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

Welcome to the Fortress Results Presentation for the Year Ended 30 June 2022. It's the 2nd of September and today is our CFO's birthday. So happy birthday, Ian Vorster and also one of our senior finance managers [ Vicor Serpenti ]. Happy birthday to you, guys. Just to kick off with some highlights. I mean, I think operationally, the business is actually in really, really good shape. We've had the lowest vacancy in our logistics portfolio that we've seen. It's 1.2% by GLA, 1% by value. And really, what we focused on a lot in the asset management team is just to reduce the vacancy. And as you'll see later on in the presentation, the reduction in the vacancy is actually one of the biggest drivers in terms of our like-for-like NOI growth in each portfolio, obviously. Last year, we were getting nothing. Now we're getting more from leasing that vacant space. Again, part of our capital recycling, we sold 24 properties once again at a premium to book value with another 13 properties held for sale also at a premium to book value. So that held for sale number, ZAR 1.4 billion I'll get to it later. It does include the 60% of the Pick n Pay asset, which we're currently developing. 108,000 -- 109,000 of new logistics developments, including the 56,000 to Kings Rest at Clairwood and 1 small asset of 15,000 square meters in Stargard in Poland. I think the leasing and development of our logistics business is really ramping up. I think that's absolutely a core competency led by Jason Cooper and the development team. Just after year-end -- around about year-end, we let -- pre-let other 73,000 square meters. Crusader Logistics is at Clairwood that's nearly 20,000 square meters on a 10-year lease. ZacPak at Clairwood which for those of you who follows us on LinkedIn was announced, 15,000 square meters also on a 15-year lease that we're developing. And then one of the new exciting ones is 38,000 square meters at Clairwood also on a 15-year lease with a Sasol underpin on that lease for Sammar, who do the Sasol logistics and will be storing their products there on a 15-year lease, which is fantastic, 2 more to -- at Clairwood 30,000 square meters, it was one box let to Imperial and RB Logistics. And then as we previously announced, we acquired an asset in Romania on an 8% forward yield, about 50,000 squares. We also will touch on the retail stuff. Again, I think a stellar performance on the retail side in a very tough trading environment and just the retail turnover when we look at that 17% compared to the pre-COVID level. And when you look at the like-for-like NOI growth, I think it was just under about 8% in the retail. So it's really -- I think a lot of the portfolio has come back over that COVID lull that we had. So these are just the high-level portfolio statistics. Again, vacancy came down nicely. Weighted average in force escalations sort of did trend down, but that's been a trend as the guys are looking at inflation and trying to get those contractual escalations down, which have trended to probably in our big leases and the big retail lease 6 offices on short-term leases. We're still getting 8 or 9. That's kind of the trend at the moment. Maybe as inflation kicks up globally, we'll start to see that pressure to try and get down to 5, which we were feeling from a lot of the big retail tenants lessen and maybe they'll be happy with kind of 6 or 7 again. Our like-for-like SA portfolio change, that's just the SA portfolio, 1.7%. I think our properties are still quite conservatively valued and the weighted average lease expiry was marginally down. I think it was 3.4% last year. So just to touch on the vacancies, again, I know we're probably a little bit unique in the way we do quoted by GLA officially. And then also by value is just to see, well, where are the vacancy sitting in the high rental high-value properties or the low ones. They do sit predominantly in the lower-value industrial and office space. So that by value, 3.8% total portfolio GLA 5.4%. And as we mentioned, the highlight there, the logistics SA portfolio, which is our biggest portfolio down to 1.2% at year-end, which I think is fantastic. Logistics CEE, we just finished that Stargard assets. So that has a little bit of vacancy, but it's relatively small in the overall portfolio. So this is a slide that we just wanted to put together from June 2018, just to really show when I think a lot of us -- the management team kind of took over and we had a bit of a rough patch that year as many of you might recall. And we looked at the asset composition. We also looked at the distribution. So at that time, in June 2018, we had 58% of our total assets with direct properties and 42% was listed securities. And we looked at them and we said, well, what's core and what's not core. So what was core for us is the retail and the logistics and the NEPI shares. All of the other stuff was periphery. So in the direct portfolio, we had the office of the industrial and other. And in the indirect portfolio at that time, we were sitting with Greenbay and Resilient shares. So we then said, look, we need to get out of the noncore listed and get out of the noncore direct. and that's just something that we've been working on. So -- the -- by the end of June 2020, we had only NEPI shares in the listed space, which we consider core. And we had reduced it down to 22% on the noncore. That subsequently is now down to 17%. And hopefully, over the next 3 to 5 years, we'll reduce down to 0. And that's the tough way of going. We're selling asset by asset. The portfolio deals are pretty hard to find. I haven't seen a big portfolio transaction outside of maybe sort of internal unbundlings or things like that for a long time. So that's asset by asset, and that does actually get us the best price, but it's a long road, but that's just something that I think we wanted to highlight in terms of this is the journey that we're on and we are making progress, but it's a big shift just yet. On the right-hand side, there was just distributable income. And really, what that is, is just how much of that distribution was made up with operational cash flow in 2018 following, I think, the go-go years of sort of 2014 to 2017. When capital was readily available to us, so we didn't have a problem raising equity. It was 61%. Then in 2019, we did reduce that 67%, end of 2020, which was the year when we finally in COVID stopped paying out the capitalized interest in a variety of other noncash-backed items in our distribution, 74%. And then the last 2 financial years that distributable earnings number that we present has been 100% backed by operational cash flow, which I think is an important aspect of real estate companies of dividends for the sustainability of these machines. Otherwise, you need to continually raise cash either from the banks, which has a leverage effect or from the capital markets on the equity side, which, as we know, are relatively volatile and that's quite an unpredictable source. So current asset base, this is something that we show every 6 months at our results, making progress in terms of disposing of that noncore, if you look at June 2020, we had ZAR 6.3 billion. And then you might notice as you analytical types do that ZAR 5.3 billion last year, ZAR 5.3 billion this year. But what we did at the end of last year was we reclassified 2 of our larger assets to industrial being our Isando Business Park and City Deep Industrial Park, it might have been, but it give away in the name that it was actually probably more like an industrial asset. So that was about ZAR 520 million that we reclassified and still manage to keep it static. So we have been selling out of that noncore portfolio. Again, this is the target. Just focusing on what we really are good at and what our core competency is, which is logistics, both management and development as well as retail. We haven't done major developments there for a while. The market has been a bit tough, but that's certainly something that we're open to. And as you will notice from the sales over the last few years, we have been selling some of the smaller noncore retail. And in time, if opportunities present themselves, we would be open to either acquiring or developing more of the retail that we saw in his team manage. Just -- so really, that was -- a few slides ago was where we are. The last slide was where we want to be. And this is just a bit of a report card on, well, where did we allocate capital for the year? And what were the returns in each of those capital allocation buckets? So if we look at the left-hand side and what we've got there in the dark blue is the yield and then the light blue is really the capital appreciation year-on-year. We've had quite significant cap rate compression in the CEE logistics. And obviously, as you all know, past performance is not really a predictor of future performance. So let's just take this as really a statement of facts over the last year. So we allocated ZAR 1.1 billion to CEE Logistics. And then the largest capital allocation that we made was to SA Logistics, ZAR 1.8 billion. As you can see, that total return on the portfolio was 12.9%. So where we have it in green bubbles, it means that the total return was good and above our cost of capital, and we allocated capital to that. Where we've got it low, if you look at, for example, the industry of 5.5%, we give it a green bubble because we sold. So in other words, we disallocated capital from that and reallocated it somewhere else. Where it gets a red bubble is where we allocated capital and the return was low. That was really just with the FFA buyback. And it's a bit of a blend. We bought back roughly equal number of As and Bs last year. So I think that one probably maybe needs to be viewed in context of the FFB buyback, which was only a price appreciation of 17.6%. So that's really the report card. And I think it talks to what the focus is at Fortress, which is really our logistics development. That's where we're allocating most of the capital and looking to get out of the low return portfolios. That ZAR 1.8 billion is net. And if you look at the ZAR 12.9 million total return, it actually gets a lot better than that if we look at the yield on the incremental spend. If we look at those developments, we're looking at Clairwood that's about 12% yield on the incremental rands that we're spending there because we've got quite a lot of sunk cost in terms of the land, the soil improvements, the bulk earthworks. So that's really a good place for us to allocate capital. So in terms of our strategic focus, as we've touched on capital allocation, especially given recent events, that becomes very, very important. We've always looked at opportunistic acquisitions. As you would have noticed over the last 3, 4 years, we've probably been one of the more significant buyers of our own shares. If you look at the REITs in general, but that is opportunistic. It depends how much excess capital we have at the time what the share prices are, what the likely returns are, what the market liquidity is. So we're always open to share buybacks and other opportunities, obviously, rolling out our pipeline. Noncore asset disposals FY '23 will be much better in terms of asset disposal total than FY '22. In fact, we're almost beating it already. The development pipeline is our core focus, and I think we've demonstrated our ability to roll that out and make a lot of profit. And then another strategic focus is obviously that our search for a resolution to this impediment in our MOI and the dual share structure, and we would really like to continue engaging in time to get to a single share, which would enable us to pay dividends. We don't have a solvency liquidity problem. We don't have an LTV problem. But really, what our issue is in terms of paying dividends is the impediment in the MOI and the dual share structure. So if we could get to a single share, we would easily be in a position to pay dividends to our shareholders. I'm going to ask Ian, just to hand over the birthday boy to come up and he can -- I'll take you through the easy parts of this slide, and you can touch on some of the tax complexities of the current half we're on, which is no longer being a REIT. And really, the reason for that is we have that impediment on paying dividends. And the JSE listing requirements requires us to pay a dividend by the end of October. We can't comply with that and obviously, being a prudently managed business. We also don't want to breach the listings requirements voluntarily. So we are engaging with the JSE. So just the first 2 points there is we remain a listed property company. We have had some questions about when are we do listing, we're not delisting. We're still on the JSE. We're still in the SAPY index and all property index for those of you who understand and manage your funds according to those benchmarks. So we're still listed. We're still there. And actually, it really is certainly not ideal, but probably with our dual shares, the most likely outcome. So maybe, Ian, you want to come up here and touch on a little bit of the tax implications of moving from a retail real estate investment company?

