Redefine Properties Limited (RDF) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to Redefine's interim results presentation for the half year ended 29 February 2024. Our conversation this afternoon will follow the usual format. I'll start off with an overview. I'll then hand over to Leon Kok, our Chief Operating Officer, to talk about South Africa's property portfolio earlier, I will then touch on our Polish property assets. I'll then hand over to our CFO, Ntobeko Nyawo, who will talk about optimizing capital, operating efficiently as well as engaging talent and closing with growing reputation, and then I'll wrap up with some Q&A thereafter. Okay. So just in terms of who we are, I think we all know who we are, but what I'm very happy to report on is that Redefine for the first time as a property, as a platform that is in excess of ZAR 100 billion, and you'll see the geographical split there, 62% in South Africa and 38% in Poland. Okay. Just some key financial outcomes, and Ntobeko will talk a lot more about these, but I'll just touch on a few. We're very happy with the REIT NAV growing to ZAR 7.80 per share. Our total assets are now at the all-time high of ZAR 102.9 billion. And the last time we were at a similar level, ZAR 200 million less than this was in financial year 2019. So we are basically back to where we started before the pandemic from a total asset perspective. Our distributable income per share has grown 6-odd percent to ZAR 0.253 per share. Our dividend per share, you'll see has been maintained at what we paid for the first half last year at ZAR 0.203. Our South African occupancy has slipped slightly due to a temporary vacancy. Leon will talk about it in our industrial portfolio at Cato Ridge. And our Poland occupancy you'll see is consistent at 98.4%. Our loan-to-value ratio, once again, Ntobeko, we'll unpack that in more detail, is up at 42.6%, but that is principally due to the acquisition of Mall of the South, which we guided in the pre-close update. And then just lastly, interest cover ratio at 2.2x is a focus. I just want to assure everybody, we watch it like a hawk. It is top of mind when it comes to any of the metrics at this point in time, given that the interest rate environment seems to be higher for longer. In terms of strategic outcomes for the first half, you'll note that we have not allowed anything to distract us from what matters most. And I'll just touch on a few highlights. There will be lots more to come. But from a investing strategically perspective, you'll note that the property asset platform, as I said earlier, is at ZAR 100.4 billion. Mall of the South was acquired at an income yield of 8.5%. And we've since the period closed from 1 April, increased our ownership in EPP from 95.5% to 99.2%. In terms of optimizing capital, we've been very busy with raising new debt facilities, as you can see, of ZAR 1.9 billion. We've issued bonds of ZAR 2.1 billion, and this was principally to settle maturing debt as well as fund expansion. We've also completed the refinance of Molciny at EUR 145 million, and we've secured EUR 155 million of debt funding for 11 ELI assets. Our liquidity profile remains stable. We have access to committed undrawn facilities and cash of some ZAR 4.2 billion. In terms of operating efficiently, you'll note our distributable income growth of 6.1% to ZAR 1.7 billion. Our group net operating profit margin has been maintained at 76.5% and our NAV growth of ZAR 0.14 is a highlight I've already mentioned. In terms of our staffing, engaging talent, our Net Promoter Score has improved from good to great. We have got 59 learners in the 2024 Learnership Program, and we've been awarded a top employer for the ninth consecutive year, and EPP has been awarded the responsible employer HR leader for 2024. In terms of growing reputation, we are very proud of our 5 net zero carbon Level 2 certifications and our net zero precinct award or from the GBCSA, but I just want to highlight that the precinct award is a first for South Africa. In terms of Green Star certifications, we are 62% in South Africa certified. And EPP and ELI are 88% and 93%, respectively BREEAM certified. We've also been recognized by Sustainalytics as a 2024 ESG industry and top-rated company. Those are 2 badges. There's only one other REIT with 2 badges that I'm aware of. Okay. So with that, I'm going to now hand over to Leon, who will talk about our South African property portfolio.

