Growthpoint Properties Limited (GRT) Earnings Call Transcript & Summary

All right, so good morning everybody and welcome to the Growthpoint Properties Annual Results Presentation for the Year Ended 30 June 2021. Before we start, I'd like to just take 1 minute to pay tribute in memory of Sam Hackner, who passed away last month. Sam was a former Chairman of Growthpoint Properties and chaired the Board between 2003 and 2008. Sam actually had quite a big influence in my own personal early career development and was instrumental in me leaving the corporate finance world and joining the property industry and at the same time, he was a mentor to both myself and Estienne as well as many other of our senior executives in our property and asset management teams in Growthpoint and our thoughts are with his family. So moving into the main part of the presentation and just looking at the agenda. I'll start off dealing with items 1 to 4. Estienne will deal with items 5, 6, and 7 and then I'll return to do the conclusion and we'll leave the questions till the end. I think given this online format, it is probably appropriate not to take questions during the presentation, but you are all welcome to send questions through on the various platforms that have been provided for that and we will deal with those at the end. So just looking at our strategy and our strategy in action, it's fair to say that in the short to medium term, our focus has very much been on liquidity and strengthening the balance sheet, which has enabled us or will enable us to obviously continue to pursue our strategic initiatives, all of which still remain very relevant. We did during the period raise ZAR 4.3 billion of equity in November 2020. We offered the DRIP at that time in December and raised ZAR 577 million from the DRIP. We reduced our dividend payout ratio and in relation to this dividend in question for this period under review, we have again decided to trim back the payout ratio to 80% and thereby retaining ZAR 865 million in cash. We also sold some assets and retained some cash from the half year dividend. All things considered, we've accumulated over ZAR 6.3 billion worth of liquidity and used that to strengthen our balance sheet and to put us in a position whereby we feel confident to look forward with whatever the challenges are that lie ahead and that we can continue to look to grow and expand our business. In relation to our internationalization strategy, we continue to look at ways to refining and focusing our offshore approach in our offshore investments. At this reporting period, just short of 40% of our total property assets by book value are located offshore and just short of 30% of our earnings before interest and tax is earned from offshore. Domestically, we continue to optimize and streamline the portfolio. This is despite a severe lack of liquidity in the domestic market as well as operational challenges in trying to get properties transferred once they've been sold. The deeds offices across the country are oftentimes closed due to COVID and it's taking a lot longer to get transactions done. In the period, we did sell about ZAR 560 million worth of properties and at balance sheet we held another ZAR 181 million for sale. We had transaction signed agreements just awaiting transfer and in aggregate since FY '17, we have sold over ZAR 7.5 billion worth of the portfolio in an effort to streamline. In building new revenue streams, we have 2 elements that or 2 business units that we're focusing on, trading and development. We do see that our expertise in that specific department give us a competitive advantage. We have severely curtailed the speculative development that this team undertook. However, there still remains a number of very profitable opportunities for them and in the period, they generated ZAR 193 million worth of trading profits and development fees as well as rental income from some of the assets that they hold. On the Funds Management side, we've grown the assets under management to just short of ZAR 12 billion. This talks to a capital-light strategy, which we believe is particularly attractive in the current environment. We earned ZAR 33 million in asset management fees from Growthpoint Healthcare Fund and we received ZAR 14 million in maiden distributions from the Lango Manco. Lango is the fund that focuses on investment into Africa. We received 132 million of dividends from the Healthcare Fund and 6.6 million from the investment in Lango. We are in the process of launching a third fund, which is focusing on purpose-built student accommodation and we hope that when we present to you the half year results for HY '22, we will be in a position to give more color on that. We expect to raise in order of ZAR 1 billion with a third-party capital and to close that transaction before December. Touching then on some salient features for the group for the period under review. Revenues increased by 6.6% to ZAR 12.8 billion. Distributable income decreased by 7.8% to ZAR 5.1 billion. Our distributable income per share decreased by 19.1% to [ ZAR 1.481 ] impacted by the additional shares, about 408 million shares that we issued during the period, both in terms of the capital raise as well as the DRIP. And at the asset level, our consolidated assets decreased by 8.4% to ZAR 152.8 billion. Group LTV at 40%. That is down from 43.9% at the comparable reporting period FY '20 and speaks to and is testament to the work we did on the liquidity side and raising liquidity, bringing down the debt and the equity raise. Just important on the liquidity side as well is that in terms of committed facilities and cash on balance sheet at 30 June, we have over ZAR 7 billion worth of access to liquidity. Lastly, our net asset value per share decreased by 12.3% to [ ZAR 2.023 ] driven by asset write-downs in South Africa in the [ main South African ] portfolio, the V&A as well as Capital & Regional buffered by increases in valuations in GOZ, but also the equity raise at a discount to NAV impacting that number. If we try and unpack the, let's say, the decrease in distributable income, the distributable income decreased by 7.8% or ZAR 426 million and we try and unpack where, what contributed to that. In the first instance, the South African business actually made a positive contribution of about ZAR 37 million. That was mainly driven by the weaker operating environment with higher vacancies and deteriorating negative renewal rental growth. That impacted negatively on revenues. On the other hand, we provided less COVID-19 discounts in FY '21 compared to FY '20, which had a positive impact on revenue relative to the prior period. Property expenses decreased during the period due to tight cost control on our side, but also due to the reversal of bad debts previously provided in the prior period. In relation to the finance costs, South African finance costs, we saw that increase by ZAR 67 million during the period and that is mainly due to a combination of interest savings on the one hand resulting from the equity raise as well as lower interest rates. We still have about 85% of our interest rate exposure hedged, but on the unhedged portion we did see some interest savings. That's however countered by higher interest costs from a higher percentage of rand funding. We have trimmed back on the level of foreign-denominated debt in the funding of C&R in particular, which had a significant portion of [ pound ] funding. We've reverted to rand funding on that, but also the impact of Capital & Regional being consolidated for 12 months in this particular reporting period compared to 6 months in the prior reporting period. And then the other major impact came from significantly lower capitalized interest number, which is linked to the development activity that has been scaled back from ZAR 1.6 billion in the FY '20 period to ZAR 560 million of spend in the FY '21 reporting period. One of the biggest moving parts and negative contributors was the V&A Waterfront, which has been very severely impacted by COVID-19 and the impact on international tourism. Whilst interestingly, operationally, the V&A Waterfront is doing fine, if you look at vacancies and those sort of operating metrics, the Waterfront has provided just short of ZAR 300 million worth of discounts and credit notes to mainly the operators of the hotel industry or hotels that we are exposed to, restaurants, curio shops and those tenants that are most severely impacted by the lack of international tourism. Our dividend from GOZ was down by [ ZAR 30 million ] mainly due to the dividend reducing -- the dividend per share reducing from [ AUD 0.218 in the prior period to AUD 0.20 ]. That is not a reflection of the business not doing well, but rather the payout ratio being reduced to 77.9% from 85% in the prior period. In fact, distributable income per share grew at a modest 0.6% for the Australian entity. Globalworth, our contribution from Globalworth was down just over ZAR 200 million. There, the dividend reduced to [ EUR 0.30 ] per share for the period, compared to [ EUR 0.49 ] in the prior period and they are just mainly been impacted by what we call the cash drag or the cash burn or in another language perhaps the opportunity cost associated with very significant cash being held on balance sheet by Globalworth. During the period, the average cash balance was probably over EUR 500 million, at year-end about EUR 460 million and the opportunity cost of sitting on the cash, depending on how you want to look at it on whether you settle debt with that money and save interest or whether you invest the money and earn rental income is somewhere between EUR 20 million and EUR 30 million which is very substantial and could certainly contribute significantly to an improved dividend. I'll speak more to that on the upcoming slide. The dividend from Capital & Regional. There was no dividend for this particular period under review and in the comparable period, we received a maiden dividend of ZAR 107 million. So negative movement on that. Small improved contributions from Growthpoint Healthcare and from our investment in Lango and then the fees from Funds Management has increased by ZAR 14 million mainly attributable to the maiden Fund Management fees received from Lango [ met Lango Manco ]. And then on the trading and development front, we saw ZAR 158 million increased contribution from the trading and development team mainly due to ZAR 115 million of trading profits, some rental income and development fees earned. On this slide, we try and allocate some of the funding costs to the various elements of the business and the various investments that we have. Given that the South African balance sheet essentially carries all the debt and all the interest, maybe if we start allocating some of the interest, it paints a slightly different picture. We see a slightly better contribution -- positive contribution from the South African business as well as trading and development, Lango, Healthcare and Funds Management pretty marginal increases in their contribution as well as -- and then GOZ, V&A, and Capital & Regional, and Globalworth all contributing negatively with the biggest negative contributions linked to Globalworth, Capital & Regional and then the V&A Waterfront. Moving to the next slide on the -- just looking at a summarized income statement. The gross property revenue for the period grew by 6.6% from ZAR 12 billion to ZAR 12.8 billion. I'm not going to go through each individual line, but in the gross property income line, it's important to understand one of the key dynamics of this reporting period is that Capital & Regional was only in for 6 months in the FY '20 reporting numbers whereas it's in for a full 12 months in the FY '21 reporting period. It's also important to note the impact of exchange rate fluctuations in these 2 reporting periods. The average exchange rate for this reporting period on the [ AUD 1 was ZAR 11.49 compared to ZAR 10.49 ] in the prior period. It was [ ZAR 20.71 to the GBP 1 versus ZAR 20.75 ] in the prior period and for Capital & Regional and so those 2 subsidiaries that are consolidated in the average exchange rate also has a bearing on these numbers. Property expenses grew at 6.2% from ZAR 3.2 billion to ZAR 3.4 billion leaving net property income up 6.8% at ZAR 8.7 billion, sorry, at ZAR 9.368 billion compared to ZAR 8.7 billion. Other operating expenses grew across the group at 5.2% to ZAR 646 million from ZAR 614 million in the prior period, leaving us with net property income after operating expenses up 6.9%. Our finance costs grew at 7% to ZAR 3.3 billion, up from ZAR 3.1 billion and that then leaves us with net property income after finance costs up 6.7% at ZAR 5.4 billion compared to ZAR 5 billion in the prior period. If we move to the next slide and look at the various contributions to finance income and other investments, you can see that, that is where probably the biggest negative contributions occurred. Waterfront down by just on 40% to ZAR 365 million from ZAR 606 million. The investment income or dividends from Globalworth was down 35%. Finance income was up 33%, small number in the scheme of things as well as the contributions from Funds Management. We then make the necessary adjustments for non-controlling interest for the minority interest in both Capital & Regional and GOZ and eliminate foreign exchange profits and a few other bits and pieces, leaving us with what we call distributable income, our key measurement measure -- performance measure is distributable income and that's down 7.8% from ZAR 5.4 billion to just over ZAR 5 billion, ZAR 5.052 billion. We then make a number of company-specific adjustments to get to the SA REIT FFO. SA REIT FFO came in at ZAR 5.185 billion -- sorry, at ZAR 4.653 billion. That's down 10% from the prior period at ZAR 5.185 billion. Now the per share level SA REIT FFO decreased by 19.9% versus our distributable income per share measure, which was down 19.1% at [ ZAR 1.481 compared to ZAR 1.831 ] in the prior period. On a weighted basis, considering the new shares that