Octodec Investments Limited (OCT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A very warm welcome to you for the financial results of Octodec for the year ended 31 August 2023. I will start off by giving a very brief overview of the Octodec portfolio for those of you that are new to Octodec. And then I'm going to go through some of our high-level results, after which time, I'm going to introduce to you Charlene Conradie, our Chief Operating Officer, who will talk to you specifically about residential. I think she could have some good news that she wants to share with you guys. And thereafter, I'm going to go ask Linda Chabula to come in. And she's responsible for leasing within our business, and she'll take you through the performance of some of the other sectors. And then afterwards, our Financial Director, Anabel Vieira, will go through the income statement and balance sheet in some detail. Afterwards, I hope to come back for some comments about the outlook. Okay, move on, [ Ilona ]. All right, thank you. Once again, for those that are newcomers to Octodec: Octodec is a business established a long time ago. And it's focused primarily for operation within CBDs of Gauteng. Interesting to note: When you see the results, I hope that our strategy, which has been continued for a good number of years without material change -- I may talk about that in my outlook. We are continuing along those lines. It is based on the premise that South Africa still enjoys a huge migration of people and potential shoppers from our -- and residential occupiers, for that matter, from the rural areas, towards the urban areas of South Africa; in this particular case, a movement from the rural areas to Gauteng. And that's really a basis on which -- one of the key cornerstone on which Octodec is founded. And we've gone through some very tough times and pleased to report that it appears to be -- and this is what I've just described to you, pleased to -- appears to be working well for us. And if we could move on, please. And here are some key highlights of the financial year-end for the year ended 31 August 2023: residential income slightly up by 3.3%, our profit for the year kind of stable at ZAR 610 million, our distributable income after tax slightly down by 22 -- by 2.2%, our cash generated from operations up by 14.3%, our distribution per share down by 2.2%, our dividend per share slightly up by 3.8% to ZAR 1.35 per share, NAV up by 4.1% and our loan-to-value continuing on a slight downwards trend to 37.7% from 39.2% last year. And my overall assessment of these figures is that, given the tough economic conditions in which -- all property counters [ are encountering ], I think that these results are pleasing. Obviously, as a shareholder, which I am, we'd like to see more, but from a future point of view, we don't see anything material happening that should detract from a continuing upwards trend. I'm now going to ask Charlene Conradie -- well, sorry. Before I do that, let's go through our allocation of properties between the various sectors. Interesting to note: Residential, that number is continuously increasing as the rentals and the performance of the residential sector are improving, moving from 31.7% of total rental income to 34%, and -- but as for the rest, it is approximately same, no major changes within the portfolio on both a rental as well as a geographical analysis. I'm now going to ask Charlene Conradie come in and talk to you about the performance of our residential portfolio.

Thank you, Jeffrey. So good morning, everyone. If you look at this slide. As you can see, we are extremely proud to report that we have achieved a 10.3% like-for-like rental income growth in the residential portfolio. This was mainly due to 2 reasons, the first being that, on average through the year, we experienced a decrease in vacancies compared to the prior financial year. We also achieved rental escalations on both our market rentals as well as our renewals, and this in turn achieved this 10.3% rental income growth. If we look at our vacancies. Our vacancies decreased to 5.2% at the end of the financial year. This is excluding The Fields. At The Fields, we have experienced higher vacancies throughout the year; and this was mainly due to NSFAS announcing a decrease in the NSFAS accommodation allowance at the beginning of the year. We did decrease some of our rentals to be in line with NSFAS' allowance, to attract students. We also had various marketing campaigns to promote these special rentals. However, students, once they decide on their accommodation at the beginning of the year, there's very little movement in occupancy for the rest of the academic year. We are currently liaising with industry peers on what NSFAS' allowance will be for the new academic year and what the accreditation process will be like, but unfortunately, there is no information available at this stage. In the meantime, at The Fields, we have implemented a quiet green rooftop area for the students to relax in. We are also busy constructing a events space for the students where we will hold social events, wellness programs. And we had various of these pop-up events during the year; for instance, movie nights. There was a quiz night. We had mental awareness workshops with the students. And it was very popular and well attended so we believe that this initiative will give us a competitive advantage for the new academic year in 2024. Just lastly, 2 more points on this slide that I just want to draw your attention to, the one being that, based on the leasing inquiries that we continue to receive, it is a good indication for us that there is still strong demand for our quality, affordable premier accommodation which we are well known for. If you also look at the net salary per application, it is a good indication of the quality of the tenants that we do have in our portfolio. So over and above the quality accommodation that we offer, we also continue to invest in the value-adds, one of that being the free uncapped WiFi in our buildings. And we have plans to roll out this offering to the remaining 11 small buildings in the portfolio in the new financial year. We also have, in most of our residential buildings, generators, which provides backup power during load sheddings or power failures, to make sure that common area lighting, the lifts, the water pumps and all of those services can continue. We are also rolling out more of our cashless laundry facilities. As I've reported previously, they are very popular amongst our tenants. We have completed the refurbishment of our common areas at Vuselela Place to make them more attractive and more contemporary. And we have a similar refurbishment planned for Ricci's Place in the new financial year. We have also implemented recreational spaces at some of our Pretoria buildings, which includes dry and play areas. And one of these can be seen in this photograph of Steyn's Place on this slide. Then lastly, as I've mentioned before, we are exploring different product offering to a lower LSM market. And I think Jeffrey will talk a little bit more about that later. And that concludes our residential overview. Overall very proud to -- with the results that we have achieved in this portfolio. Thank you. I'm going to hand over to Linda.

