RMB Holdings Limited (RMH) Earnings Call Transcript & Summary

Thank you. Afternoon, everybody. Thank you for making the time to attend the call today. I don't think we need to wait for anybody. Most of the people that accepted are on the call. I'm delighted, as I'm sure you are, to be joined by the Atterbury team again today for the second time. And if you were with us last year, I would like to introduce you to Armond. On the right in the screen there, he's the CEO of Atterbury South Africa. And then Louis in the middle, the Founder and Atterbury Group CEO. And I can't see, but I think DC is on the left, and he's the CFO of Atterbury South Africa. You will be hearing from the 3 of them a little bit later. I will soon hand over to Ellen, who will take you through the results that were released on Friday morning. When Ellen is finished, I will take you through a couple of other matters, and I will give you an update on Integer. Armond, DC and Louis will then take you through an update on Atterbury. And when they are done, we will open up the meeting for questions. [Operator Instructions] If you go to Page 4. After the unbundling of RMH's 34% interest in FirstRand Limited in June 2020, the most significant asset remaining in RMH was its investment in RMH Property. As communicated to shareholders at that time RMH's strategy was to monetize the underlying investments in RMH Property. To date, in line with that -- with RMH's monetization strategy, RMH has declared ZAR 3.557 billion in dividends to shareholders. This ZAR 3.557 billion is 72% of the NAV at June 2020. What the graph on this slide shows is that if you invested ZAR 1,000 in RMH shares in December 2020 when the share price was ZAR 131, you would have got yourself 763 RMH shares. As a shareholder of 763 shares, you will have received a special dividend of ZAR 610 on the 10th of May 2021. You will have gotten a second special dividend of ZAR 1,081 on the 10th of October 2022. Then at the beginning of -- sorry, the beginning of this year, we've got another dividend of ZAR 179 per share. And then there were 2 special dividends paid this year of ZAR 27 on the 3rd of June and ZAR 29 on the 2nd of September. The sum of the 5 dividends is ZAR 1,925. I checked a few hours ago. And if you sold your 763 shares today at ZAR 0.42, you would get another ZAR 320. The 5 special dividends plus the proceeds of selling the 763 shares today equated to an annualized return on your ZAR 1,000 investment from 52.4%. So we still got one big asset to sell, but I think in summary, it's been a fairly slow but a successful path of monetization since the announcement of the change in strategy to do so. I will now hand over to Ellen to take you through the financial performance.

The decrease in RMH's net asset value from ZAR 1.4 billion to ZAR 999 million is not unexpected, as it reflects the impact of the ZAR 428 million in special dividends that was paid during the year. Despite this, RMH remains focused on creating value for its core investment in Atterbury, which now makes up 88% of the RMH Property portfolio and achieved a net increase in net asset value of ZAR 196 million. Key factors contributing to this increase includes the ZAR 325 million investment in Atterbury through the loan to equity conversion, the ZAR 59 million in dividend from the sale of Atterbury's 20% share in the Mall of Africa and equity counted loss and other reserve movements totaling ZAR 17 million. The comprehensive loss reported by Atterbury reflects once-off impacts rather than under operational underperformance, these include a ZAR 70 million decline in the Ascencia share investment due to the share price pressure and the Mauritian rupee devaluation, a ZAR 62 million provision related to preference share restructure, a ZAR 90 million loss on the sale of Mall of Africa, a limited net investment property increase of ZAR 32 million as gains of ZAR 243 million were offset by ZAR 126 million decline in the Newtown Precinct valuation and an ZAR 85 million reduction in the valuation of the growth. Despite these challenges, Atterbury successfully sold ZAR 3.2 billion worth of assets, adjusted to 1% discount to carrying value. RMH also monetized its 7% interest and at Divercity at a loss of ZAR 37 million. Operating costs excluding the FSP amortization were well managed within the guidance range of ZAR 20 million to ZAR 25 million. RMH maintains a liquidity reserve of ZAR 106 million, ensuring continued operational funding capacity. In conclusion, RMH has demonstrated prudent financial management despite challenging conditions. Our confidence in Atterbury's ability to develop and sell assets near carrying value remains strong. With a stable liquidity position, RMH is well equipped to navigate the current environment, and we'll continue monetizing RMH Property to maximize shareholder value. Thank you. I'll hand back to Brian.

