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

Well, thanks, everyone, and good morning, and welcome to our Interim Results for the period from 1 July, 2022 to 31 December, 2022. These are our interim results. And thanks very much for joining us. And to those of you who've dialed in online, I hope everything is clear and working and welcome to you, too. Just a couple of highlights from our interim results. I think we've done really well in terms of the asset management, keeping our vacancies low at 4.8%. These are by rental in terms of the SA REIT best practice. We're going to start quoting the vacancies by rental, but we've got the comparators also by GLA. I think once again, for the 6 months, we've had a good success rate in terms of the sales. We sold ZAR 503 million worth of income-producing properties and 1 vacant land site, which we had earmarked for an office development when we thought that was a good idea many, many years ago, and that was sold for 86%, slight discount of 13.5% to our book value. But I think we're happily exiting those landholdings, particularly the 2 that we had in Sandton. We now have one, which is opposite of Gautrain station, which hopefully we will offload as soon as possible. We also have 12 properties held for sale totaling ZAR 1.7 billion. A large part of that is the Pick n Pay distribution center and their portion of 60%. For the 6 months, we completed nearly 90,000 square meters of logistics space, including a small extension to our Bydgoszcz park in Poland. Currently, we've got 306,000 square meters under development. Just over half of that is Pick n Pay, but we've also got quite a few pre-let deals in the pipeline. We've currently pushed the button on being Crusader in Eastport, Dromex and ZacPak in Clairwood. Retailability up in Cornubia. It's nice to see some excitement and some sort of development at that site where we had that disastrous fire in the riots of 2021. And then also Clairwood Sammar Logistics development for Sasol products. We had completed 2 speculative developments right towards the end of last year that remain unlet, but we're pretty confident of closing those deals within the next month or so. We've got quite a lot of interest at Eastport, and we've -- we are in final lease negotiations on the one at Long Lake. Vuso will touch on a couple of the retail highlights. I think the turnover and the defensiveness of our retail portfolio has once again proved itself. But if you look at the like-for-likes and the pressure on the retail is certainly from -- stemming from load shedding. I think there is a little bit of headwinds coming our way, but I think we'll be able to manage those working with our tenants. And we'll touch on the load shedding and the crisis and what our plans are a little bit towards the end of the presentation. Portfolio statistics, we've got the GLA vacancy there, 4.9 by rental, 4.8, as I mentioned, those 2 spec boxes, if we let that, that will come down quite significantly, probably to around about the region of -- certainly sub-4. In-force escalations, we're seeing some sort of stabilization. We saw those coming off as inflation dip. Now inflation has come back. I think the tenants are happily accepting around about 7%. The retail is still kind of anchored at 6%. So between 6% and 8% is sort of where we're seeing the market comfortable with contractual escalation rates. Our tenant retention is good. Just in the -- I mean, we do quote this number. It's not something that we fixated on. If we can get more rental or we can get a better tenant, we're happy to churn the portfolio. So, I think it's something that we report on, but for us, it's not a particularly important KPI. And then the weighted average lease expiry is slightly up. So overall vacancies, I think, obviously, we've got that green line, which is indicating a positive trend in the vacancies. And I think we've put a lot of emphasis on letting that vacant space. The offices are still too high. So, we do have a number of initiatives. In fact, Bruce is at the moment working with a fine gentleman by the name of [ Darryl Meyers ] to assist in just uplifting some of the offices, giving us some ideas in terms of asset management initiatives. And I think we're hopeful that that's going to bear fruit during the course of this year and just get some more NOI, make it easier to sell. And if we don't sell, at least we're getting some income from those vacancies. Another highlight there is Logistics CEE currently at 0% vacancy. So, this is something that we've shown for a number of reporting periods. It's really the 2 core portfolios, our logistics and our retail. We added a little bit of busyness to this slide, which I'll just stop and explain. We've got our non-core portfolio, which is really our industrial, our office and our other assets, which is some residential. It was a hotel, but we sold that and some other assets in there. So really, that's the source of our funds for our roughly ZAR 3.5 billion to ZAR 4 billion pipeline. So, I think we've done really well out of recycling those older assets and using that cash to develop out the new assets. In the bottom left-hand side there, you'll see our cumulative asset disposals from 2019 is now sitting at ZAR 6.2 billion, and I'll touch on where we spent about ZAR 6.3 billion on new development. So, that is changing the composition of the Fortress portfolio. It's making it far more defensive, and it's giving us a lot more growth and a lot lower operating cost because all of these new buildings come with 10-year roof guarantees, a guarantee on the yard so that the repairs and maintenance on an ongoing basis is certainly much, much lower. And then on the right-hand side there, you'll see our retail component also roughly at the moment, just over half of our asset base, which is our ZAR 10 billion direct retail, which is based in SA, which Vuso and his team run really well and then our indirect retail in Central and Eastern Europe through NEPI Rockcastle. So, this is our target. This is kind of over the medium term where we would like to go. We'd really like to exit the office and the industrial assets, and those other little bits and pieces, use that cash to roll out the pipeline. Currently, on estimated prices and the GLA that we've got in our land bank, that would be about 75% in SA Logistics, 25% in CEE Logistics and then roughly ZAR 20 million to ZAR 25 billion in retail, both here and indirectly in Central and Eastern Europe. I think it's also important to note that, that LTV target, 35% to 40% is kind of where we feel comfortable against that asset base and that will come into play just now. I think one of the key questions that we've got on a consistent basis from a number of shareholders is we aren't a REIT in the current scenario where our distributable earnings are below the Fortress A benchmark. The MOI prohibits the Board from declaring distributions out of income to either share class. So, that does leave us with capital that we had earmarked for distributions to shareholders by way of a dividend as largely trapped in the business. So now the question comes in, well, what do we do with that capital? I think when we look at it and when we discussed it, we don't view that capital as either being sought by us. In other words, we didn't ask for it. And the majority of shareholders didn't want to give it to us. So, I think we need to acknowledge that, and we need to sit with that capital from the retained distributions in a safe form. So what do we mean by a safe form? Liquid assets. We could sit on cash, or