Speaker #1: Well, good morning, everyone. And, yeah, I just want to extend a warm welcome to each and every one of you for attending Spear's half-year results presentation today.
Speaker #1: I also want to extend a warm welcome to those joining us via the Spear YouTube channel. We appreciate you taking the time. It's also great to see so many familiar faces in the room, and also some new faces.
Speaker #1: And, yeah, we look forward to, you know, delivering some great content for all of you today. So we're also just under a month away of celebrating our 10th year as a listed REIT in South Africa, on the JSE, and it gives me and the team really a great pleasure in delivering what we consider a really strong set of results today.
Speaker #1: I also want to extend a warm welcome to also one of the co-founders of Spear and our chairman, of our board, Mr. Abe Baracha.
Speaker #1: The chairman of our investment committee, Mr. Brian Goldberg, who's also in attendance. Thank you for your valued support, guidance, and input. Over not just this half-year, but over all the years that have gone by.
Speaker #1: As I mentioned in the pre-closed presentation, just a few weeks ago, the first half of this year has again been quite an active period for the Spear team.
Speaker #1: We have distinctly focused on maintaining robust operational performance, we've maintained a strong financial cadence, and also we've executed on key aspects of our growth strategy.
Speaker #1: As you'll see in today's presentation, despite the local and global volatility and tensions, both financial and operational performance are measures that we set in place, have certainly been met.
Speaker #1: Despite the trading environment slightly being more constrained, we've seen shifts in monetary policy, we've seen interest rates that have moved in the opposite direction than what we thought they would move in the beginning of this year, and we've seen a lot of inflationary characteristics kind of play out in a market not as bad as Europe, but still, you know, still inflationary in nature.
Speaker #1: However, the good news is that Spear is, from inception, a regionally focused business. We only invest in the Western Cape, and the strong property fundamentals within the Western Cape, across sub-sectors, are certainly mitigated against the deeper downside risk that one would see in other regions which is really has been gratifying for us.
Speaker #1: But looking ahead, there is no real planning in our scenario that thinks that the current tough macro is going to kind of give us any respite anytime soon, so we've made adjustments, we've fortified within our planning and our own assumptions to obviously cater for that, and we'll just keep building on the momentum that we've created in the first half of the year to ensure business continuity and to ensure that we collect our rents and that we keep our buildings as full as we possibly can.
Speaker #1: Also, just a special word of thanks to our Spear team. We certainly have delivered, as a team, in the half-year, I would look back on the past 10 years and say that currently Spear is in its strongest financial position.
Speaker #1: It has ever been in its history, and that takes a village, it doesn't just take one or two people, so thank you very much for that.
Speaker #1: So if there are any questions during the course of the presentation, we'll deal with them afterwards. If you are online, you can email them through to info@spearprop.co.za, and we'll answer them during the course of, or after the presentation's Q&A.
Speaker #1: If you have any questions from the audience, please make them easy. If they are difficult, please refer to Cliff when you ask the question.
Speaker #1: If you can just state where you're from and what your name is when you ask the question, obviously we'd appreciate that as well. So just what we're going to talk about during the course of the presentation, I've spent a bit of time on the introduction and the welcome, so I'll try and speed things up a little bit.
Speaker #1: For you, but I'm also joined here today with by presenting with us is Christian Barnard, our CFO, and Kim Pfaff-Karg, our Chief Investment Officer, and they would take various portions of the presentation with me today.
Speaker #1: So I think there's an old saying that says that the art of navigation is best learned before entering any type of storm, and not that we've entered or come out of any storm, but that's what our mission statement also means for us.
Speaker #1: Our mission statement is to be the leading Western Cape-focused REIT, to grow our distributions on an annualized basis, and to also operate within the top-tier of our peer group.
Speaker #1: And thanks to star analysts Keelan Ndlovu, who reminded me this morning that we are operating in the top-tier of our peer group on a variety of key metrics, so I do feel that, you know, we don't just look at that mission statement as some abstract piece of writing on a wall.
Speaker #1: It's actually something that we live and breathe, and choose to succeed in on an annualized basis. But that being said, you know, we have strategic priorities, so at the beginning of every year we sit down and we think, like, what are the priorities that we need to set out for ourselves and we need to achieve in a specific year, and what you see here are kind of six kind of key strategic priorities that we set out, and, you know, through the lens of the interim results you can judge for yourself how well we have executed on these priorities today.
Speaker #1: And the first one is to strengthen our leasing performance. At the end of the day, we're a glorified leasing operation, so without our leasing business we really aren't much of a business, and that also goes for our people.
Speaker #1: So that's really been a key focus, is aggressive letting ensuring that our buildings remain full, and also to be laser-focused on key metrics such as weighted lease expiries, or escalations, weighted unexpired lease terms, as well as occupancy, occupancy certainly does at the right rate per square meter continue to drive top-line revenue growth, which does mitigate against the challenges of cost creep, which is unfortunately a factor of life when we try and mitigate as much against it as we can.
Speaker #1: Then disciplined cost controls. Fortunately, we have a CFO with deep pockets, but short arms, so we ensure that whatever we do, there's an element of strong cost controls, because the business can do fantastically growing its top-line revenue, but if it doesn't manage its expenses well, that net operating income growth isn't going to be ideally where you want it to be, so that's been one of the key focus areas.
Speaker #1: Unlocking organic growth. For years we've been telling our shareholders that we've got this bulk within the portfolio, we don't value it because we only want to value, we only kind of value it when we add value to the underlying portfolio, and you'll see through today's presentation in a variety of areas within the business how we've kind of created that momentum into the unlock phase of our business.
Speaker #1: And then targeted asset growth. You know, we value investors, so we're pursuing yield enhancing acquisitions, and also strategic asset expansions. Being very kind of focused on where we invest, how we invest, both in value assets but also in quality assets across the board.
Speaker #1: And then to drive sustainable platform growth. Now, what does that mean? It sounds like a fancy word, but ultimately it's about ongoing and authentic prioritization of ESG investments, things that are measurable, things that are quantifiable, and then you can actually see what type of returns you actually generating out of your ESG strategy.
Speaker #1: Active debt portfolio management. It's critical. We are sitting with a very low LTV, but that does not mean that we can just rest on our laurels and just kind of be comfortable.
Speaker #1: So we want to actively manage the debt portfolio as we do the overall portfolio. And also we have a great set of properties, but also we have to have great people to run and operate these properties, and that for us is equally important is that ongoing investment into best-in-class human capital.
Speaker #1: And then finally, the consistent execution of our smart strategy. You can see for yourself what it is, but ultimately it's to remain exclusively invested in the Western Cape to manage our business fully internally, because we manage everything from developments to financial management to acquisitions to redevelopment, as well as our leasing strategy within the business.
Speaker #1: So these are the strategic priorities that are referred to that, based on today's results, you'll see that kind of working out. Now that I've spoken about the starter, the real kind of main course here are the highlights, and these really are incredible results that I have the privilege to get to share with the team.
Speaker #1: We set out in May with a distribution growth of 68% compared to the prior financial period. We've exceeded that by 8.02 to 8.02%, which is over the top end of our guidance, that will deliver a distributable income per share of $47.29.
