Growthpoint Properties Limited (GRT) Earnings Call Transcript & Summary

Apologies, we are starting just a few minutes late. We do have a pretty big online presence as well. So I think we need to get going. I believe there are over 150-odd people online. So thank you all very much for joining us here this morning for the presentation of the annual results of Growthpoint Properties' results for the period to 30 June 2023. As I think in the past, just running through the agenda very briefly, I'll update you guys on the strategy, look at some of the salient features for the period under review, skim through the financial, some of the high-level financial information, give some update on the offshore investments that we have. And then Estienne will come and talk to you about the South African portfolio, the Growthpoint Investment Partners and touch on the capital management side of things. And then I'll come back to conclude. I have to say at the outset, again sound like a broken record, but what a tough year. I think for the last sort of 4 or 5 years every year, there are 2 or 3 or 4 curveballs, which are being thrown at us, which we couldn't or can't anticipate. And this year was no exception. I'm going back to 2019 with COVID and everything that's happened in between. This year I guess the key issues that we faced was mainly the issue of rising interest rates and the impact of that clearly on our interest bill and on the debt and debt capital markets, but also the extreme load shedding. As I stand here, I can hear the purring of the generators in the background and as I drove into the parking lot one could hardly hear, you yourself think given the noise level. So significant disruption and impact operationally on the business from the excessive levels of load shedding. So we started the year at this time last year, I guess, with Studio and said we're going to produce muted dividend growth, and 1.3% is what we delivered and it's probably quite fitting into that muted description. But having faced the challenges, we're actually relatively pleased to have come out at or about the kind of level of distributable income and profitability that we had predicted a year ago. So given that backdrop, I think if we look at the strategy, we continue to be very focused on our balance sheet and our liquidity. We had a very significant refinance this year with the $425 million Eurobond that we had to refinance in arguably some of the most challenging international debt markets that we've seen for many years. And we've been -- we prepared for that years in advance. We continue to carry high levels of liquidity. We have over ZAR 6.6 billion worth of preapproved undrawn debt facilities with our banking partners at balance sheet date, we had ZAR 1.7 billion with a cash on balance sheet. LTV has ticked up a little bit, but still very manageable at 40%. And we continue to manage our payout ratio at the 82.5% level, thereby effectively retaining just below ZAR 1 billion worth of cash in the business. The 3 main pillars to our strategy involves the -- firstly, the optimization of the South African portfolio, where we continue to look at disposing of non-core assets and ultimately sort of rotating into higher growth asset classes, but also higher growth nodes. And I'll speak to that a fair bit, I think, as we go through the results. The distinction between the performance of our, let's call it, coastal property portfolio versus our inland or greater Gauteng portfolio. But we sold ZAR 1.5 billion worth of properties. We produced a profit on book of just over ZAR 100 million, and at balance sheet date we had another property held for sale, which hadn't quite transferred yet. I think the profit on book provides a bit of an underpin on valuations. Obviously, a lot of questions always about valuations and book values and LTV -- which obviously inform LTVs. But having sold ZAR 1.5 billion and in fact, if you go back to July 2016, we sold 142 properties at over ZAR 11 billion, ZAR 5 billion in office, ZAR 2.5 billion in retail, ZAR 2.5 billion in industrial and in some of our trading and development properties as well. All of those were sold at or around book value and slight -- small profits to book value. So providing a good level of comfort, I guess, at the end of the day for NAV and for -- and the valuations. Secondly, we continue to look to grow our funds management business. We now have ZAR 17.9 billion worth of assets under management, targeting ZAR 30 billion. There are essentially 2 income streams from that for us. The first one is just the dividends from our co-investment, and we have ZAR 146 million of dividends from our co-investments. Our strategy within this Growthpoint Investment Partners is to co-invest with third-party capital. We earned ZAR 146 million of effective income from dividends from our investments. That is down, but primarily, I think, down to 2 factors. The first is the sell down of our stake in the healthcare property fund where we sold down from about 55% to 39% with the introduction of the GIPF, the Government Institutional Pension Fund, I think, Investment Pension Fund of Namibia. They put ZAR 500 million into that fund and we consequently diluted. And then Lango also producing a considerably less in dividend from our investment there. We'll speak to that a bit later. And then the second stream of revenues is our management fees and there we've achieved just short of ZAR 100 million worth of fees, that's up quite nicely. And if you look at all 3, the funds, the healthcare fund, the student fund, and Lango, management fees from all of those actually coming through and growing quite nicely. And then on the international side, we now have international expansion still remains an objective and a strategy for us. 45.8% of the assets are effectively located offshore. 29% of our distributable income is earned from these properties. We saw about a 7.6% increase in our total dividends from these offshore investments, which we received either in cash or in shares. And through the -- I mean, located offshore, 29% of our distributable income is earned from these properties. We saw about a 7.6% increase in our total dividends from these offshore investments, which we received either in cash or in shares. And through the -- we reinvested the dividends both from capital and regional and global worth to the tune of just under ZAR 300 million as part of the, let's call it, increased offshore investment strategy. And then we also invested another $30 million into Lango. Sorry, just going back. So the salient features for the period. DIPS as well as distributable -- sorry, dividend per share up 1.3% and the total property assets up 5.3%. Our interest cover remains pretty healthy at 2.9x. LTV, as I mentioned, 40%, just over 40% and our NAV slightly down at [ 2,151 ]. This slide always -- we always put this in here to try and just give you a sense of the varying and differing moving parts within the business. So, at the end of the day, distributable income was up ZAR 56 million, 1.3% is not a big number but one has to appreciate is the significant moving parts within that. And for this year, South Africa increased its contribution by ZAR 77 million. The South African finance cost, the single biggest negative drag on this year's performance was the ZAR 215 million worth of, let's call it, additional interest costs, which talk to obviously the underlying increase in floating interest rates. Obviously, we do hedge our interest rates and we sit at balance sheet data at 77% of our interest rates hedged. But the impact on the floating portion of our book as well as an increase in the overall total debt balance of ZAR 1.6 billion higher overall debt balance, the combination of those cost us ZAR 215 million on the income statement. Thank goodness for the V&A because it came through quite nicely and gave us a bit of a boost to offset some of the negativity on interest rates. GOZ was quite flat, notwithstanding the fact that the dividend in Aussie dollar terms was up by, I think, 2.9% taking into account of the dividend withholding tax and some of the hedging impact, converting dollars to rand, slightly negative, ZAR 10 million negative, but still a very, very important contributor to the overall picture, just over ZAR 1 billion worth of bottom line contribution from GOZ. Globalworth's dividend was up from EUR 0.29 to EUR 0.27, and that effectively added ZAR 77 million to the bottom line compared to the prior period for us. Capital and Regional equally, they paid a 5.5 cent (sic) [ 5.5 pence ] dividend compared to 2.5 pence, and that added ZAR 54 million. Growthpoint Healthcare was down ZAR 24 million, mainly as I said due to our sell down, and then flattish from the Student Accommodation Fund. Lango negative ZAR 19 million. Growthpoint Investment Partners in total up about ZAR 21 million. And the income from trading and development down ZAR 32 million. So all things considered, if you put that all in the mix, ZAR 56 million up. And just to, I think, highlight again the -- what we believe to be one of the core strengths of Growthpoint is its diversified exposure across regions, across geographies, across sectors, and obviously also introducing some of the new revenue streams from funds management and trading and development. So this is always a busy slide, and I'm not going to go through much of the details, I have to just highlight that gross property income for the year grew at 7% from ZAR 12.8 billion to ZAR 13.7 billion. Our property expenses grew at 11.7% to ZAR 3.9 billion from ZAR 3.5 billion and leaving our net property income up 5.2% at ZAR 9.8 billion, just under ZAR 10 billion. A big mover in that is GOZ and a big chunk of that obviously due to currency movements as well between the Aussie dollar and the rand. The other operating expenses were up 11.9% to ZAR 931 million and that leaves us with net property income after operating expenses up by 4.6%, just short of ZAR 9 billion, ZAR 8.927 billion. Our finance costs, as we highlighted earlier, one of the single biggest negative drags and movers on the income statement. Total finance costs up from ZAR 3.19 billion to ZAR 3.78 billion and our finance and other income was up 32% to ZAR 1.4 billion. We then adjust for non-controlling interest in the -- for the pieces of the investments that we don't own 100% of and various other adjustments, leaving us with distributable income of ZAR 5,363 million, up 1.1%. And on this slide we really just try and reconcile the distributable income that we report to the FFO, the SA REIT FFO. There are about ZAR 338 million worth of adjustments there. The 2 biggest ones talk to the add back of the amortization of tenant incentives in GOZ, ZAR 470 million and the distributable income from Capital and Regional that was retained, which is about ZAR 406 million. So