Octodec Investments Limited (OCT) Earnings Call Transcript & Summary

Jeff and Tim, I think we can start. Good afternoon to everyone, and I welcome you all to Octodec's pre-close update for the half year ending 29 February, 2024. Management will be discussing the portfolio's recent performance, key developments and the outlook for the upcoming period. As we navigate the different property markets around the world and market conditions and their unique challenges, I believe that it is important for management teams to maintain open communication and transparency with all stakeholders, and today's call presents an excellent opportunity for the Octodec team to provide us with insights into their operations, strategy and the steps they are taking, or have been taking to deliver sustainable value creation. From the Octodec team, I'm joined by their CEO, Jeffrey Wapnick; the Financial Director, Anabel Vieira; the COO, Charlene Conradie; and the Head of Leasing, Linda Chabula. I encourage everyone to actively participate in the discussions and ask management all the tough questions as your insight and feedback may help management in shaping this portfolio in that direction. And once again, thank you very much for joining us. I would like to hand over to the CEO, and then we can ask questions towards the end of their presentation. Over to you, Jeff.

Thank you, [ Luando ]. To all of you, once again, a warm welcome to the Octodec pre-close presentation. Today I am joined, as usual, by Chief Operations Officer, Charlene Conradie; our Leasing Manager, Linda Chabula; as well as our Financial Director, Anabel Vieira. I will handle very briefly some few -- a few high-level observations. I will then hand over to the team who will go through the individual areas which they are responsible for, and I'll obviously return for some Q&A together with the rest of the team. For those of you that are new to Octodec, I don't want to spend too much time, it's all out there on the presentation. It's -- I understand it's already been uploaded on to the website for your convenience. My high-level comments as follows. The local economy, as I'm sure you all know, remains under pressure, significant levels of unemployment as well as high -- which are probably related, high interest rates, probably are the 2 most difficult things that we as property people certainly at Octodec need to deal with. However, having said that rather gloomy introduction, pleased to report that certain of our sectors did well under these tough conditions, namely residential, which constitutes approximately 1/3 of the Octodec income, is performing well, although it must be said that it's tempered by -- and I don't want to enter into Charlene's [indiscernible], but it's tempered by 2 things. First of all, the gas explosion in Johannesburg. There haven't -- no work has been done, although understand -- I saw an article come through yesterday or perhaps the day before that, that the work is now starting and hopefully, this will make a difference. Although structurally, our buildings weren't affected. Access into these buildings is a concern for 1 or 2 of those buildings and obviously has an impact on our vacancy rates. The other one, which you're all aware of, is The Fields, which has been limited by the -- which happened last year, the reduction -- the announcement by NSFAS of a reduced subsidy for all those who went in to attend the university, but Charlene will give you an update on that. Pleased to report, however, that leasing activity in the entire portfolio, especially in Hatfield, is fairly brisk at the moment. One of the concerns that I have further is, one, specifically in Johannesburg, and that relates to criminal activity. It is a problem with -- for retailers when criminal activity is in the -- which is in the streets. Right. Having said all that gloom and a little bit of light at the end of this tunnel, just as looking forward, I think Octodec has been too -- and I've mentioned this before -- has been has been too quiet in terms of development. I think the time has come where we need to identify clear alternative -- opportunities for Octodec to start with a small development pipeline. The first one of this is the -- which has now been completed in recent months is the HealthConnect. We hope to be able to get the keys from the construction [ man ] at the end of this month. Leasing has been quite brisk. So we think that this is going to be a successful and worthwhile development. We have identified a number of other ones, which we will release as and when we get the green light to go ahead. Other opportunities that we do see is, we've accelerated our investment into solar energy where possible, and that's really all I want to say. More of this topic will be handled by the people that you're going to hear from now. So Charlene, I think it's your turn now. So over to you.

Good afternoon, everybody. I just want to see in terms of the presentation -- there we go. Maybe if we can move one more slide, please.

Charlene, maybe tell me which slide you want. I think [indiscernible] is struggling on his slide. Which slide do you...?