Morning. Thanks, Steve. Appreciate it. So what does it mean for Fortress moving from this REIT structure into sort of a non-REIT world? Well, we become the taxpayer. So currently, we pass the dividend through to our shareholders, and they pay the tax. So the corporate doesn't suffer the tax, the individuals do. In a non-REIT environment, Fortress becomes the taxpayer, but we actually could become quite an efficient tax payer. By that, I mean, we have a significant benefit in that we receive a large portion of exempt foreign dividends in our NEPI dividends. And currently, an allowance that we don't get, we don't have the benefit of is our Section 13quin allowances, which is a building allowance. Now with Fortresses, significant building pipeline and the building that we've done in the past sort of 5 or 6 years, there's an accumulation of these allowances that we will be able to enjoy going forward as a non-REIT. That's something that's specifically carved out of Section 25BB in the REIT world. So we would be able to become quite an efficient tax payer. I have done a slight or a small example as to what a REIT as a nondividend payer looks like vis-a-vis an investment real estate company as a normal tax payer. As if you want to the results presentation, I'm happy to take any questions, perhaps offline on the detail. Moving on to the actual results. We do -- this is a slide we present every year normally shows dividends. Unfortunately, there's dashes in those lines now. The benchmark continues to travel. So that's -- we will continue to show this and that's the FFA benchmark. Whilst the dividend is a noncumulative, it's noncumulative instruments and so on, the benchmark continues to travel at that lower of CPI of 5%. And of course, that stays. The MOI doesn't change as a consequence of us sort of moving into a non-REIT environment. Our net asset value per share year-on-year, slightly up, but against December, down mainly as a result of the change in the NEPI price. Whilst we equity account that investment, the last adjustment we make is to mark-to-market, it will test it against the market value and that results in a sort of a downward impairment that we take in effect, fair value in the investment to spot at balance sheet date. Our distributable earnings, 1707, I'll get to the detail on cash back, et cetera, on that number. And our SA REIT-FFO number, 1911. The difference between those 2 mainly the accrual forward grab in dividends on NEPI and of course, the noncash capitalization of interest that -- sorry, SA REIT would include in their distributions. LTV against our measurement, 40%. SA REIT LTV slightly lower. The reason for that is we don't include the fair value of our derivatives in determining what the LTV is. And with the interest rate increases that we've had and the significant exposure that we've got to caps, that value has increased. So really as a result of the market, it's not something that's tradable. It's -- we don't view it as an asset that we sort of dip in and out of. It's really a hedge on the interest rate, but it has become more valuable as a result of the increases in the rates. So our distributable earnings and what it's made up of, the slide used to be far more complex. As mentioned, all cash backed and pretty straightforward. I suppose one thing to note is the income tax that we currently suffer. That's in the European leg of the business. That number will obviously grow in future if we become the taxpayer. Sorry, on the slide, if I could just mention, again, we have reclined it to SA REIT's FFO number, and that's a 2 in the presentation. Again, happy to take any questions on that offline in a detail. So NAV per share, what's happened over the last 12 months and how has it moved. The significant increase in that movement is as a result of the buyback. So what that means is that when we bought back the Fortress As and Bs, I think it was July through August of last year. We bought them back at a price that was at a discount to its intrinsic combined net asset value. The direct property and development pipeline increases, if we just speak about the direct property first, that's primarily as a result of the acquisition that we did in Romania that was effective July of 2021. We had spoken about it previously, but the sort of cash flow only occurred post year-end of 2021. And about ZAR 850 million of new assets built in the development pipeline and you transferred out of developments and into direct property and then the balance in the development pipeline is, of course, the significant building work at Eastport in Pick n Pay and the activity that takes place down in Durban at Clairwood. A big negative movement in our listed portfolio. That's really the price movement in NEPI's price year-on-year. I think it was ZAR 101.22 at 30th June, 2021 and at close of business 30th June, 2022 8709. So that's about ZAR 14 and of course, with 144 million shares, that's about ZAR 2 billion reduction in value. How did we fund it, and that's the increase in borrowings that you see there of ZAR 0.89. Liquidity and funding. We're in a pretty good place from a liquidity and funding perspective. LTV of 40%, as mentioned. We issued 5 new sustainability-linked bonds in the last 12 months, totaling ZAR 2.2 billion. And this really aligns with our strategy and target debt mix between secured and unsecured. We've had a target of 80-20 being 80% in the secured space, 20% in the debt capital markets. We don't want to really move beyond that. So we're sort of in a steady state in terms of that split. And as the portfolio or the need of cash grows, we'd look to grow in that same proportion. Those sustainability-linked bonds that we issued in the current year in 10 years or 3, 5 and 5.5 years. And the sustainability-linked bond that we did in 2021 has just gone through its first KPI measurement period. We'll be sending that shortly, and obviously, repricing, which is that we've obviously met that KPI. Our LTV proportionately consolidating NEPI's 45.2%. Just a couple of other notes there is that we repaid some debt in the DMTN market price year-end, and we've refinanced about ZAR 1.6 billion and about another ZAR 1 billion late-stage refinancing of the circa ZAR 5 billion that comes up for maturity in the current year. Our interest rate hedging, what we try and do on this slide, whilst it's quite complex is really to look at our true and economic position of what our exposure to variable rates are. So we take our drawn position. We add to that commitments, capital outflows and capital inflows, getting to the -- to sort of the more sustainable and permanent position. And then on that balance, we make sure that we're sufficiently hedged. The risk, of course, is if you just take the drawn position, you run the risk that you completely overhedge, and that can come at a significant cost if you don't get it right. One change from prior periods is that we've assumed circa ZAR 750 million of cash retained in the business from the nonpayment of dividends that will, over time, reduce the term of funding requirement. So how do we do that hedging? We do it through caps and swaps. We still favor the caps. We're sort of 60% caps versus swaps and that is the -- sorry, that is the maturity profile of those hedges. We do get a number of questions on the caps because, of course, in forecasting at the moment, it's not as straightforward as a swap. We haven't locked in a particular rate. We can wear some of the interest rate increases up to the strike price of the caps. So the combined swap and cap rate, whilst 6.77, we start to actually see some benefit on the caps from about 5.68. So we are on the brink of now starting to receive sort of cash income as a result of those caps. Of course, it depends on where the interest rates go in the next 12 months and thereafter. Our facilities expiry profile, as mentioned, and I sort of make this point every year with a debt requirement of around ZAR 20 billion and the tenures of between 3 and 5 years, we're always going to have between ZAR 4 billion and ZAR 5 billion coming up for maturity every 12 months. So it's an ongoing process with our funders, ongoing engagements and obviously, refinancing. So of that ZAR 5 billion that we see at 30th June, 2022, we've already refinanced, as mentioned, 1.6, late-stage negotiations with another ZAR 1 billion and the balance sits sort of post year-end. One doesn't want to go sort of early grab that and refinance it because it also comes at a cost that you don't want to bring forward. I suppose the other important point there is that our all-in cost of funding 7.86. The way we calculate that is to include the amortization on the caps because they obviously have a premium when you enter into them and the smooth cost that comes with the swaps. So all of that included in the actual pricing paid to the banks and the funders, 7.68. And that's just to confirm our -- the mix in terms of unsecured versus secured. We're at that 80-20 mix, which, in our view, is sort of prudent enough but achieving some pricing benefit and flexibility in the unsecured market. And the plan from here on is sort of to keep it stable just to continue to refinance and follow the trend of what's needed in the business. Thanks. I'm going to hand over to Vuso to go through the retail portfolio.

