Growthpoint Properties Limited (GRT) Earnings Call Transcript & Summary

Welcome here to the V&A Waterfront and to the results presentation for Growthpoint Properties for the 6 months ended 31 December 2024. Before I start and just single out one or 2 people, maybe special welcome to -- welcome to our guest teachers and peoples from schools, 3 different schools in Riversdale, care of Melt Hamman, one of our non-executive directors. Welcome Melt as well. Many shareholders and investors and colleagues, I think quite a few of the Waterfront Exco, David Green, CEO, is here and members of his executive team and then some of the members of Growthpoint's executive team here as well. So all very welcome. Thank you very much. We're going to try and get this done in an hour. We don't normally succeed very well, but that's the target, the KPI, and we'll get straight into it. I always like to start, I guess, with this slide, just to give a little bit of perspective as we move through the results. Just looking at the various parts of the business, trying to simplify the Growthpoint picture. The top of the slide, you've got the South Africa and Waterfront. Essentially, South Africa and Waterfront make up about 60% of the assets of the group and contribute just on about 65-odd percent of the distributable income for the business. The middle section deals with our offshore investments, Growthpoint Australia, Globalworth, Capital & Regional, which we sold during the period and now we've got a remaining stake in NewRiver REIT and then Lango. We've moved Lango out of the third-party fund management business into offshore investments. I'll elaborate a little bit on that as I move through the presentation. And collectively, those make up about 37%, 38-odd percent of the assets of the group and contribute just over 30-odd percent of the income towards DIPS. And then at the bottom of the slide is Growthpoint Investment Partners, the third-party fund management business, which today comprises essentially the health care business and the student accommodation business. They contribute about 2% of total assets and 3.6% towards our distributable income per share. Some highlights for the -- I can call them highlights again, Lauren. We used to have highlights and then we had a period where things were all negative and we changed it to salient features. Now we can bring highlights back in, but we did manage to show an increase in distributable income per share for the period of 3.9% to ZAR 0.74 per share. On a dividend per share basis, we've got a 3.7% increase to ZAR 0.61 a share. Group LTV came down quite nicely, 1.5% from 42.3% to 40.8%. The group consolidated assets did reduce by 11.2% to ZAR 155 billion, essentially through the effect of the sale of Capital & Regional and deconsolidation, obviously, of that entity as well as some quite meaningful write-downs that we're still experiencing in the main -- in the Australian entity. That had a consequential impact then also on the NAV per share, which was down 2.6%. I forgotten at the introduction that Lauren reminded me to just highlight the fact that we don't have the hard copy of the presentations here today. I do understand there are a couple of people that are disappointed by that. But in an effort, I guess, to, I guess, not only to save cost, but also in line with our sort of strategies to minimize waste and be more green. There are links obviously to the -- on the website, and the presentation is available on the website. Last point here is just our interest cover ratio for the period remained static at about 2.4x. Touching on the strategy and the various elements to the strategy, still very much focused on optimizing the South African portfolio as well as the international optimization. Starting off with the balance sheet and the focus on maintaining a strong balance sheet. You'll see that across the South African business, the group LTV was down, as was the Australian entity's LTV to 38.5% and then also the South African stand-alone LTV was marginally down from 35.4% to 35.3%. The company remains very, very liquid, and we've got great access to the debt capital markets in South Africa. We, in fact, I think, should we choose, which is not on the cards at the moment, but should we choose, I do believe the debt capital markets in Europe are available to us again as well. For a period of time, I'd say those markets were closed. But it's definitely not a strategy of ours at this time to be targeting those markets. But domestically, there's significant appetite for Growthpoint debt. You'll notice from this slide that we did reduce our total, let's call it, liquidity. We -- in the prior comparable period, we had ZAR 6.2 billion worth of available unutilized committed debt facilities. We've reduced that to ZAR 5.2 billion. Obviously, having those facilities in reserve comes at a cost. And we took a view that -- we probably felt that the ZAR 6.2 billion at that level was a little bit surplus. We also in engaging with a ratings agency we do have circa ZAR 9 billion worth of debt that needs to be refinanced in FY '26, not much more left for this financial year to FY to June '25, about ZAR 1.3 billion. But with a big chunk of ZAR 9 billion for next year, the ratings agencies weren't that comfortable with us reducing these committed facilities too drastically. We did have ZAR 800 million of cash on balance sheet. And the -- with our 82.5% payout ratio, which we've maintained, we retained ZAR 440 million of cash in the company. On the portfolio side, domestically, we sold 12 assets for about ZAR 589 million at a profit to book value. We did spend and invest during the period as well, though, about ZAR 945 million, principally into existing assets and improving existing assets on balance sheet and also new assets in the form of the new Hilton Canopy Hotel just up the road here in Longkloof Studios. And that ZAR 945 million is split almost equally between new investment and investment into existing assets and improving them, and what we call maintenance CapEx. So the maintenance CapEx is not necessarily always yield accretive, but is obviously important to keep the portfolio in good shape. And I think that number, it's in the annexures. I think there's like 65 or 67 annexures in the presentation, which gives a lot of the detail. You can see the detail there, about 945 -- sorry, ZAR 450-odd million spent on maintenance CapEx in the period. So this is an ongoing effort in terms of trying to improve the quality of the South African portfolio. This -- over the last 10 years, we have sold 173 buildings, over ZAR 13 billion worth of sales across the different sectors, over ZAR 5 billion in office, over ZAR 3 billion in retail, another ZAR 3-odd billion in industrial. And then on our trading and development side, in the trading and development business, we sold about ZAR 1.7 billion over the last 10-odd years. So this is an ongoing effort. I mentioned at balance sheet date, I'll go back one here, ZAR 589 million at half year. For the year FY '25, we believe we will be -- we will have sold in the order of ZAR 2.4 billion to ZAR 2.8 billion worth of assets as part of this ongoing process to reposition the portfolio domestically. On the international side, I mean, just starting off, I guess, the big item or moving part would have been the disposal of Capital & Regional. Cap & Reg, there's a slide on it later. But essentially, the view was that it was no longer a core investment for us, and we sold it to NewRiver REIT in exchange for 50% cash and 50% shares in NewRiver REIT. I'll elaborate on that a little bit later. So the different components here, though, effectively in aggregate, we received in what we call rand-equivalent foreign currency income, ZAR 769 million from the investments in the different offshore entities, and that's slightly down from the prior period. Again, we will get into the detail. So in the -- recognized in the income statement was a dividend from NewRiver REIT. We consolidated and included in FFO, the results for Capital & Regional up until the date of sale on the 10th of December. And the Globalworth dividends, Globalworth continues to pay a dividend, albeit -- and offering a scrip dividend. And the 3 largest shareholders, we control collectively, I guess, there's an entity called Zakiono with about 60%, ourselves with about 30%. The 3 largest shareholders have all committed to take shares instead of cash for the dividend in the interim, whilst some of the key debt metrics are still challenged. So when the company refinanced its bonds in April '24, ICR with ICR covenants or the actual ICR sitting at below 2 the bond documentation restricts the company from paying cash dividends for a period of time until we get the ICR back above 2. So I think that's more or less the story on