Good morning to all participants, and good morning to the Hyprop team. Welcome to the Hyprop Pre-Close Operational Update for the Five Months Ended 31 May 2024. We are joined by the executive management team, Morné Wilken, Wilhelm Nauta, and Brett Till, and they'll be providing an update for the five months that have passed, or up to May. The format of the session this morning, the team will be providing a, well, they have prepared a presentation that they will be taking us through, and thereafter, we will open up the floor for Q&A. Just a note to participants, if you would like to ask a question, kindly pop the question in the Q&A section of the Teams chat.
Alternatively, you can raise your hand and you'll be provided with an opportunity to ask the question directly. I would now like to hand over to Morné for the presentation. Good morning, Morné, and over to you.
Thank you very much, Mahir, and the Absa team for hosting us this morning. Good morning to everyone, and thank you for joining us. As Mahir has said, we will be covering the operational update for January to May for South Africa. In terms of Europe and Africa, we will actually give it up to the end of April. It very much summarizes the information we have disclosed in a SENS earlier today and at the end of the presentation, as Mahir has said, we will go into some questions. If we just look at from the group's perspective, portfolio is trading very well under a tough economic environment.
After the acquisition of Table Bay Mall, our loan-to-value has increased to 40.8%. In Europe, we are amortizing around EUR 10 million of in-country debt per annum, and we also have settled a further EUR 20 million of our Euro equity debt. We secured two new corporate bonds in April at a very good margin, 120 basis points for our three-year bond and 130 basis points for our five-year bond. Although I saw an article this morning where Standard Bank believes there's going to be two rate cuts before the end of the year. We think rates could stay higher for longer and therefore we favor caps to ensure we are protected against interest rate increases with the potential to participate as rates reduce. At the moment, 85% of our group's interest rates exposure is hedged.
We have strengthened our board with the appointment of Reeza Isaacs. He also joined our audit committee. Reeza comes with a wealth of experience. He was the Chief Financial Officer at Woolworths for 10 years, and before that he was with Ernst & Young for 22 years. In terms of our South African portfolio, as I've mentioned, we took ownership of Table Bay Mall on March 28. We completed the onboarding of the property management team and the integration of their systems. Feedback from all the retailers pertaining to Table Bay Mall has been very positive. The focus for the first few months will be to complete the solar installation at Table Bay Mall, fill the current vacancy, and secure non-GLA revenue opportunities like digital screens and other marketing opportunities.
We also have given the go-ahead for the installation of generators at Table Bay Mall to secure full backup power. That's the only center that doesn't have full backup power within the South African portfolio. That will be completed in September of this year. In the medium- term, we will finalize the leasing strategy to rightsize some of the tenants and to optimize the tenant mix. We are also making good progress with the use of power purchase agreements for our solar rollout rather than using our own capital. The benefit of that is secure power at a very competitive price per kilowatt hour without the necessary CapEx spend on our side. We secured the first deal on The Glen Solar project that would have costed us about ZAR 80 million in CapEx.
In Europe, we have made good progress with the food court upgrade at City Center One West, and we have opened H&M at Skopje City Mall in March of this year. In sub-Saharan Africa, and Wilhelm will touch a little bit more on that, we've secured replacement tenants for all the space in our Ghana portfolio, which was vacated by Game. Unfortunately, the sale of the 50% of Ikeja City Mall with Actis has lapsed and will not proceed. On a positive side, we have concluded a letter of interest for the sale of the whole Africa investment, and we will provide further details in due course. Now, if we look at our operational performance for South Africa, we can see the repositioning is definitely paying off. We are looking at the 12 months trailing performance for SA portfolio measured over a 12-month period ending May.
Tenant turnover increased by 4.4% for the 12-month period. Given the better turnover of tenants on our portfolio, our effort ratio is now 8.7%. Footfall and vehicle count also have both shown positive growth. Now, if we look at, and this stat shows everything of the SA portfolio, excluding Table Bay Mall. It is for a five-month period for the last three years. As we can see, we have seen some positive growth in terms of footfall, and vehicle count has been negative for the last month. There was a slight marginal negative growth in tenant turnover and trading density for April and May. Now, looking at Table Bay Mall on its own, as we can see, there has been very good operational performance for the last five months. Tenant turnover for February was 15% up compared to February the previous year.