Speaker #1: Our board has approved the 95% payout ratio. Which is a distribution per share of $44.92, per share. Our operational performance has maintained a lot of strength over the period.
Speaker #1: Our weighted average lease escalation, these are all new acronyms, so it's a bit of a tongue twister, it's well above inflation at 6.90%. That has moderated slightly over the years, but I'll talk to that when I speak about the subsectoral performance in the portfolio.
Speaker #1: Occupancy rate still maintained at extremely high levels. If I look at the benchmark of the Orpi, it averages between 94 and 95%, and I'm pleased to say that compared to the benchmark of the Orpi constituents, we are still about 160 basis points above what they would deem the kind of average of the Orpi constituents from an occupancy rate perspective.
Speaker #1: Our weighted average unexpired lease term by revenue is 27.38 months. Rent reversions, just under 8%, again, which is testament to just the active asset management, the early engagement, and also the quality of our assets, where our tenants actually would choose to pay higher rent per square meter when they renew versus actually moving out of our portfolio across the board, which I think is really positive, but also talks to the supply constraint that's also evident in the market.
Speaker #1: We're able to get above inflation growth on our rent reversions and on a renewals, as a collective. And then on renewals, renewals only, we saw about a 5.82% rent reversion growth, which again is above inflation, and is sustainable, we believe, into the long run.
Speaker #1: Collections. Ultimately, cash is king, without the money, you guys would not be happy, and neither would we, so cash collections have been 19, over 99% for the period.
Speaker #1: But what's also important is that we are a cash-positive generating business, so after we've paid all our expenses, after we've accounted for all our distributions to our shareholders, we still are generating net positive cash flow, which means that any capital that we reinvest into the portfolio, we use out of our free cash flow.
Speaker #1: So we effectively are building on steam as opposed to having to go to our debt portfolio to withdraw money out of our debt portfolio, which would obviously come at a cost of interest, to improve assets within the portfolio.
Speaker #1: So we see that as kind of arrows in our quiver to be able to generate additional upside across the portfolio. Then in terms of our growth over the last three years, we've seen consistent asset value growth in the portfolio through good quality acquisitions coming to the portfolio.
Speaker #1: This half year wasn't any different. We acquired four prime real estate assets. When I say four, we do have three buildings in the Sunsum Precinct.
Speaker #1: And then obviously the Watergate acquisition, so that kind of collectively becomes four. To the value of over $1.4 billion. These were acquired just on $8.99% blended yield, so it's accretive from an earnings perspective, and it's yield enhancing going forward into the portfolio from the transfer date.
Speaker #1: And adds $48,000 square meters of high-quality real estate into the portfolio, in areas that we want to be invested. Then from a balance sheet perspective, the balance sheet certainly is prime for growth, 21.9% loan-to-value, a very strong ICR of 6.31 times.
Speaker #1: I'm sure the bankers in the room will be screaming at us to say that that ICR deserves more debt, and the answer really is, well, we'll have to see about that.
Speaker #1: And yeah, and you know, from a liquidity perspective, we are in a strong position to be able to execute on the right assets at the right price at the right time, that fit within the strategy that we've set for our business, with $800 million of unallocated liquidity, that we can deploy.
Speaker #1: We have a strategy of operating with a 65 to 75% debt-edge ratio at any given time. We're currently under that ratio, the market just isn't conducive for us to execute against specific hedging instruments right now, but Christian will touch on that further in the presentation.
Speaker #1: And I'll all in average cost of debt at the moment is $8.54%. Another very exciting part of our business, certainly has been the growth in our solar portfolio.
Speaker #1: If you look at the growth in the solar portfolio, it has really made some significant contributions just from the prior year to this year, so we've seen incredible growth, 29 solar assets currently, by 65% of the portfolio has got PV solar.
Speaker #1: The generation is about 6.1 megawatt for the period, for the half year. Now, just comparing half year from 2026 to 2027, it's probably an increase of about 2.6 megawatt of generation, which we think is, when you look at the revenue growth of the contribution that solar is making, as well as the NOI growth that the solar is making, it's quite significant.
Speaker #1: Our solar penetration has increased by 5.76% to 20.13% in terms of what is generated across the portfolio. Delivering about just under $20 million worth of solar revenue, at a net operating income of about $16.28 million.
Speaker #1: Then just having a look at the portfolio at a glance, asset value at the half year, $8.81 billion in assets, it's growth of just under 23%, which when you take into account the new acquisitions and the fair value adjustments made during the period, which we think is really phenomenal growth, and we also have the courage of our conviction that we've bought really good quality assets that have got sustainable cash flows to continue to support that asset value growth from a growth in the specific cash flows of each asset.
Speaker #1: We own 44 high-quality assets across the Western Cape, with an asset under ownership of about just under $675,000 square meters. Cost to income ratios, I'll just breeze through this and leave that to Christian to unpack in more granular detail later on in the presentation.
Speaker #1: Our total cost to income ratio, 45.81%, our property cost to income ratio, 38.67%, and our admin cost to income ratio, 7.27%. Slightly higher than what we'd like it to be, but bearing in mind that over the last three years, we've seen portfolio value growth and asset growth of close on $4 billion rand, which means that we've had to, you know, be forearmed in terms of having the right people, the right systems, and the right tools to be able to take on these assets in a way that they can be stabilized into the portfolio as quickly as possible.
Speaker #1: Then in terms of tangible net asset value, 6.73 billion, that translates to about 13.33 rand, 33 cents per share, growth of 3.25% for the period.
Speaker #1: We were also very fortunate in April, we raised $1 billion rand from our shareholders through a multiple oversubscribed accelerated book build, so thank you to our shareholders and also to the PSG team that did a phenomenal job on that capital raise.
Speaker #1: And then in, we offered a dividend reinvestment program in June, which was also very well supported, we raised $108 million or retained $108 million for the period, which again was also enhancing, slightly enhancing to the net asset value based upon the pricing levels that we got out of the way at.
Speaker #1: And our gross shares in issue, $517 million, $589,000, $651 shares. Right, so that's the kind of, just the kind of highlights package, but there's a lot more detail that we can share with you throughout the presentation.
Speaker #1: But just having a look at, you know, on the 23rd of March this year, Spear was included into the all property index, and the SA REIT index of the JSC for the very first time.
Speaker #1: It certainly, and it's no secret that it's been a transformative event for our liquidity, we've seen up to the half year, over $1.8 billion rand worth of shares traded, going further down into the year to date, it's probably over $2 billion rand already traded.
Speaker #1: And that has certainly placed us on the radar of a lot more institutional investors, but it's not just, you know, because of that that we're pleased.
Speaker #1: We're pleased because for any investor, liquidity is important when you come in and when you come out. Spear has now become one of those assets that you can invest into.
Speaker #1: And if you need to come in and you need to come out in a meaningful manner, you can do that through the strong levels of liquidity that we're seeing.
Speaker #1: Also on the total return profile perspective, even if you look at five years, three years, that's all pre-indexation, we've consistently delivered on very, very strong total returns, assuming that you've reinvested your dividends, which I hope you all have.
