Spear Reit Limited (SEA) Earnings Call Transcript & Summary

Warm welcome, everybody. Good morning. Thanks for joining Spear's FY '24 Results Presentation. Obviously, welcome to those that are in-person attending in beautiful Cape Town, and also to those that are attending via the Spear YouTube channel. So having a quick look at what we're going to be covering, we have quite a bit to cover today, so we'll get straight into the presentation. If you have any questions, please we'll have a Q&A session after the presentation. And for those that are watching online, if you have any questions, please just email them through to info@spearprop.co.za and we'll take them after the presentation. So I'm joined here today by Christiaan Barnard, our Chief Financial Officer, and Kim Pfaff-Karg, our Chief Investment Officer, who will be co-presenting with me today. Also joined with us is our Chief Operations Officer, Cliff Toerien. So if you have any difficult questions, please pose them to him, not to me. And then obviously our fantastic Spear team is also here as support. So just a quick refresh. To date, Spear remains the only regionally focused REIT listed on the JSE. We obtain our specialization through investing solely into the Western Cape and our diversification through investing into high-quality industrial, commercial, retail, and mixed-use assets. We started out live in 2011. A couple of years down the line that was started at a ZAR 345 million portfolio. Fast forward a couple of years, JSE listing as a REIT. We have ended off the financial year at about a ZAR 4.6 billion portfolio, which is just over a 13.5 multiple from when we started. Come fast forward further to December, portfolio will increase by another ZAR 1.1 billion with the Emira transaction, which will be about a 15.7 multiple since inception. Now, we're not obsessed with size, but we think it's a great story. We needless to say, we love what we do, where we get to do it, and with whom we get to do it with. Our proximity to our assets remains excellent. One of the key advantages we have is that we operate within 1 region. We are close to our assets. And also, we have a very simplistic capital structure. We've got no exposure to cross-country interest rate swaps. We have a high inside ownership percentage. The Founders, Board, and Management still own 23% of the company, and our portfolio generates free cash flow. Now, these attributes are only some of the kind of key attributes that we have, but these consistently create moats around our business. The 2024 financial year has been another challenging year. Oftentimes, I think about it as like a walk in the park, but more like a walk in Jurassic Park, coming through the listed property sector in this climate. But it's been individuals and businesses alike, and we've been good stewards of what we have, and I think we'll continue to do exactly that, just making small strides forward, which ends up building a great business. Beyond just the high-quality portfolio, there are some tangible and intangible attributes that I believe do further underpin the Spear investment case, and we'll just have a look at those. So the Cape Metro, using the economic data that's available, is saying that we are ranked #1 for economic development. We've also been given a stable outlook investment grade by Moody's. We have proudly maintained the lowest unemployment rate in South Africa. If you have a look at the provincial government's growth for jobs campaign, you'll see that we are just below a 19% unemployment rate, which is the strongest in the country. We rank first amongst good governance indicators, which rank cities based upon service delivery, infrastructure investment, et cetera, et cetera. Cape Town is also the most financially sustainable Metro, actually the only financially sustainable Metro in South Africa that operates with an operating surplus and a cash surplus. Given the fact that we're recovering 97% of our revenue, which places the city in a very strong liquidity position, Ratings Africa, again, have noted us as a very sustainable city. And then provincially, all 14 Western Cape provincial government departments, in addition to the 11 other provincial entities, received clean audits from the Auditor General. And the City of Cape Town will be making, in this next budget period, the largest investment into infrastructure that it's ever made, just below ZAR 40 billion, will be deployed between 2024 and 2027. Compared to the City of Joburg for the same period, it's actually 80% more for a million less people. And I think this is what drives the infrastructure investment and the population growth. And also, it's a great breeding ground for us to take advantage of regional opportunities. We also will be the first metro to be load-shedding free by around 2026 between Stage 1 and Stage 4. And we'll talk about that while we haven't necessarily invested into batteries just yet, because there may be a bought of cost that we are trying to avoid. Cape Town International Airport voted for the 9th consecutive year in a row the best airport in Africa. And for those that spent time in Cape Town during December, you would have known that it was an influx of local and international tourists, which again has a cascading benefit to the Western Cape economy, to our retail centers, to our mixed-use developments, et cetera. Cape Town has also now become known as the Silicon Valley of Africa. We have approximately 500 tech firms in Cape Town, employing about 40,000 people across those different businesses, which include the data centers in that entire catchment, and that is just increasing consistently. By 2035, we will be a ZAR 1 trillion economy, and we would have outpaced the GDP growth of the rest of the country, which I think is fantastic because that means that our investment universe from a provincial perspective, whether it's in Langebaan or whether it's in George, continues to expand and improve and they'll be supported by the population in those areas. And again, Cape Town has been voted the second best city by Time Out. We disagree. We think it's the best city, but we'll go with the second best because they did survey 20,000 people. So we're not going to necessarily pick a fight with them. Then just having a look at another key area that I believe to be thematics that have played themselves out over the year. Just a reminder about our mission. Our mission is to be the leading Western Cape focus REIT, to grow our distribution on an annualized basis, and also to operate within the top quartile of our peer group. Now, a mission is something that is there through the good and the bad times. For the most part, we've achieved every single aspect of that mission, but the trading environment some years have not given us that opportunity, but we've still operated. So thematically, how do we see this year? And I'll just touch on them because there are points in this 10-point, over these 2 slides that will get touched on in more detail in the presentation. From an operating environment perspective, it's remained extremely challenging. Load shedding is not gone. I think it's going to surprise us post the elections. So we have dealt with the most severe load shedding ever in 2023, and that has impacted, from an operating perspective, the profitability, rising op costs, and the limit on economic growth. But I believe that we've done what we needed to do to achieve what we've achieved. And, despite that, the Western Cape has been this positive outlier, but it is still part of the South African context, which does provide a bit of a punitive impact with regard to load shedding and the economic effects that do make investors less keen to invest into South Africa. That being said, we did have a record festive season, which saw incredible numbers coming through into the Western Cape, and I think that will continue to drive businesses' investment decisions to grow their existing businesses, to employ more people, to take up more space, and to seek out these growth opportunities, given the fact that the Western Cape has presented itself as such a reliable place to do business. And then in a macro context, the SA government projects for 2023-2024 is aimed to be around ZAR 101.6 billion. And about 68% of these projects will actually be undertaken by the City of Cape Town. Now, when a city grows and a metro grows in the way that the City of Cape Town has grown, you do need to upgrade your sewer infrastructure. You do need to upgrade your roads. You do need to upgrade your electrical infrastructure in order to prepare yourself for becoming that trillion-rand economy. And I think the goal of 2035 is exactly that, and we're on track to achieve that. Then moving on to the operating cost creep, it's obviously been a challenge. The higher for longer interest rate environment does impact profitability in the short-term. The material increases in the City of Cape Town's rates and taxes, was absorbed, but there is a lag effect. For those just that don't know, we do recover on a 2-months-in-areas principle from our tenants. We had severe storms last year, which probably impacted about 8.5 months of our financial year with regard to rain, which was higher than normal repairs and maintenance. And then the City of Cape Town's electricity tariff was absorbed from an expense perspective in the first 6-months of the year, but it still had an impact. And then far less, we're now 54 or 56 days into no load shedding. But prior to that, there's areas that are unrecoverable from a diesel perspective. But we are recovering between 96% and 97% of our spend, but areas like vacant spaces and common areas are not recoverable. Having a look at the portfolio indicators, the portfolio is occupied at around 93%. Personally, I'm not satisfied with that. I'd like it to be higher, and we're doing a lot of effort post-year-end to get it there, and I do believe that there's already been quite a bit of work done to increase that marginally since year-end. Occupied GLA of 397,000 square meters, our in-force escalation has been one of the strongest arrows in our quiver. We have managed to, through our active management and property management abilities, we've managed to get that in-force escalation up by over 100 basis points, if you compare year-on-year, which I think is really fantastic. And, again, also presents a great opportunity for us to build greater revenue growth into even the Emira portfolio, which is at a 6.9% escalation rate on a 26-month whale. So I do think there's a great