Spear Reit Limited (SEA) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining Spear's FY '23 Pre-Close Presentation. It's just gone on 12:00 o'clock here in Cape Town as the noon gun has fired off. Today, I'll be providing you with an update of the trading year for FY '23 on a year-to-date basis. Spear remains the only regionally focused REIT listed on the Johannesburg Stock Exchange, obtaining its specialization through 100% Western Cape real estate ownership and its diversification through ownership of high-quality industrial, commercial, retail and mixed-use assets. Spear's proximity to its assets and its tenant base is one of the key operating strategies of this business. Now FY '23 has been a year that has served up what feels to us like a 12 rounder with Mike Tyson, as tougher macros, more intense load shedding, interest rate hikes and operating cost creep has encircled and deflated what we all hoped would be a post-COVID recovery. The Western Cape, however, continues to stand out as the beacon of hope of what this great nation could be like under the right leadership and a leadership that governs for the people and not just for the elite. This pre-close presentation will reflect on a nimble business, a business that consistently has navigated the challenging trading environment, a business that's applied an active asset management and hands-on approach to business operations adjusting to market forces as and when required and also a business that has displayed a prudent management of its fiscus. There will be a Q&A session that will follow after the presentation. Please, if you have any questions during the course of the presentation, email them through to [email protected]; and myself and the CFO, Christiaan Barnard, will answer them after the presentation. Just having a look at what I'll be covering during the course of the pre-close presentation today. Moving on to our environmental update. Spear's Western Cape-only strategy continues to be proven sound as the Western Cape economy and the Western Cape real estate sector continue to navigate the SA macro far better than other areas within South Africa. Spear's focused asset management initiatives have resulted in a more defensive portfolio, providing the consistency required to navigate through FY '23 on a year-to-date basis. The positive effects of semigration and localization of supply chain solutions continue to provide Spear with an investment and development opportunities within the Western Cape. 2 cases in point for Spear would be the Bravo Brands redevelopment at Blackheath Park, constituting of 16,000 square meters, which is recently been completed. And the acquisition of the ZAR 185 million Urban Logistics Park called The Island in Paarden Eiland. The commercial office sector will continue to have a space and a place within the real estate landscape of Spear, be it to a lesser degree than before. The office sector recovery is underway, but at a pace that will see the subsector still lag for at least the next 24 months within the Western Cape and possibly for the next 60-plus months within the greater parts of Harting. Spear's Western Cape-focused portfolio boasts strong real estate fundamentals, high-quality assets in sought-after locations and strong lease covenants. Now don't misunderstand me for one minute that we are not immune to the effects of load shedding on our business. However, we've been proactive in our mitigation measures on assets that have high demand through the City of Cape Town's innovative load shedding curtailment program. It's also worth noting that fortuitously only 2 out of Spear's 30 assets are on a Eskom supply, which allows our tenants to have enhanced business continuity during Stage 1 to 4 load shedding. Now one of the key takeaways from today's pre-close is that now more than ever within South Africa, real estate is about location, location, location. I don't want to make light of the negative impact of load shedding, but we have critical locations in South Africa with power and locations with no to limited power. For commerce to grow and to flourish, we need electrical baseload within this country. The leadership of the Western Cape through their proactive approach to infrastructure investment and maintenance has created an environment that is conducive to investment, development and economic opportunity. For this, we'd like to honor and thank our Premier, Mr. Alan Winde, the Provincial Government of the Western Cape, all our municipalities, and in particular, our superb City of Cape Town Mayor, Honorable, Geordin Hill-Lewis, who embodies servant leadership for leading from the front and by example. All of this being considered, as a management team, we believe that Spear's investment case within the Western Cape remains 100% sound. Moving on to the mission. Spear's mission is to be the leading Western Cape-focused REIT to consistently grow our distribution per share ahead of inflation and to operate within the top quartile of our peer group. We believe that our history -- that history shows that we've consistently delivered on this mission, and it remains our firm intention to do so going forward. Delving into the operating environment, you'll see that we've [ doubted ] the light in the darkness as this operating environment does come with some pros and some cons. Year-to-date FY '23, the context has been extremely challenging due to the persistent load shedding. The Western Cape, I believe, has been resilient on many fronts. But from Stage 6 and beyond, the province is equally exposed to the