On the residential slide. There we go. Thank you. Okay. So, as you may know, we are currently in our busy period in the residential sector. It is that time of the year when there is an increase in prospective tenants looking for quality and affordable accommodation in the market. We have, for the month of January, received just over 9,000 leasing enquiries, and this is a good indication that there is strong demand for our accommodation. However, how these leasing enquiries will convert into deals done and ultimately in occupancy levels going forward is still a bit uncertain at this point in the year. In this slide, you can see our vacancy trends as of the end of January. You will see that our vacancies were 21%. However, if you exclude The Fields from that number, which is the one building in our portfolio that's mostly occupied by students, then our vacancies were at 8%. The vacancies at The Fields is high at this point of the year because students vacate towards the end of the previous year, and then they only return to the universities in February. We have also seen a slight increase in our vacancies in the Johannesburg portfolio, if you look at the table. And the reason for this is it is those buildings that was affected by the gas explosion. However, our Joburg portfolio is only 33% of the total residential portfolio. It is also important to note that we have managed to conclude new deals and renewals at escalated rentals. NSFAS has also increased their accommodation allowance for 10 months from ZAR 45,000 in the previous year to ZAR 50,000 this year. This is also very, very positive. And then lastly, we continue to invest in our residential properties. We continue to refurbish some of the common areas and the [ brine ] facility areas in our buildings. And for this year, we've got Ricci's Place prioritized, which will still be done in this financial year. And ultimately, the reason why we do this is to remain competitive in the market and to attract quality tenants to our accommodation. Thank you.

Good afternoon, ladies and gentlemen. As Jeffrey has alluded to the tough operating environment, we still remain resonant. As reflected in our presentation, I'll be taking you through the commercial portfolio overview, and starting with retail street shops and shopping centres. In our convenience shopping centres, we've signed a number of new deals at much improved rentals with lease periods ranging between 3 to 5 years. These have been signed on and above inflation, annual escalation. Some of the leases that have been signed are: Steve Madden at Woodmead Value Mart; Woolworths Edit; and Vida E Caffe at Waverley Plaza. Some of the significant renewal leases that have been signed during this period is Foschini with 3-year lease on 953 square meters at Cuthchurch. This is a street shop. Standard Bank at Praetor Forum, we signed a 3-year lease on 822 square meters. This once again is a street shop. We've signed a 5-year lease with Pick n Pay Clothing, 403 square meters at Waverley Plaza, which is a convenient shopping centre. And a 5-year lease was signed with Guess South Africa for 373 square meters at Woodmead Value Mart. We can go to the next slide, [indiscernible]. In terms of our government renewals, I'm pleased to advise that a 3-year renewal with a 2-year option was concluded at Odeon Forum for 3,102 square meters at a rent reversion for the first year of the renewal period, ended in 6.5% per annum escalation thereafter. In terms of the Department of Public Works, 8 of the 12 expired leases have been renewed in these range from 2-year to 5-year leases, the majority thereof being 5-year leases. These include operational costs, which we previously didn't get in the past. Negotiations on the 4 remaining leases have been concluded, and we await signed lease copies. In terms of our office sector vacancy, we've seen an increase in the office sector, and this is as a result of a large space that was vacated during this period. I must mention that we anticipated this vacancy. The building in question is suitable for residential conversion, and we are looking at options towards converting this building into residential. In terms of the industrial sector, we've seen an increase as a result of vacated units due to affordability. We are, however, comfortable that these will be relet. Taking you through leases over 3,000 square meters that expired during this period, the first being the City of Tshwane, the lease has expired. However, the tenant remains on monthly tenancy. In Asland, Salvage Car Dealers, they remain on monthly tenancy. In Cuthchurch, Gauteng City college, they remain on monthly tenancy as well. In terms of Apollo, the Tshwane College of Commerce, they are currently on monthly tenancy due to arrears, although the tenant is keen to sign a longer lease. At Gerlan, McCarthy Limited, an offer for a 3-year lease renewal at negative rental reversion in the first year of the renewal period, escalating at 6% per annum, we are awaiting tenants for the approval. With CCMA at CCMA Place and Marlborough House, these lease extensions have been concluded with CCMA Place effective 1 October, 2023. And this is for an 8-month extension, and we are busy with negotiations for a longer lease. Similarly, Marlborough House for the CCMA is in 8-months extension, effective 1 November, 2023, has been concluded, and we continue to negotiate on a longer lease. In terms of SEDA, their lease expired in December, 2023. However, the lease allowed for a 10-month lease extension at a certain percent escalation, which we've effected and the tenant has confirmed that they will renew and we await a directive on the lease period from their Board. In terms of Centre Walk, the Department of Rural Development, it is important to report that while we expected this tenant to vacate because they were to move into their own building, we have started renewal negotiations with early indications that the tenant is interested in retaining 6,000 square meters of the available space. With City Lodge at The Fields, negotiations are underway for a 2-year lease renewal. Transpharm at Talkar, the lease expires in December, 2024. However, it has been extended for 6 months at a 6% escalation. They have indicated that they will be moving to their own premises at the end of the 6-month extension. In Numall, TUT, and Station Place, MIG Primary School, both these negotiations are yet to commence. [ Thanks ], [indiscernible]. In terms of our collections, when we look at residential, the collections as a percentage of our billings, residential is at 96.9% and commercial at 95.3%. We report that our arrears are stable with collections in line with historic trends. Thank you very much. Anabel, over to you.