Speaker #1: Then just having a look at the portfolio overview, so obviously I've spoken about the kind of specialized nature of, you know, our Western Cape regional approach, but what's also important to understand the more granular detail of the diversification within the portfolio.
Speaker #1: So if you look at the retail portfolio, the portfolio that has grown over the years slightly slower than what we would have liked, because we also value investors and we need to acquire assets at our cost of capital or above.
Speaker #1: But in the last two years, we've seen that portfolio grow to almost $2 billion rand, and it's really been fantastic to see how we've grown into the kind of retail space the way that we have.
Speaker #1: Occupancy that's almost 97%, collections very strong at 99%, reversions positive at 4.90%, renewal reversions at 6.10%, enforce escalations at 6.76%. Now, there's actually a correlation between the increase in nationals at 68% and the kind of downward kind of pressure on those escalations.
Speaker #1: So initially we used to have around 41% of our retail, tenants were national tenants. So we were kind of pushing that seven plus percent annualized escalation rate.
Speaker #1: As that percentage has increased, you'll see that that escalation rate, the nationals continue to push on the escalations. However, if we're printing renewal reversions positive at 4.90% and we have to give up a little bit on the escalations, maintain occupancies and maintain the kind of cash flow cadence that we are on a month-to-month basis, it's unfortunately a sacrifice that you have to make but the other beneficial trade-off is the fact that your credit risk is largely mitigated when you've got larger exposure or more exposure to nationals.
Speaker #1: Not all nationals, because some nationals are under pressure, so we also have to be mindful of the tenant mix or the exposure we have to any specific national tenant at any given time.
Speaker #1: Then on the commercial front, about $151,000 square meters of GLA, occupancy is just under 92%, collections at almost 100%, reversions at 4.62%, renewal reversions even stronger, again, the cost of moving for an office tenant is very expensive, it's ACs, it's dry walling, it's furniture, it's IT, so our leasing team has done really well in pushing those renewal reversions strongly.
Speaker #1: But also for us, even on the new let side, you know, we've covered all our expenses, so you know, we want to let space and we want to let space as quickly as we possibly can, because all of that drops straight down to the bottom line.
Speaker #1: Then in terms of industrial, the lion's share of the portfolio and certainly the star performer, occupancy at 98.22%, collections at almost 100%, reversions extremely strong at 13.49%, renewal reversions at just under 6%, enforce escalations at 6.82%.
Speaker #1: And again, it's if you have a look at the spread of the industrial portfolio from a manufacturing, logistics, urban logistics, mini units perspective, great locations, great power supply, and it's a space where tenants want to be, but also we've seen some great organic development growth coming out of the industrial portfolio.
Speaker #1: We will add about $140 million rand worth of value coming into that industrial portfolio over the next 12 months, which will translate to about $12,650 square meters, of which $7,150 square meters is the new Mumbo's distribution center that we're developing in Blackheath.
Speaker #1: Then just a general business update, you know, in terms of when you're kind of looking at the business as a whole, obviously, you know, the portfolio has been built around the resilience style platform.
Speaker #1: Which has meant that we are able to navigate the volatility that comes through in the market, the Western Cape has remained the strongest performing kind of region from a real estate perspective, across asset types, including residential, and that for us has moat-like characteristics within our business.
Speaker #1: The consistent renewal and leasing activity within the business has also ensured that we are able to keep occupancies as high as we can and also ensure that we can get the rental growth that we require.
Speaker #1: The operating cost pressures is prevalent. There's no escaping it. We will also in a general valuation year this year, we had increase in rates and taxes in a variety of other costs that have increased as a result of fuel surcharges, et cetera, that has been absorbed and being managed.
Speaker #1: We'll continue to look for creative and strategy-aligned acquisitions like we've done in this year, with the acquisition of Watergate and with the Sunton Precinct.
Speaker #1: On the disposal side, we've disposed of Hamilton and Cioppini, which Kim will talk about in her part of the presentation, in a way that we believe really has unlocked value for shareholders.
Speaker #1: And we'll continue to look inward at times to the portfolio and say, well, what is there that no longer meets the criteria that we believe is required, that we require of ourselves to deliver high-quality returns to our shareholders, and then that will become a strategy over this potential disposal.
Speaker #1: And then we'll consistently progress in our investment into renewable energy. And you know, Christian is certainly championing that part of the business and I must say that we are working on some exciting things, specifically within our retail portfolio in the coming 12 months.
Speaker #1: And we'll talk more about that probably in the May presentation. And then the organic development within re investing money into organic growth, you know, it's new assets at like low land cost, which means that we can really get the best returns we can possibly get, even through the grid of very high construction costs.
Speaker #1: And then also we acquired a land parcel, which certainly is probably, we probably one of the only, call it third-party land owners other than Robbie in Century City anymore, that can still develop high-quality office assets.
Speaker #1: We acquired that at really good value, about $2,200 square meter for the land, which means that we can get a decent return, especially when rental rates are pushing $300, $320 rand a square meter here in Century City.
Speaker #1: So we are very excited about the development progress and plans that we have for that particular property. Then just having a quick look at the sectoral split, as I mentioned, 8.81 billion of assets, revenue $495 million, $44 assets, high occupancy rate, there's very little to say other than the stats do speak for themselves.
Speaker #1: And if I just kind of granularize that into the industrial portfolio, across the board, all assets are performing exceptionally well. $3.3 billion rand worth of assets with a 98.2% occupancy rate.
Speaker #1: On the commercial side, we have quite a spread of commercial assets across the established nodes within Cape Town, we've seen strong interest from tenants looking to grow within our portfolio.
Speaker #1: In instance, we had a tenant move out of the Cape Town CBD from one of our buildings into the northern suburbs, into one of our other buildings.
Speaker #1: So that also does help having a diversified office portfolio across the established nodes within Cape Town. Then in terms of retail, so just the stats below, mostly almost exclusively relate to Maynard.
Speaker #1: So Watergate, we've only owned for literally about two months, so we haven't had any trading density stats for Watergate. Sable Square, we don't have any stats at this point in time, we're busy putting measures in place to be able to deliver a lot more kind of granular trading detail in months to come.
Speaker #1: But overall, $2.02 billion in assets, $100,000 square meters of GLA, and contribute about $114 million towards our revenue for the period. Then just switching on the letting activity, we had $104,000 square meters of GLA come up for renewal and relet during the period.
Speaker #1: We renewed $102,173 at a positive rent reversion of $7.98%. And again, also on the renewals only, we did exceptionally well, we had just under $62,000 square meters of renewals.
Speaker #1: We renewed $61,484 and again, if you look at the closing revenue of $5.2 million, opening revenue of $5.5, you can see that it's also moving in the right direction at a positive reversion of $5.82%.
Speaker #1: Having a look at the tenant vacancy profile per sector, commercial, off the period end, we did let 3,200 square meters of office space at Northgate.
Speaker #1: So that $12,000, you still need to deduct the $3,200, and obviously we want to just shout out to James Barlow, our head of leasing and Devon Duplessis from Baker Street for pulling that deal together.
Speaker #1: So well done, gents, we appreciate it. Industrial portfolio, $7,500 square meters vacant and retail portfolio $3,269, $2,000 square meters of that $3,000 is currently undergoing a bit of a tenant reshuffle and we kind of collaboration at Sable Square.