Good afternoon, everybody. So as Andrew mentioned, our property portfolio is just around ZAR 1 billion now and split 62% in South Africa and in Poland, 38%. From a capital allocation point of view, we spend at ZAR 4.4 billion during the period. The bulk of that was ZAR 1.9 billion to the Mall of the South acquisition as well as the final dividend for 2023, it was paid during the period of the year of ZAR 1.6 billion. And then we give you an analysis of where we spent locally from a development and CapEx perspective as well as principally in Poland. From a South African point of view, our portfolio is now just short of ZAR 61 billion at ZAR 60.9 billion. And the portfolio is 44% invested in retail, a 35% invested in office portfolio and the balance of 20% in our industrial portfolio. As you can see there in that bottom right-hand bar graph, our portfolio. You can see the consistent improvement in the value per square meter. That's principally driven by 2 aspects. Firstly, from active asset management point of view, where you can and see over time, we've divested out of the smaller, lower quality properties and rather invested in the bigger, more valuable properties. And that's similarly supported by a stabilization in the valuation of which we'll touch on in a minute. In terms of our outcomes, the slight blip, as Andrew mentioned, was in the occupancy, which increased to 7.9%. And what we've done is on the right-hand side, just to give you an analysis or give an idea what that vacancy is worth to us. The vacancy that we calculate by GMR, this is where we calculate the vacancy of -- or the value of our vacant space based on the asking rentals, as you can see, for instance, in the retail space, there's not much value sitting in that vacancy and it's only 2.4% by GMR, Similarly, in office at 9% and the industrial is 5.4%. So the total vacancy by GMR is just over 5%, 5.4%. The other key factor for us is to focus on those renewal reversions and as you can see, a slight improvement coming from a negative 7.5% to negative 6%. That's driven principally by our retail and industrial portfolio, and there's still some weakness in that regard in the office sector. If you can see on the property valuation, those exit cap rates, which is a key driver of the valuation large states stable. It's just in the office sector. That's increased slightly from 8.8% a year end to 8.9%. And you can see in our retail and industrial sectors, the valuations that largely stayed stable. In fact, some positive improvement and just a slight deterioration in value in the office sector, and we'll touch on that in a minute. The other aspect that we're very excited about is our solar PV expansion. As you can see, we've got installed capacity of 41 megawatts, and there's 21 megawatts of solar installations currently in play. And we're hoping to have that finalized over the next 12 to 18 months. The big delay there is often local municipal approvals to install. The other aspect that we're very excited about is that acquisition of a stake in the Pan-Africa Mall. And that is effective from the second of May. So it's not yet in these half year results, but it will be included from second of May going forward. The reason why we say a state because it's a bit of a complicated structure in the sense that we acquired 51% stake in the existing mall, roughly about 16,000 square meters, and this plan to expand it by a further 9,000 square meters. So we'll bring them mall to a 25,000 square meter development and our total investment there at a gross asset value level is ZAR 418 million at a yield of 9.25%. In terms of our retail portfolio, as you can see, the movement in metrics in terms of GLA and number of tenants is principally driven by Mall of the South. So that's roughly about 66,000 square meter large regional mall. They have contributed to those increase in tenants and in terms of GLA. From a valuation performance point of view, as you can see across the board in terms of all our formats, positive performance, and that's supported by strong income and underlying operating metrics. Our occupancy in retail has improved to 5.5% -- well vacancies improved to 5.5%. And we've also just -- we often say that the bulk of the vacancy sits in the sort of non-core retail. So within our retail portfolio, we've got some office related space. These office space in the shopping mall and also motor-related buildings, which is principally there to service motor dealerships. During the period, we actually sold one of those dealerships. As you can see, that's where the bulk of that vacancy sits. So in terms of pure retail, the vacancy is only at 4%. The key focus for us in retail in order to achieve growth from an NOI point of view is on those renewal reversions. And as you can see, we're certainly on our way to get flat or at least positive towards the end of the year, but a minus 0.5%. We're very encouraged by those signs. And that's principally driven, as you can see by the improvement in trading density, a 5% growth year-on-year. which leaves us with a very comfortable rent to turnover at 7.4%. We believe that bodes well for future lease negotiations. And as you can see on the right-hand side, where we've given you some analysis of our renewal activity. The bulk of our renewals either positive or flat with this small element on the negative front. Again, the point to make on our solar PV, the bulk of the solar PV sits within -- in this retail space. Over and above that 14% in progress, there certainly is some opportunity to start exploring whether we can maybe unlock car parks within some of our malls to see if that can also host some solar PV capacity. So we're quite confident that we can look to even improve on that in-progress pipeline of solar PV for us. In terms of our office portfolio, on the valuation front, that negative performance there in the premium grade, that's principally based on income and expense assumptions, principally is driven by a couple of our buildings that used to be single tenanted. That's now multi-tenanted in the multi-tenant building, the landlord absorb a fair element of that common area cost and which has driven an element of that negative performance within the premium grade. But on the other side of -- well in the rest of the portfolio, we're very confident that we've bottomed from a valuation point of view and then hopefully, as the economic cycle turn, we can start seeing an increase in valuation within our office portfolio. The increase in vacancy rate to 12.3%, principally driven by Centurion Gate office development being in Centurion. And as I mentioned, those renewal reversions still at a negative 13.6%. And we foresee that to probably hover around that minus 13% to minus 15% for the foreseeable future. In an environment where you've got excess supply limited demand that will be a key focus area and a continuous trend. We've just given you some analysis of what our renewal activity look like. And as you can see on the right-hand side there, roughly it's 50-50. 50% of our negotiations is flat to positive, which again speaks to the point that not [indiscernible] perform equally. We certainly have seen in Rosebank in certain parts of the Western Cape that we managed to increase our asking rentals for vacant space, and that just drives that positive renewal performance. In terms of our lease escalations still stay at 6.8%, which is good and tenant retention, particularly in this very competitive environment is a key focus area for us. So we're very pleased with that outcome of 97%. On the industrial front, again, another very solid contribution from a very defensive portfolio. As you can see on the right-hand side, are well diversified across the various formats. And similarly, that plays out in the valuation performance of the portfolio, where consistently across the board, most of our assets have performed very well. The point about the vacancy, we call it a temporary vacancy simply because we were quite fortunate to let Cato Ridge post period. So that's -- we entered into a 5-year lease effect of 1 July. So as at the end of March, I look this morning, our vacancy in the office in the industrial sector sits at 4.5%, and we would hope to maintain that to the end of the year. That renewal reversion of plus 4% is very encouraging. Please just notice on a very a small percentage of the portfolio. I think it's roughly about what's at 2%. So it's a relatively small element of the portfolio, but it does bode well for the industrial sector at large, I would suggest, because again, it speaks to the good demand within the sector. And certainly, we've seen an increase in market rentals, which is very positive and will certainly bode well for the sector going forward. You can also see from a lease expiry profile point of view, fairly flat expiry profile. So we're quite confident that our industrial sector will continue to perform as expected. And we're also quite pleased with some of the solar PV opportunities that we managed to unlock in our to portfolio, and we would look to further potentially expand that. Similarly, we're quite tough with those green star ratings that we've managed to achieve in this portfolio, and we will look to potentially expand that. The [indiscernible] renewal success rate of -- over 27%, that's obviously driven by Cato Ridge. So within this vacancy of 7.1%, 70% is contributed by 2 assets being Cato Ridge and as well as [indiscernible]. Cato is let, [indiscernible], we haven't yet signed. There's a temporary lease at the moment, but we're quite confident that in the not-too-distant future, we should be able to let that. And then just lastly, to touch on our alternative income streams, what we used to call non GLA, we're hoping to have this sector contribute roughly ZAR 100 million in the next 12 to 18 months. So the pressure is on for the team to perform. And certainly, in terms of our LED network expansion, that's the chunk for the biggest element of contribution in the sectors within in our network expansion there, and there's certainly some further opportunities. The other nice thing about this is that it allows us to support a number of our SME and CSR initiatives, particularly in that we've got access, obviously, to our unsold stock within those advertising spaces and such like. So again, another nice sweetener just to enable us to manage some of these negative headwinds we faced in the current climate. With that, I'm going to hand over to Andrew.