the international side. Long and short of it, I think GOZ remains a very core investment for us. Capital & Regional, we did dispose. It's fair to say that NewRiver REIT and us holding 14% of NewRiver is not -- it's not sort of in line with our strategy to own minority shares in other listed entities. Generally, where we have these investments, we like to have control or significant influence. So the stake in NewRiver REIT is probably not something that we'll hold on forever, and we'll find an opportune time to exit that stake. And then Globalworth. Globalworth is still -- we continue to work very closely with management as well as the other 2 large shareholders to find an optimal way to unlock value from that investment. This slide really just tries to unpack the movement for the period compared to -- so this would compare the ZAR 2.5-odd billion worth of net income for the period compared to the prior comparable period, which was about ZAR 2.4 billion. So there's ZAR 103 million increase in distributable income comparing to the half year 2024. The biggest moving part here by far is the South African business, where gross property income, both on the gross income line as well as on the expense line, we did well. Collectively, there's about ZAR 166 million increase in net property income comparing the 2 periods. And that was mainly due to improved contribution from all 3 sectors. There's detail again in the slides. In fact, retail office and industrial all contributed positively during the period. And we also included -- part of the drivers was lower negative reversions, reduced vacancies, mainly in the industrial portfolio and then improved expense efficiencies and recoveries. A lot was -- in the last couple of years, we've spoken about diesel, diesel expenses with load shedding. Obviously, there isn't much load shedding anymore. So diesel expenses have come right off, but equally with the recoveries. We were always recovering the bulk of any diesel expense. So not only have we lost the expense, but we've also lost the recovery. So net-net, diesel isn't really a big moving part or feature of these numbers. Just looking then at the next line item, which talks to finance costs. So finance costs were still up for the period, ZAR 65 million. That's made up of about ZAR 46 million of higher interest expense due to effectively elevated and higher average debt levels during the period. And that's notwithstanding the fact or offset to a degree by the fact that we managed to bring down our average -- weighted average cost of debt from 9.6% to 9.2%. And then in that number as well is the fact that finance income was ZAR 19 million lower than the prior comparable period. Waterfront, a strong positive contributor, continues to perform particularly well, ZAR 17 million up. And we look forward, I guess, to continued positive contributions from the Waterfront going forward. Growthpoint Australia was down by ZAR 18 million, notwithstanding the fact that they paid a special dividend of ZAR 0.021. And you can see the bottom line contribution, ZAR 533 million compared to the prior comparable period of ZAR 551 million. Now this talks to Growthpoint Australia having actually declared or guided for lower dividend this year compared to prior year. Their distributable income impacted mainly by higher interest rates. And the special dividend was essentially paid by Growthpoint Australia to compensate for a very significant increase in the dividend withholding tax which is linked to the sale of the industrial portfolio, and I'll elaborate on that when I talk to GOZ. So on a net basis, we got ZAR 0.091 and a prior comparable basis, we got ZAR 0.0965. So negative for GOZ. Small increase for Capital & Regional and NewRiver compared to the prior comparable period, ZAR 6 million up. Globalworth dividend down ZAR 17 million. Again, if you look at the underlying actual dividend per share for Globalworth, that has come down principally off the back of higher interest rate. Once again, they refinanced a significant amount of their bonds in March, April '24, April '24, where interest rates went from 3% to 6.25% and that is still playing out. So we've seen the dividend steadily decrease. That number is now not quite fully baked in yet. I think that refi was done in April. So for the next 12-month period, their financial year-end is December. So for December '25, we foresee that there would still be negative pressure on the dividend from Globalworth. Lango, we're showing Lango there separately. In the prior period, in the prior reporting, we included Lango with GIP, but we received an ZAR 11 million dividend from the management company, which -- and in the prior period, there was ZAR 9.8 million worth of dividend income, but that's in the GIP line on this particular slide. So Growthpoint Investment Partners, up 8%. And then lastly, ZAR 15 million increase in the contribution from the trading and development business. A lot of numbers on these slides. I'm not going to delve into them. And I just want to highlight the, let's call it, the slight skew that is coming through the numbers by the change in the way in which we're reflecting the trading and development numbers. So at a high level here, you can see gross property income growing at 5.1% but you've got the trading and development number in there, which is skewing it. If you exclude the trading and development from gross income, gross income grew at about 2.5%. And the reason for this change is the accountants, the auditors have required us to, let's say, disaggregate. There's a note at the bottom of the slide here, the way in which we show trading and development. We used to just show net numbers. Now they're showing -- asking us to reflect the gross sales of any assets that were sold and the cost of those assets separately. So you'll see in the expense line, there's also ZAR 180 million expense there. Now that's influencing the property expense number, which looks -- doesn't look good at 11.6% up. But if you eliminate T&D from that line, expenses were up about 3.5% so I just thought I'd point that out. Net property income is up at just under ZAR 5 billion, ZAR 4.997 billion. That's 2.4% up on the prior period. And the other operating expenses up 3.2%, leaving us with net property income after other operating expenses up 2.3% at ZAR 4.4 billion. Net finance costs was up ZAR 61 million or 2.9%. The finance and other income, which includes the investment income from the Waterfront and the investment income from Globalworth and Lango, that was up to ZAR 671 million, 2.1%. And then at the bottom, we eliminate the noncontrolling interest and the effect of exchange losses and taxation, and we end up with what we refer to as distributable income of just over ZAR 2.5 billion compared to ZAR 2.414 billion in the prior period or 4.3% up. If we now reconcile, I guess, the distributable income number of ZAR 2.517 billion down to what we -- the SA REIT FFO number. We eliminate a whole number of items there. And we end up with an SA REIT FFO number, which is 2.9% down on a comparable period, ZAR 2.132 billion. And on a per share basis, that's ZAR 0.628 a share compared to ZAR 0.648. And the bottom line is our distributable income per share is ZAR 0.74 and dividend payout ratio of 82.5%, giving us a dividend per share of ZAR 0.61. Just a few little highlights on the balance sheet. Key moving parts between the financial year '24. So there would have been the June '24 number and our December '24 number. South African assets, pretty stable. We saw slight increases in valuation across all 3 of the sectors. Growthpoint Investment Partners, pretty much driven -- the increase there pretty much driven by assets being acquired by the student accommodation fund. The big moves are essentially GOZ, which is down from ZAR 54.7 billion to ZAR 49.5 billion. Combination there of the disposal of assets, I mean the disposal of the DXI stake as well as the 6 industrial assets into the partnership, let's say, the fund management business. And then obviously, there were still some significant write-downs in asset values in Australia. And then Capital & Regional, you can see there ZAR 9 billion of assets that we used to consolidate that we no longer consolidate. On the investment side, I think the only notable 2 items there is the investment in the Lango Manco, ZAR 341 million. I may as well elaborate on that here briefly. So what Lango did is it internalized its management during the period. So there was a management company, and it elected to cancel that agreement and internalize management at a cost of approximately $60 million. We were a 37.5% shareholder of the management company, and we benefited to the extent of our 37.5% piece is worth ZAR 341 million. So that's not a cash item. We were -- all shareholders in the Manco