Thank you, Linda, and good afternoon to everyone. I'm going to just take you through the financial position of Octodec and what's happened in the last 6 months. So, from a borrowings perspective, just to inform you we've refinanced the ZAR 350 million facilities that were due to expire during the financial year -- sorry, calendar year 2024. We've also settled a ZAR 50 million DMTN note, and we've issued a new one for ZAR 100 million. And that basically takes us to an increase of ZAR 50 million in available facilities for this period. We have concluded all our refinancing for the calendar year 2024. We know that we do have quite a bit of maturities coming out in financial year 2025. As soon as we've released our interim results, we will then get engaged with our funders in order to stock our negotiations for the financial year 2025. With that said, we also believe that our LTV levels will be maintained at below 40% in the short-term. For those of you who are not aware of, but most are, that we've moved our DMTN programme from Premium Properties to Octodec. This is basically to streamline the process and just make it simpler. We have our hedging policy at between 70% and 80%. Currently, we are hedged at around 80.7% as at the end of January. Our range is between 70% and 80%. So we're looking at our swaps, with one coming up now for renewal. However, it is very important for Octodec to look at the pricing and make sure that when we enter into these swaps, that it is at the correct price, even if it means us reducing our hedging a little bit. So we're continuously looking at the pricing over the year. Right. Next slide. Thank you. Right. In terms of our property portfolio, our disposals this year have slowed down considerably. We've only sold 1 property for the amount of ZAR 4.5 million, net of commission. However, we are actively working on the disposal of assets which we've identified as non-core and they no longer fit our strategy. Unfortunately, these assets are not always located in desirable areas. These are mainly due to lack of service delivery, rising crime, et cetera, and purchases for these type of properties are not of few, and they sometimes lack the funding. So it does take quite a while from the offer to purchase right through to the transfer of the property. So this has slowed down a little bit in the first 6 months. That is -- We're working on that and trying to make sure that we push as many of the sales as possible. In terms of our capital expenditure, I think Jeffrey has alluded to a lot of it already. So I'm going to go through it quite quickly. So we've completed the HealthConnect and our tenants I think are ready to move in by the 1st of March, which is basically in 2 weeks time. There we've signed up leases already for 30% of the space, and we've got some lease totaling to up to 50% of the actual space. So we are very excited about the interest in this development. As Jeffrey pointed out, we are looking at the conversion of this vacant office building into a new spec for residential. It is taking a little bit longer than what we anticipated, but we're still hoping to bring it to completion by the end of the 2024 calendar year. Our team is working hard on it and making sure that -- how can I say -- everything works out because if this is successful, then there is a good pipeline of other developments that we can put to work [ here ]. We've also completed the installation of our solar projects at the 2 shopping centres, Blaauw Village at Woodmead, as well as our industrial Park, Sildale. We're investigating a couple of other installations, specifically at our smaller retail spaces and also at The Fields and Silver Place. And we're hoping that by the end of the financial year that we would have accomplished some of the smaller ones. And with that, those are our major projects, but we're also focusing on improving on our current portfolio, always making sure that our portfolio remains relevant to our tenants. We've completed the upgrade of Vuselela Place at the beginning of this year. And as Charlene mentioned, we are looking at starting shortly on Ricci's Place. From an ESG perspective, so ESG is on the top of everybody's minds. It is very important for Octodec to also balance the sustainability in the short-term and in the long-term. So with this said, we do focus -- and it is [ entrenching ] every section of our business from governance to our people to the social impact as well as our environment. We do choose our projects very carefully, especially when it comes to the CSR, making sure that we invest in the communities in which we operate, that we can make a difference to them. So you can see that beautiful picture on the left-hand side, where we've just opened our Kamane ECD Centre. So this is a long-term standing commitment to enhancing the CBD residential quality of life and activity supporting the community welfare. This is in partnership with Cotlands. So we've developed the premises, refurbished it, furnished it, and Cotlands will be operating it, and in this way, facilitating early childhood development while breaking the cycle of poverty and fostering a community cohesion. Next slide, [indiscernible]. And we most recently also partnered with Dis-Chem, and we've launched a community clinic in Tshwane, emphasizing our commitment to improving the quality of services for communities in and around Tshwane. This clinic basically provides for the basic medications. And any patients with more severe conditions will then be referred to the doctors. This collaboration builds upon our established partnership with Dis-Chem and Future Life, who joined forces in 2023 to alleviate child hunger through their [ Food ] and Future program. On the environmental side, as I've mentioned, we have completed the 3 solar projects. This brings [indiscernible] the largest solar projects in our portfolio with 3 of our shopping centres already covered with solar and our 2 significant industrial parks, [indiscernible] and now Sildale. The others are under investigation. And as I mentioned earlier, we're hoping to make some further progress before the end of our financial year. So these initiatives will assist basically in us reducing our carbon footprint as well as reducing our costs, and ultimately, the reliance on Eskom and our municipalities. So that brings the presentation to an end, and I'm going to open the floor to any questions.

