Growthpoint Properties Limited (GRT) Earnings Call Transcript & Summary

Right. Good morning, everybody, and a very warm welcome to all of you. Lovely seeing so many familiar faces here, in particular, some current directors, former directors and a special welcome. She said I mustn't do so because she's going to walk out. She'll be embarrassed, but I'm going to do it nonetheless. That's exactly what I'm going to do. So Angelique de Rauville, sitting in the front row here, one of our earliest supporters all the way from the U.K. Angie, welcome and lovely to see you as always. Thank you all very much for your attendance, and welcome to the results presentation for Growthpoint Properties for the year ended 30 June 2026. Just a brief comment. I mean, I'll be doing the presentation together with Jose Snyders. Jose joined us 6 months ago as the -- at the beginning of the year rather, I think -- sorry, January, so more than 6 months already, as the new Group Chief Financial Officer. This will be the first time that Jose participates in doing the presentation, but also, I guess, in the absence of Estienne. Unfortunately, Estienne had to have a procedure in hospital 2 weeks ago or so and is at home recovering in a very successful operation, but he is going to be out of action for a short while. We hope to see him back in the office towards the end of the month. I think the intention was that I would do a little bit less of this presentation, but I've stepped up, and we just wish Estienne well and a speedy recovery. Just dipping through the agenda. I'll quickly look at the portfolio composition, touch on the highlights, talk to the strategy, touch on the international investments and Growthpoint Investment Partners. Then Jose will deal with pretty much the rest of the presentation. I'll come back right at the end on the conclusion and the forward-looking statement as well. Just briefly on the overall composition of the business today, still very much South Africa as the dominant part of the business with 49% of total assets on the South African balance sheet, contributing 55% of the distributable income. 12% is the V&A Waterfront, our 50% share of the Waterfront, making up 12% of total book value of assets and contributing 18% to distributable income. We then have the offshore investments, GOZ at 22.8% of total assets and 18.3% of contribution to DIPS. Globalworth, 11% of assets and 3.8% of DIPS. Lango, pretty small at 1.8% of total assets and no contribution to DIPS. Then lastly, we have the third-party fund management businesses, 2 of them, collectively, we sort of group it under GIP, Growthpoint Investment Partners. Given it's an equity-light model effectively, our total balance sheet -- it only makes up 3.1% of the book value of the assets, but contributes 3.6% to distributable income per share. Highlights for the period includes the increase in distributable income per share of 4.3% to ZAR 1.526 cents. The dividend is up 7.4%. That's driven by the increased payout ratio where the average payout ratio for last year was 85%, but the total average for this year is 87.5%. The group LTV came down from 40% to 38.7%. Group assets grew by 2.8% to ZAR 160 billion. NAV per share, up 3.8% and then the interest cover ratio is improving nicely, both on a group level and on the SA/ICR level, reflecting our overall lower debt levels. Looking at the year that was, I guess, starting the year off on a new -- with positive momentum, having returned back to growth in distributable income per share for the June '25 year. We then, in August, disposed of a holding in NewRiver and effectively got out of the U.K. in August. Then in October, we announced the Cape Winelands transaction and our investment -- strategic investment into the Cape Winelands project as well as the Boston Hydro green energy project up in Clarens. Then in December, we announced the Auria acquisition or the healthcare fund announced the Auria acquisition, pretty significant investment of acquiring ZAR 3.6 billion worth of assets there. January, we got the good news from the City of Cape Town that we've been successful in acquiring additional 440,000 square meters of bulk rights for the V&A Waterfront. Then February was quite busy with the disposal of the Discovery building, announcing the 3 new logistics projects in -- one in KZN, one in the Western Cape and one in Gauteng. Then also in February, we announced the Olympus residential development in the Sandton Summit precinct. Then towards the end of the financial year in June, we did a very significant bond issuance of ZAR 1.8 billion, achieving all-time record low credit margins and literally the lowest margins we've ever achieved in Growthpoint's history. Some good momentum there. We continue to put a lot of emphasis, I guess, on the balance sheet and ensuring that we have a strong balance sheet. I think Estienne one day is going to thank me for leaving him with a company with a well-capitalized balance sheet and Jose, giving them the opportunity to invest as opposed to leaving them in a position where things are stressed and they're having to fight to bring down loan-to-value ratios and debt levels. But I think the 38.7% is well within or below the sort of 40% mark. We've got ample capacity on the balance sheet to my mind. GOZ LTV remains a little bit elevated, just over 40%, 41%. I think ideally, GOZ would want to be below 40%. I'll speak in a bit more detail to GOZ later. But clearly, I think the Australian economy and GOZ going through a bit of a tougher time than it might have been used to in the past. SA LTV right down to 30%. That's, I guess, where the real capacity now sits. We have ZAR 5.7 billion worth of access to capital with unutilized facilities at balance sheet date, ZAR 323 million worth of cash and then the payout ratio as we withhold 12.5% of the dividend, we're effectively retaining ZAR 647 million of cash pretax. Those achievements in terms of bringing down the loan-to-value and improving the balance sheet are largely attributable to the disposals. For the period under review, and it's an ongoing process, I guess. We have continued to look to dispose of underperforming assets and reinvesting in newer, better, well-located, modern, green energy-efficient assets. But for the year, we sold 29 assets valued at ZAR 4.9 billion. That's ZAR 3 billion worth of offices, ZAR 1.3 billion of logistics assets and ZAR 600 million of retail. On