opportunity there for us. And then, obviously, the current Spear WALE is around 26-months. Rent reversions, I think the only aspect that I'd like to comment here is that offices did put us down a little bit. Otherwise, we saw growth across the retail and industrial portfolio between 6% and 11% positive rent reversions. But what also stood out for me in the letting activity for this year is we had about in excess of about 10,600 square meters of space that was net gain on what expired. And I'll chat about that in the letting activity slide, which is why we did 100% of our total renewals concluded for the year. In terms of receivables, high interest rate environment does place tenants under a bit of pressure. The credit card debt racks up or other expenses take a priority. So we've been working very closely with our tenants, and we've obviously reported ZAR 6 million outstanding at year-end, but that is starting to decrease. The court process, we are involved in a few litigious matters, and we have some of our legal eagles here that have done really well for us in this year, so we thank them for their efforts. But that does take time, and it's a bit of a slow burn on that recovery. Then having a look at the acquisitions, which Kim will touch on both in terms of capital recycling and acquisitions, we've stabilized the island. It's yielding ahead of what we expected, and that will come through in the presentation. Also, we have sold the Liberty Life Building. That will register either tomorrow or the day after tomorrow, and we'll advise the market when that happens. The notable impact there is a 650 basis point drop to our LTV. So the day that property transfers, the Spear LTV goes from a year-end number of 31% to approximately 24.5%. And then the Southern Edward Street 142 Edward, it was a small disposal, ZAR 43 million, which had about a 61 basis point improvement on our LTV. The way we see capital, when a business, our perspective on our capital allocation tree, when we're trading at a discount to our net asset value, we do see it as an opportune time to repurchase our shares. That did slow down considerably in November because we started to see in November the Fed towards December had a bit of a dress rehearsal of what the markets would look like once rates start to cut and then the actual yield that we could repurchase at wasn't the right way to allocate capital. So we seized that. We did do a very successful capital raise in February. We raised ZAR 313 million worth of new equity at a DPS yield of about 9.7%. It was oversubscribed, and we thank quite a few of our shareholders that are here that have supported that strategy, and we are planning, obviously, on settled debt for the time being, and then that capital will be redrawn and deployed against the Emira transaction. ZAR 20 million of defensive CapEx was spent. And, again, this is all spent out of free cash flow. We don't rely on credit facilities to do this defensive CapEx. Then in terms of sustainability, we adopt the people, planet, profit approach. We've executed on another 2 megawatts of PV solar through the expansion of our Mega Park facility and our Sable Square facility. Currently, about 55% of the portfolio is covered in solar. All systems remain grid-tied, so there is an impeded performance when there is longer periods of load shedding. But we do anticipate that we should be close to 10 megawatt within the next year or so. And just to compare, we're a ZAR 4.6 billion business. I had a look at a ZAR 28 billion business in the same industry as us. They were 20 megawatt. And I think we are punching quite high above our weight category when we are closing in on 10 megawatt so well done to the team. And then in terms of development growth, it's predominantly in the industrial space. We're doing a development in George GTX Park, which Kim will also touch on, in addition to what we call shareholder NAV unlock on land we own that is in at a 0 cost in Blackheath Park called Bravo Park now. In Blackheath, we will develop a 7,000-square meter warehouse. Both of these developments are tenant-driven, so we don't take development risk. We only do developments off the back of contractual income. Then just moving on to the corporate performance. So as I mentioned earlier, 2023 definitely -- ended off differently than what most fund managers thought the year would end off towards the beginning of 2023, where listed property ended the year off as probably the top performing asset class ahead of what people's expectations were. And again, it was driven by dress rehearsal I spoke about earlier. Spear, from a total return perspective, outperformed the SA REIT Index by about 12.8% and the Small Cap Index by about 15.8%, assuming that you reinvested your dividends. Now, if you look on the right-hand side, your left-hand side, the amounts of shares that trade during the year, liquidity is a journey. And, for us as a small business, our liquidity has been consistently improving. In this particular year, liquidity was relatively low. We traded about just under 12% of our shares in issue traded, about $245 million. But what's also been encouraging is that we, in the same period, introduced additional property specialist investors, institutional investors, into our register, which also, given the fact that we're a more counter-cyclical business, similar to the Western Cape, those investors are long-term holders and want to trade out of our share, which we obviously thank you all for. Just mentioning the share repurchasing, just giving you a snapshot. We repurchased about 5.6 million shares. We did dispose of some of those shares as part of the raise that we did because we had authority to issue shares for cash, and it was given to us at AGM. This 800,000 were issued in terms of our conditional share plan, which was approved by shareholders. So currently we're sitting on about 22.3 million shares held in Treasury. Moving on to our salient details, Spear owns 29 high-quality Western Cap assets, comprising about ZAR 4.6 billion in value. We saw about a 9.78% increase in portfolio value during the year, which was a result of improved cash flows, improved fair value adjustments that came through the year. Our average property value has increased to ZAR 157.6 million. And just to maybe be a bit anecdotal, but when we listed, our average property value was closer to ZAR 70 million. So what we've done is, over the years, is that we have recycled capital carefully. We've invested into higher quality assets. Our approach is less is more. So we'd like to own fewer assets that we can be a lot more hands-on with, but assets of higher value. Our average rate per square meter from a valuation perspective is ZAR 10,700 a square meter. Now, if you look at the diversified portfolio of what you get as an investor for ZAR 10,700 a square meter, I think that you are buying great value. Our in-force escalations, as I mentioned 7.5%, gross equitable area currently, prior to the Emira transaction, 426,542 square meters, occupancy at 93%, our weighted average lease expiry at 26-months. Now, we do make a concerted effort to push that well as much as we possibly can. But what's also 2 top priorities for us is rent preservation and tenant preservation. The cost of replacing a tenant, if you dig in your heels and you say I want a 3-year lease instead of a 2-year lease and the tenant leaves, it's actually more expensive. So what we do is we take a long-term view. There's a vast majority of our leases that are 5- to 10-years, but also we see it as an opportunity to get escalations and to renegotiate leases a lot sooner. If the weighted average lease expiry is potentially less than 36 months, there's an effort and a goal to get it to 36 months to 45 months, but that is a work in progress. From an average rental perspective, we had ZAR 108 a square meter gross. Our collections at year-end was 98.92%. Christiaan did a Recon last week. We're probably closer to 99% now post year-end. And also a number that we're incredibly proud of is that we are generating net cash flows from operations, ZAR 36 million for the period. Then having a look at the financial results, distributable income per share for the year, ZAR 0.8299, distribution per share of ZAR 0.7886. Our guidance we gave to the market at our last cents was between 0.75% and 1.5% DIPS growth for the year. We've achieved the midpoint of that at 1.04%, which gives us a final DPS for the 6 months of ZAR 0.4053 per share, being a growth of 3.80% distribution per share for the year. We paid out 95% in the first 6 months and 96% in the second 6 months, giving us that average of just over 95%, probably about 95.2% for the year. Our SA REIT cost-to-income ratio is 43.69% and our SA REIT admin cost-to-income ratio remained very stable at around 6%. Our TNAV, ZAR 11.79 per share, which is a 2.79% increase from the prior year, which was ZAR 11.47 per share. The LTV at year-end, 31.60%, and when Christiaan gets to his presentation, he'll talk you through that sensitivity slide. Our fixed debt ratio of 47%. Our strategic band is to be between 65% and 75% hedged at any given time. We know that it's under that at the moment, but the cost of actually entering into expensive derivatives to artificially increase that rate actually was too expensive, given the fact that we already had the Liberty Life disposal confirmed, post that building transferring, we're actually at the gate of the lower end of our band in terms of that fixed debt ratio. So the decision was made to not enter into expensive swaps or fixes, given the fact that we do believe we're at the top end of the interest rate cycle. Expiry of our debt portfolio, about 25 months. Average cost of debt, 9.48%. Average cost of our fixed debt, 8.55%. And the average cost of variable debt, 10.16%. And just to add, when we do see those first rate cuts coming through, that may be lower than our strategic band hedge ratio will be actually advantageous to the business because that will be straight profit coming down to the bottom line. In terms of collections, another milestone year for us at Spear, it's the first year that we exceeded revenue of over ZAR 600 million. We billed ZAR 608 million for the year, we collected ZAR 601 million and it was as at Feb which is a 98.92% collection ratio. We received 97% of our commercial rentals, 99% of our industrial rent and 98% of our retail rental. So this is where I hand over to our CFO, Christiaan Barnard, to take us through the balance of the slides, and then I'll return after Kim. Thanks.