were issued in November and December last year, distributable income per share decreased by 15.7%. And then at a dividend per share level, given the 80% payout ratio, the dividend decreased by 18.8% from [ ZAR 1.46 per share to ZAR 1.185 ] per share. Just looking at a few extracts from the balance sheet and some of the moving parts. The property portfolio decreased in value by 8% from ZAR 140 billion to ZAR 129 billion. The South African portfolio down by 6.3%. Growthpoint Australia down by 4.6%. That's notwithstanding circa 10% write-up in the values in the Australian business. That number mainly driven by currency fluctuations. We actually saw very significant currency fluctuations on the balance sheet dates. FY '20, the currency ex numbers looked as follows: the rand to the Aussie dollar at 30 June, '21 was [ ZAR 10.70 versus ZAR 11.98 ] in the prior period. In terms of the euro and pound, it was [ ZAR 19.75 compared to ZAR 21.52 ] and on the euro, it was [ ZAR 16.94 compared to ZAR 19.49 ]. As you can see, very significant movements in the balance sheet date -- currencies used to convert the foreign holdings. So GOZ actually showing a decrease in value, notwithstanding that the Aussie dollar valuation of assets was up over 10%. Same dynamic with Capital & Regional. There, again, it's been exacerbated -- the actual write-down in value was exacerbated by the currency movement, down 28%. Our equity investments decreased by 14% mainly due to write-down of the property values at the V&A Waterfront and our investment in Globalworth. Also, that's mainly driven by currency. Our listed investments, GOZ owns 15% investment in one a listed fund known as ADI and that grew by 34%, strong share price performance of that particular investment in Australia and then our Lango real estate investment decreased by 13.3%, again mainly driven by currency. On the borrowing front, nominal borrowings amounts to ZAR 60.5 billion at year-end. That's down 13.6% from the ZAR 69 billion, almost ZAR 70 billion in the prior period. In South Africa, our borrowings were down 12.8%. In GOZ, borrowings were down 18% and in Capital & Regional, we saw a decrease of 9% to just over ZAR 8 billion of debt. So total shareholders' interest, it's down by only 0.2% from ZAR 69.225 billion to ZAR 69.1 billion in 2021. Moving into a brief look at our investments. Firstly GOZ, our investment in Australia. We own 62% at a cost of ZAR 9.6 billion. The current market value is ZAR 20.9 billion. The GOZ dividend reduced mainly reflecting the more conservative payout ratio. GOZ does remain a core investment market for us given our experience and our knowledge of that market. It has a particularly strong balance sheet with gearing levels now below 30%, 27.9%. The company has access to significant liquidity, over $387 million of undrawn debt facilities and no debt maturing before December 2022. We saw strong NTA performance, 14.2% increase in the NAV per share to $4.17. Currently, the share is actually trading at a slight premium to NAV in stark contrast to I guess many of the companies on the JSE real estate companies anyway that are trading at just discount of anywhere between 20% and 40%. 65% of GOZ's debt is fixed for 4.3 years at an average interest rate of 3.17%. On the portfolio side, GOZ is a very defensive portfolio, well positioned with very strong tenancies. Occupancy is over 97% and the tenants are very heavily weighted to large listed corporates and government. Very significant leases were signed in the period. Average length of these leases was at 8.2 years. The weighted average rent review or escalations embedded in the lease portfolio is 3.4% and the weighted average lease length is 6.2 years, more than double what we have in the South African portfolio. The Growthpoint Australia property portfolio experienced the largest like-for-like 12-month valuation uplift of over 10%, mainly driven by very strong investment evidence in the Australian market. The level of capital looking to be invested into the Australian real estate -- direct real estate market is unprecedented and transactions -- very significant transactions are taking place at record prices or record low yields driving -- feeding through into the valuation psyche and GOZ benefited from that in the valuation of its own portfolio. The recently completed development office --development in Melbourne, Botanicca 3, just short of 20,000 square meters is now 82% leased and driving the upward occupancy rate in that portfolio. Looking at disposals and developments, it was only $21 million of development and capital expenditure with [ about AUD 97 million ] of commitments. The bulk of those commitments are in fact in relation to tenant installation incentives that have been granted to new tenants signing very long-term leases, about half of that is off the back of the new 25-year lease that the company signed with the New South Wales Police Force in a building in Western Australia. Sorry, not Western Australia, Western Sydney. GOZ sold 3 assets for $116 million that no longer fit with its investment strategy and it acquired a modern A-grade office building in Sydney Olympic Park of $52 million, which settled post year-end -- post the reporting period. COVID impact has been almost -- has been very negligible. 97% of the tenant base is core large corporates and government. There is no retail exposure. 99% rental collections throughout the period. And as I mentioned, very nominal impact on earnings due to COVID or COVID relief needing to be granted in favor of the tenants. Just on GOZ briefly, if I look at those metrics, I'd have to say you could almost not position a company -- a real estate company better in this environment. All those metrics are extremely good. Looking at Globalworth, we have a 29.3% investment in Globalworth, a cost of 8.4 billion and the market value at gearing was 7.6 billion. A consortium comprised of CPI Property Group and Aroundtown made an offer, a cash offer for all the shares in the company during the period under review at a price of EUR 7. They did manage to pick up about 7% or 8% additional shares to their starting position, which was just over 52%. So they are now just over 60%. Growthpoint do not believe that the EUR 7 offered was compelling or reflected the underlying value of the business. Our view was shared by the Independent Non-Executive Directors of the Board of Globalworth who recommended that shareholders do not accept the offer. So we do have a new controlling shareholder group at Capital & Regional. They will be making changes to the Board. I have been in contact with them and know the individuals and early discussions are positive in as much as their interest is aligned to ours in wanting to grow the dividend and wanting to invest significant balance of cash that remains on balance sheet and on deposit. The balance sheet is strong. The company issued an inaugural green bond in July, raising EUR 400 million. It's got a pretty good investment-grade rating. Off the back of that bond, the coupon was 2.95% and it was a 6-year term. They used some of the proceeds to repurchase about 40% of one of the bonds that expires in June 2022 at a premium of about 2% over par and the remaining EUR 323 million of that bond still expires in 2022. The company has about EUR 460 million of cash on balance sheet and EUR 215 million in undrawn revolving credit facilities. Net gearing is at about 39%. At the portfolio level, the value is about EUR 3.1 billion. There are 66 buildings valued at EUR 2.8 billion equally split between Poland and Romania. Occupancy level there is 88.7%. So vacancies have risen a little bit in that portfolio off the back of the weaker economic environment, but we don't see it as being, as you know, as problematic as we've seen in the South African portfolio. Certainly there seems to be pretty good demand still across the board, not only from an investment perspective, but also from a [ letting ] perspective and we believe that the very significant exposure to large multinationals across that portfolio will remain a defensive element to this portfolio. Leasing transactions in the period, which are mainly renewals amounted to about 194,000 square meters and the average lease length achieved was 4.7 years. Fairly quiet on the acquisition front, 2 high-quality industrial properties were acquired for EUR 18 million and some auxiliary land was acquired. We have selected a few projects to facilitate further development. On the development project front, 2 A-grade offices were delivered adding about 90,000 square meters of A-grade space in Romania and Poland, mainly Romania on the development front. So the Podium Park II in Krakow, Poland and Globalworth Square in Bucharest, Romania were the 2 assets that the bulk of the development activity was centered around. On the industrial front, the first phases of an industrial hub in Chitila and Constanta Business Park were completed and 5 light industrial logistics facilities of just short of 100,000 square meters have been prioritized as development opportunities. And then there is some refurbishment of 2 properties in Poland, where there has been some retail exposure or there was some retail exposure and some of that retail space is being repurposed. On the COVID front, a number of measures were adopted by the authorities in Poland and Romania to address the pandemic. The exposure to the retail sector is very minimal and as a consequence, the impact of COVID on the business of Globalworth has been pretty minimal with collections remaining over -- just short of 99%. Capital & Regional, our investment there is 52% of the shares in [ Cap Reg ] at a cost of ZAR 3 billion. We are in a market cap or market value of ZAR 833 million. COVID-19 has had a very material impact on the U.K., but also the U.K. retail space in particular. We still have a very strong management team in Lawrence and Stuart -- led by Lawrence and Stuart and we certainly believe that they have got the means to get through this particularly tough time that the U.K. and the U.K. retail environment is currently experiencing. We did not receive a dividend in this period. COVID impact, again very material. For their recent reporting period, they released results last week for the 6 months to June. I think more than half the time they were in -- under -- equivalent of our level 5 lockdown where only essential services or tenants providing essential services were able to trade. So those shopping centers didn't remain open throughout the year, but very severely impacted by the levels of lockdown. The U.K. government lifted restrictions on U.K. retail trading in April 2021, a couple of months back and since then, most of these stores within these shopping centers have reopened. 99% of stores are now open again and for the year to 30 August '21, 83% of rent due in respect of that period has been collected. It's important to note and understand as well that the U.K. government still has a moratorium on landlords especially retail landlords dealing with tenants or acting against tenants who don't pay their rent. You are not able to evict them or to put them into liquidation and so I believe collecting 83% of rent during this period is a pretty good performance. CapEx projects have been rationed to strategic projects only, those with short-term income impact. And then the impact of CVAs and administration is ongoing. One of the biggest impacts on the portfolio has been Debenhams which went through couple of rounds of CVA. Ultimately, it's been liquidated. They have vacated now the units in Blackburn, Ilford and Luton, but management again have done a phenomenal job in trying to re-let and repurpose that space. So at Blackburn and Ilford, these have been partially re-let and at Luton, the entire unit has already been re-let. The portfolio comprises of 7 dominant in-town needs-based retail assets. They are very well positioned with the community center strategy. Only 19% of contracted rent is from fashion operators. Rental income did come under pressure and reduced to GBP 31.9 million and 7.5% -- we saw a 7.5% like-for-like decline in the portfolio value to GBP 482 million from December 2020. It's important to note that the rate of decline has deteriorated considerably. So the 7.5% portfolio value write-down in the prior period comparable period was at least double that. Commercial occupancy, we have -- the properties are still 90% let by the expected rental value. We also entered into -- or Capital & Regional also entered into a conditional contract with a JV partner and first-stage planning approval has been obtained for 500 residential units at Walthamstow. A company called FEC, Far East Corporation who specialize in residential development in and around shopping centers and we believe that not only is there a benefit to [ Cap Reg and them ] seeking to hold residential units in close proximity to our shopping centers, but they also have exposure to some shopping centers themselves that potentially Cap Reg could get some exposure to either via management or investment. We've also agreed terms with the National Health Service for new healthcare facilities and in total 54 renewals and new leases were signed in the first half of 2021 at levels above the previous passing rent levels. The challenge with Capital & Regional I guess is its balance sheet and whilst it still has high cash reserves, GBP 75 million on balance sheet, which is equivalent to more than a year's rent. Net LTVs have however risen to 61% from 56% at the December 2020 date, mainly driven by the further write-downs in the property portfolio. Average cost of debt for C&R is 3.3% and its average debt maturity is 4.1 years with the earliest loan maturity in February 2023. Most of the facilities, debt facilities are currently in breach, but there have been -- waivers have been granted by the lenders in terms of all of the current income covenants. At this point, I'll hand over to Estienne to deal with the South African business and the Waterfront as well as the capital structure and I'll return after that. Thanks, Estienne.