Okay. So just moving on to Poland. You'll note here that over the past 2.5 years, we've had some nice expansion, growing the value of our Polish assets from just under ZAR 30 billion to just under ZAR 38 billion. And in terms of the split, as you can see, 80% of this portfolio is retail-specific with 16-odd percent logistics. In terms of some salient features for this period, I've mentioned the acquisition of the remaining EPP shares, but very importantly, it presents an opportunity for tax and operational efficiencies going forward, and those work streams are underway. As part of the acquisition of the EPP shares, that was a share buyback for these offshore shares, 50% of Power Park Olsztyn, which is a non-core asset, was used to partly settle the purchase consideration for the shares. The cash proceeds from the Towarowa 22 disposal is expected by the end of June, and we're hoping that this money will come sooner rather than later because I think Mr. Nyawo would sleep far better at night with some relief on our LTV as a consequence of this money being repatriated back to South Africa. In terms of the takeover of the M1 portfolio from a property asset management, administration as well as leasing perspective, that happened seamlessly from the 1st of May. A lot of planning went into that process. In terms of solar plant installations, EPP is in the stage now of obtaining approvals, like we do here in South Africa before they can commence the installations themselves. And then what is also very pleasing to note is that the energy prices are now back very close to the pre energy crisis levels that drove that crazy inflation rate in Poland as well as the rest of Europe. To note, draft REIT legislation is expected to be released later on this year in Poland. So we'll be taking a keen interest in the legislation from a compliance point of view and then, obviously, from an opportunity point of view. But we're staying close to that one. And then there's a draft bill being discussed at parliament level to relax the Sunday retail trading regulations, which is very good news for EPP. In terms of EPP's core portfolio, you'll note here that it's pretty static at ZAR 19.7 billion, and it's got a bias towards fashion and accessories at is at 37-odd-percent. In terms of the core portfolio, you'll note here that every metric that we report on is either stable or improving. The occupancy is stable at 98.4%. Renewal reversions are now positive at 2.7% versus a negative 6.7%. Tenant retention by GMR is healthy at 97.5%, renewal success rate by GLA very good at 57%. Indexation is a consequence of Eurozone inflation rates at 5.5%. The weighted average unexpired lease term by GMR is pretty static at 4.1 years. Annual footfall is growing. And the rent to sales ratio is still at a very healthy 9.4%. I think Leon would have mentioned, 10% is the kind of ceiling there that you don't want to exceed, but in an environment of high inflation where rentals were increased as a consequence of indexation. It will tell you that our tenants are able to afford their rental all every month. In terms of the joint ventures, a pretty stable outcome, nothing surprising, nothing new other than the Henderson JV that is office specific, which you will see there, is taking a lot of strain on the occupancy side, having a vacancy of roughly 24 and a bit percent. That market is difficult and offices is an area of focus for us. These are pressure point in that Henderson's exposed to nodes outside of Warsaw. The one node that's all doing pretty well, and that's just anecdotally Lodz, Poznan and Kraków where those office assets are located. But for the rest, everything is positive. Molciny does deserve a special mention in that it's occupancy sitting at 98% is very, very good. And it's starting to show very good, not only trading metrics but also from an investment perspective, now that we have been able to secure the refi, we are able to now enjoy some dividend income from that venture as well. In terms of the ELI portfolio, it's been a quiet period. We've got 3 developments in progress, 100% let, and they will be completed at the end of this financial year, August, September. And that will add them to the active income GLA, which has been static at just under 1 million square meters. In terms of outcomes for the portfolio, the occupancy level sits at 92.3%. Leasing is challenging in Poland at the moment. And that's principally driven by the difficult economic conditions with Germany, who is principally the biggest trading partner of Poland, and that has an influence on the leasing market. So there, we have got a watchful eye on leasing. But nonetheless, it is an area that is showing some signs of challenge. Our renewal success rate is good at 67%. Our reversions remained positive at 3.9%. We have a very healthy weighted average unexpired lease term at just over 6 years. Our tenant retention is very good at 70.8%. And our weighted average indexation rate is at 4.7% lower than EPP and the reason why is because the timing of the indexation isn't mostly at the beginning of the year, as is the case with EPP, but it's staggered as lease maturities arise or lease anniversaries arise. Okay. Just in terms of self-storage, this is a very small part of our lives at this point, but has the capacity to become meaningful. You'll note here that our carrying value has doubled over the period from ZAR 183 million to just over ZAR 400 million. That was principally due to the acquisition of Top Box. Active income producing lettable area is 24,000. And should we be able to do all 7 developments that are under consideration, we'll be taking our net lettable area up to 50,000 square meters. Importantly, if you look at the right-hand side, at the map of Poland, you'll see the key markets that we've circled in red. We've got at least one project per key market that we are looking at, but we're also being the best yielding market from a self-storage perspective, you'll see a multitude of either pipeline situations or else a standing asset being Top Box over there. Okay. Just in terms of adapting our strategic priorities to the evolving variables under our control for the second half of this year, we will preserve capital value through organic growth and asset optimization. That's a daily exercise for Leon and his team, strategic allocation of capital to grow subsectors. I just want to assure you, we are very careful and responsible with the scarce capital at our disposal. Principally generated through the -- one the dividend payout policy, but more importantly, non-core asset disposals, which hasn't been as prolific this period as previous periods, but there should be a bit more to come in the second half. And then an adaptation of our spaces to ensure they meet stakeholder needs is once again an ongoing focus for us. With that, I'm now going to hand over to Ntobeko.

