Redefine Properties Limited (RDF) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Leon Kok, and I'm the CEO for Redefine Properties. Thank you for joining us this afternoon. We are very excited to share some retail insights with you this afternoon. We will kick off proceedings with our external guest speaker, whom I will introduce in a minute. After Arthur's session, we will open the floor to questions for you. [Operator Instructions] We will then get Nashil Chotoki, our Redefine National Retail Asset Manager, to provide some insights into the SA retail market as well as Redefine's specific retail portfolio performance. I must remind everyone, however, that Redefine is currently in a closed period as we are in the process of finalizing our financial results for the year ended 31 August, which will reduce -- which will be released on 8 November. All Redefine-specific financial information contained in the presentation this afternoon is information that has previously been disclosed in our interim results presentation as well as our preclose. Can I also kindly ask that any specific Redefine questions around financial information is avoided as we will obviously deal with those with our year-end results. Interestingly, this morning, I read in the media that LEGO, the very well-known toy manufacturer, said that they experienced a massive surge in online sales during the height of the pandemic. However, they reiterated that they would continue to bet on physical stores to attract new customers. They said if anyone doubted with the stores, would still have relevance on the other side of COVID-19. They have seen both traffic as well as revenue increase dramatically and back in their stores. We have certainly seen a similar trend. So to provide us with more insights on this topic of online retail, we introduce you to Arthur Goldstuck. He is the founder of World Wide Worx, South Africa's leading independent technology market research organization. He's an award-winning writer, analyst and technology commentator and has been presented with a distinguished service and ICT Award by the Institute of IT professionals of South Africa. Arthur, very welcome, and over to you.