Thanks, Ian. Good morning, everyone. This building here is in Bloemfontein. It's one of our retail assets, Central Park. It's quite a busy building. It's got, you'll see, it's got the buses on top. I think just from the bus rank we get about 40,000 people per day. We've recently installed a solar there. It's quite a busy area. Let's say, we get about 1.8 million visitors. I think this will probably take in winter. One can get very cold there. So it's anchored by Boxer, and we've got most of the retailers, the fashion retailers, your TFG group, your PEPCO group and most of the banks are there. I think we did a revamp here about 2019, I think. The building incidentally on the left-hand side, that's the taxi rank revenue probably built, around about 2017. We spent about ZAR 800 million, but the taxis never came. So -- but we benefit from it because the taxi park around our center. Just as an outset, I think our portfolio is still doing well, trading well. We've got about 52 buildings currently. After year-end, we transferred Philippi, which is a noncore building. We've got another building Market Square Grahamstown that we hope to transfer in the coming weeks. So our value is at ZAR 10.1 billion in terms of value. Something I want to highlight on this slide is the reversion is quite topical at the moment. We're negative 2.1% -- 2.8%. I think generally, we've seen with -- the improvement in trade, we've seen the negotiations being better with tenants. We -- in the period, we renewed about 466 leases or 466 leases came up for renewal this year, and we retained most of them. We retained about 376 and signed 19 new leases in this period. I think going forward, in the short term, we're likely to see a similar single-digit negative reversion, mainly because of -- I spoke before about it previously Mayville in Pretoria. That's a leasehold to Checkers on the whole building, which is about 22,000 squares. That's coming up for renewal end of November, and we're expecting to see a drop in rental there. So I think that would be the main driver. But generally, in the portfolio, we are starting to see positive rental increment. As Steve mentioned earlier on, we're seeing -- with the rise of inflation, we've seen a lot more a decrease in pressure of the national retailers trying to push the escalations down to 5%. So in our negotiations now, we're negotiating between 8% and 7% with some of the bigger nationals who might end up at 6 store, but I think on the general on the portfolio, we're trying to increase that escalation rate. Our WALE remains relatively unchanged from the last time. Vacancies fairly flat, 2.6 by value, 3.6 by GLA. I think as we've got a few redevelopments underway. As those redevelopments come online, we should see a slight decrease in the vacancy level. Income wise, I think the portfolio performed pretty well and our collections for the last 12 months are sitting at 98% of what we build. So I think we've got a fairly stable retail portfolio. Trading-wise, as Steve mentioned earlier, if we compare 2021 to 2022, 6.8% up. 2019, which was pre-COVID, 17% up. So I think most of the retailers have returned to, well, pre-COVID levels and doing well beyond that. I mentioned previously that we didn't suffer too many losses of tenants in this period, whether it was through COVID or through the rise that we saw in the previous year. What we're seeing, I think, is a result of the economic issues that we've got and also inflation. A lot more people are focusing on the, call it, essential goods, being your grocers, your pharmacies and also there's a lot of activity in the fashion -- in the value fashion category. If we split our performance, our turnover performance into our various categories, the townships are still slow in recovery. I think a lot of that has got to do with the fact that we're still dealing with the residual from the rise that we had last year, but also that's where probably unemployment is felt the hardest. Having said that, July, August have been very strong of those -- in those centers. So I'm hoping that this will increase in the coming year. The CBDs quite active. Quite active around the taxi ranks, the bus ranks. So I think it's normalizing or normalized. Suburban centers obviously benefiting from -- depend of convenience dropping. But also, there was a big tick up last year, from the restaurant and fast food retailers obviously coming off a lower base in the previous year. In terms of our plans for redevelopments in the coming -- in the near future, Palm Springs, we had a redevelopment there. We're busy with BO, so we're handing over to tenants for beneficial occupation. That should open for trading November this year. Weskus, we relocated Food Lover's Market from a smaller box to the ex Edgars box We gave BO impact yesterday, and we expect those guys to trade also in November. We also had -- we deal a deal with McDonald's, and I think that will open in November as well a drive-through, and we're negotiating close to finalizing the deal on another fast food drive-through that will open early next year. Mahikeng, we did the deal with Shoprite Clicks are coming in. They will expect in November to open for trading. And then Vryheid Plaza, which is in KZN, northern KZN, we're expanding the center from -- by about 7,000 square so about 16,000 in total. Again, we've done a deal there with Shoprite Clicks some of the TFG brands, some of the Mr Price brands, particularly on the Studio 88 side. And that will -- we just started the earthworks there now and that we expect to open October 23. So I think generally, the portfolio is doing well, and we'll maintain and improve on where we are. This is a center of ours in town called Park Central. It's -- I've shown it before, it's right next door to the North taxi rank. Also, quite busy. The buildings that you see, the office buildings are fast being converted into residential. Mark Stevens used to say that this is probably going to be the first center that opens for 24 hours in the portfolio. It is quite busy also installed solar. We get about, call it, 800,000 people going through the building, boxes are anchored there. We've got all the Mr. Prices, the TFG brand and the Studio 88 brands out there. So that's the North taxi rank. So they've been wanting to revamp this for a number of years. It looks like they've got their budget for it now. So there will be a renovation there. It's got about 4 levels of taxis. I'll hand over back to Steve now. Thank you.