Thank you, Ellen. After the sale of the stake in Divercity earlier this year, RMH is left with a 38.5% stake in Atterbury and a 50% stake in Integer 3. The 38.5% stake in Atterbury accounts for 79% of RMH's NAV and 88% of the RMH Property portfolio. So when we talk about RMH's monetization strategy, we are, in essence, talking about monetizing RMH's 38.5% stake in [ APH ]. Disposing of a noncontrolling stake in a private property development company with no dividend policy and no monetization strategy for its own is challenging. But management continue to explore opportunities that will best promote value creation for our shareholders. There are only 3 properties remaining in Integer 3, same as last year. In fact, I think the report is very much the same as last year. We have a call center in [indiscernible] that's occupied by SSD. We still refer to SSD because that's what it was when we bought it. They left it. It's changed its name. It's got a new holding company. There's only 1 year left on the SSD lease. The bank debt will be paid to 0 at the end of the lease term. The partners or shareholders of SSD are our partners in the property. They own 25% of the property and Integer 3 owns the other 75%. So we are in talks about extending the lease and all interesting things, but to date, it's all just talk. But as things stand, we've got 12 months left on the lease. We have a loan account into the property and the value of the property exceeds the loan account. But it doesn't make sense for us to sell until such time as we have negotiated or finalized what the tenant will be doing at the end of their lease term. No, I think -- not I think. It ends at the end of January 2026. So we've got 13 months left to make a plan of what to do next. A warehouse in Montagu Gardens in the Cape and this warehouse is occupied by Robertson and Caine. Robertson and Caine build luxury yachts and the production line for the assembly of the yachts spans 2 properties, of which ours 1. Last year, the tenants signed a new 5-year lease and much like the case in the SSD property, the debt reduces at an accelerated rate over the next 4 years, which means it does not make sense for Integer to consider selling the property in the medium term. The last asset is Integer's 50% share in Millennium. The company has concluded the 7-phase development of the Big Tree. That's the name of the estate. It's an 808-unit residential estate in Northriding. The final cost of the project was ZAR 509 million, which is in line with the original budget. There is negative equity in the company. The negative equity is as a result of the interest that has been capitalized on the shareholder loans over the last 5 years. RMH has made a provision for a ZAR 41 million expected credit loss, which is RMH's portion of the negative equity. In summary, it is unlikely that Integer will sell all 3 of the remaining assets in the next 3 years. For RMH to execute on its strategy of monetization, it will make more sense to sell its 50% share in Integer 3 than the 3 individual properties. RMH can't really expect Integer to sell the few remaining assets given what I've just told you. Move to Page 13. So as mentioned in the first bullet on this slide, the NAV increase of ZAR 142 million in Atterbury includes the ZAR 325 million conversion of the RMH loan to equity. If you ignore the increase in NAV that's attributable to the share conversion, the NAV decreased by ZAR 183 million. RMH management has always held the view that the process [ followed ] by the Atterbury group to arrive at the final valuations of the properties that you see in annual financial statements is robust and that it accords with industry standards. On occasion, I have thought that Atterbury errs on the higher side of an acceptable valuation range, but management's argument has consistently been that Atterbury develops best-in-class properties and that Atterbury has a history of selling assets at their fair value. If you look at the table on this slide, you will see that the assets that were sold over the reporting period were sold at fair value. I don't even think it is 1%. I think that in the circumstances, we haven't had the greatest economy over the last 12 months. And as much as the property market seems to have recovered, there's still not a strong indication that there's a heap of liquidity around, so I think that this is a great achievement by Atterbury management and a testament to what they've been telling me over the last 6 years. You will have noticed in the condensed results and seen that the vacancies in the portfolio are low. Most notable are the low vacancies in the commercial portfolio, which at 5% is materially lower than the national average. Atterbury management's focus on reducing the group's debt and improving the capital of the management on the balance sheet has resulted in the group LTV dropping from 82% in 2021 to 62% in 2024. I feel it is unfortunate that the effective NAV decrease of ZAR 183 million is not reflective of management's achievements. The decrease in the NAV is as a result of a number of factors that Ellen has alluded to or mentioned, the big 2 being the decrease in the value of the Newtown Precinct and the decrease in the valuation of The Grove Mall in Namibia. But I'll now hand over to Armond, and he can tell you more about the Atterbury performance and about those 2 assets. Thank you. Armond?

