Growthpoint Properties Limited (GRT) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. I wonder if you could just take your seats, please, and make yourself comfortable. I'd like to get the show on the road. I think we do have a number of participants online as well, so we don't want to keep everybody waiting. We're going to try and do this. We've never managed, so -- but we'll try in sort of an hour, hour and 15. It depends on how difficult the topics are. And if okay, we'll just leave the questions till after, if that's all right. Thank you very much. Just again as well the online questions -- I think Lauren will handle the online questions afterwards. But thank you all very much for joining us here today, and welcome to Growthpoint's results presentation for the 6 months to December 2023. I hope you all enjoy this very spectacular venue that we once again managed to secure. Truly -- probably one of the best views and best venues to my mind in the country to host results. That's for sure. All right. So just flicking through the agenda. I'll give a bit of an overview on the strategy, touch on the salient features for the period under review, looking at the financial side of things as well. I'll present on international investments and how they've contributed for the period. Estienne will do the South African portfolio and Growthpoint investment partners. I'll come back and do the bit on the capital management and various debt and funding initiatives that we have on the go. And then I'll conclude. There are probably something like 70-odd annexures in the document, providing an inordinate amount of detail. But clearly, if there's anything that you still want to know, please feel free to keep your questions and we will take them at the end. So just touching on strategy. I think it's fair to say that in this environment, both locally and globally, we continue to be mindful of the upward trajectory in LTVs. And in the short to medium term, we're going to remain focused on various strategic initiatives that will preserve liquidity in the balance sheet in the long term. Group LTV rose from 40% to 42%, and that's a mix of the Australian LTV rising from 36% to 37.6% and the South African LTV from 32.9% to 34.8%. The GOZ increases mainly due to the write-down of property values in Australia. And in South Africa, the increase is mainly due to some increased debt levels. We took on probably about ZAR 1 billion worth of additional debt between the South African business and the funds. At 31 December, we had ZAR 6.2 billion worth of unutilized committed bank debt facilities compared to ZAR 6.6 billion at the year-end in FY '23, in June '23. We had ZAR 1 billion of cash on the balance sheet. It's down a bit from the ZAR 1.7 billion in FY '23. And then with our payout ratio of 82.5% on the dividend, I think the total distributable income is just around ZAR 2.4 billion. The dividend will be just below ZAR 2 billion. We retain in the order of ZAR 422 million before tax as part of our overall liquidity. Looking at the SA portfolio and looking to continue to optimize the makeup of that portfolio. We sold 9 properties in the period for ZAR 635 million. We also disposed of the residential development down in La Lucia, known as the Kent, completely sold out, ZAR 141 million of proceeds and a profit of about ZAR 20-odd million. Spent ZAR 1 billion on CapEx and mainly development CapEx. And then we signed this purchase power agreement with one of the energy brokers called Etana, securing 195 gigawatt hours of green energy for our portfolio, estimated at about 32-odd percent of our current usage. So that will only come online in June, July 2025. Overall, since 2016, we've disposed of circa ZAR 12 billion worth of assets, ZAR 5 billion of offices, ZAR 3 billion of retail, ZAR 2.6 billion industrial and ZAR 1.4 billion through our trading and development business. Looking at the funds management business or Growthpoint investment partners as we call it, we have about ZAR 17.9 billion of assets under management there. That didn't change during the period. We're still targeting ZAR 30 billion by FY '27. And then there are 2 effective income streams that we earned from the Growthpoint investment partners business. One is dividend income from the co-investment into the various funds. And it has been a bit challenging there. Dividend income is down from ZAR 79 million to ZAR 48.6 million. I'll provide a bit more detail in some of the later slides on that. And the management fee is the other revenue streams that we get out of the Growthpoint investment partners business, and there the management fee has increased from ZAR 48 million to ZAR 52 million. On the international side, 43.5% of our assets today are effectively located offshore by value and about 32.5% of our distributable income is earned offshore. The rand equivalent of our foreign currency income via both the script dividends as well as cash amounted to ZAR 796 million compared to ZAR 763 million in the prior period. In relation to Capital & Regional, we reinvested the dividend that they paid out post 30 June '23. That was ZAR 2.4 million. And then we also invested another ZAR 21.8 million -- GBP 2.4 million rather. We also invested another GBP 21.8 million in Capital & Regional to -- as part of the underwrite of their GBP 25 million capital raise to acquire the Gyle Shopping Centre in Scotland. And then the dividend that capital & regional has just declared, GBP 3.9 million worth. We will again reinvest that through the dividend reinvestment option that they're offering. And on the Globalworth side, their final dividend -- or rather the interim dividend June '23 was EUR 9.7 million. We reinvested that for additional shares in the company. And likewise, their final dividend, which they just announced a few days ago, equates to EUR 7.4 million for us. And we will also reinvest that back into the shares of the company. A couple of highlights or salient features. We call them salient features nowadays. We don't call them highlights anymore because it's a little bit -- and so down our dividend per share -- our distributable income per share and our dividend per share down 8.4% -- or, sorry, 8.6%. Now we did guide at the beginning of the financial year -- at the end of the last financial year that we would be down between 10% and 15%. So we are within that range. We're slightly better, I guess, from the first half. But we're still foreseeing a few challenges in rising interest costs in the second half. So as an overall guidance for the year, we have tightened the range a little bit from 10% to 15% down to 10% to 12% down. Property assets, group consolidated or total assets, if you want, that we're controlling one way or another for the group, ZAR 177.9 billion, just down 1.1%. Interest cover ratio, 2.9x -- sorry, 2.5x, down from 2.9x. Group LTV, as earlier indicated on one of the slides, 42%. And then our NAV per share down 3.9% to ZAR 20.67. We always put this slide forward just to try and give a sense of the moving parts. So the total decrease in distributable income was about ZAR 248 million. And the various components of that, that contributed were -- are sort of as listed on the slide there. So in the first instance, the South African portfolio is about ZAR 74 million down. Interestingly enough, the income side is pretty flat. It's mainly driven by expenses and then a once-off ZAR 26 million profit on the sale of a piece of our management company on the healthcare fund that wasn't repeated in this period. So ZAR 74 million down there. RSA finance costs. So clearly, with the rising interest rates and renewing interest rates swaps at higher levels, and also the increased level of debt, a total of ZAR 179 million negative