Thanks, Vuso. Central Park and Park Central, I mean, we still get a little bit confused at the office. I hope you are following, and they're similar assets, but it really does look great with the new solar shining light in the deteriorating Johannesburg CBD. So I mean, just in terms of the logistics portfolio, ZAR 10.2 billion of income-producing assets currently. So roughly the same size as the retail. I think a couple of interesting points on this slide is the building valuation, ZAR 8,400 per square meter. Currently, we've had quite a mild time in terms of construction cost increases over the last 5 years up until the last 12 months. I think we've seen about 40% to 50% in terms of hard construction cost increase from where we were. So it's 5,000 -- 4,500, 5,000 roughly. It really does depend to sort of 7,000, 7,500. So it's been a really huge increase in terms of the hard construction costs. And for those of you who have ever listened to Sam Zell, he's a big proponent of buying assets that are below replacement cost. And our logistics portfolio almost without fail is significantly below current replacement cost, which is leading to 2 interesting things: number one, the new developments that we're looking at are definitely with asking rental we're able to ask for more. So [indiscernible] if I can just use that as anecdotal evidence was ZAR 60 to ZAR 65 for 5 or 6 years. That was it to everyone was 60 to 65 on new developments and you would get these escalations and it would come crashing down to 60 to 65. Otherwise, the tenant were threatened to move. Now with number one, lower vacancies and higher construction costs, that has definitely shifted. And I think it doesn't shift incrementally. It's kind of now 75 to 80. That's what people are certainly asking. So I think it's positive, certainly for our portfolio. Obviously, the higher construction cost, you need a higher yield -- higher rental and the yield is the output. So whether we get an actual higher yield, I'm not so sure. But for the existing portfolio, there's definitely a benefit. And actually, one of our assets in Louwlardia, we had a positive rent reversion on a renewal for 5-year leases for the first time in quite a while. So there's some definite anecdotal evidence that I think we're going to see lessening of those huge negative reversions and some real rental growth. So the reversions there, minus 9.3, that was last year, relatively small base and some unique asset sort of deals that we did there. One was a 6-month lower rent, which ramps up, but we just print it as the formula spits out. So I think don't read too much into that, but I think it's going to probably get better. And actually, the one step, which we've seen for this year, for the first time, is that we've always had renewals reverting at a less negative rate than new deals. So that's why we've always focused on tenant retention. Actually, the first time this year, we had the renewals actually now slightly below the new deals, which I think is now actually quite a positive trend in terms of tenants used to be able to threaten you with leaving. And I think now they're going to find that more difficult as the landlords have less vacancy and a slightly more pricing power. So these are the developments completed during the year, actually not that many that Kings Rest is the whole container park. So the GLA is a little bit misleading. I think the exciting part is what we've currently got under construction. In our pipeline, Pick n Pay will finish during the course of the year. Some of those will finish during the course of the next financial year. Yes, as I said, 15, 10 -- I mean we've got 3 15-year leases that are currently pre-let and in the ground, Imperial and RB Logistics 5-year lease. Retailability that's the Cornubia redevelopment. For those of you that follow us quite closely, we had a building burn down last year, July in Cornubia in KZN, [indiscernible] and that one is being rebuilt and actually expanded the tenant had about 10,000 squares. They need more space, so we're going to do that on the site next door. This is just a slide that we've shown. I know we include Louwlardia which is actually all done. But about 4 years ago, we said we've got 1 million square meters of GLA in our -- in the Fortress control pipeline. I think it was a daunting task at the time in terms of when we looked at the time line to roll that out. We were involved in N1 Business Park and in Montagu. So we saw how long those parks took to roll out. And I think we were hoping that it would be inside of a decade. I mean it looks like it's going to be inside of probably 5 or 6 years to roll out that whole pipeline. We only have -- if you look at the bottom right there, 300,000 square meters left from 1 million 4 years ago. So I think it's been -- it really has been a big shift and a big positive shift in terms of rolling it out and in terms of our capability to deliver the projects on time, on budget and actually ultimately what the tenant wants. And to be open to tenant needs, if they want to join a joint venture, if they want some ownership in the assets, we're more than happy to try and accommodate them. So this is Eastport. It's our big one, just north of the airport on R21. This is where we're doing the largest single phase distribution center in the country for Pick n Pay 164,000 square meters. That's it on the right there. On the left is that funny looking thing, which is a data center, which we don't own. So we do still have some remaining GLA at this park, the construction side in front there on the left is for Crusader Logistics. They've just signed a 10-year lease with us, also with an option to purchase a portion in year 3, whether they exercise it or not. I'm not too sure if they do, we'll make some money. So actually, that roof sheet that you just saw on Pick n Pay set a Guinness World Book of record for the longest single rolled roof sheet ever. And as our architect, he was quite excited about it and his daughter is in her early 20. She said, that's probably the most boring world record ever. There were a lot of engineers, kind of a lot of middle age, people are getting quite excited about it. We thought it was exciting, but maybe for the Gen Xs or the millennials, it's not so good. So Savino was one that we did actually sell to them also at a fantastic yield, 7% Teralco. They do logistics Tiger Brands, take a lot short-term lease, we'll renew that likely with someone else. And then that data center is actually the largest data center in Africa. I think it's about a ZAR 4 billion cost, but we sold the land to them. But it's quite a nice tenant to have in the park uses 70 megawatts of power, which is like a small power station. Just some highlights on Eastport. And that's the map. So it's really the piece on the R21, which we've got left and then that larger bit on -- between R21 and the coming R21 Expressway. So I think the rollout of this park has also being fantastic and very profitable for us. I think the entry price on the land level was probably sub ZAR 1,000 a square. The other big park, which we've got, which took us a long time in terms of the EI process and a lot of deliberate obstacles that were thrown in our way being Clairwood. African Sugar and Super Group sort of combined to take up those ones. On the left, there is that one that I mentioned with Sammar and Sasol, just on the left there. They'll take 38,000 square meters of space. I think SG Consumer are in there. They're very, very happy. We hope that the whole of Super Group comes and maybe takes a bit more space at Clairwood. So this park has been -- it's been a long road, which cost us a lot, we've had to deal with the[indiscernible] issues, with the soil improvements. I love this container terminal because suddenly, the port is congested, and this does actually link in with a lot of the tenants in terms of what Kings Rest do. And some of the tenants that are looking at moving to Clairwood can use their capability in terms of container handling. So this is where Imperial are coming on the back of a Diageo contract for 5 years and RB logistics to a third-party logistics provider also moving into the rest of that building. So that's just a bit of waffle on Clairwood, but this is the interesting part here is what we actually have left on this huge site, which is quite daunting at the beginning. So if you look at that slide, Pocket 6 where it says not constructed, Pocket 5b in the middle, not constructed and Pocket 3c is all we have left, once that's rolled out, Clairwood will be completed. And the rest of it is pre-let and under construction. So I mean, it's really -- it took us a while to get that first building up. But once we did that, it really just gained a life of its own. And in terms of that Durban South Basin near the port, I mean, this is an absolute standout asset. There's literally nothing like it in KZN. Longlake Logistics also in 3F up [indiscernible]. We sort of had 2 phases the one we did with Zest, which we've announced a few times in Cargo Carriers. But on the -- if you look at the bottom of your screen there, that's Phase 2, which we've done a 20,000 square meter spec development, and we can do another 40,000 square meters of GLA on that platform. And if you drive on the N3, I mean, it really is -- you almost get a view of the whole of the northern part of Johannesburg. So this one is on spec. We're negotiating with a few tenants that will be ready in a couple of months' time. I think this node is actually fantastic. It's on the N3, it's near all the prime assets, Longmeadow, and they will extend that road, which will actually go and join the N1, the K113 extension. Our focus, as always, just really converting the land to income-producing assets and rolling out the pipeline. So this is part of our noncore assets is our office portfolio. Interesting to note that we've got ZAR 1.6 billion of completed buildings there. Central and Eastern European income-producing assets is now equivalent to that also ZAR 1.6 billion. Yes, we did one really good deal there at Oak Avenue without insurance, so we leased that on a 3-year basis to them. Short WALE, negative like-for-like, negative reversions, but the one pluses are building valuation per square meter. I think that's probably now less than half of replacement cost, and we are negotiating 2 sales actually with residential conversion experts want it on a portion of [indiscernible]and one on a portion of [indiscernible]. So it's complicated, but we're hoping to close those deals. Also noncore for us, but actually quite a few positives in this industrial portfolio. If you look at the vacancy, how it's come down from 12.4 last year to 7.4 like-for-like NOI growth. I think if you had asked us 2 years ago, we wouldn't have expected that in the industrial portfolio. And actually, I mean that building valuation again sub ZAR 