the other side, we did spend ZAR 1.3 billion on developments, ZAR 600 million of retail, ZAR 377 million in office. That's essentially just buying up the 45% of the Discovery Phase 2 building or the building #2 at Discovery. Then ZAR 172 million on logistics and a similar number in trading and development. At balance sheet date, we had ZAR 3.6 billion worth of commitments talking to churning of this capital, having sold, having created capacity, now looking at opportunities to reinvest, and we're certainly still fancy the logistics and industrial sector. We've got ZAR 1.5 billion of the ZAR 3.6 billion is earmarked for logistics and industrial, ZAR 1.1 billion in retail, ZAR 200 million in office and ZAR 700 million in T&D. That's mainly Olympus and the development of an industrial warehouse done in Cape Town for into Foods. Over the last sort of 10 years, a decade, we have been very active with this repositioning, sold ZAR 19.9 billion worth of assets and reduced the number of properties actually from 471 properties to 302. In the process, the actual, let's call it, portfolio composition has also changed. The 2 biggest moves there being office, which used to be 46% of total value of the portfolio in 2015, now at 39% and industrial moving from 15% to 20%. During this period, the total disposals of ZAR 19.9 billion, ZAR 8.5 billion of that was office, ZAR 4.5 billion of that was retail, ZAR 5 billion was industrial, and then we had ZAR 1.7 billion worth of disposals out of the trading and development business. On the other hand, we have been reinvesting and we have reinvested ZAR 9.2 billion into office, ZAR 5.5 billion into retail, ZAR 5.2 billion into industrial and ZAR 2 billion into trading and development. Focusing a little bit more on the international side. As I said, we've got the 2 international investments. They comprise -- they make up or contribute 22.1% of our distributable income per share, and they make up about 35-odd percent of the group assets. The rand equivalent foreign currency income via cash or scrip dividend alternatives has reduced from FY '25 to FY '26 by almost ZAR 300 million or ZAR 1.4 billion to ZAR 1.1 billion. A big chunk of that is the disposal of NewRiver and Capital & Regional. That still contributed to last year's distributable income numbers, but there's nothing in this year's numbers from NewRiver and Capital & Regional. Then from GOZ, the GOZ dividend remained -- was slightly up. But Globalworth dividend on a dividend per share basis slightly down. A big mover in that ZAR 1.4 billion to ZAR 1.1 billion drop in foreign income is also the rand strengthening this year compared to prior years, obviously, where we always used to rely on a fair bit of rand earnings uplift from a devaluing rand. I'm not sure who in the room would have been betting aggressively on the rand strengthening to the extent that it has, but that also played -- was a factor in that number. If I touch on the international investments individually just briefly. Growthpoint Australia, we have 48 properties there, just short of 1 million square meters and about ZAR 47 billion worth of assets. That's 100%. Now we own 63.6% of it. As I said earlier, GOZ and Australia more broadly, I guess, is going through a slightly tougher time economically than in the past. We're seeing 15-year high interest rates actually currently in Australia. They are currently predicting for even further interest rate increases, possibly another one in September. That is constraining, I guess, the economic growth and some of the -- and certainly, we all know the relationship between interest rates and real estate and certainly putting a lot of pressure broadly on the listed property and direct property sector in Australia. But notwithstanding that, we did grow or GOZ did grow its FFO per share marginally by 0.9% and its dividend by 1.1%, declaring a dividend of ZAR 0.184 compared to ZAR 0.182 in the prior year, and that excludes the special dividend that GOZ paid last year. In rand, we received ZAR 946 million, down from ZAR 1 billion. That is mainly, as I said, rand devaluation -- sorry, rand strengthening. The payout ratio remained pretty constant at 78%. The balance sheet, as I said, it remains strong, but is slightly above that 40% mark that everybody sort of generally is more comfortable with in the period. I think the company is looking at a number of options, obviously, to bring some of that gearing down. One in particular, we sort of call it a self-help option, I guess, ultimately is asset disposals. Post year-end, the company did announce the disposal of a very significant industrial asset in Perth valued at ZAR 268 million. Now that sale, if you just use those proceeds to reduce debt, immediately, the LTV is back down to about a 38-odd percent number. I think all in hand, nothing to be concerned about. The company refinanced ZAR 495 million worth of debt during the period. It's got good access to liquidity and debt funding within the Australian market, both from the Australian banks and the Australian debt capital markets. NTA per share was down 1.3%, driven mainly by the downward revaluation of the asset portfolio and 1.9% down in the office portfolio. Yes, I think 0.9% down in the industrial portfolio. The debt is largely fixed, 77% of all interest rate exposure is fixed. The weighted average debt maturity is 3.2 years, and the weighted average cost of debt has just nudged to over 5%. The portfolio is a mix of office and industrial, about 65% office, 35% industrial, so about $4.1 billion worth of assets. I think a very healthy tenant base with 29% of income coming from government tenants and 48% from listed corporates. The portfolio is very well let. I mean, 96% occupancy, 6.8% weighted average cap rate on valuations, a 6-year WALE. If you look operationally, I mean, they had a record leasing year with 81,000 square meters of leasing in the office space and 117,000 in the industrial space, so a record year for leasing and like-for-like property FFO up 2.6%. Operationally and at a direct property level, the metrics are pretty good. The one challenge though is that with the office heavy sector, whilst FFO is growing and as we see here, up 2.6%, the incentive levels in that Australian market for attracting new tenants or retaining tenants on renewal are very high. We're seeing anywhere between 30% and 50% incentives in that market. I think the higher end