Thanks, Octodec team. I think the attendees can raise their hands to allow me to unmute you all. Similarly, you can just type your questions in the Q&A function. Maybe just to break the ice and allow for the attendees to ask questions, I'm going to maybe ask a few questions that I've prepared for management. Maybe starting with you, Jeff. What would be the primary drivers between the Octodec's rental income growth during the period under review? [ So ], Jeff, you're [ on mute ].

I'm going to answer that question in the following way. I think one of Octodec's principles or the strategy on which it stands is that there is a huge movement which has been happening for a long time now, a movement of people from rural to the urban areas. And we try to capitalize on those people that come to the urban areas. So as long as that continues, we will always have demand certainly for our CBD type assets, certainly not the only assets we have, but that needs to be said. What -- for the current year, I think that we, to a large extent like many other people, are governed by the economy, specifically the higher rates of an increase in the rates of unemployment. But as soon as that tapers off, I think there's going to be an enormous change to some of Octodec's operating results, specifically on the rental income. In addition to that, a cut in interest rate would obviously help not only Octodec, but perhaps even more importantly, the tenants, or the potential tenants [indiscernible] to give them a little bit more spending power.

First hand is from John Simpson. You can unmute yourself and ask a question. And then maybe [Technical Difficulty] to the next question. The first question is from Fabian [ Manuel ]. What is the collections in the September [indiscernible]? Can it be normalized, that is, to other [indiscernible] higher collection rate?

Can I ask Charlene to talk about collections in the business generally?

Yes. So our year end in Octodec is August. So at the end of August when we run our month-end finance processes, we generally extend that during the night, which means that we can allocate all the receipts up until the last -- on the last day of August into the August period. A lot of our residential tenants also pay upfront. So those receipts all went into the August financial period, whereas in September then on the last day fell on a weekend, so those receipts went into the October period. So a long way around, but it will average out. It was just the allocation of the receipts that fell in August, whereas normally it will fall in the September period because the last day is received normally fall into the next month's financial period, if it makes sense, except for August, that we still process in August.

John still has his hands up. Can you please unmute yourself?