move from the RSA finance costs. The V&A Waterfront -- and I see David and a big chunk of his management team are all here. So thanks -- a big thanks to them for helping us out during the period. We've becoming more and more reliant on them. But a sterling performance from the V&A Waterfront, an increase of ZAR 46 million for this particular period in terms of contribution from the Waterfront. Growthpoint Australia delivered an extra ZAR 18 million. It's a bit distorting or bit distorted, if you want, because actually underlying GOZ had a relatively weak performance. But this is just the dividend that's reflected here. And a combination of some currency movement and an over accrual for withholding tax in the prior period that was released in this period gave rise to an ZAR 18 million increase here. Capital & Regional, ZAR 39 million positive contribution. A mix of a pretty decent performance out of Capital & Regional, notwithstanding the challenges in the U.K. And an increased dividend from them. Globalworth, ZAR 21 million down. You'll see that the dividend per share is actually reduced quite drastically from ZAR 0.15 to ZAR 0.11, but underlying actually Globalworth had a pretty solid performance. The key driver or certainly one of the key impacts that you see in this number certainly on the dividend per share is the fact that Globalworth has been offering the script dividend and been offering that at a very deep discount. So in the first instance, the share price is trading at a very big discount to NAV, and then on top of that, the company is offering the DRIP at a 20% discount to the prevailing share price. So you end up with a very discounted DRIP. And that's increase -- that's obviously resulting in an increase in shares. I think the increase in number of shares for this period -- over the previous period is something like just short of 14%. So 14% of that dilution is attributable just to the additional shares in issue. But in terms of absolute numbers, Globalworth actually had a pretty solid performance. The healthcare fund, down ZAR 21 million in terms of its contribution. A number of factors there. Probably, the biggest one is the impact of us selling down our shareholding there. We were at 55.9%. We sold down to 39%. And then there are some elevated arrears in that fund relating to one of the tenants. So the fund decided to withhold a portion of their dividend just until we sort out that arrear situation. Student accommodation, down ZAR 6 million. So these numbers are relatively small. They're not really making a major impact. But student accommodation down ZAR 6 million. Lots of moving parts I guess within the student fund. Obviously, the NSFAS payment or the annual allowance that they allow for accommodation was negatively impacted. And we also had a head lease -- or not a head -- it's a profit warranty from the vendor, the Feenstra Group, who sold the portfolio to us 2 years ago. That head lease or profit guarantee has run out, and we're now exposed to the underlying, let's say, revenues and profits from the fund, which are down, mainly driven by the NSFAS issue. Lango. Lango continues to experience pretty difficult times. So we had ZAR 3 million of dividend there in the comparable period, but no income from Lango for this period. And then Growthpoint Investment Partners got about ZAR 35 million net fee after expenses, ZAR 35 million contribution. That's just down ZAR 1 million from the ZAR 36 million in the prior period. And then lastly, the Trading & Development contribution was down ZAR 46 million. By its nature, it's quite a lumpy business. And in the prior -- comparable period, I think we had a couple of big contributors like the Bakers transaction, where we sold the Bakers industrial development that we did for them back to them and pocketed a nice big profit there. That wasn't repeated in this period. Just looking then briefly at the income statement. There's a fortune of numbers here. I'm not going to go through all of them, just to -- maybe some of the high -- the key numbers. Gross property income at a group level was just short of ZAR 7 billion, down 0.6%. Property expenses just over ZAR 2 billion, up 7.1%. Net property income down 3.5%, ZAR 4.882 billion compared to ZAR 5.61 billion in the comparable period. Other operating expenses up 19.2% from ZAR 452 million to ZAR 539 million. The 2 big sort of movers there or contributors there to the negative movement is Growthpoint Australia GOZ, where the Fortius funds management business that was acquired in 2023 was only in the half year number for 3 months of the half year, and it's in for a full 6 months in this HY '24 number. And the other big contributor there is Capital & Regional, where the operating expenses increased from ZAR 35 million to ZAR 77 million. And that was impacted by a insurance credit that was received in the HY '23 period for the Walthamstow fire which we had in the U.K. and that income was credited against the expenses. So the ZAR 35 million understated in that prior period. Top of the page there. That then leaves our net property income after operating expenses up -- sorry, down 5.8% to ZAR 4.3 billion. Finance costs, a very key feature. And I guess one of the biggest factors that we raised at the time of our year-end results that would impact this set of results is finance costs and interest, not only in South Africa, but across the board. And so finance costs up 16.9% to just over -- just ZAR 2.1 billion. And then finance and other income ZAR 657 million, up 4.6% compared to the prior period. And then once you make all the various adjustments for noncontrolling interests and foreign exchange losses, et cetera, we're left with distributable income of ZAR 2.414 billion, down 9.3% compared to the prior period of ZAR 2.662 billion. So the 9.3% is higher than the per share number because of the fact that we bought back some shares, we increased our number of treasury shares during the period. So when you eliminate those treasury shares, it dilutes to the 8.6% number. This slide just as a reconciliation between our distributable income and the FFO per share. And again, way too many numbers to go through individually. But the single biggest impact there being the fact -- the line which deals with the distributable income from GOZ that was retained. So in the prior period, the payout ratio for GOZ was about 70%. And the GOZ payout ratio in this period was 80%. And effectively, therefore, there's over ZAR 200 million there of additional income that was paid out of GOZ which was not retained as in the prior period. So that leaves the FFO -- SA REIT FFO down 18.5%, on a per share basis down 18%. And as I mentioned before, the DIPS and dividend per share down 8.6%. A few numbers to just pick out on the balance sheet. Property portfolio pretty stable, ZAR 140-odd billion, didn't really move by much. Probably the single biggest move within that was Australia. Australia was down. They mark their assets down by about 4.2% in Aussie dollar terms. Our equity accounted investments also pretty stable, ZAR 16.2 billion compared to ZAR 16.471 billion in the prior period. Loans granted -- that's principally the development loan that we have with the V&A Waterfront, that remained pretty flat. Listed investments, the investment that GOZ has in Dexus Industria fund in Aussie. So I'm not going to go through each one of these. Just to highlight, again, in terms of the total borrowings, total nominal borrowings, ZAR 70 billion, up from ZAR 69.3 billion. When we talk about ZAR 1 billion upward movement in our nominal borrowings, you got to look at the combination there of RSA and the student accommodation fund. Together that will give you that ZAR 1 billion odd number -- increased number