were paid in the form of convertible pref shares, and those shares would convert on IPO. So this has become, let's say -- effectively, it becomes an investment back into Lango. Those convertibles will convert into shares in Lango, the fund itself. So that's the ZAR 341 million there. And then the other item that wasn't there in the comparable period is this co-investment that Growthpoint Australia has in the Growthpoint Australia Logistics Partnership. Very simplistically, there's about $180 million worth -- well, $200-odd million worth of assets that were sold into a fund, a new core international investor, TPG, Texas Pacific Group, TPG Angelo Gordon came in for 80% of that fund and Growthpoint Australia remained with a 20% stake. And so we'll be earning fees from that joint venture going forward. And that co-investment is what's reflected there, the ZAR 315 million. The other notable one under the investments is that we now have a 14.2% investment in NewRiver. That's ZAR 1.168 billion that's on the balance sheet there. And then the debt number at the bottom, nominal borrowings decreased quite materially by over ZAR 7 billion. Again, effectively the deconsolidation of Capital & Regional being the biggest part of that. And then also Australia degeared. With the sale of those assets, Australia degeared and we can see the impact there, almost ZAR 3 billion equivalent lower gearing on the -- from GOZ. So touching then very briefly on the international investments. Growthpoint Australia did see a decline in the FFO per share, and they did guide for this negative decrease or the 5.7-odd percent decrease in their dividend. That has played out. And it's likely that the -- for the next 6 months, I think the total guidance from the company still talks to a ZAR 0.091, I think, effective dividend for the second half. Total distribution received ZAR 533 million versus ZAR 551 million in the prior period. The payout ratio, if you include the ZAR 0.021 special dividend, the payout ratio was effectively 95.2%. If that were to be excluded, their payout ratio is 77.3%. Still it has a very strong balance sheet pro forma at this particular transaction with the sale of the 6 assets, 3 of the assets transferred on balance sheet date, the other 3 transferred just shortly after. So GOZ in disclosing its information showed pro forma balance sheet with 38.8% gearing, and that's down from over 40.7% in the prior comparable period. It remains extremely liquid. I mean it had over $605 million worth of undrawn debt facilities. It's probably a bit elevated because of the cash that was received from the sale of the DXI stake as well as the sale of the industrial assets. We saw a 7% decline in NAV per share off the back of the decrease in valuations. And 92% of GOZ's debt is fixed for a period of 25 years at 2.8%, excluding margin. And the weighted average debt maturity is 2.8 years and the average cost of debt, including margin and amortization is -- amortization of cost is 4.8%. The portfolio is we've got $4.1 billion of assets, pretty much split between office and industrial, 75-odd percent, I think, office, 25-odd percent industrial. It continues to be very well let. Occupancies are between 94% and 96%, whether you -- depending whether you're looking at it from a rental value perspective or a GLA perspective. Weighted average cap rate 6%. The weighted average lease expiry is 6 years. Market is pretty active, 113,000 square meters of leasing was executed during the period. And then the details of those asset sales down below. On the fund management side, GOZ, the assets under management reduced from $1.6 billion to $1.3 billion. It did manage to boost the assets with the creation of the Australian Logistics Fund as well as the establishment of a new office trust, the Growthpoint Canberra Office Trust, effectively a syndication, $90 million syndication of an office asset in Canberra. So those 2 combined added about $288 million to the assets under management. The biggest loss was a $490 million Sydney MidCity Center asset where the management contract expired in November 2024. Management fee income for the period was ZAR 5.9 million compared to ZAR 4.1 million in the prior period. Capital & Regional, the disposal. Effective 10 December '24, we received 62.5p per share for the shares that we owned. And effectively, that was paid out as ZAR 0.3125 in cash and ZAR 0.3125 in NewRiver shares. We picked up effectively 14.2% shareholding in NewRiver. And that is reflected as an investment on balance sheet at our half year. The cash proceeds of about ZAR 1.25-odd billion was utilized to settle debt. And as I mentioned earlier, we did reflect, we did receive a dividend from NewRiver of ZAR 0.03, which translated after tax to about ZAR 38.8 million. And for the period, we had the ZAR 57 million of FFO from Cap & Reg up to the date of disposal. Globalworth continues to -- I guess, the dividend continues to be under pressure pretty much as a consequence or as a result of the higher interest rates. The -- there's also, on a per share basis, another dynamic to be aware of is that with the scrip dividends that Globalworth has been offering, they've been offering it at a very deep discount to the actual share price. So the share price is trading at about a 50% discount to NAV. And then the actual price for the reinvestment on the dividend has been at a 20% discount to the share price. So the issuing of shares at such a discount has resulted in more shares being issued and effectively resulted in a dilution of the actual dividend per share dynamic as well as earnings per share numbers. Like-for-like, you might ask why that deep discount. Essentially, it's driven to -- or it's designed to, I guess, ensure that all shareholders end up -- it's a bit like a discounted rights off where we're trying to entice all shareholders to take the shares as opposed to having some cash leakage. I think the company has come through the refinance of all of its debt. It's actually quite liquid. You'll see here the balance sheet now, EUR 333 million worth of cash with another EUR 115 million of undrawn debt. So perhaps that practice of offering the -- such a big discount could be reviewed. But it's still fair to say, though, that the 3 large shareholders are going to continue to take scrip for the short to medium term. We did see some negative property revaluations in the 6 months, about EUR 50-odd million. Gearing has come down quite nicely to 38.1%. There was a period about a year, 1.5 years, 2 years ago where we were a bit worried and concerned about gearing. But I think both valuations, you saw the valuation write-down there, not too dramatic. But that together with the sale of some assets and repayment of some debt has put the company in a pretty good space from a liquidity perspective. On the disposal and development side, not much actually to report on during the period. There was a disposal of the joint venture industrial portfolio. The company had 50% -- owned a 50% stake in that portfolio, very small moving parts on the disposals and developments. In total, there was a 5.4% portfolio decrease to ZAR 2.6 billion of assets. That's a combination of the disposal of the industrial assets and the asset value write-downs. The company has 36 assets in Poland and 20 in Romania. And total revenue for the period was EUR 113 million. Vacancies have come down, currently sitting at about 13-odd percent, very, let's say, different dynamics between what's happening in Bucharest in the capital of Romania, where vacancies are 5% or below, Warsaw capital of Poland, where vacancies are equally in the probably 5% to 7% range. But then the smaller regional cities in Poland is where we have vacancies in some of those up to 30%. So those smaller cities are still under pressure. And -- but certainly, the 2 major capitals of those 2 countries are performing pretty well. Lango. I touched on this briefly. We own 15.8% of Lango. Lango in the period acquired $200 million worth of assets from Hyprop and Attacq. The Manco internalization was done effectively 31 December '24. And at the same time, the company also redomiciled from Mauritius to the U.K. It's now a U.K. domiciled company. And that internalization, as I explained earlier, has given rise to ZAR 331 million investment in the -- which will ultimately become additional shares in Lango. And then from our reporting perspective, we've tried to -- we've now -- because we don't have a management company anymore, we don't own a share of the management company anymore, we don't show Lango as part of our funds management business or GIP anymore, but we're now showing it effectively as an investment -- international investment. I'll hand over now to Estienne to deal with the South African portfolio, and I'll come back to close later. Thank you.