Thanks, Norbert. Good day everybody. So over the past year, we have focused a lot of our attention on ensuring that many of our smaller tenants survive this very, very difficult economic environment, which is obviously compounded by the COVID situation. We have recovered ZAR 173 million of the ZAR 191 million of rental deferrals that we have granted since April last year and in the same period, which obviously stretches across 2 years, we've granted ZAR 475 million of rental discounts. Our average collections have improved in this year to 99.7%. We have re-let or let space to the extent of 1.2 million square meters. Vacancies, unfortunately, have continued to increase in this difficult period and when we get to the different sectors, it will be evident as to some of the reasons for this. The letting has come at a bit of a cost in that, obviously to get those renewals, we've had to give up on rental levels a little bit and given the environment we're in, we've seen that renewal growth rate has dropped to 14.9%. Arrears have improved remarkably to ZAR 308 million and our bad debts for the period reduced to ZAR 29.9 million. Renewal success rate is marginally weaker at 65.4% and the South African balance sheet as Norbert has mentioned, as a result of the initiatives that we've undertaken has improved and the loan to value ratio is at 35.1% with quite a conservative interest cover ratio at 3.2x. Our total expense ratio has also improved given that we have had to provide less relief to tenants. It is at 31.2%. We have managed to sell ZAR 559 million worth of assets. We've got only ZAR 309 million of strategic acquisitions. We've spent a ZAR 1 billion on capital expenditure and we have a further ZAR 311 million of capital commitments on developments. Our portfolio, unfortunately, has been written down further in this period by 7.4%, that's ZAR 5.4 billion and the write-down over a full 2 year period is in aggregate of 16.2%. In terms of our discounts granted, we have granted additional discounts of ZAR 198 million in the period. We have also granted additional deferrals of ZAR 32 million, but in the same time we've collected ZAR 156 million worth of deferrals that also relate to the prior period. We have had direct expenses of a further ZAR 6 million. So if we go and look at the total impact, if we include the write-back of provisions as our arrears have reduced, the total impact was ZAR 234 million and if you spread it across the whole period, the total impact was ZAR 754 million. So very, very significant for our company. The split of the arrears is ZAR 290 million for what we would deem to be normal arrears and then the outstanding deferral rental amounts to ZAR 18 million. So in aggregate ZAR 308 million. If we go and look at the movements in our provisions, we remain -- we have ZAR 175 million worth of provisions remaining. So as the arrears have reduced, we have reversed some of the provisions that we have made and you can see in the income statement there, our normal provision has increased marginally by ZAR 12 million and we've reduced the 25% on deferments as well as the ECL additional provision by ZAR 31 million and ZAR 66 million respectively. Bad debts for the period actually written-off was ZAR 115 million and then the total bad debt through the income statement as mentioned earlier was ZAR 29.9 million. If we go and look at our retail portfolio which now today consists of 46 properties of 1.356 million square meters worth ZAR 24.9 billion. The vacancies have increased marginally. The core vacancy, if we exclude the offices is around 5.5%. The largest single vacancy is in a property called The Avenues in Springs, which is 13,546 square meters. So this property has also been identified to be disposed of. We've also had 2 game stores that have vacated in aggregate 11,311 square meters and that was at the Bayside Mall down in Milnerton and City View in Durban. We have secured a tenant for the City View property and we are in quite extensive discussions and negotiations with a food retailer for the space in Bayside. So demand for space remains reasonably muted amongst our retailers and if you go and look at the sort of fundamentals, they continue to be reasonably weak. We have managed to improve our renewal success rate. So we've focused a lot of attention on retaining our tenants, but it has come at the price of renewal growth in terms of rental levels. Vacancies have, as you've seen, also increased a little bit in this time. So it is evident of a very, very difficult market and our arrears have also been able to -- we've also been able to bring that down at the same time. There are a few large clients, if you'd like, that are giving us gray hairs for those that have it, we've got Ster Kinekor, which is 21,000 square meters and it's quite a large arrear at ZAR 23.3 million. This has been fully provided for. This business isn't business rescue and we expect a business rescue plan by the end of this month. And then CNA is another one, which has gone into business rescue and has an outstanding amount of ZAR 9.4 million. So across the board, if you go and look at arrears, I think it has improved, but it remains very, very difficult, and tenant weakness is still a strong theme. The arrears, however, at our Watercrest Shopping Centre in Kwazulu-Natal and in Hillcrest Corner in Hillcrest are both inflated because we do have an outstanding insurance claim for loss of income as relating to COVID specifically at that shopping center. So we haven't passed any credit notes there. And then there is further pressure on arrears, just generally, given the recent unrest that we have experienced in specifically Kwazulu-Natal. Like-for-like growth has weakened further. This has been impacted by vacancies, our bad debts and parking revenue that has come down. Our trading density surprisingly has firmed and that really is through a strong performance from our supermarkets, our home and electronics, fashion and home decor categories. So in this environment, we have been hampered by ongoing regulations around lockdown and certainly, the third wave hasn't really assisted us in terms of strengthening the trading environment. If we look at the portfolio, the smaller community centers still perform better in this environment and if we look at Watercrest Mall and City View, which were both impacted by the recent riots. The total damage there was -- certainly Growthpoint's component of the damage was ZAR 24 million. Watercrest is jointly owned 50:50 with another investor. Both those shopping centers were up and running within 4 days and now we have 83% of our tenants back up and trading at Watercrest and 57% at City View. Online is a strong theme. I have, in fact, seen questions come through already around the online component. Now here, we have seen an increase in demand, certainly in hard lockdown and then every sort of post lockdown regulation event has certainly increased the online demand and what we have done is there are several aggregators and certainly, the retailers themselves like Takealot, OneCart, Checkers, Sixty60, Woolworths Dash and Dis-Chem, what we have tried to do is ensure that we have adapted and provided facilities for them to support that online retail. In the scheme of things, online retail has grown quite significantly, but still remains a relatively small percentage of total retail sales in South Africa. As mentioned earlier, our valuations have come down by 7.5% for specifically our retail portfolio, that's ZAR 2 billion. And just to understand, because I have seen there's a question on the valuations and the methodology. So all our valuations, we have more than 92% of our properties have been valued by external valuers. They all perform a DCF value where they make certain assumptions on vacancy periods, on growth rates in rental and they obviously have a reference to what the in-force rentals are in the leases as well as the current market rentals and all those are built into their assumptions as to how they have got to their valuations. Now across this period, and in fact, right across the portfolio, most evaluations have come under pressure, not because the yield environment has changed materially, but more or less, most of the assumptions around rental growth, the vacancy periods and the probability of renting the space has impacted these valuations as well as the specific environment around COVID. If we look at our office portfolio, it consists of 165 properties. It's 1.7 million square meters. It's currently valued at ZAR 27.6 billion. Vacancies have increased markedly to 19.9%, clearly quite a concern for us and we have several initiatives that we are putting in place operationally to try and improve the situation. The vacancies are spread across the whole portfolio, but specifically more in Gauteng where we have 22% vacancy. Western Cape has reduced to 14% and Kwazulu-Natal is very actually close to normal at 11%-odd. Sandton specifically has been the hardest hit node and Sandton has 21% of our office portfolio by GLA and here, vacancies are at 25%. 48,000 square meters of the terminations impacting the vacancy number is basically as a result of third-party legal action and business failures and then the other 1/3 is tenants giving up space and paying cancellations to reduce their costs and reduce their space. So the letting is slow and there's a lot of uncertainty economically, and many of the tenants are unwilling to commit to longer lease lengths. So what we are also seeing is a reduction in the lease period across the board. On the renewal success rate, that's evident of a tough market at 52%. The renewal growth rate has also weakened further to 16.1%. So we are really in a defensive scenario here and the market is certainly impacted by oversupply. And then further, the many large corporate tenants, certainly in Sandton, have their own space on the market, what we call ghost vacancies and they effectively are competing against us for tenants at this point. Escalations also are being negotiated down. Our arrears are under control. Broadly speaking, there are 1 or 2 lumpy amounts in our arrears. So we've got 12% sitting in one large outstanding tenant and we're hoping that we'll be able to resolve that. Like-for-like growth is down 9.8% and that's as a result of the weakness and the vacancies that we are experiencing in terms of rental levels and across the tenant base. On the work from home dynamic, certainly, many of our tenants have indicated that they would like to return to work. Clearly, in the third wave, that has negatively impacted their ability to do so and we do believe that once the working population is predominantly vaccinated that we will see a marked increase in people working from their office, but I think the level of flexibility that will be required from an employer-employee perspective will increase significantly. Valuations are down 8.8% or ZAR 2.7 billion for mainly the same reasons as I've mentioned earlier. If we look at the industrial portfolio, it's 208 properties. It's 2.26 million square meters with a valuation of ZAR 12.37 billion. Vacancies have also increased. Quite lumpy, the vacancies. So we've listed there just on 105,000 square meters of the 200,000-odd square meters for you and as you can see, quite -- 7 properties make up half the vacancy. So very, very lumpy. We have had some success in letting some of these vacancies post year-end. So we've done some good letting at Millroad in Cape Town and the Fountains Motown property, we've commenced a redevelopment project for the student residential -- student accommodation fund and we've also let some space to take a lot at Chain Avenue. Renewal success rate has weakened slightly. It continues to be a difficult environment and in fact, in the year, the renewal success rate, in fact, improved. So things are starting to improve we hope and the only challenge is that with the market vacancies there's -- it's a tough negotiation and all the parameters are up for negotiation and are unfortunately showing weakness for us. Like-for-like growth, however, has improved slightly in that it's only 0.9% negative and that is significantly impacted by bad debts. Our portfolio, in terms of the disposal process, we have seen good demand for properties in the industrial side and we disposed of 6 properties worth about ZAR 300 million. We've got another 5 properties worth ZAR 87 million held for sale and then there's another 12 properties worth ZAR 350 million that we're in quite [ fuller ] stages of negotiation -- negotiating the disposal. Kwazulu-Natal, the unrest there, 5 of our industrial properties were impacted with the unrest. The total damage was ZAR 7.1 million. That is our share. There is one property that we jointly own with Bidvest, where the office building was damaged quite severely, and we're busy refurbing that. But I think if you consider overall, the damage for Growthpoint sitting at just over ZAR 30-odd million, I think we can certainly recognize the efforts of our staff, the heroic efforts, I must say, given the environment that they had to operate in and the lack of support from the law enforcement at that time. Certainly, our security suppliers, our community members, and then afterwards, the suppliers that helped us remedy these properties. I visited these properties a week and half after the unrest, and most of them were up and running and totally repaired, certainly, in respect of the industrial portfolio. So I think, certainly, the effort from the team there was remarkable to say the least. On the valuation side here, we've also seen weakness and valuations were written down by ZAR 780 million, or 5.9%. Our trading and development teams had a good year. They've received ZAR 71 million from stock and trade in rental. They've further earned fees of ZAR 7.3 million from third-party clients that we are developing for. We made trading profits of ZAR 115 million. And then in terms of the projects that we are busy with, we certainly have scaled back our development activity in this environment quite significantly. Certainly, through COVID, we reviewed every single project. The largest project that we were busy with was the redevelopment of the Woodlands Office Park, specifically for Altron, which -- we spent ZAR 205-odd million, and that tenant has taken occupation. And on the T&D side, we completed the Cintocare Hospital in Menlyn, Pretoria. In August 2020, the property was handed over in December and then subsequently has been sold to the Healthcare Fund. We have a client, NTT, for whom we are busy building a very large data center. That data center will be completed in November this year. And then we have commenced the development of a sectional title residential scheme at La Lucia Mall called the Kent in the back of 75% presales in that development. We do take our ESG very, very seriously at Growthpoint. And it is important to us because, not only is it corporate responsibility, it helps us to future-proof our assets and benefits our tenants. It is, obviously, value way beyond compliance. Investors increasingly are requiring very well-defined ESG strategies, and it helps us with our legal compliance and risk management. Further, in terms of the 17 United Nations Sustainable Development Goals, Growthpoint has focused on specifically 6 areas. You would have seen the introductory video on Property Point, which is our enterprise development program, which has been going for over 10 years. So it's not like we woke up yesterday and decided to do these things. Growthpoint has been working on these initiatives for several years. And each one of these areas have been specifically focused on, and there is a strategy for each. We have made some good progress and that the Board has approved our new ESG strategy. We've got a development of a carbon-neutral pathway to 2050. We've undertaken a climate impact assessment and scenario planning. We've looked at setting new targets for emissions, for electricity, water and water -- and waste usage. And those have got a base of FY '20. We continue to actively expand our solar coverage, and we have BEE level 2 rating at the moment. Internally, we have reviewed all our codes of ethics. We've had an initial social impact review, and we've also conducted an employee survey and reviewed numerous policies within the organization. At the V&A, the V&A has had some highlights, in that they've completed a 9,350 head office for Deloittes, which has achieved a 9 -- a 6-Star green rating. We've also opened the Makers Landing kitchen incubator of 3,300 square meters in December last year. We're just about done to reconfiguring the Edgars space, where Edgars vacated for Zara, and that will be completed at the end of November. And we currently commenced the development of a 10,500 square meter office building in the Canal District, anchored by Investec of 6,900 square meters. The City also approved the allocation of 100,000 square meters of existing bulk to the Canal precinct. And on the financial metrics side, net property income was severely under pressure and declined by 32% for the financial year ending 30 June, and largely due to ZAR 228 million of rental discounts provided, as well as ZAR 64 million additional provisions. Arrears are ZAR 234 million, of which ZAR 64 million is provided for in net property income for rental discounts and ZAR 61 million for doubtful debt provisions have also -- ZAR 61 million has been raised for doubtful debt provisions. Our collections for the year were at 69% on average, but has currently improved significantly to 90%. And the valuations have also come under pressure and reduced by 8.7%. As a result of the lockdown provisions, we've also seen a marked reduction in footfall, where footfall has reduced from 21.6 million to 13.7 million. On the retail side, retail sales have steadily until harsher lockdown restrictions were imposed in June. And certainly, we hope that this will improve all the way through the holiday season in December. May footfall levels were at 72% of the prior period in '19 and then subsequently have reduced again in the lockdown to 56%. Vacancy levels are low. There's strong demand still for the space. We have focused on rental relief, specifically for our small tenants, restaurants, taverns, jewelers, and tourist-dependent tenants, and -- at the Watershed, specifically. And then there have been quite a few new tenants that have been introduced, which includes Faithful to Nature, La Colombe, BoConcept, Sportsmans Warehouse, Factorie, Mr Sport and Cabo Beach Club. Negative reversions are expected, given the environment we're in. And on the office side, we have 65% of our portfolio is let to blue-chip tenants. They have been paying their rental very, very well. And vacancy levels in this specific precinct is very small at 3.4%. The extended relief is very limited to the smaller retail tenants in these office buildings. But we do expect downward pressure on rentals. Hotels have reopened in a phased fashion between October and December of '20, and currently, all hotels are open except the Commodore. And the 5-Star and 6-Star hotels, obviously, generate the predominant revenue from tourism, and these have clearly been under pressure. The only hotel where we actually are exposed to operating risk directly is the Radisson Red. And the rest of the hotels are -- have lease agreements. The V&A is assisting these hotels with rental discounts and deferrals. And there is a significant oversupply at this point in the residential market, certainly, in the V&A catchment area. And irrespective of this, we have managed to reduce our -- improve our rental collections and reduce our vacancies in the residential stock for rental. The marine and industrial side of things, the tenants have continued to trade normally and have paid their rent. Casual shipping and superyachts in the yacht basin have performed very strong in terms of rental there. Clearly, all the tourist attractions have been severely impacted and the cruise terminal remains shut. Our fund management business has continued to grow. On the Healthcare Fund, specifically, we've raised just under ZAR 1 billion. Currently, Growthpoint owns effectively a strategic shareholding of about 62.2%. The idea is over time to reduce that. And we are pleased to announce that the transaction with the IFC on equity and convertible debt packages has been concluded. And in fact, the funds have already flowed post year-end. So we will reduce through that transaction, I think, to about 52%-odd in post year-end. The Healthcare Fund continues to build a strong pipeline of acquisitions. The current portfolio consists of 5 hospitals and one medical chambers and is worth ZAR 2.8 billion. We have, post year-end, acquired the ZAR 515 million Cintocare Hospital developed by Growthpoint and that property transferred in August. We also acquired 51% stake in a subsidiary that owns 193 -- 100-bed Busamed Paardevlei Hospital and that property transferred on the 13th of May. This company performed very, very well from a distribution per share perspective. It grew its distribution per share by 11.6% to a distribution of [ ZAR 0.8641 ]. Fund management income, the fees that we've earned from the fund was ZAR 32.1 million. And then the -- we're just about complete with a disposal of 15% of the Manco to Kagiso. Our Lango Fund, which was previously referred to as the Growthpoint Investec Africa Properties Fund, we currently own 16.1% of the Fund. We acquired this for ZAR 727 million. It's currently valued at ZAR 758 million. The NAV of the Fund has grown strongly to $320 million. It's a quality portfolio worth $600 million, 11 prime office and retail assets in Ghana, Nigeria and Zambia. And then we've got 2 pieces of land in Angola. The countries that we operate in have been affected by COVID in varying degrees, and we still maintain social distancing measures in these countries. The Company has paid out maiden dividends. And this year, Growthpoint earned ZAR 6.6 million from the Lango Fund, and we opted to elect to take the DRIP. Several acquisitions of minority stakes have also been concluded. And today, we now own 100% of Standard Chartered building, the Stanbic Heights building in Accra and 99% of The Wings Complex in Lagos. We have gone out to raise additional capital, and that process is quite developed with potential investors. There's also existing pipeline of potential acquisitions that can be made if this capital is raised. Dollar liquidity remains a challenge still in Nigeria. And certainly, the local naira that we hold, we try and convert that when pockets of liquidity present themselves at the banks. And given the damage to Circle Mall in Nigeria, this asset has been closed and is under redevelopment and set to open in the first quarter 2022. So the -- we will also see a decrease in our shareholding to ultimately 37.5%, given that whether staff have taken up 15% of the Manco and that we are looking to issue another 10% of the Manco in a BEE transaction. I'll pass on the capital management side. The South African balance sheet has ZAR 37.8 billion of debt. We have converted and repaid the pound debt post the capital raise, and we've converted some of the euro debt into ZAR. So ZAR 2.3 billion of the debt maturing is in the next 12 months, of which ZAR 1.8 million is in listed bonds. The weighted average debt -- term of debt is 3.1 years and 57% of that's unsecured. Our Moody's global rating is at Ba2 and a national scale of Aa1. Our offshore bond maturity is in May 2023 and will place a bit of pressure on that weighted average debt maturity in the short term, but management is busy reviewing the various alternatives for that bond. We have got liquidity on balance sheet of ZAR 6.5 billion of unutilized facilities and cash of just under ZAR 710 million. Further, we have hedged 85% of our debt at an average rate of 7.8%. And if we include the CCIRS, it brings it down to 6%. And as you can see from the table below, the exposure to cross-currency swaps has reduced. And as such, the FX to LTV ratio for GOZ is at 49%, Globalworth has reduced to 64%, and Lango, albeit small, is at 83% and the Capital & Regional debt is all in rand. At this point, I'll pass back to Norbert for conclusion. Thank you.