in debt. So that leaves shareholders' interest or NAV down 3.7% at just ZAR 70.4 billion. So moving quickly then through the international investments. Firstly, GOZ. We own 63% of the Australian business, cost ZAR 9.6 billion and market cap ZAR 13.9 billion -- market value, ZAR 13.9 billion. As I mentioned earlier, it's been a -- it was a pretty tough set of results for GOZ, impacted mainly by 2 things. I think the first one is interest. Again, the net interest costs rising quite substantially. And then, secondly, again, the prior period had a $15 million lease cancellation income included in the prior period. So FFO per share was down 20.9%. GOZ increased its payout ratio on the dividend from 70% to 80&, which then gave rise to a dividend of $0.0965 million as opposed to the $0.107, and that results in a 9.8% drop in the dividend. GOZ, obviously, still for us a very key and core investment and we continue to support that business wherever we can. It continues to have a strong balance sheet. LTV is 38.4%. It's got significant facilities, undrawn debt facilities of $297 million. We did see a -- because of the property value write-downs, we did see an NAV downward adjustment to $3.75. It was a 6.3% decline. And on the debt side, 77% of it's fixed. The weighted average maturity of the debt is 3.2 years and the weighted average cost of the debt is 4.7, gone up from 4.3. Their portfolio, as I said, down -- like-for-like valuation is down 4.2%. Operationally, the business is very sound. So 94% of the portfolio is leased to government and listed companies. 95% let essentially by rental, and 97-odd percent by GLA. Weighted average cap rate, 5.9%. The weighted average lease expires 5.8 years. So all things I think looking pretty solid from an operational perspective. There was one disposal in the period for $35 million. And the like-for-like also impacted by -- sorry, the overall number impacted by the sale of 333 Ann Street in the prior period. GOZ's own funds management business, Fortius, has got $1.7 billion of funds under management. That's down from the $1.8 billion in the prior period. There was a sale of one of the assets, which achieved an 11% IRR for investors over a 7-year term. The fund is actively looking at opportunities to grow. And I guess the Aussie market, not too dissimilar to the South African market, in a bit of a state of flux, where buyers and sellers are just not really meeting one another yet, where the buyers are looking for real bargains and the sellers not really agreeing to selling their assets at big discounts. On the Globalworth side, 29.5% stake that we have there, cost of ZAR 10 billion and market value of ZAR 3.9 billion. We did see that 26% decrease in the dividend. As I mentioned before, a big chunk of that downward adjustment, at least half of that, is due to just the additional shares that they've issued. And for the rest -- if you look at the actual underlying Globalworth results which were published on -- I think it was on Monday, a pretty decent set of results to my mind coming out of Globalworth, considering the backdrop. Also a big impact there is the increased interest rate and -- probably more so the increased levels of debt rather than the interest rates. On the balance sheet, EUR 696 million worth of cash on the balance sheet and EUR 265 million worth of facilities. Now that might seem like excessive liquidity and probably is excessive liquidity, but the key focus of the management team of Globalworth in the last 3 to 6 months has been liquidity management, garnering more liquidity. In fact, there was an announcement on Monday about a portfolio sale of the industrial -- the 100% industrial assets that were sold for about EUR 174 million. And this is all with a view to refinancing the 2 bonds that the company has. They've got a May -- sorry, a March '25 bond, EUR 450 million, and a June '26 for EUR 400 million that needs to be refinanced. And the company's involved with various initiatives to look to optimize the refinancing of those bonds, includes anything from buybacks to exchanges, to settlement, to a whole range of options. And in order to successfully execute on that, it's important for the company to have this -- what is seemed -- or deemed to be excessive liquidity. Properties were valued down by about just over 5% in euro terms and gearing is sitting at about 42%. And as I mentioned there that the big maturity being March '25 on the bonds. A relatively quiet period in the sort of acquisition and development space. Only 6,000 square meters of industrial asset added in Romania. And then in addition to that, there are under construction another 13,000 square meters of industrial assets in Romania. Poland has seen the ongoing redevelopment of the Renoma and Supersam assets. That should hopefully be done in the next couple of months. It's been on this acquisition development list for the last 2 sets of results. And then the entity also did sell the Warta Tower Office, a office tower in Warsaw for EUR 63 million. Portfolio has about 36 standing assets in Poland, 35 assets in Romania. A very active leasing period with 136,000 square meters let in the period. Again, interestingly enough, operationally pretty sound. I mean, vacancies were brought down from 14.7-odd percent to just over 12% -- sorry, 11.7% -- 14.5% to 11.7%. So on the ground things are pretty solid. But clearly, the broader financial markets are having a major impact on the overall result. And then, lastly, Capital & Regional. 68% interest we have in CapReg. They managed to increase their dividend to GBP 0.0295. And as I said, they put their results out on -- it was Friday last week. And again, a pretty robust set of results coming out of Capital & Regional. At adjusted profit -- they've got a particular number that they refer to, which is adjusted profit. And the adjusted profit number was about GBP 12.7-odd million, up from GBP 10 million, about a 23% increase in adjusted profit for CapReg. We have reinvested our dividends, as I mentioned before. And we believe that notwithstanding the challenging time that Capital & Regional is experiencing and the U.K. consumer is experiencing, we do feel that their strategy with community-based centers remains a robust strategy. And again, if you look at the operating numbers that CapReg put out in terms of number of leases renewed, additional space let, et cetera, it was pretty solid. LTV increased a little bit to 43.6%. Debt maturity is there 4.1 years. And the cost of debt 3.7% with 70% of it fixed for the next 3 years. Property valuations were pretty flat and -- but we did obviously see the acquisition of the Gyle Shopping Center for just over GBP 40 million. That would have increased the overall value of the property portfolio. NAV, GBP 203 million, down from $1.06 (sic) [ GBP 1.06 ] per share to GBP 0.90 -- sorry, pence per share. And the big mover there being, I guess, the equity raise that the company did. I forget the exact price. It was GBP 0.52 or GBP 0.54 that we did the capital raise at. And that would have been dilutive to the overall NTA per share numbers. On the portfolio, as I said, the operating metric is solid: 44 new leases; occupancy, 94-odd percent; 21 million shoppers. Not quite as many as we get here in the Waterfront, David, with your 25 million. Rental collection is 99%. And I think by all accounts, the acquisition of the Gyle Shopping Center has been a pretty good one. There's been some decent letting that's taken place since the acquisition, and there's actually even been a slight valuation uptick as well on that asset. And then some CapEx that we needed to spend. So I think that finishes the section on international. I'm going to ask Estienne then to do RSA, and I'll come back after.