Good afternoon, everybody. So yes, the South African business, what you see on this page is some salient features. I'm not quite sure we had highlights yet. I think the -- what it reflects is some really hard work in a really tough market. And if you go and look at some of the stats, we've done, once again, over 0.5 million square meters of letting. The like-for-like growth for the first time in some years is now positive at 6.8%. Vacancies have reduced compared to the comparable period from 9.2% to 8.3%. And the one number that's been quite sticky has been the negative renewal growth rate now. Here, it still remains negative, but it's very close to flat now. The market remains competitive. And as such, certainly in certain parts of the different sectors, we're still experiencing negative reversions there. We have done a lot of work in the cost base. And as such, we've been able to bring the cost-to-income ratio down to 35.4%. And generally, the portfolio is really in good shape from a client arrears perspective. Finance cost on the South African balance sheet has gone up. That is obviously a function of the significant increases in the interest rates we had seen over the past 2 years. And hopefully, as that reverses, what was a threat becomes the upside and the secret weapon of Growthpoint in that if interest rates come down, the margin just drops straight to the bottom line. Loan-to-value ratio is still very, very conservative. We have seen a marginal increase in our property values now, which is sort of hopefully indicating a bit of a turn. And we continue to actively develop in our portfolio as well as maintain our properties and ensure that the product is fit for purpose and fit for the market. On the asset sales side, I think Norbert pretty much covered it, but the intention is and hopefully, we'll get to around about ZAR 2.8 billion worth of disposals before -- by the end of the year. Just running through the 3 sectors. So our logistics and industrial sector, we've trimmed that down to about 150 properties now, just under 1.9 million square meters of space. We have managed to bring vacancies down quite a bit with some strategic letting and sales. We've had one sticky vacancy at Lascelles, which is literally on the way to the airport in Johannesburg. We've actually sold that property, but the tenant actually -- or the acquirer of the property has actually taken occupation of that property. And as such, that vacancy has come off the book. And then at Growthpoint Business Park, which is also a property we're busy disposing of, we've also got a bit of a vacancy there that will come off the book shortly. In fact, that property is already transferred. So we continue to develop quality logistics facilities. I know that some of you have been on recent property tours with us. So you would have seen some of the properties we've developed in Cape Town and in Samrand in Johannesburg, and those properties have really let strongly. So the product that we're bringing to the market is certainly appealing to the market, and we've been able to let those properties reasonably quickly and actually marginally above our initial feasibilities. So the market remains strong there. And then if you exclude the vacancy on some of these new developments, that vacancy would be around about 3%. Renewals. Still a pretty competitive market out there, albeit that sort of national vacancies are also very low. But the reality is that given the dynamic, we have seen that the negative reversions now on renewals has turned to positive. And in fact, pretty much most of our leases that we've signed now are either flat or positive reversions when we renew them. So those are all positive factors. We've also seen a positive like-for-like growth on the total portfolio. and valuations went up by 1.5%. On the disposal side, we've been very active in selling noncore nonstrategic assets. They're typically smaller industrial properties. There's very, very strong demand for these assets often from the actual tenants that occupy them, and they don't really meet our strategic objectives anymore. We're trying to move into slightly newer, slightly better logistics facilities. And as such, if you look at the portfolio today, more than half -- pretty much half the portfolio today is quality logistics. Moving to retail. So on the retail side, we've also trimmed the portfolio down to 34 properties. I mean, I think prior year, I think we sold about 27 properties already in the retail space. So there's good demand for the smaller retail facilities that we deem to be nonstrategic now. Vacancies have ticked up a little bit in some of the properties. But if you strip out, let's say, offices and some of the assets under construction or redevelopment, it's a vacancy of about 4.4%. On the leasing dynamic side, what we have also seen is that the renewals have been pretty flat. And more or less 56% of the leases are now positive and the negative renewals are only on about 14-odd percent of the portfolio. So it speaks of the market improving in the retail portfolio in terms of the trade. So when looking at that trade, you can see that the -- our annual trading densities have grown by 3.8%, so that's marginally better than the national average at about 3.4%. And generally, we've seen good growth in foot traffic in our retail portfolio. There are 1 or 2 centers that we have a couple of challenges with. We've got a couple of big box tenants that moved out of Brooklyn Mall and Alberton and those -- both those shopping centers are under review at the moment, potentially for either redevelopment or for disposal. And then at Bayside, we had the opening of a property that we have redeveloped. And actually, the performance has been quite spectacular. In the month, we saw trading densities increase significantly. Turnover in the shopping center lifted by 50% and in fact, is now higher than pre the redevelopment. So on a stabilized sort of like-for-like basis. So definitely, these redevelopments are proving. And that is sort of the natural life cycle of a shopping center that at some point, you have to reinvest and bring the asset back to -- I think my wife talks about the shopping center looks tired and old. So that you have to give it a bit of a relook, and that's exactly what we have been doing on many of our shopping centers. We have also managed to dispose some of the smaller shopping centers. There, we've sold ZAR 304 million worth, and we've got another ZAR 647 million in various stages of disposal. At Watercrest, we've expanded or we're putting in Shoprite into area and relocating Checkers. And we're spending -- we've spent ZAR 117 million on solar installations at 7 centers. And at Beacon Bay, we're busy with ZAR 113 million extension for Builders Express of 2,500 squares as well as giving the old lady a bit of Botox and upgrade. And I think, hopefully, that will certainly meet with the market's approval. Looking at office, I think this is probably the more remarkable recovery of the 3 sectors. This portfolio has really been -- it's been a difficult 5 years for office. And we have sold off some office. Clearly, the market for disposals in office is much more difficult. There's much less investors interested in acquiring offices. And in fact, what we have also strategically been doing is not really selling assets to competitors, but rather to owner occupiers or to developers that would change the use. Ultimately, here, we have -- you can see the market remains very, very tricky and difficult. We have lost some tenants since year-end. Obviously, from the comparable period, vacancies have come down from 17.8% to the 15.9%. And I think that is one of the reasons why we've seen good like-for-like growth in this portfolio from the work that was done in the prior year. And then a lot of work has gone into the expenses in this portfolio specifically. So what we are still seeing is that negative reversions make up roughly about 60% of the renewals. So it is reflective of a pretty tough market. Interestingly enough, if you come to Cape Town and specifically in the Durban market Umhlanga Ridge more specifically, we've -- these portfolios are now what I would say normalized. In fact, Durban is full, and we're starting to see pretty decent rental growth there because there's a shortage of space in Umhlanga Ridge area. And in Cape Town, there is a bit of still a little bit of vacancy, but generally the market is what I would deem to be normalized and hopefully, things will start turning and we'll start seeing negative reversions reduce quite significantly. So like-for-like growth has actually been up at 9.4% with the dynamics that I've just explained. On the disposal side, we have sold 2 properties and we've got 6 other properties for just over ZAR 0.5 billion that we're looking to dispose of and hopefully will in the next -- in this half of the year. And then on the