Good morning, everyone. Thank you for being here. Some of this is repetitive, but it's worth repeating, and I promise I'll be quick, because I know you all want to hear about the Emira transaction. Looking at the more detailed income statement. Looking at our top line revenue, our revenue grew by 5.92% for the year, excluding smoothing. On the like-for-like basis, that's 9.72%. Now that just further underlines the strength of the core portfolio, that in-force escalations, the reductions in vacancy that we've worked hard on to achieve. Our net property operating profit grew by 5.24% on a like-for-like basis, 9.03%, again, showing the work that was done on cost containment within the group, even though we had a lot of onsite in the year, which impacted probably about ZAR 0.02 of the DIPS in the year, which are non-return of R&M. Operating expenses increased by 8.8% for the year. Now that is a factor of 3 main reasons is the acquisition of The Island, which is not in the base in the prior financial year, increase in rates, as Quintin mentioned, as well as consumption charges, which is also recoverable, which sits within your revenue for the year. Administrated expense declined by 2.23% for the year. Now that again is if we previously communicated, we are able to acquire assets without substantially increasing our SA REIT administrative base. And that's why that number declined for the year compared to the prior financial year. I will touch on interest cover ratios a bit later on, but our income statement is straightforward, it's easy to understand, and it is there. We also this year provided you like-for-like numbers for the majority of the income statement for you guys to run your numbers and your forecast on. Looking at the FFO recon, this is where the repetitive nature come in, but again ZAR 0.8299 distributable income per share is something to be proud of and being a 1.04% growth on the prior financial year. That's something we are very proud of, especially in the environment we operate throughout the financial year. We paid our total dividends of ZAR 0.7886 per share, which is a 3.8% growth on the prior financial year. That is applying a 95% payout ratio. Now, this payout ratio is carefully reviewed every 3 months when we report to our Board. We ensure that we retain sufficient capital as well as with a robust R&D budget that we can maintain a high quality of our portfolio, which drives a high occupancy and drives revenue growth in the portfolio. Again, our FFO recon is simplistic. There is no capitalized costs in here. This is pure property operating profit being paid out. Hence, we are paying NOI numbers which are driven by property information. Our balance sheet is extremely simplistic. Quintin spoke about the LTV being 31.6% and the assets being ZAR 4.62 billion. Worth to note, within that asset base is ZAR 443 million of assets held for sale. Now this consists of 142 Edward, which was disposed of in March post the balance sheet, as well as the Liberty Life building, which will be transferred either tomorrow or by Friday, which will then reduce the asset base prior to the Emira acquisition. Our net asset value per share is ZAR 11.80, TNAV 11.79, and the tangible asset value per share post-distribution, which means if you take your TNAV and you deduct your distribution, is ZAR 11.39, which is the SA REIT base that we have to report on. Now, a TNAV bridge. This is basically to show the market where we went from in the prior financial year, and how we got to our new number of ZAR 11.79. You will note that none of these numbers are anything strange compared to the prior financial year, but the main driver in this year's change was the fair value adjustments. And this is mainly because we've seen that revenue growth and we've seen that cost containment within the portfolio, giving us higher NOIs in the portfolio, being able to give us a higher fair value for our properties. And this is evident within the revenue and growth numbers that we've seen in the financial year. LTV sensitivity, here you will see, this is of 12-month forward looking numbers. Quintin mentioned the disposal of Liberty Life happening now post this disposal, which will be the second block there, we are at 24.5% LTV at this point in time, which now gives us the ammunition to move forward into the Emira acquisition. Post the Emira acquisition and a 12-month forward forward-looking basis, we do anticipate the LTV before any further farewell adjustments to be 41.07%. Now this is within our strategic band of 38% to 43% and we are comfortable to operate in this environment given where we are currently with interest rates -- that's higher for longer. So we are comfortable at this point in time. At this point in time, you will note, the GAT Phase 1 and 2 is only the civil infrastructure work that we've contracted for. We've not included any of the top structure work currently as we have not yet, as Quintin mentioned, signed leases to the effect to start building the top structure. Our funding maturity, total net debt at the end of the period was ZAR 1.48 billion, with an average cost of 9.48%. Our fixed debt is 47%, average cost of 8.5%, and a weighted maturity of 18 months. Variable debt at 53%, an average cost of 10.16%, and a variable maturity of 34 months. Now, we believe we've hit the top of the interest rate cycle, and that is what all people indicate, all financiers indicate towards us, so we believe our interest cost has now topped. In terms of when we'll start seeing GAT, that is the number we're all waiting for, when the announcement will come for start for seeing interest rate reductions. But, as Quintin mentioned, post-Liberty Life, we will be about plus-minus 59% fixed, which is still below our strategic band, and we're working diligently to get that number back into the strategic band, but we do not want to enter into long and expensive hedges just for the sake of the disclosure metric. We want to make sure we enter into products which is accretive to the group. In the past financial year, there was a brief period in early December where there was a period where hedges traded at very accretive yields, at 7.8%, and we did take advantage of that and entering into ZAR 200 million of additional hedging products for 4-year periods, which is now in that base number of 47%. At the end of the financial year, we had liquidity availability of ZAR 180 million. We refinanced debt to the tune of ZAR 391 million by bringing in our first ever rolling credit facility within the group, so thank you for Nedbank for assisting on that matter. And then we also settled debt accretively to the tune of ZAR 298 million post the capital raise we did. Then balance sheet and funding update in terms of covenants. Our LTV is at 31.60% and in April as we stand here today, it's already dropped to 30.78% given additional cash collections within the group that we've done, and successfully getting tenant arrears into the group. ICR covenant is 2x, and the post-financial year, we were operating at 2.28x, which I know seems low, but post-accretively settling debt at the financial year-end, we are now currently operating at 2.78x, which is well on a comfortable margin above our covenants. We do foresee that this will be a stable number for the financial year until such point in time where we enter the immediate transaction where this number should be coming down towards the 2.5x level for the financial year, post any changes in interest rates. Any cuts will obviously improve that number, but at this point in time we do not want to forecast when we will see those cuts. At this point in time, we are operating in the environment and we are waiting patiently for that to happen. I told you, it would be very quick. Now, Kim -- Quintin tell about the Emira.

