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

Good morning, everyone. Welcome to the Fortress Real Estate Investments Annual Results for the financial year ending 30 June 2026. Thanks very much to our tenant VDM Attorneys for hosting us here. It is just next door to the Fortress head office. So thanks very much in this lovely auditorium, which just seats pretty much everyone that we invited. So thanks very much to them for hosting us. I'll take you through a few of the highlights, and then I'll hand over to the other exec directors, Ian, who will take you through some of the finance aspects; and Vuso, who will give you an overview and some details about our retail portfolio performance. I think overall, it's been a good year for us. Our distributable income per share grew 10.1% from the prior year, and we have increased guidance. Ian will touch on some of the reasons for that on a per share basis, 7.5% for next year. I think all in all, the highlight for us was really the like-for-like NOI growth in our core portfolios in logistics and in retail. So if you look there in that middle block at the top row, 8% like-for-like NOI growth, that's SA and CEE. Low vacancy rate. I think it probably dropped a little bit after year-end as we let or signed the binding heads for some -- one box in Eastport. So that has dropped a little bit. The buoyancy in the capital markets also allowed us to raise some equity right at the end of the year, I think on the 29th, 30th of June, we raised ZAR 1.35 billion. So thanks to all the shareholders and participants for their support. That's really being deployed into our development pipeline and into the refurbishments and some opportunistic acquisitions that Vuso has identified on the retail side. Overall, the property valuations went up 5.7% like-for-like. We do get 100% of our assets valued by external valuers. Those are not directors' valuations. I think it's still relatively conservative in my view. If you look at our direct portfolio net initial yield of 8.6%, overall 8.8% in SA, we certainly wouldn't be selling the assets at those kind of yields. So I do think it's pretty conservative. On the disposal side, for those of you who follow Fortress closely, we did make an announcement in a few statements probably about 12 months ago that we were going to slow down the sales a little bit. I think when you look at the performance of the portfolios and just the general buoyancy in the direct property market, I think that it was a good call. But we still view those properties as noncore, but we were hoping that the market was going to be a little bit better to sell those into the future, and they do give us a pretty good yield. So just in terms of our strategic focus, I think it's pretty much more of the same. It's really just focusing on optimizing our portfolio, capital allocation. And fortunately now, and I think that's the step-change, is growth opportunities and then maintaining balance sheet strength. We've had quite a lot of success with internalizing our asset -- our property management. So we've got 46 logistics assets now, which we manage internally. And I think what gives us a lot of optimism on that strategy is I think the technology is starting to change. So we are going through our smart meter rollout, and it might sound a little bit mundane to you, but we have big assets. They need quite sophisticated water meters. There are many, many electricity meters when you consider each tenant needs a separate meter, all the common areas. And that -- all of that data gets sent to our Fortech system, and then we can automate the tenant billing and things like that. So it really just makes it a lot more efficient. It makes the errors less, and we still have the councils to deal with, which I'll touch on in a little bit. Capital allocation, I think it's very much the same. We're still focused on logistics and retail. We've been quite disciplined at rolling out a balance between spec and pre-let transactions. And I'll touch on how we've gone through that development pipeline that we had, which was just over 1 million square meters in 2019, and we've got about 170,000 square meters of that left. And then the balance sheet strength. Ian will touch on that, but I think we've got a much stronger balance sheet, 34% LTV. So really no concerns there. And I think the access to capital, both on the debt and equity side, has certainly actually been remarkably strong, even though there's a lot of global macro headwinds. Just looking back from 2019, which is the first time we published the little kind of wheel in terms of our asset base, I think it's quite nice to see where we are now from our stated strategy, which was the first time we showed this. So back in December 2019, we had quite a lot of assets that we identified noncore. We still had some listed shares in Resilient. If you look at the component there in terms of logistics, we only had 9.5 billion, but we had 3 billion in work in progress, and that was a little bit of a drag. So we said 2019 sort of medium term, where do we want to be? Well, we want to be roughly ZAR 17 billion in logistics. The noncore, we had identified as that was our really capital for new growth opportunities. And then we had the retail, ZAR 10 billion of direct retail and ZAR 17 billion at the time in NEPI. So that was really our stated target, I think, when we took over as a management team. And when we wind forward now to where we're sitting here today, our actual portfolio, so we've got ZAR 19 billion in SA logistics, ZAR 6 billion in CEE. We still have a little bit of noncore. And then we've got roughly ZAR 28 billion in retail. So I think it's quite nice to look back and see over the years what our stated target was in 2019. We wind forward 7 years, and we've pretty much achieved what we set out to do. So this is our current asset base. It's almost 50-50 logistics and retail, a small amount of noncore assets, mostly in the industrial space, which we're actually quite comfortable to hold. I think the yield on that portfolio is 10.7% on our book value. So the holding cost is relatively low. We managed to, since 2019, develop and acquire ZAR 17.5 billion worth of assets. And I think it's -- I would like to say, quite an achievement, especially since we went through quite a tumultuous time from 2019, 2020, we had COVID. 