development side, we've just upped the drag here. We built a new 154-bed Hilton Canopy Hotel, which opened in January. And then we've also got a zero carbon new office for -- or refurbished new office for Ninety One, and they should be moving in the latter part of the year. So very, very exciting. On the trading and development side. So the predominant focus of this team is the Growthpoint balance sheet. So those skill sets work on our properties, improving them, making sure that they're fit for market, but they also have a mandate to do a bit of trading and development. And often what we do is use the team to realize difficult assets. So there are 2 examples. I think some of you that went on the Joburg property tour would have gone to Riverwood's, which was the first conversion that we actually did of our office park. It was a woodland sort of office park that was perfect for residential conversion. So we've converted that and sold off the units. We've already transferred 52% of those units. And then we're also busy in Pinetown selling off an older industrial property in sections -- in sectional title spaces. So we've made some good money. This team contributed roughly about 25 net for the year. On the Waterfront, here we are. We can show you some quite spectacular numbers. Certainly, I think David and the team, well done. These statistics are certainly to be celebrated, not just locally but internationally, to be honest. If you're seeing net property income growing at 15.5% and we've seen the hospitality section, what we have done is we're increasingly taking on operating exposure. So the Radisson Red over there, we actually own the hotel. We have the Radisson group that manages the hotel for a fee. And if the hotel does better, we make more money. And in recent times, we've also taken the Portswood and Commodore hotel on and done a same arrangement. So that operating income now makes up 17% of the total income of the V&A. On a like-for-like basis, net property income increased by 16.6%, and that was driven by a 14% increase in turnover rental from generally most of the hotels and across the retail precinct. The Waterfront is full. And as such, we're seeing strong rental dynamics in this market, and it still remains probably the most visited property on the continent. Internationally, we have seen also tourism pick up quite a bit and just under 10% growth in tourism numbers. So the big constraint is actually airplanes coming into Cape Town. We have introduced funding into the V&A, funding a lot of the development that you see around us here. And today, there's ZAR 2.5 billion worth of debt on balance sheet. We've also got undrawn facilities of ZAR 1.5 billion, which will fund -- continue to fund some of the future development. So the shareholders are not really required to put in any additional equity into this investment at this point. The average interest rate is around 9.4%. And certainly, we've had the opportunity to also issue some green bonds into this entity. On the retail side, in December, we turned over ZAR 1.4 billion in trade, which I think is a record, if I can check with the team there, so getting nods. So certainly a very, very strong December for the V&A. Trading densities are significantly higher than the market. The retail rental growth on renewals is growing at 6.4% given the strong trade. And certainly, in this period, some of the developments that we have completed have also opened. So if you go to the Union Castle Building, which is just outside here, it's totally redeveloped. There's a new Nike store and Wedgewood's, one of the most beautiful sweet stores you'll ever see, kids go and visit it for sure. They also sell some sharp ice cream. And then there's a [ Tuile ] and then we've got H&M's head office in the middle and a beautiful new Marble restaurant on the top story. So that's been a spectacular opening. Then on the office side, certainly, these statistics are to drill over if you come from the world we live in up in Gauteng, where we're seeing strong positive renewals and very, very, very high rental levels. I think we've just recently signed a new transaction at over ZAR 360 a square meter. So very strong rental dynamics for office. On the Marine side, so where the big ships pop in, we've had over 83 vessels that have come in, in the season. And what we've also done is given the COVID period where we weren't -- couldn't operate, we have negotiated with the ports to extend that lease by additional 2 years, giving us the lease to 2037. Then on the yachting side, that also remains strong. And on the charter boat side, we've made more than ZAR 21 million worth of income from turnovers. As mentioned earlier, hotels are pumping. Income is up by 37%. The hotels had an exceptional year, albeit that the occupancies were marginally down, the actual daily rates were up by 29% and commonly referred to as RevPAR, the average rate per room was up by 21%. So evident of a very, very strong market. The Table Bay has been closed in February. So we're spending, I think, just over ZAR 1 billion in refurbishing the Table Bay and that hotel will open in December and come back to trading. So that will have a bit of a negative impact on the V&A's numbers for this period through to December this year. The hotels have -- the residential has also shown very, very strong resilience, and we've had very high occupancies with very strong escalations at 10%. Just looking at GIP very briefly. So the -- we've got the 2 funds. What they consist of today is the health care fund has 9 properties worth ZAR 4.2 billion. We own 39% of this fund still. So our investment is ZAR 754 million. And the dividend that we are receiving from that fund is under a little bit of pressure given some of the negative reversions we've experienced with some of the leases we've renewed there. LTV is very, very conservative. So this fund really does have capacity to acquire new assets, which hopefully will be accretive. On the student accommodation side, it was quite active period in that they've brought on 2 new assets that were developed by the Growthpoint development team. Fountains View was transferred and Crescent Studios as well as Arteria in Parktown were 2 new assets that were added to this fund. So the fund actually trades in the market under the Thrive Student Living brand, and it has proven to really be very successful in the student market. So when you guys go and study one day, you can maybe go and stay in one of those rises. They're very, very nice. On the capital management side, we have maintained the debt levels in South Africa at about ZAR 40 million (sic) [ ZAR 40 million. ] It's actually been quite a, I want to say, nearly bizarre period in that the demand for Growthpoint paper. Growthpoint is one of the largest corporate issuers into the debt market of bonds. And the pricing we have seen has been really attractive. And in fact, even for term. So we've done 10-year deals at 1.83%, which is probably the lowest margin that we've ever seen in our careers on that level of term debt. And generally, we have a very strong position from an unutilized debt facility point of view. Obviously, that comes with a bit of a price tag, but it means that we have capacity if there's a nice opportunity that meets our investment criteria, and we sit on ZAR 826 million of cash. The weighted average debt rate has come off to 9.2%. So I think the one thing that's come through the numbers, albeit that the interest costs have gone up with higher interest rates, I think the impact has been marginally less than what we originally would have expected it to have been, and we remain very conservatively financed on the South African balance sheet. We have given quite granular detail here on some of the hedging for your benefit. I'm not going to go through the whole lot, but we remain quite highly hedged at -- just under 75%. And we are seeing that our interest rate swaps, we're successfully rolling those and our average cost there is at roughly about 7.3%. Our euro debt also matured and that matured at a rate of 0.6% and was re-hedged at 2.1%, which was also, to be honest, a little bit better rate than what we expected. We've given some detailed hedging on the cross-currency swaps also for some of the hedging that we've been doing in the future. This is where we were quite concerned when we gave original guidance that this part of the income statement would be pretty punitive in this year. But here, we have also seen that some of the deals that we've been able to do were actually quite a little bit better than what we'd hoped. And in the Australian rates, you can see there that we've got rates floating from 4.8% to 4.1%. And in fact, the most recent deal we've done at 1.4%, which we used in the money swap to hedge there. So I think maybe I'm going to curtail my discussion on this issue and pass to Norbert to cover the conclusion.