national load shedding schedule. We've seen operating costs creep, become a reality. Management has, as best possible, mitigated this operating cost creep, which you'll see further on in the presentation that there's been a marginal decline in the overall portfolio cost to income ratios. Positively, Spear has finalized its exit from the hospitality sector with the disposal of 15 on Orange ahead of initial guidance. The Spear portfolio still boasts a high occupancy rate of 93%. There has been a slight decline since the half year, but that's natural attrition of tenants moving in and out of the portfolio at any given time. Portfolio reversions for the FY '23 year have yielded improved metrics of a negative 3.96% reversion compared to the half year of 4.08%. We've also seen a positive uptick in in-force escalations moving from a half year of 6.45% to a year-to-date of 7.4%. We've seen a shrinkage of our debtors book, which is evident through our cash collection showing consistent improvement and our general payment profiles of our tenants have remained positive. In line with Spear's 3-pronged capital allocation strategy, management has initiated a share repurchase program, which has been ongoing with the repurchasing of north of 6 million shares between AGMs as announced on SENS last week. There's been an initiation of the Spear portfolio rebalancing with the disposal of 15 on Orange as well as the announced disposal of the Liberty Life office building in Century City. We have been successfully implementing our PV solar strategy with -- in excess of 50% of the portfolio being covered in PV solar, which translates to approximately currently 5.3 megawatts of PV solar capacity and generation, and that equates to roughly 15,000 solar panels. That capacity will increase from about 5.3 megawatt to approximately 7.5 megawatts within the next 8 to 12 months, which is an ongoing strategy of the business to implement PV solar wherever feasible to place less reliance on fossil fuel-generated electrical supply as well as to augment the generation capacity that we have on our sites as load shedding is not a quick fix for this country. We have also completed the 16,000 square meter redevelopment of Blackheath Park for Bravo Brands. This has a capital value of north of ZAR 74 million, which was initiated off the back of a new 10-year lease at an initial yield of 9.85%. Furthermore, the transfer, as mentioned, of The Island Urban Logistics Park is imminent. That property is 100% let at an initial yield of 9.75% pre any asset management interventions. Moving on to our operational update. So on the left-hand side of the slide you will see the operational focus areas of the business over the year. And on the right-hand side, the status update as to where we are with those operational focus areas. And from the top, commercial vacancy exposure. It's no secret that the office sector is under pressure nationally, far less in the Western Cape, but still, there's pressure. Vacancy creep mitigation is best possible across the entire portfolio. Real focus has been on mitigating the interest rate hikes that have come through over the last year. The mitigation of negative rental reversions, which we'll have a look at in more detail in the letting activity slide; managing our cash availability and treasury management in order to give effect to our 3-pronged capital allocation strategy; to ensure that our collection profile remains strong; to ensure that the debtors team are on top of any concerns that may emanate from the collection of rental across the portfolio; and then to manage the balance sheet from a loan-to-value perspective in terms of the strategic execution that the management team have set out to do. So where we are in the current status? Letting activity continues to improve in the commercial office sector, albeit not to levels that we saw pre-COVID. From a vacancy mitigation perspective, vacancy creep perspective, we've seen encouraging activity and also in the subsector updates, I'll give further on in the presentation, you'll see that we have done some good leasing within the office portfolio in particular over the fourth quarter. Reversions; we've seen improved reversions year-on-year. We've seen approximately 161 basis point improvement in our rental reversion rates compared to FY '22, which we believe is in line with management strategy to work as hard as possible to get us back to a breakeven reversion and moving towards positive reversions in the future. Cash availability has remained strong in terms of liquidity that we have available of ZAR 270 million. Our collections are back to pre-COVID levels. And on a year-to-date basis, just over 97% of our collections -- rentals have been collected. And we believe that we would report most likely closer to 98% in May once some of the late charges that have come -- that have been -- not been settled yet come through. Some of our tenants do have arrangements to pay at month end as opposed to the beginning or by the 7th of each month. And then management has executed on its LTV strategy of keeping within the 38% to 43% band on a year-to-date basis. We'll see that drop even further in February as the hotel disposal was only effective the first week of February. Moving on to our salient details. So on a portfolio snapshots, Spear owns 30 high-quality assets within the Western Cape. Our portfolio value year-to-date, ZAR 4.24 billion. Our asset values have decreased compared to the prior financial year by 0.85%. Our average property value is ZAR 146 million per property. Our average