Thank you very much, Estienne. I'm not going to read to you all the comments, I guess, under the conclusion section here, but I'll comment briefly on each one of the, let's say, jurisdictions, starting off with South Africa. It's fair to say that we remain a bit concerned about the short-term prospects for South Africa. The economic growth rate, obviously, is -- whilst coming off a low base, used to be growing quite nicely and there are a couple of, let's say, positive -- there is some positive news in recent times as it relates to the current account surplus, I mean, the rand has strengthened quite considerably off the back of that. The GDP is miraculously absolute -- in absolute terms is 11% bigger than it was a year ago. I think many of those, I think generally bode well, but we see that the property sector is generally a bit of a lagging sector. So even if there were to be a short-term recovery, the recovery in the real estate sector probably takes a little bit longer to filter through. So we are focusing in South Africa quite heavily on the building of the funds management business in the short term. We continue to dispose of some of our assets, which no longer meet our longer-term investment criteria and remain very focused on running the domestic business, let's call it, within our means, taking into account the capital that's required to run the business from a development and CapEx perspective. And considering the access to liquidity that we have without wanting to necessarily gear up for growth opportunities or needing to issue any further equity. In relation to the V&A Waterfront, we mentioned a couple of times that the ability for the Waterfront to return to its prior glory is inextricably linked to foreign tourism returning to the country. And I guess, there we are encouraged, again, by globally what's happening on the vaccination front, but also domestically what's happening on the vaccination front. And we're quite optimistic that leisure and travel tourism returns perhaps quite quickly towards the end of the year into next year, maybe even sports tourism, if you consider events like the Argus cycle race, the Cape -- these sorts of events. The area that we remained a little bit concerned about is the business tourism and the spin-off -- Waterfront used to get a lot of spin-off from the Cape Town International Convention Center, and all the conferences that used to take place there. We think that takes a relatively longer time to recover. But as Estienne mentioned in his address, there still remains -- the fundamentals of the Waterfront still remained pretty good on the domestic front. Vacancies are low and there -- still there is a highly desirable area for corporates to have their offices and for retailers to have their flagship stores. In relation to GOZ, it continues to perform particularly well. The Australian investment market is extremely liquid. The share prices are close to all-time record highs, that of GOZ included, and the company has gone out with its own guidance on dividend growth of just over 3% or just on 3% for FY '22. GOZ is also exploring funds management opportunities as a growth strategy, which is very much in line or akin to what we are exploring in the South African market. In relation to Globalworth, the balance sheet is in good shape, I guess, with the new controlling shareholders on board. Time will tell on how they develop their strategies on how to deploy the cash, but we certainly look forward to -- I think, we're aligned and we look forward to improved dividend payout and dividend growth out of Globalworth once decisions have been made vis-a-vis the cash and the investment of the cash. C&R remains a very challenging environment. Having said that, it is certainly, our considered view that the U.K. and the U.K. retail sector, in particular, has either bottomed out or if it hasn't bottomed out, it's very close to the bottom. And we expect an improvement in performance, operational performance, whilst we're not necessarily convinced that the -- we are at the bottom of the valuation -- downward valuation cycle. We do have already seen a material moderation in the level of write-downs that have been experienced and we certainly hope that any further write-downs, if they materialize, will be very modest. Not projecting any or predicting any material write-ups, but we're pretty confident that we're close to the bottom. And then in conclusion on the dividend and the dividend guidance, we're not quite confident enough yet. There is still too much uncertainty to go out and proactively make a prediction on the dividend or a forecast on the dividend or our distributable income per share for next year. But we continued to remain committed to retaining our REIT status, and we intend to continue to pay dividends twice per year of at least 75% of our distributable income. So I think that brings an end to the formal part of the presentation. There are many annexures. There's probably about 60-odd annexures in the presentation, providing a lot more detail to some of the numbers that have been presented to you. And before I go to questions, I also would like to just take the opportunity to express my sincere thanks and appreciation on behalf of management but also the Growthpoint Board to 2 of our long-serving directors. Both of these will be retiring at the upcoming AGM on 16th of November. These are Francois Marais, our current Chairman. Francois joined us in 2003 when we executed on the merger between Growthpoint Properties and Primegro. And he has been the Chairman since 2008, took over, in fact, from Sam Hackner. John Hayward has also been with us for a long time. He joined the Board following the transaction we did with the Mines Pension Fund, which is today known as Sentinel back in 2001. And John has been with us for pretty much 20 years. And has chaired various committees, including the Risk Committee and the Remuneration Committee during his time on the Board. Both of these individuals have provided incredible support over the years and have made invaluable contributions in many different ways and are always there when we needed to signing Board or specific advice on any particular matter. So I just want to thank them for their contributions. On that score, I think we will go to questions. Lauren, happy for you and Estienne to, let's say, guide us on those questions, maybe if get some common themes out of them and we'll see -- hopefully, we're going to answer the questions.