Thank you, Andrew. Good afternoon. If we just look on the key outcomes from the balance sheet point of view, I think it's very pleasing for us that our healthy liquidity headroom of ZAR 4.2 billion, which is made up of undrawn committed by undrawn facilities of ZAR 3.7 billion and our cash on hand of ZAR 0.5 billion. That gives us the strength in this constrained environment. On the LTV side, we've seen that growing -- increasing slightly just 42.6%. That is primarily driven by the acquisition of Mall of the South which is impacting that by 1.1%, that ZAR 1.8 billion acquisition. And then the interest cover ratio printing at 2.2x. It has come down from 2.4x, but that is something that we watch quite closely. And you will see that in this environment, we are pleased that our cash generation continues to support our ICR levels at the peak of the interest rates. And then if we just look at the cost of debt, the group weighted average cost of debt pre-let at 7.2%, which is slightly higher than the 7.1%. We are pleased that the South African weighted average cost of debt remained flat at 9.4% if you compare it to the previous period. And then where you saw an uptick is on the FX debt, which moved from 4.6% to 5%. In this environment, I think we're very careful and very judicious in protecting the interest rate risk. That's why we remain hedged at 76.7%, which is a stable hedging profile. And then we keep you the split between the ZAR debt that is headed for 83.7% and the FX debt that is hedged for 66.9%. Very comfortable with our average term of debt, which is weighted at 3.5 years. And then if we just look at the LTV in the waterfall, when we last reported at the end of last year, it was at 41.1%. The real material move up, you can see it on the right of the graph there, which is the ZAR 1.8 billion, being the 1.1% Mall of the South acquisition. Then the 2 items that typically move also quite in tandem to each other is the cash that we generate, which have improved at 1.6% and then the distribution that we had made in the -- as a final payment for FY '23 at 1.6%. And there is a bit of ForEx, which I will also touch on now. And then you will see that also equally with the ForEx coming through slightly as well in our see-through LTV that printed at 48.4%. On the covenant side, we're comfortable that we've met we're all within the covenants. And then we -- as we generally do, we provide some sensitivities. I think you can see that the recovery that -- or the stabilization of asset values, those are the kind of sensitivities that it will have on the path that over a period of time, as we look to bring our LTV to accountable and medium-term target range of 38% to 41%. If we look at our funding profile, I think Andrew touched on that we completed the refinancing of Molciny at EUR 145 million for 5 years at a margin of 240 basis points. If you compare that very favorable to the previous margin that we had of 300 basis points. And then 75% of this facility is hedged at 275 basis points, which you will note, it is actually attractive because the spot 3 months Euribor is trading at closer to 4%. And then the floating piece that's what is subject to the Euribor. Then the all-in cost of debt on this transaction is 5.4%. Also, we had a very successful issuance of ZAR 1.3 billion of bonds in SA that priced on attractively on a 3-year basis above JIBAR at 135 basis points on 5 years at 149 basis points. And then 7 years, which is really where also it's a sweet spot for us because that extends our tenure at 165 basis points. I've touched on the liquidity profile. I think that's quite healthy. And all the unforeseen that we are in the near-term I think we'll be able to absorb with that just for [indiscernible] powder. Then if we look at the weighted average funding margin in SA, we are pleased that it improved to 1.75%, which compares very favorable to the 2% in the prior period. And in EPP, we're also pleased that their funding margin was stable at 2.5%. And then in the graph at the bottom, I think it gives us a lot of comfort. But if you look up to 2027, we actually have a very flat maturity profile. We don't foresee any liquidity events that you can't finance given the appetite that you will have seen in the markets for our debt. I think on the interest rate hedging, that is really where we got our focus is -- our sharp focus is here. We've -- as a guiding rail, we've maintained that more than 75% of our group debt will be hedged and albeit that we're hedging for shorter tenants, given the fact that interest rates are higher, and we're really trying to create some flexibility if the interest rates slightly shift that we will actually be flexible around that. But what we did here in the period is that, we did refi ZAR 1.6 billion of new interest rate swaps at a cost of 8.1%. That was opportunistic. If you look at where JIBAR was trading around that time, it was trading at about 8.3%. So it was quite accretive in terms of the spread. But I think the challenge here that we have, and it's really our focus is that we'll maintain stable hedging and the inflation is expected to be persistently driving higher interest rates, and this will impact our funding cost over the period. Then if we move, I think, for us on our funding sources. The very broad, you can quite see, but I think the pleasing point to really -- that's worth calling out is that we've improved that all the big 4 banks in South Africa, roughly have got all important funders now on the table, which actually for us, lowers our concentration risk in terms of our funding sources, and we'll continue to actively broaden our funding sources with other alternatives here. Our focus is when it comes to this. I think the proactive renewal of our maturing facilities, especially, I think Andrew touched on Henderson that is coming up in June 2024. We'll actively with the team busy with that. And then as part of diversifying our funding sources so that we lower concentration. Interest rate risk management is very important, but I think we also want to make sure that we protect the earnings from the impacts of high interest rates, while we're maintaining flexibility with shorter data tenants. And then in terms of recycling non-core assets, and trying to promote our investment proposition will also, over time, open up the opportunities in terms of capital sources in the future. Then if we move to operating efficiently. I think for us, it is pleasing that the active SA net property income margin in South Africa, very stable at 82.5%, if you compare to the prior period of 82.3%. And I think also the -- you will see that at EPP, the net property income margin improved by -- improved to 90.5%, but we do give you a footnote there that it's on the exclusion of the asset management fees. That number is impacted by that. The number that we also truly watch is on the graph on the bottom right of the screen, which is the net operating profit margin after taking the overheads where you will see that the group is -- has got a net operating profit margin at 77%. We are very clear working forward that, that number, we targeted over the medium term to get closer to 80%. You'll see in South Africa, it's closer to that with the net operating profit margin printing at 79%. And then where we've got work to do, and we're focusing on that. In EPP, we would like to get that 72% higher closer to our target over time. And then we do provide the sensitivities at distributable income cents per share. And largely, the impact would be on the interest rates both in the Euro, if it moves the Euro rate, if it moves by 0.5%, you'll see the ZAR 0.04 impact on the earnings. And equal also on the ZAR side that if it moves by 0.5%, it will also have an impact movement of ZAR 0.04. We are pleased that with our digital ratio that has improved to 29.6%. That's part of us focusing on efficiencies, so that over time, we have an efficient business