property value per square meter is ZAR 10,303 per square meter. Our average in-force escalation is 7.4%. Our portfolio GLA on a year-to-date basis was 426,531 square meters. Our portfolio occupancy rate, 93%. Our weighted average lease expiry, 27 months. There's a concerted effort, as I've mentioned in numerous presentations, to get that weighted average lease expiry up further and further. Our internal focus and strategy is to get it to between 36 and 45 months. Our average portfolio rental rate per square meter is ZAR 96.20 per square meter gross with the year-to-date collections to billed of 97.56%. And as mentioned, a forecasted 98% collection when we report our results in May. Having a look at the financial snapshot. Management is pleased to advise that we are on track to achieve our 5% to 7% DIPS growth per our forecast set out to the market. Given the strong cash collections, a final payout ratio of 95% will be proposed to the Spear Board for consideration. This will result in the forecasted average payout ratio for FY '23 increasing to approximately 93% over the 12 months. Spear REIT's SA cost-to-income ratio was 43.41% on a year-to-date basis, which is an improvement from the half year, which was 43.71%. Our SA REIT admin cost to income ratio was on a year-to-date basis 6.50% and the half year was 6.61%. Our tangible net asset value per share, ZAR 11.33, which is a 0.27% increase from FY '22. As at January 2023, our loan-to-value is 39.80%. But for the avoidance of any doubt, this is pre the implementation of the 15 on Orange transaction, of which ZAR 249 million worth of debt was settled. Therefore -- and you will come through in the slide shortly, we'll show you a January LTV and a Feb year end LTV snapshot. Spear's fixed debt ratio is at 65%. This is within our debt hedge percentage strategy of between 63% and 75% hedged at any given time. Our average debt expiry, 33 months, which is up from 21 months at interims. Spear's average cost of debt is 8.78%. At half year, it was 7.79%. So one can see the effects of the interest rate hikes that have come through on the interest costs for the business. Our average cost of fixed debt is 8.39%. And our average cost of variable debt is 9.32%. Moving on to our collections. On a year-to-date basis, Spear has billed ZAR 574,310 million. We've collected just under ZAR 561 million, giving a year-to-date collection profile of 97.65%. In terms of how we've collected, we've collected 96% of our industrial rental, 100% of our hospitality rent, 99% of our commercial rent and 97% of our retail rentals. These collections include billings for February 2023. On a year-to-date basis, the collections have been in line with management's forecast as we are starting to see all the debt being settled together with current rental obligations. And all these billings reflect revenue inclusive of recoveries. And our receivables for FY '23 will amount to approximately ZAR 13.5 million. But as mentioned earlier, we do have specific tenant arrangements that settle at month end, their consumption charges and some of their rental, which will still come off this. And we do anticipate to report improved receivables in May. So when you look at our letting activity. During the period, 111,876 square meters came up for either expiry, renewal and relet. Management has successfully renewed and let just under 100,000 square meters at a negative rental reversion of 3.96%. We are very pleased with the 96% retention ratio. We are furthermore pleased that we can see clear improvement on a year-on-year basis. As mentioned earlier, FY '22, negative reversion of 5.57%. FY '23 year-to-date negative reversion of 3.96%. We do believe that the reversions that have improved are as a result of Spear's geographical focus, our early tenant engagement strategy as well as our market-related terms that have all assisted to mitigate deeper rental reversions across the business. So when you look at our balance sheet in terms of our Group covenants. Spear's covenants on an LTV basis is 50%. On an ICR basis, it's 2x. On a year-to-date basis, as I mentioned, our segmenting in January and February because of a material event that occurred between the 2 periods. Year-to-date, January LTV, 39.80%. In terms of the forecast for Fab 2023, we'll be between 36.5% and 37.5%. For further avoidance of any doubt, this does not include the impact on LTV reduction with the disposal of Liberty Life building. That will only happen towards September of this calendar year. In terms of ICR, the ICR for January would be 2.5x with a slight reduction to 2.45x. On the right-hand side, I've mentioned the current cost of debt and the current split between fixed and variable. As you can see, the material difference between the pre-interest rate hiking cycle kicking into full gear compared to where we are today. We are still a very well-capitalized business, a business that has opted to continuously settled debt in a manner that's accretive as opposed to enter into very expensive hedging or fixed solutions offered by some of our funding partners. So moving on to our sectoral performance. The portfolio has displayed continued resilience. And I think these next 2 slides will give you some further context to the performance of the business in each subsector. Retail trading has been consistent with positive tenant feedback irrespective of the inflationary environment. We have quite some years ago already invested into business continuity solutions through diesel power generators in our retail portfolio. And a lot of our tenants are