5,000 a square, I mean it's just crazy how cheap the space is. So I think really, the focus here is to sell the assets and to reposition them as we've done within a space. It's really -- I think that portfolio that we put together with them of ZAR 1.2 billion, I think it was 12 assets from us, 10 from them, there's been NOI uplift. I think there's -- they've reenergized things. For those of you who have seen them, I hope that you kind of share our view that this is really something quite exciting for us to do with our older industrial assets. And for those of you who haven't seen them, they're all over the country, I really suggest that you go and pop your head into one of these Inospace buildings. They are exciting. And the reason we partner with Inospace is they've been doing this for years. They've got experience. They've got all the systems. I think head count is about the same for their small portfolios, our entire Fortress team. So it's a lot of admin and you need a lot of good systems and you need the capability to cut up the space and deal with tenants who are signing a 5-page lease and are in for maybe 6 months, 9 months, 1 year, 2 months. So it's a lot of admin that we prefer to outsource to them. Property disposals just in terms of our Disposal for the year, 577, again, at a premium to our previous book value, which I think is positive and held for sale already ZAR 550 million of net proceeds. If we exclude Pick n Pay, so we're already almost at the same number in absolute terms as we were for the current year and what we're expecting for next year. So next year, we will get quite a lot of cash from the sales. For those of you who follow the market out, we own 23.6% of NEPI Rockcastle. You would have seen they had results a little over a week ago. I mean, it remains the largest listed property company on the Johannesburg Stock Exchange. Liquidity of EUR 1.1 billion, EUR 400 million of which is in cash, which I think in euro still has a negative yield. So it really has become a bit of a Fortress balance sheet in terms of NEPI Rockcastle. But we like that investment. It makes a lot of sense for us. It gives us a lot of stability. And in terms of liquidity, it's highly liquid in terms of the value that trades there on a daily basis, the low LTV in a growth market with some of the best assets. So that we do consider core, and I think it really does underpin a lot of our earnings and our balance sheet. This is something that we started just over 2 years ago, we bought some logistics assets in Central and Eastern Europe. We've now got ZAR 1.6 billion of income-producing assets and about ZAR 0.5 billion in terms of a pipeline there. I think the one standout there has been the like-for-like valuation change with the cap rate compression. Year-on-year, there was a lot of hysteria around logistics. So we hope that it doesn't go the other way for next year. I think it's likely that it holds its value. But there was just a significant cap rate compression, but that was also combined with real income growth there. I mean a strange set of anecdotal evidence in terms of where you've got a great market is our biggest tenant in Romania and our biggest tenant in Poland, the team there approached them just to extend the lease, and they said, sure, no problem, we'll extend the lease because there's such a shortage of supply that they're happy just to sign a lease extension to ensure that they've got security of tenure on those assets, and they don't risk their business in terms of getting kicked out. So that was actually why the WALE increased significantly from last year. So that we've got a little bit of space remaining at Bydgoszcz, which is a very successful park, some at Stargard and then the 2 sites that we acquired in Lodz and Zabrze. This is the Bydgoszcz park. It's just sort of northwest of Warsaw Bydgoszcz and it's about 700,000 people in that city and the wider area. It really has been successful. When we bought it, we had hall F and a little bit of that hall and that was it. And there was a shell behind it where the guys sort of had a bit of a funding issue. They had borrowed a lot of money from some mezz lenders and eventually, we bought the assets from the mezz lenders. And that was where we -- we got the assets and with the assets, fortunately came a really great guy, [indiscernible] who's now MD and a lot of the development managers and leasing managers came from the original developer who ran into some financial problems. But this one is fantastic. That's a German company there who actually have their production plant linked via a small little private road. So it's very difficult for them to move out of our park. Lots of demand in Bydgoszcz. So the one in the middle there, which we call hall E, We completed that blue part just after year-end, that's all leased, and we're continuing the extension there in terms of Phase 2 and actually, the tenant from Phase 1 has pre-let about 1/3 of Phase 2. So we'll continue that. And then we've got another piece there. Stargard, which is close to Szczecin, we also acquired that as part of that portfolio. This land Lodz, we partnered with MDC2, but we own 100% of it. They had an option on the land, and we then acquired it. So they're assisting with the development. That's Zalando, one of the biggest online fashion retailers there. I think that's just over 100,000 square. It's really on the highway, the A1 highway, which runs from Krakow through Warsaw or [indiscernible]. This is a fantastically located site in terms of Polish logistics right in the center of Poland, we're dealing with a number of big tenants who want to run their big box distribution centers from the site, similar to Zalando. Zabrze is one that we acquired on our own. So we haven't partnered with anyone on that. It's also in sort of the Silesia region in Poland, also can do 80,000 square meters there. I think it's a fantastic site. And the site next to us actually slightly further away from the highway has been acquired by [indiscernible] for one of their big DCs for Poland. As previously announced, this was an acquisition we made in Romania ELI Park 1. We did it in July. And just in some of the stats like the like-for-like portfolio, as we've included this at cost because we've held it for most of the year. Also some nice cap rate compression that we've seen in that market since we agreed that price. So just -- a slide just to touch on some highlights from ESG. The renewable energy for us is obviously important, not only globally in terms of sustainability and where we want to take, I guess, the global journey to carbon neutrality at some stage but also for our unique circumstances in the country with load shedding. Really, what the focus has been is it's been on solar, but we've also focused a lot on smart metering and giving tenants access to our portal where they can manage water consumption and electricity consumption. I think there was a little bit of a neglect on the demand side. So we've now got systems in place that we're rolling out across the portfolio where tenants can -- if there's a water leak, they can set an alarm so that we can pick up when water is leaking rather than just at the end of the month and then you wonder what happened. And also in terms of live electricity usage per tenant per shop where they can see in terms of what their actual usage is in terms of time of day and they can set alarms so that if something looks abnormal, someone can go and investigate. And also just in terms of really getting them efficient, making sure the phases are working. So we're spending quite a lot of time on ensuring that the demand side of the usage is lower and then also looking at rolling out solar PV across the portfolio. It's not a lot of money in terms of the CapEx that we can spend, but I think it does make the returns a little bit better per asset. We have done one battery storage at Bloemfontein Value Mart and we'll roll that out across the portfolio, but it does hamper the yields in terms of the cost of batteries at the moment. On the social side, we had the same level B level rating as we did last year. Our Food & Trees for Africa partnership, I think, is -- I mean, I know it's going to sound here -- whether it's bearing fruit in terms of the number of trees. I mean it's 19,000 trees that we've planted since inception. Education programs, I think that's something that we've always looked to do in terms of our CSI spend is to prefer pushing money into education. And in particular, where it impacts our business, property, finance and things like that. So we have given a lot of bursaries, a lot of school projects that we support with that CSI program. Governance, not many changes in terms of that slide and you would have seen it mostly on since. So industry challenges very briefly. Obviously, as I mentioned, the steel price increase, but that's both a challenge and an opportunity for us to hopefully increase some rental. I think in terms of construction costs, in general, there's like a little bit of retribution from the contractors in terms of what we've seen. I think they're now jumping on the bandwagon and everybody is looking to try and push their prices up because they've been low and their margins have been squeezed for so long. A couple of other challenges is just at council level, that's a challenge both in getting plans approved in getting services delivered and in combating the extortionist increase in rates. And I think what we're doing there is really trying to work with support and to support them in terms of their legal challenges that I think they're going to launch against municipalities in terms of the constitution to try and at least get some airtime on this rate issue. I think it's sort of -- it goes a little bit under cover, but the municipalities really are, I think, abusing their power. And I think it's bad for business. It's bad for those municipalities, and we're soft targets being commercial landlords. Yes, SA has a low growth environment as we all know. So that is a challenge. But hopefully, it's showing some green shoots, and it's most bad as we always think. Prospects, as we announced in our trading update yesterday, really just -- really the sort of estimated tax charge that we'd have in a non-REIT environment of circa ZAR 350 million. And then we will -- we did factor in the retention of some cash, but unfortunately, interest rates from where we last forecast, we're ahead. So we did take a more -- also more conservative view on our interest rates in that forecast predicting a further 75 basis points until the end of June next year, and that gets us to the ZAR 1.6 billion. Just some portfolio stats that are really just a summary slide. Okay. Maybe Ian, Don and Vuso want to join me up here and then if there are any questions from -- should there be questions from the floor first. I'll open up for questions.