Thanks, Norb. Right. Okay. If we look at the salient features for the South African portfolio, the macro remains very, very difficult. I mean, the economy is not growing. And in that context, to buck the economy given the scale of Growthpoint is challenging. But in looking at the numbers, there's quite a few positives to be taken out of the movements in the past 6 months. Once again, huge volumes of letting done in the market. That is -- the 644,000 square meters is across all 3 of the sectors. Vacancies have come down marginally to 9.2%, which is a marked improvement from the high. And I think the specific number that we've been focusing a lot of our attention on is the renewal growth rate, which is still negative but has improved significantly and hopefully will continue to improve going forward. Given the environment that we're in, the renewal success rate has improved quite a lot, and that's mainly driven by the retail dynamics, which we'll touch on just now. Expense ratio up a bit. And the reality is that, that ratio is being quite materially impacted by administered costs. And there have been -- in this period, we did have a specific charge in office, which I'll touch on just now, which skewed the number somewhat. Arrears are reasonably flat. Provisions have actually -- we've reversed some provisions out. And the debt book is looking actually in reasonably good nick. There was some sort of peril -- long-term -- let's say, long-term arrears that we've been working on, and we've had some success in getting some of those in. But that's an ongoing situation. The LTV, so just to touch on that. And Norbert will take you through the treasury component. But this number, the 34.9%, is effectively Growthpoint to the mothership, the South African balance sheet. And that strips out a lot of the complexity that we have with the accounting entries that you find when consolidating international investments and even the local funds from the fund management business. So still conservatively geared. The valuations ticked up marginally, pretty flat. We have continued to invest. We are in a process of turning the business in the South African context and moving the asset allocation and capital allocation more towards the industrial side. And a lot of that ZAR 1 billion went into industrial property. We've still got commitments of ZAR 1.6 billion. A lot of those commitments are here in and around Cape Town. And we're fixing a '91's building. We're building a new hotel. And we're busy refurbishing Bayside. So that's the bulk of that ZAR 1.6 billion. Then we've made asset sales of ZAR 776 million. I mean, it remains a big focus. We're effectively self-funding the South African business, and asset sales make a big component of that. Then we've spent ZAR 73 million on diesel and we've increased our solar range up to 32. So the target there is to get to -- close to 40 meg of rooftop solar. Now, we will touch on the power purchase agreement, but that power purchase agreement ultimately a bit of a return for us than actually investing in solar. And we can talk about that now. So I'm not going to run through every single component of every slide. I'm sure some of you have already looked at this. But I'll touch on some of the big themes. So in industrial, clearly the market has been reasonably strong. Our vacancies have ticked up marginally, but actually in real terms the like-for-like portfolio actually came down somewhat. So we are busy developing brand new quality industrial properties, and some of those are coming on to the sheet partially let. So we've had some very, very good success in the letting in this space. And nationally vacancies are actually low, so the market is quite conducive. There has been quite significant inflation in development cost of industrial facilities over the past 3 to 4 years, and that has opened up quite a gap between what I would say secondhand or existing industrial properties, and then the rentals that you would have to achieve given the yield environment we're in given the cost of building these boxes in terms of the new rentals. And over time that benefit will definitely flow through into this portfolio. If you've got a good quality product that is marketable, you should actually start seeing growth coming through. Then if we look at the renewal success rate, that is a key component, and I think that will continue to improve if you have this dynamic, because the existing tenant has the alternative of going to a new property or staying in the existing one where the rental is obviously slightly lower. And now there's quite a big gap and there's not that much stock available in the market. So our success rate has gone up. The renewal growth rate still is negative at this stage, but you can see there's been a marked reduction in that percentage. And I think -- my impression will be that over the next year or 2 that we will see an improvement in that. A new statistic that we have provided this time around is just sort of to give you a bit of a trend on the amount of transactions we are concluding in the 6 months in the sector, and then just the dynamic in terms of those renewal rates. So you can see more than half of the leases that we have renewed have actually been either flat or positive. And we're now still working just on that -- the other 1/3 that we have -- or other 40% that we have to get into the positive territory. But generally, the trend is looking reasonably positive for the sector. Like-for-like growth was 5.8%. And then on the valuation side, it was pretty flat. In terms of the portfolio mix, we are trying to sell the older, let's call it, less desirable assets or maybe assets that are in nodes that aren't strategic for us anymore. And we are trying to develop quality industrial property in nodes where we believe the demand and the growth will be for the future. So quite a lot of effort and money going into new developments, and many of these will be hitting the balance sheet in this financial year. On retail, I think there, generally, the trade has sort of improved things for us quite a bit. And it's ironic because if you think about the macro we are in, the higher interest rates must have a negative impact on the shopper. And what we are seeing is a little bit of catch-up from the COVID days. So I think the retailers had a couple of really good seasons, and even in December trade was very, very strong. So we have still got some vacancies in our shopping centers. If we strip out some office and some redevelopments, that core vacancy is around about the 3-odd percent. We are busy redeveloping quite a few properties which have significant vacancies in, so -- Bayside being the largest, which has got 18,000 square meters of vacancy, where we are busy redeveloping. We're going to be putting in Checkers and ShopRite. And pretty much that whole development will come on in November fully let. So I think the vacancy number hopefully by, let's call it, first half of next financial year should come down quite significantly for us. The renewal growth rate has also improved significantly from 9-odd percent to 3%. And I think the rate of success in keeping our tenants is also a function of the improvement in the trading environment for many of our tenants there. And as you can see from the volume of leases, huge volumes there, but most of them are now positive or at least flat, which is I think a marked improvement. Like-for-like growth was just under 3-odd percent and trading density growth was 4.2%. Now if we just take December, December was a strong month for retail in South Africa, and there the growth was 5.9% for that month specifically. Foot count continues to improve, but it's slower. And certainly, in the festive season, we saw those trading densities for the festive season up 26.7% higher than the average in November. And that includes the Black Friday period. Valuations were pretty flat. And I think it is important to mention that if you look from the period of the 1 of July 2016, we have written down our retail assets by 17.5-odd percent. So quite a significant write-down. And to the extent that the market does improve, I think there will be a bit of positivity coming out of that sort of total return aspect on the portfolio. And then we have been successful in selling 2 properties for ZAR 465 million. And there is still another ZAR 1 billion worth of assets that we're in negotiation with at the moment. And I've already sort of touched on the developments. On the office side, vacancies are coming down quite significantly, which is encouraging. Lots of activity, even in Sandton, believe it or not. I know that most of the analysts have written off Sandton to look something like San Francisco, but that's not the case. We're actually seeing traffic in the mornings into Sandton. It's quite joyful sitting in a bit of a blockade. I mean we've done over 30,000 square meters of letting in the 6 months and managed to reduce vacancies of over 20,000 in Sandton alone. And by year end, that will be more because some of the transactions that we have done only commence in this current 6 months that we're in now, the second half of the year. So things are definitely looking better and we will hopefully see vacancies continue to come down. Obviously, every property we have, we assess ongoing to see if there are other uses. And you have to sort of make a pick which ones you're going to back for the long term and which ones you're going to refurbish and where you think you will get growth in the specific portfolio going forward. And that's quite a hot debate internally, because some people would -- we've had suggestions from analysts to flatten the properties. We didn't think that was such a great idea. So we've decided some of them we'll convert. So we've got one that we converted. Not every property you can convert into residential. But it is an ongoing challenge if you've got oversupply in the market, but it does look like things are picking up a little bit in the sector for us. If we look at the like-for-like growth, so here if we strip out this rates charge that we're disputing, and I think we've been successful on that now. So that'll come back in -- that was about ZAR 35-odd million. I think that, that like-for-like growth number would have been significantly less if it wasn't for that one-off charge, which I think will disappear. So we will see that like-for-like number reduce quite significantly. And then on the valuation side, given the significant write-down of offices over the past few years, what we are seeing is now that the sort of fundamentals are improving somewhat. Valuers are actually writing up the portfolio marginally. Certainly, some of the properties literally are written down to land value, just about. So we do believe there will be a bit of upside in some of these assets. And the ZAR 200 million, so pretty much the bulk of the improvement in our valuations for the portfolio came out of the -- ironically, out of the office portfolio, which everybody had sort of written off, right? And then on the disposal side, we've sold 2 properties there. The significance of -- certainly one of the properties was totally vacant, so that helped the vacancy numbers a little. And certainly, ongoing discussions with many investors, it is the toughest sector to sell assets into, given that investors are clearly concerned or less confident at the moment, given all the rhetoric around office to invest into the specific sector. But we are making some good progress there. And then the idea is to obviously reduce our concentration to Gauteng somewhat. And in fact, the coastal -- the 2 coastal areas are actually performing very, very well. So our vacancies in Umhlanga Ridge, I think, is 1-odd percent. So the market is quite strong there. And then if we look at the Cape Town market, even here we're starting to see strong demand. And if you're