Thank you, Brian. As you greatly mentioned, our -- most of the proceeds that we -- that we got from the disposal of assets was used to settle debt including a portion of the RMH loan, which you would recall, 1/3 was repaid in cash and 2/3 were converted into shares. And then the rest into reducing the debt throughout the company. As a result of that, our finance cost decreased by 13.5% for the year. This also doesn't take into account the recent decreases in interest rates, which we've seen so that the finance cost should decrease further going forward. In terms of our portfolio, 80% of our portfolio NAV is made up by effectively 5 assets, being Castle Gate, Newtown, and The Club Precinct, Riverwalk and The Grove Mall of Namibia. Next slide, please. In terms of trading densities, you will note that most of our retail assets have shown increased trading densities for the 12-month rolling period to June 2024, with the exception of Newtown junction, which showed decrease in trading densities. Star performance in our portfolio, you see include Castle Gate, [ Klubhuis ], or The Club Precinct and then also Grove Mall of Namibia, which is a regional center located in [indiscernible]. In terms of the vacancies, you would see 24,000 square meters of vacant space. Most of that relates to the Newtown Precinct. And then if you note, the lease expiries, which is quite a big number at almost 90,000 square meters, most of that relates to The Grove Mall of Namibia, which has turned 10 earlier this year. So we're going through the renewal cycle there. And there's very little risk of nonrenewal on those lease expiries. Just briefly touching on the development pipeline. These are a couple of assets that we are currently in construction with -- in Richmond, which is based on Capetown, there's expansion of the Takealot facility, which is -- which will be complete this year. Barlow Park Phase 2, the residential precinct that we are developing in conjunction with Divercity. We are busy with Phase 2, which will be complete early next year. The Old East Precinct, we've got a couple of developments, small commercial development that anchors the corner of the village and then a couple of other developments located within the club or the Old East precinct. And then should Barlow Park or should that the shareholders in Barlow Park decide to proceed with the Phase 3 of the residential buildings, then we will do the development on their behalf, which will commence next year to be completed mid-2026. I think that is it from me, Brian.

Thank you, Armond. We'll open it up for questions now. I see before we go to questions from the floor or the -- I got a question from Charles. 2 questions from Charles. The first question is Integer, the gross loan is ZAR 97 million with an ECL of ZAR 41 million, net ZAR 56 million. The balance sheet still seems to carry the ZAR 41 million. Please, can you clarify if this is recoverable? So Charles I stand to be corrected by Ellen, but I think the ZAR 41 million and the ZAR 41 million are actually a coincidence. So there's 2 loans into Integer from RMH and 1 is the disproportionate loan, which the balance was ZAR 41 million. And the other is the proportionate loan, proportionate loan being, as 50% shareholders, we put in ZAR 97 million and calculus put in ZAR 97. Because the disproportionate loan ranks first, the ECL is taken on proportionately. So there are, in fact, 2 loans into Integer 1 of ZAR 41 million, which ranks ahead and then 1 of ZAR 56 million, which is the ZAR 56 million is net of the impairment. So yes, we have the view that the loans are recoverable. So the ZAR 56 million is net of the ECL. And the ZAR 41 million is the disproportionate loan. And then the second question, I will let the Atterbury answer. This property Newtown -- this property seems very challenged to Atterbury management believe a viable plan can be developed for this property. Armond or Louis or DC Kemp, can you guys?

Yes, Brian. Thanks. Yes, Newtown is obviously, the bad apple in the basket. We are currently fairly far advance of discussions where we bring in the partner in order to secure a tenant from the government sector or the parastatal or the municipality from Johannesburg. Unfortunately, as we -- where the shareholding is at the moment, we won't be able to do that. And we're currently busy with the transaction where we want to first form the company and maybe dilute to 49% in order to have a 51% black partner and then to approach local government or government and submit tenders for the specifics. We're very far advanced with that. We are in the last sort of phases of agreeing values and do we share upside if we find a tenant going forward. But I think most of our management time at the moment goes into Newtown and how to solve the asset there with Nedbank moving out. It's obviously a big problem to us. But I can assure you that we -- all our attention is on that asset at the moment.

Thank you, Louis.

[Operator Instructions] I'll see if I can sort it. We've got another question from Paul. So let's see if Paul can.

Everybody still got no entry signs.

After now, this might. He needs to unmute himself from his side.

Sorry, can you hear me?

Yes, we can hear you, Paul.

Okay. I've got a few questions relating to Atterbury mainly -- actually, exclusively. Do you report comparable income generated from your portfolio if you strip out all the assets that you've sold? Is that a number that you track and disclose?

Yes, we disclosed it in directors' report. You've seen the directors' report, there's a table that has comparable info on the buildings that have been sold out of the portfolio.

Okay. A question on your variable rate funding. That seems to have fallen to 58% from 74%. I mean why has there been a change at seemingly the property interest rate cycle to less exposure to variable funding?

Sorry, can you just repeat that?

The variable rate funding has fallen from 74% to 58%. Why was that?

No. So on certain of the assets, the banks force us to have a certain amount of our loan amount to be hedged. So in some instances, we don't have a choice to enter into those hedges. And then also the impact of the buildings that have been sold also had an impact on that percentage.

But you would agree that you'd prefer to have as much variable exposure as possible at this point?

Yes. I think at the moment, we do not fix anything if it's not necessarily or demand by the bank. So we think we're in a downward cycle, so we want to have as much as possible there.

Okay. In terms of sensitivity to your sort of fair value of your assets, I mean, do you have a sense of what that sensitivity to interest rates would be for a 1% decline in interest rate, what the increase in fair value of your assets would be?