2021, we had the July riots. 2022, we had the Ukraine war, and we had some capital structure issues. So largely, we've managed to achieve that without access to external capital. And how we did that was we disposed of close on ZAR 12 billion worth of assets. and we recycled that. So if you look at the portfolio now, considering that we had about 30 billion of assets, we've sold 12 billion, and we've developed and acquired 17.5 billion. It's almost a completely different portfolio that we have today from the one we had in 2019. If we look forward, I mean, that's probably only 12 to 24 months away in terms of our forecast asset base; we haven't changed this slide for a number of years. So it's good to see that we are actually getting to where we want it to be. This is just some vacancies on -- and we've tried to, on the right-hand side, just give you a weighted breakdown because sometimes when you look at the office portfolio, although it's 20% vacant, it's relatively small in our overall vacancy. Nice reduction in vacancy, largely driven by our core portfolios and a big reduction in the vacancy in our Polish portfolio. We had a tenant that had some financial difficulty. We canceled the lease, and we plugged that gap with 2 smaller tenants, Rossmann, Stokrotka, so 2 retail tenants and DSV signed a lease in Gdansk for 19,000 square meters. I think this one is something we've shown for a couple of years, but it really does indicate the step-change in the health and in particular, in our logistics portfolio. I think if you wound back to 2022, 2023, and you said we would get positive reversions on expiring leases of plus 4.2%; I don't think we would have believed you. But the market has really -- the demand has increased. I think we do see a little bit of supply coming on, but I think with the rise in construction costs and inflation, there's been a lot of demand, and that gives us the ability in a very, very tight market to increase the rentals. Vuso will touch on the retail. Bear in mind that a 0% reversion is actually not bad for us because we have contractual escalations. Just some stats on our sales. As I mentioned, we did deliberately wind that back. If you look at, for example, the offices there, the yield that we were getting was only 6.3, 10% considering it's fully let, but it hasn't been fully let for a decade. So it's a little bit of a sort of misleading figure there. So I think this is really what we, I guess, get paid for, is how do we allocate capital. And what this slide shows is it shows in the light green there, that's the yield that we're getting from those different asset classes that we have. So NEPI, our logistics, our retail, our CEE logistics, industrial and office. And then the blue is what happened with the capital growth. So NEPI is relatively easy. It gives you a yield and then that's the share price change. Our logistics, that was on a whole portfolio basis, the yield plus we had a nice valuation uplift. Same with retail, CEE logistics is in euros. And then if you look at the right-hand side there, I think that probably, if you look back now, justifies the decision not to quickly offload at last year's values, the industrial and the office and to be a little bit more patient. So that is the portfolio really high-level returns. And then when we look at, well, how much capital did we allocate to each of those separate buckets during the year. NEPI Rockcastle, we didn't put that in red because we gave that to our shareholders. So if you recall, last year, October, we gave the shareholders an option they could take cash or they could take NEPI shares. And we did that because we viewed the NEPI shares as a really good investment. It's yielding 8% in euros. It's highly liquid. So we said, let's rather give our shareholders the choice if they want to sell those shares, and we distributed those to the shareholders. So if you had a Fortress share September last year and you elected the NEPI share option last year, you would have got 16.8% return on those shares. Fortress SA Logistics, we allocated ZAR 428 million of capital. The return on completed developments, which is just the yield plus the uplift from completion to valuation at year-end, 20.4%. Retail, we spent ZAR 270 million. CEE logistics, we spent ZAR 414 million and the return on the completed developments, again, same calculation. It's the yield plus the capital growth, 27.7%. And then those are the yields on the assets that we sold, 9.7% for the industrial, again, quite a high yield, which is -- it does sort of weigh on the distribution a little bit, but it's still the right thing for us to do longer term and then the offices. And that little sunshine drop at the bottom, that's our solar. We are getting to the end of our big solar rollout. And really, we're now focusing on the smaller assets with slightly smaller installations. We've spent about ZAR 600 million so far on our solar PV projects. That's given us a 22.1% return during the year, we only spent ZAR 87 million. I think we'll touch on some of the opportunities when we look at the videos. I'll hand over to Ian now, who will take you through some of the finance.