Thanks so much, Leon. It's a pleasure to be speaking to you all today. I think some of you may well have attended some of my recent talks, but I'm going to give you a very different perspective on what is happening in the online retail world versus physical retail and mall. There's an assumption that because of the dramatic increase that we saw in online shopping and particularly grocery shopping, that, that is the end of the mall. Well, I'm going to be sharing the reality behind that myth with you, amongst various other insights. And feel free to line up questions for me once the presentation is over. But first, I'm going to share with you a brief history of the future or rather how we once saw the future. So this was how the school was perceived back in 1900 in terms of the developments over the next 100 years. What you really see here in terms of textbooks being turned into information that is fitting to the brain is nothing less than the digitalization of information. The only thing they got wrong was how early it would happen and also how readily it would be fed directly into our brains. But in the next 10 years, we, in fact, expect to see brain-to-text interfaces. The other way around is going to take a little longer, but this was an uncanny vision of the future. This was Netflix circa 2000. This is how streaming entertainment was perceived that someone performing in 1 room and people would listen either from their beds or in lounges and watch the performance from a distance. The only thing they got wrong was the dress code because you all know how you dress for Netflix these days. And then we fast forward just 30 years to how socialization was perceived from the 1930s. Again, an uncanny vision of the future. The only thing they got wrong about the smartphone was the size of the speaking tube. As we know, the microphone has disappeared into the device, but most of us are guilty of talking to someone else on a smartphone while we're socializing with the person in front of us. And then fast forward to 2020, this was literally a month before the pandemic began, how the office of the future was envisaged. High tech, high comfort and also very stylish. But within a few weeks, what transpired was this. The new office in March 29, 2020, was one where we wore pajamas to work and we're -- now you could see what we're wearing. Very quickly, as we embraced video conferencing, people began to understand that they could only wear the pajamas at the bottom. But those pajamas also wore out very quickly. And eventually, by 2021, this was the shape of remote working. This is highly significant in the world of retail because people became used to the idea of working remotely, of operating remotely and ordering their groceries remotely in particular. This must be seen in the context of the shape of the recovery from the pandemic. This is the International Data Corporation's perception of how it would pan out, and it's been pretty spot-on. When the COVID crisis first hit in February and March last year, everything was around business continuity and how businesses could carry on operating. We then entered an economic slowdown, which led to a recession. And then the focus of businesses became on resilience: not just how they could carry on doing business, but how they could strengthen the business to cope with the recession. And then as we saw a return to growth, we saw targeted investments into technology, into IT, in order to ensure that the revenue focus return to the digital side of things. And of course, this had a massive impact on the retail sector. I'll show you the extent and the scale of the revolution that took place as a result of this massive investment in IT, in business continuity and business resilience because what you're going to see now is really the shape of the digital revolution in 3 graphs. The first one is Amazon.com. This was their share price and the trend line of their share price as of the end of last month. Their market cap was an astonishing $1.73 trillion, not because they were selling half of the retail goods that Americans were buying, but because their cloud service, Amazon Web Services, had grown massively. If you look at that dip around 2020, the first dip in a while, that was when lockdown hit. But within days, perhaps weeks of lockdown, you saw a massive leap in their share price, as the world realized that they were going to need cloud services and access equipment to access those cloud services and also as online retail suddenly boomed across the world, not just in South Africa. This graph was mild compared to what happened at Microsoft. They went from well below $1 trillion market capitalization to $2.28 trillion at the end of last month. And again, they had that brief dip in March 2020. And after that, it was just relentless growth. They are far more cloud-focused than Amazon because half of Amazon's business is cloud; the other half is online retail. But online retail is, in fact, physical retail because the goods have to be shipped. And the cost of that shipping is massive. Microsoft doesn't have that constraint in its office software business or in its cloud business. Microsoft, of course, being the world's second-biggest provider of cloud services through its Azure data centers. So by being fully digital, Microsoft truly benefited dramatically from this revolution. The only company with better performance than Microsoft was Apple due to the massive demand of the iPhone but also the performance of the App Store, which delivered digital services to those iPhones. And then the other big player in cloud computing being Google or rather its parent company, Alphabet, which saw the same scale of growth and a similar market capitalization, not quite at that level yet, but $1.93 trillion market cap. Before the pandemic, it was well below $1 trillion. And you can see after that same dip when lockdown hit in March 2020, a relentless rise from Alphabet and largely thanks to the performance of digital advertising on its search engine, the extent of searches that were being conducted on Google and its cloud business, which expanded dramatically during this period. This gives you a sense of just how much demand was being made of the cloud and of the Internet. The one that will be of most interest is on the right-hand side, the second item, USD 1.6 million spent online every single minute on the Internet in 2021 globally. And then a little further down, 197.6 million emails sent every single minute on the Internet this year so far. So it gives you a sense of how much activity is being conducted online, facilitated by the cloud, of course, but also the extent to its people's lives are becoming online lives across all spheres of activity. The smallest number perhaps or one of the smallest numbers that is truly momentous in the business world is the LinkedIn stat on the left-hand side. 9,132 connections made every single minute on LinkedIn. That being the professional network, gives you the extent to which our business lives have also moved into this space quite dramatically. So with that as a backdrop, let me share with you some of the findings from our online retail in South Africa 2021 study that we conducted with Mastercard, Standard Bank and Platinum Seed. So these were some of the numbers that you may have come across fairly regularly. But by 2017, online retail in South Africa was at the ZAR 11.3 billion mark. That was a small number but represents a massive growth of 25%. And that growth was maintained the following year, reaching ZAR 14.1 billion. So one could assume at the time that growth would continue at that level and also that online retail would remain a very small element of the total retail part. So we expected that by 2020, with that continued level of 20% to 25% growth, that it would still be approaching, but possibly passing, the ZAR 20 billion mark by last year. In 2018, at 1.4% was expected to reach 2% only by 2022. And this is one of the reasons why online retail wasn't taken seriously by many commentators and observers. It just seemed too small. And even at 2%, it was going to be too small to be taken truly seriously. And then came the retail crash of March 2020. This is stats SA, total retail trade sales from a quarterly perspective. And you can see, it was fairly stagnant, not dropping, but not growing significantly from 2016 through to 2020. And then suddenly, with lockdown came that absolute crash. Total retail trade sales dropped by half in that month. It then recovered fairly dramatically and fairly quickly but obviously to lower levels than where it had been pre-pandemic. In fact, it recovered more to 2016 levels at the time. And into this gap came the online retail sector. And here, we see Takealot, in particular, in the third quarter of last year, growing by 85%, generating ZAR 7 billion revenue in just 2 quarters. Woolworths grew 87.8% in the first 6 months of last year. Mobicred, which provides credit to people shopping online but can't pay immediately, they can click on a Mobicred button and be given credit. And the fascinating thing there was not just that the transactions grew significantly, but that the largest segment of transaction growth was for over 60s, which traditionally were wary of online shopping. And then PayFast, the payment processor, saw turnover from grocery retailers using their platform and their payment switch growing by 357% in just 2 weeks. And that was clearly the extent of people stocking up for the pandemic because we still buy groceries at that stage but nothing else aside from medicine. So I want to show you how the shape of online shopping changed, and the most dramatic shift was in the age breakdown or the age profile of the online shopper. Now back in 2018, when we were at 1.4% of total retail, there was a very clear demarcation of online shopping according to how old you were, but I should also point out that those numbers are incredibly low. Less than 4% of South Africans were shopping online. And if you were over 44, then it dropped to less than 3%, with the 45 to 64 and the 65-plus age groups being almost 2/3 of the extent of the younger age groups in terms of propensity to shop online. And then look what happened in just 2 years. 