we could be more efficient and pay down some debt. So that's what we'll do. We could also buy, for example, liquid assets in NEPI shares, for example, taking up this attractive scrip dividend or we could do share buybacks. And I'll touch on some of the complexities around that in a bit. So, that's really what we're saying with our capital allocation is. We've got these 2 components. We've got the retained distributions, and that's what we intend to do with it, keep it, make sure that that's in the safe and that we don't go and buy illiquid assets. And then we face a scenario where perhaps there's a resolution to the capital structure. We're in a position to pay dividends on a sustainable basis, and we're now sitting on vacant land, which we can't access, we can't liquidate easily. So, I think that's an important an important focus for us to make sure we stick to that, and that the asset recycling is done as we've always done it, that's business as usual. We're selling assets largely at our book value -- at a premium to our book value, and we're using that cash to roll out our pipeline. So really, those are the 2 buckets. We've got the asset recycling, which is the proceeds from non-core disposals and that is about ZAR 5 billion pipeline, ZAR 3.5 million to ZAR 4 million. So, there's more than enough in terms of that asset base to provide the funding we need to roll out the pipeline on a measured and sustainable basis and then the retained distributions. What we don't want to do is go and sort of say, well, let's go and spend that money on silly investments and waste it. So, we're going to look after that capital that we're retaining in the business, and we're going to do that on a conservative basis in liquid assets. So, that's just another graph of what I've been mentioning. Really the asset recycling is the business as usual. The retained distributions is making sure that we maintain optionality and flexibility on that capital. So again, we said debt, liquid assets, buybacks. And I think the buybacks are important because it is a lot of capital. The liquidity isn't particularly high in the market in some of our shares. So, I think we need to make sure that buybacks are executable and that they're effective. In other words, if we want to resolve the capital structure, which we do over the medium term, we need to make sure that we don't go and do buybacks in the market in a non-measured sort of panicked way and that we can do transactions with our shareholders that benefit everyone and accomplish the goal, which is really stabilization and optimization of the capital structure. Property disposals, we moved this up and I'll touch on the asset recycling in the history, ZAR 589 million, book value, ZAR 595 million, but that's actually because we mark these book values to the net proceeds at year-end. So when we take that out, we've actually sold these assets at a bit of a premium to their June 2021 independent formal valuation. So, that was ZAR 589 million for the 6 months. And when we look forward, what are our assets held for sale? ZAR 1.7 billion. Most of that is the Pick n Pay. 60% Secunda, we're hoping to close that deal. That's been a bit of a problem child for us for a number of years. And then assets like Tillbury and other things, which haven't been bad, but they're industrial. It's a mini park. It's performing. It's liquid. It's easy to sell, but I think we need to exit and rotate that capital. So, I think this is something that we just wanted to mention to everyone is, when we look at the disposal proceeds and how we rotate that into new assets, we've just, on the left-hand side there, detailed, well, what does it look like financial year '19 to the estimate of where we land for FY '23. Roughly on average for 5 years, we've been selling ZAR 1.2 billion of assets per year, and that's at an 8% premium to our book value. Now that is, to be quite honest, the hardest way of unlocking and recycling assets, which is asset by asset. I mean I don't know the exact stats, but I would guess it's probably 1 in 10 that actually phone calls we get from potential purchases that lands up in that bucket. So it's a hard way. But it keeps the run rate ticking over for the business. So if we didn't do that, we'd then be sitting and waiting for hallelujah portfolio deals, which we just simply don't see in the market at the moment, or you then introduce investors into subsidiary portfolios, which gives you a much bigger operational complexity in terms of, well, what do you do now if you have an investor, for example, in our logistics portfolio? Maybe they come in and take a 1/4 or 40%. Now you've got a shareholder there, which you often lose control, lose flexibility of what you do with your assets. So this, I think, is the hardest way, but it's also the best way of really, in essence, raising capital at a premium to NAV and redeploying that into growth assets into new assets, which is going to be far more defensive and far more profitable in the future. So, that's the 5 years of history. That's what we've been doing. What do we need to do to accomplish our goal of getting to roughly ZAR 20 billion of logistics assets? Well, we need to keep going. We need to keep selling the industrial, the office assets. We need to keep recycling. We've got ZAR 5 billion, I think, of relatively conservatively valued assets in that bucket. What is our pipeline? It's about ZAR 3.7 billion. Now when we actually look at the developments that we're doing, there are quite a few tenant JVs. So that ZAR 3.35 billion to ZAR 4 billion roughly might actually not be that much. It really depends on what we build. If we do more tenant JVs, that number will come down. But it gives us a lot of headroom. It provides us a lot of buffer to rotate that 5 into the 3.7 over the next 3 to 5 years. So this is Clairwood. It's really come to fruition. We had a lot of stop start with it, with the planning, with the environmental. I mean, as we'll show you now, we only have 2 sites left at Clairwood. Everything else is under development. You'll see the new one on the left-hand side there, that's the 38,000 square meters, which will house Sasol products. That's been a great structure for us, which is third-party logistics providers often struggle with the rentals and with the longer-term leases. So their client being Sasol, has provided us with a step-in rights agreement so that if Sammar ever don't pay the rental, we can force Sasol South Africa to become our tenant. So, that gives us a lot of comfort in terms of spending roughly ZAR 650 million. ZacPak, also a 15-year lease, same lease length of Sasol. Well, Sammar this one. So, Clairwood is a hub of activity at the moment. We're keeping 2 pockets there just for, I think, really for a great pre-let development Pocket 6, and then we've got one just behind ZacPak a smaller one, where we can -- this one actually where we can do 14,000 to 17,000 square meters. Funny enough, I know there's a bit of negative sentiment around KZN. But the floods led to a drop in supply. This is Pocket 6. We think it's the best pocket, so we're going to wait and see what tenants we can book. So, KZN is interesting. There's obviously Transnet. There's the whole illogical shift from rail on to road and then the slowness of the port, plus the lack of supply has led to an increase in demand for warehousing and logistics space in KZN. And we're a beneficiary of what is a relatively sad state of affairs in the province. I'm going to hand over to Mr. Vorster now, who can take you through some of the financials. Thanks, Ian.