As always, it's nice to talk to management. I find it a bit of perhaps unnecessary to go through the [indiscernible] of 400 meters being let here or 400 meters not being let there. I would think the time would be much better spent if we discuss strategy and big picture things with the Directors and management rather than those minute lease details. So my first question is, if interest rates are going to -- if you believe interest rates are going to drop, which is the common agenda or common thought in South Africa, should you be reducing the amount of hedging you're doing? That's question number one.

Perhaps Anabel, you should talk to this.

Yes, quite right. And I did allude to that when I was speaking through it. The prices at the moment are quite high, and we don't want to tie ourselves into that pricing because we do foresee a -- quite a sharp drop in the interest rate curve. However, we also see quite a sharp rise shortly thereafter. So it's a matter of, how can I say, entering into a swap at the right time. So we don't mind coming down. In fact, we've done all our calculations, assuming we move out of the 70% to 80% range. That is only a guideline. And if it works better for Octodec to go slightly below that, surely we will. So we're not really tied into those [ bands ] just because we want to be there. We certainly look at the pricing of the swaps.

The next question is from Rahgib Davids. What is the like-for-like net rental growth for the period overall and per sector, if you are able to disclose?

It's -- [ I don't know ], Charlene, you want me to start this one and perhaps you could add anything afterwards. It's -- In residential, I anticipate we will be able to rise our rentals. By how much, I'm not quite sure. I think the big issue here is what happens in Hatfield. Hatfield is very competitive. And I think we've hired -- I don't know how many new people -- I think there are about 10 people into that team sitting at Hatfield. The reason being is that there's a window of opportunity. And if you don't make it now, well, then they're gone. It's competitive, so they'll go across the road. And we've done our best to make sure that we can get whatever we can and that's looking for residential accommodation. And the results of that [indiscernible] ultimately, I think do have an impact on the total residential impact on Octodec. It should not be forgotten that South Africa has a chronic shortage of accommodation. And as long as there are takers that can -- call them bankable takers, that can afford to take our residential accommodation, I think we're going to see a continuous rise in accommodation. I don't think that the development for whatever reason of accommodation, certainly our type of accommodation, has kept pace with the ever-increasing demand. I spoke to you earlier on about this migration of people, this migration of students from the rural to the urban areas, and that will continue. I think when you take a drive around the country in recent months, you'll see how unfortunately many of our rural areas are collapsing. And that alone will drive a lot of people into the urban areas. And the question then remains is, will there be enough people to take up whatever available from [indiscernible] at our kind of rentals. I -- We did speak a little bit about this new concept, anticipating tough times. We are developing, we have developed it. It's about to go to tender, a new product which enables us to come in at a slightly lower rate. In other words, produce a lower entry rate for some of our residential tenants, but without compromising on quality. You may ask the question then how do you do this. And obviously, you can't get the same level of amenities in our traditional places as this one. And the way we've done it is to introduce shared accommodation. In other words, I think the ratio is for every 4 beds in there, there will be one toilet facility as well as a bath. In addition to this, we have made sure that we have adequate communal facilities such as lounges and kitchens where people can do basic booking and certainly watch TV and socialize. Very, very interested to see how close the team has got to making sure that we're able to produce the correct product. I'm very confident in the team. They've been here a long time. They know this market. And if we can get right, well, then there's a whole new bunch of guys that we can bring into our portfolio. I hope I've answered you properly. Oh, wait, I just [ toppled ] residential. Our shopping centres, Killarney Mall, that's the, I suppose, [indiscernible]. As for the rest of our commercial tenants -- rest of our convenience centres, really going exceptionally well. You visit any of our -- it doesn't get much [ end ] [ time ], but if you are to visit any of our commercial -- any of our convenience centres, you'd notice how on average the parking lot is so big. And we find that to get rid of any vacancies that may pop up, it's not difficult at all. With regards to our industrial, it is -- there's one park -- industrial park doing very well on average. But now and then a big tenant moves out, and that has a material impact on vacancies. But we're not worried that this vacancy won't disappear. Offices in the main are fairly flat, fairly stable. Roughly just over 50% of it, I think it is occupied by government. And government are a fairly stable tenant. It sounds crazy, but it's true. [ Now and then ] government do move out. And I think Linda spoke to you about the one building in Centre Walk where they [ were ] to reduce size from 9,000 to 6,000 square meters and obviously something like that does impact on our results. Street retail, which I've been a fan of, is under pressure, especially in Johannesburg where I mentioned to you, prime was taking -- was affecting things. I -- you've heard me say on many occasions before, the property guys are not the smart guys, and it's the retailers that are the smart guys. As long as there's demand from the big retailers, we know that there are opportunities in the city center. But we're also hearing from them, when there's crime, it doesn't help when you've got a break in every month. We've got to deal with the fixing up and the insurance, the loss of stock. So it's a difficult one to call. However, in Pretoria, in the prime locations, I don't think we have a single vacancy today, which I think is positive. I think when we came out of COVID, something that now got behind us, we were -- we coined a phrase, Finalise a lease, [ at ] Best FAB or the FAB deal, Finalise at Best. Well, those days are now over and we've learned now when you're dealing with the bigger type tenant and he's pushing for rental decreases provided during -- in the -- I call it the golden [ month ] -- provided in there, we're not going to entertain any form of rent reductions. So those in the main have disappeared. But there are 1 or 2 small tenants. We are close to our tenants who are struggling, and sometimes you have to help a tenant. But with the big nationals we're fairly tough, and generally come out well as compared to the initial offers that we receive from these guys. And so -- I don't know whether I've given you guys enough information to help you with your guidances. Perhaps to say that the portfolio is still intact and there is demand, but weaknesses mainly showing in the Johannesburg area for reasons I've discussed. I don't know if you want to add to that, Charlene?