Okay. So I just want to apologize upfront. I understand that many of you have been struggling with poor feed, on this video feed. I do believe that the taped version of this presentation will be available very, very soon to everybody that's in attendance. So hopefully, you'll pick up what you -- that you missed. There are several questions. I will try and cover them in certain groupings. So Keith, I think I've dealt with hopefully, the -- how the vacancies are dealt within the valuation. So effectively, they reduced the valuation of the property and do not add to the value of the property and that it's in a discounted cash flow. We have [ Shaqir ] that was asking about -- you've got a very long question, but the end of it was basically the impact of online shopping and -- on business and hopefully, I've given him some guidance in my presentation on that already. And [ Arbor ] has got a query in respect of the purpose-built student accommodation. And is it a short-term, long-term play? He's got a view that, obviously, tech could have an impact on the demand for the student accommodation and somebody else later asks, are we buying or are we developing the student accommodation? So I think I'll try and answer that in short in saying that this initial portfolio, the bulk of it is being acquired. And we are in a partnership with a provider, a player in -- that's a very experienced player in this market called the Feenstra Group. And the initial portfolio is circa about ZAR 2 billion. And then on top of that, we are also in -- busy developing 3 additional offerings, 1 in Cape Town, 1 in [ at Wits ] in Johannesburg and the other 1 in Pretoria. So hopefully, that answers where the properties are coming from and what they look like. I think the view on these assets is that, the demand is immense. The governments recognize the demand. They are supporting it via NSFAS. And there is really more -- significantly more demand for student accommodation of quality, then there is available for the growing student market at our university. So we do believe over the long term, it is a good place to be and there is good demand from the institutions in that it falls into their social sort of structural capital investments and -- social infrastructure investments. So we believe it will be a fund that we'll be able to grow with strength. Then there is a question around the -- Norbert, this one I'm going to push it to you, if it's all right. Just around Globalworth. And obviously, our long-term intention, I think somebody asked that 6 months ago as well and I don't know if you want to give it a go?