a number of moving parts there again. But all told, an adjustment of ZAR 338 million which leaves FFO -- SA REIT FFO at just over ZAR 5 billion, down 5% and on a per share level down 4.4%. Few little highlights from the balance sheet. Total property portfolio, ZAR 140 billion versus ZAR 136 billion in the prior year, that's 3.5% up. South Africa up 2.5%, GOZ up 5% and Capital and Regional up 1.1%. Equity accounted investments up 12.9%. The Waterfront up 12.9%. Our investment in Globalworth up 13% and our investments down 6%. Then the loan that we grant to the V&A Waterfront of that ZAR 3.3 billion of loan on the balance sheet, ZAR 2.9 billion of that is to the V&A Waterfront. Total exposure to the Waterfront or investment in the Waterfront valued at just over ZAR 10 billion, and on this slide, a combination of the investment and the loan. Our listed investment is mainly in GOZ, was up 5.8% at ZAR 1.5 billion and our unlisted investments came in at ZAR 1,449 million. A big mover there, I guess, our investment into Lango, additional incremental investment into Lango. And then on the borrowing side, total debt, ZAR 69.3 billion, that's up about 9% compared to the ZAR 63 billion in the prior period. South Africa at ZAR 40 billion, GOZ at ZAR 24 billion. So the movement on GOZ, quite big, 23% up on debt, a combination of the higher debt levels within GOZ itself and then also the exchange rate movement in Capital and Regional coming down from ZAR 4.6 billion to ZAR 4.3 billion. That leaves our NAV or shareholders' interest at ZAR 73.1 billion, relatively flat on the prior period. I'm going to skim through the offshore investments quickly and try and leave some time for Estienne to speak about the South African business, which he always complains that I don't leave enough time. But Growthpoint Australia, 58 properties, just over 1 million square meters and with property assets valued at ZAR 61 billion. We own 63% of it. They showed negative FFO growth, but that's mainly due to the movement in interest rates once again and their increased debt levels. At a dividend per share level, they were up 2.9%. It remains a core investment for us. I mean, I have to say, I look at that share price, taken an almighty beating from a higher $4.40 to $2.27, I think, this morning. And I think GOZ being impacted by -- it's not alone in Aussie market. I think lot of the Aussie stocks have been traded down quite significantly, but GOZ is being tainted with its exposure to the office market. So it's still 70-odd percent office. And I guess, globally, there's still a lot of negative sentiment towards office exposure. GOZ, however, in terms of its office portfolio continues to perform very well, a very solid, well-located, well-let portfolio, and I'll talk to some of the stats as I go through. But again, on the balance sheet side, solid 37-odd percent LTV, well within our range of 35% to 45%. Good access to liquidity, sort of 70% of its debt is fixed in terms of hedging, but that 30-odd percent that is exposed to floating interest rates costing GOZ in terms of its bottom line, and certainly also in terms of its projection for next year. At a portfolio level, asset values were written down by 6.5%. The bulk of that came in the office portfolio, which was just about 9-odd percent, with 1-odd percent write-down in the industrial portfolio. As I mentioned, very well-let, long leases, embedded 3.3% escalations in the portfolio. So fundamentally, I think the portfolio continues to be a very well-constructed for very low, like, it's all relative, but on a relative basis, low levels of activity there. And then on the fund management side, we've now fully incorporated that Fortius Asset Management business and got about $1.8 billion worth of assets under management in that business. And it's proving to be challenging in this market to grow that. We had, I think, management was set targets of growing the funds under management by $500-odd million in the first 12 months to 18 months post-transaction, and that is proving to be a stretch too far given the current state of that market. Globalworth, this is our exposure in Eastern Europe. 72 properties owned by Globalworth, about 1.4 million square meters, and our share of that is circa ZAR 17.4 billion, 100% in rand terms is just sort of ZAR 60 billion, about ZAR 59-odd billion. We own just short of a third, just sort of 30%, 29.5%. Performing solidly. I think Globalworth at an operational level, solid. Having said that, it's tough. It's also probably 90% exposed to office. The only exposure we have to industrial there is in Romania, and it's relatively small. So, I think the strong tailwinds that the region experienced sort of pre-COVID, with business process, outsourcing, and tech and IT, big major multinational companies, Google, Amazon, Microsoft, all establishing huge presences in those markets, leveraging of the tech expertise and the workforce in those markets, relatively cheap, I guess as well. Eastern European, let's call it, labor rates relative to Western European rates. I think a little bit of wind has come out of those sales, and many of those big multinationals are not expanding in the region certainly at the same rate that they used to. In fact, a lot of them are actually slowing down and closing down or reducing rather some of the space that they occupy. So on a regional level, Warsaw as a city still very strong, but the smaller regional cities that Globalworth has exposure to in its Polish portfolio, they're showing some strain there with oversupply and from 2-fold, 2 -- from 2 angles. One is these big multinationals giving back space on the one hand, but also some new developments, which were committed around about the COVID time now being delivered and looking for tenants and competing in the market. So not without its challenges. The balance sheet does remain strong. We've got about 42% LTV. We have EUR 130 million of cash available and EUR 265 million worth of facilities to draw on. There isn't any near-term debt refinance to concern about, and -- but there is some -- most of the debt in Globalworth is actually in the debt capital markets and there are 2 bonds, March '25 and a June '26 bond totaling about 950 -- EUR 850 million that needs to be refinanced in the FY'25 and FY'26 year. And obviously everybody's very keenly watching the state of those debt capital markets and whether they open up again. No doubt that refinance in the debt capital markets or with the third party bilateral debt facilities is going to be more expensive. But for the next financial year, not a big impact on Globalworth from interest rates because the bond debt is all fixed. So the impact on the income statement probably only in the year after that. Quietish on the development and acquisition front as well. Mainly -- the only real development activity is in Romania on the industrial side where 61-odd thousand square meters was added through the development of new facilities and there are 2 smallish industrial facilities for 13,000 squares still being built. And then in Poland, no new development activity, just the redevelopment of 2 of the properties, which should be complete by the end of this year. So at the portfolio level, valuations were down 2.5%. There's about EUR 3.1 billion worth of assets there, split roughly 50-50 between Poland and Romania. Good letting, 280,000 square meters of letting done in the period, but vacancies are ticking up due to the factors that I mentioned earlier. What's been providing a bit of a support for that Eastern European market is the fact that all of those leases are indexed to inflation, and obviously European inflation has been quite high. There's a term there called the Harmonized European Inflation Index, and the leases are annually indexed to this number. It has come down. I looked this morning, actually, I think it peaked, that index peaked at 10%, and it's now down in the 5.5-odd percent level, so it has come down. And so that level of support, I guess, for rental growth on escalations, probably also going to come under a bit of pressure as inflation normalizes in that market in particular and in the European markets more generally. In CapReg, CapReg owns 5 properties, about 185,000 squares, valued at ZAR 8.5 million. We own 62% of it. It has -- it significantly increased its dividend to 5.5p for the period under review from 2.5p in the prior period. I'd say that Capital and Regional has stabilized post the impact of COVID, which was pretty severe on both valuations and operationally within the shopping centers. The vacancies have stabilized, I'll talk to them on the next slide. But more importantly, I think the balance sheet at about 42% LTV is certainly considerably better than what it was 2 or 3 years ago when we had overall LTV in excess of 70%. So we've seen a stabilization there on property valuations. In fact, we saw a small increase in value for the first time in 3 or 4 years. NAV is relatively stable at GBP 183 million or 106 pence per share. So the fundamentals and operations are well managed. I think Lawrence Hutchings and his team did a good job of managing the underlying shopping centers and the letting and leasing their occupancies at about 95% and rental collections are very high. Post year end, Capital and Regional did announce a small acquisition, which sort of positions it slightly on the front foot with about a GBP 40 million acquisition of a shopping center in Edinburgh, GBP 25 million capital raised to part fund that. So the sellers of the asset were financial institutions or banks that had the asset on their books and they provided 40% debt sort of stapled that to the deal, the equity we raised with this equity raise. Growthpoint underwrote that and as part of the process we invested GBP 22 million and increased our shareholding from the 62%, 63%-odd level to 67%-odd. The company also spent about GBP 12 million in CapEx on refurbing and letting some of the vacant space. Just I was catching up yesterday and this morning on some of the what's going on in the U.K. I mean, U.K. is going through a pretty tough time. It's fair to say that the U.K. is not out of the woods economically. Growth is under a lot of pressure. And just when you think everything has sort of settled down nicely and stabilized quite nicely, we find out that one of the top 10 tenants, a company called Wilko, has actually gone into liquidation. Capital and Regional does have exposure to that particular company in 3 of its centers. And so that is going to obviously challenge management again to try and re-let that space. It's quite a big group, Wilko, about 400 stores across the U.K. and got about 12,500 employees. And those stores will all be closing in the next couple of months. Right, then on the half-hour dot, almost, I'll hand over to Est to talk to the South African business.