There's a few questions on the Q&A and chat function. [ Colin Lamb ] is asking, how will the possible rollout of office to residential conversions projects be funded? Will it be by debt or by an equity raise?

So we do have facilities, Pleasing to note that our bankers -- and we heard Anabel talk about an increase in our funding from the [ DTM ] program. But there's a limit to what we can do. Just hopefully, the share price things can improve whereby rentals increase and the share price increase. And it makes sense to go to the market to raise a bit of money. Interesting to know the other capital -- other REITs recently went to the market and I think did particularly well. So it's a wait and see, but there are certain small projects that we have to undertake monthly, which will be funded by debt.

Other question is from [indiscernible]. She is asking, can you give progress on the initiatives relating to Killarney Mall?

Yes, that's -- we're about 2, 3 weeks away, I think, from taking a proposal to the Octodec Board. It's not a simple one. It's -- we still believe in Octodec as a location, it's well located. We've put an enormous amount of work. We've spoken to tenants. A lot of the retailers know about the proposed redevelopment. Some of these when engaging with tenants advise us that they would like to move in subject to one or 2 changes to the [ let ] of the center. And so it's back to the architects, and [ the ] architects need that we continue to affect those changes because of -- the consequential changes. You move one tenant and then another one is going to have its shop moved. So it's been a long and hard process, but we're coming to the end of it.

[ Colin Lamb ] is asking, what is the square meter size of the HealthConnect property?

It's about 4,000 square meters.

Another question from [indiscernible]. Are you comfortable with the guidance provided at FY '23? Any areas that you can identify that could result in Octodec exceeding the guided range?

I don't know. I'm going to share this responsibility with the Financial Director, get her to comment on that. Yes, Anabel, your thoughts?

Sorry, [indiscernible], will you just repeat that question?

The question is, are you still comfortable with the guidance provided at FY '23? Are there areas that you can identify that could result in Octodec exceeding the guided range?

So the guidance provided in '23?

Yes, I think if you provide the market [indiscernible] guidance. They want to know if there's going to be any challenges with achieving the dividend in FY '24 and in 1H '24?

So certainly, I think we expected interest rates to come down sooner and this sort of seems to be moving further and further away. And that is impacting the economic environment, and it's impacting the disposable income of our tenants. So it's making it a little bit more difficult for us to achieve the increases that we want to and to achieve the occupancies that we'd like to and that we've budgeted for. But as far as the 6 months is concerned, the guidance that we gave, we anticipate to meet that and to achieve that. Going forward, there's a lot of uncertainty. We know that we're getting into an election period. We certainly hope that everything is going to go smoothly. But it's difficult to say how it's going to impact the economy. But yes, at least from a distribution point of view, we will be staying put on the guidance we gave, that we should remain flat on the first 6 months compared to previous 6 months.