Thank you, Estienne. Se we're doing all right for time. So just to conclude then, I think certainly, post the elections in whenever it was April, May this year, there was a pretty, I think, good feeling. Everybody had a very positive feeling about the outlook for South Africa. Interest rates and the interest rate decreasing environment has obviously also helps towards sentiment. And certainly, some of that, I think, is playing out. There's a little -- I'm personally a little bit concerned that some of that positivity is sort of slowing down a little bit or waning a little bit. We're seeing that the Government of National Unity isn't necessarily the answer to our economic growth. A couple of months ago, economic growth prospects of 3% were being spoken about. Now we're back down into the below 2s and even in the mid-1s. So I think the recovery, to me, still feels quite sort of tepid, but it's definitely better, and we're seeing that coming through in the performance of the 3 sectors in our portfolio. The disposal program continues. As we mentioned that there's about ZAR 2.8 billion odd that we will be disposing of by the end of the financial year '25. V&A continues to sort of project for growth. We are funding the bulk of the capital program, and it's quite an extensive capital program with debt at the moment. And all those really spectacular numbers, I have to say they were -- they are spectacular. The growth in net property income and turnover rentals and things that the Waterfront received at a net bottom line distribution basis, if you look at that distributable, the contribution was up 4.5%. Interest is having an impact on the very bottom line of the distributions receiving from the Waterfront. For the next 12 months, there is this -- there will be an impact from the Table Bay Hotel, which closed and also the luxury -- the lux mall wing, which is being redeveloped. So that will have a negative impact on the net income for the Waterfront. But notwithstanding all of those challenges, we still foresee mid-single-digit growth from the Waterfront for our financial year '25. GOZ has already given its guidance. I'm not going to sort of update on GOZ necessarily, but for the second half, they would -- they have forecast a ZAR 0.091 dividend. Globalworth, mentioned before, continues to -- the dividend continues to be under pressure from the impact of the higher interest rates. Operationally, Globalworth is doing fine. And -- but we've -- as a minority shareholder there, in the long term, it's not an ideal position for us to be in, and we continue to look for optimal way, together with the controlling shareholders at the moment, to unlock value from that investment. NewRiver, we own 14.2%. It's not necessarily a core long-term hold for us. In time, we would seek to find the best possible opportunity. We currently are restrained from selling that stake as part of the transaction was a lock-in. And so for a period of time, we are unable to sell with -- certainly without the permission of the company. But in the fullness of time, we'd look to exit that stake. So yes, continue to look to maximize value from those international investments. Asset managers, Growthpoint Investment Partners, continues to grow. We're trying to still aggressively grow the student accommodation fund. There's a lot of momentum there. But the fund needs equity. The funds sort of run out of capacity in a way with LTVs pushing the 40-odd percent level. It's got a very strong pipeline of opportunities. But in order for it to deliver on some of those and pursue some of those, it's needing more equity. The team are very actively in the market with institutional investors looking to raise additional equity capital for that fund. The health care funds growth, we're currently developing a new small day hospital in the Rosebank area, but the rate of growth has probably been a little bit disappointing. We are looking at ways and means to increase, I guess, the rate of growth of that fund. And then I think all things said and in conclusion, I think the forecast for the financial year FY '25, whereas we had previously guided for minus 2% to minus 5%, we are guiding for a 1% to 3% growth for FY '25. That's a bit lower than the 3.9% that we've done for the half year. In the second half, we do see the impact coming through of some of the disposals essentially and that when we had originally guided, we had anticipated certain assets selling by a certain time. They've sold later. So we've kept on -- held on to those assets a bit longer. And -- but they are coming through. And certainly, the disposals will have an impact for the full year. So I think that concludes the formal part of the presentation. Ladies and gents, thanks very much. Spot on the hour pretty much. I understand there are a couple of questions online. We welcome -- you're also welcome to ask questions. Maybe we'll deal with the questions online first, and then we'll come to the floor.