Good morning, everybody. Just upfront, I want to say my voice is a little bit like the Eskom power stations. They are squeaking but not at full power, and it's not reflective of the state of the company at all. So, getting to the South African business, it's been a busy year. There's been a huge amount of activity in what has been a very difficult market. I mean, we've done over -- just short of 1.2 million square meters of letting in this time. Vacancies have continued to come down, which is a positive. It has come, unfortunately, at the price of renewal rentals that have remained under pressure, so negative 12.9% on the renewal growth rate. There are a couple of numbers. As I go through the different sectors, that number is probably reflecting a little bit higher than, I would say, the norm would be, but that is a number that we keenly watch and measure and we're hoping that going forward that that number certainly will improve. Renewal success rate has remained reasonably under pressure, given the competitive nature of the market at the moment and the expenses have continued to tick up as a percentage given the drop in the revenue line as well as the inflation pressure that we are facing in the South African context. Arrears have fortunately continued to come down as we move away from the COVID period. And as a result, we've been able to reduce our provisions for bad debt. The valuations actually for the first time in a year or 2 here, we've seen some firming there albeit marginal at 1.2%, and we've been pretty successful at selling continuously active asset management in the 3 sectors, selling assets into the market at marginally above book value. The strategic property acquisitions have been reasonably minor just given the fact that capital is a little bit tight and there is a bit of a competition for capital within the business. So we're rolling over every [ rand ] twice and making sure that that capital is being spent in areas where it's going to give us the best return. We have continued to invest in ensuring that our portfolio remains relevant and upgraded and we're also continuing to develop properties. We have -- for next year we have still in this financial year coming we've got commitments of ZAR 1.8 billion, which continues that trend. The South African balance sheet you would have noticed that the group LTV ticked up a little bit. I mean, the biggest driver of that tick up was really the increase in debt in Australia where they've made acquisitions and they've bought back shares, but the South African balance sheet marginally ticked up, but remains very, very conservatively geared at 32.9%. Diesel cost, on a favorite topic for everybody. We spent about ZAR 140 million on diesel, but we do recover a percentage of that, 40-odd percent of it. And then the increase in interest rates is the main theme I think in global real estate and for this specific year, we've had to pay an additional ZAR 215 million on interest. So running through the sectors briefly, I mean, industrial I would say of the 3 sectors probably remains the firmest. The logistics space is still performing very well. Vacancies have come down to just about an all-time low at 3.7%. And specifically in our coastal areas, the market has performed strong and their vacancies are at -- in Western Cape at 3.3% and in KwaZulu-Natal at 0.8%. So practically the portfolio is full. Gauteng, there is slightly more stock available, but the market is competitive. And as a result of that, we have seen churn in tenants. The renewal success rate here was impacted by 2 large tenants that we lost. The one building we actually sold, which was Paul Smit, that's a 22,000 square meter building, but the other building we have actually re-let on a short-term basis. The negative renewal growth rate is a number specifically for industrial. I actually, I think at the same presentation, sort of indicated that I believe that we should start seeing rental growth on our renewals. So it is a number that has disappointed from that perspective personally. But I think as the market continues to firm in this area, we do predict that that -- that those -- that rental renewal rate should come up and another supporting factor is that there's quite significant construction inflation cost. So if you're going into a new industrial box today, the rental level is significantly higher than, let's say, the existing second hand box. So I think those 2 dynamics I still believe going into this year, we should start seeing improvement in that specific metric. The escalations remain at 7.5-odd percent. And as I mentioned earlier, arrears have improved. The like-for-like growth is at 2.6%. That is obviously impacted by the negative renewal growth as well as quite a few significant bad debts that we experienced in the period. Valuations in industrial have -- we've started even with the negative reversions we've seen affirming and that has been really driven by valuers' views on rental growth going forward in the market. On the portfolio side, very active asset management here. We've sold over ZAR 530 million worth of properties. We still have a, let's call it, a couple of properties that are sort of strategically not meeting our investment criteria and those will be sold over the period. We made one acquisition of a warehouse. And then we've been developing quite a few additional warehouses, some on spec and some specifically for clients across the country. So in Cape Town, in Durban, and here in Gauteng, specifically in Midrand. So actively investing and increasing our exposure to logistics. And then a big investment this year across all 3 sectors has been in the solar portfolio. We've literally doubled our capacity on the solar side, just given what's happening in the energy sector at this stage, it really is a key focus area for us. On the retail side of things, the vacancies have ticked up. I think it is slightly skewed, however, by some of the large redevelopments we're busy with at Bayside and at River Square. I think if those are removed and completed, vacancies will come down quite significantly. So we would sort of say our core vacancy is at 3.1%, and with all the redevelopments, that will come down to 2.4%. And if you look at the market, I think generally the renewals are increasingly improving. In fact, the last quarter, we've seen that those negative reversions were at low single digits. And I honestly believe that the trading densities within our shopping centers now are supporting the rental levels to start seeing at least the rental level on renegotiation starting to firm. So I think that is a metric that will improve. And arrears have come down. In the specific space, if you think about increased interest rates, increased cost of occupation in this coming year, I am a little bit concerned that maybe in retail you could start seeing arrears tick up a little, but again, some of the smaller tenants may struggle as trade in some of the shopping centers slows down with economy slowing down going forward. The like-for-like growth is marginally negative. Trading densities still continue to grow, and I think that will support rental levels. And here we've also seen a 2.3% increase in our valuations on the portfolio. Also very active asset management here. We are selling non-strategic retail shopping centers. We've reduced significantly over several years the number of retail facilities that we own and focusing on a core strategic portfolio and selling out the rest and continually investing and extending those shopping centers where we believe over the long term we will get growth. And also here, a big focus on investing on solar into this portfolio. On the office side, I mean, this is obviously the big topic of discussion. Most folks have probably discounted, as Norbert mentioned, GOZ and Growthpoint's share price significantly because of office exposure. But as most analysts say, if everything's full, there's no upside. So here's the upside. And certainly my view would be that things are actually improving marginally. It is a very competitive market, but there are areas of significant improvement. And I think Norbert mentioned the coastal areas. I mean, if you think about the Western Cape portfolio, it's a large portfolio, 374,000 square meters. And there we've seen vacancies come down, just around about 15-odd percent towards the end of last year, and they've come down to 7.7%. So there's quite a lot of activity of user looking for more than 3,000 square meters in Cape Town today. You're in particular trouble, because there isn't actually that kind of space available. In Gauteng, there are specific pockets where we've seen actually some strong demand. The Fricker Road, Illovo area, we've literally halved vacancies in that node. But Sandton remains a difficult and very competitive market. It doesn't mean there isn't activity. There's huge amount of transactions. We are attracting tenants back into that market. But some of the larger corporates are still consolidating space. So it is a little bit of a churn in that market space. But the reality is the oversupply in that market still exists. And I think without economic growth, it's going to remain quite competitive and difficult. On the renewal side, I think if we strip out the one specific lease we had to renew in Parktown, the sort of negative renewal growth is more like 12% rather than this 20%. So that print, I think, will improve going forward and isn't reflective, I think, of the embedded over-rented nature of the portfolio at all. And once again, arrears continue to come down. Like-for-like, growth is pretty anemic to negative. And valuations, unfortunately, given the environment we remain on the negative side. The portfolio, once again, actively asset management -- managing the portfolio, selling smaller non-strategic assets in lower growth nodes and reinvesting by redeveloping and improving our portfolio. And there we have triggered the development of the Hilton Canopy Hotel in our Longkloof Studios property in Cape Town. So we've got Hilton on a lease there. And then the old Investec head office, where Ninety One is in occupation, Investec will be moving to the Waterfront, and we'll be accommodating Ninety One in the Waterfront on a temporary basis as well, and we'll be redeveloping that property on the back of a 15-year lease. And then to, obviously, office, given the surface area, the solar capacity there isn't really the main show. Trading development continues to be a good contributor to the business, so I think we've always said we're trying to get a contribution of around about ZAR 100 million a year from this business. The net contribution for the year was ZAR 80-odd million. And the business is very, very active in developing specifically for our funds, business, student