We've also seen good positive growth in vehicle count and footfall. We are very excited with the potential growth of this mall in the future. In terms of our leasing activity, given the improvement in tenant turnover, we've seen positive reversions on new lettings and still some negative reversions on our renewals of 1.4%. Overall, the [retail versions, rental reversions were 4.6% positive on 12.8% of the portfolio GLA. If we include the offices, the positive rent reversion was 3.7%. Retail vacancies, excluding Table Bay Mall, is 1.7%, and including Table Bay Mall, it is 1.9%. The WALE on the whole portfolio is currently three years. In looking at projects we have completed successfully, the first one was the three drive-throughs at Woodlands Boulevard. We opened a Chicken Licken, a Burger King, and a Steers. The initial return on this development was around 10%.
We also completed at Woodlands Boulevard, to increase the size of Woolworths and completed a new WCafé as well as a WCellar. To create the space for the expansion, we relocated Mugg & Bean into the mall to create more activity within the mall and to improve the food journey. The construction of The Fun Company next to Nu Metro was also completed, and this has definitely improved the entertainment offering at the Woodlands Boulevard. At Somerset Mall, we have completed, what we call Cinema Connect. It is actually the food offering that is supporting the Ster-Kinekor Cinemas. Sorry, I will just go back there. The Cinema Connect includes tenants like Milky Lane, vida e caffè, Free Bird, Simply Asia, Debonairs Pizza, Hungry Lion, as well as Burger King. At Hyde Park Corner, we have started the project on the back of a new 10-year lease with Workshop17.
Workshop17 will take occupancy of the whole north office tower block. The external façades will be upgraded, and the old steel windows will be upgraded to aluminum frame windows with performance glass. A raised deck will be built over the unsightly mall services with a landscape garden, as you can see on the artist's impression on the bottom, and that can be used by the shoppers as well as the tenants. We also will upgrade the sense of arrival to the offices via the mall, and a new tenant will reduce the office vacancy, which we have had in the office portion of Hyde Park Corner, and it will definitely add benefits to the trading of the mall. At Somerset Mall, the investment committee has approved a two-year expansion project for Somerset Mall. This will add about 5,400 sq m of new GLA.
If everyone can see now on my cursor, I am actually showing what we are going to do. We are going to cut the old Edgars store back. They are going to form the new Edgars here in the corner and be the anchor to the new development. We also will right-size Game as part of the development, and then we will actually form a new link that will actually flow through here. The old Edgars space, we will convert to a new food court section. In terms of tenancies we will bring in here, would be tenants like affordable luxury as well as at leisure stores. If you look at these artist's impressions, this one is the artist's impression of the new food court that will be situated here.
Then this is actually looking from the Game space, I mean, Edgars space, looking through the two links back to the rest of the mall. What is beneficial of this development is there won't be a lot of disturbance because you can actually build this in the back without affecting the trading of the rest of the mall. In terms of Eastern Europe, the Eastern Europe portfolio is delivering strong operational performance. The tenant turnover increased by 11.4% for the rolling 12 months until April. We have also seen growth in foot count of 3.1%, and the effort ratio has reduced over the last four years and is currently 9.3%. Vehicle count also increased by 11%. Looking at the last four months for the last three years, we see a positive growth in all key performance measures. In March 2024, we had an increase of 12.6% compared to March 2023.
Trading density also improved by 11.3%. Good positive growth in footfall as well as vehicle count. We are extremely happy with the ongoing good performance of the Eastern Europe portfolio. In terms of leasing activity on our renewals, which was 14% of our GLA, we had positive reversions of 2.7%. On new deals, we have seen positive reversions of 8.1%, although it was only on 3.3% of the portfolio GLA. Combined on the new deals and renewals, we had positive reversions of 3.7%, similar to what we had in South Africa. We had reductions in vacancies from 0.3% to 0.2%. Looking at projects, at the mall in Sofia, in Bulgaria, we installed a new slide connecting the first floor and the ground floor. The new slide is very popular for the kids as well as some adults. We also installed new digital screens to improve our non-GLA revenue streams.