Vivian Greene writes, "Life is not about waiting for the storm to pass, but it is about learning to dance in the rain." We believe this statement to be true of the Octodec portfolio, as seen in the increase in the [ leasing ] activity in the various sectors within the portfolio and also within the challenging operating environment. In terms of the retail shopping centers, we performed very well. And we're seeing a very strong performance within the retail shopping centers, with the rental income growth at 5.3% on like-for-like and the vacancies having reduced from 7.4% in the previous financial year to 6.8% in the current -- in the financial year, as at the end of August 2023. To continue with the retail shopping centers. Our retail assets are located in the Tshwane and the Joburg regions. In terms of the Tshwane shopping centers, we've seen a strong performance from all the neighborhood convenience shopping centers, at a vacancy percentage of 0.4%, which is at an all-time low; the rental income growth at 5.3%. Speaking to the individual shopping centers and some of the highlights from each shopping center. Waverley Plaza, we've concluded a lease with Woolworths Edit. They are currently shop fitting, with anticipated trading date being mid-November. We've signed a lease with Vida e Caffè for 104 square meters. This is [ excited for the center ] because it's a fresh look for this concept. The center, as at the 31st of August, is at 98% occupied. In terms of Blaauw Village, which is almost fully let as at the 31st of August, we've signed a new MTN retail store. In terms of solar installation at the center, it commenced in June 2023, and we anticipate that completion will be in mid-November. In terms of The Park shopping center, it is almost fully occupied as well. We've seen renewals for Fishaways and Steers. These 2 leases renewed for 36 months at an escalation of 6.5% per annum. We can move on to the next slide, [ Ilona ]. In terms of the Johannesburg-located shopping centers, we've got Woodmead Value Mart, which sits at a rental income growth of 5.9%. The center is fully occupied. The center is known for high-caliber tenant with authentic brands at great value. We've concluded various leases with Jo Borkett, Overland, Salomon and Steve Madden. In terms of the solar project, it will be completed in November 2023. We are also busy with a project where we are improving the access into the area, as this area is a high-traffic area because of the value generated from the shopping center itself. In terms of Killarney Mall, we've seen rental income increase by 5%. We continue to focus on the tenant mix, and vacancies at the center are sitting at 17.4%. We are in the process of evaluating various proposals received from consultants for potential upgrades. In terms of retail shops, these are shops that are mainly located in the Johannesburg and Tshwane CBDs and also in the outlying areas. We are seeing a like-for-like growth in terms of rental income at 1.2%, with the core vacancies at 16.6%. In terms of these retail shops, we find that there is still a huge demand, to an extent where we have some of the national tenants waiting for opportunities in high-foot-traffic areas. In terms of the continued improvement, we've signed a few leases in the Joburg CBD and the Tshwane CBD. At Arlington House, we've signed a lease with Dunns. Education Centre, we've signed a lease with Dunns as well. At Nedbank Plaza, which is located in the Tshwane CBD, we've signed a lease with Standard Bank. And at Poyntons, we've signed a lease with Chicken Licken. This speaks to the demand that we're speaking about that's coming from the national retailers for the CBDs. In terms of the strategic capital projects, we completed a Shoprite development in the Tshwane CBD, with the remainder of Phase 2 to be completed in the 2024 financial year. We are continuing to explore the conversion of large pockets of space vacated by the banks into smaller retail stores offering different amenities to the community. In terms of offices, which are mainly split between government at 54% and other SMMEs at 42 -- 46.2%, what you will note, ladies and gentlemen: that even though the office market is challenging, we've kept the number of tenants flat. Also, in terms of rental income like-for-like, we've seen a reversion in terms of rental income. And this has been mainly because of the banks that have vacated, colleges where we've signed a renewal at a rental reversion. In terms of our vacancies, even though our peers have escalating vacancy percentages, you will note that our vacancies, our core vacancies, have remained flat. This also speaks to the demand that continues to be in the market for a product that's relevant to the market. We continue to receive inquiries from government and parastatal departments for additional space, and even though the operating environment is challenging, but -- it is still manageable; and this done through strong relationships. Government and parastatals continue to meet their payment obligations, although challenges are experienced with the city of Tshwane in terms of arrears. In terms of smaller offices, there is still demand for the SMMEs. The tenants are under pressure, but the occupancy levels are stable. In terms of strategic capital projects, we continue to explore value-adds such as WiFi, shared meeting rooms and boardrooms to attract and retain tenants. We are also in progress with the conversion of HealthConnect, which is about 4,000 square meters, in the Pretoria CBD, converting it into medical suites due to increased demand at Louis Pasteur Medical Building. The project is ongoing and it's anticipated to be completed in January 2024. In terms of our 6 largest government tenants by GLA, you've got the city of Tshwane at 12,000 square meters, special investigation unit at 12,000 square meters, the department of rural development and land reform at 9,500 square meters, the CCMA at 9,000 square meters, SAPS at 7,000 square meters and the national department of public works at 7,000 square meters. Thanks, [ Ilona ]. In terms of the industrial sector of the portfolio, we've seen an encouraging and an excellent performance in terms of rental growth at 8.6% compared to August 2022 where we've seen a reversion at 2.1%. In terms of our core vacancies, we've seen a slight pickup at 8.7% from 6.8% in the previous financial year. However, we are not alarmed. If we look at the vacancy post the 31st of August 2023, those vacancies have come down to around 7.7%. As I have mentioned, we are not alarmed. They will definitely let. Our industrial assets offer affordable rental options. They offer security and access control to industrial parks. And the majority of renewals are achieving escalations of between 6% and 8%. Our arrears are stable and under control. And we still continue to have strong demand for the well-located industrial assets, some of which are fully let. In terms of our capital projects, we've recently completed solar power installation at Sildale Industrial Park. And we have 2 industrial parks with solar power to provide uninterrupted power supply to our tenants -- and investigating further solar options at other smaller industrial parks. Thanks, [ Ilona ]. In terms of vacancies by sector and our focus on the core vacancies, [ we're seeing ] the offices that have remained flat compared to the previous financial year; the retail street shops, which have reduced by 16.6%. And it is important to also report that, in one of our buildings where we had retail street shops, we've had to mothball a section of the particular building; and that is also contributing to the reduction in the vacancy. In terms of retail shopping centers -- sorry. [ Ilona ] -- we're seeing the reduction from 7.4% to 6.8%. And the 6.8%, in terms of the Tshwane shopping centers, it's mainly smaller offices. In terms of industrial, as I've spoken to in the previous slide, a slight uptick, but we are not alarmed, once again, ladies and gentlemen. In terms of residential -- the reduction in vacancies, as Charlene has alluded to. We can go on to the next slide, in terms of our lease expiry profile. The majority of our leases are typically of a short-term nature, with lease periods of 12 months; and these are typical of residential and small to medium-sized enterprises. This profile is in line with historical trends and expectations. In terms of the non-national tenant leases, they are typically from 1- to a 5-year term. And the national tenant's lease is typically 3- to 10-year term. In terms of the average stay in the residential space, we are looking at 23 months, excluding Hatfield. And the Hatfield market, which is traditionally student [indiscernible] market, the average stay is 10 months. In terms of the commercial tenants, the retail shopping centers, we're seeing on average 93 months; for the retail shops, about 55 months; and the offices about 36 months; and industrial at 43 months. An update on leases above 3,000 square meters that have expired in -- pre August 2023. At 28 Church, we have the National Prosecuting Authority. We have concluded the renewal for a 3-year lease at a 6% escalation per annum. In terms of Cuthchurch, the Gauteng City College, the lease is -- the renewal is under negotiation, with the tenant choosing to remain on monthly tenancy before deciding on a longer lease after student registration in January 2024. The City Property Administration lease has been concluded following the finalization of the management agreement with City Property. At Gerlan, McCarthy, for 3,855 square meters, we've received a counteroffer of ZAR 470,000 per month. And we await a market valuation from an independent valuer in order for us to conclude the negotiation. In terms of same of the leases expiring in 2023 and 2024. The CCMA place, CCMA as a tenant, the lease expired in September 2023 and has been extended for 8 months at a 6% escalation, while the tenant is finalizing their tender process. The Marlborough House, the CCMA as the tenant, the lease has been extended for 8 months at a 6% escalation, while they are still finalizing their tender process. At The Fields, Seda [ which occupies ] 6,500 square meters, they are still in the process of restructuring. And the renewal negotiations have not started. However, the lease allows for a 10-month extension at a 7% escalation. Rural development at Centre Walk. Even though the tenant have indicated that they would be relocating to their newly constructed buildings, the renewal conversations have not yet started. The Fields, City Lodge, the negotiations on the renewal, which is in August 2024, has not started. And we will start having the conversations closer to the renewal date. In terms of reversions by sector, the retail shopping centers, residential and industrial sectors have experienced a positive reversion on both new leases and renewals. We have, however, experienced negative reversions on retail street shops, which were largely attributed to a national retailer and a hotel renewing leases at negative reversions of 39% and 40%, respectively. In terms of the office space, the sector remains in a challenging environment because of the oversupply of office spaces. We have negotiated a renewal with colleges at a rental reversion, hence the impact on the figures. We'll continue to focus on tenant retention as it relates to the office sector. Thanks, [ Ilona ]. In terms of our collections as a percentage to the billed rentals, in terms of commercial, we are sitting at 98.5%; and residential at 99%. Thank you, ladies and gentlemen. Over to you, Anabel.