looking for 3-odd thousand square meters of office space in Cape Town, you're in trouble, really. And we will see definitely some rental growth coming from that. And then on the new development side, we've mentioned the Hilton Canopy, just up here in Longkloof Studios and the refurbishment of the Cape Town 91 property. Our trading development team remain active. The one transaction that we thought was worth mentioning is that at Lucia Mall we did have additional bulk and we commenced a residential development there that we pre-sold. And that property we gave transfer in this period. So got ZAR 141 million in, made a ZAR 20-odd million profit on that development. So it was a very nice transaction for us. We're also busy with Riverwoods, which was the old AXA offices in Linksfield. And we're converting those offices into 254 residential units. The first 80 of those have actually been handed over to the buyers already, and that's been 80% pre-sold, that whole development. Then, we are -- this department, clearly the biggest client's Growthpoint. So building for our own balance sheet, but they're also increasingly working for our funds. They've got 2 developments that they've just completed, which was Horizon Heights right next to UJ, and Fountains View, which is just up the road from the University of South Africa, UNISA. And both these properties have been fully let out. And so letting has been phenomenal in terms of the new product that we have brought to the market. So that is pretty exciting. We are now currently busy with 2 new developments. One, both of them for Wits. One for the -- so 33 Princess of Wales is for Wits Medical School. So it's in the area close to the Sunnyside Hotel, which is well positioned, and we're very confident that we'll be able to let that to many of the students there because the facility is quite a bit closer than any of the competition. And then the podium is right next to the Apex, which was a development we did at Wits, 900 beds. It was fully let out, and we're confident that this property, which will be a similar size, will let out equally as strong. And then we're busy looking at extension to the Hillcrest Hospital for Busamed. Just on this renewable energy transaction, it's quite an innovative transaction. So it's the first time that there's been a deal done from multiple generation sources. So in other words, we effectively will be getting our energy from a hydro power station, from a wind turbine farm and from solar. And we can then wield that through the transmission network, through the various distribution networks, so not just limited to Cape Town. So you would have noticed we did a little wielding deal here in Cape Town from Constantia Village to the 36 Hans Strijdom property, and that was a sort of a test run to see if this whole process works. And that really unlocked, it was the final key to really being able to put this whole transaction together. So ultimately what it means is we can acquire from multiple sources, we can give our clients green power at the building that they are in, and at an attractive rate. And over time, we have also locked in on one of the deals a limited escalation on the cost of that electricity. So that is one of the benefits. The hydro power station and the wind turbine station will be completed in the middle of next year, and that will be effectively when we commence with this. But ultimately the idea would be that certainly it will help our letting for our office building, specifically where it's not really financially feasible to go and put solar on the roof because it doesn't really supply sufficient power for these properties. Moving on to the Waterfront. So I was actually going to spend hours on the Waterfront, because it's such an easy discussion. Given that you guys are all here, I'll try and keep it really brief. But certainly, some of the numbers are popping in a global context, to be honest. The net property income has increased by 17.2% for the period. It's driven by a 109% increase in the turnover rental, largely driven by tourism, so in our hotels, in the retail and in some of the attractions. Then our visitor numbers, I think Norbert touched on already. We had ZAR 3 million in the month of December, and it's 25% up on the prior December and ZAR 25 million for the year. International visitation, so the traffic through Cape Town Airport has increased significantly even compared to pre-COVID levels. Retail sales just in the month of December was ZAR 1.2 billion, which is 16% up on the prior period, and there are hardly any vacancies in the property. Alex, is there still anything left? I thought you gave that last piece away at record high. Still there? It's done? All right, so if you need space, you better come quick. Then obviously the load shedding continues. We are fully backed up here in the V&A, and we provide power for our clients at our cost given the premium service that we provide. Then on the funding side, we have introduced debt onto the balance sheet of the V&A. The V&A has got several development projects, and it is more efficient for us to fund off this balance sheet. So there's ZAR 1.3 billion of total debt and another ZAR 1 billion of undrawn facilities and ZAR 52 million of interest expense, of which ZAR 22 million was capitalized, was in this period, so at an average rate of 9.76%. On the retail side, retail sales for the period increased by 18-odd percent, and compared to the previous 6 months, it was up 45%. So 45% on 2019. So you can see, even compared to pre-COVID levels, it's really next level where the trade is at. And the nice thing about this increase was also that it wasn't just in the luxury goods. It was actually significantly broader than the luxury segment this time around. So trading densities increased by 21% on a rolling 12-month period. And certainly, the rentals are in excess of what most shopping centers in the country can achieve by a long shot if we go on the MSCI numbers. And then we also opened the new TimeOut market. I'm sure everybody would have been there, so that's old news for most of the Capetonians. And on the marine and industrial side, so all the shipping here and the marina, we've seen with -- certainly, I think impacted by what's happening in the Middle East. We've seen significantly more traffic coming through the cruise terminal, and the charter boat section has also performed particularly well with a 22% increase on the same period in the previous year. And then casual berthing is performing very, very well, and then the marina was literally fully occupied over November and December. On the office side, Investec have moved in. I think you can see their building just through the window here, and they're apparently very happy, lovely offices. And I think there's also been -- as the whole precinct is full. In fact, David had to move out of -- and the team had to move out of their own offices, and they were actually busy preparing new offices for themselves in the Cape Town Cruise Terminal, and a client walked in and said, "No, no, well, we like the space more, and they wrote David a nice lease, and it's all let now. So I'm not sure, Dave, where are you guys going to be operating from now? So yes, so it's a wonderful story from an office perspective, very, very strong demand in the V&A. And ultimately, what we certainly will see is that the rental levels, I think, will continue to grow given the demand, and the negative reversions were marginal at 2.1% for this period. Hotels, NPI up 45%. RevPAR was up 22% for the 6 month compared to the previous year. And then hotel occupancies grew by 5%, and the average daily rate was up by 36%. Cape Grace in this time was mostly closed because they were busy refurbing it to become Fairmont. And I think that's open now, and then City Lodge and One & Only have both been refurbished. So annual residential vacancies in the units that we let was also very marginal at 3-odd percent. And all these facilities are now fully backed up with power, and they've all had a brand refresh. And then the helistop, which is out on the point over there. If you want to go and see the whole of Cape Town, you've got 3 operators. They've got beautiful helicopters and a wonderful heliport to go to now, so it's a nice place to go to. And as a result, you've seen a magnificent increase in trading. They're up 122% and 138% for November and December. Moving on to the funds, and I'll just run through these quite briefly, just some of the main things that have changed. I think for -- on the healthcare fund, we acquired the Johannesburg Eye Hospital for ZAR 106-odd million. In one of the debt agreements with the IFC that we have, they had a right to convert to equity. They've chosen not to do so. So we're in the process of discussing a restructure of that debt package with them, or with other financial institutions. We'll still make a decision as to exactly which way we go. And we've also signed a renewal with Netcare to extend at N1 City Hospital here in Cape Town, as well as the medical chambers, and that's a 20-year lease. And as part of that lease, we've made a commitment to refurbish and have CapEx available for the hospital of up to ZAR 65 million. And then the dividend is slightly lower. There is currently arrears, you'll notice from the pack, of around about ZAR 75 million in the fund. We have concluded documents, or agreements rather, with one of the tenants that will reverse those arrears, hopefully before year end. And we're working with the other tenant and hopefully those arrears will also be predominantly wiped out before June. So those are all very positive things, and I think there will be a bit of a catch-up on the distribution to the extent that those are eliminated. Then on GSAH, clearly, this fund, there's huge demand from students for quality, purpose-built accommodation all across the country. And we have seen investors certainly interested in participating in this. So in the time we've raised money from Eskom Pension Fund and Vulindlela, and then we've acquired Brooklyn Studios for ZAR 450-odd million, and as I mentioned earlier, we developed 2 properties. So this fund will probably be close to 10,000 beds, 10,400 beds by the end of this year with the new developments that we are completing. And in this period, what we've also seen is that NSFAS have come out and they've increased the rate they prepare to pay per bed. A little complicated, but hopefully we'll get roughly about ZAR 50,000 a bed for the beds that we have let to students that are reliant on NSFAS. We have over the time reduced the reliance on NSFAS, so the amount of students that now rely on NSFAS is probably about 15% less than what we had in the prior year. The distribution there is roughly 12%. As Norbert mentioned earlier, that really is a combination of NSFAS and then the underwrite that we had from the original developer. And total debt on balance sheet is ZAR 1.27 billion. In Lango, only things that have changed here materially is that we've refied a large component of their debt, ZAR 120 million. 48 odd percent of their senior debt has been re-financed at improved terms. I think the operating environment remains very, very difficult in Africa and certainly the dynamic in the currencies is making -- having a negative impact on the distributions of the fund per se. The property quality remains good. And the -- clearly the dollar liquidity in Nigeria very topical given some of the other results that have snuck through before we could get out to town. And that liquidity, I think is actually improving in that -- but clearly, the exchange rate now becomes a challenge for most of the companies invested there. We are looking to re-domicile Lango to the U.K. and that will assist in re-commencing distribution payments for Lango. Okay. Norb, I don't know if you want to come talk about the capital management. Thank you.