Tony from Asset. I just wanted to know what is the difficulty that you're experiencing at the moment converting from a deal equity per share to a single one? And if you do manage to get it sorted out, would you then revert back to being a REIT?

So I think the short answer is yes. If we did manage to get it sorted out, we would all likely to revert back to being a REIT. And I think I would imagine the regulator needs to make their own call being the JSE. But I would imagine that they would probably be quite amenable to us once we had removed that impediment in terms of our constraint in our funding document to the MOI, if we convert it to a single share, we could pay dividends. And I'd imagine that take quite a lenient stance on us converting back to a REIT. But a single share REIT is certainly the ideal structure for us.

Have you given yourself a time frame?

We haven't. Ultimately, this is up to shareholders. And when we put it to them, we didn't reach the required threshold of 75%, but we'll continue to be open to discussing that as with them. But unfortunately, we can't risk a noncompliance with the listing requirements.

Do you think it will affect your share price?

I'm not too sure. I think if I look at the share price, it is, in my view, so cheap, maybe I'm biased. But it is so cheap for the access to the portfolios that you are getting that I think logic will prevail. And ultimately, it's really just a tax status between the company and the shareholders. So we pay the tax versus the shareholders paying the tax, and I understand that some shareholders have got different tax rates. But really someone paying the tax in the system and at the moment, it's us. So I don't think there's going to be that much of an impact.

Last one, the -- your retail portfolio is in a lot of deteriorating CBDs. How difficult is that to actually operate in those environments and especially when you're looking at CapEx to improve those properties in those areas?

Vuso?

I think what we've always done is we've always tried to be, call it, oasis in the maze. So we do tend to spend a lot of CapEx on our buildings in those CBDs because what you want to do is you want everyone to shrink to you, with the shrinkage. So that's the aim. So we have seen a continued deterioration in the CBDs. We're obviously engaging with the local authorities trying to put pressure working with other businesses in and around us. So yes, that's how we handle it.

Talk about the ratio of earnings to benchmark before you'd look at -- planning to be REIT, do you a ratio in mind that you're thinking of?

No, we didn't make that -- the Board would need to make that call at the time.

Okay. And then regarding the tax rate, current one is about 18.5% effective. Approximately, is that a similar level that you see over the next 3 to 5 years? Or do you expect some improvement given your development pipeline?

No. Sorry, it's a -- forecast is a little bit higher, and I did make a point there that we need to do a bit of an internal restructure. We've capitalized the business within Fortress. There's circa 35 companies that sit within that group of companies. And bear in mind that a REIT is a taxpayer like any other company. It just enjoys one additional deduction being the 25 BB deduction. Now we have capitalized those businesses as if each one of those are REITs, we will need to do some work on an internal restructure and then thereafter, it will lower the tax rate. But forecast for next year is a slightly higher rate because we pre-that restructure, we will lead a little bit more.

How long do you think the restructure will take? Could you be done in the next FY '23? Or do you think it will be a up till '24?

It will be done during the course of '23, but it's not as straightforward as one thinks. You've got equity capitalized businesses that one needs to ensure there's appropriate tax deductions put in the right companies. So yes, 2023 is certainly doable, but -- yes.