Sure. Look, I mean, obviously, we remain confident in the region and the prospects for the region. I think many things are relative. And if you look at the prospects for Central Eastern Europe, Poland and Romania, in particular, where the Company has got its exposure and, let's call it, the assets that they have on balance sheet, we think the prospects there still remain pretty solid. So there is nothing to suggest that there is anything fundamentally wrong with the investment case. It is fair to say that we enter the investment essentially as supporters of the founder of that business, Ioannis Papalekas. Ioannis has sold out. There is a new controlling shareholder. We generally don't like positions where we are, let's call it, deemed to be passive investors or minority investors. We have become effectively a minority investor. We were the largest minority, but we had significant influence on the Board and on the Investment Committee. We will continue to have strong representation on the Board and strong minority protection rights through our 29% shareholding. But we clearly will no longer be directing the traffic at the Board. And on that basis, it could be argued that if the right opportunity did present itself, and we thought that perhaps when the consortium made the offer to all shareholders at EUR 7 that they would be inclined to increase their offer. That was not forthcoming, but if an offer that represented fair value were to be tabled, certainly, the Growthpoint Board would seriously consider exiting that investment, again, not because of the underlying investments in the different -- in the regions and the properties, but more just due to lack of alignment perhaps between ourselves and the current controlling shareholders and the fact that we essentially become a minority.