We've got 2 questions from [indiscernible]. Question one is, what do you expect the refinancing rate to be for renewing your expiring swaps? And the second one is, can you please comment on the operating performance for Pick n Pay as a tenant and franchise [indiscernible] [ operate ], run stores? Maybe Pick n Pay [indiscernible]?

Anabel, if you can handle the rate, and I will try my level best to handle the [ Boxer ], Pick n Pay question.

So I found that difficult to understand. What are we trying to ask, the first part of the question? I understood the [ Boxer ] and the Pick n Pay.

The first one, I think he is trying to understand where maybe -- are you able to give guidance on where your average cost of debt is going to be after renewing of swaps?

Yes. So for now, our cost of debt to be precise is [ ZAR 9.17 million ], but we do expect a small uptick if we do not change or find -- how can I say -- a good price to enter into a new swap. So we expect that to increase slightly, but not too significantly. But that is currently our cost of debt at [ ZAR 9.17 billion ].

Maybe I can ask one from my questions I prepared.

Do you want me to answer the other one?

Yes, you can answer.

So as a property person, we all know that Pick n Pay are going through tough times. And I worry that Pick n Pay will run their stores. I don't know how many there are, about 250, I think, I may be wrong. Just over 250. But I think it's the wheel that's -- they've got to run it on the spreadsheet, in other words, where they're [ hemorrhaging ] the most. That's where they're going to apply their attention. I personally don't like that. I think that as a property person, nobody -- so we'll just [indiscernible] that's going to get the most [ oil ]. And so I've been and spent some time with Pick n Pay. And I want them to attend 1 or 2 of our businesses. Generally, they're not performing as well as a Shoprite and/or Checkers. But having said that, I think there's a new team aboard that've got -- there seem to be changes in the way they operate, certainly the people have changed. And I got to believe that these guys will pull it right. It would be a sad day in South Africa when brand name like Pick n Pay just fizzles out and reduces to nothing. So if you had to ask me, I would still -- I wouldn't kick out any Pick n Pay. Certainly, we wouldn't. But we need to -- I think all of us, we need to have the necessary conversations, and they are able to have them with us, [ have ] got more so than in the past to see who's -- to try and get our Pick n Pay with suggestions on how to improve things. Our team are sending videos and comments of the Pick n Pay stores, and hopefully, this is going to help them not only fix up their brand, but also fix up our stores before the others. I hope I'm right. But the other point you asked about was Boxer. We have only one Boxer in our portfolio and doing very well. That's -- anecdotally, I haven't yet met with the Boxer team, but I have no concerns there. There's a big Boxer that opened up in the center city [indiscernible] CBD. That seems to be doing reasonably well. We watch it quite closely because we have one of our major CBD shops right across the road from there. So we're watching them. And yes, that's all I really want to comment on.

Maybe we can take one another question from -- I think John still has his hand up. So maybe if you could maybe unmute him, and then we can...

Am I unmuted?

Yes.

With a net asset value of ZAR 24.24, a share price of ZAR 9.99 which has declined by 50% over the past 5 years and by 66% from its peak at just under ZAR 30 over the last 10-year period, that's really fairly glum -- and minus 1% of the share price for the last year. That's a terribly glum last 10 years for the company. Do you believe that the net asset value accurately reflects the value of your properties on a willing buy or willing sale basis?

Well, I think the 2 parts to the question once implied [indiscernible]. I really do. Why? Because those properties that we do manage to sell, we sell very close to book value, a 3% on either side. So our valuations are, I think, reasonable. The more difficult question is -- I'm acutely aware of the glum picture that you presented. What to do about it. I'm not quite sure. I think there's also the question of scrambling the egg. Once you scramble, well, then it's gone. You can't unscramble it. But a decision has got to be made at some time to try to rectify the situation.

Sorry, I have suggested 1 year ago that you sell the whole portfolio if you really believe you can get ZAR 24 a share for it. That would enhance your ZAR 100 million family shares and everybody else's. And the last question is, have you thought about buying Delta properties?

No, I think I've got my own problems to deal with regards to Delta. But things are fluid and things do change. Delta has a lot of government and government is very tricky to handle. So what is the first part of your question?