Just on the modeling, I mean, I guess you made the point that you made some conservative assumptions in terms of debt -- but I guess a lot of the interest expense savings, probably disappears, tax have already gone up quite aggressively. Can you maybe unpack, I mean, through debt prepayments, share buybacks and reinvestment into the pipeline, how do you stack up those alternatives? Because one would think maybe the next 2 years, while you did it, I mean, share buybacks might be an option. And then on the LTV, I mean, what sort of LTV do you expect to merge 2 or 3 years out, I mean, as you generate a significant amount of retained earnings?

So I mean, on the LTV one, I think our LTV is comfortable at the moment. If it was significantly higher than where it is now, I think it would get into a range that it might become uncomfortable. So I think that's where we are with the LTV. I think 40% is probably quite comfortable 35 to 40 years is good. In terms of what do we do with that cash? I think it really depends on what -- how much excess capital we have and what the opportunities are at the time. Rolling on our pipeline has always been and remains our top priority because it converts those parks into really fantastic yielding assets. And I think also there's a benefit in having a totally complete park rather than pockets which are still vacant land. So I think that's going to be our -- in terms of our top opportunity. And in between finding capital allocation opportunities, be it opportunistic acquisitions, buybacks, we'll pocket in debt. So I think it will be probably a combination of all of those.

On development, I just wanted to find out what is the current value of -- current development -- of developments currently being undertaken? And the second question is, do you develop on spec? And if so, what sort of sizes are you developing?

I think, well, your first question is what's the value of our development partner at the moment, I think we've got about ZAR 4 billion still to go in terms of top structure and rolling up the pipeline. Yes, we do love our step point space, which is quite a major manner. Our typical size, correct me if I'm wrong, it's about 20,000 square meters, about 20,000.

And then my second question on the direct industrial portfolio, how many assets do you have? And of this, how many are you selling?

So we've got about 40 industrial assets, excluding the Inofort ones.

44 immediate sale, and probably just a few more than that and then 29 office buildings in the portfolio, remaining portfolio.

But we'd look to sell all of them. Yes.

Including offices?

Yes. Yes. offices and industrial. We'd look sell all of it.

With your profit spending up, Steve, are you searching for more land? And if you are, where we are those pockets of land that you are trying to secure?

Look, I wouldn't say searching, but we're certainly open to it, especially where it's around our existing parks. I think the benefit we have now is we understand where the rentals are. We understand where construction costs are so we could probably be a little more -- a little sharper with the acquisition price. But yes, definitely. I think it's something that's worked for us. Whether we'd go out and look to buy 2 million square meters, again, quite rapidly, I doubt. But certainly, pockets of land that are in and around our existing parks, we would look at it at the right price.

[indiscernible] change in the development yield that you are managing the [indiscernible].

No. The yields are actually pretty much the same. Clairwood being -- a lot of the ones that we've just finished, as I mentioned, have been at Clairwood that has been a little bit lower, rentals in case but that's really attributed to the history of Clairwood and the soil improvements and the bulk earthworks that we've put in there. But I think in the fullness of time, one step that we had this year is, I think that first building that we did at Clairwood, Sammar 1 is now above the full construction cost even the pre the impairment. So time is our friend in property, and we've already seen that, that building even though it was valued below cost is now actually valued above cost. So I think Clairwood in time, just given the kind of infrastructure that we have, which you don't see under the ground is going to be a pretty solid park going forward, even though we're doing yields of roughly 7% there. Eastport is much better, a lower land cost, lower construction costs. So I think those ones are sitting at sort of -- Crusader is 8.25%. Pick n Pay is quite unique given the joint venture and things like that at 7%, but we do get paid a little bit of a profit on the land and some other benefits there for taking that development risk. Okay. Do you want to give us some questions online?

Sure. First question, what was the yield on properties sold?

So that one is difficult. I mean, if we look at -- we stopped quoting that because that was always our estimated yield, but a lot of them are vacant and then there's no yield and it skews things. But if you use circa 9%, 9.5% as an average, that probably gets you there. But as we sell the vacant properties, we would impute a yield, and it actually wasn't technically correct. But most of them were selling at or around book value, and that's probably 9 to 10 sometimes for some of those properties, a little bit north of 10 on an assumed fully let basis.

Just a question around Inospace, Will the loss of REIT status have an impact on Inospace JV, i.e., did you impute REIT status on the JV?

So it would be a controlled property company in terms of how that works. I think from a tax perspective, it's pretty highly geared in terms of what have we got there, 60% senior debt. We've got ZAR 300 million of May. So the impact on that JV is probably quite small.

Just a question for Ian. Debt went up by ZAR 3.5 billion over the year, but income was flat. How do you reconcile apparent leakage?

I think that when you say income is flat, we're probably talking about the distributable earnings. And of course, that takes into account interest rates as well as that increase. I think the analysts really don't like this idea that caps because you can't forecast exactly what that interest charge is. So if you look at our book, whilst we hedged 75% until you reach that cap sort of rate and you turn it upside down, we float in on 75% of the book. And I think -- so it's a bit of a tricky question to answer because it's distributable earnings includes all of that. And of course, then a fair amount of the debt that we've incurred has gone into the development pipeline, and we don't distribute or include capitalized interest in our distribution, noncash back, et cetera. Some cases, possibly non-value backed. So it's a combination of those 2 items, I would say, that have been broadly speaking.

Are you able to disclose the average rental per square meter receiving at Eastport? It looks impressive.

It looks impressive. Yes. So -- I mean kind of Pick n Pay is a yield-based deal. The other ones, I mean, it's probably in terms of a stellar, it's sitting at 75 would be my guess, and that's why we're doing the new deals, but that's kind of an average on a whole lot of stuff. So it's quite hard to say. But the asking rentals are 75 to 80. That's probably our best indication of where that market is.

Just a question on capital allocation. How do you -- were up development at a 7% yield versus other uses of capital?

So as I mentioned, Clairwood is -- we've bought the land. We've done the soil improvements on a lot of the pockets, other than those ones that I mentioned, Pocket 6 and some of Pocket 5, which are still to come. So I think the way we look at it and the way we should look at it is we're nearly done there, what's the yield on that incremental rand that we spend there, and we're getting 12% yield on the incremental rand, which is actually going to lead us to the correct capital allocation decision. The 7% is the historic cost with all of the rolled-up capitalized interest, et cetera. So I think that's low, would we do things at 7% now off the bat, probably not. But we're in it and the best way out is to complete it, and that's actually going to give us the best return.

There are a number of questions around our holding in NEPI Rockcastle, so I'm just going to bundle those. It's a significant part of our distributable earnings and shareholders effectively can access that on the JSE as a listed company. And then there's a reference to -- within the same question in reference to resilience, they've been setting the NEPI Rockcastle shell and say they want to actively manage assets, not hold passive listed stakes. And then just in the same light, again, investors want to ask us if NEPI can buy direct exposure in the market. And then questions around options in NEPI, if Fortress is to do REIT compared to remains a REIT, hypothetically, if Fortress do REIT and unbundles NEPI, will the unbundled shares be split equally between A and B shareholders?