of that in the Melbourne market. Melbourne as an office market at the moment is particularly challenged with vacancies. The Melbourne government is not particularly investor-friendly and certainly not friendly towards foreign investors, and that's causing challenges within that -- the broader market in Melbourne. On the funds management side, we've got about $1.2 billion worth of assets under management in the funds business. During the year, $331 million was returned to investors where some of the funds matured and the assets were realized and capital returned to investors. But the team was also successful in creating new assets to the value of $125 million. But all in, the assets under management decreased from $1.4 billion to $1.2 billion. Globalworth, our investment into the entity that's listed on the London Stock Exchange on the alternative investment market there. Globalworth, we own just under 30% of Globalworth. It owns 56 properties across Romania and Poland, just over 1 million square meters and our 29.6% share valued at about ZAR 14.6 billion. The dividend per share for Globalworth came down from ZAR 0.14 in the prior period to ZAR 0.12. We -- they have been declaring dividends, albeit that the December dividend was a scrip dividend, and we elected to reinvest. The June '26 dividend now that they've just declared is going to be a part cash and part share. We'll take about 40% of our dividend in cash and the balance will be in shares, and that is consistent with the position of the controlling shareholder in that entity called [ Zaciono ]. The decrease in dividend was mainly attributable to the -- this is on a per share basis, the significant discount that is applied when they offer their DRIP, discount to NAV. Then the increase in finance costs as well as some additional tax charges in Poland gave rise to the drop in dividend per share. Again, on an operating level, net operating income growing at 0.6% and the actual portfolio letting, I'll talk on the next slide, what I mean, operationally, similar story to GOZ actually, the operational side at the property level, pretty robust. The balance sheet remains very strong with ZAR 273 million of cash on balance sheet. We did repay ZAR 125 million of the bond notes during the period. There was some LTV improved by -- from 38% to 36.7%. The debt maturity is 4 years, 90% of the debt is hedged in terms of interest rates. There's no major refinance risk in that debt portfolio. A fairly quiet period in the disposal and investment side at Globalworth with one asset disposal being the Philips property for EUR 9 million. Then on the development side, we are in the process of building a new 17,000 square meter office building in the heart of Bucharest, which is a demand-led and demand-driven development on a vacant piece of land that Globalworth owned since we invested there, I guess, in 2016. In Poland, the Renoma redevelopment project is finally complete. That took a fair while. That's a 48,000 square meter mixed-use development in Poland. We saw marginal uplift in the value of the portfolio to EUR 2.6 billion. We have 56 assets, 36 in Poland and 20 in Romania. Very good letting period. Again, record letting actually in the year. The vacancy came down from 14% to 13.4%, and we actually saw a slight increase in vacancies in Romania and a decrease in the Polish vacancies across all 3 of the sectors there or regions there. Total revenue up at ZAR 240 million compared to ZAR 228 million in the prior period. Lango. Lango is the entity that invests into African Gateway cities. It owns 15 properties, 242,000 square meters and our -- the value -- equivalent value at the asset level of our 18.9% shareholding is ZAR 2.4 billion. We own just short of 19%. It owns 12 office properties and 3 plots of land. The property valuations in the period were declined or written down by 3.7% to $788 million. Our 18.9% stake is valued at ZAR 633 million. In the prior period, the company did internalize its management company. We were about a 32.5% shareholder in the Manco. As they internalize the Manco, the owners of the Manco received convertible notes into Lango as compensation. That tranche A notes that we still own is valued at ZAR 207 million. Growthpoint Investment Partners, the funds management business. The 2 Growthpoint Healthcare has got 15 properties, 129,000 square meters of GLA and a portfolio value of ZAR 8.5 billion. We own 39 -- Growthpoint owns 39.1% of it. As I mentioned earlier, the acquisition of the Auria business was a transformational transaction for the fund, branching out from its traditional health care and hospital property portfolio into life rights and aged care. The value of that portfolio at 30 June was ZAR 3.9 billion. We received ZAR 71 million worth of dividends, down from the ZAR 90 million in the prior year. The dilution mainly attributable to the inclusion of Auria and the fact that the Auria acquisition was fully debt funded for the period and was originally anticipated to be dilutive. So slightly less dividends. But on the other hand, the asset management income increased from ZAR 46 million to ZAR 56 million. Then on the LTV front, it's quite a complicated story with these life rights and how you account for them and whether it's a liability on balance sheet or you net it off against the asset value, but LTV went up to 51%, given the fact that the entity fully debt funded the ZAR 1.2 billion equity check to buy the business. But if you exclude those life rights liabilities, LTV is at 29%. Then the student accommodation business, 16 properties, 10,000 beds and a value of about ZAR 5 billion. Ongoing expansion of that fund with the addition of new properties. The single largest one currently being constructed is a 2,400-bed unit down in KZN. It's called Hluma Studios. That will be completed by the end of the year for occupation by students for the '27 calendar year. We received both dividends and asset management fees were relatively flat for the year. Then this is a little graphic, I guess, of the Auria assets. There are 5 of them, 670 units in total and 3 of them in Gauteng, San Sereno in Bryanston, Melrose Manor in the Melrose area and Royal View near the Royal Golf Course. Coral Cove on the North Coast of KZN and then Woodside in the Western Cape, just outside -- Cape Town actually. All right. So at this point, I'm going to hand over to Jose, and then I'll be back at the end.