At Skopje City Mall, we have completed a new ATM zone as well as new digital screens. We have improved the ambiance of the mall with new downlighters as well as some chandeliers. The mall continues to trade well, even though we have got a number of competing malls that has opened in the area. The team has also opened, as I mentioned before, a new store for H&M in March. Also at the mall in Bulgaria, what we are currently busy with is a new staircase to link the recently upgraded food court with the first-floor retail. This new staircase will also improve the access for the office users from the European Trade Center, which is adjoining the mall. At City Center One West, we almost finished with the increase in the upgrading of the food court.
Five new food operators will open in the food court and will be trading towards the end of July. I will hand over now to Wilhelm to give us an update on the operational performance of sub-Saharan Africa.
Thanks, Morné, and good morning, everybody. Trading conditions are still being impacted by the sovereign default of Ghana two years ago and the deregulation of the foreign exchange market in Nigeria last year. Fortunately, US dollars are much more readily available in Nigeria, and we have managed to convert all the rolled-up interest on the US dollar debt, and we have even reduced the capital amount of the US dollar debt. We put contingency measures in place to manage collections in Nigeria. After the initial upheaval in the currency market, during which time we offered blanket concessions, we have now moved to a model where we consider concessions on a case-by-case basis. There have been some tenant casualties in Nigeria on a small scale due to the currency collapse, but we have signed up replacement tenants for all of the vacant space.
In Ghana, we have signed leases on all the ex-Game space in Ghana. The replacement anchor tenant, Melcom, is trading at West Hills Mall already. A temporary tenant is also trading at Accra Mall but will be replaced in the second half of the year with Decathlon and Melcom, a supermarket tenant. The replacement anchor tenant at Kumasi is also Melcom, who is due to open later this year. We expect that by Christmas, all permanent anchor tenants will be trading in the ex-Game space. Turnover growth was positive in both local currency and US dollars, driven by vacancy reduction largely. Trading density declined due to a large temporary tenant that had a low trading density. This tenant is due to be replaced with two permanent anchor tenants, as I have mentioned before, for which leases have already been signed. Next slide.
Foot count increased by 8.5% as a result of the opening of Melcom at West Hills Mall and a resilient performance from the other malls in tough economic circumstances. Despite the challenging economic climate, vacancies continue to decline, which is testament to active asset management. The most significant developments relate to the disposal strategy. The sale of 50% of Ikeja City Mall to Actis has been terminated, and we have agreed terms with a different buyer for the whole portfolio of all four assets on a share-for-share basis, and I am sure there will be questions about that later. The buyer will step into our shoes with regards to debt guarantees. A non-binding letter of intent has been signed, and we are currently in a due diligence process. We are looking to sign binding legal agreements in July.
We are confident that we will soon have eliminated our in-country debt exposure to sub-Saharan Africa, and we will look to realize the equity exposure as soon as possible thereafter. Thank you. Back to Morné.
Thank you very much, Wilhelm. In closing, I will just touch on what is our key purpose and priorities for this next period. We want to focus improving our ICR and maintain our loan-to-value at around 40%. We are pursuing some recycling opportunities in South Africa, and we are making positive movement in terms of that. Nothing to disclose at this point in time. The finance team has done good work implementing the new hedging policy, and we will focus on flattening the Europe hedging profile as well as debt maturity profile. We are investigating new growth opportunities in Europe and the focus remaining countries we already have a presence. In terms of the portfolios, in South Africa, we will continue to drive the repositioning strategies, complete all the projects as I mentioned, which we are busy with.