Thank you, Linda. Good morning, everyone. I would like to take you through our distributable earnings and some highlights on this slide. So as Jeffrey and Linda and Charlene all have pointed to, our revenue line increased by 3.3% compared to the prior year. That is despite the hard and difficult trading conditions we are experiencing. However, it is important to note that on a like-for-like basis, that is excluding the buildings we have sold in the prior year, which was a considerable number of buildings, we have grown 4.1%. So in the tough economic conditions that we're experiencing, it is we are very happy with the growth in our revenue. Included in sundry income are 2 nonrecurring items. There's basically 2 claims from our insurance, 1 for a business interruption relating to our COVID period; and another, smaller claim for damage to our buildings in prior years. Looking at our property operating expenses. We have managed to keep that at an increase of 5.3%. Our biggest contributors to this line item were our repairs and maintenance, which we've spent ZAR 105 million in the current year compared to ZAR 87 million in the past year. We've also been impacted, although to a much lesser extent than many of our competitors, [ with ] generator costs adding up to net generator costs of ZAR 12.2 million -- sorry, ZAR 11.2 million. And another big contributor to this cost is our free WiFi which we provide to our residential buildings and some of our office buildings now, which is also -- tune of ZAR 12 million. However, this -- the benefit of the free WiFi is really reflected in our good performance from our residential sector, so we are reaping the benefits, however, on our top line. Also very important to note here that another contributor here is a slight increase in our bad debts, which increased from 1.6% to 1.7%. However, I think this, for the kind of market that we operate in, is very, very well managed. And I think our credit control [ department ] has really done a sterling job in maintaining our bad debts at this level. That gives us net property income of ZAR 940 million, which is 2.5% (sic) [ up 2.5% ] on prior period. And distributable profit before finance costs, so after our admin and -- admin costs and our share of income in our joint venture, has remained almost flat at ZAR 841.6 million compared to the ZAR 835 million in the prior year. Our finance costs have also climbed slightly by 3.4%. This has been shielded, obviously, by the fact that we are hedged to the tune of about 80%. However, an increase here is also due to the funding that we provided to our joint venture in the prior year in terms of [ cycling ] our external borrowings, but the return on this is really reflected in our share of income from our joint venture in the line above. So after that, we've got distributable profit before tax of ZAR 460 million, 1.3% down on the prior year. And after a smaller tax exposure of ZAR 4 million, it's down 2.2% on the prior year, which I believe, in the current economic environment as -- we managed to contain this and keep it to a minimum decrease. And that leaves us with a distributable income per share of 171.2% -- ZAR 1.712 compared to ZAR 1.751 in the prior year. So before I leave this slide, I think I'm just going to point out a couple of things. I've done an exercise recently going back to 2019, so before COVID hit us, and comparing where we are to that time. And we've just basically caught up in terms of our revenue line and we are reflecting the same numbers as 2019. However, our property expenses have really galloped ahead of us, and that has impacted our distributable income, so in terms of distributable income, [ we're off ] 85% compared to our distributable income in 2019. So still a long way to go. And we're trying to manage this through improving our top line and basically managing our expenses and containing that. I just -- a few highlights on our statement of financial position. So the biggest asset on our balance sheet is obviously our investment property portfolio, and that has increased by ZAR 200 million. The increase is really a direct result of the upward revaluation of our portfolio to the tune of ZAR 179 million, and we'll talk about that figure a little bit later on. Also, our investment in our joint venture, which is also property-driven, that's decreased by ZAR 3 million. It's really just a repayment of the loan advanced to it at the end of last year. And in terms of our current assets, those increased significantly but bearing in mind that included in the ZAR 343 million is ZAR 113 million worth of cash and cash balances. The rest is also represented by a shift in our derivatives, an increase in derivatives; plus a shift from the noncurrent to the current portion of our assets. The remainder of our current assets is represented by our trade receivables. And we are happy with our trade receivables as they stand at the moment. There's been a slight increase to 4.2% of revenue compared to 3.3%. However, the arrears here are really focused on our commercial tenants, a couple of arrears in our government space which have subsequently been settled or at least partly settled and one commercial tenant which we believe will fully recover at the -- before the end of our calendar year. Looking at the liability side of our balance sheet. And borrowings have basically remained unchanged. The movement is really just the allocation between noncurrent and current liabilities. And our trade and other payables has increased from ZAR 393 million to ZAR 416 million, where included in the -- is ZAR 88 million worth of tenant deposits as well as ZAR 59 million worth of rents in advance. That's obviously going to be recognized in revenue in September, so the remainder of our trade payables just represents [ our normal ] trade accruals and trade payables. With that said, it leaves us with an equity of ZAR 6.6 billion as at the end of August '23 and a net asset value of 0.2424 (sic) [ ZAR 24.24 ] compared with 0.2328 (sic) [ ZAR 23.28 ] in the prior year. And our LTV has been brought down from 39.2% to 37.7%. And what's driven that LTV down is basically the increased value of our portfolio, which went up by ZAR 200 million; as well as the movement in the interest rate swaps and cash on hand, which reduces our debt. And that's the way we've achieved the reduction from 39.2% to 37.7%. All right, just looking at our dividend policy. So Octodec's dividend policy has not changed from the prior year. It is premised on the basis of retaining sufficient funds in order for us to carry out our maintenance projects as well as our developments and refurbishments. It's also important for us to maintain a strong balance sheet with an loan-to-value ratio that is acceptable to us and maintaining a distribution of at least 75% so that we can retain our REIT status. And most important is also taking our shareholders' expectations into consideration. So with that said, the Board has approved the final dividend of ZAR 0.75, to be payable to shareholders in November '23. And that brings our total dividend for the year to ZAR 1.35, an increase of 3.8% on the prior year, a dividend of ZAR 1.30. All right. Then a couple of highlights on our investment property, which is obviously the basis on which we derive our income. And so as I mentioned earlier, our valuations increased by ZAR 179 million; and the prime driver of this increase was really just rental income. And that to us is very positive because it's not impacted by any of the other factors but a big contributor coming from our rental. And in terms -- in line with our JSE listings requirements, we've had 1/3 of our portfolio externally valued, so in the current year, 87 properties were externally valued. That represents 87% (sic) [ 25.4% ] of our properties in terms of number as well as in terms of value of the total portfolio. And I'm happy to say that there were actually no significant or major differences between our external valuations; and the internal valuations, which were valued at ZAR 11.2 billion, including 100% of our JV. [ All right. So you all ] basically are familiar with, from a valuation perspective, we use a capitalization-of-income method to value our portfolio. We find it a lot more practical because of the short-term nature of our leases. And with that, the 3 most important inputs into our valuation is our capitalization rate, our long-range vacancy factor [ analyzed against the ] expense ratio. And those have basically remained the same, with our capitalization rate actually remaining unchanged