I tried to count this morning, and I think, Norbert, this is your 44th results presentation as CEO. My first. He told me yesterday, he can do these things off the cuff now. I still need my notes. Okay. Good morning, everyone. From an RSA portfolio perspective, we had a good year. Like-for-like NPI growth up 4.4%. We renewed just shy of 1 million square meters of space during the period and with some new lettings in that number as well. During the course of it, we had dropped our vacancies at the portfolio level from 8.2% to 7.2%. I think in considering the quality and sustainability of our income streams, one of the key discussion points is always going to be the reversion rates on lease renewals. Overall, in the portfolio for the year, this was minus 2.3% but that varied quite significantly across the different sectors and the different regions in which we operate in South Africa. The overall result was dragged down by the office portfolio that nationally delivered a minus 6.3% reversion rate on lease renewals and Gauteng being particularly challenged at minus 10.2% on lease renewals. The Western Cape had a much better experience where reversions in offices was actually plus 0.4% with a decrease in vacancies for our portfolio there outside of the V&A from 5.39% to 3.6%. Escalations for new leases in the Western Cape actually exceeded some 7% compared to the prior year. Average in-force escalations across the portfolio remains healthy at 6.8%. Lease tenures underpinned in the portfolio have increased by 3 years to 3.8 years on lease renewals for the office sector and our renewal success has jumped to north of 80% across the portfolio. We have seen a 3.3% increase in valuations of the property portfolio in SA by ZAR 2 billion, most of that being led by the industrial portfolio that's seen an uplift of 6.4%. I think it is important to point out that, that valuation uplift is driven by underlying income increasing and not by the valuation metrics having improved across the portfolio. As we all know, bond yields last year improved significantly towards the end of the year. The benefit of those decrease in bond yields has largely in our valuation has been offset by an increase in the risk factor applied to the discount rate. Looking at our office portfolio more specifically, Growthpoint South Africa portfolio still is heavily weighted to offices with about 40% of the portfolio represented in that sector. Overall vacancies improved from 14.6% to 14.1%. Gauteng still sits at an unhealthy 18.6% and all indicators would tell you that the Gauteng offices are the primary drag in the SA portfolio. We recognize this and our capital allocation strategy speaks to it. Within the past 12 months, we have sold ZAR 4.9 billion in assets, of which ZAR 3 billion was in offices. As Norbert had pointed out earlier, over the last 10 years, we've sold ZAR 8.5 billion worth of office assets out of this portfolio. It's not all doom and gloom for offices in our view. In-force escalations are still very good at 7.2%. On renewals this past year, escalations signed up was 6.9%. Lease duration on renewals have also improved to 3.8 years. Like-for-like NPI growth for the office sector has dropped to 3.1%. But importantly, recoveries for electricity are now at 101% and for water and other charges at 107%. Although we still have difficulty in the top line for growing rentals on a gross basis, we are able to pass through more of the underlying cost to tenancies, which is helping us on an NPI level. We believe Gauteng still remains the primary corporate and economic market in South Africa. As we stand here, 2/3 of our office exposure are still in the province with vacancies concentrated in select areas like Midrand, Parktown and select pockets of Sandton. A place for offices still exists in our diversified portfolio, but our exposure is becoming more selective. We are selling out of office with weaker long-term fundamentals and concentrating our exposure in modern, sustainable, efficient assets that offer more competitiveness and growth in the longer term. Over time, our relative exposure to offices will drop, but it won't drop to 0. It's also evident that when economic activity improves, the office portfolio will perform better. We've seen this in the Waterfront, where vacancies in the office portfolio are now sub-1%. In our Western Cape portfolio, where our vacancies have dropped below 4%. It's important to note that when economic activity in an area improves, the offices will do better. As Estienne always said, 20% vacant still means 80% let. The right offices in the right locations remain key. The decrease in our exposure will be deliberate and sensible. We have seen our office assets valuation increased by 3% for the period. Going on to our retail portfolio. Our retail portfolio currently also constitutes about 40% of our value by assets in the country. For the period, we have seen densities in trading increase to 2.7% across the portfolio. Leading the way was the Eastern Cape at 3.9%, the Western Cape at 3.4% and KZN and further inland at 2.5%. Gauteng again was the laggard at 1.8%. Renewal success in the portfolio was in excess of 90% for the period, and we have seen a positive reversion in the portfolio for the first time in a while of 0.8%. Vacancy in the portfolio is exceptionally low for a portfolio of this nature at 3.5% and in-force escalations still remain above 6%. We are also looking at the long-term positioning of the retail portfolio to have assets in our portfolio that are dominant in the catchment areas that they serve and offer long-term sustainable competitiveness and growth. Our current rent to turnover ratio in the portfolio is up to 7.8% from 7.6% in the prior year period. But at an annualized trading density north of ZAR 37,000 per square meter, we are still of the opinion that this is relatively healthy and affordable for the tenancies in our portfolio. On our logistics portfolio, the portfolio is showing good strength and good progress in terms of the strategy and rollout that we envisage in that side of the business, currently about 20% of the portfolio, and we expect that to increase over the next number of years as our development pipeline rolls out. In this portfolio, we are also consciously disposing of assets that are in noncore areas and positioning the portfolio into modern logistics parks where the assets are group closer together to offer some operational synergies and long-term appeal. During the period, we did sell