Thanks, Steve, and good morning, everybody. Yes. Fortress has had a really fantastic year, very strong performance from a distribution perspective. Our distributable earnings per share, as mentioned, is 10% higher than last year with a distribution of ZAR 1.78. That's also about 5% higher than what we initially guided. We guided to the market at the beginning of the year, ZAR 1.70. And through stronger operational performance and some treasury management, we've beaten that. That strong operational performance has resulted in a like-for-like increase in our standing portfolio of 5.7%. But in rand terms, that's ZAR 2.4 billion. That, coupled with the book build, as Steve mentioned, we raised some capital at the end of the year and a stronger NEPI price has resulted in an LTV of 34% at year-end, which is nicely down from last year at 39% or just under 39%. We don't believe that it will stay there. Of course, we've got nice opportunities in our development pipeline. But at the moment, the balance sheet is in a really strong position. Where does that distributable earnings come from? Or where does the distribution come from? I really like this slide. It's kind of a health check for the distribution because what it indicates on the left-hand side is the nature and type of earnings. So this year, our ZAR 2.2 billion worth of distributable earnings is entirely cash backed, in fact, in excess of the ZAR 2.2 billion of cash-backed earnings. The charge that you see of the ZAR 114 million in the middle, there is actually an amortization charge that we take for our interest rate protection linked to the caps that we use. Another nice point on this slide is that the -- sorry, the NOI directly from the portfolio on a compounded annual growth -- from a compounded annual growth perspective for the last 3 years is just under 10% year-on-year growth. So if you've got a standing portfolio that delivers around 6% of in-force escalations, that additional growth comes out of the development pipeline. And of course, one doesn't see it perfectly in the distributable earnings because there's a lot of other stuff that happens in the middle there, which is in the last couple of years, we've had a scheme of arrangement and we've distributed NEPI shares, we've had alternate options to cash to distribute again, NEPI shares, et cetera; but that number is unaffected by any of that, and it really is just growth out of the existing portfolio, which is really great to see. Of course, we're not a REIT, so we do pay some tax, and that charge is in the distribution, of course, the ZAR 136 million. So we deliver a post-tax distribution or post-tax dividend. That number is slightly higher than we initially indicated to the market. And that's actually largely as a result of in the first half, we distributed NEPI over cash. When we retain the cash, we have a lower interest shield and, of course, pay a bit more tax. Looking forward, we've revised our guidance upward. We had published guidance of ZAR 2.3 billion at the beginning of June. That number is now ZAR 2.46 billion, roughly a 7.5% increase year-on-year. Yes, it's a big step-up from the ZAR 2.3 billion. But of course, in that period, we raised ZAR 1.3 billion of additional cash. So there's a return on that, plus some more time to see what the portfolio is going to do and of course, revised our guidance upward to ZAR 1.92 per share. We, again, have offered an alternative to cash for this half in a Fortress share. But we've set the price at ZAR 24 a share, given the volatility that we've seen in the market, a trailing sort of pricing mechanism in 6 weeks, we felt wasn't in the best interest of Fortress and have pegged the price that we're comfortable to issue shares to our -- of course, to our own shareholders. From a NAV perspective, we've mentioned that we've seen a nice uplift in the standing portfolio. That assisted by a stronger NEPI price, albeit on less NEPI shares. We now hold 102 million. At the beginning of the year, we had about 108 million NEPI shares. and some valuation uplift that I've mentioned has resulted in our net asset value per share increasing by just under 7%. And that's again after the distribution, which is a yield at price at the beginning of the year of about 8.5%. From a funding and liquidity perspective, we've been quite busy, but it's been a very good year. The debt capital markets, we've seen unprecedented pricing compression, and we've been able to take advantage of that. We raised just under ZAR 2.7 billion in the year in tenors of 3, 5 and 7 years. So we were able to raise quite a whack of that in the 7-year space, ZAR 1.6 billion. We've repaid some senior secured debt, and we're in the process of refinancing a facility that we have with Nedbank of ZAR 4.4 billion. but increasing that facility against the same or existing security pool. In Europe, we've increased our facilities with BNP Paribas to roughly -- sorry, by 32 million and increased our facilities with [ ING ] by EUR 7 million. In Europe, at the moment against that portfolio ring-fenced direct funding, we've got about EUR 105 million of euro debt, and I'm going to come back to the split between SA and abroad. We've repaid in full a facility that we had against a [ collar ] position of EUR 100 million. And we've introduced a cross-currency swap now of just under EUR 70 million. And the reason it's not -- the entire EUR 100 million is because we've been able to raise direct euro senior secured funding against the European portfolio, which I'll touch on shortly. Available cash and facilities of just under ZAR 6 billion in SA and abroad just under EUR 20 [ million ]. Our weighted average cost of funding has reduced in South Africa marginally and it's slightly up in Europe, and that's really just as a result of the base rate, but well hedged, which we'll touch on shortly. So when we look at our exposure to variable interest rates, we do a little exercise to ensure that we don't overhedge or underhedge. And our exposure as we see it for the next sort of 12 months is about ZAR 19.2 billion, of which we have 84% hedged. We still favor the cap product over the swap product in SA. In Europe, it's about 50-50. And the reason for that is it's far less volatile there. In SA at the moment, if we look at our hedge book, we at an 80% cap exposure, 20% in the swaps. But as I've mentioned, because we haven't been an incremental borrower, we -- our challenge is ensuring that we've got tenor in the debt book or in the hedge book as opposed to just increasing the notional size. So we've entered into a number of forward starting caps, which prolongs the tenor of the book. This year, no different. We've done another ZAR 1.5 billion, but we've introduced a product being a cap spread product, which allows us to cheapen the cap product that we have. And if we bring those into the mix, you can see that our weighting now changes to 93% in the caps in SA, and it pushes our tenor right out to 2033. Just reminding everybody how that works. So in that cap product, you'll have a strike price. And below that strike, we would float. And above that strike price, we'll be protected by the product. So at the moment, with JIBAR at around 7. Of course, going forward, that will change to ZARONIA. But around 7, we are at or about the strikes on most of our cap products. From a debt maturity perspective, we've got facilities of just under ZAR 28 billion with tenors of between 3 and 5 years, which means that roughly 25% of the book will mature in any 1 year. This year, no different, ZAR 7 billion at 30 June was -- will mature in the next 12 months. Of that ZAR 7 billion, we have already repaid ZAR 2 billion and are in the process of refinancing the balance. But very comfortable from a funding and liquidity perspective. The relationships with the banks are good. The debt capital markets is open to us at really compelling pricing. So very comfortable at the moment. From a debt -- debt split perspective, we used to target sort of an 80-20 split between senior secured and the debt capital markets. We've revised that strategy now and increased our exposure to the debt capital markets to 30%, and that was largely as a result of the completion of our development pipeline. So we've taken large tracks of non-income-producing land and made it income-producing unencumbered assets. And as a result of that, we're comfortable then to approach the debt capital markets raise unsecured funding because we've got the assets unencumbered, should we need to take them to the banks and encumber them to replace this funding. So it puts us in a very comfortable position to try and take advantage of the lower cost of funding that, that market presents. So this is a new slide that we've introduced, and it's really to illustrate the debt split between rand and euros. So if you take our overall group balance sheet direct property, NEPI shares and the associated debt; we had a 34% LTV. And if you split that between ZAR exposure and euro exposure, you can see there that our SA portfolio carries a 39% LTV and our offshore business, taking the NEPI shares and converting them into euros at spot at 30 June, a 25.3% exposure. Now this isn't a see-through LTV. And the reason for that is that we do view NEPI very differently to, for instance, a subsidiary of the group with debt in it, in that NEPI is a highly liquid, well-rated share. So we are able to monetize that if we had to quite easily. But you can see from this slide that we're very comfortable when we look at our euro exposure to our euro debt at the 25% level that allows us the freedom to continue to take advantage of the opportunities in that development pipeline that we've got in Europe. Thank you very much. I'm going to hand over to Vuso to take us through the retail.