Thank you Speedy Gonzalez. Okay. So just having a look more in detail in terms of the portfolio overview. As you know, ZAR 4.6 billion of assets, of which 48% is commercial, 35% industrial, 16% retail, and 1% is the land we own in George. Revenue split of ZAR 607 million, 48% is commercial, 36% industrial, and 16% retail. In terms of GLA, this is really my favorite metric, to be honest, and my team always laugh at me, but it really is industrial, is the cornerstone of our portfolio. So 30% of our GLA is commercial, and declining. 59% is industrial and increasing. And 11% retail, and we are making a concerted effort to push that up higher and higher. But for those that are interested, buying retail assets in the Western Cape are very expensive. We are value investors, and we know that we have to achieve certain financial outcomes immediately on transfer, not within a year or 3 from transfer. In terms of the 29 property portfolio as it stands today, 14 commercial assets, 9 industrial assets and 6 retail assets and then the occupancy split between commercial 84%, industrial 97% and retail 96%. Looking at sector-by-sector, the industrial portfolio makes up ZAR 1.6 billion worth of assets, 252,000 square meters of GLA, 97% occupancy and a revenue contributor of ZAR 218 million. The industrial portfolio is made up of logistics, warehousing, urban logistics, multi-let industrial and manufacturing. In terms of commercial, makes up ZAR 2.2 billion of the portfolio across 126,000 square meters. Occupancy currently 84% and the revenue just under ZAR 300 million contributing towards the overall portfolio revenue. In terms of retail, just shy of ZAR 740 million, 47,000 square meters of GLA, occupancy of 96%, and revenue under ZAR 100 million. And this is certainly an area where we are looking to add as we unlock some development bulk in Paarden Eiland, and also as we bring in the medical retail assets from the Emira transaction. Then having a look at letting activity for the year we had expiries and re-lets or vacates coming up about 142,700 square meters. We renewed and achieved net growth of 153,383 square meters so effectively that's the 10,600 square meters I was speaking about earlier. But more than that, we increased the actual overall revenue from 12.1% to 12.9%. The one that pulled us down a bit was commercial. We had some long-term leases at Northgate Park that came off of 10-year leases, so the reversions were 4.67%, largely driven by that auditors' renewal being lower than the expiry rental. But for industrial and for retail, we saw 6.12% positive reversions, 11.03% positive reversions on retail and what is quite material from my vantage point is that, if you have a look at the percentage of, if you take the GLA of our industrial portfolio over what was renewed it's a very, very high percentage, and if you look at the GLA of what was renewed over our retail portfolio, it was also a very high percentage. And the reason why I pointed out is given the fact that we got a 6.12% positive reversion on industrial, which is also the highest in-force escalation contributor at north of 7.7%, it certainly does bode well for revenue projections going forward. Then having a look at the split by vacancy, 19,000 square meters vacant in commercial, 7,500 vacant on industrial, and 2,100 vacant on retail. That's at the end of Feb. Post that, that 19,000 has dropped by about 2,000 square meters. The 7,500 also dropped by about 1,800 squares and retail dropped by about 200 square meters post year-end. Now concerted efforts are being made to drive that vacancy rate we possibly can, and I assure you that, that is a top priority for the leasing team and obviously for management.\ In terms of our tenant split, about 43% of our tenants are large national, international, large-listed tenants. 49% national tenants, small-listed tenants, franchises, and medium to large firms, and the balance is made up of smaller, privately-owned, more entrepreneurial businesses, and then we have the vacancy of just on 6.8%. Then having a look at the more granular performance of the portfolio across the different sectors, trading has been consistent within the retail portfolio, but 41% of our retail tenants are considered nationals, and that's an important percentage because there's a far lower level of credit risk associated with the pick-and-pays. I know it's kind of like a question in the market, but the Pick n Pay's, the Pepco's, the Mr. Price's, the Adidas, et cetera., and that 41%, I believe, is a very strong underpin. We also have no, we've got no reliance on international and local tourism to support our retail portfolio, and I think it's important because your international tourism is like hotel occupancy. It's lumpy, some months are high, some months are low, where our retail assets are consistently supported within the locations that they are, or within the areas that they are located. Occupancy of 95.5%. We are busy with a bit of a strategic reshuffle at Sable Square, so there is about a 1,100 square meter ground floor vacancy that we are busy finalizing a bit of a tenant mix adjustment on, so that will be a shorter-term vacancy which should be resolved quite soon. Collections have been strong. In-force -- I'm sorry, reversions were even stronger at over 11%, as I mentioned, and we are constantly engaging with the larger retailers that have gotten more and more CapEx allocations to increase their footprints, to increase the type of stores that they are keen to open within our portfolio. Officers, it's a bit of the, it's like a brother in jail. You know he's there, but you don't like to talk about him. Progress is slower, but we are seeing vacancy contraction, and I'm very encouraged by what we've seen in 2 Long Street as an example. We've done probably about 1,500 square meters of letting post year-end, which is extremely positive. Your smaller pockets of 200 to 300 square meter to 400 square meters of space, typically in Cape Town were the spaces that let the easiest. Now it's taking a little bit longer. The BPO sector has certainly been the silver bullet that helped the Cape Town office market, which, and we obviously are also a net beneficiary in this building. We have the Hilton Global Call center that rents about 3,000 square meters from us. And in terms of letting, 1 Waterhouse is still fully let. Tygervalley, Bloemhof is fully let. Liberty Life, even though it's soon to be gone, was fully let. In-force escalations are still strong at 7.4%, and then that reversion came through about 4.67%. Now the star performer, the industrial portfolio, trading has been exceptionally strong during the year. We saw over 6% increase in our rent reversions, and I think the reason, if you have a look at the Spear industrial portfolio, it's an incredibly versatile portfolio that offers well-priced rentals, good quality space, great locations. Also, just to mention that 93% of our total portfolio's energy is supplied by the city of Cape Town. So we are always operating at 2 stages, or 93% of the portfolio's always operating at 2 stages below the national average of load shedding, in addition to us having entered into load shedding curtailment agreements on our large industrial assets. So we're actually benefiting from tenants moving out of places like Airport Industry and Montague Gardens to our Balboa South locations because of that energy security. Occupancy has been at 97%, collections close on 100%, and those demands will continue to come through. And this is also one of the reasons why we are so focused on continuing to grow the industrial portfolio within the Spear portfolio. Kim will touch on the last 2 points in terms of The Island coming into the portfolio and the commencement of the work in George. Just generally, we're all South Africans. We know that it's been tough, and the operating environment has been tough, but what we've been focused on is basically just the business. We've been focusing on letting space, managing costs, saving where we can, and also implementing additional cash flow opportunities where we can through our renewable energy strategy. Rent collections have been consistent, but smaller businesses do struggle, and we have seen some pressures coming through. Also, given the fact that we have a record amount of public holidays in South Africa, tenants also take full advantage of that to pay slightly later. And I think, as I mentioned earlier, 2023 was an incredibly difficult year from a load-shedding perspective, and that had put pressure on operating costs in addition to the interest rates. But over and above that, we are always planning for the future, and we are looking at some portfolio enhancement opportunities, not just in the industrial portfolio, but in our Paarden Eiland portfolio at Sable Square, which will see the introduction of 2 residential blocks in the not-too-distant future. In terms of lease expiry by GLA, consistently about 16% of the portfolio comes up for renewal and re-let on an annualized basis. We, as you can see, we exceeded through a net gain in the last financial year. We're comfortable that we'll continue a very strong trend of early tenant engagement, getting leases renewed well ahead of expiry. And just maybe something to point out, in the 2025-2026 bar you'll see in commercial the bar in red. That includes about 15,000 square meters of Liberty Life, which is still in the numbers. So that transfers out of the portfolio, and that'll probably reduce that bar quite easily by about 300 basis points. So technically, in that year, it'll probably be 13% as opposed to the kind of 16% average. That's it for me for now. I'm handing over to Kim Pfaff-Karg, our Chief Investment Officer, and then I'll come back shortly. Over to you.