Yes. Thanks, Steve, and good morning, everybody. Thank you for your time. We'll get right into it. As mentioned, there will be no dividend paid on the Fortress A and Fortress B share for the 6-month period. But what is important to note is the A benchmark continues to travel. So if we have a look there, and we see the ZAR 0.8832 for the 6-month period, that is 5% higher than the equivalent prior period of ZAR 0.8411. So the way that share works is it grows at the lower of 5 or CPI, CPI being north of 5% for the 6-month period, therefore, only the 5%. Our distributable earnings for the 6-month period, ZAR 801 million, lower than the comparative prior period of ZAR 830 million. But what's important to note on that number is that there's a provision for tax of ZAR 111 million included, which wouldn't have been at December 2021. Our NAV per share has increased by ZAR 1.40. About ZAR 0.06 of that relates to the fair value adjustment on our NEPI Rockcastle stake and the balance being operational income, net of a provision for tax and actual tax paid in respect of our 2022 year. So again, we sort of had some questions around this. The ZAR 1,707 million for the year ended 30 June 2022 was excluding the tax charge applicable to that period. We had raised a contingent liability as at 30 June, which has materialized post year-end and is worn in the 6 months -- sorry, 6 months ended 31 December. All right. Our distributable earnings. If we have a look at this slide, what we try to do here is show the components of what goes into our distribution and the nature of those items, whether they cash back or not. So the starting point is that all of our distributable earnings is cash backed and a couple of sort of notable points on this slide. When we look at our NEPI distributions that we receive and communicate to the market, that would be the actual dividend received, plus the hedged percent or the hedge portion thereof. So for these 6 months, it would be roughly ZAR 663 million, being the EUR 580 million, plus the profit on the [ FEC ] that we had of ZAR 83 million of those 2 lines together. For the next 6 months, in fact, our hedge book and spot is almost at the same place. So, that won't be the case for 30 June. Our interest charge -- when we calculate our all-in cost of funding, we take our direct interest paid to the funders, plus that of the effect of our interest rate caps and swaps. So, our charge for this 6-month period would be ZAR 722 million, being the $672 million, plus ZAR 13 million and 37%. As mentioned, our NAV has increased by ZAR 40, primarily sort of allocated in 3 buckets. Again, mentioned on our NEPI stake, the ZAR 1.06. That's the fair value adjustment that we booked for that 6 months period. And then somewhat misleading is the development pipeline and direct property. So what's happened there is we've spent about ZAR 1.2 billion in our development pipeline, so that's rolling out the developments. But in the 6-month period, we've completed and transferred ZAR 930 million worth of buildings from developments into finished -- sorry, the finished goods buildings into direct properties. So the direct property uptick is, as a result of the transfers in of ZAR 930 million. About ZAR 230 million of CapEx to the existing portfolio and then, of course, net of the sales of ZAR 589 million. Liquidity and funding. If I start by saying that our position with all of our funders is healthy. The relationships with the banks remain strong and good. All of our facilities are within covenant levels. Our LTV has reduced to 36.9%. At spot today, it's probably a touch lower on the back of the NEPI price being slightly higher than 31 December. Cash and available facilities, ZAR 2.1 billion. We've repaid in the 6-month period ZAR 900 million in the debt capital markets. We've closed out a color over some of our NEPI shares at a slight premium and settled ZAR 805 million of debt associated to that product. We've refinanced ZAR 1 billion. We've introduced ring-fenced funding at one of our tenant JVs of ZAR 355 million and specific development funding on our Pick n Pay site of just over ZAR 1 billion. And agreed terms with Nedbank on an early refinance of the entire position of ZAR 4.4 billion, which will be split over periods of 3, 4, 5 and 6 years. And I'll come back to that in a moment. We're well on track to meet our KPIs attached to our sustainably-linked notes, and I suspect that we will probably reach those well in advance of the sort of maturity of that debt just given the accelerated program that Steve will touch on shortly. With regards to our exposure to variable rate interest -- sorry, variable rate debt and how we protect debt position, we obviously take our drawn position and what we -- sorry, what we try and do on the slide is just to explain how we look at our debt. We take our drawn position and we make certain adjustments to get to our sort of economic exposure. So by way of example, if we know that we're disposing of the significant asset in the next 6 months, which Pick n Pay is a good example of, one wouldn't want to include a drawn position on which you hedge because that comes at a significant cost. So our economic exposure at this point, we estimate to be about ZAR 16.8 billion against which we have hedges in place of ZAR 13.7 billion, split roughly 58-42 in caps and swaps. If we have a look at the caps and swaps positions that we have, it's proven to be quite an effective hedge as well as quite profitable, the strategy that we've adopted in our -- the blend of our caps and swaps. So if you have a look at what the fair value of those 2 products are for us at 31 December, swaps, ZAR 142 million and our caps are worth roughly ZAR 460 million. And obviously, we've seen quite a significant benefit as a result of the caps in the last 5 years with the rates moving or first down and sort of coming back presently. Just another point on this, the tenor of our book weighted to the longer end, which obviously means that it's quite healthy and gives us good protection for the coming years. Our maturity profile, if you have a book of circa ZAR 20 million, ZAR 21 billion as we do with tenors of between 3 and 5 years, we will face refinance, call it refinance risk or refinances of between ZAR 3 billion and ZAR 4 billion every year. This year, no different. For the 6-month period, no different. But as mentioned, we've already started to refinance it as we do continuously. And with this -- with the Nedbank refinance and some others, I suspect that by 30 June, this graph will look a lot flatter and longer going forward. Our all-in cost of funding, 8.64%, and as mentioned previously, that includes interest paid and the effects of both the swaps and caps and the effect of the cap that we included in that is also the amortization of the premiums that we paid. So it's an all-in cost of funding that we raised and 3.24% in our European markets. With regards to the split between secured and unsecured, we have a sort of a loose target to -- that we work to of roughly 80-20, but obviously, that will fluctuate from time to time depending on when we've had repayments or we've gone in excess capital in the debt capital markets. We haven't done any placements in the last 6 months. Of course, with the position of being a REIT and not being a REIT paying a dividend, not paying a dividend, treasury management has been slightly more complex than historically, resulting us not going -- sorry, not raising any capital in the debt capital markets, but still pretty comfortable at sort of 16% in the debt capital markets and the balance being secured. The effect of repaying the debt that I mentioned, the ZAR 900 million and the ZAR 805 million, really doesn't reduce an overall debt position because we're obviously spending and we've developed during the 6-month period, but it results in a reduction in available facilities, which in a non-dividend-paying environment, the sort of level that we had at the moment is very comfortable. But the upshot of that is that the unsecured assets over unsecured debt, cover ratio increases to now, currently, we sit at 4.3%. I think at our last reporting period, it was about 2.7%, and our unencumbered asset ratio increases as a result as well, which is currently at 28.2%. With regards to our dividend policy, Fortress remains liquid and solvent. And the Board is willing to declare dividends to shareholders, provided those dividends can be paid on a sustainable, regular and predictable basis. The loss of REIT status ultimately was as a result of not being able to pay a dividend or the Board not being authorized to pay a dividend. The company was liquid and solvent, but we were unable to pay the dividend, which means that we weren't able to satisfy the JSE distributable profit requirement embedded in the listing requirements and as a consequence, lost Street status. The Board obviously wouldn't want to be in the same position again. So, that is the dividend policy as we see it currently. The Board remains with the view that the capital structure is suboptimal in its current form. But fortunately, as shareholders, you have the ability to neutralize the position for yourselves. And if you buy roughly 1A for 1B, in any which scenario being a trade-out, a corporate action, as Steve has already sort of alluded to with the cash that's being retained through a rerating or a dividend flow, you will access that underlying discount to NAV of roughly 50% by owning roughly 1 for 1. Our guidance, we've revised our guidance marginally upwards from ZAR 1.6 billion to ZAR 1.66 billion. The increase primarily comes on the back of better-than-anticipated operational results and an increase in the dividend that we expect from NEPI at this stage. Included in that guidance, we've penciled in electing scrip at the end of March given current prices and the attractiveness of that position. That's obviously offset by marginal increases in the interest rate that we hadn't yet -- that we hadn't forecast when we previously guided in November. In summary, our business is in a strong position. Our balance sheet is in a strong position to provide for growth going forward. Thanks. I'm going to hand over to Vuso to take us through the retail business. Thanks.