To be honest, I don't think it will have a huge impact. The impact when the interest rates went higher was less than we thought because a lot of people thought that it was sort of a temporary movement in interest rates, especially after COVID. So I think on the other side, as interest rates come down, I don't think there will be too much of a play on the valuations. We haven't seen -- I mean we -- I've seen in Europe as well that the movement in valuations with interest rates and inflation going up and then down again was very little. And I'm expecting the same in South Africa. I don't think there will be too much of a yield compression because of interest rates coming down.

That's great. And final question for me. With the renewals of all the leases in Namibia at The Grove, I mean, what are you anticipating in terms of those renegotiations? I mean you say that it's kind of after 10 years, you're now renegotiating all those. I mean are we going to have positive rental renewals there? Or does it go the other way? I just want to get a sense of what the discussions are like with your tenants.

Yes, it's probably going to go positive. I mean that asset is performing extremely well. If you look at that specific area of [indiscernible] where the Grove is situated, there's a lot of development and office and residential development actually going to that part of the city, which is obviously great for retail. So the rental rates will probably be more positive than seen renovations. We don't believe that the center is overtraded. And it also allows us learning this renewal cycle to put in the correct tenants, rightsize certain tenants, et cetera, and in the instances where some of the tenants aren't performing as well as we would have liked. So in that specific asset, I think it's probably more positive than negative.

I just think if you look at the table that Ellen had provided on the trading densities as well, to have a regional mall of that size with a trading density over ZAR 4,000 a square meter is quite high. It's 48,000, 49,000 per year. And that is one of the better regional malls in -- I think, in South Africa -- South Africa, Namibia.

Albie, if you can unmute yourself.

Can you hear me?

Yes, we can hear you.

I joined the other browser. So seems my app is not working. Thanks. Brian, I have just a quick question on dividend and I have a couple of questions for Atterbury and I'll [indiscernible] if it becomes too long and others want to ask as well. If I'm correct, the equity value, the 50% share that you mentioned that might need to be sold, what we said of the properties in Integer 3 is carried at a 0 value, right? I mean, you think you'll look at all the disproportionate loans and ordinary loans paid back. But the equity is carried at 0, right? Is that correct?

Yes.

Do you have any idea what valuation you might get? It seems like it's getting better. We're going better with those developments, especially looking to the future.

So the equity -- the cost of equity was 0. The Integer model is to get its 50% stake or 50% stake in the properties it owns. So for example, in the Robertson and Caine property, we have 50% -- Integer has got 50% of the equity in their property and paid Northriding. It got its equity because it has provided a disproportionate loan. And on that disproportionate loan, which doesn't get through this, we charge interest capitalizing it prime, sometimes prime plus 2, sometimes prime minus 1, but an average prime like -- so that capitalizes at our rates. So we -- and that ranks ahead of everything. So it's probably more likely that the full proceeds of the sale of those properties will be owed to Integer in terms of their Integer loan, which is not a shareholder loan, which ranks ahead of equity. And that's why the equity is not because in order for it -- it's going to grow faster than what those loans are capitalizing it at the moment. So the investment in entities really all shareholder loans.

Okay. So the transaction would basically entails a value for all those loans. That would include any kind of equity.

Correct. I mean I can give you a practical example. So the Robertson and Caine, we bought for ZAR 45 million. We put in ZAR 12 million as Integer. Our partner put a note. At the moment, if the thing gets sold for ZAR 56 million, less the bank debt, there's ZAR 26 million worth of equity in the property and the Integer loan is ZAR 26.5 million. So we've got 100% of the proceeds of the sale, but it would all be in repayment of loan, not equity.

Okay. All right. To move on, before I go on to the Atterbury questions, I just want to make a comment and ask if you agree. I mean, I think, Ellen, you alluded to the fact that the disposals inside Atterbury amounted to less than 1% of the carrying value. I think I need to split out those disposals between mature assets and new developments that were sold. I think if we want to split them, you will see that basically all the mature assets were sold at a loss. And basically, it was developments that made up the slack and contributed significantly to the profits. Wouldn't that be the focus for Atterbury going forward, to sell more of mature assets and say concentrate on what they're good at and that the development and sell that as soon as they are developed. Would you agree?

Albie, I think that was -- that's always our models. We develop, keep it for 3 to 4 years and then sell. Unfortunately, over the last, let's say, 7, 8 years, it wasn't ideal time to sell with COVID, with cap rate, where it was. So yes, I agree with you. I mean, our model have always been over the last 30 years to try and not keep the asset longer than, let's say, 3 to 5 years. So yes, I think I agree with your statement.