Thanks very much, Quintin. Good afternoon, everybody. As Quintin mentioned, I'm the Chief Investment Officer of Spear. I'm responsible for our acquisitions, our disposals, and property valuations. And I will also be taking you through our current and our future development opportunities. Firstly, and especially for those of you that are new in the room today and joining us online, I'm going to start with a brief recap of our investment strategy. First and foremost, Spear is a 100% Western Cape-based fund, which means that we exclusively invest in the Western Cape, and we intend to keep it that way. Thank you. We are a diversified fund. However, from a sectorial point of view, we strive to consistently have an industrial and a retail bias, both in terms of Gross Lettable Area and in terms of value, whilst remaining value investors. We aim to have a minimum asset size of ZAR 100 million, unless an acquisition is particularly strategic to the fund. Our emphasis remains on quality over quantity. We will only grow the fund with assets that meet our strict investment criteria. We have around 150,000 square meters of unrealized bulk in the portfolio, which we plan to unlock over the next 5 to 10-year horizon, as and when market conditions are conducive. And finally, we intend to grow our fund, from which it's currently at around ZAR 4.6 billion, to a meaningful mid-cap-sized fund in the region of ZAR 15 billion. This is more of a strategic growth intent than a specific target value. So with that in mind, I will now move on to our acquisitions. During the past financial year, we took transfer of The Island. The Island is a high-quality, almost 22,000 square meter urban logistics facility, located in the popular industrial and mixed-use area called Paarden Eiland. Paarden Eiland is located immediately north of the Cape Town CBD, and as you can see from the slides above, within close proximity to the Cape Town harbor. We purchased this property for ZAR 185 million. From an asset management perspective, we have stabilized The Island into our core portfolio, and it is in fact performing above our expectations, having yielded a first year's return of just over 10%, versus our initial expectation of 9.75%. The Island remains fully-let and in high demand, resulting in a healthy growth in terms of what we can achieve, rental-wise, for renewals and re-lets. We have also seen a nice enhancement in the fair market value of this asset, after our year-end valuations. We are very pleased with this quality addition to our portfolio, which ticks all the boxes in terms of our investment strategy. Further, in terms of acquisitions, after our year-end, and as mentioned earlier in the presentation a few times, we entered into an agreement to acquire the majority of the Emira Property Fund's Western Cape portfolio. After my presentation, Quintin will take you through the high-level details of this transaction. On to development growth. First up is GTX Park in George. GTX Park is a greenfields development opportunity, which comprises a consolidated 7.75 hectare piece of land, situated directly opposite the George Airport. The land is zoned for light industrial use, and will be approved upon completion, with a 30,000 square meter cutting-edge light industrial business park. GTX Park forms part of a greater precinct known as the Airport Business Park. For those of you who do not know, George is the second largest and fastest growing city after Cape Town, in the Western Cape. It is a prime location for business growth, and it also has a very well-run municipality. AXA has also just recently put out an RFP to upgrade the George Airport, and the expansion of the terminal buildings, including a planned increase in cargo capacity. As you can see from the slides above, bulk infrastructure works are currently underway. We anticipate a ZAR 300 million spend on the top structure, over the next 5-year horizon. The Park will also feature PV solar infrastructure, and innovative water augmentation solutions, with the aim of becoming a self-sufficient eco-friendly development. This development is tenant-driven and not speculative. We are currently targeting agri-logistics, cold storage, last mile, and airport-related users. The unit sizes will vary between 300 square meters and 10,000 square meters, with roof heights of between 10.5 meters and 15 meters, which is entirely dependent on user requirements. Letting enquiries remain strong since we've launched this development. We are in advanced stages of negotiation or discussions, with several smaller users, which we are looking to consolidate, in order to commence with our first top structure. Bravo Park, Blackheath, this is known as the extension Phase 2. Off the back of the strong demand for industrial space in the Western Cape, we have identified an opportunity to develop a 7,000 square meter warehouse, on a vacant piece of land at one of our existing industrial facilities, known as Blackheath Park. The vacant piece of land lies immediately north of the main warehouse, which recently underwent a major ZAR 74 million extension and refurbishment, for Bravo Brands on a 10-year lease. This further unlock of value will also be tenant-driven and not speculative. However, given the popularity of the Blackheath Industrial Park, especially after the upgrades to the ZAR 300 and the Stellenbosch arterial roads, we believe it will not be long before we secure a suitable user. The estimated cost of Phase 2 is around ZAR 66.5 million, but given that we already own the land and the land cost is effectively nil, we anticipate that the return on this development will be good. Marine Place, Paarden Eiland. Marine Place is a substantial development, with an estimated total development cost of around ZAR 1.5 billion. We have approved rights on these consolidated urban of 52,000 square meters. The envisaged design is mixed-use, but with a strong residential bias. The idea would be for us to trade out of the residential components in order to reduce the total capital cost of the development and to retain the non-residential components, being the light modern industrial units and the retail units. We are currently in discussions with a best-in-class residential developer on this project. As you can see from the slides above, the location is absolutely prime, being a stone's throw from the Cape Town CBD and also benefiting from uninterrupted ocean views, especially from the first level. The properties are currently fully let and they are yielding an acceptable return, so we are in no rush to develop these sites, but we do believe we're moving closer to the development cycle where this project is moving closer to activation. This is a prime opportunity to unlock net asset value for shareholders through the successful execution of this mixed-use development. Now, moving on to our property valuations. This year, we had approximately 65% of our portfolio valued by a third-party external valuer. In accordance with JSE requirements, only a third of a listed portfolio is required to be valued annually externally. However, we continue to increase this ratio in order to demonstrate the level of the independence in our property valuations. When comparing our year-end valuations to that of the prior year, the total value of the portfolio excluding land has increased from ZAR 4.165 billion to ZAR 4.570 billion. However, on a like-for-like basis, our portfolio has increased by ZAR 153 million, representing an annual like-for-like growth of 3.46%. When analyzing our portfolio from a sectorial point of view, all sectors have performed well, with the industrial sector being the driver behind the growth, which is really no surprise, given the high demand and the low availability of good quality industrial space in Cape Town. When looking at our average rates per square meter, our industrial properties have been valued at ZAR 6,417 a square meter, our offices at just over 17,500 per square meter, and our retail properties at around ZAR 15,500 a square meter. These rates per square meters are consistent with similar quality properties within their respective sectors in Cape Town. Worth noting is that all of the rates per square meters are still considerably below their respective replacement costs, indicating the conservative nature of our valuations. As always, it is important to note that we do not value any bulk in our portfolio, which, as I mentioned earlier, we have around 150,000 square meters across the portfolio, which represents considerable upside as and when we choose to develop the bulk. Our valuation parameters, being the discount rates, exit cap rates, market rental growth and growth rates, are all very much in line with reported statistics in South Africa and also those relevant to the Western Cape. All in all, we are very pleased with the performance of our portfolio and we're starting to see some meaningful growth after a long period of stabilization. This is due to our growing cash flows and our increased operational efficiencies, but also the superior performance of real estate in the Western Cape. Best I take a sip of water. My last slide, excuse me, is our property disposals. As mentioned a few times in this presentation, we are delighted to conclude the near conclusion of the sale of the Liberty Life building to Capitec Bank for ZAR 400 million. This transaction lodged last week and registration is imminent. This sale is strategic and will significantly reduce our exposure to purpose-built single-tenanted offices. This financial year, we have also concluded the sale of 142 Edward Street, which is a smaller office building in Tygervalley for ZAR 43 million, the size being 2,668 square meters. This property was considered non-core and had been earmarked for disposal. The combined net proceeds of these 2 transactions will be utilized for the Emira property acquisition, the portfolio acquisition. Further, we are in advanced stages of negotiation to sell another one of our office assets, which is ideally suited for an owner-occupier and which we as a management team believe has reached the end of its life cycle for ZAR 160 million. Upon conclusion of the sale, we will either reinvest the disposal proceeds into our debt portfolio or into strategy-aligned acquisitions. Thank you very much. I will now hand over to Quintin, who will take you through the details of the Emira transaction.