Speaker #1: So some of it is kind of intentional for us to kind of just get through the planning phase of a couple of changes at Sable Square.
Speaker #1: But other than that, it's pretty stable and we're always working to try and improve that. We've got 1,004 tenants across the portfolio and currently about 651,000 square meters is occupied GLA.
Speaker #1: Just having a look at the lease expiry profile, another real positive takeaway that I take from this is that for the last two plus years or two to three years, we've had an average of 19% of the portfolio coming up for renewal and relet on annualized basis.
Speaker #1: Now, we consider that to be reasonably benign over those years. But now it's actually dropped by another 500 basis points. So currently only 14% of our leases come up for renewal and relet on an annualized basis, which again, just, you know, starting a financial year knowing that you've got only 14% of your leases coming up for renewal and relet, it does give you a lot of capacity to forecast accurately and to plan diligently for what the year ahead could look like.
Speaker #1: And also, you know, what levers you can pull within the portfolio to ensure that you are you've got your planning dead set for the year ahead.
Speaker #1: Right, so I'm going to hand over to Christian to take us through the financial performance. Thank you.
Speaker #2: - Morning everyone, thanks for being here and just remember you're going to have to listen to me talk fast, but not as fast as I deliver and it's growing.
Speaker #2: So it's good news. So just taking a look at our income statement, I've did make a joke or two, I have to. So just first of all, the income statement you see here excludes moving and that's purely because it doesn't relate to our actual FFO recon.
Speaker #2: But in our results in the booklet and published online, all the IFRC compliant information is disclosed. So this is purely because this is more of what we distribute.
Speaker #2: Now, the income statement for the revenue growth of 28.14%. And on a like-for-like basis, 28.74, but now based on popular demand, we've added a new metric called like-for-like full period, which gave us revenue growth of 5.92%.
Speaker #2: Now, just to explain the reason for this is, like-for-like means asset held at the same corresponding period end, meaning at August and in August.
Speaker #2: But as we acquired assets in certain periods, some could be held for a month and some were held for six months. So we shareholders want to know what was the core portfolio growth, assets held for the same number of months within a period.
Speaker #2: Hence, we created a like-for-like full period, which is the final column you will see there on your right-hand side, giving us revenue growth of 5.92%.
Speaker #2: Now, in that, you will have assets excluded, like I'm not going to show P&E, which was disposed, may not more consignee, burger rubber, which was held for no months in the prior corresponding period, but full months here, but also sometime precinct and Watergate held for a couple of days in this period, but not in the prior corresponding period.
Speaker #2: So grabbing revenue at 5.92% is very much on par with where our lease escalations is. And dropping it down to the NOI of just under 3%, which is due to some structural vacancies as we continue to spend capital on a roof replacement, meaning we have to vacate those premises, while we do the work, but you still carry the full cost while you do the work in those premises.
Speaker #2: So there's a reason for that and you will see later what those could contribute to the performance of the group. Now, again, we've operated a very low LTV in this corresponding period after capital raise in April, just over 8% for the majority period, giving us an ICR of 6.31%.
Speaker #2: And as Quentin mentioned, we the bankers want to give us more debt, but we have enough cash, so we threatened them with settling if they become difficult.
Speaker #2: Then the reconciliation of our FFO, as mentioned, 47.29 distributable income per share, applying a paired ratio of 95%, giving us dividends of 44.92 cents per share.
Speaker #2: Now, we also announced a dividend investment program to continue this morning in our sales announcement and further details of that targeting pricing will be announced on the 2nd of November after we've done all the diligent work leading up to that date.
Speaker #2: Again, it's just evident, it's kind of difficult to find a highlight in something that's that simplistic. It is pure property operating. There's nothing we have to explain.
Speaker #2: We distribute pure property income to our shareholders. That's why we continue seeing growth in our portfolio, because there's no one source, there's no strange numbers we need to explain.
Speaker #2: It's continuous collections of income and revenue, and that is what we are all about. So there's very little to explain, but I'm happy to go into detail if someone wants afterwards.
Speaker #2: Our balance sheet, we lost another couple of lines, even more simplistic now. I mean, it's again, there's a couple of highlights in there. 8.8 billion rand of assets.
Speaker #2: We are sufficient cash available of 637 million in the bank, which we can deploy, which we're actively working on. Net debt of 2.56 billion.
Speaker #2: And our only current liabilities are based on development debt as we are utilizing the debt to fund the development of the GTX portion 165, which Kim will touch on later.
Speaker #2: All of this led to an LTV of 21.91%, the balance sheet date, and a tangible net asset value of 13.33, which we'll discuss a bit now in terms of how that growth prescribed throughout the financial period.
Speaker #2: The TNRA breach and LTV symmetry is quite important because this just shows our shareholders how we make the assets work for them and making the share the tangible net asset value grow.
Speaker #2: Starting the period at 12.91 and ending at 13.33, you will see a number of transactions that occur during the period, which resulted in that growth.
Speaker #2: The most notably is the capital raise we did in April, as well as the dividend reinvestment program, which you will see at a marginal net reduction in the NIV, which was more than well absorbed through our fair value adjustments, which Kim will talk to.
Speaker #2: But again, fair value adjustments is just under comes from collecting property rent, having enforced escalations, that's well above inflation, a growing NOI, which drives your valuations.
Speaker #2: And we have that's why we have a continuous growing NIV. It's a pure property operation this. LTV sensitivity, 21.91. And we project in the fullness of time, 12 to 24 months of now, all transactions we know that is going to occur.
Speaker #2: We'll be just over 26%, still extremely low, which we have gives us optionality within the balance sheet to actually grow more to develop some assets as we as Quentin has mentioned.
Speaker #2: And the most notable transaction is there is we have kicked off the developments of the Mambos transaction in August and as the George in May, which now the numbers you see there is for the completion of the projects in the next six to eight months once those were completed.
Speaker #2: There is already been capital some spent in the projects, but that is for the completion of those projects. So then looking at our funding maturity, but firstly, I'd just like to shout out to our funding representatives, which answers a lot of early morning WhatsApps from me, a lot of calls, and I'm always willing to help and answer my questions and are without them our growth ambitions will never work.
Speaker #2: So thank you very much. And then just looking at it, 2.56 billion of net debt at the average cost of 8.54%. 56% is edged at 8.77% for 25 months.
Speaker #2: And maybe just to touch on that. So as Quentin mentioned, our strategic band for fixed debt is between 65 and 75%. Currently, we are operating below that, but that is not because any of our fixed debt expired in the period.
Speaker #2: That's purely because of the new acquisitions just before period end of sometime precinct, the Watergate, taking on new variable debt that artificially lower that point in time.
Speaker #2: As Quentin also said, the current volatile market, thanks to a very strange orange man, doesn't allow us to fix debt at this point in time.
Speaker #2: The fixed debt is far above the variable debt at this point in time. And we do not want to enter into swaps and hedges for a long period of time without having certainty where the market is going.