that supports us maintaining those healthy operating profit margins at the group. Then just to touch on the net areas at the reporting period at the end of February, you will see an uptick in South Africa to 103. That was largely related to 2 tenants, and I'm pleased to report that since then, now we've been able to collect and those have normalized. And similarly, also in EPP, you will see an uptick to ZAR 86.2 million, which as at the end of February was the trend-up of the savings charges. And that also, I'm pleased to report that as of today, those has been recovered and collected from the tenants. Those have also normalized. So our -- one of the things that we're also very pleased about is our collection rate, which you will see in South Africa is sitting at 99.5%. And in EPP on the directly held properties on core is sitting at 99.2%. Then if we look at distributable income, which grew by 6.1% to ZAR 1.7 billion. That is 75% of that ZAR 1.7 billion comes from South Africa. And then the 25% is a contribution coming from offshore. In that offshore contribution, you will see in the waterfall is largely driven by really us normalizing, which is something we also guided to when we spoke at pre-close is that we will normalize the distribution from the JV. That is coming through from JV communities as well as the M1 JV. That's why you see that EPP number they're coming at ZAR 192 million. And then the NOI of active portfolios, that's really on the positive organic growth of 3.5% out of the SA portfolio. Where the pressure is, which really is offsetting some of these tailwinds. It's really just on the funding cost. You'll see on the last 2 blocks being the net ZAR funding cost increasing by ZAR 160 million, and our euro debt increasing by ZAR 97 million. That's offsetting those. And then that's why we have the ZAR 1.7 billion outcome. So if we move on to NAV per share, I think we're pleased that the NAV grew by ZAR 14.3 to ZAR 7.83 per share. I think largely what is driving this, a weaker rand is NAV positive. You can see that in the second block of 12.8 coming through in terms of our offshore investments translating into ZAR. And then the 2 blocks that are also quite key here is the profits, the earnings that we generate as well as the fact that we are in a normal dividend paying cycle, you'll see that playing out in the NAV. And then I think if we look at the valuations, also that property valuations, largely driven by the outcome in the South African portfolio and also a little bit of a flat outcome in EPP. I think, yes, it's very important for us that we're very balanced in trying to get to a consistent and a sustainable payout ratio of 80% to 90%. The factors that are consistently looked at, we look at maintaining the relevance and how defensively we can reposition our properties. We look at managing liquidity. I think in this market constrained environment, we really have to be careful with liquidity. And then preserving shareholder value, I think we're always very clear that we will preserve that value and avoid tax leakages -- and I think given where we printed LTV. For us, it's a very focused point that we have to, in the medium term, try to bring that down to target range of 38% to 41%. And then I think in these environments, we -- of higher interest rates the ability to repay debt if you measure through our interest cover ratio and maintaining the covenants is quite important. So in looking at that, we -- with the earnings at per share level distribute income per share of ZAR 0.0253 shares. The dividend per share is 0.203. That works out to an 80% payout ratio, which is on the lower end of our range. And I think as things we look at getting better in the second half, we'll look at that and bring that we're still within that range. And I think on a case-by-case basis, we do look at a dividend reinvestment plan. So for -- this distribution of half year 2024, we will not be offering a trip for this distribution. The focus areas here, I think, for us is very clear: preserving operating profit margin which will be a combination of growing our rentals, being very efficient and also been very disciplined around our cost measures. I think the efforts to retain and attract tenants and offering a compelling value-add is very important. And then supporting all of these initiatives is leveraging technology and seeing how we can put technology into some of our key processes to transform the tenant experience. If I then move on to engaging just to cover engaging talent. I think it's pleasing both in South Africa and in Poland that we've got a high employee retention rates and South Africa at 95.5%, which compares favorable to the prior period at 86.7%. And then in Poland, similarly, we have a retention of 96.3%. I think also the ethical maturity score at 88 percentile is very pleasing for us. And I think as part of strengthening our culture, we're also pleased to report that we, in South Africa, we are the participants in the International Finance Corporation's Respect at Work program, and we are pleased with the award of friendly workplace that was awarded into EPP in Poland. The focus areas in terms of this, I think building our future fit skills so that we can continue to develop the scarce skills to support the strategic delivery in our business. But I think also more importantly, infusing that with a culture where we're opting for the upside. That's why we're joining the upside is something that we're spending quite a bit of time as well with the teams across the business. And then as part of the outcomes as well that we're focusing on is to cultivate an inclusive and divest high-performing team that is able to be creative and foster innovation. I think for us, if we just move on to grow reputation now. We're very pleased. I mean, we just shared this with you some of the recognition and the awards that here, we've been awarded in South Africa. But more importantly, if you look on the top right, it's really how integrating ESG is playing out in some of the key aspects in our business like in the balance sheet. We are quite pleased that we've raised green funding of ZAR 11.7 billion in our journey. And that translates roughly to about 1/3 of our debt. So we're seeing that over time, these capital pools will form and get larger and us able to open tenure with them is really attractive from a balance sheet point of view. And then we also share with you some of the awards from an environmental point of view like the eco-certification of S&J, which is pleasing and it's the first one outside of the North of America as well as also on the social where we do bring the top employer and all the good things that are done in South Africa. If we look at Poland, I think also we're just sharing the -- with you here in terms of some of the accolades I think more importantly is if you look at the BREEAM certification of 88% of the portfolio bring BREEAM satisfied also bodes very well for some of the initiatives we're doing in raising funding with green assets in that part of the of our operations. If I just quickly cover the key focus areas here for the second half around here, I think for us, to collaborate with our stakeholders so that we can really expand the sustainability initiatives. We think of it as in an ecosystem. And I think also to create sustainable social impacts through how we can accelerate some of these initiatives. And if you look at that from a pathways to net zero, we're always very clear. Energy-efficient will always be our primary focus. And then secondly to that, we look at alternatives, and that is the last result, we look at carbon [ offsetting ]. This, as we do, it will reduce our reliance on municipal supply utilities is very innovative. You've seen our initial yield, which is in mid-teens and our solar is really coming through also in our initiatives. With that, I'd like to then hand over to Andrew for wrap-up.