Conclude our purchase agreements with the remaining solar installations at The Glen, Somerset Mall, as well as Canal Walk. The potential CapEx we can save on these four projects is around ZAR 350 million. We also want to install at least four days of backup portable water at all our Gauteng malls. In Eastern Europe, the focus will be to secure the rights for the expansion on the two Croatian Malls. As you would recall, we need to go through a process which they call GUP. GUP actually only opens in October this year, and this is the first time it has been open since COVID.
We are installing energy-saving initiatives at all the properties in the Eastern Europe and obviously in Africa, what we are going to drive hard is the new potential deal to sell the whole portfolio as well as completing the fit-out of the new tenants in the ex-Game space. That is all for me, and we will open the floor now for questions. I am going to stop sharing.
Thank you very much, team. A reminder to participants, if you would like to ask a question, kindly post it in the chat. Alternatively, raise your hand and you can actually ask the question directly to the team. Maybe I will just start off from my side. The announcement does not make mention of any guidance for the full- year. Can you maybe just elaborate on why it has been omitted, and whether we should be reading into that in any particular way?
Morné, I am happy to answer.
Okay, you can go, Brett.
Mahir, just before that, Morné said at the very beginning of the presentation that the LTV was 40.8%. It is actually 40.2% as it was in the presentation. Just that is one correction. We have chosen not to update the guidance. Do not read anything into it. Obviously, there is volatility in some of the African numbers still, and we felt better to just wait until we have more certainty once we have got through the financial year, and we will probably make an announcement closer to publishing the final results.
Perfect. Then maybe just another question on dividends. The decision was taken at interim to not declare dividend, and you cited, I suppose, three key factors, in terms of the uncertainty being operationally. It was Pick n Pay. It was sort of the elections. It was the uncertainty with regards to closing the Africa transaction, specifically Ikeja disposal. Can you maybe just elaborate on sort of how you think, or how you would rate that uncertainty as we stand today compared to where we were when you reported your interim results?
I think if we look at, obviously, the elections has happened and there is positive movement in terms of that, as we disclosed in our SENS. With the new transaction and if we can close it on Africa, it takes quite a lot of the risk away. In terms of the risk we saw at that point in time was the refinancing of the Ikeja City Mall debt, as well as a serviceability point of view, given you had to make some concessions and obviously you have an interest payment you have to do there. So those was the reasons. What we have communicated to the market is, when these risks have been addressed successfully, we will potentially pay out the full dividend at the end of the year, but that will be subject to our board making decision in September.
Is there anything you would like to add, Brett Till, in terms of that?
No, I think that is spot on, Morné.
Okay. Another question from my side before I get into the questions that have come through. Wilhelm, it sounds as if you are more upbeat with regards to the closing of a potential transaction, sort of across the SSA portfolio. You said that you will provide further details in due course. I am assuming there is not much more you can add with regards to the transaction. But then a follow-on question from my side is given, I suppose the indications that there may need to be an equity cure, with regards to Ikeja Mall specifically, given where the LTV is. How would the timing of this transaction impact Hyprop sort of needing to inject further equity and bringing some of that debt onto the SA balance sheet, in the interim? Any thoughts or comments on that?
Yeah. There is long answers and then there is short answer. The short answer, Mahir, is that this transaction will make that all go away.
Okay. Brief enough.
Sorry.
Then, yeah.
Can I just add to that as well? You talk about pressure on the LTV, and what is important to remember is the implied value in terms of the transaction with Actis, that $85 million, is not the value that the bank uses for purpose of calculating the LTV. They still use the independent valuation. So that transaction value reflects a very unique high-risk circumstance that we find ourselves in at the moment. It does not reflect the long-term value that the valuer ascribes to the property.
Okay. Thank you for that. There is a question from Mweishö Nene. He says: "With regards to the SSA portfolio sale, is the deal still subject to due diligence from the potential buyers?" I think the answer to that question is yes. Mweishö, I am not sure if you were going to add anything, Wilhelm.
Yes, the answer is yes, Mahir.