Good morning, everyone, and thanks for joining us. In our portfolio, we've got 50 retail assets at the moment. During the period, we sold Philippi, which is in Cape Town and Market Square, which is in Grahamstown. Both these assets sit in our non-core allocation, and these further 2 assets that we hope to sell in the coming months. As Steve mentioned, Secunda, earlier on, there's another asset where we signed an agreement to sell and hopefully, we will conclude that shortly. So consistent to our strategy of selling some of the non-core assets, that's what we've been doing. But all in all, the portfolio sits at about ZAR 10.1 billion. So it's stable around that number. During the period, we had 452 leases that came up for renewal. We retained 380 of those and signed 72 new leases. Our reversions were slightly negative at minus 2% -- minus 2.2%. A large portion of that actually relates to a couple of assets, Secunda being one and Bellstar being another one, which is in Cape Town. Now both assets in a train station and is quite reliant on passengers from the trains. Now the trains have been working since COVID or have not been fully working since COVID. So, we had to do some rental concessions for tenants. So that's a large part of that. Certainly, the tenants are quite under a lot of pressure, particularly from energy costs, which is quite topical at the moment. So, we are seeing some pushback on rentals. But within our portfolio, as I mentioned, the negative reversions relate to a couple of buildings would sit in our non-core assets. Steve talked about escalations earlier on. Yes, the retailers seem to be comfortable around the 6% escalation rate. We are pushing for 7%. Sometimes we get lucky, sometimes we not. But regardless seems to be comfortable around 6%, and we think that will stay for -- in the short term. With regards to our vacancies, by GLA, we're stable at 3.6% vacancy. And by rental, as you can see, we're 2.8% vacant at the moment. I think in the next coming months, we should see that figure decreasing. There's a couple of boxes, big boxes that we are working on to let. So, we're hoping to improve that. With regards to our NOI, so in this last period, we've seen a few increases in some of our costs including energy costs, including some of the municipal rates costs. And also, we've seen an uptick in our security and insurance. Just to touch a little bit on some of those, I'll start with security. So in some of the areas that we operate, we've had quite a few social unrest protests and that kind of stuff. And we've spent quite a bit of money upping our security there. Insurance, I think, globally, insurance is in a bit of an unstable state. So, there was an increase in our insurance. And on the rates and taxes, we recover most of the rates and taxes, but there's a portion that we don't recover. And last year, we had quite a few -- a lot of increases. So obviously, that impacted our NOI. On trading, over the last 12 months, we've seen good turnover figures from tenants within the portfolio. I think the portfolio is up 7.6% on last year. If you compare that to the same period in 2019, we're 14% up on 2019. So that's been positive. A lot of that has been let, and you would have read some of the reports from some of the retailers. A lot of that is let by your grocers. In our portfolio, the grocers are up 9%, which is good. And then some of the fashion, the value fashion is also doing pretty well at the moment. The restaurants have rebounded nicely also, partly due to COVID, but also we've seen in some centers that due to load shading, a lot of people are opting to eat out. So some of the restaurants have benefited from that. This slide just sort of tells us where the growth is in turnover by the categories. So the townships have grown nicely. However, a portion of that is a bit misleading because it's coming of a low base. Part of the previous year was affected by the social unrest. So some of our centers had closed in that period. So that's why it's a little bit an outlier. CBDs and rural, that's stable, supported mostly by social grants and such. The suburban centers, those have seen some positive growth. Some of that, as I mentioned earlier, relates to the uptick in restaurant spend. We own an asset in Klerksdorp, together with the Atterbury Group. So, we own 50% of the asset and then our partners have the other 50%. They indicated to us that they were wanting to sell their share. The asset is a good asset for us. It's over the years performed well. It's almost fully latest 98% let. It's in a busy retail node within Klerksdorp. So, we've seen some good interest from national retailers wanting to open shops at the center. So, we think there's some opportunity there. We have also recently and in fact, even before we received some inquiries to purchase. So if we get an attractive price, I'm sure we'll look at it. So in our view, we've got optionality with this asset. And we think that there's some initiatives that we can do that can be incremental. We think it will transfer maybe in the next month or 2. We bought it at a 10.5% yield on the income-producing asset. There is some land that came with it. We bought that also. Just some of the redevelopments and expansions. So we finished Mahikeng Station Road. Shoprite is the last tenant to open. They've taken BO. They'll open 1st of April. The tenants that have opened thus far are trading at above expectation. It's located in a very good spot in Mahikeng. So we like that asset. Vryheid, we started our extension of the 8,000 squares. There, we're introducing quite a number of tenants, including Shoprite, some of the Studio 88 brands, some of the TFG brands. We anticipate we'll end -- will be open later on this year in October. With 93% let there, I think we'll be 100% let before opening. And then in Burgersfort, we own Morone Shopping Center. We had Choppies there being our anchor tenant. We've signed a deal with Shoprite to replace them. We think that will be a positive thing for that center because I think Shoprite will trade well there. And on the back of Shoprite coming in, we've also received more interest from other national tenants. So, I think it's a good thing for us. It's a small redevelopment. Game vacated their box in Evaton earlier this year. We came to an agreement, some of which -- we settled some of their rental obligation. And we have -- we've cut that space up into 3 boxes. One is occupied by Boxer, which is trading fantastically. We've seen the feet and trading on that side of the mall improved since Box has taken occupation. The other 2 tenants will come in, in the next month or 2, or at least before the June year-end. There's a couple of other planned redevelopments that we're working on, but we will update you in due course on that. So, this is the Flamwood asset that I was speaking about earlier on. So it's 20,000 squares in size, Flamwood Walk anchored by Checkers, Dis-Chem, West Pack and Game. Trades very well. You can see some of the solar there. That's working well for us. [Presentation]