from the prior period. Even though a large number [ of our buildings ] -- the capitalization rate was increased, with most of our buildings really remaining in the bracket of 10.25% to 11.5% of cap rates. So the positive here is that some of our [ big star ] performance, like our shopping centers, et cetera, haven't been impacted by higher cap rates. And that's remained at 9.8%. Our vacancy factor and our expense ratio has ticked up slightly, obviously due to the increase in the cost base of our property expenses. All right. And then just a quick synopsis of our cash flow for the year; so like Jeffrey mentioned right in the opening slide, a strong cash generated for our -- from our operations. We started with ZAR 66 million at the beginning of the year. We've earned ZAR 863 million from operating activities. From that, we've used it to repay finance costs of ZAR 415 million; and also paid our dividend, in November and in May this year, of ZAR 372 million. And we've had a net movement in our investment property portfolio of [ ZAR 20 million ]. And with a small change in our net borrowings, it's left us with ZAR 113 million of cash on hand at the end of the year. All right, just a small analysis of our borrowings. So most of our borrowings comprise bank loans, to the tune of ZAR 4 billion. And we've got a small exposure in our DMTN market of ZAR 330 million, bringing our total borrowings to 4.3 million -- ZAR 4.3 billion at a weighted average cost of 10.4%, but however, we are hedged to the tune of about 80%. And that's benefited us in the current year, bringing our total cost of borrowings to 9.2% and the cash to the total of ZAR 735 million, allowing us to basically settle our maturing debt, if necessary, and also [ flowing that ] into our redevelopments. All right. And so this slide, yes, basically just present the split amongst our lenders. And as I mentioned earlier, most of it is really with normal bank loans split amongst 3 different banks, Standard Bank, Nedbank and Absa; and a small exposure to the DMTN market. This has really remained very stable compared to the prior year. [ We can see very little shift there ]. I'm happy to say that all the borrowings from Nedbank that were due to expire all at the -- during '23 and '24 have all been refinanced for a period of 2 to 5 years. We've also refinanced 2 facilities with Standard Bank, 1 of them being the -- in a note in the DMTN program. That's been refinanced by a normal loan. And we've also refinanced another loan, which was maturing in 2024, for a period of 4 to 5 years. And we continue to refinance our DMTN notes. And very recently, we've refinanced a ZAR 50 million note that was due to mature at the end of October. We've refinanced that with a ZAR 100 million note. All right. Also important to note here that we've moved our DMTN program from our subsidiary Premium Properties to Octodec. That's basically as -- the positives there is that our noteholders now really have the full exposure and transparency to all our holdings in Octodec investments and also makes it -- the administration of this program a lot easier being in a holding company. Good. Looking at our expiry profile, so -- and with all the refinancing that we undertook in the current year, being a very busy year for us, we've refinanced our loans. And our expiry term has now increased to 2.9 years, ranging from 2024 to 2028. We are also busy engaging with our funders to refinance what's maturing in '24 and some of '25, also looking at longer periods [ over year ]. All right. And as I mentioned earlier and -- we are hedged 80% with swaps that are expiring between the periods of '24, '25 and '27. We're continuously looking at our interest rate swap curve, looking for the opportunities to either take out a new swap or to extend the period. [ Even the costs ] at the moment are just not attractive. And we don't want to lock ourselves into high costs when we believe that we are reaching the peak in terms of interest rates, okay? It's also important to note that, right at the beginning of the year, and I'm sure we've mentioned this in our previous presentation, we took out a forward-starting swap, ZAR 500 million, which was to cover the swap that's just recently matured in October and that we took also at a lower rate. All right, next slide, all right. So that brings me to the end of our finance-related issues. And I think it's also important to deal with our environmental, social and governance, our ESG, reporting. Octodec sees ESG in a very serious light. And we do and embed this in everything that we do at Octodec; and also at City Property, who really manage the assets on behalf of Octodec. So from an environmental perspective, we've really put a lot of focus in terms of our solar plant installations. I suppose that the increased [ loads ] of load shedding have all forced us into this direction. So not only reducing our greenhouse gas emissions but at the same time reducing our costs and also our dependency on Eskom. So basically just a summary of where we are with our solar projects. In 2021, we installed our very first project at Waverley Plaza. And that's really shown significant results both in terms of cost reductions in our property there, with the electricity. And in 2022, we completed The Tannery, an industrial park, also showing significant results there in terms of cost savings. And in the current year, we rolled out 3 solar projects, [ 3 at our ] shopping centers, Blaauw Village. And the other one is Woodmead shopping center, and 1 at our Sildale Industrial Park. These are all in the process of being completed. And [ we issued -- or keep our ] completion date [ now ] at the end of November. Unfortunately for Octodec, a lot of our buildings are CBD-based. They are tall and they are narrow. And they're not really conducive to installing solar power, but where we can and specifically in small retail space and industrial spaces and even certain office spaces, we are considering the smaller projects in terms of solar power and increasing that in the course of coming year. So a lot of focus has been spent in terms of energy due to load shedding, but now we basically have arrived at the time where we're also suffering from water outages, [ with our councils ] really battling to provide the service, including rainwater, so we're looking at also alternatives to supply water to our residential buildings. All right, that's the environmental part of it. However, to Octodec, it's very important also that we support the communities in which we operate, so Octodec started a few years ago, being one of the very first companies, to convert our old, dilapidated office building into residential. And from there we've continued to turn our cities into attractive -- or, well, CBDs into attractive CBDs; and converting many office buildings into residential accommodation, providing affordable accommodation to our CBD dwellers. This, however, is part of our business model, so that is the way we earn rental, but over and above that, we also have the passion to impact our communities in which we operate. And we've over the years been involved with many, many projects. And I'm sure you can read all about it in our interpreted report, but we are very happy to share with you 2 exciting projects that we've partnered with very recently. And we're hoping that they will be soon reaching conclusion and rolling them out in the beginning of our financial year, but one is education, where we've partnered with one of our long-standing beneficiaries, Cotlands, where we're establishing an early childhood development center in one of our buildings. And this is to provide our tenants' children with qualified staff in a nurturing, educational environment. And if that works well, we certainly intend to roll this project out to further buildings in our portfolio. The other one that we're very excited about is that Dis-Chem is trying to roll out a new product and providing an accessible inner-city clinic in Tshwane. So the [indiscernible] field. This service is available to the people who live in the CBD. The vision behind this clinic is to offer health care services that are affordable. And this will all be appointment-based visits, reducing the need to -- for patients to sit in and to endure long queues and walk-in visits. So we are upgrading a dedicated space that we will provide to this scheme, rent free for a period of 5 years. All right. And with that, it brings me to the end of the presentation, so I'm going to hand over to Jeffrey to deal with the outlook. Thank you.