Good morning, everyone. So this video is of our Evaton shopping center in the south of Joburg. It's 35,000 squares in size, trades very well. I think we've got -- it's fully let -- it was fully let at year-end. We've got a 300 square meters that's vacant currently that we're working on. You can see that our roof is covered with solar panels. So we -- 37% of the electricity we consume comes from our solar panels. And you saw there that there's some construction that's going on. We're busy in closing our food court. We've got a very healthy and -- tenants that trade well in the food court. I think the trading density there is about 6,500, and we've got other tenants that want to come in. You'll find the usual suspects from a tenant point of view here for this type of mall. So it's anchored by Shoprite, Pick n Pay, Boxer. And then you've got the rest of the tenants, your value fashion tenants. As I say, it trades very nicely. We wish we could probably -- we wish we would have more of this type of assets, and we are on the lookout for this type of assets. I think we'll get about 900,000 people visiting the mall per month. That's our [ taxi rank ] and the full court that we built. You'll see just now that there's also -- at the bottom left-hand corner, there's also lots of Hawker structures surrounding the mall. About 30% of the people who buy from the shopping center itself also buy from the hawkers. So we're working with the municipality to try to formalize those hawker structures. So our portfolio really focuses on commuter and convenience shopping centers. It's valued at ZAR 12.8 billion, increase from last year. We are continuing to focus on redevelopments and expansions of the existing portfolio, but we're also in the market for new acquisitions. You would have known that we bought 51% of Balfour Mall and our partners are sitting in the front here, and we're looking for more acquisitions. Our rental reversions are flat this year. I think at half year, I made a point to note to tell everyone that in this period, we were going to have quite a few big-box tenants. that were coming off long leases, 10-year leases, et cetera. And those tenants obviously had escalated over the length of those leases and the rentals were higher than market. So they were going to revert. So those big boxes have put pressure on our rental reversions, and that's why they are zero. But looking forward, our rent-to-sales ratio is still around 6.2%, and our vacancies are quite low. So we expect that reversion to improve. A zero or flat rent reversion just reaffirms to me that our rentals are actually at market. So we're comfortable with that. Our in-force escalations at 6.1%. We still -- the new leases I had a look -- all the new leases that we are negotiating now and that -- those that we've signed recently, we're still getting between 5% and 6% escalation rates from the tenants. We know that it's -- we're under pressure because tenants are -- the turnovers are decreasing, so tenants are pushing, but that's what we're still able to get. I think, yes, we're comfortable with that also. Our vacancies are sitting at 1.7% by rental. That includes the vacancy that we bought with Balfour Mall. If we exclude Balfour from those vacancies, our vacancy will be sitting at 0.9%, which is quite healthy. So we see Balfour Mall as an opportunity. We think we can reduce those vacancies over time, and that will benefit the portfolio. Our NOI, like-on-like NOI is 7.3%. The big drivers of that is obviously rental escalations and electricity savings from our solar plants. I think without the solar plants, our NOI would have been around 6%. So that helps. When you look at the trends, the trading trends for the year, it's really been uncertain, and this is not different from last year. So this year, we started with a positive back-to-school period. But global tensions and inflation started to weigh in around February, and we haven't seen a recovery since. So it's been -- on average, we're sitting at 3.9% like-for-like tenant growth. July incidentally, July this year versus July last year, was sitting around 3.8% growth. So what we think and what we're seeing, we're seeing a lot of shoppers moving or focusing more on the more essential goods and services and value offerings. And we think that, that trend will continue. And our portfolio is well positioned for that because our exposure in terms of tenants is more aligned to essential tenants and value fashion. This slide breaks up our portfolio by category. So the townships are performing very well. At year-end, we had zero vacancies over there. And you can see that turnover are growing nicely well above inflation. CBDs were a little bit under pressure. And I think that's mainly our Mahikeng and Central Park Bloom buildings where competitors came into our catchment areas. But having said that, these assets are still well located in high-traffic areas. So we think that over time, they'll come back and grow. Suburban centers performed very well over the period and a lot of that has got to do with improved lettings at Arbour and Galleria. You'll note that just the vacancy is 3.9%. And if you look at the other categories, 0.1 and 0.4, that 3.9% really is mostly Balfour, which I mentioned we're busy working on. And then our rural centers, 2.9% growth, still stable. I think obviously, the consumer is under pressure, and that's what those assets are reflecting. This slide breaks down our retailer turnovers by category. You'll see that liquor stores are still outperforming, growing at 9.9%. I'm just going to touch on a few. So health and beauty pharmacies, they sit around there at 6%. And our food grocers are sitting at 2.2% on a like-for-like basis. You probably saw Shoprite's results the other day. I think on a like-on-like basis, SA supermarkets, they were sitting at 2%. So that's consistent. So obviously, we've got a bigger exposure in terms of weighting on the grocers. So when the grocers are slowing down, the rest of the portfolio is slowing down from a turnover growth point of view. This slide breaks down our tenants and shows our top 15 tenants in the portfolio. So over 80% of our tenants are national tenants, and these are the biggest ones. I think this slide just reinforces that we've got a strong tenant mix, and it shows that most of them are actually focused on the essential goods and services. So we like this. And in terms of developments, so you are aware that we are doing an extension at [ Botlokwa ] in Limpopo, and we expect that to open in November. So Shoprite will be there. Some of the Foschini brands will be there, Clicks will be there, and we're also improving our food area. So I think that will be a nice development. And then -- it's actually 22,000, so there's area there. We're doing the 22,000 square meter extension at Tzaneen. We own 25% of that together with Resilient and another private partner. And that extension would include the expansion of Checkers into a Checkers Hyper. We're bringing in a new Pick n Pay, new Mr Price, new Dis-Chem and other tenants. And then obviously, we're quite excited by the acquisition of Balfour Mall. We'll own 51% of that. Quite a lot of work to be done there. I think a lot of the work that we're going to be doing are going to focus on actually establishing a precinct around this so that we look at landscaping, look at lighting, we look at security in the area surrounding the center. We improve access into the center, and we improve the tenant mix. So we're already well advanced in terms of our planning, and we have had quite a few discussions with tenants. I think there's quite a lot of excitement. Everyone is waiting to see what we can do. met with quite a few tenants this week. They're excited. So soon, we'll be able to show you guys what our plans are and yes, and tell you our timelines. This is our Park Central shopping center. Some of you may have visited when we did a tour. It's in the CBD of Joburg. The best way to describe it is that it pumps, which trades very well. You can see that's a North [ taxi rank ]. There's actually 4 levels of that [ taxi rank ], 2 underground and 2 above, anchored by the usual suspects, Boxer, Clicks, all those guys. We're actually investigating an opportunity to expand the center by 4,000. [ Pasa ] put out a tender a few months ago and we submitted a bid. Hopefully, we win that, and we're able to expand this shopping center. Again, the shopping center is covered by solar panels. If we had more space, we'd build more. About 29% of the energy that we consume comes from our solar panels. So it's quite a good asset for us. Thank you very much. I'll hand back to Steve.