Okay. Then there was a question in respect of the assets that we have disposed, the ZAR 559 million SA assets. Were they sold at book value? I'll refer you to Annexure 27 in the presentation pack. There are a plethora of annexures, which contains a huge amount of information. But there it'll -- it actually gives you the exact profit on book value for those assets was ZAR 118 million to book value. So we've done reasonably well there. There was a question, why we are giving one of our competitors air time on our results presentation? And I think that's made reference, obviously, to the Property Point presentation. And I think there are times when the property industry works together for the greater good. I think example of that would be, when we went into COVID under the Property Industry Group, which works wider than the REITs. All the property players worked together to try and get through this period and help as best we can our economy and our tenants across the board. And certainly, the initiatives that Property Point stand for and have been working towards resonate with many of our competitors. And in fact, I would argue that it is probably become an industry initiative today and not just a Growthpoint initiative. Then there's a question around the office tenants. Broadly speaking, why are they leaving? Are they moving for lower costs? What are we doing to try and keep these tenants? And I mean, there's multiple initiatives, some of which I clearly can't disclose. But some of the things we've done is, we've tried to improve our leases, made them shorter, much more concise and simple to understand and much more fairer and balanced. We've improved our broker liaison. We've got initiatives like Smartmove and Smartstay, which focus on attracting new tenants and focus on retaining our tenants. We've got the UNdeposit, which helps tenants that don't want to put down a deposit. It helps their cash flow, specifically the smaller tenants. We've got a Flexi Office product, which we're busy promoting to tenants, which provides them a high level of flexibility. We've even promoted a -- within the organization amongst our staff, from all over, other than the letting staff, they can send names through to the letting team for staff, from staff to increase tenant volumes. And then what we've also done is, we've made our tenant incentives quite flexible, so that, ultimately, the offering is better than our competitors. And certainly, we have tried to ensure that our buildings, the product that we have in the market is better than that of the competitors. So those were just some of the initiatives. The reality is, many of our tenants that do leave are downsizing. So they downsize to smaller space. So we reflect that as a reduction in terms of retaining the tenant, you've lost the piece that they've given up effectively. Then there is a question around the negative reversions and how we're looking at them for the coming 2 years? It's quite a difficult question to answer given the weakness in the market. But I think there's sort of maybe positives and negatives. I think on the negative side, there is -- the shoes on the tenants, which they are spoiled for choice. There is significant oversupply in office and even in industrial, to some extent. And then on the retail side, the trade, given the current regulations is relatively less in turnover and as a result, rental discussions across the board are quite difficult. And I think will remain this way for probably this coming year. From an economic perspective, it does look like the mining sector and 1 or 2 other sectors have lifted their head and performing pretty well. And hopefully, some of that positive benefit will start flowing through the economy and we'll start seeing an improvement. And certainly, I think a very big key to this whole thing is how successful we are in vaccinating our, certainly, working population in the country. So I think more than that I'm not going to say on the rental levels. Then there is another question in respect of the value -- the implied value of the South African portfolio, if you like. So the calculation is taking your market cap, reducing it by the international listed assets, as well as the V&A. And it seems there is, though, the portfolio is trading at a very, very significant high-yield effectively. And there is questions around the conglomerate structure, which is referred to here and why not spin-off GOZ to see whether the market will fairly value the South African assets? So Norbert, I think that maybe I'm going to pass to you.

Yes. Look, what I can say is that, the issue of capital allocation, the issue of the, let's call it, this discount that is being referred to are being discussed and debated at Board level and the Property and Investment Committee of the Growthpoint Board. Personally, I don't see how -- if you unbundle GOZ, how that's going to change the valuation of South African portfolio. That makes no sense to me, personally. But just to say that these issues are at the front of the minds of the Board and certainly of management and is receiving significant air time and we're spending significant time as a Property Investment Committee and our Board and Management on analyzing these issues and trying to find solutions for them.

Thanks, Norbert. There was also a question here. Obviously, once again around the vacancies in offices and the tough market and whether we're looking at effectively alternative use for these assets? I can promise each one of you that our development team are scouring over every single opportunity within our portfolio. And we are assessing many of the assets that currently are vacant. Usually, they're not fully vacant, which complicates things. And I think the other thing to understand is that, to convert something to a residential block, as an example from office, isn't such a easy task. It often gives you a sub-quality residential solution. But over and above that, the numbers only start working on that residential play when the assets valued at, let's say, under ZAR 6,000 a square meter. So most of our assets in office should be in excess of 10,000 to 11,000 square meter on the low-end. And so, it does make it a little bit difficult. And we effectively assess which assets we think can have an alternative use or not. And we work actively on those opportunities. There is a question in respect of C&R. And when do we expect the distributions to resume for C&R?

I think the short answer there is probably not in the near future. It all depend, I guess, on the eventual outcome of the, let's say, capital structure reevaluation that the C&R Board are currently undertaking. So I do not foresee that, certainly, for the next 12-month period, possibly 18 months, unlikely that we will receive any dividends from C&R.

Thank you, Norbert. There is then a question on, if we can provide a little bit more information on these online retail facilities, if you'd like? So Growthpoint invested in a small company called OneCart in March 2020. And the idea was to roll out this facility concierge service. So it's an online application. And what made it unique was that you can shop as a -- as the use of the application at more than one shop. So you could actually pick a shopping center, let's say, Woodmead Retail and you can shop from the Pick n Pay, from the Woolworths and from some of the other stores on the application. And the benefit for us was that the trade was actually going through the toll points at the shopping center. Clearly, with lockdown, the number of orders ramped significantly on this specific application and the logistics around that becomes a bit of a challenge. So we started with providing initial [ discollection ] areas for the chaps that have to do the delivery and the delivery agents. And over time, we've had to improve on those logistics. So it boils down to providing a seamless interaction, if you'd like, for the online providers relative to our clients and tenants in the shopping center. What is the market like for data centers in South Africa? So look, it is a market that has developed quite well. We do believe there is still some legs to the data center market, if you like. There are a few very large players like Teraco in the market. And clearly, our client entity is a world-leading technology company and we do believe it's a competitive market, but it is a market where there seems to be a solid growth as more and more clients move on to cloud-based computing, et cetera. Right. Then what is the remaining free float of Globalworth, other than Growthpoint post the offer? I think it's about...