I just want to pick up on perhaps where I left off early on in my little, short presentation. And that was I am fairly comfortable, given the tough economic conditions in which we are operating, that these results are reasonable. Obviously we'd want greater growth and perhaps [Audio Gap] growth, but as to the future, I think we will continue doing what we've done. And there's no single event that is in top of our mind at the moment to indicate to us why we shouldn't continue to grow, albeit at a slow pace. The darling of our results was residential with a 10% increase. I think that there is still, there are still [ legs ] in the sector. Residential is -- our flats are a lot fuller than they were, which takes away some of the growth opportunities, but we are starting to show our ability to increase our rentals per unit a little bit more than we have been in the past. With regards to negative reversions of retail, I think we do -- in our retail, there are these leases that do come across our desks, but I think that we are taking a much tougher stance on these kind of deals. And where we have well-located, strong retail, the -- we are pushing back a lot harder than we have in the past. And we're finding less and less of a necessity to grant rental reductions on the renewal of lease. One of the problems that we have and continues to be a little bit of a problem for us is the residential -- the financial institutions are reducing their size, specifically the banks. And it's sometimes hard to remodel a bank, a large-format bank, into the kind of size that a bank wants today. Typically the large-format banks ranged from approximately 2,000 to 2,500 square meters. Now they're wanting a [indiscernible] CBD quite aggressively. And they're wanting to shrink that format down to about 300 square meters. This is one of the problems that we have to deal with when we come up with solutions for Killarney Mall. Killarney Mall has some large banks on the lower level, but how do we remodel the lower level to accommodate the future needs of these banks? But pleasing to note that in the core CBD in which Octodec controls the bulk of it, certainly in Pretoria, there is -- we've sort of noticed a -- very few retailers wanted to give up their leases. And they now come to the realization that they're going to pay to stay. And when we were tough with these retailers, we definitely have noticed more willingness or bigger willingness of the retailers to sit down around the table and negotiate. I think, the last time we met, I expressed the view, and I think I'm right, that as a business, Octodec, we cannot become negative and do nothing and just become a [ rent-collecting ] business. And so we are aggressively looking, hunting opportunities; and there are opportunities out there to expand our business. Examples of this would be the Shoprite Checkers that we remodeled fairly recently. We're now busy with HealthConnect, which is the extension of our Louis Pasteur offices into an adjacent building that we've owned, Octodec has owned, for many, many, many years and was occupied by government. Government moved out some time ago and we have now taken the decision, construction well underway for completion January, February next year, to convert it into medical suites. Initial indications are that there's going to be a strong demand. This was originally based on the realization that there was a very strong demand for these kind of offices in -- or not offices, rather medical suites, within the main Louis Pasteur building itself, so I think that, that is going to go well. And now we are about to launch and finalize a new residential product, which is a product that would -- that is aimed at a slightly lower LSM tenant, somebody who doesn't quite -- is not able to afford the kind of rentals that a typical residential offering requires, but a few hundred rand less. And we've come up with a product which we will release to the market fairly soon. There are 1 or 2 little technicalities that we need to still finalize. It's not a hell of a lot of money. It's somewhere between ZAR 35 billion to ZAR 40 million. And I think it was in Octodec's -- well within Octodec's balance sheet's ability to do a proof of concept to see how well this rolls. It is true that Octodec does have big vacancies in what we call mothballed buildings. The sale of these buildings would be ideal, but in the given -- given the current economic climate -- not easy to sell these kind of buildings within CBD or in the Johannesburg or Pretoria. Not only aren't that many entrepreneurs willing to try this kind of work, but also the banks pose a problem in the sense they're not willing to finance many people wanting to experiment or play in this -- in the city center. I am very confident with this product. A lot of work and a lot of thought has gone to it. And I hope that [ I would come ] to the market with news of this. It is a complex -- or it's previously a -- has the school, 4,000 square meters. And -- but at the same time, I'm not willing to destroy our brand. And so we will always recognize the importance of respecting our tenant and give a quality product but obviously not quite the same as what we call [ a brand is all in place ] and which has gone down fairly well in the market. With regards to guidance. [indiscernible] guidance. We don't see -- we certainly believe that we should be able to develop at least what we've currently done plus another 3% to 5% on top of that, yes. Not much more on my side, but to those of you that see opportunities within Octodec -- and there really are opportunities, but you're going to believe in the future and perhaps believe in miracles. One must. I invite you all that are attending here to please contact Instinctif, our investor managers, to arrange walking tours so that you can see and understand better some of the positivity that I know that I personally still show. Before I say goodbye and end my little presentation, I want to introduce something to you that happens in the background but we never really talk about. So [ Ilona ], if I could ask you to flick to the back of the appendix. And here's something that's very topical at the moment. Octodec owns a number of buildings very close to Church Square -- and Paul Kruger statue is on that. And we thought that this provided Octodec a fairly unique opportunity to take advantage of our recent win at the World Cup. Some of the thinking behind that is that we need to ensure, which I think we've done successfully, ensure that our engagements with our tenants that occupy these areas is very positive. And I think that the business is certainly viewed that way. I think it's important that we create and we develop communities within the areas in which we operate. And we came up with the idea: Why don't we place Paul Kruger up in a green cloak? We've seen -- it should be on your screen now, with the number "6" on his back. You can't see that -- 6 being the jersey worn by Siya Kolisi. And the amount of positive communication that we received from people operating in the area as well as others was, in the main, exceptionally positive. And I think that this kind of work -- and I'm not, we're not dealing with some of them, but certainly the work -- Anabel spoke about some of our CSR initiatives. The early learning center as well as the clinic and the partnerships with various people that we've established over time has gone a really long way to making sure that our tenants see us, view us in a positive light. A lot of work -- we don't always disclose it, but a lot of work goes in from our offices to make sure, to the best of our ability, we're ensuring that people are always on our side. And that really concludes -- I just wanted to share that little bit of fun with you, but that concludes our formal presentation. I'm now looking forward to hearing and engaging with you on the Q&A session, but please -- my advice to all of you that have got some interest -- some of you know us really well and understand what we've been talking about, but those of you that don't have a -- just not quite sure what we've been speaking to, please contact us either directly or through Instinctif and arrange walking tours, [ best tours ]. I'm doing it all the time. You must remember that our buildings are concentrated, and so for us to show you a reasonable percentage of the portfolio is fairly easy to do. It's a lot more difficult when the property is located all over the country, sometimes even in other places in the world. And on that note, I wish to say thank you for spending time with us.