accommodation, healthcare facilities, and then actively working within the portfolio on the variety of developments for the on balance sheet business. From the ESG perspective, it is a key component where Growthpoint typically excels. We've invested now close to ZAR 400 million into solar. We doubled our capacity in the year. And for next year, we're targeting to get to 40 megawatt peak of capacity. There are other initiatives we're looking at in the energy space, and when we're ready we will announce those. We continue to focus on ensuring our buildings are green. We have a Level 1 BEE rating. We are a member of the UN Global Compact. And from an ethics perspective, we've introduced a new value, which is Play Fair. I think in the South African context, it's a very important component within business that we maintain as corporate South Africa a very high level of ethical standard in the way we do our business. On the V&A, so this is obviously the price performance from the portfolio this specific year. I mean, there's literally not one metric in this whole section on the V&A that looks negative. So the portfolio has performed particularly well. We've seen a 19.8% increase in NPI. The reality is the property is particularly performing well across all the different segments. We've seen the NPI exceed even pre-COVID levels by close to 11-odd percent, 11.2%. Certainly, the return of tourism, the increase of flights to Cape Town directly is benefiting the precinct, vacancies are 0.4%, footfall is up 28%. The reality is that from a strategic point of view, literally all the facilities have back up power. And as a result, the asset has continued to benefit from that. It does come at a cost and there we strategically took the decision not to recover the diesel expense from our tenants. On the retail side of things, the statistics are staggering. To see retail sales increase by just under 40% and it's up 31% from, let's say, last normal, which is sort of pre-COVID. In December, the shopping center turned over ZAR 1 billion, representing a 46% increase over the last year and a 30% increase over last normal. So these are statistics real estate people only dream of generally. The retail trading densities have increased by 48%. The demand for space is strong. The shopping center is full. Tourism is performing very, very strong and driving the underlying metrics. The redeveloped Alfred Mall opened in the period. And if you are down in the V&A, I suggest you're going to have a look. It really is a nice facility now. It's got coffee shops and they've opened up the mall nicely and it's performing particularly nicely and strongly from a retail perspective. And then the Timeout Market which was the redevelopment of that whole food market area will be completed for the peak season. On the Marine and Industrial side, the Cape Town Cruise Terminal is operating at full capacity again. They've processed over 145,000 passengers as well as 40,000 crew. Just to understand, every passenger that we process we earn a fee for as well as processing their luggage. So it's actually a profitable venture for the V&A. And then the Moorings, all the little canoes that are parked in the marina there, we charge rental for those as well and that revenue is up by 9% and for those that have come into the V&A would have seen the new Astron service station is open from December as well. On the office front, even here, fundamentally, very, very strong metrics. The portfolio is full. The negative reversions are really marginal, and I would argue going forward we should see rental growth as a theme. Investec will be moving-in in November in their new office building, and we are busy converting 6,600 square meters in the Cruise Terminal for, amongst other, the V&A management offices themselves, but creating additional office space because of the specific demand in Cape Town at the moment. The hotel and residential portfolio has also had an exceptional year. In November, the net property income increased by 39-odd percent there as well. Occupancies were up by 56%. The average daily rate was up by 42%, so the room revenue was up by 122% compared to the prior year. And residential vacancies, we obviously have on Portswood Ridge there, a big residential portfolio, and literally at half year I think there were about 6 units left, 2% of the portfolio was vacant. And the Helistop, we've built a new Helistop and -- with leases with 3 companies there, and that has also been completed in this period. Moving to our Growthpoint Investment Partners business, so we've got roughly about ZAR 17.9 billion of assets under management now. The healthcare fund, we've raised about ZAR 2.8 billion there, and of which ZAR 765 million was from Growthpoint. We're very grateful to the GIPF who has supported our fund management business very, very well, and they invested ZAR 500 million into the healthcare fund in this period. The healthcare fund also acquired its first warehouse property, warehouse office property, with Adcock Ingram as a tenant, and we own 50% together with Bidvest Properties in -- of that property. And then we are busy with quite a few acquisitions. We have got debt funding capacity there. So we've got an extension to the Busamed Hillcrest Hospital, which is really performing particularly strongly. We are looking at a health care campus in Cornubia in Durban. And the Competition Commission has approved the acquisition of the Johannesburg Eye Hospital property so that transaction will also be completed in this period going forward. The underlying distribution performance of the fund has been strong and that distribution grew at 8.2% and we have sold a 15% stake of the management company of this business to Kagiso for ZAR 41.6 million and the total debt of this fund is at 13% now. Lango: obviously Africa, a very difficult market to be trading in. We do 18% of Lango at this point. We invested additional $30 million into this company. The NAV now is $333 odd million. Lango's environment remains pretty tough. The portfolio has been pretty stable at $611 odd million in value across the jurisdictions being Ghana, Nigeria and Zambia and then there's a couple of pockets of land that they own in Angola, which they are trying to dispose of. The fund have utilized the funds that they have raised in the period. They raised $40 odd million, of which Growthpoint was $30 million, and they've secured another $85 million, which hopefully will be coming in this period. And those funds will be obviously used to further diversify the portfolio and potentially bring down the debt, which is at circa 40% at the moment. So it's also well known that Nigeria has been a pretty difficult market from a currency perspective. A recent development was that the Nigerian Central Bank, they unpegged the currency. It led to quite a significant devaluation of that currency. So we do sit on naira in that market and we have hedged a portion of it, but ultimately that will impact the returns of that business. And the ability of this fund at this stage to pay distributions is hampered by a regulatory constraint in Mauritius so we are looking at redomiciling the company. The Student Accommodation Fund today is 11 properties. It's over 6,400 beds and we're targeting to get to over 8,800 beds by the end of this calendar year. The GIPF also supported us there with ZAR 250 million of additional investment into this fund. There's a very big pipeline of opportunity here and to the extent we can raise money, we certainly can deploy into this market pretty attractively. So in the period they've committed to Brooklyn Studios and Fountain's View, 2 developments that have been completed, and they're busy with a development in Horizon Heights which is at the University of Johannesburg. We also acquired 2 additional pieces of land and those will be obviously for future development. The fund also declared a dividend, which grew quite significantly, but it wasn't really comparable because the previous period was for a 7-month period. So the 1 hot topic obviously in this sector is obviously the NSFAS reduction in rentals and there we have various initiatives that we're busy working with NSFAS on as an industry and hopefully over a period of time, that will normalize. The fund has currently got debt at 29.5% LTV. On the capital management side, the big focus has been to try and term out our debt and we've been very active. We've got a very good relationship with IFC and they have also supported us well and there we've raised ZAR 1 billion green bond over periods of 10 and 7 years at very attractive margins. We've also secured additional ZAR 2.5 billion of unsecured private bonds on the back of that at very attractive margins with term so getting term into our debt book, increasing the term of the debt book to 3.5 years. A big transaction for us was obviously the refinance of the Eurobond in a very, very challenging market. We took the decision prior to this bond maturing that we didn't believe that the Euro market was really suitable for any issues of a decent company like Growthpoint so we used our relationships locally and we have refinanced all that debt back into the local market here in euros. And we thank our local banking relationships for supporting us in this refinance, which was a big transaction for us and very successfully executed and the weighted average term of the hedges that we have there is 3.8 years. The final fixed rate will be around about 4.2-odd percent. And I think given what we're seeing in the international markets, that has really been a good answer for us. The $30 million that we have used for Lango, we have also refinanced with CCIRS. As I mentioned, our debt maturity now averages 3.5%. 49% of our debt is unsecured. We've got only ZAR 3.6 billion maturing in the next 6 months. Our credit rating has remained stable with both the 2 rating agencies. And liquidity for the company is very strong with over ZAR 6.6 billion of facilities available as well as the ZAR 1.7 billion of cash that we have on balance sheet. We remain very conservatively hedged. I mean it is a topic for discussion internally given where the interest rate cycle is whether as the hedges roll off, whether you continue to hedge. But there's a huge amount of uncertainty in the world's interest rate markets and as such, for now we will be maintaining the 70% sort of benchmark hedging level. The weighted average cost of our debt has ticked up marginally as interest rates have gone up at 9.1% and if you overlay our foreign debt, it brings it down to 6.8%. And then if we take all the -- there's an annexure in your pack, which will set out the level of hedging we have on each one of our foreign investments. And Norbert, I think you can come and give us a conclusion. Thanks.