Property, you trade at a higher discount to net assets than most REITs do. If your asset value is realistic, surely, you would enhance shareholder returns the most by selling the portfolio?

Yes, I know. The problem is to sell the portfolio is very difficult. Very difficult to -- if it was that easy, probably could have made a decision. But there's a portion of the portfolio that's virtually impossible. You will see we announced it at all our announcements such as this, we do -- not the pre-close, but certainly at the results, we do give the selling activity. I'm involved with the team that worked the sales, and it's extremely difficult for our kind of properties. I wanted to just give you something else, which I think I mentioned before, that approximately of the -- 70% of Octodec, it's sustainable, it houses a lot of residential. Residential has been well maintained. I mentioned to you that there's demand. I mentioned to you in this presentation that rentals are still -- we see them going up. Difficult to sell in that kind of the dynamics in terms of the pricing. I'm not sure there are too many takers, although I think these are quality assets that we do. And then there are other parts of the portfolio, call it 70%, such as the shopping centers, such as the, say, Killarney Mall perhaps, such as the -- what I call is the street shops. There are certain areas that are magnificent. But what to do with the other 30%? It's -- they're not going to attract tenants in the short-term and there's management intervention, and we have to come up with the management intervention. It's very hard for me to explain myself. I hope I've done -- made some attempt to do this, John, but I want to personally invite you at your convenience. I don't know where you stay, but if you're in [indiscernible] to give me a shot and we can do a walk about, do this all the time. And you can see what -- you could get a better indication of this portfolio.

I'm just -- Jeffrey, I'm just cognizant of the time and what I would -- try to take all these questions down, which were not answered here. And also just on your point of -- I did visit your portfolio the past year, I saw you spent a lot of CapEx on your portfolio. And even if on my TCF I put a sky high CapEx requirement, I still find upside. So which -- also for me, if the market is so fixated on dividends, why not buy the Octodec dividend yield of more than 17%? But maybe, Jeff, in closing -- maybe you can [indiscernible] close.

13%.

Yes, Fabian you can maybe answer - I mean ask.

I really just wanted to sort of essentially make a comment, right? Jeff -- I'm sure Jeff can hear me -- Jeff and the management team. To the management team, right, I don't think the expectation should ever be that you guys manage the share price because you can't. Okay. The share price is something that you can't manage. But since time in memorial, the things that one would want you to focus on, right, is just to continue to focus on earnings per share, continue to focusing on your collections rate, continue to focus on your vacancies and things of that. I mean one of the points that you made to John, I think, was that you can't speak to the -- you can't necessarily speak to the share price. And that's fine, right? Speak to all of those controllable things like the vacancies, the scenario around The Fields and things of that nature, right? Those are the things that the market will eventually start seeing that happening and those good traction happening, right? And then a consequent event would be -- is that you will see the share price -- as unintended consequence, the share price will then rise. But yes, it's not -- it's definitely not -- it can never be from a shareholder perspective that we expect you to manage the share price. Just continue to manage all those other enabling factors that eventually will give you that, say share price uptick. Well done and all the best.

Thank you, Fabian. I agree with some of those sentiments.

Yes. I didn't even see you come here or see you raise your hand, but it's fine. Maybe Jeff, do you want to maybe close because I'm just looking at the time, it's already...

Not much left for me to say, and thank you for the engagement. It's always so much easier in -- there are a lot of you out there listening to this. But it's so much easier when we do get some of the kind of [ research and ] questions that were asked today. So thank you [ for ] -- to you, and thank you for the rest of you for attending. And I guess for those of you that are shareholders or would be shareholders, I want to [ extend to ] you the same invitation that I gave to Mr. John Simpson. And that was, give us a shot, we regularly do these to as a make up your mind for yourself. Property is not an easy space at the moment. But I still think given where this country is and the emergence of this middle class, Octodec should be -- maybe it's misunderstood -- but it should be well poised to go forward, should our country, SA Inc., sort one or 2 fundamentals out. And thank you to you, guys, [ Luando and Capital ] for hosting us today.

Yes, I think if that's the case, we can end the call. Thanks guys for joining. Thanks to the attendees also for asking tough questions and everyone for taking time and joining this call. Thanks, Jeff and team.

Thank you.