I've been notified that there's some load shedding on the way. So nothing -- certainly in an effort to speed things up a little bit, we'll try and get this done before load shedding. We've got like 1 or 2 minutes left. Otherwise, I mean, you do have hard copies I guess of the presentation and we can still finish. But I'll try and do this as briefly as I can. Very, very active period on the funding side. So we've got Aasha, our Treasurer, here with us today again. So anybody over there, when you ask any tricky questions, Aasha is available. So we have ZAR 41.8 billion of total nominal debt. That includes the healthcare fund and the student accommodation fund. On the bond side, ZAR 910 million of unsecured bonds were issued in a public auction, 7-year and 5-year. So we are trying to turn out our debt a little bit by going for 7, 5 and 10-year type debt. You'll definitely see the impact in the weighted average duration of our facilities. Margins that we've been achieving have been very encouraging and probably better than we have in many years. We did ZAR 1 billion green bond that we placed privately with IFC. There was some tenure, ZAR 650 million 10-year and ZAR 350 million 7-year, again at some pretty decent margins. And off the back of the success of that issue, we issued a -- we had reverse inquiries from the banks and we [Audio Gap]. We had ZAR 980 million worth of interest rate swaps that we entered into, new swaps, at an average rate of 7.9%, keeping our hedge ratio above the 75% level. Another ZAR 2.4 billion of the swaps will mature between [Technical Difficulty] as they expire to see whether we re-hedge or not. On the cross currency interest rate swaps, we had mainly Aussie dollars, big chunks of Aussie dollars that came up. AUD 132 million matured in September '23 and we re-fixed those at 4.2%. So you can see here the actual movement in interest rates quite material, having 1%, 1.5-odd percent Aussie interest rate swaps and refinancing them at 4%. So that's putting additional pressure, obviously. So you've got a bit of a double whammy happening. In Australia, Aussie itself, on their balance sheet, they're seeing more expense [Audio Gap] of debt and refinancing of their debt. And in terms of our investment, our equity investment into GOZ, we've got some debt in relation to that, and we're seeing upward pressure there as well. And that's coming through, obviously, in the numbers. At an overall level, 76% hedged. Our weighted average interest rate is 9.6%. It's up from the 9.1% at FY '23. And 7.1%. If you include the cross currency interest rate swaps and the effective interest rate of the Aussie dollars and the euros, we're at 7.1%. So the key debt metrics. The average term of our debt is 3.4 years. 51% of it is secured debt and 48% unsecured. Sorry, the other way around. 51% unsecured, 48% secured. And we have another ZAR 4 billion of debt coming up for maturing in the next 12 months. Our credit rating with Fitch and Moody's remaining stable. And then the liquidity, very good liquidity, which is over ZAR 6 billion of [Technical Difficulty]. So if I'm a bit rushed here at the end, please excuse us. I think the conclusion is really just [Audio Gap] ending June '24. We see the SA sector actually performing in line with budget and pretty stable. It's notwithstanding, I think, what's happening globally and also domestically, clearly elections in May. Who knows what might transpire. We hope everything goes down smoothly and we don't have massive disruptions and violence like we saw in KZN a year or 2 ago. GOZ has reaffirmed their distribution of guidance of $19.3. V&A. V&A obviously, continuing to grow in strong demand, but the base keeps rising, so it's impossible to keep growing the Waterfront at 10% and 20% and 30%. So we're seeing high single-digit growth for the Waterfront of the next through to June '24. Growthpoint investment partners. On the fee side, things are stable. On the dividend side, there's still a few challenges in relation to any final outcome with NSFAS on the one hand. No pressure on the dividend out of Globalworth, expecting lower dividend for the second half of our financial year. And then, yes, we continue obviously to evaluate our strategic options in relation to Globalworth and capital and regional. So notwithstanding, I guess, the upward trajectory on LTVs, we remain focused on these strategic initiatives which will preserve liquidity and balance sheet strength in the long term. And as I mentioned a little bit earlier, DIPS down 10% to 12% for the year. So I think that concludes the formal part of the presentation, ladies and gents. Thanks very much. I know that there are a couple of questions on the online platform, which between Estienne and myself, we're happy to cover them. And then please feel free yourselves as well. Let me deal with the ones online quickly. I don't think there are that many. There were 3 or 4 when I looked earlier. Pick n Pay.