Thanks, Estienne. All right. We're running short on time so I'm going to move through this quite quickly and just touch briefly on each one of the different investments that we have and the prospects for the year. Capital & Regional, GOZ and Globalworth are all separately listed so they put out their own results and certainly you can look at those for more in-depth analysis I guess of the business. But GOZ remains a core investment for us and it is facing some challenges in the office market like every company that's got exposure to office assets across the world at the moment. There's no doubt that the industrial portfolio is very strong, but the office market is going to face some challenges. The key negative for next year on GOZ is interest rates. So GOZ put out their own forecast that they're going to be just short of 10% down on their dividend per share and that is almost entirely driven by the impact of higher interest rates. The thing with this interest rate phenomenon is when you look at countries around the world and investments around the world, often you have cycles that are peculiar to a country, but the interest rate dynamic we're seeing at the moment is a global phenomenon. So it's impacting all of our businesses, but in different percentages and to a different extent. GOZ obviously picking up a fairly negative impact on interest rates. Globalworth has the bulk of its debt in the debt capital market so we're not seeing or foreseeing a material negative impact of interest rates on its performance. I mentioned earlier that it is obviously in a particularly challenging market at the moment. The office segment definitely continues to be under strain. But having said that, we think the balance sheet is in good shape. The management team there are very actively working on optimizing the portfolio and preparing for the debt refinance, which will be looming in '25 and '26, ensuring that there is sufficient liquidity to manage those refinancing opportunities. Capital & Regional, as I mentioned, the balance sheet has been stabilized. I think operationally the business is doing well. In fact with the acquisition this month that's just gone by and the new investment, I think that positions Capital & Regional quite nicely. The challenge is the U.K. economy and, as I mentioned earlier, I haven't quite got a number yet or a feel yet for what the impact of the Wilko liquidation might be. I'm sure the company will itself put out something if it were to be deemed to be material. South Africa, Estienne has just given you a full overview of that. I think the 1 thing that he did mention and that I thought I would impress upon you again is the regional distinction in performance between coastal and inland. There's no doubt that Gauteng as a province or as a region; mainly Johannesburg and Pretoria is under more pressure than what we're seeing in Cape Town and KZN or Western Cape and KZN. But we do feel that we seem to be bottoming out and that we hope to see some improved metrics as we move into the next financial year. V&A Waterfront, very good prospect. I spoke to the CEO earlier this week and there's no doubt that there's sort of some forward visibility as well at the Waterfront on tourism. A number of cruise liners are booked to come in, a number of hotel bookings that have been pre-made, conferences at the CTICC. I mean Cape Town as a city is tremendously active with anything from Formula E to marathons to these major events, rugby events and otherwise soccer events; which draw huge crowds into Cape Town and into the Waterfront itself, which supports the trade of the underlying retailers in the Waterfront. But one has to appreciate that the base is high and to continue to expect growth of 20%, 30-odd percent off the higher base is unrealistic and we're probably looking at sort of high single-digit kind of growth numbers rather than anything in the 20%s or 30%s. And then Growthpoint Investment Partners, we will continue to look for additional third-party capital to be invested in these themes. We are working on trying to find a new -- establish a new fund by FY '25. It is fair to say that certainly the Growthpoint Student Accommodation fund did benefit this year from the rental underpin when we bought that portfolio. We are probably likely to see less earnings coming out of that fund next year given the impact of this NSFAS issue. And the growth as well in the health care fund that we experienced this year probably not to be at the same level next year as we experienced this year. So in summary, we're pretty confident about the financial health and stability of the business. We remain in very, very tough environment locally and sort of globally and internationally. Interest rates, I think this year we have had stepped interest rate over through probably from October, November last year through to June. So the average increase in interest and the interest cost for the year reflected the monthly sort of increases of 25 to 50 bps that we saw, 75 bps that we saw. Next year we foresee that the interest rates are going to remain high for pretty much the entire year. There's talk about interest rates coming down maybe towards the fourth quarter of our financial year, which is sort of the second quarter of the calendar year so April to June '24. Not convinced of that. Maybe towards the end of '24 calendar is when we start seeing interest rate declines. So we're predicting and budgeting and projecting in our numbers that interest rates are going to remain at this high level for the full year. We do have a chunk of floating interest rate debt and we have quite a significant chunk of our interest rate swaps that actually expire during this budget period with the new financial year FY '24. And as Estienne pointed out, we spent an enormous amount of time internally debating our hedging policies and whether we maybe don't rehedge some of the hedges that are rolling off or do we remain conservative and put some hedges on. For now the decision is to sort of stay at the 75-odd percent level of hedging, but it obviously will have an impact on our income statement. And as a consequence, the forecast is for our DIPS to decline between 10% and 15% for FY '24. And then on the dividend policy, we will endeavor to sort of remain consistent with a payout ratio of 82.5%. So that concludes the formal presentation. Ladies and gents, thanks very much. I know that Estienne has got a couple of questions here from the people that are online and we'll try and deal with those maybe quickly and then I'll come back to the floor for questions.