Okay, perfect. Then there are three questions that have come through. The first one on Pick n Pay. Pick n Pay has indicated that they would close 100 stores as part of their restructure, and that some existing stores would need to reduce their footprint by 30%-40%. How have discussions with Pick n Pay gone as it relates to the Hyprop portfolio?
We are in discussions with Pick n Pay on our whole portfolio in terms of stores. They have given us their wish list in terms of what they want to rightsize and potentially convert some of their stores to franchise stores. Obviously, we cannot disclose all the information because some of the information is sensitive. Therefore, I can just say we are in discussions with them. As soon as there is more finality, we will communicate it to the market from our side relating to our portfolio.
Thank you. There are two questions or one question or another question with two parts. The first one is: Tenant turnover appeared to slow down in April or May versus prior years in the SA portfolio. What was behind this? That is the first part of the question. The second part of the question is: Effort ratios have reduced in SA, but what has happened to retailer operating margin levels, and are they at levels which allow positive reversions to continue?
I must say we must still unpack what has happened in April and May, where the trading densities have dropped a little bit. I think it could also sometimes be what you had in the previous years in terms of when the holidays were compared to now. Sometimes that is the biggest impact of that. I think it is more exception than the norm. We actually still see our malls trading well. In terms of our malls, I do think there is scope for further positive rental reversions, as we can see. I think the renewals have been washed out, quite most of it, but you can actually see very good positive rent reversions specifically when we secure new tenants. I think it will still go on to see those positive reversions coming through.
A follow-on question from my side. Just with regards to the trading density trend, are there any insights you can provide with regards to, I would say, tenant categories or contributors to, let us say, slowing turnovers as well as trading densities as you have seen it in your portfolio?
I think the big category that is under pressure a little bit from our perspective, if I now think about the portfolio, is more the cinemas. I think the cinemas are still under pressure. But the others, I would say everyone is doing relatively all right in our portfolio.
Okay. There is a question from Kundai. If I heard correctly, you mentioned that you are looking at further acquisition opportunities in Europe. Do you think that this is prudent given the stretched LTV, the fact that you are not paying a dividend and not comfortable to issue any guidance?
As I mentioned before, we always try and recycle our assets and as we said, we are making quite a lot of progress specifically in Africa as well as South Africa. We will not go and buy new opportunities before that, but it is always trying to get your timing correct.
Maybe just to clarify on that question, Morné, how will you fund? I am assuming that when you are saying you are looking for growth opportunities, you are looking for acquisitions in Eastern Europe. I am just trying to give a sense of how you intend to fund that. Will that be disposing of assets in Eastern Europe, or is it to what you said now, using some of the potential capital that could be freed up through an Africa acquisition and then reallocate that capital to Europe?
Yeah, I think it is exactly like that, Mahir. We would recycle capital and reinvest it in new growth opportunities.
Would it be in Europe? Would you be selling European assets?
No, we won't be selling European assets.
Thanks. There's a question relating or a specific question on Somerset Mall. How much will the work on Somerset Mall cost, taking into account the moving of the food court and changes to Edgars? Will the net addition of GLA be ±5400 sq m? Given that it looks like the GLA in Edgars and elsewhere will become passageways and food court seating area. Are there other malls where you plan to change the layout in a similar way as at Somerset Mall, i.e., move the food court closer to the middle of the mall?
I think Somerset Mall has got its own challenges. When we got involved with it, obviously, the food court was sitting where we've put a new Checkers FreshX. What we did do is keep the Ster-Kinekor at its current location, and that's why we did the Cinema Connect. But the big problem with Somerset Mall has always been the fact that it's a very long mall. You walk from the one end, from Pick n Pay to the Checkers, it's about 700 meters, but it feels longer. What you want to create is actually that flow of better linkage, and that's actually why this is quite a good way to start sorting that out. So it makes the journey back actually more interesting, so you don't have to travel the same road back, passengers through the same passage direction through the mall.
We are improving that. On our other malls, we do not have any of these issues, a similar issue. I do not foresee that happening on any of our other malls.