The question is our view on Pick n Pay and what we think about them and what's happening? Okay. So clearly, the results came out. Everybody's totally freaked out. And I think maybe our view is the following. So just to give you some statistics that occupy about 109,000 square meters in our portfolio. It's roughly of our revenue for just retail. That's about 6.3%, roughly. Works out if you put it over the whole of Growthpoints' South African portfolio brings [Audio Gap] it down to about 2.3-odd percent -- 2.5-odd percent. So we'd be relatively less worried than those focused retail funds maybe. But the reality is we are discussing their occupancies with them [Technical Difficulty]. Once again, all those financial impacts. We don't have that many expiries. I think the first one comes up in 2 years' time. And in most of the scenarios, we've got alternatives. So we're reasonably confident that we'll be able to manage if the situation goes really, really badly. We think they trade reasonably well in several of our shopping centers. So we're reasonably confident about that. Then second question. Do you want to add?

Yes. Just a very -- I mean, so we're talking -- I think Estienne said maybe 2.5-odd percent of our gross income is the exposure in total. And that's without [Technical Difficulty]. But you've got to appreciate that there's some CapEx to be spent on that asset. And some of that CapEx will not be revenue-generating. It'll be a sort of -- let's call it non-revenue-generating CapEx. We estimate that once you've spent that CapEx and done some of the key re-letting that you need to do on that center, you can get a stabilized yield there of 10% or just over 10% in the U.K., which we think is pretty decent.