Thanks, Vuso. Yes, certainly an exciting project there in the Joburg CBD. Joburg needs a lot of help. Just touching again just on our SA logistics portfolio, I think some interesting stats here, the building valuation, 11,700. It's still below replacement cost of new assets. It is a bit of a mixed bag. Clairwood sort of upweights that a bit. Clairwood is quite expensive. It's an expensive place to build in the Durban South Basin. Like-for-like NOI growth, 8.4%, vacancy by rental 1.3%, which is, as we sit here today, a little bit lower post some lettings after year-end. So this is Clairwood. It's an asset that we've had for a while. We have one space left between 30,000 and 35,000 squares. We are still in advanced negotiations still with the same tenant. It's taking a while, but we hope to close that soon. We have lease comments back from them. So we're hoping to iron that one out. I think one interesting stat on this asset, our first building, the first one on the left there, the bottom left, we initially let it to Sammar, and Sammar then outgrew the space. So we did another building for them next door to our Sasol product. That building then was in excess of their requirements, but they still had a lease. So we then found GanTrans, who came in and there was no vacancy for us. They just were desperate for the lease. So they almost stepped into the shoes of Sammar. Their business isn't also requiring that space. So now we've just signed a lease, also no vacancy, no loss to fortress with DHL for that first box. So I think it just speaks volumes to the demand for this type of product in Durban, which is related to the port. Another exciting opportunity that we've got here, you can see there's a lot of containers. And if you look at some of these videos, you'll see the rail siding. It's actually a holding terminal, which comes into Clairwood. We did negotiate with Transnet. It didn't amount to anything. This is the one -- sorry, that's to DHL. Lots of containers. You can see the rail at the background. So what we've done now is we've entered into an MOU with African Global Logistics. They are one of the, I think, 11 or 12 preferred Transnet private operators. Then we'll have a revenue sharing agreement. And if Transnet agree, we will then develop a rail siding there for exclusive use of the tenants within Clairwood so that they can have better and more efficient and cheaper access via rail into the port and back. So I think that will also just make Clairwood another absolutely unique asset down in the Durban South Basin. I mean it really -- there isn't anything like this in and around the Durban node. Liquor Runners is actually a fantastic tenant. We had them in a small building in 45 Diesel Road in Isand, leaking roof, old industrial asset, which we subsequently sold, and we've now grown with them. We've built them 32,000 squares, I think, at Eastport, and they've just actually expanded here. So you can see all the rail there that rail siding, which is called Race Course halt. I think it used to take the race horses into Clairwood when it was a horse racing course, is not used at the moment, and I think we can make it certainly a lot more efficient. So this is just our development update, 113,000 square meters, which we delivered for the year. Currently under construction. I think Phase 3 of Zabrze in Poland is mostly delivered now. So that's actually completed. Cornubia, we just started one speculative smaller project next to Dromex. And then Longlake is completing soon, September 2026. I think this is a slide that we wanted everybody to see and to focus on. It's really the pipeline that I mentioned in the introduction. We had over 1 million square meters in 2019, and we've delivered about 122,000 square meters a year on average. We topped that up in terms of the pipeline with that option, which is pretty capital light for us in terms of Eastport North. We have just triggered that option. We renegotiated the strike price. So that transfer should happen, I'd imagine any time in the next sort of 6 to 8 weeks. So we are going to acquire the 65% undivided share in that site. We already have a heads of terms signed with a 60,000 square meter user on that site. So we needed to acquire it, so we could deliver that to them. We haven't signed the lease yet. We're having negotiations, but it's highly probable that they will occupy that space, and we'll develop that for them with delivery in about 2028. So if we take that off, we include Eastport North and we take the advanced negotiations off, as we sit here today, we only have about 170,000 square meters in our pipeline. And if we look at the history and the future, we say, look, historically, we've delivered 122,000 squares; we feel that the market and the inquiries we have, plus also our brand that we've established in terms of, I would like to say, being the sort of go-to team for logistics developments, means that we probably are likely to deliver even more than that in the future. So we feel that right now, it's a good time to go and look for additional land opportunities in terms of topping up that development pipeline. So We, in the next sort of 12 to 24 months, we will look for land opportunities on which we can develop roughly 500,000 square meters. We're probably about 6 to 8 weeks away from closing probably half of those, subject to a whole bunch of things. But that feels to us like a comfortable development pipeline, which gives us scope to continue these developments for the next 3 to 5 years. So I think it's sensible. If you look at the history and what we've delivered, we probably need that, and we certainly have added a lot of value in terms of continuing with these developments. So that's coming in the next 12 to 24 months. Hopefully, 2028, we'll have about another 500,000, 600,000 square meters of pipeline. This is Eastport. We just have -- for those of you that don't know, it's on the R21, which is really becoming the premier logistics node in the country, just past the O.R. Tambo Airport. We just have one site left here. And as I mentioned, if you look there on north of Eastport, that site down there, you'll notice some earthworks. We've already started the earthworks, given that it's highly probable that we sign that lease. So this one is a fantastic park. It's the land size was 1 million square meters when we started out, and we've nearly developed all of that. I really think the spec, the access, the location is really absolutely top class. Interesting to see when we look at these logistics videos following from what Vuso said about Park Central, look at the solar on the roofs and see how small it is and how little of that roof space we use to supply the tenants with the energy they require. One thing that we are exploring alongside another partner is that the city of Ekurhuleni has tendered some feed-ins from assets within the city. So we're looking to see if we can do a PPA with the city of Ekurhuleni using