In terms of the Q&A, the first question -- a couple of questions from [ Seleka Marwe of BTGI ]. The first one is has the portfolio not been impacted by the explosions in Johannesburg. And the second question, which I'm going to combine with a couple of questions from [ Albi Saleus of Salandia ], et cetera is the risk impact of office conversions into residential, for the portfolio. A little bit more about the question is redevelopment of office takes time and needs capital. What is your target rate of return on that capital and versus using that capital to buy back shares? What's the rationale there? You're muted, Jeffrey.

Charlene, if I can ask you to deal with the first one. And that's the impact of the recent gas -- can you hear me now?

Yes.

Yes.

Charlene, can I ask you to handle the first one? And that deals with the recent gas explosion. And I suppose, add to that the fires that have -- the [indiscernible] fires that happened in the Johannesburg CBD. What impact did that have on our business? I think it's an important question because I -- well, I'm going to leave that question to you, yes.

Okay. So in terms of the gas explosion on Bree Street, it has not had any structural effect on our buildings. We quickly had our maintenance engineering department out there, after the gas explosion, to inspect our properties because there was quite a few of our properties situated close to the gas explosion, but there was no structural damage. Initially as well, some of our buildings were closed, but they were quickly opened. And we had some water interruptions and some power interruptions, but those were quickly resolved. In terms of vacancies, we do see increase in some of the buildings that is close to where the gas explosion was, but because of the volume of apartments that we have in the Joburg CBD -- there are close to 2,000-odd units. The impact is not significant, but there is uptick of vacancies at some of our residential properties. We are also communicating closely with our insurance providers in terms of managing any insurance-related aspects surrounding loss of business, et cetera. On the commercial side, we've only had 2 tenants that stopped trading. One was already on a monthly lease, so there was -- potentially he was not going to stay -- remained on. And the gas explosion wasn't necessarily the cause of it. But that's the extent of the impact on our vacancies at this point.

Thanks, Charlene. There was a question that related to -- I don't have it. I can't see it in front of me at the moment, but a question related to hurdle rates on conversions and risk thereto. I -- you've got to understand that we know the areas in which we operate. We know them well. We know where the potential -- the no-go zones are. We know where the [indiscernible]; fully aware of the fact that we can't go and develop, convert rentals -- convert office blocks into residential because the yields aren't always there. The cost of construction has soared in recent years astronomically, without a commensurate increase in our residential rentals. This doesn't always have to be the case going forward, but I did speak about, I am very excited about we worked out a way to produce a product at a much lower cost than previously was the case. Obviously there's a reduction in some of the facilities, but I don't want to release all those, that good stuff, until we are ready to do that. But I would guess that we [ want ] well in excess of 10% before we go into -- undertake such a conversion. Just as a thought, that one of the things that's still a problem in this country is a running shortage of accommodation. Yes, it can be argued that the -- there is a shortage, but is there an affordability issue? Are there enough people that are able to afford a [indiscernible] type of quality [indiscernible] the type that we provide? And I think that there is. There is still such an excess of demand over current supply. And we see some of our competitive -- competitors in the market at the moment, and they are -- I think they appeared to be doing it. So there are opportunities, but you'll -- you choose your opportunities very, very, very carefully. It also must be remembered, for us, the -- we work in an ecosystem, so the more residential we bring into an area, well, the more our retailers are going to benefit. The more deals that we can do -- and that's why government-type deals are good for us, because it's good for the rental, but it's also good for the number of employees that they employ because they then bring additional turnovers into our -- either our retail or our residential offering. I don't know whether I've answered all the questions. Bryan?

We'll come back to that question. I just want to move on to again 2 related questions on this [ asked on ] The Fields. First, from [ Nazeem ] of Investec Securities. What does the 23% vacancy at The Fields represent in terms of monthly billings? What could be potential in a couple of -- be if vacancies at The Fields improved year-on-year? And then from [ Matthew Marder of Alpha Private Capital ]: What is the impact of the NSFAS funding-led vacancy on rental net income for the portfolio? Presumably that's on, call it, the whole of the residential portfolio.

Okay. So to answer the question -- it's a difficult question. And so in terms of the NSFAS impact on the portfolio, if I think about it. So in terms of income, our income is made up of a few elements, right? So at The Fields, we have different rentals. So we don't typically just have a [ per-paid ] rental. We have certain students that take a whole apartment. Certain students want a private room, which can typically have 2 beds, so there are all different variations of the rentals we offer, but to give you an idea: We're also expecting that NSFAS will approve allowance with inflationary-type of increase at -- as a minimum, so -- but to give you an idea: On average, we had 200 more vacant units this academic year -- or this financial year compared to the prior year -- financial year. So if you take 200 units at a rental NSFAS allowance of 4,500, that would give you an indication. And it's -- remember NSFAS pays for 10 months, so if students only move in during March, end of November, it might be shorter than 10 months. That will give you an indication of the annual income opportunity in the portfolio, if that makes sense. I hope that helps. In terms of The Fields as a percentage of the whole portfolio, I don't think it has that significant impact. It does have because it's our biggest asset but certainly not the biggest impact on the residential portfolio as a whole.

Thanks, Charlene. A question relating to Killarney Mall, from Charles from Titanium Capital. It seems that the vacancy in this asset continues to increase, and Octodec seems reluctant to reposition or upgrade assets just yet. Does Octodec not need to make a decision to either exit the asset or to reposition the asset? How far down the line are you making this call? And is repositioning viable given the competition from [ modes ] such as [ Rosebank ]?

I -- my thoughts on Killarney Mall. I think Killarney Mall remains for us a -- well located, easily accessible, great visibility, in proximity to a big number of high LSM -- not work -- LSM people that live around the area. And I think that's why so many questions are coming out from the investor community as well as others who are interested to hear on Killarney. We recognize the ability of Killarney to be remodeled. We spent a good 4, 5 months recently, fairly intensive debate to come up with a solution. The solution is in the region of about 4 to -- ZAR 3 million to ZAR 4 million -- ZAR 100 million. Really difficult to make a decision within the Octodec balance sheet with those kind of numbers, but it's something that we need to do. As to the sale of Octodec, I will not merit [indiscernible]. To sell an asset like this and of this size in today's market, it's not easy. And it's been like that for a good few years, but it's certainly, rest assured, receiving a lot of attention at the moment.

Another question from Charles. Just in terms of office, do you consider it a long-term -- an attractive long-term property segment? It seems that the oversupply will take a considerable period of time to be absorbed given the state of the economy and work-from-home trends. Your thoughts?