beneficiaries of diesel-powered generation capacity in our retail centers. None of our convenience or destination retail centers require international or local tourism. We have about 41% of our tenant mix within our retail portfolio on national tenants. Therefore, good covenants, rent gets paid every month on time. Occupancy rate is around 94.3%, collections 97%. Our renewals have all been in line with our forecast. And what we are seeing with the consolidation that's taking place in the retail sector, and I've mentioned this before, is that retailers are now looking to grow market share and looking to invest additional CapEx in build-out of newer stores together with refurbishing existing stores, which bodes very well for the convenience and destination retail portfolio of Spear. So when you look at the commercial office sector, so there has been improved metrics coming through on the commercial letting activity across the office portfolio. Occupancy rate at 84.2%, collections at just under 100% of our rental being collected. The return to office momentum does continue. But for every type of industry, every type of business and sector, there just isn't a clear model. And I think that the hybrid regime will remain fluid. We've seen a lot of conversations with tenants looking to bring back more and more of their workforce into the office, particularly because of the effect of load shedding where laptop batteries and UPSs just don't last when you start pushing beyond Stage 4. We will see some augmentations, as I've mentioned previously, on lease renewals as we see tenants looking to either grow space or to shrink space. And that's the nature of a diversified office -- multi-let office portfolio is that we do have pretty much solutions for every type of tenant, whether they're growing or whether they're shrinking. There's been an influx of both national and international firms looking for opportunities to rent office space in Cape Town, both from ourselves and from some of our peers. And we've seen improved letting activity in our Century City portfolio with approximately 1,150 square meters let in our Waterhouse building in Q4, which takes the building to approximately 96% occupancy. And we believe that prior to May, we should see 100% occupancy in the Waterhouse building in Century City. And furthermore, we concluded the sale agreement with Capitec Bank for the disposal of the Liberty Life building for approximately ZAR 400 million with the anticipated transfer date being September 2023. Having a look at the industrial portfolio. The portfolio remains extremely resilient operating in a tough trading environment, but operating robustly. All of our industrial assets are in very well-located areas close to public transportation and to all our main arterial routes. Occupancy rate of just on about 96%. Collections on 96%. We continue to see strong demand across the board for the multi-let industrial parks with a balance of single-tenanted larger assets under long-term leases. The deglobalization and localization will continue to be a tailwind for Spear. Load shedding has taken a bit of the momentum off of that. But given the fact that, as I mentioned earlier, having the bulk of the portfolio in a City of Cape Town supply does give us a slight competitive advantage. From a completion perspective, we've completed the 16,000 square meter redevelopment of Blackheath Park for Bravo Brands. They have successfully run their first production run in the first week of February. And we wish them all the success in the years that they are with us at Blackheath Park. Pepkor successfully occupied 27 Junction Road on the 1st of February on a new 10-year triple net lease. And The Island Urban Logistics Park, as I mentioned, which is fully let, 21,000 square meters transfer is imminent. So moving on to hospitality. Other than possibly in May, but probably one of the last times that we'll be presenting a sectoral performance update on hospitality. Up until the end of January, 15 on Orange delivered 100% fixed net income to Spear. The disposal was effective on the 2nd of February. The disposal yield was 8.13%. The disposal proceeds was ZAR 246 million. We settled debt in the sum of ZAR 249 million, of which ZAR 246 million was from the proceeds and ZAR 3 million was set -- was utilized from cash reserves. And all the debt settled against the overarching debt portfolio was settled in an accretive manner for the business. So having a look at the general business update. The operating environment remains challenging, regardless of being in the Western Cape. We're still exposed to the SA macro, but to a far lesser degree. Our industrial and retail portfolio remained resilient. And this really will become the cornerstone investment focus of our business going forward, growing the industrial and convenience retail and retail portfolio further and further as opportunity sets present themselves. The office portfolio momentum does continue with numerous new leases concluded and key lease renewals concluded during this particular trading environment. We've successfully exited our hospitality investments. We will continue to implement our PV solar strategy together with our water augmentation initiatives. As I mentioned earlier, we have just over 5 megawatt currently installed across the portfolio to grow that to about 7.5 megawatts in the fullness of time. Our rental collections are strong, back to pre-COVID levels. Receivables are declining. Persistent load shedding. There are a few unknowns when it comes to what happens beyond Stage 6. And