So just moving on to the last stretch of our presentation this afternoon. Our businesses, real estate managers is actually quite a simple one in that we don't have many levers at our disposal. But what is absolutely critical is knowing what those levers are and knowing what not to touch in an environment where there are a number of unknowns. So for us, it's about focusing on the variables under our control. We know there'll be a lot of aftershocks to the normalized interest rate horizon. However, there also will be opportunities, and that is what we are alive to. So just from a direct influence point of view on value creation, capital allocation absolutely critical in terms of building a quality diversified portfolio that is capable of delivering sustainable risk-adjusted returns. Capital sourcing, very much under our control, as you would have heard from Ntobeko. In terms of our focus on balance sheet management to ensure sustainable growth, and that is focusing on a proactive and conservative basis that approach. And then very importantly, rental growth and cost containment. And this is where new data and digital platforms are important to accelerate our endeavors, but this is an ongoing focus for us. On an indirect basis, from an influence perspective on value creation, team and culture, you would have heard from Ntobeko when he spoke about investing the engaging talent rather, we need to invest in and transform our human capital to enable the creativity and foster innovation. That's an ongoing area of focus for us. And then very importantly, stakeholder experience in terms of embedding ESG into everything we do by embracing collaboration to extend that reach of our sustainability initiatives. So just with that on the outlook side, the distributable income per share guidance that we've provided previously is maintained at ZAR 0.48 to ZAR 0.52 per share. Our dividend payout policy is at the 80% to 90% range. We have opted for the lower end of that policy given the ICR challenges, given the LTV numbers and also just giving us a little bit of a buffer during this period through the elections and so forth. But I want to assure everybody, our intention by year-end is to get back to where we normally settle, which is probably at about the 85% level by year-end, if all our thinking and plans come together. So just with that, I want to -- firstly, thank you for your time and attendance this afternoon. But I just want to touch a little bit on opting for the upside, if I can. You may recall that last year, we adopted this as a theme in terms of seeing the opportunity in every challenge. But I think as we are journing through this is higher for longer interest rate environment, the resilient approach to business is now going into an endurance approach. This approach requires a cultural shift to mindful optimism. We're doing a [indiscernible] Redefined, but if I can encourage each and every one of you to also join us on the upside and adopt that mindful optimism approach, it will be hugely supportive to us in our journey as we get back to normalized interest rate from the environment, which we know is the biggest catalyst for improvement of all of our trading metrics. With that, I want to thank you, and we're going to now go on to some questions from you.

