. If we missed any of your questions, please feel free to contact us directly, and we'll get those answered. And thank you very much for the questions that have come through.

Thank you. Thanks, everyone.