Thanks, Morné. Francois, I trust that answers your question. There is an additional question on dividends. Before any acquisitions, despite the stated objective to recycle, would Hyprop make up on missed dividend in the first half, or make up on missed dividends first before considering further acquisitions?
I think what we will always do is do what is best for the business. As we said, as we mitigate these risks, the intention was to pay out the dividends, and the final dividend. I do not think that would have changed. What we will always do is try and do the best for the business going forward.
Thank you. Two more questions on the Africa disposal. First one, what are the reasons for Actis Ikeja transaction falling through?
The legal reasons are that they haven't fulfilled all the conditions precedent by the deadline dates set. Yes. That's the legal reasons. We took a view on how long it might still take and the likely progress. Subsequent to that, we found an alternative that is at least as good, if not better.
Is it realistic to expect another transaction transpiring, especially concerning the state of the Nigerian economy?
It's not a slam dunk, but I think it's realistic, Mahir.
Okay. As a follow-up to the potential equity injection, if the SSA sale does not take place, can you give us a ballpark figure for what the distributable earnings impact would be if the sale doesn't go ahead?
Sorry, Mahir, I don't think I'm fully understanding the question.
Yeah. The way that I interpret it is, would there be any distributable income impact associated with the transaction not occurring in SSA, meaning does debt need to be repriced, debt need to be moved from Africa to South Africa? I would assume that would be sort of the reason for a potential distributable earnings impact, negative impact.
Yeah. If you're looking forward, the biggest impact on the distributable income in the current period, 2024, from Africa has been the foreign exchange losses that have been incurred and the discounts that have been given to the tenants. Those right now with the lenders, we're in the process of refinancing that debt. The maturity date is February 2025. We've not been asked to start reducing that debt as yet, but that's not to say it won't be a requirement. I think we are all, including the lenders, optimistic that the transaction we're working on can be implemented.
Thank you. Can you provide any sense of expected timelines for the closure of the Africa disposal?
Well, let me start with the binding sale and purchase agreement. That should be done in July. We are breaking up the transaction into two components, catering for the two countries and the slightly different shareholdings we have in the Nigerian structure versus the Ghana structure. I do not want to put a very specific date on it, but it is not expected to be long and definitely in 2024.
Okay. How would this transaction not closing impact any dividend decision come year-end? Can you provide any color or thinking behind the importance of this transaction being close to closing or sort of there being more certainty around the transaction and how that would then impact your dividend decision?
I think, Mahir, I can just repeat what we have said a number of times, where our decisions will be taken in September in terms of that dividend. If these risks have been mitigated, obviously, we will pay the dividend. But if, for example, some other reason the transaction does not happen, we potentially have to reduce the in-country debt in terms of Ikeja. We will take that decision at that point in time and then make a final decision on the dividend. But I think it is a little bit premature to actually give any feedback on that at this point in time.
Okay. Brett, maybe just on some of the specifics with regards to the distributable income pool and the dividend decision. From a European perspective, I am assuming, there has not been any dividend declared from Europe, if I recall correctly. Should the dividend not be declared, you are not obliged to distribute that component, or that does not form part of your, I would say, payout required in order to sort of meet the REIT requirements, correct?
Yeah, that is correct, Mahir, because the REIT requirement is based on the income that we have in South Africa. We can base that decision only on the income here without declaring a dividend out of Europe.
Then just in terms of the leeway. Let us assume that this transaction does not close and there is still sort of uncertainty here. The required dividend that would sort of need to be made at a bare minimum would be 75% of your SA distributable income. Just simplistically speaking.
That is correct.
Okay, thanks. There is a further question on Pick n Pay. Is Pick n Pay still a material risk to the distribution of dividends, as previously stated? Any comments on that?
I think that was taken out of context. I think that was one of the reasons. That wasn't the pure reason. I think what we always said is there was major concessions we had to make in Nigeria. Obviously, that has put pressure on our ICR and therefore taking that into account and some of the risk in terms of the elections that was happening, plus the retailers, we actually made the decision. It was never a case of Pick n Pay being the reason why we haven't paid a dividend. I think it's a combination of the both. As I said, the bigger risk for us was always Nigeria, not really the Pick n Pay initiative.