this is something that is an ongoing conversation we're having with our tenants within the property management department of our business, how do we best mitigate against a deeper load shedding schedule, which would affect every business and every citizen in South Africa. Our loan-to-value is aligned with our Group strategy, which continues to position Spear for growth and gives us the opportunity to seek out these growth opportunities within the Western Cape. And finally, the portfolio rebalancing is underway with the disposal of 15 on Orange and the announcement of the Liberty Life building disposal. So when we look at the outlook. The Western Cape real estate sector has maintained its resilience across property types on a year-to-date basis. I believe with the effects of semigration and the provincial infrastructure that's being invested over the next 10 years, the City of Cape Town will allocate ZAR 120 billion towards water and sewage infrastructure given the effects of the densification, semigration and the overall investment within the Western Cape, which bodes really well for the Western Cape. The good governance across the provincial and metropolitan spheres enhances the investment appetite for Western Cape real estate and commerce. Cape Town will be the first load shedding-free metro in South Africa. And Spear will continue to do its part through the execution of our ESG strategy to contribute and blow win into the sales of the City of Cape Town. The City of Cape Town has announced that a further 500 megawatts of city capacity will come on stream towards the end of 2024 to honor the mayor's commitment that he made before being elected as mayor to bring load shedding to an end in 2020 -- by the end of 2024. And just to be clear, that will allow the City of Cape Town customers to operate without any load shedding, whilst they're Stage 1 to 4. Beyond Stage 4, there's a legislation that forces the city to reduce capacity, and that remains firmly out of their hands. In order for the city to be completely free of Eskom, that will require approximately 2,200 megawatts of own supply. And at this point in time, the city is not able to do so. And there still will be some reliance on Eskom beyond Stage 4. Spear will maintain our investment bias towards industrial warehousing, logistics and retail assets within the Western Cape. We'll seek out near-term organic and inorganic growth opportunities to further enhance the portfolio through the lens of our 3-pronged capital allocation strategy. There will be persistent load shedding does remove the shine. As I mentioned earlier, it's cost creep, diesel costs, investing in generators, looking to invest into batteries and the cost thereof and the payback periods. It does become a challenge for the business or for any business for that matter. We'll focus on further NAV unlock for shareholders through the development and redevelopment of embedded portfolio bulk. Just for the avoidance of any doubt, we don't value any of our bulk currently on our balance sheet. It's a pure unlock for shareholders in addition to our ongoing share buyback initiatives as and when market opportunities present themselves. Spear's investment universe, despite all the challenges, will continue to expand as numerous new growth nodes are established within the Western Cape with semigration being one of the drivers. Anecdotally, there's approximately 20 construction cranes currently up across the city and the periphery with 28 property development projects having come on stream in the last year, totaling a cumulative value of ZAR 5.7 billion. As long as we see cranes, we see investment, we see people arriving, both international visitors and people looking to relocate to the Western Cape on a more permanent basis, all bodes well for the entire Spear portfolio. On a portfolio level, the portfolio remains defensive underpinned by strong lease covenants in highly desirable locations within the Western Cape. Spear's hands-on asset management approach will continue to propel the business forward. So when you look at our guidance. In terms of FY '23 guidance, as I mentioned earlier in the presentation, management will -- is pleased to confirm that we are still in line with that guidance forecast of achieving a 5% to 7% growth in our distributable income per share. This guidance is and has been based on the following assumptions that no further COVID-related lockdowns take place, which I think we can now firmly place behind us. That vacancies were reduced in line with management's forecast. That lease renewals were concluded per management's forecast. No major tenant failures occurred during the year. The SARB repo rate increases were mitigated. And tenants were able to successfully absorb rising cost of occupancy, utility charges, consumption charges and municipal rates. And that load shedding stages does not persistently go beyond Stage 4. Towards the end of the year, one can probably -- financial year, one can probably argue that we are probably in a higher stage more often, but we are pleased to advise that we still believe that this qualification has not resulted in us having to revise our 5% to 7% DIPS guidance. Any changes to the above could impact the guidance. But as we sit here today, we are pleased to advise that that hasn't happened at all. So this brings us to the end of the presentation. I wish to thank you all for listening in today and look forward to answering any questions if there are any. And we appreciate your ongoing support as shareholders and investors in our business.