Okay. So the first question is a question on the payout ratio and some greedy investor wants maybe more dividend on strategy.

Francois, is that you? You're on the floor. Did you send a message on the online while sitting in the audience? So the question, just to repeat, is the payout ratio, 82.5%, we adopted. Post-COVID, I think we moved to 80%. We then started feeling a little bit better about life. We moved to 82.5%. We currently have maintained that, and we continue as a Board. We have not had any active deliberations about increasing that. The thinking behind a reduced payout ratio really just talks to the required capital or our capital needs, especially as it relates to the what we call our maintenance CapEx. So we're running at a rate of ZAR 700-odd million a year. The rule of thumb over the last 15 years has been approximately 1% of assets of your property portfolio is spent on what we call maintenance CapEx. And so with a ZAR 70-odd billion portfolio, 1%, ZAR 700-odd million a year is the capital needed to maintain the portfolio. And in the absence of other sources of capital, if you're not issuing equity or taking more debt, we were particularly concerned about debt levels. Those have abated, I think, and we do feel that generally, the market, we've topped out in terms of interest rates. We've bottomed out in terms of valuations. But combined with maintenance CapEx and development CapEx, we still have a program of CapEx of anywhere between ZAR 1 billion and ZAR 2 billion, maybe even ZAR 2.5 billion a year. Now we're funding a big chunk of that with disposals, but our view is still as a Board that we want to retain some earnings to self-fund especially the maintenance CapEx element, which is not a -- when you're thinking of investment capital, you got to go out and find money to fund the investment, whether that's new debt, new equity or from churning the portfolio, selling assets. But this is maintenance CapEx, and we feel that we want to fund that internally. So that's the view at the moment on that.