Thanks, Kim. That's excellent. So, I'll just fix this little view here. When this thing unplugged, it lost the full-screen mode. Okay, we're back. Excellent. So, maybe just a quick reminder. We announced the acquisition of 13 assets from Emira Property Fund, totaling about 93,500 square meters at a value of about ZAR 1.146 billion. The diversified portfolio consists of high-quality industrial, retail and commercial assets. Just split granularly, 9,253 square meters of retail, 50,700 square meters of industrial and 33,400 square meters of commercial at about a 97% occupancy rate. We acquired these assets at just on ZAR 13,000 a square meter, and we can see a great overlay between where these assets are located in comparison to the Spear portfolio, as well as some both internal and external asset management opportunities that we believe we can unlock on these assets, given the fact that currently these assets are managed by a third-party manager, not by the owners, and we are a fully internally managed REIT. Maybe just chat through the rationale. This acquisition is accretive to shareholders from the date of transfer. We acquired it at a 9.46% acquisition yield, but have also agreed -- sorry, I know my backup hasn't been done. We have also agreed a once-off top-up, which will get us to a 10.1% yield, which will be smoothed across a 3- to 4-year period, so it doesn't all just get sucked into the first year. And that was done purely because we don't believe that we have to own every single asset in Cape Town, but we do want to own high-quality assets that add profit to the portfolio, and that's exactly what we've done. The acquisition, by type, by size, by location, again displays very strong similarities with the Spear portfolio, and I do believe that our ability to take, for argument's sake, The Island acquisition, get it from 9.75% to 10.1% within a year, bodes very well to what we can and believe we can do on the Emira portfolio. So, maybe just to chat about this from a sustainability perspective, and when you see these pictures, you won't -- one thing, there's a common denominator, other than great-quality assets, and we've acquired them at what we believe good rates, is that not a single asset has got any PV solar installed on it at the moment. We plan to overlay our people, planet, profit approach over this portfolio. We'll invest probably around ZAR 20 million into our PV solar program on this portfolio, which would also give us about a 15% to 18% internal rate of return once it's implemented. So, post the acquisition, the Spear portfolio will increase to about ZAR 5.4 billion, with about 502,000 square meters of owned GLA. In terms of projected revenue, we anticipate that this portfolio will contribute about ZAR 180 million in the first year towards our revenue, in addition to about net property income of about ZAR 110 million. We will -- Cat 1 Circular goes out to shareholders on the 2nd of July, so for those that are planning to vote, we would appreciate your support for this transaction. I think it's definitely in line with our strategy, as Kim pointed out. It's accretive, good properties in good locations, and also there's some interesting asset management opportunities that we are looking to unlock over this portfolio, and then you will get your chance, both on the 29th of May to vote in the national elections, and then on the 31st of July to vote at the AGM for this transaction. Maybe just a quick summary. I know you've been waiting for this. So, the first asset you'll see there is Northpoint Industrial Park. It's a 16,400 square meter logistics park situated in Brackenfell. The ZAR 300 million area has become known for large-box logistics and distribution facilities. This park is no different. It has units ranging from 1,800 square meters to 4,000 square meters, occupied by the likes of Pepco, Storage King, Fonseca Distribution, et cetera. We acquired it at 8,500 square meters. Now, if you just do the math's based on construction, you take a land cost of over 2,500 square meters, which is what land is going for in industrial areas at the moment, a construction cost of ZAR 11,000 square meters, you can see that I think we've bought well, and also in a location where we do believe that there's strong demand and rental growth going into the future. The second property is The Studios. The Studios is a multi-let industrial park in a secure location called Atlas Gardens. It is also in a node that's become known as Atlantic Hills, which is situated on the N7, which links the West Coast with the rest of Cape Town. These tenants range from 300 square meters to 800 square meters in size, and also from a location perspective, it's easy access to the N7, N2, N1, and connects to all other major arterial routes, and we acquired that at ZAR 6,900 square meters. Freeway Park. Freeway Park is situated right opposite the new Amazon Africa -- new Africa headquarters on the M5, just off the Ndabeni Turnoff. Now, what's interesting about this park is that it's a hybrid between industrial and mixed-use, because these are units that range from 100 square meters to 150 square meters, with a small little garage and an office, but they're achieving rental rates of north of ZAR 99 a square meter, and occupancy is about 98% to 100% at any given time. So we do believe that this will continue to benefit, especially now with the upgrade of the infrastructure, the road infrastructure that's happening in and around that precinct. You can now link straight from Observatory via the Black River Park over to Ndabeni without having to navigate the M5, which I think is great for smaller businesses that need this type of space. The fourth property is 14 to 16 Boston Circle. It's a 7,000 square meter facility. Excellent location, Airport Industria on the corner of Modderdam and Borcherds Quarry, tenanted by Bidvest, their Bidvest Data Division on a long-term lease. And then the fourth property is Steel Park. Steel Park is located very close to our Mega Park facility. And again, given the fact that we believe that we can create some operational efficiencies, the person responsible to look after Mega Park that's based on site will also have oversight over this particular property once it transfers into the portfolio. Then our foray into what we call medical retail. Both of these properties are underpinned by long-term leases with InterCare. For those that are not familiar with InterCare, InterCare is a medical services practice, but it's a multidisciplinary practice from ophthalmologists to chiros to ENTs to a bit of an ER focus to your normal GP visits. And they occupy the bulk of both of these properties in addition to Clicks. There's a strategic arrangement between InterCare and Clicks that wherever InterCare goes, the Clicks will follow. What does make the view an interesting opportunity for us is that it's not only just a multidisciplinary InterCare on the ground floor, but on the fourth floor, it's also a sub-acute day hospital, which has a specific license given to the property for it to operate as a sub-acute hospital. So it becomes a very sticky tenant within your portfolio, very difficult to move as long as the building is being looked after and obviously fulfilling the medical needs. We acquired these properties between ZAR 18,000 and ZAR 19,000 a square meter. And quite right, Kim mentioned our kind of less is more approach does fall a bit foul of a ZAR 49.5 million acquisition. But given the fact that semigration has not just brought high net worth individuals to the Cape, it's brought middle income earners, lower income earners, as well as high income earners to the Cape. But the West Coast area has been one of the biggest benefactors of semigration, where you've seen huge housing developments being rolled out, school developments, retail developments, which is also one of the reasons why Hyprop acquired Table Bay Mall, just given the fact that it's a very high growth node. And we believe that given the fact that this InterCare is such a -- it's in such a great location in between Parkland, Sunnydale and Big Bay, that it will continue to do well within the portfolio. And again, when we buy something and it's under ZAR 100 million, there's a very clear strategic reason for it. And this is one of them. And also when you're buying a portfolio, you sometimes need to take what you get. You can't always cherry pick. Then in terms of the office portfolio, even though again, I mentioned earlier about the brother in jail, but the office portfolio, this will see our return to the Southern Suburbs office market. Pre-COVID, we disposed of an office building in Newlands. We are now entering that market again. Boundary Terraces is an incredibly well-located and well-tenanted office park within the Newlands area, tenanted by the likes of PSG, ACESA, World Wildlife Federation, PPS Investments, and the rental rate's achievable, just given the fact that there's such a shortage of supply in the node. We believe it's sustainable at around the ZAR 250 a square meter level. And the acquisition there was at around 24,000. And again, 24,000 does seem slightly on the higher side for offices, but given the fact that it's node-specific, there is a bit of a higher price tag on this particular property. The second property is Newlands Terraces. This building is made up predominantly of parking and about 3 office floors. This is tenanted on a long-term lease by a global BPO called CCI. CCI is one of the leading BPOs operating on the continent in addition to the Middle East. Then moving slightly further in towards the CBD, 9 Long Street, just over 10,000 square meters. The 2 major anchor tenants in the office portfolio is another BPO called NDA and the National Government. Now, the National Government is not necessarily our tenant of preference, just given their track record with regard to rental payments. But given the fact that the Department of Labor is the main tenant, I'm sure that they would make sure that they behave themselves. We do take a belts and braces approach to delinquencies. In terms of acquisition, ZAR 13,000 a square meter. Then the 2 properties in the centre, from our vantage point, is where we can also unlock future development upside. These 2 properties are located in De Waterkant right next to Cape Quarter. Successfully, the building just behind Chiappini House is going to be redeveloped into an apartment block called The Valour, and that is already sold out and development commences imminently. We will be following a rezoning process on these 2 properties while they're tenanted under long-term leases, but they do have redevelopment conditions, and looking to up the bulk ratio to get us to about 13,000-15,000 square meters of bulk on this property. We may not take the development risk ourselves, given the fact that if we can find an opportunity to unlock that shareholder return by offloading the