Yes. So I -- we are not and haven't ever been great -- we don't like offices, one of the reasons being is that offices historically for us have always resulted in -- it's the nature of offices. Big tenants demand, "Well, at expiration of the lease, we'll have moved out." A lot of work to be done in terms of a [ TI or 2D ] model [indiscernible] all the money that you've earned in rental for the duration of the lease, you then plow back in terms of a [ TI ]. And you never really break out of that circle, especially when rentals like there are, and have been through a number of years now, when they're relatively flat. It must be remembered that we don't have these kind of typical office blocks within the portfolio. Our portfolio is divided roughly in 2 parts. 1 part is government work. And government [indiscernible]. Nobody is disputing it, but I -- from where we sit, government has been a model tenant. They've always paid their rent, albeit not timeously. And [ to a deal ], you need special people in the office that were able to do deals because, [ these deals, they go ] on and on and on, but eventually they do get done. I don't think we will be investing in offices. [ Today, I ] have a choice to invest in offices. I don't know. The whole office -- viability of offices today has been complicated by this COVID and this work-from-home story. I would imagine most businesses out there, the bigger corporates, when those leases come to an end -- but we're not there, so my opinion is just a guess. A lot of those corporates will realize, well, they don't need the kind of spaces that they do. And they would -- at best, they would shrink their current [indiscernible] their current office requirements. We are going to find [indiscernible] at the moment. [ Where are we ] going to find corporates [indiscernible] to move into those spaces? I don't know, but I think a lot of the listed spaces [indiscernible] what to do long term with these kind of assets. Our assets -- so we have a lot of mothballed. You obviously purchase [indiscernible] the purpose of buying office but with the intention of converting these offices into residential. And if you have to visit our mothballed assets, you would notice, in the main, most of them would meet the requirements that are suitable for [ a conversion ].

Just moving along, another question from [ Albi from Salandia ] again. What is the split between properties held for redevelopment and those held for sale? And then why do you consider redevelopment of properties while the stock is trading at 1/3 of NAV? Should you not be selling the properties rather and leaving the redevelopment to others? Yes.

I -- not easy to -- if I understand the question: not easy to sell and leave the redevelopment to others. I think we still have enough people smart enough to tend to this kind of redevelopment fairly well as well as the management thereof, so I just don't think -- I would love to be able to sell these properties because it hurts Octodec when we've got vacant buildings, not in terms of current costs but more in terms of opportunity cost. To have assets tied up in areas where it's not income producing is hurtful to distribution growth. There was another question that just slipped me from -- in time being, but the first question -- the first part to that question. Just help me, Bryan. From [ Albi ].

So the first question was...

I think it related to share buybacks.

Yes. Could you -- would you not like to take...

Yes. So why don't she -- Anabel, do you want to handle that one?

Thank you, Jeffrey. So look. We have spent quite a lot of time looking at the alternatives of doing share buybacks, but share buybacks really work in a short term and they not work in a long term for the sustainability of Octodec. So in order to do a share buyback, we'd have to go and sell our assets. And what is available for sale, and there is significant list of them, are not our prize assets. Those are difficult-to-sell assets and our buyers are specifically finding it difficult to fund the acquisition of those assets. So we could sell our prize assets. That would be quite easy. I'm sure that, overnight, we could sell some of our good, well-located assets. However, we'd get left with a portfolio that is not really contributing to the bottom line, so we solve one problem in the short term, but we've got a problem in the long term. So we've looked at all those things and we really believe that disposing off what we've ringfenced to dispose is the best strategy. It will take some time, but we hope it's going to find some momentum in the short term; and that -- with the interest rates coming down, that we will find a couple more interested purchasers to buy those properties. And like Jeffrey said, we're looking at the development opportunities. We have these assets. They're not costing as much money. They're -- not value that much, but there is opportunities there. We're looking at really the costs of development, making sure that they give us a marginal yield that we like, and to then go and develop it. So HealthConnect to us is one of -- well, Shoprite, was the first one, but HealthConnect, coming up. And then with the conversion of the residential buildings to the lower LSM market, I think that really poses a good opportunity. So I think to us, in the short term, that is our strategy. We're certainly not ready to entertain a share buyback at the moment. We don't think it's good for Octodec in the long term.

Another question from Charles from Titanium. Can you give some insights on why the average stay in retail malls is so much higher than in retail shops?

I'm happy to take that one. I think it relates to the type of tenant that moves into a shop, a retail shop. This is the type of tenant that's going to move into a mall. A type of tenant that moves into the mall generally is -- and I'm going to include in malls. I want to include our type of shopping centers, our convenience centers. Those are sophisticated operators that [indiscernible] they are comfortable because they put down a lot of money in terms of the investment. And so they're going to not want to sign a short-term lease. They're going to sign a long-term lease, where in some of our shops we've got operators who are -- they're sophisticated, who are opening up their stores -- [ lease ] their smaller stores. And the type of CapEx that they're putting in is a lot less, so they are happy to take a chance given the size of their investment in those shops, but having said that: In the core of the -- both the Pretoria and Johannesburg CBD retail spaces, those tenants realize that, their space, if they give it up, it's gone. It's gone for good, so we have many tenants at both Johannesburg and in Pretoria that, certainly from my own memory, which is a long time, these tenants have remained there even though they are outside the malls or the shopping centers. I hope...

So just to move on to the next question -- I think you did answer it -- from [ Zaid from ANF investment management ], just in terms of admin costs in the income statement reflected ZAR 103 million. Impairments to City Property reflected at ZAR 223 million in related-party transactions. How do you account for the difference? Is it inclusive of the incentive fee? And if you could please provide clarity on the hurdle rate used. A follow-up question there was that, if one uses the ZAR 223 million as total admin costs, does the admin cost to ratio (sic) [ admin cost-to-income ratio ] change from the stated 5.1% to approximately 11%.

Anabel, I'm going to -- I don't know if you've got that detail in front of you, but I'm going to ask you to handle it.

Well, not in front of me but in my head.

Okay.