Speaker #2: So because we have optionality on the balance sheet, we have cash availability, we actually want to make sure we buy that time towards the year end before we just blatantly fix debt to get back into that strategic band.
Speaker #2: So we will buy that time and option and giving having an ICR of 6.31, we have capacity to absorb some increases, which we have.
Speaker #2: And just to put it to everyone again, we did prudently forecast two interest rate hikes in our budget, which we disclosed in May. So the two numbers that came out now was kind of already in our budget.
Speaker #2: So anything after this, we will have to absorb, but that's why we're able to grow to this rate because we did expect that we would have two rates hikes in this period.
Speaker #2: Then just again, the two bars on your right-hand side, the middle and the right, just to explain again, we have variable debt and we use fixed debt to overlay over that variable debt.
Speaker #2: So 2.56 of variable debt is overlaid by 1.43 billion of fixed debt. And again, as shareholders have requested in the last roadshow, we have included all the expiry buckets together with the average enforced rates that we pay for each expiry profile.
Speaker #2: You will note that there is no upcoming debt for renewal in the next 12 months, both on variable and fixed. So we have a robust maturity profile.
Speaker #2: We refinance 750 million as a debt in the period. And four-year terms at 40 bucks cheaper than we previously were paying on three month Jaibar debt, which is now all converted to Zironia debt.
Speaker #2: It's all new debt has to be now done on Zironia. Then just looking, this is again just our covenant ratios, which we are far in the margin of safety in terms of our debt covenants and our ICR covenants.
Speaker #2: And just a table of showing the actual expiry profiles on our debt. And the only one that has not improved due to the reason I just explained is the fixed expiry profile, which just naturally decreased by six months from the prior year end to now, which was on purpose as we're monitoring it before we enter into new strategic.
Speaker #2: But there's nothing expiring in the next 12 months, which you have to be concerned about. Now, this is a new slide, which we want to give to the market just to show some more granular detail on our cost to income ratios.
Speaker #2: Total cost to income 45.81, admin cost to income of 7.27%, and a net cost to total cost to income of 23.92. But maybe just to touch on the admin cost because we know the question will come.
Speaker #2: As we explained to the market, we've been aggressively growing the business in terms of acquisitions. And this is the result. In the past eight months, we've employed 17 additional staff members.
Speaker #2: To run the portfolio, and this was done for a particular reason as we never want to take turns of an asset and don't have the right manpower to actually operate those assets and financially manage those assets.
Speaker #2: And that's the reason why sometime in Watergate, transferred five days before the August period ended, as of yesterday morning, all billings went out for those assets, including utilities went out.
Speaker #2: So we have no delay in the recovery, no delay in any of those charges, meaning the dividends flow quicker to the shareholders. And that's exactly the reason why we do that.
Speaker #2: We bring the staff in early, they get trained on our process and procedures, and they are those assets can be implemented as quickly as it possibly can.
Speaker #2: In the fullness of time, our modeling shows that number will reduce below a prior year number of 6.8%. I have the revenue of those new assets come into play.
Speaker #2: For the portfolio. So we have no concern that it is artificially high at this point in time. Then the table on the right is just a bit more granular detail.
Speaker #2: Now, just to disclose, the net cost to income you see in that table is including your solar recoveries. You will note, for example, on the industrial having a net cost to income of 3% just shows you how large the actual solar usage on the industrials are.
Speaker #2: After you've taken that into account in the recovery, you're almost going into a zero cost basis. But obviously, that is not a true reflection.
Speaker #2: You look at your gross cost to income to operate that portfolio, and where your costs are. And we are looking at ways as Quentin discussed, we are looking at ways to start in the future passing solar benefits to our tenants.
Speaker #2: Because the cost of occupancies are increasing, we are fully aware of that. And we want to find mechanisms which we can keep tenants in our business by sharing them and because ESCOM keeps increasing rates that have kept them keeps increasing rates, and we have the capacity to starting to build up to pass these savings to our tenants.
Speaker #2: So we are working on mechanisms to do that. And we want to show the market all of these cost to incomes. But further to that, I just want to give a massive congratulations to operations team led by Cliff.
Speaker #2: Just look at the actual stagnant nature of the total gross cost to income ratios. Given that we're where we are and the inflationary measures we are, these numbers did not increase by inflation.
Speaker #2: That is due to hard work on the repairs and maintenance, compliance work, reducing the insurance costs, capital expenditures, reducing repairs and maintenance. So the money we generate is free cash flow.
Speaker #2: It's put back into the portfolio. All of this is stepping stones to what is to come. So like I said, I speak fast, but dividends grow quicker.
Speaker #2: Okay, then just lastly, looking at our solar, we obviously talk a lot about our solar and there's a lot more to come the way this is coming from other than solar.
Speaker #2: We are working on wheeling. We are working on carbon credits, REC certificates. We're working on a variety of reasons to sell our roofs to after IPPs.
Speaker #2: There's a lot of discussions ongoing with first of all, we want to make sure any agreement we enter is right for our business because they're going to use our properties to do it.
Speaker #2: We want to make sure the terms of beneficial to spear and our shareholders. But 29 properties of solar, 24 owned, five roof rental, of which three is donate your roofs, which we donate the money to variable charities.
Speaker #2: 20.13 penetration rate with industrial and retail being the star performers. And then we have a grand target of 30% penetration at the end of the year.
Speaker #2: During the interim period, just over 19 million of revenue generated from solar. And we forecast it will range between 42 and 45 million by year end on the solar revenue.
Speaker #2: A NOI of currently of 16.28 million, and we had estimated that will range between 33 and 35 million at the fullness of this financial year, just showing the value of what solar is adding as a POS itself generation.
Speaker #2: That's before overlaying any other green measures we're implementing in our portfolio. And that is me all done for today.
Speaker #1: Good morning, everyone. Thank you for joining us. I might sound very slow after Christian, but I'm going to try and speed up. So as always, I'll take you through our capital allocation decisions and our valuation our property valuation performance.
Speaker #1: But before I get into the presentation, just a brief comments on our investment strategy and the markets in which we are currently operating. In line with our investment strategy, we continue to target industrial and convenience retail assets together with quality offices in established nodes in the Western Cape.
Speaker #1: Essentially, we are looking for durable rental income and opportunities to grow the value of these assets over time through active asset management initiatives. But it's no secret that institutional quality properties in the Western Cape remain scarce.
Speaker #1: Unfortunately, competition for these assets are strong and sellers are often using bidding processes in order to obtain the maximum price. And that is where our industry relationships become so important in order for us to source quality acquisitions at prices that deliver attractive returns to our shareholders.
Speaker #1: That said, despite this challenging ongoing environment in the Western Cape, we are very proud of our I say there are two acquisitions, but as Quentin mentioned, they're four because the one property has three office buildings on.
Speaker #1: But we're very proud of these quality acquisitions that have taken place over the last period with a combined value of 1.4 billion rand and a GLA of just over 48,000 square meters.
Speaker #1: So let's get straight into those acquisitions. So the first one is we took transfer of the Sunland Precinct in Tiger Valley on the 26th of August.
Speaker #1: At 960 million rand, this is Spear's single largest transaction to date. It adds approximately 28 and a half thousand square meters of prime commercial space to our portfolio.