The consortium owns 60%. We own 30%. So there's 10%.

That's it.

And within that, there's one particular institution, let's call it, hedge fund investor that owns half of the 10%. So the true free float is then essentially 5%.

Okay, then there's a question here, would you consider good quality local REITs as acquisition targets? Or is the strategy still to focus offshore?

Yes, I'll give it a go. I think we always consider everything, I guess. We wouldn't be doing our job properly, to my mind, if we didn't consider local as well as international opportunities. It's fair to say though that the prospects for SA and SA real estate sector remains pretty challenging. How one funds such a transaction would be very, very important. So clearly, we don't want to gear up off our current levels. We are at about 40% LTV. So the target company and [ each ] gearing would need to be a key consideration. If we're going to be issuing equity at these levels. Clearly, we're still at a deep discount to NAV, 27% to 30%-odd. So the target would have to be trading at significantly bigger discount to NAV and we need to understand their asset values relative to our own asset values. At a high level though, I'd say that we certainly wouldn't want to just be picking up someone else's problematic portfolio. If we've got a few challenges in our own portfolio, which are very much linked to the, let's call it, domestic challenges, in particular, the lack of economic growth. So to just have more of the same, to my mind, makes no sense. So we'll be circumspect and we will certainly look at all opportunities, but it's not an active search out there at the moment on our side for that. The Board remains committed to continue to find ways to expand our offshore exposure, but the Board on the other hand is also acutely aware of the limitations in our ability to do that, considering where we sit with gearing and where we sit with an equity share price that is trading at a pretty deep discount to underlying NAV.

Thanks, Norbert. There's a question. I don't know if maybe there was just a misunderstanding there, but it said, would you elaborate on the main driver behind the lack of alignment with the majority consortium at GWI. I think you said there was actually a high level of alignment. So I just want to confirm that.

Yes, well, I think there are 2 elements there. I think we are aligned as it relates to growing the dividend or wanting to invest the cash, but we're not necessarily aligned to my mind on, let's say, geographically where they might wish to expand or on the asset class, are they going to continue to want to invest in office and industrial or the reality is as the controlling shareholders and they will be controlling the Board, they could decide to invest in salt mines in Siberia, which would certainly not be aligned with us. So I think there's different levels of alignment there. I think strategically, whilst we haven't quite seen their exact plans and ideas and I think we'll see that in the very short term. There, we potentially would not be aligned. On the other hand -- and there is an element of competition in one of the parties to that consortium essentially is a competitor in the Warsaw office market. So there's that element, but we do seem to be aligned on the desire to invest the money and grow the dividend.

Thank you. Then there's a question around just the growth in online shopping and whether that is a risk to the retail portfolio of Growthpoint. Look, the reality is, is that globally, we have seen the growth of online significantly in all the developed countries. We have done significant research into that from a Growthpoint perspective and that drove, let's say, some of the decision-making investing into something like a OneCart at the time. The reality is, is that in South Africa, most of the online -- the large online brands that you're familiar with are still loss-making because the delivery process is quite difficult and expensive and we believe that actually there's maybe a role to play for the shopping centers and helping with that distribution process. So we believe that the last-mile distribution is probably where there's going to be a big growth area. And hopefully, that will be supportive of our retail facilities, but as I mentioned, we are trying to accommodate these online platforms as best possible. There's a question around whether we would be prepared to provide color on the negative reversions on new leases for each sector? So it's quite a difficult thing to do because there's timing issues. You might find that a vacancy might have been there for a year or maybe even longer. So then the numbers become a little bit convoluted and the sizes are also a factor in the property portfolio. So you might have had a 10,000 square meter box. Now you're only letting 4,000 of it and how does that all divvy up? But I think what we'll do is, is we will take it on board and see whether that kind of information can be provided in some form that makes sense to the investment community. Are you still comfortable with your 20% value reduction range through the full COVID cycle? And I presume that value reduction is our South African property portfolio value reduction? Or is it for C&R? Anyway, I think, across the board. I don't think anybody can be happy with the value reduction, but whether we're comfortable with that, I think...

I'll give that a go. We made the prediction in May 2020 that we saw off the back of COVID and the weak economic fundamentals in South Africa, we would see valuations decrease by between 10% and 20%. I don't keep track necessarily of all of our competitors, but I would argue that most of the South African peers with the exception perhaps of a couple have experienced write-downs in that range over the period between June '20, December '20 and now June '21 reporting periods. We have written the South Africa portfolio down by 16.2% in rand quantum, it's about ZAR 12.5 billion. Similarly at the Waterfront. I think the Waterfront properties were written down about 9%-odd. So the question, I guess, is whether are we predicting that the 20% is going to become a 40% and I think the short answer there is no. We've already seen a moderation in the actual rates of write-down. So the first round was about 8%. This year was -- or 9% rather. This year was in total 7.5%. So we see the rate of write-down moderating. Can it eventually exceed the 20%? Depending how far forward you want to look, if you took another 24 months from now, maybe 12 to 24 months, maybe it can sort of -- it can surpass the 20%, but we think that -- and we've already actually seen some of our competitors have started writing their assets up again. So we think that there's probably another write-down in the next 6 months and perhaps things stabilizing, but quite moderate and then stabilizing after that. Clearly very dependent as Estienne says on a 1,000 inputs into these 10-year discounted cash flow models and the prospects for the economy and how things turn out vis-a-vis COVID on whether we're in a fourth wave, fifth wave, more lockdowns, very difficult to judge all of those, but we feel that the bulk of the write-down in the cycle has happened. I don't know if that's...

I think the other point is, obviously, these valuations we're receiving them from third-party valuers. So it's not like we're determining the value and saying it's right. Ultimately, these valuers determine what they think the value is and that's what goes on to the balance sheet. There is another question here, right. It's to Norbert relating to distressed debt companies. With Growthpoint trading at a discount to asset value, is Growthpoint at risk of being targeted by distressed debt investors like Apollo or Oaktree or Ares Management. Case in point was Washington Prime, which was bought by SVPGlobal when SVPGlobal bought Washington Prime's debt and took the company over. Washington Prime is one of the largest REITs in the U.S.A.

Yes, I'm not really familiar with that transaction or the play. I mean one thing is for sure, I don't think Growthpoint's debt is distressed or anywhere near distressed. So I don't think it fits into that category. Does the discount to NAV somehow create a play on that? I don't quite understand the trade, to be honest with you, but I would be very circumspect and very surprised. I can't see that happening at all. I mean the reality is, to my mind, foreign interest in real estate as an underlying asset class in South Africa has never been particularly high, but at the moment, to my mind, it's probably at an all-time low. So I would not attribute a very high probability or likelihood to that scenario.

Yes, my view would be that, as Norbert pointed out, the play usually is you go and buy the debt from the institutions at a deep discount and then you hold it to maturity, you can liquidate the assets and then get your money back and you make a turn, right? Now I don't think that, that scenario is an opportunity here at all. So I think none of our financial institutions will sell the debt at a deep discount. If they are prepared to, they must give us a call. And then I think the other thing is that the other play potentially is where like an equity office, I think, many years ago, where the shares were acquired of the company and then the underlying assets were liquidated and there was obviously a value play in the middle. Now in the South African market, it's something that we have raised is, at the moment, there just isn't that deep liquidity in the direct disposal market to be able to do something like that. So I do believe that it's unlikely. And then there's another question here. What are the expectations regarding valuations? Okay, I think we've covered that and further write downs? I think we have covered that as well. So hopefully, we've covered all the questions that have been put to us. I think I've tried to make sure that everything is done. Thanks, Norbert and everybody. I think we've run out of time, unfortunately, a little bit.

Just a little bit. I wonder if anybody is still on the call actually, but in any event, ladies and gents, for those of you that are still on the call, we thank you very much for your time and attendance. If you do have any further questions, please feel free to reach out, certainly via Lauren, our Head of Investor Relations. She'd be happy to circulate those back to us and we'll endeavor to answer them as best as we can and we look forward to speaking to you again in 6 months' time. Thank you very much.