So yes. I think, for those of you who don't understand the assets and property management agreement: Octodec has no staff, absolutely no staff, except for balding managers; company Secretary; and very recently, a compliance officer. So all the services performed or that we have to carry out on our Octodec buildings are performed by City Property. That includes collection fees. That includes commissions on the leasing of our properties. It also includes the commission that is charged on the repair work and developments and the buying and selling of properties that City Property carries out. Because obviously Octodec has got no staff to perform those services. So in line with that, included in those related-party transactions are letting commissions, collection commissions, et cetera. Those, we view all as property operating expenses. We would have had people doing that, so we're paying City Property instead. So those are reflected in our property operating costs. And what is sitting as an admin cost paid to City Property is really the asset management fee, which is that fee which is basically based on the share price and the loan-value, which is subject to a minimum; and also our supervisory fees and shared resources. So Octodec employs, for example, internal audit, risk officers, center managers, et cetera. And those costs are shared on a ratio basis between City Property and Octodec, so they are reflected in various parts of the -- of our income statement. And maybe just to answer the question of our total increase in our corporate costs, which I think there's a few questions leading to that, [ as I think it's ] additional fee -- the hurdle fee -- or the incentive fee based on the hurdle rate paid to City Property was only ZAR 6.7 million, so it is a small amount. Although, it is significant in this year, relates to the prior year. And it's not the only cost that's gone up. It's been an increase across the board, so in the current year -- and I'm just going to highlight a couple of items. We've had quite a big increase in our professional fees. So those included all our legal costs in terms of negotiation of the management -- asset management agreement. We've also had an increase in audit and IT costs. And overall, regulatory costs have increased. They don't increase in line with inflation. Audit fees don't go in line with inflation. They're based on time. And as we've had a new auditor and we changed auditors at the beginning of last year, this resulted in a significant cost increase there. So there's various line items that we incur which are included in that admin and booked with costs section. And it's not only related to City Property.

I just want to move on to the penultimate question from [ Sinclair ] from MSM Property Fund. Can you take us through the disposals completed in the financial year? How many buildings are considered noncore versus mothballed? And what is the -- what is progress currently towards their disposal?

All right, I'm going to try and answer that question as best as I can. So in the current year, we disposed off 7 buildings, for a total proceeds of ZAR 109 million. That really consisted -- there are 2 main buildings sold. There was a vacant office building, Midtown, which is really just adjacent to our City Property office. That was sold in the current year, and that was always highlighted. Obviously it was bought with the intention of reletting it, being lease-driven. That didn't work out and there was an opportunity to sell it to the city of Tshwane, and that transfer went through this -- in the current year. The other one that was also quite significant was our dealership in Midrand. That, obviously, we also saw as noncore, kind of sitting very much in isolation and really a difficult market to go into. You lose one tenant, very difficult to replace it, so that was sold to the tenant there. And the rest of the properties are real small industrial areas outside of our zone and also noncore properties. As far as assets that are available for sale: So we've got a couple of offers, sales agreements that have been signed. However, they are all subject to conditions, most of them relating to funding. And under the current conditions, it's very difficult to say when these transfers are going to take place, but yes, we've identified, obviously, our noncore [ line in ] outer areas, predominantly all in Pretoria West. We don't see growth in that area, mainly due to poor service delivery from the council. The type of tenants that operate in that area are also not the type of tenants that we really like to deal with, so we're trying to move out of there and really focusing on our big industrial spaces in Silverton, where we find that our returns there are much more attractive. All right, and yes, maybe just dealing with office buildings. So we've got a couple of office buildings which are at the moment vacant. And they are also on our sales list, obviously looking for the right opportunity and trying to find the right buyer for that particular property, but the rest of them: We've got retail underneath which is trading well, so we're looking at -- to see whether we can convert the top portion into residential, but obviously that requires, first of all, an appetite from the residential market. And as you can see, I mean, we basically just turned-around our residential sector, so that provides an opportunity now, knowing that we can achieve better rentals, to see those opportunities for conversion. All right, I hope I've answered the question fully.

And then just one final question from [ Trillo Fello from Kamasa ]. How has the percentage of leases with no escalations progressed in the financial year? And just asking on what services were rendered by the law firm Tugendhaft Wapnick, et cetera.

I can handle the Tugendhaft Wapnick Banchetti question. Very little work during the year's. It was -- I don't really remember the number, but it was a fairly small number. But I think what's important to recognize is that there is a special subcommittee that has been formed. And they -- whenever we are considering using a fairly high-end operation like TWB, it's always up to these nonexecutive independent subcommittees that this kind of work is approved, but it's very -- I'm repeating myself. It's very little. There was another part to that question...

It was around the percentage of leases with no escalations. Have those progressed in the financial year?

I'm not sure. Is that -- I'm not sure I understand exactly what that question is, but I think that what's behind this question is a whole lot of -- a low WALE, potentially with a higher number of residential tenants, I suspect. The big number of [ amount of the ] tenants comes from residential, as well as a number of much smaller tenants 20 to 40 square meters in the office portfolio. These tenants don't sign long leases, but we have seen -- Anabel [indiscernible] you can answer this for me -- long stays, but these tenants, they don't. The churn is not that normally high but certainly not high, so high, that we can't deal with this churn. It's just the nature of the beast that we're dealing with. We've lived with these tenants [indiscernible] for a long time -- and should not be viewed as being negative, a negative feature of Octodec, but depending on how you look at it, as we anticipate rentals to be rising in the short term, well, then you want a business with a low -- property business with a low WALE. If you're -- on the other hand, you're anticipating tough times ahead, then you want a higher WALE. We've seen in many occasions now that willing to lease is not necessarily a guarantee that, that tenant will stay and/or pay. If the tenant can't pay, he is going to move out irrespective of whether he's got a long lease [indiscernible]. I hope that helped with that question.

2 final questions, and we need to close. 1 is from [ Matthew from Alpha Private Capital ]. What was the fair value of the buildings that were sold? Were they sold at a profit or loss to the last reported fair value. And then [ Nick Krekhe from Signal ] is asking about Octodec trading at a 33 -- at 33% of book. Given the dynamic, it does not make sense to spend the money redeveloping properties instead of using it to buy back shares. If management can embellish a bit more on that decision.

Anabel, I'm going to throw this one to you if you want to handle that one, just a comment on share buybacks. I think the other one -- the other solution is to sell. And I just want to tell you guys I think that under no circumstances is management married [ to those assets ]. And if we do find a buyer -- and this is a team that I've spoken about a lot over the last few years as well as today. If we do find a buyer that's willing to pay some kind of reasonable price for these properties, we are going to sell. We are [ going towards that ]. With regards to the price at which we're selling, they're approximate our book values, which gives me comfort that there is value in the balance sheet. The fact that there is a huge discount to -- on -- between market and NAV -- I just think that the market is wrong, [ but I don't know. Will -- do you want to add anything to that ], Anabel, with the final word with you. Talk about -- again about share buybacks.

Yes. It is a difficult decision. And I can say we really have to do that exercise and find the ultimate benefit for both the shareholder but at the same time also for Octodec, yes. Just trying to answer the first part of the question, in terms of the exit yields: So our 2 major assets that we disposed of, one went off and -- exit yield of 0.48%, so tiny. That was obviously our vacant building. And the other one was at 9.32%. So Bryan, I hope I've answered the question there. Was there anything else to be covered?

Well, if there's not anything else, I'm going to bring the meeting to a close but want to thank everybody for the attention and patience; and continued belief in Octodec, those of you that have been with us a long time. We now there are a number of you. And yes, I hope you're satisfied with the results. Thank you. And to all my co-presenters, thank you very much for your effort; to the accounting team. A lot of work goes into doing these kind of things, so thank you to you guys [ as much ].