GOZ's valuations?

The question is whether GOZ's valuations have sort of run its course now in terms of the downward trajectory and whether we will continue to see more downward valuation at GOZ. Our view is that until the interest rate cycle actually turns -- now everybody's talking second half of this year when you start seeing up to 100 basis points perhaps cut in interest rates, that's obviously not going to affect our financial year to June '24. Everything will be coming into the '25 year. But it is our view that there would be probably some more write-down to come both in GOZ's and Globalworth on the basis that interest rates will only start reducing, let's call it, in second half of calendar '24. So we think there's probably still a bit more to come on the downward valuation for Globalworth and GOZ.

And then there's a question in respect of GSAH, the Student Accommodation Fund. What drove the increase in expenses or operating costs? So the addition of the Peak and Apex Studios as well as the addition of Brooklyn Studios obviously added between the 2 of them close to ZAR 33 odd million. If we then look at the additional load shedding that we've experienced through the period, that also added another just short of ZAR 3 million. CapEx spent on beds and mattresses was an additional ZAR 2 million. And if we look at the other movements, effectively the -- let me just check what was the last one here. No, the other is about ZAR 1.3 million. So that would be the main drivers. And then there was another question around I think pick and pay we've dealt with. Anybody got questions off the floor?

Over there, if you wouldn't mind, just please stand up and speak loudly. I don't think we've got a -- we've got a roving mic. We do have a roving mic. Okay. But maybe for the online guys, let's just start.

Testing. All good? Yes. Probably going to get pushed back on this one, but considering we're basically 3 months away from the start of the '25 year and it's quite a depleted base year that you'll then have. Could you see a situation where 2025 yields some sort of nominal growth in DIPS again, notwithstanding all the other unpredictable things that could happen?

[Technical Difficulty]. Or back into the debt capital markets. You're looking at, I don't know, euro. Anybody borrowing euros today for 5 years, you're probably looking at 7% -- 6%, 7% there or thereabouts. So there'll be that pressure. CapReg not so much. GOZ I mentioned earlier. GOZ's underlying cost of debt, their own weighted average cost of debt, is also rising. So I think there's still a bit of pressure around, but it's difficult to say whether it's ultimately translates into nominal growth or whether it's flattish or whether it's nominal down. But one would hope that we're sort of hitting the bottom of the cycle, yes.

Good afternoon, guys. Can you hear me? It's not working. Just a question on Globalworth. So there's a diminishing return profile, yes? So I just want to get a sense from you in terms of what do you think the end game is? I mean, do you think perhaps we could see a recapitalization? Would you be compelled to sort of participate in a recapitalization? Just in terms of how the story might play out with the refinancing, et cetera, or whether you would actively be willing to dispose of your...

So look, I mean, the -- whether there's additional equity [Technical Difficulty] very active in managing this refi cycle of theirs. As I mentioned, they sold the industrial portfolio. The industrial portfolio is about EUR 300 million. Some of it's 100% owned. The other piece is, let's say, joint venture, 50% owned, with a development partner. The 100% owned portion was sold, and we announced that deal, or the company announced that deal on Monday. ZAR 170 million. There's some debt against that. I think net cash back to the center is about ZAR 70-odd million. So in addition to that, the company has been -- all of the debt, historic debt, being in the bond market has been unsecured. So the company's gone and taken on normal bank loans, secured debt by offering the assets as security, putting in place facilities, and actually drawing down on those facilities and putting the cash on balance sheet. So you can see the cash sitting there, ZAR 360-odd million worth, or euros' worth. And all things considered, we believe that [Technical Difficulty] as an investment destination in terms of risk profile, returns, et cetera. And if you look at the operating metrics, it's not bad even though it's all office. It's pretty much all office. I mean, the actual -- we got 8.5% sort of growth there in rentals through the indexation through this particular period, is what they announced. So at an NOI level, I think NOI for Globalworth was 5% up year-on-year. So it's a bit of a mixed bag. But the region is definitely still a region that [Technical Difficulty] it's more just -- let's call it the efficiency of the structure and the minority position that we have, et cetera, which is not optimal for us. Don't know if that answers your question. Other questions? No, Francois. You always come with difficult questions. Come on.

The mic was closer.

We can't hear you, just make sure that's on.

No. The mic was nice and close, so I thought I might as well ask a question. Just on the rates dispute that you mentioned in offices, so you've provisioned ZAR 35 million, if I'm not mistaken, and that could reverse.

You pay first, argue later, like SA.

Yes. So does that help explain why the office costs to rent ratio went up as much as it did? And...

I think it's -- is it 36? What was the number?

What was the number? 36.

36.

I think it's 36. And if you strip it out to go to your [Technical Difficulty].

And the level of [Technical Difficulty]. But maybe if you could just talk to the environment and where you see that going. Any interest in your empty spaces?

Yes, yes. Maybe, Paul, if you want to take that one, that would be good.

That's unfair.

Maybe I could just, before Paul answers, I mean, just some perspective there, Francois from my side. If you look at -- if you analyses the letting that we've done now in the last 6 months, there's a fair chunk of that is BPO call center type demand. I mean, the reality is, guys, there's not a hell of a lot of demand out there, right? I mean, very few corporates, banks, lawyers, accounting firms, our traditional tenants, nobody's really growing. There's still a trend of consolidation. There's still a trend of reduction of space and optimization, et cetera. But what we've seen is Cape Town and Durban have benefited massively from BPO in the last 3 to 5 years. So much so that the Durban, our Durban portfolio is something like, I think it's 60% or 70% of the tenants are BPO. And they've run out of space in Durban and Cape Town. And there's always been arguments why Joburg doesn't suit. We've taken active steps to meet with the various associations to try and understand why Joburg doesn't suit. It doesn't instinctively make sense. The rentals in Joburg can be half of what you are paying in Durban [Technical Difficulty]. Paul will have the exact number for us. And then maybe beyond that, Paul, if you want to answer what other activity you're seeing [Technical Difficulty].