property once you've done the rezoning work and redeploying that capital at a better return, we will do so. Then the fourth property is Waterside Place. This is also in a secure park in Tygervalley, right opposite the Santam Head Office. It's fully let to one of the anchor tenancies, AECOM, a global engineering and consulting firm, in addition to multi-tenanted users. If I look and I do a cross-section of the passing rentals across this portfolio, I think the rentals are either on market or slightly below. We do see in particular in some of the parts of the industrial portfolio, there's a great opportunity for us to drive revenue growth even further. Then once you take these 2 together, a combined portfolio, what will it look like from a valuation perspective? Probably about 44% of the portfolio will be commercial, 38% will be, in terms of value, will be industrial, 17% retail, and 1% we have the land in George, and then 28% by GLA will be commercial, 59% will be industrial, and 14% will be retail. Now we are not overly concerned by this mix. It's a mix that looks very similar to what we have now, and if you look at the consistency and the way that we've managed to sustain cash flows within the existing portfolio, the kind of reversing in of this Emira portfolio logically is the right thing, and I believe that we've bought well. We haven't paid ZAR 0.01 of a premium for these properties. We bought these properties at slightly below Emira's book value. Then just moving on to our ESG. This is a property that I love. This is a property in Epping called Viking Business Park, and we've tried to cover every square meter in solar as much as we can. Just having a look at where we are in terms of PV solar, we have 16 properties. We'll be going to 15 properties once the Liberty Life Building transfers out of the portfolio. On a per-property with solar basis, we've got a 21% penetration rate, meaning that 21% of the properties that have solar have got the electricity being generated, 21% of the 100% being generated on property. In terms of percentages, 55% of the portfolio has solar at the moment. That'll drop slightly with the disposal of the Liberty Life Building. All of these stats exclude the implementation of the Emira Sustainability Strategy. We are around just under 7.8 megawatts of power being generated across the portfolio. What we've done is we've adopted a 3-pronged approach to how we initiate these projects. We have a self-funded model where we would do the CapEx ourselves, predominantly in the retail part of the portfolio where we're into PPAs, and those returns are really fantastic. In other parts of the portfolio, when you're talking about a Mega Park which is now north of 2 megawatts of solar, we enter into roof rental agreements because the extent of covering almost 90,000 square meters of property in solar comes at quite -- you've got to redirect CapEx from other parts of the portfolio. There we've entered into 25-year roof rentals where the operator does all the CapEx. They do the insurance, they do the maintenance, and we generate effectively an unlock of a roof asset in terms of cash flow for Spear going forward. And then the other leg of it is finance, so we do installment sales, and that also gives us a little bit of a shield from a distribution perspective because we can obviously utilize that, given the fact that there are unintended tax consequences when you do pay out less than 100% of your profits. Where do we want to be? Close to 10 megawatts, which we do believe that we can get to. We have already designed all the PV solar systems for the Emira transaction, subject to Com approval and shareholder approval. And we should, by all things being equal, by the end of the FY '25 year, be close to 10 megawatt of solar. In terms of just Sustainability updates, Christiaan negotiated a great deal for us with Standard Bank. Our first sustainability-linked loan of ZAR 230 million. The KPIs there is our solar penetration and our BE procurement, and we have met that target for all intents and purposes, and we should be seeing a 3 basis point reduction of that 3-month job, or plus that 179, should drop by about 3 basis points as a result of that coming through. We do believe that the world of the generous gets larger and larger, so what we do is we find, within the province, NGOs and NPOs that make a difference and make an impact, and these are some that we support. And I'm pleased to say that we have initiated on our second Donate Your Roof project, which will be 26 Marine Drive in Paarden Eiland, and all the roof rental that gets generated from that gets redirected to a non-profit organization that will, at this point in time, look after previously disadvantaged children and also a feeding program. And this is the beauty about real estate, is that you can leverage your assets, they're fully let, you can leverage those assets to actually make a difference, so it's not that difficult, you've just got to have the desire to do so. Then in terms of our equity strategy, we have concluded 3 BE deals, historically, from an equity ownership perspective. The total guarantees we provide off the back of those BE deals is about ZAR 77.8 million. We have not had to once step in to cover any of the shortfalls or any of the requirements that our BE shareholders have undertaken with the funders. It is a requirement of our business that BE shareholders should have skin in the game, and generally they put in about 30% of the equity, and we provide a guarantee, and then the bank funds it on a 70% loan to value. I'm also pleased to note that we'll be seeing a settlement of one of these BE schemes, which actually has probably happened already. Our first BE scheme, the bank funding has been settled, given the fact that they have been good stewards of their other investments and also have been net beneficiaries of dividend flow from Spear. So we are looking at how we can improve that BE ownership further and further in the year, which is also, if you can see in FY '22, we had 13.31 points for BE ownership. That has increased to 26 points, which is unaudited. We're still waiting for our certificate, but that is where we are from an ownership perspective. So we do take these things seriously. It's not just window dressing, but we are a small business, and we are doing our level best to know what our responsibilities are in terms of businessmen and women in South Africa. Then just to have a look at the outlook, things will be tough for longer, but, you know, tough times don't last. Tough people do. And we think that the climate will be challenging, and we will have to box smarter and smarter, and we will have to work harder and harder to get the outcomes that we have set goals to achieve for ourselves, for our shareholders and for our business. I am incredibly encouraged by how the provincial government, the local authority have got this maniacal focus on creating jobs. You cannot tax a country into prosperity. You can only do that by creating jobs and economic opportunities, and this must be replicated across the rest of the country. What is encouraging also, other than the Russian oligarch yachts that we see in the harbor, we are seeing greater collaboration between the private and the public sector to unblock logistics dislocations in the ports and in the ecosystem of Transnet & Eskom, given that we're now 56 days, I was corrected earlier, without load shedding. Real estate fundamentals will continue to shift in the favor of the Western Cape, just given the fact that we are miles ahead from an infrastructure investment perspective, from a governance perspective, from a policy framework perspective. If you have to look at any other metro, there's no metro in South Africa other than the City of Cape Town that can give you the assurance that we will be load shedding free by 2026, and you can see these policies being implemented, and the men and women responsible for it take it seriously. They see themselves as true public servants. As I mentioned earlier in the presentation, we've seen strong leasing momentum at the end of, coming out of the last financial year. I've said we need to vote. We do need to vote. You know, we're a bricks and mortar business. It's not like we can just pack up and leave. We are optimistic that this election will start to change the narrative in South Africa from a political perspective, but it is our duty to vote and to also work collaboratively with government, and we remain fully invested in that process. The nodal expansions, whether you're looking at the West Coast, whether you're looking at the N1, the R300, we do see all of these as opportunity sets for Spear to continue to grow within the province as an investment opportunity for us. As you saw in Kim's presentation and in my ESG presentation, we have lots of opportunities to unlock shareholder value. We do think that the higher for longer rate environment will only start to kind of being repeat in Q3 FY '25. So when that comes, I think that with a higher or strong in-force escalation rate and a contracting interest rate, there should be improved profitability for the company. The portfolio of the Emira acquisition will transfer in December, as I mentioned, and we will do, as Christiaan mentioned, strict cost controls in every possible avenue to create that sustainable shareholder value in the year ahead. In terms of guidance, so we do expect there to be net operating income growth in the year ahead. Now, the extent of what we believe to be distributable profit for the year at this point in time is difficult to quantify, just given the fact that we are in this higher for longer interest rate environment. We don't necessarily believe that load shedding is a thing of the past. We believe that there will be an element that will come back into the system that would impact some of the performance in this year, and also cost creep. The reality is that insurance costs, SaaS rear costs, these costs continue to go up because it's become more of a grudge purchase for corporates in South Africa to have these insurances, and the insurance companies are now making hay while the sun shines. We will, however, endeavor to give an update on our guidance at half year. We believe that that's the responsible thing to do. We're a business that has been built on credible results, a management team that is honest to the market and transparent. The guidance, as you can see, will be informed by a couple of those qualifications. Now, the qualifications must never be seen as a get-out-of-jail-free card, but it's just a transparent disclosure to note that, there are factors that are both not in our control from a provincial perspective and not within our control from a national perspective. Any changes would obviously affect that guidance. So, that brings us to the end of the presentation. If there are any questions, please. Thank you.