We've got a number, and I'll read them out and then I'll hand them out as [indiscernible]. The first one is from Nazeem Samsodien of Investec. He's asked, can you provide more detail on the takeover of the M1 head lease? Where is MPI tracking versus the previous head lease? Any potential risks of lower operational cash flows from this JV. If so, can you provide a quantum? So Nazeem. Firstly, it's very early days in terms of the takeover. We took over the management of the M1 portfolio on the first of May. As you know, today is only 5 or 6 days thereafter with the weekend and a public holiday in between. So we haven't had a lot of time to get to grips with the service charges, which is the unknown at this point in time. We hadn't received any access up until now on the service charge recoveries from tenants. And that unfortunately gives me some degree of being unable to answer your question on NPI tracking versus the previous head lease. We will only know that in due course, and we can update everyone on that when we have clarity on that. But there is no -- as I stand on now known reasons why the cash flows out of this JV will be impaired. So that's all I can unfortunately provide you with at this point in time. In terms of Nazeem's second question, here are leasing challenges is his question. He says there's no vacancy risk from the long wall as per Slide 25. Thank you, Nazeem. But should you not look to recycle some of this portfolio to reduce LTV. The answer is absolutely, Nazeem. You're right. We have earmarked a couple of properties that we'd like to dispose. Unfortunately, the transactional activity in Europe, not only in Central Eastern Europe is very subdued and massively opportunistic. The reason why it's subdued is because of the high interest rates, and then the opportunistic guys out there are throwing very crazy offers at us, which are unacceptable to us because they would be value destructive. Mweishö Nene from SBG Securities asks, has the payout ratio decreased to 80% as a direct response to the 2x ICR would the payout ratio change with the ICR improvements. And Ntobeko, do you want to answer that?