Okay. Sorry, there are quite a few questions there. I'll start with the last one because that's the one I remember. So technically per the MOI, if we unbundle on capital account is pay and pursue between each share class. We've mentioned before, I think that's almost impossible to do. Number one, the balance sheet takes a whole lot of strain in terms of unbundling our whole NEPI stake. We wouldn't remain a REIT after that because I think our LTV would probably be north of 60. And then it would be one for one. I don't think it's particularly fair. So it's just something that I don't think we're going to do and I think it's probably a, hypothetical maybe yes, but I think it has a whole host of commercial and possibly legal and certainly fairness challenges in terms of unbundling all of it on a per REIT basis. If we had a single share, it would -- certainly, we would just face it, well, what is the balance sheet impact but the fairness and everything else would disappear. So I think when we've looked at and certainly in the circular with the single share, we said, well, why do we want a single share? We've been a proponent of specialization. We specialized in logistic, we specialized in retail, I think those huge corporate finance machines of the past where you just used to bundle up assets, hotels, residential, student accommodate, everything that was technically sort of related to real estate and you'd bundle it and you'd get bigger and the benefit was in the way you raised funds and the index inclusion on the stock market and it was wonderful, but that's gone. We now need specialized funds. So we'd be happy to unlock value for shareholders. In fact, it's something that we've been drumming. But for that, we need a single share. So it's kind of strange. I mean I don't follow the market that much, but it's mostly shareholders shouting at Boards to unlock value. This is the board asking shareholders for support to get to a single share to unlock value for them. So the power is really in the shareholders' hands to unlock value for themselves. In terms of the NEPI Rockcastle stake, many years ago -- it's quite funny that comment because we said that we don't want to hold stakes in companies over which we don't have more than 20% and an influence on the decision-making. So it's funny because that's why we said resilient and noncore and why we said NEPI was core and remains core because we hold 23%. We've got a board seat. And I think we do have an influence on their decision-making. And I think it's a great business today. I don't know where the share price is, but it's probably 20% to 25% discount to NAV, 9%, 9.5% forward yield in euros, incredibly liquid. So it makes a lot of sense for Fortress as a company to hold it. I understand that the shareholders can hold it direct, but with my company hat on, I think it's a wonderful investment. It's very cheap. It gives us a lot of income. So as a capital allocation, I think we're very happy with that. What was the other ones?

No, that's all those questions. Tax question, your tax forecast of ZAR 350 million. Does that include tax relating to FY 2022? And if so, how much?

Simple answer, no, it doesn't. It relates to the earnings for next year. The '22 tax amount of circa ZAR 220 million sort of post-balance sheet event, we'll suffer the charge, but it doesn't impact the distributable earnings of next year or amounts available for distribution at the ZAR 350 million relates specifically to the 1.9 that we had previously guided.

There's a question here, assuming you become a REIT at what ratio will the dividend be split between A and B shareholders? Will the FFA benchmarks still apply?

So in short, yes, the benchmark does still apply. The MOI is still there. Yes, I mean in terms of that ratio, I think just what we said was distributable earnings below the FFA benchmark -- sorry, FFA benchmark has increased to a level which mitigates the risk of distributable earnings being below the benchmark for the foreseeable future at the time of electing to resume dividend payments. So we didn't -- the Board at that future date would need to assess whether it's prudent just to resume paying dividends.

There's some similar question just around when you could possibly call for a revote? Do you see any light at the end of the tunnel and the -- is there enough time? What was the time restriction before calling another vote just around the restructuring?

So technically, per the [ TRP ] regulations, we would have a 12-month cooling off period, but I'm pretty sure if we had significant shareholder support that we were certain that some scheme would pass, we could approach the regulator and I think they would probably take quite a favorable view on that given our circumstances.

Is the company engaging with the JSE to ensure to retain REIT status, notwithstanding the nonpayment of the dividend. I refer to the exemptions provided delta and basis to remain REIT despite the nonpayment of dividends.

So we are engaging. I mean, obviously, we can't -- as I mentioned, we can't compliant currently with the listings requirements, which means we need to engage with the regulator and the listings requirements are quite clear in terms of -- they don't have much discretion to alter them. And as Ian showed, as a non-dividend paying REIT, the tax situation could possibly be worse.

And there's a question around our CEE business here. Can you expand on what your in-house development and leasing team will also entails?

So we do all the development. I mean, obviously, the leasing team, they engage with the brokers. But in essence, it's pretty much a carbon copy of what we've got in SA, which is we lead the developments and we seek the tenants as opposed to what's quite common in Europe, which is you acquire land and you just outsource everything to a third-party developer who delivers everything for fees and for profit share. So we have the same structure that we've got in SA.

There's a question around the FFA benchmark. What is the plan to meet this in the future and there's a math here. You have NAV of ZAR 27 billion, which you earn just over ZAR 2 billion for the FFA benchmark for 2023, that is a net yield of around 7.5%. Can you do that? Or what is your plan?

So I mean, I think if I could answer that as we -- I'm not sure I understand the question or the math, but I think the plan is to stick to the strategy, which is selling the low-growth noncore assets and reinvesting that in the better quality, higher growth assets in the logistics portfolio and obviously, making sure that the retail is running smoothly and NEPI is well managed in paying us dividends. That give us the best growth on our asset level. Compared to the benchmark, the benchmark is now significantly above our distributable earnings. So we do need to grow at a rate that I think is unlikely for us to meet without retaining cash in the business. So certainly, if we retain a lot of cash in the business, we will eventually come out of the -- in terms of distributable earnings to be above the benchmark in the future and at which stage the Board would need to assess whether it's prepared to pay dividends so that we don't have the current situation we're in.

There's another question along the same lines, sort of referring to the interest attributable to developments for the year in the next 6 months period. And whether this were -- if you were to include this, whether you would meet that threshold?

I don't think so.

No, I don't need think so. For this year, it was roughly ZAR 90 million. If you were to say the same amount for next year, 1.9 million plus 90, it'd still be shy circa ZAR 60 million.

And there's a question with reference to Redefine they didn't pay a distribution, but kept restates. How do they manage that?

You need to ask them.

There are no further questions from the webcast. I don't know if you want to open it to the floor again.

Do you want to use the mic?

On the retail, given that your township portfolio turnover growth was negative and also as just sits at 15% by value, what do you consider exiting the township markets? And the second question is you sold 2 small retail assets. Are there more to be sold? And are you looking to acquire more?

The last question. Yes, we do have some noncore assets that are on the sale list. At various stages, we've got some offers, but I think there's quite a way to go with some of those. So yes, the short answer is, yes. We do have some assets to sell. The answer to your first question, no, we're not really looking to exit the township market. I don't think you should read too much into the turnover and where they are. As I said, we still have a little bit of a residual from the rise that happened last year. And over the last couple of months, those turnovers have improved quite significantly. So I think we're happy with that as an asset old.

And a follow-up question. What's -- can you unpack what's happening in the rural retail?

I think the rural retail obviously still benefiting from your social grants. There's a lot more activity out into those markets because I think it's proven to be quite defensive. So again, we're happy with that segment as well.

Okay. Well, we're here for a coffee afterwards if anyone wants to grab us and ask some other questions. Otherwise, some of you will see in the next couple of weeks. But thanks, everyone, for coming. It's nice to have everybody back in person once again. Thank you.

Thank you.

Thank you.