this excess roof space, which is really superfluous to the tenants' needs and sell them the power on a 20-year PPA. So that will be about 12, 13 megawatts of additional power that we can install here. And in essence, what's really happening, the electrons don't sort of follow government instructions. They'll just flow directly to that Teraco data center, which is the largest in Africa, and they're looking to make it twice the -- sorry, 3x the current size. So it will be about 200 megawatts. So our little small 12 megawatts will just be consumed in essence by that data center. So that's the one site we have just there on the left, available in Eastport. Savino Del Bene was the one asset that we sold. Unfortunately, that was the deal we did, wish we had that asset back. There's Eastport North, 150,000 roughly square meters of GLA, fantastic location. That road running past Eastport will become the R21 Expressway. So that will actually run parallel to the R21 all the way almost sort of past the entrance to the fence to Serengeti. So our pipeline reduced a little bit in terms of value, we estimate about ZAR 2.6 billion currently. And as you can see there, that's the 500,000 square meters that we spoke about. And the under-negotiation assets gives us a very small existing pipeline as we sit here today. And we're hoping that we'll close those transactions. And then we do really need to get going with with additional land. And we will buy it zoned and serviced. We've learned that lesson following Clairwood. We prefer to just buy it zone serviced ready to go, so we can just start delivering it. Longlake is done. It will be done during the course of September. That middle box there is the last one. We let -- we developed a box for Suzuki. It was a pre-let deal, 8-year lease, fantastic tenant, cargo carriers and Zest with the initial ones we've done. So we've developed out this park. It's about 100,000 square meters. And I think what's interesting to see from when we initially started is the whole node has developed. Zenprop has been doing a lot of smaller units. They're almost done. We will potentially look to acquire some more land in this area, but it's actually been really successful. That road that runs almost between our assets there, the 3 on the left and the 2 on the right; actually will eventually go all the way to the N1 and round about sort of waterfall that will join the N1. So I think accessibility here is only getting better. And the -- just the topography of this node, if you look from the highway, it really sits on top of the hill. So I think it has fantastic visibility for the likes of tenants such as Suzuki. Again, you'll look there on the solar on the roof, very, very small amount required for the logistics tenants usage. That's just a summary of our of our logistics portfolio. So when we look to Europe, we have a team of 12 people in an office in Warsaw. We do developments from start to finish. So the team is able to develop -- to acquire land, build the whole development, lease it out and manage it. So I think that's the way that we've approached it. It is a competitive market. The weighted average lease expiries jumped up significantly from last year. We acquired an asset in [ Wroclaw ], in Western Poland, a fantastic location of an asset, slightly older. It was an old Volvo occupied sort of bus factory, but it had a nice big warehouse, and that's what the tenant needed. That was on a 20-year lease at an 8.75% net initial yield. I think if you look at the bottom right, there's something that is making us increasingly optimistic about this Polish logistics business is the vacancy rate has dropped. I think the market got pretty hyped up about logistics and warehouses and e-commerce 2021, 2022, probably a bit too much supply brought online. But that has largely stopped, and you can see the vacancies now on the whole market come down by 200 basis points, which is good to see. Our vacancy by rental is only 2.4%, still developing roughly 7% to 7.5% net initial yield. Those are just the locations of our assets. I'll just show you a couple of these videos. I must say the team there is fantastic at developing these assets are really, really top spec. The signage, I think, is unbelievable, wish we could bring those signs here to SA. So Stargard was -- when we acquired this initial portfolio, we only had one hall there, Hall A. We've subsequently done Hall D, Hall C, and we are looking to expand this park. It's quite interesting, this particular node for tenants that occupy there, they do get some significant tax advantages. So we bought all the land to the left there that we developed a yard in the background there for Vestas, and they are actually occupying some of Hall A. Hall C, the tenant is looking to expand. So it's actually -- it's been interesting to see the development of the node. When you have a $1 trillion economy that's growing at 3.5%, it really does help a business like ours in terms of growth and tenant demand. Zabrze, a really great case study. It was Fortress start to finish, acquired the land. That little piece at the back, 15,000 squares is all we have left to develop there. The rest of it is fully let. Our tenant, INNPRO, just keeps growing and taking more and more space. But I think it's a fantastic location in Upper Silesia, just behind the M1 retail park, really good asset, and we could probably replicate that on the site on the right there. Unfortunately, that's owned by a big retailer, but that may come to market depending on their plans if they decide to develop it or decide to sell it. Just in terms of the pipeline, I think you can see there currently under development is pretty small. Zabrze, we're about done, but we do have quite a few inquiries both in Stargard, there's an inquiry, [ Walcz ] and Gdansk. So I think it's looking quite positive on that side. We did buy another piece of land close to our existing park in Bucharest. It's been a very successful investment for us in Northwestern Bucharest. And it's really that [ A0 ] North Ring Road around Bucharest has changed the whole logistics market for that city. So a lot of the incumbents who were on the old ring road are now sort of -- they're a little bit stuck. They aren't on the -- they don't have the flyovers, they don't have the good network, they don't have the bigger space. So I think it is nice for us to look to expand around that ring road. So that's just the development pipeline. Bydgoszcz has now been completed. It's been a fantastic asset for us in terms of the rollout there. We've completed almost 100,000 square meters there. When we bought that asset, we had -- there were 2 completed buildings and a shell, the developer had run out of money and was not able to access any debt. And that's when we acquired it in that state. So it was a little bit of a leap of faith, but it's great to see what the team has done with those -- with that asset. NEPI Rockcastle, we have 14.4%. It's -- as you would have seen, it's been another good set of numbers there. Obviously, as they get bigger and bigger, it does get harder for them to move the needle, but extremely stable business. And I think one thing that we appreciate with, as Ian mentioned, the form of our holding there. NEPI Rockcastle trades roughly ZAR 200 million to ZAR 300 million a day in -- on the JSE. So it is a very liquid instrument for us to hold, which does, I think, differentiate that holding from something perhaps in an indirect subsidiary or a minority holding, something like that. So another set of very good numbers from them. In terms of the South African industrial, I think the one notable metric there is the net initial yield of 10.7%. So if we take our forward income, we look at and divided by our book value, we're getting 10.7% from that portfolio. So it is a high-yielding portfolio. But I looked yesterday at just some of our R&M numbers. This portfolio of ZAR 1.5 billion compared to our logistics portfolio of ZAR 18.5 billion, the R&M number on this portfolio is half of the R&M number on our logistics portfolio, which is quite incredible. So when we say buildings get older, they get more expensive to maintain, it is true. You need to make sure that you're constantly refreshing the portfolio. We can't shy away from the R&M in this portfolio because you have to keep it fresh and relevant and lettable to the tenants, but it does start to suck up a lot of cash in terms of just keeping these assets refreshed and usable. The office portfolio, very, very small for us now, 1.2% of total assets. Again, building valuation, ZAR 10,500 -- sorry, a square meter. When you look at the building that we're in now, I mean, replacement cost, I would say, is probably more than double that. We are deliberately keeping the vacancy high. We don't want to cut up a lot of these buildings and let them out because our best exit at the moment is to owner occupiers. So actually, if you have a let building and especially a multi-let building, it becomes very, very difficult to sell that to an owner occupier. So that vacancy is a little bit more by design, and we are hoping to get out of that office portfolio shortly. Our JV with Inospace, again, looking at the -- at that micro spaces rental rate, ZAR 164 a square meter, that's really the business that they're in taking the older big boxes space that really wasn't functional compared to the new prime assets that we're developing and making that appeal to the smaller tenants having shared boardrooms, a reception, coffee shop, storage spaces, things like that, and they can uplift that rental. But it becomes an operationally very challenging machine to run and one that is probably quite different to what we have at Fortress. So they've done a very, very good job there. And I think in terms of the rentals, they get really uplifted at the start and then they kind of level off, but we've had success with that JV, and it's certainly been quite lucrative for us. Yes, in terms of the ESG, I think the biggest one for us is really utilities. That's how -- that's kind of renewable energy and making sure that, especially in a water scarce country like South Africa that our water usage and the tenants water usage is as efficient as it can be. And really, what we started with was we needed the data. We needed better data from the tenant's consumption and from the assets. So we've been on the smart meter rollout. And as I mentioned, it's just trying to cut out the human intervention. And then also and just as important is trying to council something that they can rely on. They don't want to use private meters to meter their utility consumption. But unfortunately, a lot of times, the meters are broken, you call them out. The require a payment upfront for them to come and fix the meter in case the meter -- in case that [ call-out ] is incorrect and they've got the money. So it's a bit of a mess at the moment, and we have appointed a utilities leader, someone who's come in who's just purely going to focus on getting the utilities as efficient as possible, but also making sure that our rates and the utilities with council and invoiced correctly. It shouldn't have to be like that. We shouldn't have to incur costs as a private enterprise to do that. But hopefully over time, they'll start to build a little bit of trust in our metering systems and be able to rely on our meter readings, which would then just ensure that we're paying for what we actually use and there's not a whole lot of estimates and other confusion going on. So that's something that we're quite excited about. Batteries, we are really ramping that up. I think that from a few years ago, the technology has really changed radically in our favor, as have the costs and the foreign exchange rates. So I think when we had the whole load shedding increase, I think it was about 2023, I think looking back, we were very glad that we made the decision to rather sort of provide backup power with generators and hold off on the batteries. The technology and the cost has now gotten so much better than it was back then. In terms of our social impact, broad-based BEE Level 2 again for this year-end, we do a lot of great work, I think, with food and trees for Africa but also the communities. Talking about Johannesburg about [ Vuso ] Central Park expansion, we're looking to expand that over the railway lines. And that would actually take our asset across the railway lines, and then it would border on the Johannesburg Art Gallery and your Bear Park. So Jodie Dreyer, who leads that for us, has been discussing with City Parks and with the Johannesburg Council to really get involved in your Bear Park and try and fix up the park. I think Standard Bank and the French Embassy are involved with the Art Gallery. We did Donald Mackay Park down the road in Hillbrow successfully. So it's really about trying to it's quite incredible trying to get council and the city to allow private enterprise on their own account to make the parks better for everybody who lives in Johannesburg. It shouldn't be, but that's the way it is in Joburg. They don't actually want to let private enterprise in as easy as I think they should. But fortunately, we are there. And I think the more positive impact we can show, the more they'll sort of let us get involved in fixing up the areas around our assets. From a governance perspective, there have really been no changes. I think the Board has been -- Board and its committees have been pretty stable and supportive throughout the year. As Ian mentioned, the guidance, so 10.1% on the total distribution part. But if we look at it from a per share basis, we're expecting 7.5% distributable income per share growth for next year, which I think is great of a circa 8% current yield, that's going to grow at 7.5%. So probably 15%, 16% total return, all things being equal. These are just the portfolio stats that are in the back of the pack.