Right. Next question, great results. With the last 2 sets of results showing stronger operational metrics has Growthpoint SA made any notable changes to the leasing teams or operational activities? Okay. So I'll give that a bit of a crack. So I think there's been -- there are multiple initiatives to get improved results. It's not just one specific thing. I mean, we've put in a lot of work into our client experience and that has certainly started proving to the letting. We've become a little bit more flexible in terms of the types of leases we do. We've -- through our disposals and maintenance programs and redevelopments, we've got better product effectively for the client. And ultimately, that's a more lettable product. And then most of our teams are incentivized. So certainly, if you look at industrial and office, that's quite relevant where they're incentivized to do letting. So a whole bunch of things, I think, play into that improved operational performance. Then there's a question on exactly which month was the AUD 214 million of CCIRS is renewed. So it was in end of July and end of September. And that is -- there's still one more question here that's just popped up. Okay. In fact, it was the answer. So July '24, we did AUD 89 million. And in September, we did AUD 124 million. Thanks, [ Nicoline ]. And I think that's all the questions. Any other questions?

Any other questions on floor? Anybody in the audience here, they want to ask a question? Francois? Is there a roving mic? We've got one coming, just so that the people online can also hear the question?

Can you hear me?

Sure.

Just on the -- so I also picked up that the numbers didn't quite match the narrative in terms of distributable income out of the Waterfront and the balance sheet also fairly flat there. But if you can -- so a lot of that is because of expensive funding costs. What is the internal rate of return or -- sorry, initial yield rather of your money being spent and the delay to actually that coming through the income statement? And you effectively cash account for things there, right, because you only take the dividends into account when it comes through. So if you can give us a sense of timing, sense of how dilutive the transaction is on completion as well?

Yes. So I mean, if you look at that average cost of debt there 9.6-ish or whatever it is. I mean, in fact, the Waterfront borrows very cheaply. I think the average margin that we -- let's not think margin. The Waterfront, I think more in terms of a prime. So it's a prime minus 1.65%, it's roughly the kind of borrowing cost that the Waterfront incurs. So prime has come down, but that 9.6% number is sort of the average cost of debt for the Waterfront at the moment. There will be very little that is approved at investment committee level or the property committee level with a yield of much lower than that. There might be the odd 8.5% or something like that. But to your point, I think, Francois, is that if you're building an office like the one we built for Investec, you can effectively achieve your yield day 1. So if the feasibility was 8.5% on cost and you come in on cost, you get to 8.5% literally from day 1 because the building is fully let. We haven't done much speculative development, but where we're moving more towards operational type of investments, i.e., these hotels, we've got 2 big hotels coming up now with the Table Bay and the one next to the Table Bay. But there are a number of these operational-type investments where we're taking operating risk. They take a little bit of time to ramp up. So day 1, the sort of -- I'll give you the best example probably is Time Out Market. So Time Out Market was come to the deal forum at an approval of about -- it is even more double digit, I think, yield. But it takes a little bit of time to ramp up. It doesn't achieve that yield day 1. And there's your dilution that you're sort of asking about. So I would say you might end up with -- on some of those, you could end up with a 7% which ramps up to a 10% over a year. So you've got a bit of negative leverage there. If you're fully debt funding it at 9.6%, you might have a negative 2% spread for a year or 18 months until it picks up. But certainly, the long-term future ability to earn returns is a different play as opposed to just banking a 7% escalation on an 8.5% initial yield that you might get out of the Investec building. I'll give you the example of the Radisson Red, which was a ZAR 440-odd million investment. Looking at David, I think we're projecting close on 80 -- even ZAR 100 million NOI out of that hotel today. Had we just done a lease, it would have been a whole different story. So I hope that gives you a little bit of color on that.

I think I like the dividend slides to our meeting on Monday.

I know we've got one-on-one meetings with all of you over the next week. So keep the difficult questions for then, if you want.

Just on the health care fund, I know you had sort of renegotiated leases not too long ago and you bought the property. What's happened there? Is it one particular operator that's falling in arrears? And is it the same one that you negotiated with last time?

No. No. So look, I think we renegotiated all the leases with Busamed. And I think Busamed has gone through a bit of a recap of its own. Fair to say that -- and those numbers obviously have come through. We renewed some of those. There were negative reversions on those leases, and negative reversions on the Netcare lease as well. There's a new 20-year lease with Netcare. But this particular, let's say, issue at the moment is actually related to the Pretoria Head and Neck Hospital, the Cintocare, where the guys have fallen into arrears. A few operational, excuse the pun, operational issues with doctors taking leave and theater minutes coming under pressure. And so yes, a couple of operational sort of issues, dealing with DOH as well, Department of Health has been an absolute nightmare. So we've got a sixth theater, which was booked from day 1. The doctors are keen to open up the sixth theater, but you need DOH approval, and that's taken a hell of a long time. We needed to change the mix of beds from -- I forget the -- I'm not a doctor, so I'm going to get this all wrong, but from pediatric to surgical or whatever, whatever. And that's taken probably 18 months to get that. We've now got that approval. And DOH only deal with one approval at a time. So you can't have 2 approvals in. You can't say I want to change the bed mix and open the theater, deal with one. And so we've now dealt with the beds, now we can deal with the theater. But it is -- that's the issue there with that particular operator.

Sorry, can I just ask with regards to the asset disposals, right? I'm trying to figure the kind of yields that you guys are getting compared to the last 5 years. I mean, property values did come down. So I'm kind of trying to understand whether -- how much that has impacted you guys? And if that is either widening or slowing, like you said, with the views around the GMUs and the growth coming into the market?

Yes, it's a difficult one to answer because, I mean, every one of those deals are sort of quite unique in the circumstances. So you might have a vacant building or a 50% vacant building, which on the face of it, we're selling at like a 5% yield because it's only -- the income that you're losing is only 50% of what the building could deliver if it was fully let. So it looks optically like -- and it is actually -- you effectively sort of -- well, it looks like you're selling at a 5% yield. I would say on the counter to that, there are some assets where we might still be in an overlet situation. So the rentals are probably 30%, 40% in an extreme case above market and you're selling it at that level. But now you're selling it at a 17% yield, but it's with the knowledge that the buyer has that on reset, it will come down to a 12% yield. So it really does depend on each individual transaction, each individual disposal. On average, I'd say you're selling somewhere between 10% and 14% perhaps as a yield on a more normalized fully let market-related rental kind of deal.

It is marginally dilutive.

Yes, it definitely would be marginally dilutive. So it's above the, let's say, the rate at which we're settling debt. Any other questions? Francois, it looks like you're burning to ask questions, but save it for later. Ladies and gents, thanks very much for your time. I appreciate it. It's 2:15. We thank you for your time and attendance. Look forward to seeing you again in 6 months' time and enjoy what the Waterfront has on offer here today. It's a splendid day in Cape Town. And we look forward to seeing you again in 6 months' time. Thanks.