ZAR 1.26 billion of assets in the industrial portfolio. Like-for-like growth was 4.9%. Vacancies are below 3%. I think I read yesterday that nationally, they're at about 3% at the moment. Other landlords are also getting some benefits in this sector. The renewal success rate is about 80% for this portfolio this past year. In-force escalations are currently at 7.4% and on renewals at 7.3%. I think the one number that will be questioned is that we have a marginal negative reversion in the portfolio for this past 12 months of 0.5%. That is concentrated to some noncore assets where we elected to drop the rentals to keep the buildings occupied as we progress our pathway to disposing of those assets. It's not reflective of the general overall industrial portfolio. The quality of the portfolio continues to increase with healthy development pipeline in Gauteng in the Western Cape and in KwaZulu-Natal. We often do start some of these developments on a speculative basis to be ahead of the demand curve. I think Growthpoint is aimed to be in industrial assets that are more generic smaller boxes and not the large very specialized boxes that some of our competitors are invested in. We have as at yesterday, there's a development we're doing in Montague Gardens that's meant to be complete in 2027 for about 38,000 square meters. That entire development, we got a lease agreement signed yesterday for a large user to take up that space in 2027, demonstrating the demand that there is for these types of assets in the right locations. There is a lot of churn in our portfolio at the moment, as Norbert had indicated, I think our run rate will be about ZAR 2 billion to ZAR 3 billion per year as a rolling statistic. We have managed to sell most of the assets that we have sold at or better than book value. I think we won't sell at all costs. It does have a dilutive impact, okay? We will do what is sensible at the time that we make the disposal, what the market is like, what it means to our business in terms of dilution, but we are hoping to sell that amount of assets per year as we roll out and reinvest that capital into new, more modern and longer-lasting competitive assets in our portfolio. One of the disposals that we have made last year was Discovery. We have said that the dilutive impact on that transaction on its own for a full year would be about 1%. We do in our next year, disclose the yields at which we have sold certain assets and when we have sold them, so you can go and figure out what the dilutive impact is. Most of those yields because they are older assets are north of where our cost of debt is. It will have a dilutive impact, but it's a necessary cost as you reposition the overall portfolio going forward. Our trading and development business, their profitability depends on the timing and completion of the developments that they are busy with. They are quite busy at the moment with a lot of development in the ground. For the health care business, they've completed a hospital type asset this year. As Norbert had mentioned, there's a large student accommodation building that's being completed towards the end of this year. In our own portfolio, we are currently developing at Noka Park in Montague Gardens as well as an asset called in Indlovu also in Montague Gardens. The Paarl Mall redevelopment will be completed in November of this year. The Olympus residential development, you see across the road here will be complete in 2028. They have been quite busy. The pipeline of developments for them are healthy and profitable developments. When we book the income, it depends on when the development completes. But as long as the team remains busy on yielding projects, we are not too concerned about losses in any particular year as those developments come into fruition. These are some of the developments currently underway. As you can see there when they will be completed and what the development team are currently busy with. From an ESG perspective, Growthpoint over time has spent now north of ZAR 1 billion on 98 solar plants that have a peak generating capacity of 69 megawatts. The Boston Hydro plant has started delivering power into our portfolio on a wheeling basis since October 2025. Our renewable energy penetration is now up to 19% compared to 7.9% in the prior year. We have maintained a Level 1 BEE score. We have made some appointments that better improve diversity at our Board level. We have also appointed Nooraya Khan for gender diversity on our Board, and she's recently joined us as an NED. More work, of course, needs to be done, but Growthpoint is moving in the right direction. We have spent for the year close to ZAR 60 million in CSR, similar to the numbers spent last year. We are a key supporter of Property Point that aims to create jobs in our sector amongst other initiatives that they pursue. Our social spend also includes a large emphasis on education where we have spent ZAR 24 million in this last year. One of the flagship programs is our GEMS program, which is education for staff -- for children of staff in our business. It's been around for 10 years. I think this will be one of the legacy things that were implemented in Norbert's tenure that he is most proud of. Every staff member at Growthpoint who earns less than ZAR 400,000 a year gets to have their kids education paid for. There's a whole committee that does the allocations. So far in 10 years, no one has been turned away. It's quite a significant project for our staff that Growthpoint has managed to achieve. At the V&A crown jewel investment in our broader portfolio, distribution for this past year of ZAR 965 million, up from ZAR 810 million in the prior year, 21% NPI growth. That includes profits from the sale of residential apartments at 5 Dock Road that benefited us to the tune of about ZAR 139 million in that period. Excluding those profits, the NPI growth would have been 6.9%. Importantly, during the period, the Table Bay Hotel was closed for its redevelopment, now rebranded and opened as an InterContinental. It was always the plan that the resi sales, the profit from that would offset the loss for having the hotel closed for a period of time. The resi has exceeded that loss, and that's why the Waterfront numbers are looking so good. If we had included the opening of the Table Bay Hotel on a normalized basis and excluded the residential sales, the NPI growth would have been around 10%. The highest growth areas for the Waterfront has actually been in the marine