If there are any questions, if you can just grab the mic, maybe just give your name, your surname, and where you're from, and then we can take those questions from the floor first, and then if there are any questions, I think there are some questions that have come through via the website, then we'll answer those as well.

Quintin. Thanks to you and your team on a great set of results. Just 2 questions my side. Sorry, I'm Marcus from Catalyst. 2 questions my side. The one on the in-force escalations that you've managed to get up from sort of 6.5% to 7.5%, how do those conversations go with tenants considering inflation in SA is actually coming down towards 5%, so it's about 250 basis points above inflation? Just maybe speak to how it's being received and if there's any pushback from your tenants.

Yes, so I think those conversations are always somewhat tricky, especially the smaller tenants. The larger tenants understand, and I guess it comes down to just also being personal when you have these discussions. So when we sit down with our tenants, we explain to them that there are inflationary costs, security, landscaping, cleaning, all these services that you have in the building or in the park that are running at a north of 6.5% annual increase, and in order for us to allow you the space in your square box to run your business and to create the value, we need to get a higher escalation. And generally speaking, we do start out at a higher than 7.5% rate, and generally through negotiation, we end up settling on that kind of improved escalation rate. And I think also tenants are very informed. So when you look at an inflationary environment like we've been in, the cost of moving is extremely expensive. Now, if you take the incremental monthly increase of that, moving from 6.5% to 7.5%, versus the total cost of moving, IT, their contribution to their move, disruption, loss of potential business, et cetera, downtime, all that gets kind of factored into the calculation. And I think the other thing that's important is, 93% of the portfolio is supplied by the City of Cape Town. So we do provide some sort of attraction for tenants, and specifically industrial tenants, to stay within the portfolio, because the cost of them having downtime. Now, downtime for a tenant impacted by load shedding isn't just productivity. Your payroll changes, because now you need to run your payroll over time, and you've got to bring people back in. So all of those factors, as much as tenants are informed, we've also had to go and do our homework as to where we believe we can push those escalations. And when it comes to the larger tenants, they generally understand that the inflation rate and the cost of moving, even to a new development, is way more expensive from a rate per square meter basis. As an example, we've taken our PV solar portfolio at Mega Park, and we've looked at ways of how we can actually leverage off of that to shield tenants from maybe a lower kilowatt hour charge, or a lower demand charge from the municipality, as a bit of a trade-off in order to get the escalations that we require. Because there's no ways that we can just keep going backwards as landlords. You've got to kind of get to a point in time where reality has to set in for tenants. And generally speaking, we've been successful, also aided by the fact that there's been a contraction in general vacancies within the sub-sectors that we invest into. As an example, we've re-let one of the units at The Island. Now, The Island's rental in Paarden Eiland, we acquired it at about just under ZAR 100 a square meter on average, if you take some of those industrial gross rentals. We're doing renewals there, just given the demand in the area at about ZAR 110 to ZAR 112 a square meter. And we've got a waiting list of tenants. Now, that's obviously an ideal scenario for us to be in, but that's not always the case. As in offices, you do see the reversionary kind of rentals coming through. So, the trade-off there is, on a longer term lease, you're going to take maybe a slightly lower rental rate per square meter, but you are going to have to dig in your heels on the escalation rate. Otherwise, you're going to be a net prejudiced in that process.

And then just one other question on the Emira transaction. You stated that sometimes when you buy a portfolio, you have to take 1 or 2 assets along that you don't necessarily want. Are there any that you've earmarked for disposal as sort of non-core in that portfolio?

Yes, so I think we don't see in any of our portfolios that there are holy cows. If we are approached by an interested party that may have wanted to buy one of these assets and strategically it makes sense for us and we can unlock shareholder value at the end of the day, we'll consider it. You know, as I mentioned, the 2 properties close to De Waterkant are ideally kind of scripted for a residential developer to get control over. And who knows, there may be that type of conversation that we could look at in the short term. But until this time, as the Competition Commission has done their bit and shareholders have done their bit to approve it, it's all pretty theoretical discussions. But as a whole, we are happy with what we've acquired and we think that the bulk of these assets will slot very nicely into the core portfolio. Don't forget to ask Cliff any difficult questions. Are there any other questions from the floor? Okay, do you have? Maybe just give Christiaan the mic?

Thanks. Keith from Integral Asset Management. Can you explain the logic in both issuing shares and buying back shares in the same period?

Yes, so I think I did mention that in about November, we basically took our feet off the pedal of repurchasing. And when we look at the repurchasing, the kind of average repurchasing price as we were repurchasing it was probably around ZAR 79 a share. So the return that we could get or the yield that we were buying at was infinitely higher than what we could deploy capital into newer assets that would potentially come with some issues. So we were reinvesting, we were enhancing the actual NAV. Yes, for a company with lower levels of liquidity, it's probably not necessarily always the best to do. But bearing in mind that, we are stewards of capital. And when we steward our capital, and we're trading at a significant discount to our net asset value, we're not going to do dilutive deals. We'd rather just repurchase our own shares, have errors in our quiver to deploy at a later stage. So we issued the new equity in February. And between November and February, repurchasing was a thing of the past. And I think there's also, we run a very well-structured conditional share plan. And when we do see opportunities in the market, we don't issue CSPs. Siri's now also weighing in on advice on share buybacks. When we issue shares for our conditional share plan, we don't issue new shares. We issue them from Treasury. So it's not like we're kind of creating this second wave of dilution that takes place.

Alistair Anderson from Property Flash. I had 5 questions, so I'll give them one-by-one. Would you consider paying out 100% of your distributed income again and when?