Okay. So I'm going to deal with the quick easy questions maybe first and then the little bit longer ones I'll try and push out. So can you please comment on your continued use of CCIRSs? Most of your peers have stopped using them and are actively reducing hard currency debt levels through earnings retention. Do you have any intention reducing CCIRSs use given it adds 900 million in distributable earnings? I'm not quite sure that's the case.

So you'll have to understand that calculation, I'm not sure where that number comes from. But the fact is, yes, we do still have CCIRSs. We use it mainly for the Australian investment. The bulk of our CCIRSs are actually funding currently the investment into our Australian subsidiary. I think, Lauren, we've got about $1 billion worth of CCIRSs. We manage that by reference to the value of the underlying investment. So sort of we see it as a hard currency debt number relative to the value of the investment. That's sitting at an LTV. We look at it at sort of an LTV just under 50%, 48-odd percent LTV. So we remain comfortable with that. On the euro refinance, we've actually opted for euro debt or euro denominated debt, it's not CCIRSs. And the intention or our philosophy and thinking has always been to try and match our hard currency investments with hard currency debt. And so I think we're likely to maintain that position. We have scaled back a bit. I think at balance sheet date, we didn't have any pound CCIRSs. So the investment prior to this recent investment with the Capital & Regional equity raise, we had no pound-based funding. It was all rand funded. And we have recently -- I know Aasha's in the crowd. Aasha is our new treasurer, her and her team with [indiscernible] have recently done an exercise for us on the benefit and/or cost of using CCIRSs versus rand funding. And our conclusion was that we still think it's beneficial to us to continue to use CCIRSs.

And the basic principle of that is you get the benefit of Growthpoint's rating in this market in terms of margin and you get the benefit of the offshore base in the way you fund. I think just in terms of retaining capital, which is sort of the other leg of that question, I mean we do retain capital but we are typically using that in the operations. Are you able to provide more detail on the SA organic NPI profile going forward, a growth range per sector or as a whole? If not, do you believe it will improve or remain the same or deteriorate?

I thought about that. I saw the question earlier so I've given it a bit of thought. I'm happy to give it a bit of understanding. Look, I mean I don't think we can give per sector kind of predictions or forecasts on what we think like-for-like might be for the individual sectors. There's just too many moving parts between diesel costs and rates and taxes and arrears and bad debts. There's so many moving parts. What I think we are starting to feel and see, certainly retail and industrial, we think the level of negative reversions that we have been seeing and experiencing in retail and industrial are likely to moderate and certainly let's talk regionally. KZN and Western Cape I think are definitely -- we are quite positive actually that we might start seeing rental growth in the Western Cape and to an extent in KZN as well. Our office portfolio in KZN is only 1.7% vacancy. I mean I'll just give you some insight into the Western Cape. So the Waterfront's got about 145,000 square meters of offices, it's got no vacancy. Centurion City has got 160,000 square meters of offices, got no vacancy. Growthpoint's on-balance sheet portfolio is 374,000 square meters of offices in Cape Town, we have 7.7% vacancy which is halved from just over 14% a year ago. So there's a real squeeze in the Western Cape and that is conducive for rental growth. If you consider Gauteng with a vacancy factor of 20-odd percent, it's not supportive yet of rental growth. So we definitely still see negative reversions in the office space in Gauteng to continue for a while, but at least the other sectors I think would turn positive or certainly significantly less negative.

Globalworth clearly needs recapitalization. If they recapitalize, will you participate?

I'm not sure that there's quite a definitive or quite a -- what's the word I'm looking for? Not definitive, but it's quite a factual statement that it does need. I don't think the Board are currently contemplating a recapitalization. I think, as I said, the management team are extremely active in working on the refinance of the debt that's coming up. In fact the company bought back EUR 100 million of its bonds in the bond market in the last 3 months and managed to buy those back at a 17% discount. I think EUR 83 million was paid for EUR 100 million notional bonds. That is potentially there can be more of that and the company is exploring, as I said, bilateral debt facilities with banks on the one hand. It's exploring asset sales. It's exploring whatever opportunities are available to it, including bond buybacks at a discount and recapitalization is not currently on the cards.