and industrial, which has seen a 13.7% growth. Office rentals growing by 8.2%. So you can see in the right locations, offices are still doing extremely well, followed by retail at 6.2% and hospitality at 2%. That hospitality number, of course, being impacted by the fact that the Table Bay Hotel was closed. Vacancies in the broader Waterfront is now at below -- at or below 1%. The V&A is, of course, heavily dependent on tourism, and we are happy to report that visitor footfall to the area has increased by 7% year-on-year. In the overall income pool that we generate from the V&A, there has been an uptick in the amount of operational income exposure that we have, historically around 16%, now up to 20%. It gives us the benefit of participating in the high growth currently being experienced in the precinct, but also comes with the risk associated with the dependency on tourism, footfall, et cetera. The V&A has low gearing. There is an extensive development pipeline that's being rolled out over there. But it has such low gearing that it can fund off that balance sheet of it at least for the next, call it, 3 to 4 years, its development pipeline. Going on to our financial results for the year. Our NPI is up 4.4% on a like-for-like basis on the SA portfolio. Overall distribution has increased by ZAR 216 million. The primary impact there on has been the decrease in our interest cost of about ZAR 371 million, and this follows the decrease in our average debt levels from ZAR 39 billion to ZAR 33 billion, together with our interest costs having dropped from 8.9% to 8.6% this year compared to last. SA LTV, as has been mentioned by Norbert, is now at 30.2% and group LTV at 38.7%. Group ICR now being better than 2.6x. Our distributable income for the year, ZAR 5.2 billion gave us ZAR 1.52 per share of distributable income and at our payout ratio, that translates to ZAR 1.33 per share, 7.4% up on the prior year. Our portfolio has an uplift in valuations of 3.3% or ZAR 2 billion, excluding health care and the student accommodation fund, driven predominantly by income increases rather than the metrics underpinning the valuations changing. Within the SA sectors, however, the valuation uplift was quite different amongst the sectors that we have exposure in. Industrial, as I mentioned, at 6.4%, office at 2.9% and retail at 2.1%. The health care assets and student accommodation assets have seen uplift of 3.8% and 5.3%, respectively. I think Norbert has mentioned that GOZ saw a slight decline of 1.9% in offices and 0.9% in its industrial assets, which we consolidate onto our balance sheet, and that is on the back of rental growth being outweighed by cap rate expansion. Our balance sheet is very healthy at ZAR 33 billion of debt in SA. GOZ, as Norbert has mentioned, is at about 41%, still well within their target range, but probably a little bit higher than we would have wanted to be given their current interest rate environment. In SA, we have unutilized facilities at year-end of about ZAR 5.7 billion. During the last quarter of the financial year, our treasury team refinanced about ZAR 1.8 billion through a public bond issuance at 108 basis points over ZARONIA at terms of 3, 5 and 7 years. That bond issuance was 6x oversubscribed, which shows a healthy appetite for Growthpoint paper and delivered at the lowest margins in Growthpoint's history. Shortly after year-end, our treasury team did some further private placements to the tune of about ZAR 3.1 billion. This time around, ZAR 1.5 billion thereof was at the 10-year tenure and the clearing average margin was 134 basis points above ZARONIA, which for that kind of tenure is exceptional. These issuances have moved the split in our debt exposure between bond markets and banks to about 57% in the bond markets. Banks remain our friends. Having reduced our debt, we have good capacity now to support our development pipeline and seek opportunities for growth. You will note in the annexes to the presentations, Norbert has indicated our commitments are still about ZAR 3.6 billion to be spent. Overall, those commitments for the projects that we are currently busy with amounts to about ZAR 4.26 billion, most of that being directed towards retail and industrial. Of those commitments, ZAR 280 million only relates to offices, and that is for a regional head office for Discovery in Cornubia that we hope to build, lease for a while and sell to them in another couple of years. I think what the key message is as we have this liquidity and debt capacity is that we are aiming to fund the development rollout with the sale of noncore assets, okay? There is a timing mismatch. What the balance sheet capacity allows us to do is to manage that timing mismatch and also allows us to have the capacity to see some opportunistic growth as opportunities arise in the marketplace. In conclusion, the outlook for FY '27, the guidance that we've given is 1% to 3% up. There's a couple of points that Norbert will expand on when he comes to give some closing remarks. It does obviously have the impact of dilution of sales in there. The offshore investments are in difficult macroeconomic circumstances, and that has an impact. Some of the cross-currency swaps that are coming up for renewal this year in managing our exposure to Australia are rebasing to higher levels given Australian interest rates, and that has an impact. We also expect that SA interest rates will stay higher for longer, and that has had an impact on how we see this next year unfolding. I'd like to say thank you to the broader finance team. This has been a hell of a task, my first one in this portfolio. The volume is immense, and I never expected it to be this much, but I'd like to thank the team for all the long hours and the late nights that they've had. Norbert didn't want today to be about him and the more than 20 years that he has been Growthpoint's CEO or about the fact that the market cap at the time that he started was about ZAR 3.7 billion and is ZAR 57 billion today, with a total shareholder return north of 12% consistently over that 20-odd-year period. It includes the GFC, includes COVID and includes all the other factors that Estienne commonly refers to as the 9 plagues happening over that time. As I welcome you back on to the stage, I just want to acknowledge the huge effort, the legacy that he leaves and to say thank you. Great leaders do not necessarily leave you without challenges, but they certainly leave you and able to take them on. Thanks, Norbert.