730 days, suddenly, that graph looked like a standardized profile of a population that had similar behavior. Yes, a slight drop-off at the 65-pluses. But again, just have a look at where they were in 2018, 2.6% shopping online, 19% in 2020 shopping online. And for the rest of the age groups, all between 27% and 30%, and it was no longer about use; it was about necessity. So that was the true shift of the pandemic, normalized online shopping. It wasn't about the demographics or at least about age and propensity to shop online; it was now about the need to shop online. So that was the biggest takeaway from that set of statistics that online retail had normalized across age groups. And that also implies that the idea of shopping online had become normal, whereas previously, people thought they were pretty high tech when they're shopping online. And then just to show you the correlation to income with regard to online shopping, yes, there is a correlation, but it's not as dramatic as I would have expected. So for the super high earners, above ZAR 50,000 a month, at least half of those -- or just about half of those were shopping online last year. So you would expect that graph to fall significantly by income level as you move to the left, but in fact, it was a slow decline. And once you reach the ZAR 18,000 level, below that, fairly similar or between 17% and 23% in every income group. That is people sometimes ask how come people who are earning so little, under ZAR 2,500, how come so many of them be shopping online, and sometimes in research, you find that those earning under ZAR 1,000 are shopping more online than those earning over ZAR 5,000. The reason for that is twofold. The one is people living in homes where someone else has the credit card, where there's a bread winner who is paying for the purchases of other individuals in the home; and the other is students who don't have an income but are purchasing goods through family and even friends. But this graph shows you that while income has an impact, it is not the determinant that it used to be. What you would expect, though, is that according to your socioeconomic level, you would be more likely to shop online. And here, we find that above 50% of those in the top socioeconomic level, this is what replaced lifestyle measures, by the way, LSMs, that we -- are used in the past but were not as reliable. So the SEL 1, Socioeconomic Level 1, is the highest earners, but also, their lifestyles, generally speaking, are also more elaborate. Education is higher, et cetera. So there's a strong relation to education plus income plus experience on shopping online. And that's what you see in the SEL 1. SEL 2, not much lower than that, around the 49% mark. And then in the lower socioeconomic level, it drops to 22%. So still 1 in 5 people in the lowest shopping -- in the lowest socioeconomic level shopping online, largely thanks to smartphones having become friendlier and the ability to deliver to lower-income areas having expanded. So that resulted in online retail finally growing up, as many people put it, the beginning of the e revolution. So in 2020, total online retail reached the ZAR 30.2 billion mark compared to that expected ZAR 20 billion. And versus the anticipated 20% to 25% growth that was expected in -- back in 2018, we saw 66% growth in 2020. That is huge. In terms of coming off a low base, though, it's not as massive as one would expect. But in terms of a trend line, that has massive impact over time. This is what the big picture looks like in terms of measuring online retail from its inception in 1996 when we first began measuring it. These numbers come from our own research that date back to definitely the dawn of the Internet in South Africa. And we are now at the 2021 level where we're anticipating ZAR 42 billion turnover from online retail. And by 2020 -- sorry, in 2021, we're expecting ZAR 42 billion. And next year, we're expecting it to rise to around ZAR 54 billion. And to put that in a global context, the total global online retail pot in 2020 reached $4 trillion, and that's made up 17.8% of total retail sales globally. So our numbers are still tiny, but the growth in 2020 over 2019 was huge. The year before, it was 13.8%. It jumped to 17.8%. And from thereon is expected to grow steadily, increasing by around 2% of total retail a year through to 2023 and then slowing down to around 1% growth every year, again, assuming there are no other systemic shocks. The percentage change obviously takes us down significantly every year, but the blue line is the one to pay attention to. It's a far flatter line in South Africa because it comes off so much higher level. So that 17% of total retail is what has had such a massive impact on the physical retail space in many countries. In some countries, it's a lot higher; and in some countries, a lot lower. And also, based on the retail structure in many countries, it has had a bigger or a smaller impact. So in the United Kingdom, for example, the High Street was decimated by online shopping because of the way that retail was laid out in the U.K., very little mall-based shopping and largely High Street-based shopping. So in South Africa, in 2020, online retail made up that 2.8% of total retail, exactly double the 1.4% of 2018. So if I only looked at that 2.8% number, you'd say that's tiny, but when you compare it to the 2018 number, you realize that this represents a revolution in the making and the coming revolution as well. So this year, we're expecting growth to remain exceptionally high at 40%. Again, nicely thanks to people working remotely, staying in their homes, social distancing, reticence to go to the shops. So lower than last year when we were in such a heavy lockdown but still exceptionally high. And then our putting investors comes a slowdown next year to 30% growth, and that will take us to above ZAR 50 billion in total retail. So if total retail remains fairly stagnant as it has over the last few years, that will represent around 5% of total retail. And then, we're coming close to doubling again from the 2020 mark and quadrupling from 2018. So when you look at that trend line, we start getting the sense that this really has to have an impact on physical retail, and this is what we're going to unpack now. So the question everyone said -- asks, is this the end of bricks? After all traditional retail have grown every year, this century until 2019, and in 2020, it fell by 4% to the ZAR 1.05 trillion mark, still above ZAR 1 trillion, but it has fallen largely as a result of the lockdowns and the restrictions on retail in general. And this was even as online retail grew dramatically by 66% in the same period but still making up, just a reminder, 2.8% of total retail at that point -- of that ZAR 1.05 trillion in 2020. So we call this it's the 5% question that by next year, online retail will make up 5% of total retail. So clearly, it has to have a 5% impact on the physical retail environment. But the 5% question is actually multiple questions. Where will the 5% of retail that's going online disappear in the off-line world? Bearing in mind that online retail does not represent a growth in retail or new retail. It's simply a transference of physical retail into the online space. So it has to disappear from somewhere. And another way of asking the question, which 5% of businesses will be hardest hit? Or perhaps the best way of asking the question, which businesses will have 5% of their retail shifted into the online space and potentially by other businesses but also away from the physical outlet? So it seems like simple questions, but the answers are, in fact, very nuanced. And those answers represent a reality behind the myths of online retail. The truth is that the future that is being predicted for physical retail as a result of online retail has already happened. So we can see the impact on physical retail in the last few years in terms of the effect of digital in the stores that have already been affected. So just to put that in context, the office environment has seen a decimation of occupancy. Decimation, technically, by the way, and historically, refers to killing off 1 in 10. It's not the destruction of the environment. And it's probably a good term to use, because one could say that 1 in 10 meters of office space has certainly been emptied out, and some organizations that are not called Redefine have seen up to 25% vacancy in the office environment. And it seems like a blood bath, but only if you allow it to be. Redefine, in particular, if you looked at their last annual results, spoke of reinventing the sector with innovative new models, looking at redesign spaces, co-working, automation in the office environment to make it more attractive. So by reinventing the office space, you can ensure that you're not part of that decimation of the office. But on the retail side, reinvention hasn't been as necessary as resumption. We've seen less than 3% vacancy in malls, in particular. And when you consider 3% as a strategic element of your business mix, then clearly, the gap can be filled with strategic approaches, fine-tuning the tenant mix, fine-tuning the