Growthpoint has received a favorable ESG rating from Risk Insights in the past few years. Can you provide an overview of the strategies Growthpoint has implemented to acquire green bonds and meet environmental standards for their properties? I don't think we've actually acquired green bonds. What we have done is issued some green bonds. And what I can say is that for every single property, there is a strategy in terms of the water, waste, energy, utilization and increasingly, we're becoming more and more sophisticated in our approach to this. I mean clearly this energy environment isn't really that conducive if you're having to run diesel generators for good ESG performance, but we're increasingly looking at things on a more holistic basis in terms of providing solutions at various properties. We are also looking broader at various strategies I alluded to earlier in our presentation where energy acquisition can be on the cards from a green basis.

Just to add. I mean from a funding perspective, we try and diversify our funding sources as much as we possibly can. We've got exposure to the debt capital market. About half our debt is in the debt capital markets in the form of bonds. Then we have bilateral loans with the banks here. You saw on the slide earlier, we did a ZAR 1 billion private green bond with the IFC a couple of months back. We invest in -- a very big chunk of our portfolio is green certified, has got green certified ratings, I think we own the generation on the cards. So we certainly do our part on that ESG front on the green funding side.

Are you still expecting dividends from GWI given the liquidity needs for FY '25, '26? It speaks to the... '.

Yes, sure. So Globalworth; fair to say given the liquidity constraints that it has, given the particular emphasis on the refinance of the bonds in a couple of years' time; has taken a decision to whilst it is constitutionally obliged to pay a dividend. I mean the memorandum of articles of that company actually determine that it should pay or will pay a dividend of no less than 90% of [ IFF ] EPRA earnings. It has elected to pay that in shares so offer shares and the 3 largest shareholders; ourselves, Aroundtown and CPI; have committed to take shares until such time as the refinance is sorted out.

What is the split between caps and swaps in the 77% interest rate hedging? So [ Antone ], we predominantly use interest rate swaps. We have very small amount I think just literally in one of the funds we've used caps. So I would say the majority of the hedging is in fact interest rate swaps. Is there still an intention to raise ZAR 2 billion capital for the Student Accommodation Fund as indicated at the interims? If so, over what time period do you expect this to occur? So in short on that fund, we have secured already around about ZAR 630 odd million worth of funding, of which Growthpoint was ZAR 250 million of that and we have a very good pipeline of other investments that are reasonably close to commitment. So the institutional capital raise process takes significantly longer than in the public sector so you have to be a bit more patient and I think time-wise, you're probably looking at, I don't know, 9-odd months.

What's your time frame there? June next year.

June next year.

So the short answer is yes, we're still targeting the ZAR 2 billion and the time frame would be to June next year.

So 9-odd months. Okay. So then the next one is what were the yields on the disposals and then speak on the different retail segments, regional versus community centers, et cetera, et cetera? So the yields on disposals vary significantly and it would depend on the level of occupation of the property at the time when it's sold. So I think it would be very difficult to give you a range of disposals without guiding you in the wrong direction because every single transaction is really independent. It is disclosed. What did we give there?

It's a very broad range, I would say 5% to 11% or something like that. 5% is not indicative of the...

Which annexure must we refer? Annexure 26. Okay. All right. Then are the different retail segments new? I don't know if we've got a microphone. Maybe is there any comment? Gavin, just pass us a microphone there, please.

So I think really what we've done is we've disposed of what we call our tail and noncore properties. Those are largely smaller format centers, but really defined by the nodes or the markets that they enter. Some CBD centers and where we feel that they don't fit our investment criteria. It's not purely around [ SA ].

Quick another question is what are the broad cap rates used for the SA valuations; retail, industrial and office? Do we have that in the annexures? I think we do. Lauren will just look that up. Page 48 of the commentary of the asset. We're not going to review there just in the interest of time. Are you concerned about the earnings impact of hedges rolling off for GOZ in FY '24 and the impact it will have on GOZ's earnings in FY '25?

Look, I mean, I guess it depends on your views on how long interest rates are going to be higher for, right? I mean the rhetoric that was prevalent for the best part of almost 10 years was interest rates are going to be lower for longer. We turn the corner, interest rates have gone right up and the latest sort of rhetoric is interest rates are going to be higher for longer. There's also a sense that one needs to understand that interest rates were artificially low for a very, very long time. And when we think interest rates are going to start coming down again, which we do believe they will, they're not going to go down to where they were. They're going to go down to probably more like your 30-year averages. U.S. bonds 30-year average is maybe 3%, 3.5%. They were close to 0 for a long time or maybe below 1%. So they're not going to go back to 0 or below 1% to our minds unless there's another existential kind of a crisis or financial crisis of sorts or whatever the case might be or wars or who knows what. So interest rates will come down, but they're not going to come down to the levels that they were before. So GOZ, I mean obviously their forecast for next year already takes into account impact of hedging and higher interest rates. I don't want to make a prediction on anything FY '25. It's for the company to put that kind of messages out not for me. But I do believe interest rates are going to be higher and therefore the average cost of interest for GOZ, like our own will go up and will definitely be a drag on earnings.

GOZ has gone up, it was 9.8% negative.

Correct.

Okay. What is the expiry profile of our AUD CCIRSs? I don't think we provide that information so we'll think about it and potentially come back to you. In the depths of COVID, Growthpoint decided to do an equity raise at a significant discount to NAV in order to shore up the balance sheet and make sure you were the first to the market. LTV for the group came down, but are now ticking up again. Can you please explain the capital allocation decision to take scrip dividend alternative for GWI and C&R and the decision to underwrite C&R's equity raise? You've done this in the light that you have higher debt LTV levels in a period of very high interest rates, which you have blamed for the decline in your DIPS.

So I mean at least fundamentally sitting on that question is capital allocation strategy around increasing offshore investment and considering the investments that we currently already have. So one is to appreciate that these numbers are incremental. These are not -- they are relatively small. I mean the 300 odd million, the total investment into Globalworth and Capital & Regional on a balance sheet of ZAR 140 odd billion of assets. So I think it talks strategically to our desire to support the investments that we have. We support Capital & Regional and the management team and their strategy and their ability to turn that business around and ultimately grow that business. It talks to the Globalworth front as well. The fact that we don't want to dilute if we saw the prices at which the DRIP was done, 20% discount to the 6 or 7 day VWAP or something. So I mean the equity the DRIP's being offered at like EUR 2.20 or EUR 2.40. I forget the exact number. Don't know if the final price is out. So 20% discount. So it doesn't make any sense not to take the DRIP when it's being offered at such a massive discount because the dilution we would suffer would be unpalatable. But just a broad sort of comment on that. And yes, LTVs have risen, I mean they've gone up from the 37% to the 40% strategically. Since raising that equity, we've been thinking about what we call a self-funding model in a sense, which says all right we're going to sell some assets ZAR 1 billion to ZAR 2 billion. We're going to retain ZAR 1 billion odd from the dividend payout ratio bringing the dividend payout ratio to at least ZAR 3 billion there. We've got CapEx commitments and some development spend that we have to do. We're going to incrementally support some of the offshore investments and hopefully at the end of the day not be in a position where we have to borrow more from the banks. So in 1 year, maybe you don't get the timing exactly right so you might have spent maybe, I don't know, ZAR 800 million or ZAR 1 billion more than what you sort of retained or raised from asset sales. But the next year, perhaps you sell a little bit more than what you actually invest. So I think that's the thinking at the moment until such time as the equity markets sort of recover I guess and one is able to consider equity again as an option. But we're not considering equity as an option at the moment.