Thanks Jose for the kind words. Thank you. All right. Thanks very much for that. We do have a couple of questions here on -- maybe just -- I think Jose, made the remarks that I was probably about to make in relation to the outlook and the dividend guidance for 1% to 3%. Obviously, this year, you still had the interplay between a higher payout ratio on average, so giving you a higher dividend growth rate relative to the DIPS growth rate. Next year, it's in the base, so at 87.5% with a constant payout ratio, we're looking at 1.3% DIPS and dividend. The key drivers, I guess, we ourselves would have been a bit disappointed. We want to continue to build on the growth last year. I think it was 3.5% this year, 4.3%. We all aspire to continue to show growth in dividend. But the 3 or 4 factors, I guess, that are pulling us back at a very high level, I mean, it's fair to say Growthpoint continues to remain overexposed to the office sector, not only in South Africa, but also in its international investments, GOZ being 67% office and Globalworth being effectively 100% office. I used the phrase yesterday, one of the reporters latched on to that. I called it the Achilles heel. The Achilles heel at the moment, though, is probably still Gauteng office. Gauteng office has not performed well for a fairly extended period of time. I'd say even before COVID, Gauteng office started underperforming. There's a multitude of factors that are at play there, not only, let's say, the lack of infrastructure investment from the municipalities perspectives, but generally lack of economic growth. If you have 1 year of 0 economic growth and 3 or 4 or 5 years of 3% or 4%, you get a particular trajectory. If you've had 10 years of like sub-1% economic growth, it's not conducive to stimulating office growth and office demand growth. We continue to be hamstrung by that a little bit, and I think we should be looking to accelerate our disposal out of the underperforming areas. As Jose said, office is not dead. Office in good areas can still be a very good investment, and we're seeing that in the Western Cape in particular, at the moment in our portfolio. There's no doubt in my mind that Aussie will turn as it comes out of its sort of particularly high interest rate cycle that it's in at the moment. So but -- so that does, I think, drag on our growth prospects. The other one is the disposal process. We have disposed of a fortune of assets over the last couple of years, ZAR 2.5 billion last year, ZAR 4.9 billion this year. That's close on ZAR 7.5 billion of disposals. If you just -- either take 10 -- I can only do simple math, so 10% on ZAR 7.5 billion, that's ZAR 750 million of lost revenue, let's call it, NPI. You've got to make that up. We have been reinvesting as we disclosed, but not at the same rate that we have been disposing of or at. Next year, we are definitely going to see the absolute NPI number. This year, the absolute NPI number is still up. But next year, it's likely the absolute NPI number will be down. That's having an impact. The interest rate outlook is having an impact. Waterfront had a tremendous year this year with 21% increase in its contribution. That can't be repeated. We've shown you that a big chunk of it was one-off linked to the residential developments in the Waterfront. We do anticipate the Waterfront will continue to perform very well. We make a remark, I think, on the previous slide before this one, where we see the operating income probably growing at double digit within the Waterfront. But you have to normalize for the one-off residential sales that are in this year's number. There's one of the questions from online. I'll address it as part of this remark. At a holistic level for next year, we're probably looking at single digit -- low single-digit growth from the Waterfront, considering the exceptional performance and base that has been created through this year's numbers. Then, yes, I think internationally, the international investments for the last year or 2 have been a bit disappointing. Slower dividend growth coming out of Australia and negative dividend growth coming out of Globalworth. If you add all of those things into the mix, we have come to your conclusion that our dividend growth projection for next year will land in that sort of 1%, 2% to 3% space. Hopefully, that gives you a little bit more feel and color for perhaps why it's not -- why it's going backwards next year relative to this year. I'm going to quickly deal with a number of the questions that come from the online audience. The first one talks to -- can you provide guidance on the distributable income growth for the V&A? I think I've dealt with that one. The expectation for dividend withholding tax from GOZ for next year because this year was quite low. That one remains a bit of a mystery, and it is dependent on the activity within the portfolio on asset disposals, asset acquisitions. We can't really predict. We generally work on 10% as a dividend withholding tax number. Sometimes it's a bit more, sometimes it's a bit less. But it's -- I think there is going to be -- you may recall, we sold a big chunk of industrial assets into the Growthpoint Australia Logistics Partnership, which is the fund that we created. We realized significant capital gains in the disposal of those assets. Now this Perth asset that GOZ has sold, ZAR 268 million has also got a very significant capital gain attached to it. Those capital gains have a big impact ultimately on the withholding tax calculation. The exact outcome of it, I can't predict right now, but it is just something that I would highlight. There's a question that says, given the increased payout ratio, what would be the key considerations for Growthpoint in offering a DRIP option? I think the Board did discuss the DRIP option. I think a couple of considerations. One is the share price obviously is still trading at a pretty big discount to underlying NTA on the one hand. But on the other hand, given our LTVs and the fact that our SA balance sheet is now down at about a 30-odd percent LTV, our access to debt capital, liquidity is exceptional at the moment. We don't believe it's