strategy, fine-tuning the space as well. What we have seen in the last few years is that outdated business models and poor management has made a bigger impact than online retail can possibly achieve. Yes, digital might have killed off some businesses, will help kill them off, but it was in the response to digital that a lot of businesses suffered. So one of the casualties that we saw in the last 1.5 years was DionWired, which focused on being the first to provide the latest electronic goods to early adopters. The problem with that model was that early adopters also happened to be early adopters of online shopping. So electronics were among the great growth areas of online retail in the last few years, and especially, the early adopters realized they could find the products first and also at the best prices by going online. And that resulted in the DionWired model that had been invented in effect in 2007, suddenly being outdated. The irony is 2007 was also the year the iPhone was first released, but the iPhone appears to have outlived DionWired. The second one is that I want to highlight as an example of a sector and a business approach is Musica. The final Musica store closed down on the 31st of May this year. But the writing thing had been in the world for some time, and I'll come back to that one in a minute. And then CNA, this is the Woodlands Boulevard branch, we are also seeing a decimation initially and possibly a destruction of that business as well, and I'll go into more detail there. The point about all of these is that it was a long time coming. It wasn't the sudden advent of online retail that killed them off, and it wasn't the pandemic that killed them off. CNA, I describe as a train wreck in slow motion. It's height was 1995, but even then, it was in trouble. It had 350 stores. It wasn't sustainable. Ownership was changing rapidly. By the time that Edcon announced that it could sell CNA when Edcon itself was in deep trouble, it was already at less than half that level, 167 stores at the point that they announced. On the 4th of February last year, as the pandemic began, but almost 2 months before lockdown began, so the pandemic had no impact on CNA. Business rescue practitioners working on CNA said they're going to reduce the footprint to 60 stores from that 167. In fact, I think 163 as of August. But that will come down to 60 stores. And the bitter irony for people who believed in CNA was that it will now be a smaller chain in PNA, which was the young upstart that was trying to muscle in on its territory with stationary in particular. PNA is 83 stores and will, by the beginning of next year, be a bigger chain than CNA. It's ironic but it's coincidental that the collapse of CNA went hand in hand with the collapse of the magazine sector. It was already struggling. And we saw, for example, 1 of the most iconic names in magazine publishing in South Africa and across Africa, Drum magazine, which started publishing 1955, published its last print edition in December 2020. So the pandemic hastened its demise, but it was coming a long way off. And now if you go into any magazine store, in fact, you won't find a magazine store, but into any supermarket or stationary outlet or any other outlet that sells magazines, the magazine rack is looking pitifully small. And already, for example, Pick n Pays are looking at redesigning their magazine section to take into account the wounded decimation, the collapse of that sector. Musica, you could say a long time coming because back in 2007 when the iPhone was invented, you could already see that Musica was going digital. It just needed that mobile connection and that mobile vehicle to take it fully away from the physical world. The iPod was already hugely successful. And it was clear that the iPod potentially could be integrated into the cell phone or the equivalent of the iPod could be integrated into the equivalent of a handset, and that would spell the end of physical music. But the physical retailers didn't see this coming. And when Look & Listen closed in 2017, it came as a shock to many in the retail sector. But it could have been forecast 10 years before, in fact. By 2017, total music sales were only at ZAR 377 million. That is from about ZAR 1 billion or more at its height. And only 1/3 of that was a physically recorded product. In other words, product you could sell in a music store. And that, as I've mentioned here, could not possibly sustain 2 major chains. By 2018, the trend was even sharper, with total music growing to ZAR 385 million but physical dropping to below ZAR 100 million. Now a successful major store in a large mall would want to turn over that level, not the entire industry. So both Look & Listen and Musica had already started bringing in accessories, audio gear and gaming and the like prior to 2017. By 2018, Musica was transitioned fully into an accessory store with the top 10 CDs in the front of the store for those who still bought CDs. And then huge gaming sections, trying to attract the gaming audience that had their specialized outlets already. So at the time that they tried to transition, their market was already elsewhere, either online for the early adopters or specialized niche outlets or going to the discount outlet to try and get the best price on the products that Musica was selling. So the myth that arose from this is that digital was killing off retail. The reality is that digital killed off categories like music sales, like magazines, but not retail itself. If a retail outlet couldn't survive the depth of a category, then there was something wrong with the business model of that retail outlet rather than with retail itself. And this sums it up, why digital is actually good for the mall. This is really find top 10 tenants in their malls. And going by gross lettable area, the #1 tenant is Shoprite. Look at what Shoprite did in the pandemic when they launched Sixty60. They transformed online shopping in South Africa, not only groceries. Yes, grocery shopping was revolutionized by Sixty60 by people being able to order groceries and not have to book a slot later in the week or 2 weeks hence. In fact, early in the pandemic, Woolworths still only had slots up to 2 or 3 weeks away, if you wanted to buy groceries from them. No one is going to buy groceries that they need today that can only be delivered in 2 weeks' time. So Shoprite forced Woolworths to reinvent their business model. Woolworths worked with Quench and then launched their own service called Dash to try to compete directly with Sixty60. But look at the gross lettable area, it's 109,000 square meters. That is what, in fact, enabled the Sixty60 revolution because every store became a staging point for delivering groceries within 60 minutes to customers of that store or in that area. So not only were they serving existing customers better, but they were attracting new customers who wouldn't dare to use Shoprite Checkers previously. In fact, still today, you find a lot of the classic Woolies customers who shop at Woolworths because they're perceived as having high quality, not being willing to go into Checkers. But Checkers Sixty60 forced them to change their approach. And suddenly, Shoprite has an entirely new customer base as well as they better serve the existing customer base. Again, thanks to that vast presence in the physical retail space. Pick n Pay and Woolworths is the same thing, #3 and 4 on this list, also having to rely on their physical retail outlets to be able to fulfill that online demand. And many Pick n Pays also have embraced the idea of allowing their own physical customers to phone them to have a delivery made because the 60-minute delivery from the ASAP service only allows a limited number of items. So you're not going to do your big shop via a 60-minute service. And that's where look -- forward-looking Pick n Pay managers have actually realized they can better serve their customers by aligning the big shop also to be done electronically, by email, even by Whatsapp and by phone. Yes, the phone still has a role to play in e-commerce. In between those, you have Pepkor with Pep and Ackermans, in particular, playing a major role in the digital revolution that is probably invisible to most people. And that is supplying the phones that are going to make the mass market a prime target of online retail. So -- and a little known statistic is that Pepkor probably accounts for half of all cell phone sales in South Africa through Pep and Ackermans and other outlets. But Pep, in particular, is the big outlet. And until recently, more than half their phones were feature phones, what I call basic phones. Now it's flipped over. Well over half the phones they sell are smartphones, mostly entry-level, costing between ZAR 400 and ZAR 1,000, but every one of those phones is data capable and app capable where people are in a free WiFi zone, they are able to use apps at no cost in order to make purchases that can be delivered to them at low cost, in many cases, no cost. And that's where the lowest LSMs -- or rather, SELs, socioeconomic levels, are coming into the online retail environment, being able to shop through arbitraging the apps, the services, the deals, the promotions and when free delivery is being offered. Now that is not chasing them away from the mall. When they do their big shop or when they have specific needs, they go back into the mall, but the apps are making them more loyal customers of these particular operators or retailers. And so that's where Pepkor plays a fascinating role that it couldn't play if it was only a digital player. It's facilitating a digital revolution through physically providing these devices at their physical outlets. And then