Yes. We should -- that is quite right. I think ICR printing at 2.2x. We still think that we believe there is a sufficient strategic headroom, but I think we've been very conservative in the first half earnings, as Andrew alluded to with a payout ratio of 80% that we would like to get that in the second half closer to the median of our 80% to 90% being 85% in the second half.

Okay. Moving on to Francois Du Toit from Anchor Stockbrokers question. I must just point that this is an accounting question Ntobeko. You're going to have to jump in here, please. His question is there was a ZAR 294 million in quite equity-accounted investment contribution to distributable income for EPP and ELI. How has this been determined? Looks like FFO from the EPP and ELI JVs. At what exchange rate has these being converted to ZAR and how has waterfall dividends to PIMCO and I Group impacted the distributable income contribution.

Thanks, Andrew. Francois, I think just to first give you the makeup of the number, you're right. It is our cash back income from the underlying JVs, in EPP and includes the ELI component. So the ZAR 294 million is made up of the community JVs, which is on our share of ZAR 104 million and then the Horse JV, which is the M1 distributing ZAR 177.7 million. And then there is an ELI of ZAR 11.5 million pretty much include, which excludes the interest on the shareholder loans. So that's how you get to the ZAR 294 million, and this is all cash that has been pulled up through the structure. The exchange rate that was used is the average for the period of the Euro/ZAR at 20.29. That's the actual that was used. You will see the FEC that comes in the ForEx line.

The next question is from Mweishö Nene and it's for Leon. And that is what proportion of electricity will be covered by solar by FY '24? Please give a range.

In 2023, roughly 9% of our electricity consumption was supplied by solar PV. So it's difficult to estimate by end of this financial year. But if we complete that 50% increase in capacity, the range would be between 10% to 15% will be supplied by solar PV.

The next question also for Leon is also from Mweishö. What is your WALE on the SA industrial portfolio?

So Mweishö. I'm not sure if you -- when you say, WALE, you mean weighted average lease escalation for industrial, that 6.5%. But if you're referring to the WALT, the weighted average unexpired lease term, that's 5.2 years. The detail of this is on Slide 83 in our supplementary information. .

Okay. Then moving on Francois Du Toit once again as a question, at what Euro/ZAR exchange rate was the EPP earnings converted to ZAR for distributable income in the first half of 2024. So Francois, it would have been the average rate that Ntobeko quoted earlier, was it 20.29%.

It's 20.29%, yes.

Okay. Good. All right. Zinhle Simelane from MSM Property Fund asks, please talk to the retail trading stats and trends in the EPP core portfolio, trading density growth and sales growth. What was the like-for-like valuation growth for EPP core? And can we get an update on the Talis government office portfolio and the effects of the restructuring. So those are -- there's 3 parts to your question. Just Zinhle, in terms of your first part, I think we can take that off-line if you want us to talk to the retail trading statistics because we have provided you there with the trends, firstly, from the actual retail sales within the portfolio itself. And we also did provide you with the category split in terms of the portfolio itself, but we're happy to discuss that at length with you. In terms of the like-for-like valuation growth, Ntobeko on EPP core, was it -- sorry, the valuation growth for EPP core, was it?

EPP growth was flat actually. Yes, it's essentially flat.