So I think now we'll go to questions, Ryan? If there are, should we start with -- if there are any questions in the room, we can start with that. Do you want to...

Great set of results. You mentioned that you're looking for land opportunities. Can you let us know which regions you'll be looking at? And then how will future developments be funded, given the slowdown in disposals? Are you looking to come back to market? Or do you think debt will be sufficient? And then just on retail, what proportion of rentals are linked to turnover growth? And then are you affected by any of the TFG store closures?

Yes. I can't -- I don't have the figure off hand, but the turnover growth is quite small in the portfolio. Obviously, a lot of the tenants have got turnover, but very few of them are hitting that. I can get back to you on an actual number, but it's not that high.

To answer the logistics pipeline, so I mean, it's the prime nodes in Gauteng, and we have some plans in the Western Cape, but that's probably a lot further off in terms of where that land is in terms of its development cycle. So it will be all of the prime nodes in and around Gauteng where we sort of have assets and exposure and we know that there's a significant tenant demand.

And then the TFG store closures?

TFG store closures. So our approach has always been that you need to have strong assets so that when people close, they close around you, so that if people close, they close the stores elsewhere and they come to your shopping center. So since we took over, when we started as a management team, I think we had about 60 retail assets. We now have about 40. So we sold all the assets that were probably noncore, and we've really kept the core. So we think that if there are closures, there will be probably very few in our asset. And if there are, we -- in some of the buildings, we've actually got waiting lists for some of those assets. So I think we will probably be fine. Having said that, TFG talks about closing 100 stores, et cetera. But many of these retailers close hundreds of stores per year, but they also open hundreds of stores. So it's not something that is too concerning to us. I think we've got a good portfolio and good demand from tenants.

Sorry, you just had a -- how do we fund the pipeline? So if you look at our average that I showed 122,000 squares, so that's probably kind of ZAR 1.5 billion a year. ZAR 1.5 billion is probably 1.5% on our LTV roughly. So we're currently 34. So if you consider no asset valuation increases, it will take us to 40% once we roll out that pipeline. So we -- it's -- and because of the -- it takes many years to do this, it's really not going to be a funding constraint. I think we can probably just do it all with debt. Anything online?

Yes, there are quite a few questions. I'll start with Francois from Anchor. He has a few questions. Just a technical one around how we determine like-for-like NOI in South Africa. He's calculated lower value than what we've done. We actually did 7% like-for-like in the SA business. So maybe we just want to give some color on how we get to our 7%.

So we go into quite a lot of detail, so you would need all of our accounting records to recalculate that. So really like-for-like is something that was there last year that's still here this year hasn't changed. So logistics, really, what we do is we strip out things that have been brought online halfway through the year, and that's not like-for-like. That will be like-for-like going forward. And that's how we do the like-for-like NOI growth. It may not match the headline net property income growth in the accounts because of the timing. So a lot of the assets that we've sold at the start of the year would obviously be deducted. We have buildings that are coming in that may not be in that like-for-like figure if it was, let's say, brought in halfway through the year. So it's a calculation that we do based on consistent assets.

That's clear. Question for Ian. Can you just disclose the nominal cross-currency interest rate swap exposure and the pricing?

EUR 69.55 million. The spread is about 4.2%, 4.3%. So we swapping JIBAR for EURIBOR. There's no margin on either of those. So you're taking what JIBAR is at the moment, 7.01. EURIBOR is about 2.2, 2.25, and that's how you get to the spread differential.

Another question for Ian. How much hard currency debt was in place at FY '26? And do you expect to keep the same level flat through '27?

Yes. Perhaps that question came in after we showed the balance sheet split, but it's exactly the same. And in fact, the cross-currency position that we brought in is less than what we had in the euro facility that we have with Standard Bank on the collars. So that we repaid that ZAR 100 million, and we've only introduced ZAR 69 million because we've been able to raise senior secured debt in the offshore portfolio. So economically to the business, we've maintained the same LTV level. I would suggest that it doesn't increase -- well, it will increase nominally to the extent the asset base grows in euros. But I don't think that we'd be looking to increase the LTV percentage against that, i.e., to borrow more in hard currency to fund the SA business. We're comfortable with the level of exposure that we have at the moment.

You had another question just around our hedged exchange rate that we use for our FY '27 earnings expectations. Yes, we do disclose that. Maybe just want to give...

No, no, it is disclosed. It's in the results announcement. We actually disclosed it now, and we've matched the timing of the cash flows that we received, the majority of which is from NEPI. We've matched those timing in the results announcement, you'll see an October and a March flow. And our hedge profile is 100% for the next year, 66% for the following and 33% for the following year. Off the top of my head, I don't know exactly what those rates are. They're probably around 21, but it's in our results announcement.

Just a question around distributable income. Why are withholding tax and share-based compensation excluded from this number?

Okay. So the dividend withholding tax relates to the first half distribution of the NEPI shares. So when you do a dividend in [ species ] to the extent shareholders elected and to the extent that they are not a company, a pension fund, a provident fund, a life company; it would need to be an individual. There is a dividend withholding tax that's payable. It's a tax levied on the company. So we would view that almost as a capital raise fee because what we've done is we've turned the NEPI shares into cash by retaining that cash. And hence, we view it as a capital charge, and we keep it on the balance sheet and expense it. The IFRS 2 share-based payment is an accounting charge that we take. The true cost to shareholders of the share-based payments because these are in effect [ zero ] strike share issuances is the dilution. So our plan is about 4.8% that is expensed over a period of -- in its entirety and fullness will be almost 10 years. So you're taking about 0.5% dilution per year on the number of shares in issue. So to have both charges in the -- expensing the charge in the distribution and having more shares in issue, you're making shareholders pay for it twice. So we don't deduct it in the distributable earnings, yet there are more shares in issue at each distribution period. So shareholders wear it in a way in the dilution that they take.

Thanks, Ian. Another question from here. Just in terms of our tax rate outlook for that FY '27 guidance, what have we penciled in?

Yes, we penciled in ZAR 150 million. So last year, we had penciled in ZAR 100 million. It was obviously higher, ZAR 136 million, I think, was the charge that we took against the distribution. And that differential, the delta is really as a result of distributing the NEPI shares and retaining the cash. And then by not having additional debt, we didn't have the interest shield to reduce the tax charge. We think that next year will be much the same. Of course, we've made a scrip alternative available to shareholders. We won't know what the take-up is until we get to sort of mid to late October. But on the basis that we will have a cash flow as opposed to a scrip issuance, the charge of about ZAR 150 million is probably fair.

Kind of answered his last question around our assumption around the scrip take-up in our guidance.

Well, we don't know. It will depend. You see because we've pegged the price at ZAR 24. I suppose shareholders will look and see what the price -- the spot price is closer to the time. And then we'll have to see what happens.

But we haven't penciled any specific ratio in our FY '27 guidance for take-up?

No, we've assumed actually that we paid cash. So I charge -- we assume that there's a cash flow as opposed to a scrip.

Question for Steve, also from here, just on the cost of the Eastport North land.