Speaker #1: The properties are located in the very popular decentralized node of Tiger Valley. They fully occupied by blue chip tenants, which are primarily being from the Sunland Santam Group entities.
Speaker #1: The initial yield attributable to shareholders is 9.67% with an enforce escalation of 6 and a half percent. The lease expiry profile, it's relatively short at 2.4 years, but we factored this into our underwriting and early engagement with our occupiers remains a priority.
Speaker #1: We also assessing the opportunity to introduce solar infrastructure at these assets, which will increase the operational efficiencies of the buildings and also as we've seen across our portfolio add additional revenue streams to the assets.
Speaker #1: And then we have Watergate Center, Mitchell's Plain, Watergate transferred the very following day on the 27th of August. So as you can imagine, it was a very exciting but busy week for us at Spear.
Speaker #1: It transferred for 442 million rand at an initial yield of 8.37%. Watergate adds just under 20,000 square meters of very neat convenience retail it is anchored by an exceptionally high performing shop right grocer and a standalone bright hardware.
Speaker #1: National tenants make up for approximately 77% of the tenancy. The center continues to trade very well particularly amongst the anchors and the food tenants.
Speaker #1: Our focus now is on integrating Watergate into our portfolio to build relationships with our tenants and strengthen the income and lease profile over time.
Speaker #1: As you can hear, we are very proud of these two acquisitions. Alongside these acquisitions, we've continued to recycle capital. From properties where we can realize value.
Speaker #1: In July, we completed the sale of Hamilton and Cioppini House, which are two commercial assets located in the Vatican, we sold them for a combined purchase sales price of 108 million rand at a very sharp yield of 7 and a half percent.
Speaker #1: Now, this is approximately 27 million rand or a very healthy 33% above our acquisition cost, which was just over two years ago. Here we saw the opportunity to realize the property's residential redevelopment potential and recycle this capital into our investment pipeline.
Speaker #1: Turning to our developments, we currently have two projects under development, industrial projects. At Spear, our industrial portfolio remains our strongest performing sector. And this performance supports our decision to invest further into industrial development.
Speaker #1: So firstly, we have GTX Park in George. Construction commenced in May. On the first phase, which is a five and a half thousand square meter light industrial building, which has been designed for multi-tenanted occupation.
Speaker #1: Around 1,000 square meters has already been pre-let at rentals in line with our feasibilities. And securing tenants for the remainder of the space remains our priority.
Speaker #1: The wider site can accommodate up to 30,000 square meters of light industrial space. The first phase represents an investment opportunity of 56 million rand.
Speaker #1: The 300 million rand that you are seeing on the slide reflects the wider development potential of the entire site. And then at Bravo Park, as Quentin mentioned, we are building a purposeful purpose-built distribution facility for the very well-known and successful Mambo's storage and home, covering approximately 7,150 square meters.
Speaker #1: This development is backed by a 10-year lease with a capital cost of 89 million rand and a target yield of 8.6%. Construction is currently underway with completion scheduled for August 2027.
Speaker #1: And then moving on to our future developments. We were the successful bidder for the city of Cape Town vacant land, which is located at 55 Century Boulevard and this is alongside our existing Century City Holdings, next to our new head office, which is number one waterhouse place, and number two estuaries on the northern portion.
Speaker #1: The purchase consideration including commission is approximately 53 million rand. With 25,000 square meters of available developer bulk, this works out to just shy of 2,100 rand a square meter.
Speaker #1: We consider this a very competitive entry price for commercially zoned land in this location and as Quentin mentioned, it is one of the last available sites in Century City for commercial development.
Speaker #1: This site also provides a very unique opportunity for Spear in that we can link our Century City existing holdings into a precinct. Transfer is expected next month in November.
Speaker #1: And then moving on, we have the Anchorage in Pardon Island. The site development plan is approved and as many of you know, our rights are fully entrenched.
Speaker #1: We are currently refining the design as you can see from the new renders and we rigorously testing the feasibility before finalizing the commercial structure the funding and the delivery approach.
Speaker #1: The existing properties currently continue to generate income while we undertake this process. The slide as a reminder just sets out a development parameters which is we can build up to 52,000 square meters of mixed use space.
Speaker #1: We estimate the cost to be around 1.65 billion rand and our target yield is 9 and a half percent. For both of these developments, we will only move forward when demand, feasibility, and return support our capital commitment.
Speaker #1: And finally, turning to our property valuations, the presentation shows the portfolio valuation increased to approximately or by approximately 260 million rand, which is a very healthy 3.81% for a six-month period from February.
Speaker #1: Industrial and retail led this valuation growth as well as selected office assets they made a meaningful contribution to this growth. Approximately two-thirds of the portfolio was valued internally while the remainder was valued by external party Mills Fitchet and this is by number but interestingly the third valued externally makes up 66% of the value.
Speaker #1: Our valuation approach as always it remains consistent and property specific where we relook at the location, what's happening in that area, quality of the building, the income the lease expiry profile and of course the covenants which change from time to time.
Speaker #1: The detailed valuation assumptions are on the slide and there's further information in our financial booklet but if at any point anyone would like to discuss a valuation sectors or specific assets with me, please feel free to do so.
Speaker #1: And then to close, our focus remains on putting our capital to work. Where it will strengthen our portfolio and grow sustainable income. We'll continue to pursue opportunities in the western Cape exclusively but always remaining disciplined on price, risk, and returns.
Speaker #1: Our goal is to continue to build a portfolio that remains relevant to our tenants and serves our tenants well. Performs through market cycles and delivers sustainable growth to our shareholders.
Speaker #1: Thank you very much. I will now hand back to Quentin. Who will provide you with our outlook and guidance.
Speaker #3: Thank you. Thank you very much, Kim and Christian, for your contribution today. Right, moving on to the outlook. Spear certainly does enter the second half of FY2027 from a position of strength.
Speaker #3: We have all intentionality to lean into this momentum and to ensure that we finish off FY2027 in a very similar trend as which we ended off the first half of the year.
Speaker #3: Just having a look ahead, you know, we set out seven pillars as to what will be the kind of focus areas you know for the balance of the year.
Speaker #3: And that certainly is to deliver on the upgraded guidance. That's through you know driving letting managing costs ensuring that we get the top line revenue growth that we require and also execution on the general operating strategy of the business.
Speaker #3: We also intend on building on the operational and financial performance for the year as we continue to stabilize these core new acquisitions that we've done in the past in this half year into the portfolio.
Speaker #3: And that'll always be supported by our active asset management approach. You know, property, people, and kind of being close to your to our assets is always a key lever for us to generate that additional growth and continue the momentum.
Speaker #3: We'll continue to leverage the Western Cape growth story. The positive effects of SEMigration, the infrastructure investment, and the general business investment that's going into the region is what creates demand for the type of products that we own which again then drives nodal development in other parts of Cape Town whether it's the Cape Metro, whether it's Drakenstein, whether it's the Southern Cape.
Speaker #3: We'll continue to lean into that into that quite positively. And we'll we'll continue to accelerate the organic growth within the portfolio. We'll look at where other developments or value add opportunities similar to George and Blackheath are within the portfolio because they're all quite a few and we'll kind of we can get into those on the one-on-one discussions.