Welcome back, and thanks for joining us for the Q&A session. I'm joined here by Spear CFO, Christiaan Barnard and myself. Christiaan is a lot happier with life these days since Man United finally got some silver wear in the cupboard. Welcome, Christiaan.

Thank you very much.

I'm also joined here with -- by our Chief Investment Officer, Kim Pfaff-Karg, who will be just fielding the questions that have come through during the presentation. Over to you, Kim.

Thanks, Quinton. I've got a couple of questions from Keith McLachlan from Integral Asset Management. The first one. When do you see negative rental reversions bottoming? Will this happen in the Western Cape before the rest of South Africa?

In our world, we'd love to see them bottoming as soon as possible. And I think we've displayed throughout our various presentations that we've seen a decline in the negative reversion rate over the last year. I would say, as I mentioned in the presentation, we're probably going to see tougher trading from a subsector commercial office environment for at least in the next 24 months. But the focus for myself and the team is for us to bottom out within the next 6 to 12 months. It is a tough ask, given the fact that you have very little economic growth. Tenants are reliant on electricity. They're reliant on being able to generate business in this environment. So it is a little bit of a tough question, just given the fact that we are in a very tough trading environment. For us, occupancy is a very important factor of our business. So if we do have to give up a little bit on the rental or a little bit on the escalation to retain the sustained cash flow versus the vacancy risk and the cost of replacing, replacing an office tenant is extremely expensive. And oftentimes, that small reversion is far less -- has far less of a longer term impact on the income statement than what the re-tenanting costs, the brokerage commission and the vacancy period has particularly within the context of the offices. And I think the second part of your question, I do believe that Western Cape will lead the bottoming out. We are seeing very few new developments coming on stream. We are seeing, as the office sector shows a recovery, the speed of that recovery is much more evident within the Western Cape than what it is in the likes of Johannesburg or Harting or KZN. We've also seen an influx of international BPO firms taking up large portions of vacant space within Cape Town in particular, which continues to reduce the overall commercial vacancy and furthermore provides longer term opportunities to get those rental rates back to the levels where they were pre-COVID.

A question for Christiaan. What is the average cap rate across your portfolio?

I assume you referred to year end. We have not concluded our valuation at the year end. We are in process. We've had high level discussions with the valuers and there is no real concern at the moment. All our projections are on target. We have, however, to compare to our interim results, our cap rate was a plus-minus 9.5% and we expect it to be a similar range at the year-end valuations.

What -- which subsectors of the property market currently worry you the most in your portfolio? Quentin?

I think from a longer term perspective, I think you -- one would be very difficult to argue against the fact that there's been a global deterioration of office sector fundamentals. So by and large, the largest part of our portfolio vacancy sits in the office sector. And that really does require a lot more effort to mitigate the cost of tenanting these spaces and all the different legislative changes when you're cutting up space, making them slightly smaller, the common area impact, et cetera, et cetera. All that does personally play very much in the back of our mind as something that I wouldn't say worries me because our assets are all in really great locations. All of our assets have got diesel power generator capacity, providing business continuity to our tenants. So I do think that over time, the office sector will show that it still has a place in a space within the real estate context.

There's one further question. And now that you have implemented the disposal of 15 on Orange and you are about to dispose off the Liberty Life building, what opportunities have you seen in the market?

So I think just to kind of frame that question, currently, we're in a interest hiking cycle in this market. And we have to -- we're looking at opportunities. We've taken the decision to reduce portfolio debt in an accretive manner to ensure that the balance sheet is well positioned and strong for -- to take advantage of growth opportunities. But we have to look at it through the grid of our 3-pronged capital allocation strategy. The one part of that prong is the acquisition of assets. Having a look at where we're trading from a forward deal -- approximate forward deal perspective at maybe above 10%. We have to look at how we can acquire and where we can acquire assets that are in excess of where we're trading as a forward deal. The second is what investment do we have to make back into the portfolio to see long-term occupancy growth, long-term rental growth. So that would be a reinvestment into the core portfolio. And the third would be to take advantage of the discount that our share price is trading to its net asset value, acquiring back our own shares and canceling those shares is also part and parcel of how we look at our capital allocation strategy going forward. So in a nutshell, that's effectively how we're looking at it. We are seeing numerous market opportunities. But there is still a severe dislocation between sellers' expectations and purchasers' expectations when it comes to in particular retail assets within the Western Cape. We won't look to pursue further investment into the commercial office space, just given the fact that re-tenanting costs are significantly higher than that of an industrial asset or a retail asset. And then we will also look to grow exposure or to have exposure to data center opportunities within the Western Cape.

That's all the questions.

Thank you very much, everyone. Thank you for taking the time to log on. And we look forward to ongoing engagement. We will return for an in-person FY '23 results presentation towards the middle of May this year. And we thank you all for your continued support and wish you all well. God bless.

Thank you.