Thank you. There's another question that has come through specific to Table Bay Mall. Can you discuss some of the quick wins you expect at Table Bay Mall and the impact on rental income? Can you also quantify the impact of the onboarding of the TBM property management team on costs?
Well, the cost was taken into account in our initial numbers. That won't have any impact on that. We actually took the team over, so they're now part of the Hyprop team, where they were with Zenprop before. That's what the onboarding mean, and then no systems has been changed. Obviously, the solar will have a definite impact of benefits in terms of electricity benefits coming through. We haven't paid for that. The solar was always bought at cost, so there is a big positive turn on that. What we also want to do is have full backup power. There is some leases that is pure turnover deals historically. So if you can trade the whole time, obviously that will have a positive impact on rental income because it's pure turnover deals.
Although we haven't had any load shedding for quite a period, but we always cater for that. The other things they haven't catered on is, they've got a lot of digital screens in the mall, and they haven't been using that for advertising. So we will definitely be doing that, and that will bring in some income. Then we want to bring in filling the vacancy. So overall, we do think there is upside to come. I can't quantify that number. Obviously, we know what it is, but that's not in the market freely available. Thanks.
Thank you. Maybe just touching briefly on funding costs. Brett, you had a ZAR cost of funding of 8.9% at your first half and 5% Euro cost of funding. Can you maybe give a sense of where the funding rates are at this point?
Yeah. Just with the expiry of some of the old historic hedges that were done during the COVID days when the base rates were relatively low, the rand funding cost has crept up a little bit over the last couple of months. The Euro cost consequently has started to reduce, given the cuts of interest rates that came through there, as well as just managing the margin and renegotiating where we can with the banks. The funding cost in Africa hasn't changed at all since the December reporting period. In terms of our hedging, we've done quite a lot of hedging using caps, and even some collars in the last couple of months so that we will participate when rates start coming down. But we've got good protection in terms of a blowout, and that was a concern running up to the elections.
We've also maintained the duration of our interest rate hedges and actually extended that further than what we had in December when we reported.
Okay. Do you mind providing more detail on the Euro funding costs? You had, what was it, 15% floating, or you have 15% floating, 85% hedged, and now you've had a 25 basis points reduction. What does that impact from your overall funding cost perspective compared to where it was at interim?
You are looking at sort of probably less than 0.1% at the moment. In terms of where that rate has come down, it is not significant. Remember, too, that the rate cut was actually fairly recent. Still to wind its way into the system.
Okay. There is a question on load shedding. Can you discuss the impact of the reduced load shedding in recent months? I suppose a cost saving associated with reduced load shedding.
Yeah, Mahir. I think everybody's very glad there's no load shedding for all the reasons. Load shedding, we supplement the cost of load shedding. It costs us to run our generators, whereas we make money when we get the electricity from Eskom. It is a very positive effect on the overall result.
Can you be any more specific in terms of the.
I can't give you a quantum or a number to say this is what the benefit has been over the last couple of months.
Perfect.
Mahir, just philosophically the big winner is the tenant. But, if our tenant win, we will win eventually.
Yeah. Just a question on CapEx. Morné, I am not sure if I sort of got that correctly. Did you say the expected spend is ZAR 300 million on the projects that you have listed?
No, that is not what I said. I said there is a potential saving if we can do this solar through ourselves of ZAR 350 million.
Okay.
I didn't indicate anything on what is our CapEx spend going to be.
Okay. Can you provide an indication of the expected CapEx, based on the projects that are in process at this point? How much needs to be spent, how much has been spent, and I suppose the expected yield on that CapEx, where applicable.
Mahir, I don't want to give a number that could be quite variable depending on how many projects actually get finished during June. There was a lot more CapEx spend up to the end of May, compared to where we were at the half year. Certainly, we're not going to achieve the full budget number that we set out at the beginning of the year of ZAR 500 million for the SA portfolio, plus the additional projects that we added on top of that.