Speaker #3: And also to grow the portfolio in a sustainable manner. Sticking to our investment strategy, making sure we're making we allocating capital to the right type of assets, spending money on the assets that are going to generate the the higher returns for us and also maybe exiting assets that no longer fit the portfolio.
Speaker #3: And also to maintain disciplined financial stewardship, make sure that we can manage our cost of finance, make sure that we manage our the impact we make into our ESG strategy and also to to get towards that 20 megawatt strategy that we have within our PV portfolio.
Speaker #3: And then also to ensure that we continue to strengthen our own capital markets position. We've built we've been built on credible predictable and sustainable results to our shareholders and we're thanks to the JSC that's been a very kind of engaging regulator in the sense in the environment that we operate in.
Speaker #3: We'll continue to kind of ensure that we can stay top of mind not just to our shareholders but also to the general market market as a whole.
Speaker #3: Then as already you know that's the thing about a 10 past 7 sense announcement in the morning. It kind of takes all the all the bang out of the last slide but you know just given the strong operational performance during the half year we have exceeded that initial guidance to print around 8.02% growth.
Speaker #3: Based upon all the information we have available at this point in time plus the stabilization of the new acquisitions together with some additional kind of tailwinds coming through into the portfolio we are confident to upgrade the guidance to 9% to 11% growth compared to FY2026.
Speaker #3: But like most things in life they come with qualifications. So please familiarize yourself with these qualifications they're on to onerous but in reality you know things do happen.
Speaker #3: So that these are the qualifications you know no load shedding the vacant space the clients in accordance with our forecast. Renewals are done and completed in line with our forecast.
Speaker #3: We don't have any major tenant failures and rest assured that we don't expect any at this point in time. Monetary policy shifts are absorbed appropriately.
Speaker #3: Within what we've kind of allowed for. And that there's no civil unrest across South Africa and I think that talks to not just our performance but just generally you know South Africans we want peace peace to reign.
Speaker #3: So that really brings us to the end of our presentation. Thank you very much for joining us today. We are going to have just a few minutes of quick Q&A.
Speaker #3: Some questions may have come through online. If they have we'll chat we'll quickly deal with those questions. And then we'll just have a roving mic if anybody else has questions.
Speaker #3: So Christian oh thank you very much.
Speaker #2: You want to do these first?
Speaker #3: Yep. Let's go for it.
Speaker #2: Let me just go through them. Alistair Anderson from Property Flash. Will your payout ratio change soon? I will quickly answer that one. You can read the next one as well just to familiarize our.
Speaker #2: So at the point in time no 95% will stay where it is. Just a bit of context to that. It is quite a robust discussion.
Speaker #2: Every board meeting and the reason for it being we still have about 75 million round of planned capital expenditure we want to put back into our portfolio of our leveraging our balance sheet further to debt.
Speaker #2: So we believe as Quentin mentioned using free cash flow to do that we will continue doing that as we have continued to have roof replacement projects compliance works we want to do and until we've completed those works the payout ratio and those retained money will be utilized to do that without going more into the debt market for that reason.
Speaker #3: Okay. Does Spear have a growth target? I think it's you know target maybe is not the right word. We have a a strategic growth objective to become a meaningful midcap.
Speaker #3: What does that what does that mean? That means assets under ownership of around 15 billion rand. Market cap of 9 10 billion rand. And what it allows us is it allows us sufficient scale for all those big allocators of capital to to see kind of a business of substance.
Speaker #3: But what it also does is allows us to be entrepreneurial. We don't want to we we have no ambitions to become a 25 30 billion rand fund.
Speaker #3: Becomes very difficult to move the needle. Now we can look inward into the portfolio and say well that isn't working exactly how we thought it would work.
Speaker #3: Let's change a bit here. Let's sell one or two assets. Let's deleverage here or do we can be very entrepreneurial with a 15 billion rand portfolio and actually create the opportunity to move the needle so that really is the kind of what was the other quick was another question that really is Alistair the the kind of longer term strategy for the business.
Speaker #2: Yeah the question which might require a whiskey. Could Spear list a separate specialized Cape business which invest in one property type one day?
Speaker #3: No I think we're pretty clear on our strategy. And the reality is that you know anything looks like an opportunity if you don't have a strategy.
Speaker #3: So for us you know our strategy is Western Cape which is the specialization. And the diversification from that specialization is across asset type. And that really will be the kind of composition of the portfolio going forward.
Speaker #2: Okay then Capano from Multi Capital sending a few so I'll just go one by one. Looking forward over the 12 to 24 months how sustainable is the pipeline of deals without moving down the risk curve of sacrificing asset quality given Spear's current rating slash WACC and the Western Cape market pricing?
Speaker #3: Yeah so I think you know if I look at just to we just happen to do the calculation yesterday we've looked at over 6 billion rand worth of opportunities already this year.
Speaker #3: We've executed against 1.4 billion rand of those opportunities. So so there are sufficient market opportunities out there but not all of them meet our investment criteria.
Speaker #3: So we don't see a necessary see a shortage of market opportunities. So and and that also means that we don't have to start sacrificing you know quality for for scale.
Speaker #3: You know we've always maintained that you know we'd like to be five miles deep and one mile wide there's no need for us to start changing that just for the size you know because as I mentioned earlier there's no ambition to to kind of just become some behemoth.
Speaker #2: Any guess Capano furthermore if market deals converge with your WACC on new deals will management permit more towards brownfield redevelopments within the existing portfolio rather than external acquisitions?
Speaker #3: So actually you know if you it's actually we've got a four pronged kind of investment strategy in terms of growing the portfolio. One is obviously being acquisitive.
Speaker #3: The other is obviously unlocking value on embedded bulk within the portfolio. And the other is an area that we've been extremely successful in over the years is the brownfield redevelopment.
Speaker #3: I just use Bravo Park as an example. We've we've we've spent probably 200 million rand redeveloping that property you know from what it was when we acquired the property.
Speaker #3: We've put in three major tenants that one manufactures boats, one manufactures furniture, one distributes furniture, one distributes liquor. So now we've got a property that used to be multi-tenanted that had kind of asbestos roof and we redeveloped it from a brownfield type of asset that effectively had a passing rental of around 27 rand a square meter which now is a passing rental of about 67 rand a square meter.
Speaker #3: So so we we constantly looking and it's a multi-pronged approach.
Speaker #2: And then finally from Capano is there vacancy in office concentrated in specific secondary properties or older nodes?
Speaker #3: So the vacancy that was reflected there was specifically concentrated in Northgate at that point in time. That's now been mitigated where you'll see Northgate has gone from a call it an 80% occupancy rate to over 90% given that 3,200 square meters having been let.
Speaker #3: But for the most part it's it's kind of spread between Cape Town CBD we've got extremely low vacancies in the northern suburbs and in the southern suburbs.
Speaker #3: So it's pretty much Cape Town CBD and Northgate Century City we basically 100% let.
Speaker #2: And a question from Peter Comberge from ION Group. Will Spear consider a local DMT and bond program to diversify his funding sources? Yes 100%.