So that's a very busy intersection. And I think that's one of the reasons that a lot of the retailers are opting to come to our site. And that's the Value Center, which is about 5,000 squares, has got Food Lover's Market and Baby City and a few other tenants in that. So, I will hand over to Steve now.

Thanks, Vuso. All looking good there. Eastport is our biggest logistics development to date. We bought it was nearly 1 million square meters the size of the land. This is where the Pick n Pay distribution center is being developed. It's actually most phases have now got practical completion and Pick n Pay are busy moving in. That's that large kind of semi circular roof that you see there. The one in the background on the left is Africa's largest datacenter. We sold the land to Teraco. It's about ZAR 1,850 a square. That data center, just some info for me, cost about ZAR 5 billion, and it uses 70 megawatts of power. Crusader Logistics, another tenant JV that we've done. They might look to buy 50%. That's an option that they have at roughly 100% -- sorry, 100 basis points compressed yield similar to the one there that we did with Clippa. And I think it's a really nice way of us making a slightly capital-light investments in our logistics pipeline, making a lot more profit. So we'll, for example, develop it at 9.5, sell them 50% at 8.5% at completion. And then if you look at our net yield on our capital invested, it's about 10.7%. So Eastport is really humming. We have an option to acquire some land to the north, so that if there are any big users and big tenants in the area, we can certainly accommodate them. I think on this slide, what really is giving us a lot of comfort is that like-for-like NOI growth. So, we've started to see, based on construction cost inflation that the rentals are really rising. And you can see that in the middle block reversions, minus 5.2%, they are less negative than they have been. So where we were asking, for example, at Eastport around about ZAR 65 a square, we're now asking ZAR 75. And it was stuck at 65% for almost as long as I can remember since I've been at Fortress. We kind of stuck around ZAR 65, and we've seen some nice growth. And that combined with the lower vacancy does give us a lot of excitement about the future of this portfolio and the demand for our warehouses, which we do the top end specs, but we try and keep them generic. I think if we look at distribution centers in general, for example, the Pick n Pay, those are specialized. We just have to admit it. So, we're comfortable with our 40%. But I think the 20,000 square meter boxes, we've got a much deeper market for tenants there. So, these were the ones that we developed. I'm sure a lot of you are looking at the estimated yields and you're seeing a lot of things with a 7 handle on it. Most of those are Clairwood. We did have a much more expensive build-out there because we had to do the soil improvements. Some of those rigid inclusions go down 30, 35 meters until we get to the bedrock. So it is more expensive, but it's largely done. I think one interesting stat on Clairwood is that the first building we did there with all of the costs and everything, no impairment, nothing. The valuation is now above original cost. So, you can see over time, what's happening is we're starting to create value and actually almost trade out over time out of that impairment on the land that we took several years ago. Let GLA versus GLA 280,000 versus 306,000 on currently under construction, 329,000 out of the 393,000. So, I think we've -- and as I mentioned earlier, those top 2, we're very close to signing leases on those. Hopefully, we'll close out in the next month or so. So I think we, all in all, are viewing this as very positive. We're getting some nice long-term leases, which provides us with forecastable stable growth going forward. Just a little bit of an indication on -- we started out with 1 million square meters of GLA, around about 2018, 2019, and it was quite a daunting task. After this phase of construction, we'll only have 1/4 of that left. So, we really have eaten through that pipeline, I think quite quickly and quite well. So, we don't have that much left. There's not a lot of land bank left in our portfolio. And as we mentioned, we prefer, for example, Eastport North to do that as capital light as possible. In other words, try and get an option on land until we're ready to go rather than carrying that heavy burden on our balance sheet alone. Just some stats on Eastport there. As you can see here, we've got really probably 3 sites left. Ideally, warehouses, you want a rectangular site. We provide yard, potentially a cross dock if that's in demand. But again, those are specialized. So, we can do 2 on the right and one against the highway. The highway sites, although the tenants tell you they don't like it, they actually love it. Everybody wants the sea-facing room. It's just human nature. Clairwood, we spoke about in quite a lot of detail there. You can see the 2. Pocket 3C not constructed, but we are developing that. And then it's only pocket 5B and pocket 6 that we have left. It's strange. I think if we look back when we bought it, it was daunting, it was huge and over 300,000 square meters that we needed to develop. Now we're getting inquiries and we don't have enough land at Clairwood. So, I guess, hindsight, we should have maybe bought more. So again, the focus is, as it has always been, rolling out the pipeline as effectively and efficiently as possible and converting the land bank into premium grade logistics assets, income producing. I think that last point is one that I mentioned, nice to see Cornubia. Retailability is nearly done. Dromex on the bottom platform has signed a long-term lease, which we started developing. So, I think it's certainly life being breathed back into that park. The office portfolio, also non-core, ZAR 1.5 billion worth of assets there. Like-for-like NOI growth, 2.5%. We haven't seen positive there for a while. It's still under strain, but I think we are seeing some signs of bottoming out there. Load-shedding funny enough has been positive. People are coming back to the offices because that's where they have backup power and looking to trade out. And if you look at that top right-hand side, our value per square meter still very conservative at below ZAR 10,000. I don't know what replacement cost is, but I'd imagine it's probably 20,000 -- north of ZAR 20,000 for these assets. And that does open the door to some sales to residential conversion specialists. And at the moment, we're looking -- we sold one in Monyetla, and we're looking at another one for Oxford Manor. The industrial portfolio is interesting. We're seeing a lot of start-up investors, and funds looking to buy industrial assets. The savvy investors clearly see some future in those buildings like the ones we've got in City Deep. I think what's interesting there is the vacancies come right down. Reversions not as negative as they were. But these assets in our portfolio, the industrial classification is really -- it's not old smoke-stack factories and things like that. It's really the mini units and the mini parks. And those have become very popular both with tenants and with investors. Obviously, the tenants lead the investors because there's demand. And I think we're seeing demand for our smaller kind of, I guess, you could term them mid units. And then on the other side, this JV that we've got with Inospace, which is really cutting it up into even smaller 200, 300, 400 square meter units and they're filling up quickly. There's a lot of demand for people that want a small warehouse with an office and the shared amenities in terms of a coffee shop and boardrooms in a space that is comfortable. These are not -- often not small businesses, and they're happy to pay a little bit more and have a comfortable space. For example, in Island Works, I mean, Inospace had cut one of the top floors up. I mean it's a really magnificent old building, sprung wooden floors, open ceilings, it looks nice. It's got a nice feeling, but it was completely dysfunctional for a logistics user. The guys moved out. They were a bicycle distributor for giant bicycles paying about ZAR 45 a square meter, chop the space and now getting 120 a square. You lose some in common areas, but that's the uplift that we're seeing in terms of the demand for that type of space. Just touching on NEPI. Many of you would have seen the results. I think they were very strong, maybe bordering on spectacular. We've got a large investment there. We've held on to it. As Ian mentioned, we closed that collar out probably at a net price of around about ZAR 88. I think it was ZAR 92 roughly kind of. So, I think we closed it out at an opportune time around about October last year. They've sat on cash and they've deployed that opportunistically in 2 really, really great assets in December last year. Still a very strong business, which is in a strong economy with prime assets. So, I think it's something that we are very optimistic about even from these prices for the future. And as you can see, the management team is doing unbelievably well there. This is Longlake. This is one up in Gauteng, the extension of Marlboro Drive. We did 2 buildings there, Zest and Cargo Carriers a few years ago. We do have 60,000 square meters there. We finished the one in the center of your screen there, 20,000 squares. It looks like we're close to getting a liquor distributor in there. It is a good location in Gauteng. We can do another 40,000 square meters there to close out the whole node. And eventually, that road, the K113 is planned to actually go and meet almost at the back of waterfall kind of through Midrand there up