Foschini with the TFG online service, Mr Price or Mr P online also seeing massive benefits from being able to serve their customers online. But again, it's that mix of digital and online that is providing the service. So let's look at the reality of the single biggest success story of the pandemic. And as I've just hinted or [indiscernible], it's also a big world success story and that is Shoprite Checkers. So in the 52 weeks to the 4th of July, based on their last annual results, they opened a net of 112 stores. This is not the death of the mall. This is not the death of physical retail. Their merchandise sales increased to ZAR 168 billion. And even though one of the most profitable outlet -- chains, their liquor shop business, was closed for well over 1/3 of the year. Their furniture segment that you would not expect to thrive during the pandemic increased sales by 24.6% because of that enhanced presence in the physical mall. And this has been underpinned by a new division of their business called ShopriteX, which is a digital tech hub that draws on data science and digital skills of young people who want to change the way that retail happens. It doesn't mean killing off any aspect of retail. It means changing retail, in particular, through a service like Sixty60, which is 1 of the early successes of ShopriteX. Their Smart Shopper card -- sorry, that's Pick n Pay brand, but the equivalent or Smart Shopper also came out of the ShopriteX initiative. But Sixty60 had 1.5 million app downloads. That's almost unprecedented in such a short time for a shopping app. The only shopping app that can compete on that level is Takealot, which is online only. But what really gives Sixty60 its power is that it is able to operate from 233 stores and that is a gross lettable area element that I mentioned earlier. Every one of those stores is a fulfillment center, but a micro fulfillment center as opposed to Woolworths, for example, which, as I said, has also reinvented itself. But initially, when it expanded its online grocery service, had these massive fulfillment centers that were seen as the hub of the online retail strategy. That has had to change significantly. This photo of the Shoprite CEO, Pieter Engelbrecht, is a fascinating one for me because of what it doesn't show. I call this spot the mistake. And why this is significant is that when you go into a Shoprite store in a mall today, and I've had this experience in the last few weeks in multiple malls, they are busy. If you go, for example, to 1 of the biggest new malls in [indiscernible] Cornubia, it is almost deserted. I won't call it a ghost town. There are certain places where there is a buzz. But when you walk into Checkers in Cornubia Mall, you think you stepped into a different world. It is so busy. There is such a buzz, and there are things happening throughout the store. And it shows that when you innovate in the digital space, it doesn't preclude innovating in the physical space. And when you create a buzz in the digital space, it doesn't preclude you having a buzz in the physical space. Those, for me, sums up the difference in terms of this particular store. Let's look at the flip side of the question, though. Where will we see the real destruction of physical retail or rather decimation of physical retail? And these are the segments that I believe they're close watching because they are so well served in the digital world. And the first one is completely counterintuitive, and that is appliances. You would assume that large white goods like fridges and washing machines and tumble dryers, you have to see in order to buy. The reality is that there isn't massive differentiation between the different appliances, between the different brands. The differentiation is all about features, not about the look of the devices. And unlike clothes that you still feel generally need to try on, when it comes to an appliance, if someone shows you a photo of it, you have a fairly good idea of what it's going to look like. So what people are now looking at in the appliance world is comparing the features of appliances and comparing the prices, in particular. And most significantly, you can now buy almost any appliance online as well. This is where Takealot has made massive inroads into the world of physical retailers. But again, it depends on the retailer's mix of products and how it sells those products and whether it makes the products available online. For example, I've been fascinated to see how a game has transformed the ability to buy its TVs online. If you go into a game store, you may not have the range out of which you will find what you specifically are looking for. But online, they are able to aggregate what is available in all their stores and suddenly are able to better serve their customers. So again, it's not just about physical versus online. It's about online leveraging physical and it's about physical taking advantage of online in order to better serve its customers. It all comes down to the customer experience. The second segment of retailers that one needs to watch carefully is really a lesson that we've learned from the United States, and that is department stores. We have seen massive closure of department stores across the United States for the simple reason that the nature of the department store is highly physical. It needs people going from department to department almost accidentally shopping in different departments, whereas in the online space, you go to a specific category that you want to purchase. You could describe Takealot as a department store, but it's not really. It's more of an online mall than a department store. Department stores have got such a physical bias and are so difficult to represent online effectively that you can understand why in the United States, in particular, they have been under such an onslaught from digital. The next category is education. And while education books are still the key to educating the country. At some point, our education system will wake up to the benefits of digital, but also the ability to roll out digital tools more effectively. You may have seen that there's been a boom in the notebook market. I wrote a story on this in the Sunday Times this past Sunday, that was partly fueled by the education sector. And one of the big beneficiaries was a brand that came from almost nowhere, but got the contract to supply notebooks for tertiary institutions to the education -- or the Department of Higher Education. And that was an indication of the extent to which education can move into digital space. It was done very badly. Many universities still haven't woken up to -- how to properly use digital. But in the next 5 years or so, I believe we'll see a transformation in the nature of education textbooks. And in electronics is a similar story to appliances except more so because with most electronics, there are so many options, so many brands and so many different specs that physical store cannot possibly meet all the needs of its likely customers, whereas online people can mix and match. They can build their own electronics almost. And again, coming back to the game example, the physical retailer can aggregate all the products in all their outlets and give the same experience of being able to do comparison shopping as the online shopper has when they go to somewhere like Takealot. That's the only way you can address the shift of electronic sales into the online environment. And then entertainment, this is one area where it's very difficult for the physical retailer to compete with the online world. And Netflix started the revolution globally not just in South Africa, and they started off by killing off the video store, the physical video store. The irony there is, if you know the story of Netflix, you'll know that Reed Hastings, its founder, started it because of his frustration with Blockbuster when he was fined for returning a video 2 weeks late. The real experience was that the business was punishing the customer. And he found out it was a better way. He started Netflix initially not very successfully. They tried to sell it to Blockbuster after 2 years and Blockbuster laughed him out of the meeting. And Netflix then reinvented itself very quickly. And from 2004 onwards, it began reinventing entertainment online. Blockbuster woke up too late to the shift that was happening and in 2010, declared bankruptcy. So already more than a decade ago, streaming video killed off one segment, namely the video store. And the next segment that it is likely to kill off is the cinema or at least those cinemas that don't reinvent themselves. So we believe that there will still be cinemas for years to come, but there will be fewer of them. And they will have to have really reinvented themselves dramatically. We've seen Ster-Kinekor currently in tremendous difficulty as they try to restore trust in the brand. We have seen them invest heavily in transforming the experience of the cinema, but it came a little too late when the pandemic hit and people weren't allowed to large go back to the cinema. So they've really had a triple whammy of streaming coming along to take away their business, of people expecting a better experience and then of the pandemic completely pulling the rug out from under their feet. So cinemas, we hope will come back again, but they have to be focused on the customer experience. The bottom line is that in this country, the mall and retail outlets will underpin online retail. They will be a foundation for online retail. But at the same time, online retail can help to save the mall. The 2 depend on each other. The one won't kill the other one off for the foreseeable future. Thank you very much.