Speaker #2: It is on the plans to start the actual rating process in the next financial year. It is quite expensive and long process to undertake.
Speaker #2: So we are busy talking to various companies to which is the best to use for that rating. And we have a strategy which we want to deploy but we don't we won't run hastily into it as we it is expensive program to run.
Speaker #2: There's a lot of additional staff you require to run the programs and the amount of those programs. But yes it is fully on the cards in the next 12 to 24 months to to kick off that process.
Speaker #3: Okay so. Okay any questions from anybody in the audience? Francois?
Speaker #4: As Francois from Anchor Stock Brokers. Yeah just your guidance and the the how much reduction in vacancy levels have you factored in? Think you you said that you do expect it and you've you've explained that the vacancies a lot of it's because of planned roof work for example.
Speaker #4: So maybe just that. And then you've now owned two new properties for two months. Maybe just a bit of detail in terms of what you found under the surface since you've been there.
Speaker #2: Money.
Speaker #4: Yeah. Maybe specifically also Watergate Centre. I see the average rent is about 156 rand per square meter. It's a fairly short lease expiry duration left there.
Speaker #4: Where do you think that can go to? And then just obviously the other acquisitions you've done over the last year. You've you've owned them for a while now.
Speaker #4: How's the rent and vacancies and experience panning out relative to yeah especially the the yields that you acquired them at?
Speaker #3: Okay so let's start there. Let's start with what came in in 2026. The main ask Consani and Berg River all those properties are actually performing slightly ahead of what we forecasted.
Speaker #3: Some of the properties like Maynard Mall as an example we've had real success in renewal of leases. We've seen more retailers actually approaching us asking us for for more space.
Speaker #3: We've had new retailers specifically in the call it furniture space ask us for presence in Maynard as an example. So it's been really fantastic.
Speaker #3: We've we had a capital allocation of capex for the centre we've been busy replacing some lifts at the moment which is all part of our kind of acquisition costs.
Speaker #3: So performing exceptionally well. We've just expanded the PV solar system at Maynard. Just given the fact that there was a little bit of upside that wasn't yet leveraged by the previous owners from that perspective.
Speaker #3: But operating at almost 100% occupancy probably 99% occupancy. Consani also trading exceptionally well. We actually have about a seven and a half thousand square meter development opportunity we're looking at on a portion of land that's currently utilized for trailer parking.
Speaker #3: So there's some nice uplift from a development organic kind of development coming soon. What's great about Consani also it's got a very high power supply coming into the park.
Speaker #3: So also part of our capital expenditure if you go look at the even the feedback we get some of our shareholders there's capital has been allocated towards some civil's upgrade once we do that expansion of that warehouse.
Speaker #3: There's some roof replacement that we've got planned so we can overlay solar onto that property. But very sticky kind of type of tenant base because of the kind of heavy industrial kind of power demand nature of the tenants.
Speaker #3: And Berg River also going exceptionally well button up is our anchor tenant so if you can't do lactose please check out the products they're really fantastic.
Speaker #3: They make a Damian nut vanilla flavoured milk alternative is fantastic. They've expanded even further into the park. They have obviously sold their majority stake of the business which was owned by Pepsi to PSG and that has injected probably another 40 50 million rand worth of capital into that business and they've now also expanded into white label goods.
Speaker #3: For shop rights so they do the simple truth brand for shop right checkers which obviously just adds additional line to their to their product mix.
Speaker #3: And also currently we have zero vacancies on that property. Really if we could if we could buy another one of these types of properties in in Paul or Cape Town we would do it.
Speaker #3: We buy five of them tomorrow. So it really is doing exceptionally well. The rental growth is going to be strong. I mean it's average rental of 57 rand a square meter in the multi-tenanted park like this is is in my view slightly under rented and we can see kind of long-term income growth coming there.
Speaker #3: Then in terms of the Santam precinct so as you saw 2.4 months weighted unexpired lease term we've already agreed terms on about 10,000 square meters of renewals at between Santam Sunlum and Glacier.
Speaker #3: So that is concluded and it actually came in slightly ahead of our budget. That'll kick in in December. So that actually that 2.4 years is actually slightly longer now closer to three three and a half years that's kind of been pushed out on that front.
Speaker #3: So that's there's no kind of no surprises that have come from there. Then Watergate interestingly enough you know when the sense announcement went out for the acquisition we got a call from Diskem who was and Food Lovers to say that they're looking for presence in Mitchell's plan.
Speaker #3: So that tells us that there's a great opportunity for us to create some additional you know kind of revenue unlock on that particular property.
Speaker #3: There's a little bit of a reshuffling of the tenant mix that we're looking at at the moment. Some of the retail space towards the Bright's Hardware is currently not pure retail.
Speaker #3: So we're looking to move them out of the retail spaces and try and integrate some of that into actual pure retail which should give us a nice rental uplift.
Speaker #3: And also you've got a two-year weighted unexpired lease term there. It's purely because the centre has kind of was developed and and all the leases from the development are now moving towards their kind of final period.
Speaker #3: And we've already engaged with probably the the lion's share from the KFCs to the shop rights to the Bright's regarding renewals. The trading densities are extremely strong.
Speaker #3: I mean the the the shop rights trading at almost 7,000 rand a square meter which we think is really fantastic. So doing exceptionally well.
Speaker #3: The BRT infrastructure that the city's just built at the entrance to Mitchell's plan is right outside of Watergate. And that's going to just also continue to drive feet coming through through the centre.
Speaker #3: So all in all positive. Then just a question on vacancy assumptions or vacancy letup that you had. So what we do is we we don't forecast income on vacant space.
Speaker #3: It's just it's a it's a bit of a guardrail you know to ensure that any shocks that may come that we don't expect tenant fails or whatever the case may be we can kind of absorb it as a bit of a shock absorber.
Speaker #3: So within that 9 to 11% growth we haven't factored in a major letup as an example of a particular vacancy other than what we've disclosed.
Speaker #3: Obviously the 3,200 square meters.
Speaker #1: Yeah. Maybe it's more going to detail on that. So the budget set for the full financial year was on an average vacancy of 3.2% across the portfolio which we've maintained now at the interim period but also we've overlaid the new acquisitions to that.
Speaker #1: The new debt funding rate we've achieved on 750 million of renewal of the refunds we did. But where we obviously at year end we were at 3%.
Speaker #1: We knew there was a couple of vacancies but operating at 3.4% now but that 0.2 is more than made up for the positive reversions which we forecasted at 5 to 6% but running at almost 8%.
Speaker #1: So it's more than making up for that additional little vacancy running across the portfolio as well as the significant creeps of reduction creep cost creep.
Speaker #1: But further into this results we're actually saw a 19% decrease in our actual average rate insurance premium given all the compliance work we've done in the portfolio.
Speaker #1: And none of that that sits within our interim results. Our new rates only kick in from 1 September. So that that benefit will all flow to the end of the financial year all leading to the increased guidance of 9 to 11%.
Speaker #2: Any other questions?
Speaker #1: There is food so keep it short.
Speaker #2: Right. So if there are further questions thank you very much everyone. Please stick around join us for some drinks and some some snacks and thank you for your support and for being here today.