Are we considering buying back shares? My answer to that is no because we've got investment opportunities, we need the capital. Then there's the question around unlocking the discount, which is obviously the whole world's stocks are trading at a big discount. Our strategy is to get the investors to pay more for the stock. That would be a better answer than trying to dispose of assets unnecessarily given a specific market environment.

I can again just emphasize that that is something which comes up at every -- we've got one of our non-Executive Directors here, Melt Hamman, who's sitting in the crowd. Thanks, Melt, for supporting us here today. And he can confess that unlocking the discount and analyzing this comes up every year at our strategic offsite and part of our discussions not only annually, but at every Board meeting it sort of is discussed. The fact of the matter is, as Estienne says, if you look Capital & Regional is trading at I think about a 55% discount to NAV. GOZ is trading at a 45% discount to NAV. Globalworth is trading at a 60% discount to NAV. Those are just companies that we're invested in. Now if we can think of the other partners for example in Globalworth or Aroundtown. Aroundtown is trading at EUR 1.50, it's NAV I think is EUR 9. You've got -- [ Kagiso ] is not a good reference, it doesn't trade. But there's hardly a property stock in the world and I would certainly say the 1 market that we're obviously very close to is that Aussie market that's not trading at a 40% discount to NAV. So how do you unlock this discount when the entire global real estate market is trading at a discount. So we consider it as part of the interest rate cycle and we need to wait for a more normalized interest rate environment. 2 things have to happen. I think interest rates have to start coming down or NAVs have to start I guess going down, which will have an impact on valuations. And what normally happens through these cycles is it sort of closes from both sides. So yes, valuations do come down. Bearing in mind, we've written down our valuations for the last 6 years now I think consecutively. This year we had a small -- office was still down, but the others were marginally up. But prior to that, we've been writing our asset values down for the last 6 years. GOZ wrote these down by almost 10% in office and 1% in industrial this year. In Eastern Europe as well, we're down 2.5% I think on asset value write-downs. So you generally have a closing of the gap from both sides. So NAVs come down a bit and then interest rates tend to normalize and the share price reacts quickly to that and then you get the gap closing that way.

Okay. Here's a value-add proposal. Have we considered demolishing obsolete office buildings? So I think just to understand that if your portfolio is 19% vacant, it's 80% full, which means that most buildings have got tenants paying rental to average of 80%. And we don't have obsolete buildings in Growthpoint's portfolio. They are all very good quality assets and every single asset if it has a significant vacancy is reassessed as to what the optimal solution for that specific asset would be. So it might be demolishing, but then for redevelopment or whatever the case maybe. You see that often in the industrial portfolio, but we haven't really been active in flattening all our empty offices in the past while. So then the next question speaks to the GOZ. The gist of it is that 2027, can we unbundle GOZ without CGT leakage? And I think we will not be able to do that. There will be CGT leakage and the reason why there is CGT leakage is because your deferred tax distribution out of Australia does reduce your base, which is quite a technical answer. But the bottom line is our base cost has been reduced over the years by some of the distribution or component of the distribution that we have received and that capital gains tax liability is at 30%-odd. So it's quite a significant number.

Just add to that. I mean again this guidance is not something we haven't thought of probably 20 times, but it doesn't work. South African shareholders can't all directly hold GOZ and if we're going to unbundle GOZ, we have to give it to our South African shareholders as an offshore asset, you need offshore allowance, it's complicated foreign exchange control perspective. We currently have probably about a ZAR 10 billion debt or $1 billion of CCIRSs on our balance sheet, which funded the investment. So if we get rid of GOZ shares and unbundle it, we still sit with a debt on our balance sheet. So you can't just -- that will leave us with a significantly higher LTV. So I can assure everybody in the audience and online that every possible opportunity to unlock the discount to create value has been explored and where it makes sense, where it is meaningful, we will do it. But certainly unbundling GOZ is not an option.

And there's a whole bunch of questions here on your extension, Norbert, if you want to give that a go?

So look, I think in November last year as part of our sort of update, we did put out an announcement that I had intended to retire in December '24. Within that quite a lot of personal circumstances with regards to my family and potentially relocating and the reality is some of those plans haven't worked out. And I started discussing with the Board, updating the Board on some of these initiatives or some of these changes and ended up in a discussion with the Board. Ultimately we agreed that I would stay on for another 2 years beyond that date so to extend that December '24 date to December '26. And I think there's undoubtedly a lot of strategic initiatives underway. Some of them are more advanced than others. We also have a few succession issues that we're dealing with in the next year or 2. Public knowledge that the CEO of the Australian business is retiring by probably middle of next year just after June of next year, July of next year. So there's quite a lot of stuff happening and I think between myself and the Board, we agreed that right now it might just be better to keep the senior leadership of the group stable and that I would therefore stay on for another 2 years.

Okay. Then there's a question around what office rental reversions will be if we exclude Sandton? So I think Durban, we think we're going to start getting growth. Cape Town, we should start getting growth. And then the rest of Gauteng. Paul, what do you think?

Excluding Sandton.

Between 5% and 10% is the answer.

Okay. Folks, there's still lots of questions. I think we're going to put a pin in it.

Let's go to the floor actually and just see quickly if anybody's got any questions. I think we've just run out of time unfortunately. It's already 22:02, we're well over the 1.5 hour mark. So we'll take 1 or 2 questions from the floor.

I'll just maybe ask 1 then. With regards to your guidance beyond just the Australian dividend and finance cost increase, is anything else that's providing that large decline, maybe some one-off or something along those lines?

Look, I mean trading and development is always difficult to predict I guess, but I think we've got a decent pipeline and we would expect trading and development to contribute at similar levels to what we had this year. I did mention the Student Accommodation Fund. Admittedly, our equity stake there is only about 14%, 16%; but it will have pressure on its distributions given the impact of NSFAS being felt for a full year whereas this year we were supported with the head lease from the vendors of that portfolio. So we didn't suffer any negative impact of NSFAS this financial year. Health care's growth also come under pressure. We had a significant lease renewal in the health care fund with Netcare on an asset down in Cape Town and we did end up with negative reversions on that lease renewal. But on the upside, we've got a new 20-year lease triple net from Netcare on that asset. So we took a negative hit on the reversion and nowhere near what we had originally sort of anticipated. But I just talked to lower growth from the health care fund as well. Then GOZ, you mentioned already. Globalworth probably, obviously not all of its debt is in the debt capital market. So there is some of its debt, which is repricing and coming through more expensive. So to look for similar growth out of Globalworth and CapReg probably difficult to foresee. So you're probably likely to not get any real growth out of there. And then the SA portfolio is challenging as we explained. But there's no other -- Waterfront. Waterfront base is high so Waterfront gave us really good growth this year. We're predicting maybe just below 10% next year. But nothing else that's significant. 80% plus of it I think is interest.

Simple, 4.5%. Any other questions, folks? I think most of us are ready for a cool drink.

All right. Ladies and gents, thanks very much for your time and attendance. Really appreciate that. And we're going to be around. A lot of our management team out here and Melt, 1 of our directors as I mentioned, is here. I see our auditors in the crowd as well, welcome. But if you have any questions, please feel free to stick around, enjoy something to eat and drink and ask as many questions as you want. Thank you very much.