Arthur, thank you very much for a very comprehensive and thought-provoking presentation. That was really most insightful.

Thank you.

I see there are no questions online. [Operator Instructions] So without any further ado, if I can introduce you to Nashil Chotoki, our National Retail Asset Manager, to give you some perspective on the South African retail landscape as well as redefined retail portfolio. Nash?

Thank you, Leon. Welcome, and good afternoon, everyone. Once again, thank you for taking the time to join us for this webinar. Clearly, I'm not one of those early adopters, as I think I would have preferred to be speaking to most of you in person and walking you through the mall like we did 2 years ago. Hopefully, we'll be able to do that soon. So as Leon indicated, I'm going to take you through what the retail looks like, what the overall retail landscape looks like from a South African perspective and then a closer look into the Redefine portfolio in line with Arthur's theme in the presentation, also take you through our plan on how we're going to embrace online. If we start just having a look at what's happening across the South African retail market and what that looks like, I'd first like to kick off with Arthur's theme around online. And we managed to get some data from Nedbank from -- who took all the data from their card payment terminals in retail stores and compare this to online transactions, which they refer to as digital card purchases. You would see that online sales volumes, which is number of transactions, has increased from 7% in 2019 to 11% in 2021, which is a growth of 4%. You'd also note the chain graph below reflecting that growth. The interesting thing comes when we look at this volume growth in context of actual online sales growth, being the value of transactions and not just the number of transactions. So online sales growth grew between 1% and 1.5% between 2019 and 2020. That depends on who measures a bit. But the key takeout there is that the basket size has actually reduced because the volumes are up by 4%, and the transactional values are only up by 1% to 1.5%. And this supports the feedback we get from retailers being that the thing that the basket sizes are smaller because the biggest growth of online has taken place in grocery and pharmacy. And the feedback from grocers is that generally, this is their staple basket or script meds which is driving their basket spend. And we should also note that included in this data, the digital card sales for online entertainment is in the volumes. And that segment, we think, has grown through the lockdown levels as these facilities couldn't be opened. So a lot of data around what's happening within the South African retail comes from MSCI and the subscribers to that database and this slide represents trading density growth. And trading density growth, for those who don't know is the total sales from a store divided by the square meterage of that store, and it's aggregated into a mall. What we see here is that trading density is already exceeding pre-COVID levels. And note the quick recovery after lockdown levels driven by what we think is pent-up demand. In spite of the great growth on trading density, total sales is still down overall. And this is largely due to an increase in vacancy, which has went up by 3% across SA retail. And therefore, I think the oversupply of retail space will continue resulting in pressure on rentals and escalations. There's a strong recovery here. But this recovery's not across all center types and not across all retail categories and I'd like to unpack that just a little bit for us. So this slide unpacks the trading density by segment being each type of different centers and you'd see that on the right-hand side of the graph. At the bottom, we have super regionals being the largest all the way down to community being the smaller centers. The key takeout, I think, from here is you could see super regionals were most impacted by COVID, and have still not recovered to pre-COVID levels. The convenience retail recovers quickly and actually outperforms pre-COVID levels due to what has been -- due to the perceived safety and work from home as most of the small format centers are in the suburban areas. You'd also see that from the middle of 2016, one can see the move to convenience and neighborhood centers, which outgrow the regionals and super regionals. So I don't think this trend has only started due to COVID. It is accelerated by COVID. So as in -- again, the large format it's still not at pre-COVID. However, there are some green shoots for large format centers driven by vaccines and relaxation of lockdown restrictions, which impact entertainment and in particular sit-down restaurants which are mainly in large format centers, and we think that's driving this growth. When we look at what's also behind the trading density growth and overlay that with foot count, you see that foot count per square meter across retail is about -- hasn't recovered to pre-COVID levels, about half of that at the moment. And this, we think, is due to people actually visiting centers definitely. They're not visiting them as centers. There's more planned visits. And they probably sticking to 2 grocery lists given the pressure on the consumer. Foot traffic to these large format centers is also influenced by work from home, which is where most of these convenience centers are located. And interestingly due to the layout of large centers, it's difficult to count the feet that are entering those centers. So we think that, that feet has not been counted yet. The complexity comes in that the convenience centers trade onto parking areas. And the access is direct. So that feet is not being counted. If we look at what's happening with cost of occupancy. So rental growth overall has been declining, while sales growth has been positive, which results in lower rent ratios. And a rent ratio is the total rent for the area divided by the turnover that, that store generates. And that, therefore, represents amongst other factors, the affordability or sustainability of rentals that we get from retail. Given that this ratio is reducing it creates a lower income risk. And we think this is driven by COVID rental relief given to retailers as well as restructuring of leases. Large format centers still have significant risk for restaurants, health and beauty and travel and such like. And we're still seeing increasing rent ratios in those categories. So if you just take a step back, we've seen growth in trading density. We're seeing rent ratios coming down. There's all signs of real positive recovery and an optimistic view. Our concern, however, is still that the recovery is underpinned by essential services. And therefore, the sustainability of the other retail categories needs to be monitored closely. Rent ratios obviously drive what's happening with rental. What we see here is the supply-demand equation is obviously influencing rental reversions. Rental reversion, for those that don't know, is the rate at which rental grows or declines at expiry of the lease. So there is still a positive rental growth for community centers due to those work-from-home trends and the good performance of that segment. Given the recovery on trading metrics, in particular, trading density and lowering rent ratios, we do expect rental reversions to ease or to improve, although still negative as sales growth outperformed rental growth. If we start looking at the vacancy that I have alluded to earlier, the percentage vacancy has grown by 3% to 6.8%. And if we look at the bottom right on the slide, you see the percentages are largely the same. However, 7% of a super regional center is a much greater area than 7% of a neighborhood center due to the size of those centers. So this vacancy has been largely due to failures in the large format centers, which had the most casualties in square meters. Due to the size and exposure of those hard-hit categories, especially restaurants. The interesting question that comes out of this slide is what has happened in terms of tenant mix at these shopping centers, given the vacancy that has come through, given the change in the way that people are using centers, given the change in shopping patterns. What we see here is this slide outlines the change in tenant mix at shopping centers as a result of COVID. The graph shows the percentage change in GLA for the various retail categories. For example, you can see fashion in super regional has reduced by negative 1.6%. Fashion retailers interestingly have gone through a process of rightsizing and consolidating their footprints, which is why that number has reduced. You see the growth in homeware and hardware across all categories or all segments of retail shopping centers. And we also see the increased allocation to essential services, in particular, grocery, which has taken up a lot of those vacant space. And these changes are already in the base, which sets up retail for growth, barring any other macro factors such as lockdowns. If we look at the trading density performance then per category over the last quarter as an indication of the base for growth, this slide shows trading density growth per segment. It's extremely positive for large format centers, given the vaccine rollout and lowering of those lockdown levels, I think consumers are more comfortable going out to restaurants, which are mainly in those large format centers. Overall, we've seen encouraging signs as trading density for May and June has already recovered to beyond 2019 levels. If we now get into the Redefine retail portfolio and the details around this. So this is a snapshot of the Redefine portfolio. we've seen marked improvement in leasing activity driven by the recovery of spend, which has resulted in improved operating metrics for the portfolio. The vacancy was maintained at 5.5%, and which is 1.3% lower than MSCI right now. We see healthy in-force escalations at 6.4%. And we've renewed 152,000 square meters in the [indiscernible]. However, we still remain concerned about banks, which are reducing their footprint and number of outlets. And we remain concerned about sit-down restaurants due to the impact COVID had on this sector. Our strategy will continue to be focused on retention and WALT. And having a diversified portfolio in terms of large and small format centers, has proven to be beneficial. The diversification extends to geographical areas where we -- in the major metropolitan areas Johannesburg, Cape Town and Durban. The trends within our portfolio also support a recovery of retail. And this is also supported by the improved trading metrics we saw from MSCI. Key trends I'd like to highlight for you here is COVID has not impacted the turnover of essential services. However, there is a buying down trend and an improvement of online sales. In spite of this, and as alluded to by Arthur, you'd see that essential service retailers have the largest rollout of physical stores compared to other categories. And that comes across Checkers, Dis-Chem, Clicks and it continues. Office usage trends will continue to impact shopping behavior in terms of type shopping centers. And in particular, obviously, office trends, meaning work from home, would continue to influence those neighborhood and convenience centers. The fashion moving into convenience centers is an interesting one. We've opened 1,500 square meters of new fashion into convenience centers. How this trend tracks forward will also depend on office usage. Our online strategy is focused on the objective of creating convenience and giving independent retailers an online presence. The convenience gap in our view is one transaction to conclude shopping across multiple brands. As an example, if I need to buy something from Dis-Chem, Checkers and get a takeaway, instead of entering 3 different websites, 3 different cart transactions, I do it in 1 platform, 1 transaction. The plan is trial a concept with Quench, who already have a track record with the likes of Dis-Chem, Woolworths, Makro Liquor. And this track record in our view, overcomes the biggest hurdle in implementing online, which is getting the retailers to subscribe and getting them to sign on, purely due to the logistics involved. People are also uptight. I think it's unlikely that a single center platform will get the traction necessary due to the size of the target market. By having one platform with multiple malls even from different owners, creates that critical mass that differentiates it from normal retailer-based platforms. Logistics of executing transactions is also simplified in the driver purchase the goods and deliver it similar to the success of the Checkers Sixty60 app. From a shopping center owner perspective, it's investment-free. Our contribution is mainly around marketing awareness and working with retailers to sign up. We plan to launch a pilot at Kyalami Corner in the first week of December. And the intention of the pilot is to assess integration with retailers, what are the service standards and what is the take-up of other shopping centers as well. This slide looks at the performance of the Redefine retail portfolio. So the bullet points on the left showed the turnover comparison for the 12 months to July '21 versus the 12 months compared to July '19. We've also excluded new developments and new GLA added from these stats. The graph shows the movement in turnover to August '19 on a percentage basis for the different retail categories, and therefore, highlights the percentage reduction or pickup since COVID. We see that Christmas trading 2020 was already at pre-COVID levels. And we also see that the recovery was driven by essential services and value fashion as highlighted in the 12-month data on the left. Interestingly, that essential services recovered to 115% for -- that's a 15% growth. That represents $1.5 billion in our portfolio. 73% of that $1.5 million is purely grocery. For clarity, essential services is grocery, pharmacy, pet care and liquor stores -- sorry, I've just -- my own definition on liquors there, but fashion being the single largest contributor to rental for our portfolio, 27% of our monthly billing has recovered to 101% for that same period. The key point we've noticed is that value fashion for that same period was at 107%, outstripping this and showing the move to value. As indicated earlier, our concern still lies to the hard-hit categories, sit-down restaurants. However, they are trading at 95% of where they were pre-COVID. We saw restaurants doubling the turnover every month for the first 3 months post the hard lockdown, and a very quick recovery from lockdowns associated with the second and third wave. Restaurants are severely impacted by restrictions on alcohol and curfews as 60% to 70% of their total turnover comes from dinner. Takeaways at our 126% -- 26% growth compared to pre-COVID. And we've seen insignificant growth of the Mr D and Uber Eats, which is probably a challenge we're all facing because the likes of Mr D and Uber Eats take 20% off a 30% margin from takeaway foods. And we need to figure out how to make that model sustainable. Hardware and homeware, as everyone else, has been growing significantly, 45% up compared to pre-COVID levels. And as indicated earlier, we've excluded our new sites from Leroy Merlin here so that the data is compatible. In spite of the growth, we are already seeing a tapering off of homeware and hardware. And our focus on -- the focus on turnover stats is largely as retail rentals is always a function of what turnover is, and therefore, this talks about the sustainability of our income streams. For this slide, I think, in conclusion, retail is resilient, bounces back quickly. The income risk is with restaurants, but it only makes up 10% of our GMR and the risk is muted by the good recovery. Overall, we still expect to see negative reversions but we expect these reversions to ease a lot due to the lag recovery of the categories outside of essential services. The recovery of retail spend and its impact on rental needs to be reflected in valuations as well. I think valuers have taken a very pessimistic view on retail recovery. If we now unpack how this reflects across different center types and regions, we see -- so this slide takes turnover and foot count and breaks it up by large and small format retail. You'd have noted from the MSCI, as a format -- the small format centers have been largely unaffected by COVID, and this is reflected in our portfolio as well. Consistency of the small format retail and limited -- due to the limited impact that COVID has had on it. If we compare -- take the slide, if we compare 3 months May to July '21 versus August to October '19 pre-COVID, we see total turnover is already up by 5% compared to pre-COVID levels. However, foot count for that same period is only at 80% of what it was similar to what was being reflected in the MSCI stats. Recovery of our large format centers once again is driven by the risk perception with lower lockdown levels, COVID vaccines. And I think people need to be entertained and to socialize. The interesting part when you overlay this data with MSCI data, you'd see that the total turnover from the convenience centers has largely remained flat, yet the growth in large format has continued. So where's the additional funds or where is the additional spend coming from? We think it's as a result of low interest rate environments, less travel around work and holiday and has pent-up demand. From a geographical perspective, the footfall recovery in Cape Town has -- is better than Joburg. This is largely due to the nature of our centers there, in particular Kenilworth. Gauteng turnover recovery is actually due to us having a larger exposure to convenience centers in Gauteng. Non-GLA income is derived from space that is not let on a long-term basis to retailers and does not form part of the lettable area of the mall. Example, promotional costs and advertising mediums. Through COVID, promotional costs have been the hardest hit as reflected to in the graph and has still not recovered. Rooftop income is obviously the organic growth we see and not impacted by COVID. Our exterior and in-mall media, we've had exceptional results despite a tough media environment and brands decreasing spend. This was due to our strategy of investing into our LED network, which proved decisive and allowed us to capitalize on the shift from static media to digital mediums, which has accelerated by COVID. Our continued growth of non-GLA income will be from kiosks, expansion of our LED network and rooftop towers. We're also looking into new income streams for non-GLA as to self-storage units, e-commerce hubs, gaming, and tech hubs. Environmental initiatives is not only the right thing to do, but will also become a differentiator, which will drive loyalty. The entire Gen Z, our future shoppers, but mainly current shoppers as well, feel very deeply about environmental matters. And this will influence their choices on where they go to be entertained and to socialize. They will choose a venue that is environmentally responsible, and we want that to be our centers. We're investing ZAR 210 million into water saving and expanding our solar plants. The expansion into solar plants is proving lucrative given the higher cost of electricity and our -- that investment is yielding at 21%. We were fortunate in that only 4 centers were impacted by the unrest. And we've had severe damage at Chris Hani and Isipingo Junction, where the entire mall was looted. Isipingo Junction, 320 West Street and Scottsville have been reinstated and is now fully trading. At Chris Hani, there was structural damage to sections of the mall. And therefore, the reinstatement process is drawn out. We're also using the opportunity at Chris Hani to improve the mall, bring in more natural light into the mall and correct tenant mix weaknesses, which would have not proved feasible to do during the mall -- when the mall was fully operational. At Chris Hani, 56% of the GLA is currently trading, and we expect this to get up to 75% by November and fully trading by the end of February 2022. I'd now like to take you through an AV of Kyalami Corner, Centurion Lifestyle, Centurion Mall in Kwena Square, which is currently being developed. [Presentation]