Okay. Because yes, you seem to do very well with your developments if you look at Castle Gate or the new ones, Richmond and [indiscernible] and all the others. So I think that's where you're very good, and I would think that's where you should concentrate. Just a question to Armond to start off on the Atterbury results. Armond, yes, last year, we said, yes, also kind of a holiday mode already. You were very confident of achieving 20% of return on equities going forward. And you were confident that you guys were -- that the worst was behind you. Am I right that the NAV per share of Atterbury reduced by 6% this year.

Yes, the NAV per share did decrease. You are 100% correct. I think last year, we sat here and there were a lot of still uncertainties in our business. For example, the RMH loan that needed to be repaid, high gearing on our balance sheet, et cetera. I think we've now reduced our debt levels to a place we are extremely comfortable with. We've also sold assets, which we think are the right assets we have sold at this point in time. Newtown like we said earlier, is still a little bit of [indiscernible] in our portfolio, but we are desperately working on getting that right. And I think we've gone up, if I can call it, rebased our portfolio and our values to a place where we think we can achieve those type of returns or IRRs with the pipeline going forward in the next 5 years. I think the economy has been a little bit interest rates on the way down. So I still believe that those numbers are achievable given where we sit with our balance sheet and given where we sit with our development pipeline.

Yes. No, the development pipeline looks very promising and I think you can replicate that success in Capetown and Castle Gate and you do really well. So you can make up for negative growth of this year. At Atterbury, even before adding such a negative growth in NAV per share in the past 3 years that they celebrate.

No, we are only thing, but I don't think so. I think it's the last sort of 2, 3 years, I think, have been the toughest since we started Atterbury. Yes.

So it's quite unfortunate that when you said the anniversary celebration you had to publish these results. On Newtown, there's quite a disaster, if one has to be honest. I think the valuation the last 3 years decreased from over ZAR 800 million to just above ZAR 600 million in the latest set of results. You guys are now confident that's the worst, that's the bottom line valuation going forward?

I think it's a conservative valuation. But if we do not manage to find a tenant for the offices -- and unfortunately, the offices is 35,000 square meters of offices. Now that leads to feed for the retail component, that leads to feed for the area. So everything hinges on whether that we find a tenant for that size. Now fortunately, it's one of the few A grade buildings in the inner city, and it's very well maintained. So Nedbank was in there for 10 years. We didn't think that they will leave. I mean that was never the intention. They were supposed to have their call center in that building. But I think their model have changed like all the banks in the inner city. I've seen with Absa, Standard Bank, all the banks have vacated. And the art is now to find a tenant for that space. And then as I said, we are working on it. We haven't got an answer yet, but we -- that will solve the problem. So back to your question, is the ZAR 600 million value the right one? If we do find a tenant, I think it's a very conservative value. I think it can be substantially more. We made certain assumptions how long it's going to take, at what level you're going to fill it and those assumptions, we're getting to the value that we see there. But if we do not find a tenant in the next 2 years for the vacant space, then I think we will take another knock on that value.

Okay. And then another thing that concerns me is The Grove Mall. I mean that had negative growth as well, if I'm correct, and you can correct me if I'm wrong, of about -- what was it -- yes, 5% in the valuation of property. That's quite unexpected for me given that it's performing so well and it's voted the best mall in Namibia and all that. What's the explanation there -- for that?

So we've got a policy of changing our valuers and periodically I think every 3 years we've changed the valuer now. And valuer has increased the cap rate from 7.25% to 7.5% to 7.75%. So the valuers of -- increased the cap rate and that resulted in the negative valuation adjustment on the growth.

It's not reflective of the performance.

No.

Okay. Because I see the previous year, it was -- the value grew quite nicely in that year and this year, it was back down 5% again. This is kind of the trend that I see also in many of the properties. You do very well given a breakdown of all your properties, the completed assets, mixed-use retail, the commercials and all that and also the development properties. In the last 2 years, that was -- there was very little growth in most of these properties. And I, once again, want to make the distinction between the developments and the material properties. Is this just a valuation issue? Is it just a performance issue? Or what is due to what you said?

Albie, I think apart from Newtown, I think all the assets that we have performed exceptional. Even the offices, you look at the vacancies in our offices, which is almost 0 compared to most of the listed sector. So I think we went through a patch of very conservative valuations. And I'm not saying that's wrong. I think the values, where they are, is the right values. But unfortunately, 0.25% or 0.5% change in the cap rate has a big influence on the -- on your balance sheet. And I think that's what had happened. So if you look at the performance of the assets of the retail, of the shopping centers, of the offices, they're all doing well. As Brian said, it's not a reflection of how the assets are trading. It's a reflection of a cap rate adjustment, which are values. And hopefully, we've seen the last of the negative adjustments because as cap rates come down -- as interest rates come down, cap rates should follow, although not necessarily with the same percentages. But I think we were at the sort of bottom end of a cycle if you look at the cap rates.