to the N1. Zest actually do electrical equipment and generators. They're desperate for a space, and I think we'll maybe try and shift them up. So, their business is flying. It's almost hard to get hold of them at the moment to make a decision because they are so flat out installing generators and electrical switchgear and the like. As you can see, this is our kind of standard prime spec. We will obviously add solar to that wide yards, 15 meters to the eves, pumps and tanks and FM2 floors. So just to touch on the Central Eastern European direct logistics portfolio. Currently fully let. I think the number that probably stands out on this slide is the one at the bottom right, like-for-like NOI growth at 40% -- close to 40%. Why is that? When we bought these assets, we had some vacancy and the one in Bucharest. And then also, as they do in Poland, they like to have headline earnings and effective rent because it's a developer-led market. They sell it on a cap rate on headline earnings, but we like to just think about effective rents. In other words, what is going to come to us. You can make the headline earnings, whatever you want. If you never get it or never materializes, there's no point. But what the developer did is they signed quite a long-term lease with a German company in Bydgoszcz and they gave them 50% of rental for about 18 months. So, that's unwound and then the one in Bucharest, we bought it with some vacancies and had an earn-out agreement with the developer. So, that's kind of -- it was really a low base, and now we expect that to stabilize and start to grow at roughly euro-CPI, which fortunately is north of 9% for this year. So, those indexations will come through in the rental invoices actually this month in Poland. They do it at different times. Some spread it. Some do it just at the start of the calendar year like Poland. It's different from country to country. Stargard, we built another hall. That's all fully let to a logistic company. In Bydgoszcz, we're doing Hall E in 2 phases. We finished the first, also fully let and Phase 2 is roughly 50% let. There you can see we've got 2 prime sites. We're hoping to get those going, subject to really what the feasibility looks like, what the tenants are looking for. So, we're in no rush to start on Lodz and Zabrze. But given the interest there, I think that we will hopefully get something going during the course of this calendar year. Those are just the sites. And I'll just jump on. I want to just -- sorry, just the pressing issue as we face here in South Africa is obviously the load shedding. I don't think any of us can ignore it for longer than 5 minutes given that we now have mostly homeless folk becoming pointsman overnight. So it's an interesting crisis that we face here. When we look at it, it is, I think at the moment, you'll certainly see from the grocery numbers, Shoprite and Pick n Pay that they are really at the cold phase of this crisis with the diesel costs and running generators all the time. That -- and the smaller tenants who are predominantly in our retail portfolio, who are crying out for some sort of stable power supply as little as probably 9 months ago, we didn't have the problem. A lot of the tenants we said, do you need -- do you want to link up to our backup generator. No, we're fine. An hour or 2 a day, we'd rather not pay. We're okay. We'll just keep operating as is. That game has changed. So it was -- whereas they were cost sensitive, now they're just crying out for some sort of stable supply. And I think we've really got a duty to our tenants. I think to the broader market to really work with them and try and get some sort of stable supply. So how does that look for us? I'll just jump on to this diagram here. How it looks for us is really to align all of these rings. If we take the outer ring, the dark blue that's kind of the whole retail portfolio, obviously, it's all grid connected. We need 100% grid connection. We need a 100% generator backup. Generators are fantastic as a backup of last resort to provide baseload, where the problem comes in is the higher operating costs when you operate them for 6 hours to 8 hours a day. We then need solar to really act as the primary producer of energy. That's what we want. When the grid is down, when the sun is shining, the cost per kilowatt hour of solar is low and only getting lower and more efficient. So, I think we need to do solar across everything. And then the batteries, we've got a battery, we're trying to see which ones work. Is it a center system? In other words, a really large battery. Is it per tenant? So we've got a few of those trials in -- on the go, and we're going to see which one works. But I think at the moment, what we're focusing on is really the generator rollout. So, we've pushed the button on 36 million, another 40 million to come shortly thereafter. By June, we'll have 75% of our retail GLA with backup generators, and the tenants have then got an opt-in on that and we do earn a return on that. They don't have to opt in. And we've got meters to them, which are capable of metering them on whichever supply they're getting. In other words, are they getting supply from the grid, from the solar or from the generator and we can adjust the tariffs, so that we recover and we build them correctly on the source of supply. By December, that will rise to 88%. So, I think the bulk of the risk of load shedding in our -- certainly, our retail and our logistics portfolio, I'll touch on that shortly, will be mitigated by December 2023. Then what we need to do is we need to go and say, well, this is a stable supply, but it's not at a reasonable cost to the tenant. How do we lower that cost? Well, we've got photovoltaic installation. That's really the answer for us. 52% of our retail GLAs covered by solar. That will be 56% by the end of June '23, 80% by the end of June '24 and 88% by June '25. There are a few that were in the process of selling that might not make sense to do. But really, what we want to do is we want to have that little diagram, and we want to have all the rings filled. Let's see what the purple ring in the middle looks like in terms of the batteries. I think that's still untested, untried technology. So, we don't want to go rushing in and spending -- I mean some of the quotes we've got, it could be in the hundreds of millions for batteries and the one that we're trialing hasn't worked out as well as we expected. Unfortunately, that's just new technology, new management systems, and it's actually the battery management software, where we're getting from solar, getting from generators, getting from the grid. And it's kind of rotating on a schizophrenic basis that is that I think the lot of the manufacturers are struggling with. So what have we done? We've obviously got individuals inside Fortress focused on it, but we've hired 2 more who will join us in 3 weeks' time. Very qualified. The one is the Head Engineer for a renewables company called TerraForm. He will join us from the 1st of April, and the other one is the Chief Operating Officer of a renewables company called Journey 2 Green. So, I think we're throwing a lot of resources at it. Money-wise, not that much, probably ZAR 300 million to ZAR 400 million. Where the big money could be spent in our portfolio? And this is something that we don't know where it lands is these enormous roof spaces that we've got on our logistics portfolio. A typical logistics box probably needs 5% of the roof space to provide power for the tenant. The rest of it is superfluous. So for that, you need to either, for example, get a mini grid going at Eastsport, which we're trying to do? Because why? Because we've got a 70-megawatt user in Teraco inside our park who is desperate for cheap power. So, we have a user. But then you need to engage with counsel. I think, really, our focus is we'll look at that in the future, but our focus is embedded generation because we don't want to rely on Eskom and we don't want to rely on municipalities. They are bound to disappoint us, I'm afraid. So that's renewable energy. On the social side, I mean, I think we've got the numbers there from 2019 to 2022. And it's actually amazing to see the growth on nearly 40,000 direct beneficiaries and 26 long-term food gardens with our association for with food and trees for Africa and the educational programs that we support as well as the enterprise and supplier development programs that we do in conjunction with Property Point, which has really been a very well-run initiative for us to support. On the governance side, we wish Bram and Ben, and I'd like to thank them personally and from all of the staff and the executives for their contributions. We wish Ben all the best with his ALT REIT Fund. And as many of you would have seen his position on the Vukile Board as of this morning. Industry challenges. We're all aware of them. I think when we look at that list of 5, electricity supply, state-owned entities, low-growth operating environment in SA government policies, delays in plant approval, municipalities, rising municipal rates despite infrastructure collapse, municipalities, poor service delivery, government and municipalities. You may have picked up a common theme on what is providing our industry the most challenges and headwinds. Obviously, we are happy that, that is counterbalanced in our broader portfolio with a significant investment in well-run high-growth economies in Central and Eastern Europe. Those are the portfolios that. So if I could ask the other executives maybe to come and take a seat, and then we'll take questions from the audience if there are any and then we'll maybe move to any questions from anyone online. Any questions from anyone in the audience?