In conclusion, we expect leasing markets to remain very competitive, and we will, therefore, be flexible to ensure tenant retention. As illustrated, retail has recovered quickly, and will continue to rebound underpinned by COVID vaccines. Malls have to become more client-centric, and I think omni-channel is an opportunity for us. And Redefine's diversify retail portfolio has cushioned us against volatility in a very difficult market. Now we can address any -- I'll hand back to Leon, regarding any questions asked.

Sure. Thanks, Nash, and thanks, everybody for submitting through some questions. We did receive some questions online. So maybe if I can read through them and we'll tackle it question-by-question. The first question is from [indiscernible] from [indiscernible]. The question relates to a presentation was a slide that Arthur showed earlier, where she asked on that slide that says digital is good for the mall where we included our tenant mix. The question is there's government and Virgin Active. Can you please explain what their digital presence and growth is? I think maybe just to explain, this slide wasn't necessary to demonstrate the digital presence or strategy of each of those tenants. It was merely to give you a snapshot of who our big or our top 10 biggest tenants are. So you've raised a valid point. Virgin Active being gym predominantly in our retail space as well as governments. These are tenants that potentially will have to rethink how they position themselves going forward from a digital perspective. The next question is from Nazeem Samsodien from Investec. The question is on Slide 8, Nash, that was the slide around cost of occupancy. Where do you believe this should settle over time? How does an increase in essential services in the mix impact this view?