Yes. Because I wouldn't say I'm an expert in [indiscernible] property. I just know what I need to pay for my children's university fees and their accommodation. And those goes up by kind of like 10% a year. So it's difficult to understand how Mediclinic and Trumali office is going to have negative reversions down in valuations in [indiscernible]. So is that just a valuator issue? It's maybe more understandable, but then one would think, if you negotiate the selling price for a property, that would be, I think.

Albie, I think what you have to take into account is that the last 3, 4 years, the operating cost, if you take the increases in salaries, in security, electricity rates and taxes, that has an influence on this. So your asset can be performing turnover-wise and trading density-wise, but apart from the cap rates as well, the expenses, especially I think in the Western Cape slightly less than in Gauteng. But we got hurt by rates from municipalities, water, lights and salary negotiations. And I think -- so the expenses is also increasing with a bit more than what inflation is at the moment.

Charles has his hand up, Brian.

Two questions. Brian, apologies if I'm being slow. I'm coming back to this Integer thing. Not following entirely. If we just run through, Integer 1 basically has got no value, right? Integer 2, there's 2 properties left, but it's not clear if there's any residual value in Integer 2. How should we think about that?

Brian, you're on mute.

Yes, yes, yes. Apologies. Sorry. So Charles, Integer 2 is -- we've got a 20% stake at Integer 2 but 0 economic value. So there was a property -- because when it was set up, the 20% stake didn't have to contribute any equity for the properties. So the other 2 shareholders owning 40% each, they've got shareholder loans that are owned to them by Integer 2 that far exceed the equity left in those 2 properties. So there's no value in our stake in Integer 2. The all the value in Integer 1, as you correctly pointed out, is wound up. It's got no properties left. So all the value that you see on the balance sheet is in the 3 properties that remain in Integer 3, being the call center, Robertson and Caine and Millennium. So if I can explain it this way, so the Integer -- RMH is linked Integer, ZAR 97 million as a shareholder loan and [indiscernible] has lent ZAR 97 million. On top of that, there is short of cash and RMH advanced a further loan. The balance on that loan was the one that was at about [ ZAR 87 million ] at the beginning of the year. So we haven't got it in front of me and a lot was repaid. That's a disproportionate loan that actually interest at prime plus 10. The balance of that loan is ZAR 41 million. That loan gets repaid first out of proceeds that Integer 3 receives from the sale of anything. After the disproportionate loan has been repaid, whatever is realized thereafter gets repaid in equal parts to [indiscernible], our 50% fellow shareholder and RMH. So what has been written off is the ZAR 41 million of the ZAR 97 million. So basically, to get our full loans repaid, we need to get ZAR 41 million. Integer has to realize ZAR 41 million plus the [ 57 times 2 ]. So there's ZAR 114 million plus ZAR 41 million, which is ZAR 155 million. And the Millennium plus the other 2 properties, we believe there is ZAR 155 million of equity.

That was a great explanation, Brian. Just one clarification. Essentially, on the disproportionate shareholders' loan, interest payments are currently not being serviced. Am I correct in saying that it is being accumulated, if not serviced?

It being accumulated, correct.

It is. But the -- and the practical reality is as the interest accrues into the disproportionate loan, it gives us on the one hand and takes with the other in the sense that the disproportionate will go up and the proportionate loan realizability will go down. We're on the same page.

Correct. If the lump sum is ZAR 150 million. As time goes on, we -- or Integer -- RMH gets a bigger chunk of the ZAR 150 million as the disproportionate grows.

So it would also then -- given the cost on the disproportionate loan, it would make sense if I'm calculus to either realize properties and repay the disproportionate loan or settle portion of the disproportionate loan because it's carrying a fairly punitive interest rate. So they're highly incentivized to deal with the disproportionate loan. Maybe that's a better way putting it.

Which is why it's [indiscernible]. Correct.

That one makes perfect sense. A question, if I may, on Atterbury. Just -- and 2 questions on the linked. Would I be correct in saying that Atterbury future developments wouldn't be done outside of the existing corporate. So in other words, it would be we set up a new entity for new development. So RMH is participating in the growth and development projects that Atterbury's doing. So that's question one. And then question 2, you -- would be linked to that if my understanding is correct, is that with the development pipeline, Atterbury barring sales is capital hungry. So it's unlikely to be in a position to buyback RMH because it needs funding for that development pipeline. And some of those projects look like they could be quite sizable. Is my thinking correct?

Yes. Yes. I think you're correct on both. So on the first one, all developments happen within the same entity. There's no outside development company. So all benefit of any development will come to the same company. There's nothing outside it. And then secondly, also correct. I mean we -- at this stage, if we sell assets, temporary, we would park the money and reduce debt, but we need that money to do future development. So you will see the debt have remained -- have come down quite a bit. But we would either draw again on that or we would sell more assets and use that to fund new developments going forward.