Congrats on the results. [ Cabello from Masi ] here. Just a quick one on the NEPI, a few questions on the NEPI shareholding. You did mention the share buybacks. You are looking at that. But am I correct in my thinking that effectively, you're limiting the share buybacks to the retained capital? Or would you consider, for example, selling your stake in NEPI to fund -- to actually fund some of the share buybacks, just given how much NEPI contributes to our market cap at the current point in time? And then your thoughts on the NEPI sort of scrip -- dividend scrip options that they are looking at in the near term and how you're thinking about that in terms of your requirements for cash and/or potentially investing in the company through or retaining your interest in the company in the near term?

Sure. So let me touch on -- I mean, obviously, NEPI have made that scrip offering very attractive. So currently, where we haven't seen the price this morning, but certainly at the close yesterday, it's -- if we hear on the date that we make the election, it's a bit of a no-brainer to take the scrip, and I'm sure all the shareholders would be in a similar position. It's just they've made it unbelievable be attractive to take that scrip option. So as we sit here today, probably take the scrip, but we need to make that assessment on the date that we make the election. In terms of the buybacks versus the NEPIs, I think that's probably related to the capital structure, to the capital allocation. We obviously would have a lot of excess retained income as we mentioned, debt reduction liquid assets, including NEPI and buybacks. If we had to do more than that, we probably need to do a transaction with our shareholders. And I think we need to be open to what that looks like. We need to listen to the shareholders. The Board at the moment isn't going to -- has got no plans to propose anything in the near term. But we do note that the capital structure is suboptimal, and we need to see what the shareholders' feedback is. And if there's a workable solution, believe me, we will jump at it and do everything to try and get that across the line. Does it involve NEPI shares? Does it involve a buyback? What does it look like? We're not sure at this point in time. And I think we need to get some feedback from the shareholders and then go and digest that internally.

Just a quick follow-up question. I mean, so in terms of like looking as an investor or a new investor looking at getting exposure to Fortress. So I mean, from your commentary, you're advising shareholders to buy sort of equal proportion of A and B. But if as a shareholder, you come in and you're buying equal A and B, would that same thing cannot apply to your share buybacks, for example, if you just given that they have equal voting rights. So you just buy 1 for 1 and you follow that -- sort of what opposition have you seen against that?

Largely none. We did buy shares back in '20, the sort of -- within the 2022 financial year, July, August 2021. And we did that in roughly equal proportions because as you correctly point out, it does, then you're buying a unit of equity. Now are we constrained? No, we're not constrained. We could buy either. But outside of some sort of effective and efficient fix, I think we would need to then -- if it's a large amount of either class, it's probably going to fall into a shareholder vote anyway. We don't have the authority to go and buy back 25% or 30% of a class. So I think we need to just manage that. But sure, as you mentioned, why did we say that? Because there is a lot of noise around the As and the Bs and a lot of uncertainty and new investors probably don't have the time to unpack or what are the nuances and the intricate differences between the 2. So, I think when you look at the combined price, let's just take ZAR 11 for A and ZAR 4.50 for a B, ZAR 15.50, what's the NAV, you're probably buying that 1A and 1B with a NAV, combined NAV of ZAR 28. And you're paying ZAR 15.50. Is our NAV correct? Our assets are conservatively valued and our NEPI is mark-to-market. I mean it's starting to get so cheap that it's just in the realm of the ridiculous based on how we view our net asset value.

There are a few questions coming through online. Nazeem Samsodien from Investec. He's got 3 questions. I'll go through them individually. Can you confirm the timing of the 12-month cooling off period for another offer? Is it the date of publication of the law circular or finalization of the scheme meeting, which was in August?

Technically, it's the scheme meeting.

And then his second question, just on like-for-like valuation metrics. Can you provide some dot on a sectoral basis?

The like-for-like valuation. So we don't value the assets. We really just do it on an exception basis at interim. So I think that we don't have a lot of movements in the portfolio, largely we just confirm where things moved in other words, there's an indicator of [ impairment ] or an indicator of a big uplift, but that's a handful of assets on a net basis, probably ZAR 20 million, ZAR 30 million that we passed. So here we go. We'll help them with the generators. Okay. So that one is only going to make sense, Nazeem at full year in terms of like-for-like valuation metrics.

Steve, another question for you. Given the increase in logistics market rentals, would you look at reducing lease lengths on renewals?

Generally not. I think we aren't -- we probably aren't that bullish just given the history and where we see the macros to shorten lease lengths to hope for a big positive reversion, let's say, in 2, 3, 4 years' time. I don't think so. But what it does do is it gives us a lot more confidence with the market with where vacancies are to stand our ground on, for example, ZAR 75 like at Eastport, like at Long Lake. We had less than that enough feasibility, but we're standing our ground saying, well, certainly at Eastport given the demand there, let's stick to ZAR 75 and let the tenants come to us. So I think it gives us more confidence in the negotiation, but not actively looking to shorten lease length.

And then his final question for Ian. It seems like caps for FY '26 to FY '29 are in the money and make up a huge portion of cap exposure, on his number, ZAR 6.5 billion of ZAR 8 billion. How sensitive will average cost of funding be for a change in rates going forward now? I assume it will be stickier versus 12 months?

Yes. So if you look at the portfolio as a whole and our hedge book of circa ZAR 13.7 billion with that split. If we were to have a 1% increase in the interest rate, the best way to look at it is to say, we're probably a way about 25% of that on the portion of debt that's not covered because we're at -- we add our swap sort of strikes and cap strikes at this stage. So it's -- we're sort of in the money on all of them.

Thanks, Ian. Yusuf has got 3 questions. I'll go through them individually. Yusuf from M&G. What did closing the collar cost you? I'm assuming that's NEPI collar?

No, nothing. We made money on that. I think the net proceed -- so the net profit on the product was about ZAR 28 million to ZAR 30 million at the top of my head. It's a capital transaction, so that doesn't fall -- that ZAR 30 million doesn't find its way into distributable earnings because going into the collar was a capital transaction coming out of the collar capital transaction. So it was a cheap form of funding on the portion that we borrowed against the collar position. But on the overall derivative position, we made a ZAR 30 million gain.