So overall, I think retail is sustainable at a mall level, an overall mall level between 8% and 10%. That would vary depending on retail category. So the likes of a jewelry store at 10% is probably high, and the likes of a grocer at 5% is probably high. So given that grocers operate at much lower rent ratios, the increase in essential services is expected to therefore reduce that sustainability threshold.

Then another question from Nazeem, can you provide some color on supply? Is there a potential upside as centers are taken out of GLA as tenants exit? Or do you anticipate an increase in failed retail centers?

I think those retail centers that are unable to adapt to the changes of COVID and those centers that did not adapt to the ways or to the change in which retailers operate will find themselves obviously no longer relevant. I think that shopping centers overall are not only driven by shopping behavior, but spaces to meet. And shopping centers, we need to ensure we create that. It's about the experience.

Then a question from Suren Naidoo from Moneyweb. Considering the impact on regional or super regional centers and Redefine spending over ZAR 1 billion on Centurion Mall's revamp, how badly has this mall been affected considering its location in a major office node and also being surrounded by some new malls in the broader area. Also, how has Matlosana and Cradlestone regional malls performing?

So I'll take the first one with Centurion Mall. I think our investment has proved decisive at the right time. Centurion Mall is fortunate in that it's largely dependent on 3 markets, the local residential market, the office market and a commuter market. All of those have returned to some extent to Centurion. In 2019, the base is obviously subdued due to the development that was ongoing at that time. However, since then, we see -- we've reduced vacancy from 9% down to 3%. We've seen the operating metrics improved significantly. We have foot counts already about 90% to 95% of what it was pre-COVID levels. Once again, I'd just like to highlight that in 2019, center was still under development. So that number is off a low pace. Matlosana remains a challenge. And I think we need to start seeing the residential growth starting to come through there. We have a strategy revolved around improving the tenant mix and improving our access to the commuter market, in particular, to improve foot count in that center. The other...

And Cradlestone.

Cradlestone seems to have settled a bit. So we've managed to get through the worst period last year where we had the majority of leases expiring. And we've got through that period without losing a tenant. We think that, that residential market still needs to grow in order for that center to become sustainable. And how we deal with the upper level being the cinema level given what's happening with Ster-Kinekor will be our biggest challenge.

Then a question from Anton De Goede from Coronation, and maybe we can deal with his question as well as Suren has posed question. Anton's question is, please explain why there are no costs for Redefine to develop Pocket Mall. Is Quench doing it on spec? And how will we convince retailers to sign up to the service? Related to that point is Suren, where he's asking what is the pilot at Kyalami shopping center exactly, online platform catering for multiple stores? Will this not compete with the likes of Vodacom's much warranted Super App, which is offering something similar but on a bigger scale?

So maybe I start with the first one, yes. Why there is no cost? So Pocket Mall's model is to get critical mass around the platform. And that will be the differentiator against a single center. By getting retailers to sign up, there's obviously a transaction fee that they earn, but they provide the platform for that. We need to figure out how do we gain a share of that income should it actually fully take off. What was the other part of that, is Quench doing this as spec? How will we convince retailers to sign up? I think retailers will want to sign up, given the gap we've highlighted from a convenience perspective in that one is able to make one transaction across multiple retailers. And that is the differentiator. Perhaps to just also highlight, I don't think we see online as being -- as taking away the shopping behavior. I think shopping centers are going to continue to be the main stay of shopping activity.

Correct. And maybe just to also answer -- further answer Suren's question what that pilot is and is the online platform catering for multiple stores. You're quite right. I mean, in terms of barriers to entry for an online platform to procure goods and services are limited. The reason why we're specifically targeting a more like Kyalami Center or Kyalami Corner is that we believe that an opportunity such as this could aid the convenience for the actual shopper that are loyal to that center itself. In time, we would really like to make sure that there's a click-and-collect functionality or that the consumer just drive pass them all and pick up their goods per se. So to drive that loyalty and more importantly, to drive the convenience for the shopper to have access to multiple stores should they run out of time, not necessarily to just acquire goods. Then a last question from Ross Krige from JPMorgan. Thanks for the presentation. Thanks, Ross, for attending. The question is, other than restaurants, are there any other tenant groups that are of concerned? Or do you think we are past the worst in terms of mass closures, such as we saw with Edcon? And then secondly, are you happy with the tenant mix across your portfolio? And if not, what changes would you try and make?

So other than restaurants, we remain concerned about health and beauty and in particular, travel stores. I think we need to see a return to office to start seeing an improvement in those. It's difficult right now to say that we wouldn't see any mass closures. Obviously, CNA we're all aware of. Ster-Kinekor in business rescue we're all aware of. I think once again, those retailers that are unable to adapt to the change is where the risk lies. In terms of the tenant mix part of that question, we would still like to increase our exposure to essential services. We think that, that area is going to continue to grow and will be sustainable in spite of various lockdown levels or future pandemic. Those leases are also underpinned by bigger balance sheets as well, which gives us a little bit.

A question from Glenda Williams from Finweek. You say office usage trends will continue to impact retail behavior. Are you expecting suburban offices to become more relevant? Glenda, I don't think necessarily that given the convenience or access to a convenience retail center would necessarily drive demand for development of offices in those nodes. From an office perspective, I do think, however, that we need to think differently how we can make the existing office spaces more attractive. But more importantly, how it can service the evolving needs of those office dwellers that now has grown use to or accustomed to working from home environment, but are sorely lacking that collaboration and teamwork that is prevalent in the conventional office space. So I don't think it will necessarily drive suburban office development is just something that we need to be aware of from an office strategy point of view, how we make those spaces more attractive and in competition with the work-from-home trend. And then there's a question from [indiscernible] it's to what extent are the logistical centers and infrastructure needs highlighted in Arthur's presentation? I'm not quite sure what exactly he's after. But in terms of logistics, in particular, to support online distribution from retailers, in particularly the national retailers, I think the point was well made in that the example of a Checkers for instance, given its wide footprint, same with Pepkor and the other national retailers that they do have these micro centers and the ability to fulfill on a far broader scale. So potentially, it will sort of address that infrastructure need and logistics need. However, it is clearly going to change some of the demand within the warehousing space. Let's see if there's anything else. It doesn't look like there's anything else. I think we've covered it all. Thank you, everybody. I think that's all the questions. Let me just refresh once more. Yes, I think that's all the questions. Thanks, Nash. And thank you again to everybody else for attending. We really appreciate it, and particularly the engagement at the end. And feel free to -- if there's any other questions to e-mail us through the investor inquiries e-mail address that you're all familiar with. And if not, we will engage again at our year-end results presentation, which, as I indicated earlier, be on the 8th of November. Thank you, everybody, and stay safe.