So the exit -- so that's useful. So there's no spin-off of new Atterbury 2, 3 for new projects that exclude RMH. That makes sense. Brian, just to close the circle, if you will, so I'm making sense. It would seem that the most probable realization for RMH is it's unlikely to be a capital return from Atterbury, but it's probably going to require, not a unicorn, a particular kind of buyer that is prepared to invest in a non-income yielding development company. And that might be a particular type of institution that's prepared to do that, but that's probably what you would need to find to exit that stake. Is that thinking logical?

Yes, that thinking is logical, Charles.

Charles, I see your hand is still up. I don't see any other hands. Albie's hand just went up again.

Yes. I'll continue asking. Quite a lot more questions if nobody wants to answer. Anybody raised their hands, I'll yield. Just on the asset that's earmarked for sale, Brian or the Atterbury people that want to kind of answer, I see there's quite a few that's marked for sale. And then there's also some, I guess, that's not in terms of IFRS 5 at a stage where we can mark as held for sale but it's definitely -- is the right price, I guess, comes along, they would sell it. Can we walk through a few of those? I'm interested in when did you sell the Trumali office buildings, which is, I guess, held in -- which is the company...

In Sierra.

Sierra, Yes, the 50% yield of Sierra.

Yes. So we didn't sell the Trumali buildings. We still own those, but we did sell our stake in the Mediclinic to our partners in Sierra.

Okay. So the competition approval, that was for a merger. Is that not for the sale then of your stake in Sierra?

No, that was effectively for our stake in Mediclinic that we hold through Sierra.

All right. So you're just selling that little 17%. How much is it of Mediclinic effectively held for Sierra? Is that...

Yes, I think it was effectively 37...

Yes, because it's quite confusing here. I mean if I look at the Page 11, Note 4, 64% of the 70% undivided share in Castle Gate, they say that 64%, that should -- I mean what's the correct figure there to get to 64%? I guess it must be like something like 90% of the 70%...

It's 75% of 85%, we have 85% in Castle Gate. Then APH in 80% -- 75%. So the 85% times 75% is at 64%.

Okay. So now how much does Sierra own of Mediclinic?

Sierra owns 75% of Mediclinic, and we own 50% of Sierra. So effectively, we had a share of 37.5% in Mediclinic.

Okay. What was that -- is it disclosed what it was sold for or not?

Well, we made [ 100 ]. I don't have the number.

It was sold for at value at the valuation. You can just take the gross value very quickly. I think it was [ 591 ] or something of -- it was a gross value of that building.

We sold at ZAR 37.5 million.

ZAR 37.5 million at valuation.

At the current valuation as of 30th of June.

No, the 30th of June, it went up. That negotiations started before year-end, so it was at the December 2023 valuation. That's why it held its asset out for sale because it only transferred after year-end.

All right. And you're keeping the other Trumali offices development in Sierra?

Yes. We are currently actually almost complete with the third building in that park. So Trumali House, Trumali Forum and Trumali Place. So the plan is probably to work that asset for a couple of years and then we'll see. I mean, if the right buyer comes along, we'll sell it to fund our pipeline. Or I mean it's a great performing asset. It's fully linked. So in Stellenbosch, it's quite a nice asset to have.

And your partners up there is [ Paul Harris ], if I'm correct, right?

Yes, it's Foundation Capital.

Yes. That is. And then in your newsletter, obviously Castle Gate is the tremendous asset. It's performing fantastically. You're kicking the a** there of your competitors in Pretoria with that mall. And in your newsletter, you're right. You reckon it can be a ZAR 6 billion completed development when all is said and done. Why would you then sell the Castle Gate land that -- for ZAR 250 million, earmarked it for sale for ZAR 250 million? Why not keep it and keep the development profits?

Albie, I think 2 things. The piece of land that we're still keeping there that we want to sell is all offices. And I think we've got, give or take 43,000, 44,000 square meters of rights. I'm not comfortable to own the -- if you convert that into completed assets, it's about ZAR 1 billion, ZAR 1.5 billion worth of offices. And I -- we decided that we're not comfortable to have that big investment in offices even if it's in a prime note. And therefore, we've got a little bit of offices, and we will maybe do 1 or 2. But we will definitely not do 45,000 square meter of offices in 1 note. We would rather sell that land or sell portions of the land to other developers who have other tenants and then derisk it a bit.

Okay. That makes sense. I mean, especially, you also seem to want to sell Riverwalk offices in new site office developments. Yes. That's also kind of like your plan.

So I'm sorry, Albie, just remember, the ZAR 6 billion that you're talking about includes the residential development. There's a big component of residential, where we've already sold the land. So it's not only commercial, that ZAR 6 billion. So the commercial, I think, in total might be close to ZAR 2 billion. And then the remainder is the 45 hectares of residential, which we know that we've sold to that.