appropriate to be doing a DRIP when we've got that level of access to debt, and let's call it -- it's a bit of a tricky phrase and it sometimes can come back and bite you but a lazy balance sheet with debt capacity. So there wouldn't be any sort of rationale to be raising equity specifically via a DRIP. Besides the owner-occupied transactions, we were the natural buyers for the properties in Gauteng. It is mainly the owner-occupiers and then the residential converters. There are probably more guys playing in that space today than there's been in the last couple of years. Certainly, the most recent one we sold here, I'm looking at Tim for the name of Sandton Close, but also the one literally around the corner from here. Fredman Towers. Yes, Fredman Towers was also recently sold to a resi converter. Mainly resi converters, and we hesitant to sell, I guess, just to other office landlords. At the end of the day, there is an oversupply of office in Gauteng. There's an oversupply of office in Sandton given the vacancies. By selling it to another office landlord, you're just handing that landlord the opportunity to compete with yourself. That's not necessarily good as far as we're concerned. It's not to say we won't, depending on the price. If somebody wants to pay a particular price for an asset that we think is attractive, we will consider it. But as a broader statement or a broader philosophy, we'd rather sell to resi converters or owner occupiers. Can you quantify FY '25 DIPS sensitivity to rolling your foreign earnings hedges at current exchange rates? I mean the only comment I would sort of offer there, Jose dealt with it to say that when we're looking -- we have -- we've actually just dealt with them in the last week, 2 Aussie CCIRSs, which were -- we were paying about 2 -- just over 2% on them. We've refinanced them at just over 4%. They have become quite a lot more expensive, I say doubled pretty much in terms of the actual interest we pay on them. That is in the mix in our overall, let's say, outlook for what interest -- our interest number might look like next year. Then, this year what is the risk that the extent of densification at the Waterfront decreases the attractiveness and therefore, the reversions and escalations? Look, it is an ongoing challenge to find the right balance, and I often urge management at the Waterfront to be very sensitive to the pace of rollout of new developments, but also it's not only rolling out new developments, it's also the infrastructure reinvestment that needs to take place. The original asset is 25 years old. We're in the press for those of you that drive in and out of the Waterfront on a regular basis or might have been there for the rugby 2 weeks ago, you would have seen that road that goes around the Marina all the way through to the main shopping center is now down to one lane and caused chaos during the rugby. But the reason for that is that the water pipe, the main water reticulation pipes run underneath that road, and those are needing to be replaced after 25 years. So it's finding the right balance between new development, new exciting initiatives and then obviously, the, let's call it, maintenance infrastructure work. Also, I think it's very important to maintain the balance between what I call public spaces and let's say, just densifying with new residential or new office buildings, et cetera. What makes the Waterfront such an appealing precinct is the fact that it does have green spaces. It does have all these different activities, and you don't want to destroy that. So I think the point is very well made to the V&A management. I don't think they will be irresponsible in that regard. I see the Waterfront as a very responsible developer. Not all developers are always responsible. They try and maximize the last little bit of bulk that they've got. That's not the Waterfront's philosophy, and that's not our philosophy. So we will be ensuring that they do it responsibly. What's the risk that the -- okay, that is the Waterfront one. So the last one I'm going to deal with now from online is, what is your view strategy on the international portfolio, particularly Globalworth. This minority stake has been underperforming for a long time? I can't deny that. It has unfortunately been so. It wasn't by design. We never intended to be a minority. We've ended up there due to corporate activity by some of the -- by the original founder of the business, in fact, we backed into that business. We continue to find -- to engage with the other shareholders and management to try and find a solution whereby each party could be more in charge of their own, let's say, portfolio or where we -- the entity has got 95% of its shares held by 4 shareholders. It's -- there's no -- it's not tapping the equity capital markets. There are many factors and reasons, I think, why that entity shouldn't necessarily be listed. But ongoing discussions with all stakeholders are currently underway and probably more active discussions now than in the last 2 or 3 years. I remain cautious on what I say about that because it is a listed entity and there are JSE or LSE rules and all sorts to adhere to. That, I think, closes the -- we deal with all the questions online. I'd be very happy to take questions from the floor. There are roving mics. If anybody is good -- in fact, I did check, I mean, it's 12:00. How is that for timing? Sure. I think that's the best we've done in the last 10 years. The only conclusion I can come to must be I can't stop blabbering and taking way too long dealing with these sections. So we did well to finish it off in exactly an hour. Happy to take questions.

I have a question here. Mweisho Nene from SBG Securities. Just to get a sense on the guidance again, I know you've already discussed it, but you said that you're expecting rates higher for longer that wouldn't necessarily drive a decrease, right, on your net finance costs. Are you guys potentially expecting any rate hikes in that time? Is that part of the assumptions?

We have got, I think, in our budgets, we do have an -- I think the 2 interest rate increases that we have modeled in our current assumptions.