Steve, you briefly touched on share buybacks, but he has a follow-up question here. Please explain why the company has not undertaken buybacks for the shares during the period?

We were in a close period and prior to that, we obviously had the whole scheme circular. Circular and shareholder led proposal in arguably off sites for the full 6 months in any event.

And his final question. He notes that SA REIT FFO exceeds the moment a distribution. His question is, does this mean a dividend is due to those in H2 given the strong NEPI dividend?

No. It doesn't mean it's due -- obviously, the dividends are based on the declaration by the Board. And I think on our methodology, we would be behind certainly on a post-tax basis, which we need to factor that in. So I don't think we make it on the Fortress distribution methodology for H2.

Question from Mweisho from SBG Securities. How much is your euro cost of debt increase since Fortress entered that CE market?

Well, it's moved by a...

We're 90% hedged, and it's moved by about -- what has it been? It's been about 250 basis points negative -- kind of negative 25% roundabout there, I think. Sorry, it is in the comparable and in this one, I think it was ZAR 324 million to ZAR 344 million something like it. Not much because we're well hedged. But even at 10%, you can see, I mean, it was actually a question that I ask the finance team to say, but how did it move so much? Because of the rate increases there in the last 6, 7 months have been radical.

A question from [ Fiaz ] from Sanlam Investments. Ian, if you take the NEPI scrip option, will that change your dips forecast?

No. So we've penciled in the scrip at this stage. So technically 100% of the distributable earnings that they would be distributing by scrip, the 29 -- I think it's [ EUR29.32 ] sets at our hedged percentage, which I think it was [ EUR19.55 ] for this period, and I think they've locked in [ EUR19.48, EUR19.40 ] thereabout. So it's almost sort of on the money.

Question from [indiscernible]. You have touched on it, Steve, but I think it's an important one just given the current NEPI share price and where it's run and then his calculation on the discount, which is around 95%. That's the Fortress. His question is, why don't you sell all your NEPI shares and use the proceeds to pay down all your debt or buy back shares?

I think -- I mean, just practically, I think the NEPI share price would come under a bit of pressure. If we had 144 million shares on the offer. Just -- that's why I touched on with buybacks, it's got -- you've got to always look at the executability of it. Often, things work on a spreadsheet. In fact, everything works on a spreadsheet. But in the real world, it's a bit different to that. We do like our NEPI shares. We've had similar questions. We've had pressure to sell it. We've had pressure to trade out certainly ever since I've been in this role for the last 5 years. And fortunately, we haven't. I mean we've held on to it. It's been a fantastic investment. It's been a great dividend payer. We've seen other shareholders exit. So we're sitting here now in that position because we didn't do something silly like trying to drill all the NEPI shares and buy all our shares back. But could we look at that at the margin? Of course, we always need to look at capital allocation and what we can sell versus what we can buy and rotate into as we do with our asset recycling on our direct assets. I don't think we can be blind to market opportunities, but could we do it at 100%? Probably not.

Question from [ Nick at Signal Analyst ]. Given the latest budget, can you talk us through the economics of the tax shields for solar, also the need to rush the expenditure?

The stars have aligned with that, but maybe Ian can touch on it.

Yes. Well, certainly from a tax perspective, to the extent we spend, we're going to get a slightly bigger than what we spend deduction. I think that's 125% of what you spent post March. The acceleration, I think Steve alluded to it, we have to. It's sort of where we are. We're in a power crisis. So yes, it's fantastic for us in a non-dividend paying scenario because we get the benefit of that as opposed to, in fact, it's just been lost because unfortunately, as a REIT, you're a taxpayer like any other with one additional deduction being the dividend paid. So to the extent you would have had that accelerated solar deduction, you actually don't see the benefit of it because you just rely on a smaller portion of the dividend being paid. So technically trapping a lower tax or lower after-tax return in the fund pre-dividend.

Question from [ Jakub from Rane Investments ]. Just regarding buybacks, should Fortress not buy back enough FFAs. So the number of FFA and FFB are exactly equal, especially if one takes into account the difference in number of shares given the FFP and treasury. What is your thinking regarding treasury shares, i.e., why do you not cancel these treasury shares?

Historically, there's been some complexity in fact, in doing buybacks in canceling I mean -- and it actually goes the tax treatment of how you get treasury shares from subsidiary companies historically bought back at sort of in the belly of the business and then passed up to the REIT, arguably creates sort of an intragroup taxable dividend. So we may now sort of post February, be able to clean up those treasury shares that we historically haven't and sort of have set with. Our REIT listco is not really an active vehicle. It simply has listed shares and investments in subsidiary companies and loans and such like. It isn't really an operational entity. So historic buybacks haven't actually occurred in the REIT. If they had landed in the REIT when we bought them back, easy enough to cancel. So it's a problem that pertains to liquidation dividends within the group of REITs, et cetera, all of which we probably can manage now. Yes, one of those things that we can now clean up and probably will.

[indiscernible]. He asked 2 questions. The first one, please comment on share buybacks post results.

Yes, always on the list of what we look at when we're allocating capital. So it has always been on the list, and it's likely to always remain on the list.

His second question, can you please quantify distributable income from the direct Eastern European assets during the period.

In our segmental report, it would be -- it's about 40-odd the top of my mind, 45. But yes, in the segment report within the detail of our results announcement.

And then a final question from Yusuf from M&G. You mentioned in the results announcement that the company can issue B shares without issuing A shares. Please explain this to us?

That was [ 7.4 ] of the MII, where we are. If we issue an A share, we have to issue a B share alongside it, 1 for 1 in the ratio, but it doesn't constrain us in terms of issuing only B shares.

Thanks, Steve. There's no further questions from the webcast. And if there's anything from the room, threw them before we close out.

Just a ratio between the asset categories and then shares or property of that [Technical Difficulty].

Yes. So we've actually been working to unencumber our NEPI position over the last couple of years. Scrip in facilities doesn't really work well because often what happens if there's movements in the price, it makes the debt variable as well. And in the property company, you've got slow capital relatively illiquid assets, one can't go and deploy debt against that position, and then you've got a fall in the NEPI price that you've got to make good. So more than half relates to the NEPI shares. And as part of refinances, that's often part of the discussion is to get more of those NEPI shares back. But there is a significant portion of unencumbered direct property. Certainly, a lot of what we sell in or what we've identified as noncore, we do this specifically that we can trade easily with those assets without having to go to the banks and have a sort of release considerations around those assets. But of the total unencumbered portion, the -- I would say it's probably 2/3 to 3/4 of a NEPI position and the balance being direct real estate.

Okay. Well, if there's nothing else, please join us for snacks, coffee, and we'll catch up with you afterwards. Thanks for coming, everyone.