Okay. And then on Atterbury Management Services, you own now 100% of that, where previously you owned 85%. So what happened there? Did you -- did they acquire -- bought back the stake from minorities? Or did you buy -- what -- can you just explain to me what happened?

So Atterbury Management Services was actually formed probably 5 years ago as a JV with CBRE Accelerate, where we took a strategic view to internalize the property management function of Atterbury. Subsequent and that was only the property management. And we had a 50-50 deal with Accelerate. A couple of years later, we rolled in the asset management contracts as well, and the split was at 85-15. And then at about a year ago, we took the strategic decision seeing that the structure is performing pretty well that we're going to buy or make an offer to Accelerate to buy out their final 15%, which we then successfully concluded. So AMS is the property and asset management, the regional function within our business.

And what was the price for that transaction, if I may ask?

It was at 51 -- 1-5.

ZAR 1.5 million for the 15% share.

No, no, 1-5, ZAR 15 million.

ZAR 15 million. All right. Am I right that those 2 management companies or development companies, AMS, they don't carry that value? They -- there's no value attributed?

There's no value attributed to that.

Do you have any idea what those 2 subsidiaries are worth? Well, I guess, 50 million times 7, at least for the one, right?

I mean it's easy here to value the management company because we've got contracts there. We can manage the cash flow stream. And obviously, that value has decreased whether it's sale of assets because as we sell assets, we don't manage those assets anymore. So that's a sum that you can quite easily do, I suppose. The development management business is, I think, far more difficult to value because the income streams and the [indiscernible] fees, et cetera, that you earn is very much more cyclical. So we don't value it as such.

Albie, I think just on that, I mean, our policy was never to try and make money out of our services companies. We -- I think it's important to run our own buildings and do our own developments. But to be honest, we break even there, we're happy. We create value by the increase in the investments and in the development and not by trying to make money out of fees. We just want to cover our cost.

Yes. Well, I mean it has a pick up lowering your costs. And Yes. So I understand the development. But the development profits are a big part of at profits, right? I mean it's -- we come back to another point of disposals. Once it is transferred to development -- from development to investment properties, that's where a lot of your profits comes from. So I guess that can be attributed to that company or that -- that's the core competence in -- of Atterbury and what you guys are good at. I mean that's the value add.

Yes. So that runs through to the balance sheet and the growth that we get there as we make development profits. But I was referring to is more the income that we received from managing those development fees. So that's what we refer to is as long as there is revisions at least breakeven, that's fine because that's what makes us good -- as good and keeps us in control of our assets. And then the profits, like you mentioned now, that we derive from developing properly, I mean that profit is mainly attributable to the balance sheet -- to Atterbury property, not the development division specifically.

Sorry, Albie, I'm going to have to interrupt you here. I was under strict instructions from the Atterbury team that they do have another engagement at 1. So if you could ask your last question. And please be more than happy to entertain all your questions. They're all as always, very interesting. But if you can put them in writing or save some for integrated report investor call. We're more than happy to answer them. But if you could just do one more question, then we're going to have to close the meeting.

That's fine. I just had one left in case. So Atterbury -- the holding company owns 75% of Atterbury property and 10% is owned by Talis. I read in the financial statement that in the [indiscernible] liabilities guarantee that's the entity that owns that 10%, right? Is that correct? And that debt is now due to the bank and you're going to lay claim to that shares. Is this what's going to happen now? Or are you effectively going to buy back that 10% stake? Or is it going to revert back to Atterbury Property? Or what's going to happen there now?

Albie, I'm not 100 sure about the percentages, but all the shares of Talis is not in Nimacron. I think it's 8% is in Nimacron and 2% they held directly, which they bought outside of the structure. But you're 100% correct. Whatever they bought in the Nimacron structure, we're going to take back when we assume the debt. So we will cancel or we will take back those shares. That's part of the Nimacron deal.

So that will effectively increase NAV per share again, right?

Slightly, yes.

No, it won't because the value of Nimacron's trans investment in AP is lower than the outstanding debt balance. So there's actually a deficit.

If we account for the deficit and cancel the shares-- number of shares...

Yes...

Then there's less shares so the value per share should go up with that small percentage.

Thank you very much, Albie. Thank you very much Ellen, and thank you very much to the Atterbury team, Louis and Armond and DC Kemp for making your time. As I said, it's -- RMH is primarily a conduit to Atterbury. Good to have you guys here answering the questions for our shareholders is hugely appreciated and a massive amount of value. And yes, thanks also [indiscernible] for the work she does. And thank you to everybody for attending the call and have a good break. And we look forward to seeing you in the New Year when we have the integrated report in our AGM.

Thank you.

Thank you, everyone.