Okay. Is that a timing issue, or is that sort of caution from a balance sheet perspective?
I think most of it is. Sorry, it's probably a combination of two. In terms of the completion, we will accrue what is legitimately accruable at the end of this financial year based on progress on individual projects. Some of it is caution. There are some projects that we haven't approved because we just want to be a little bit prudent.
Then just specifically on the possible water provision that you'd like to have, particularly in Gauteng. How material is the spend required to achieve your objective in this regard?
It's not such a big number. Talking anything from ZAR 20 million -ZAR 25 million almost.
Okay. Perfect. Thanks. There is another question that has come through. What is the expected yield on the Workshop17 development at Hyde Park?
I do not know if we have disclosed that number. I cannot recall now, but it is not in the SENS. I think if we did disclose it would have been in the interims.
But I do not have that number with me at this point in time.
Morné, 12% is the yield we disclosed at the interim results.
Oh.
Okay. Thank you. Question on ICR. There has been a contraction in ICR. I suppose, given what is happening on the funding cost side, can you give an indication of where the ICRs would likely settle at year-end?
Mahir, sorry. Just give me one second. I am just looking for a piece of information. I think if you, at the interim stage, we disclosed the ICR as 2.3 x covered. We do not expect it to be any worse than that when we get to year-end. Obviously, a lot depends on the volatility of the earnings coming out of sub-Saharan Africa.
Okay. Thank you. Recycling opportunities. Are there any opportunities within your, we have spoken about Africa, but within the South African portfolio. Morné, you often make the point that all of your assets are up for sale at the right price. But are there any, is there interest in sort of buying or interested parties in your assets at this point?
Yeah, there is interest. We are making quite good progress. But I cannot give you more than that, Mahir.
That is quite vague.
To answer your question, in South Africa, in terms of our South African portfolio, there are discussions on some of the assets. We have not. Obviously, it is sensitive issues in terms of is the deal going to happen, and then you also have sensitivity around the impact on people if you do dispose. Therefore, until there is more clarity and finality in terms of the transactions. As and when. Similarly, I think it is easier on Africa because the intention was to sell the portfolio, and we have entered in an LOI, and we can freely disclose it. In terms of SSA portfolio, there is stuff we are looking at. At this point in time, until there is binding offers, I do not want to disclose anything at this point in time.
And just given the ticket size of your assets, would it be disposal of parts of assets, or are you looking at are the discussions trending towards outright acquisitions of standalone assets?
It is actually a combination, Mahir. Some with outright sales and there is potential under divided sales.
Okay. And what would that capital be earmarked for? Let us assume they are successful transactions. Would the sort of capital allocation decision be to reduce debt, or would it be to pursue growth opportunities, perhaps offshore, as you have indicated?
I think immediately we will reduce debt. It will be enhancing in terms just to reduce your debt. The other options we will look is if we find the right growth opportunities in Europe, we will do that. Then obviously buying back shares is also an option, which we will definitely consider given the discount in there from trading it, so that could be quite attractive. So I think between those three is more or less where we would go. But step one would definitely be reduce debt and keep our powder dry for when we find something or buy back shares.
Okay. Perfect. Thank you. Brett , I am just looking at the sort of debt mix from South Africa or from a European or the European exposure in particular. Just to clarify, you said that you have reduced, what was it, EUR 20 million of your equity debt? So I am assuming that is sitting at around EUR 90 million at present. Does that feel about right?
Yeah. That is correct.
Okay. The in-country debt, can you give us a, I mean, post amortization, I mean, where is the in-country debt balance at this point?
That will have come down EUR 10 million by the time we get to the end of June with the last installment. Sorry, just give me a second. I do not want to give you the wrong number here. It should be around about EUR 330 million. In total. Take off the EUR 90 million for the in-country, and then you are at about EUR 240 million. Sorry, take out the EUR 90 million for the equity debt, and you are at EUR 240 million for the in-country debt.
Okay. Perfect. Just a further question on dividends. I mean, how much, let us say, fat do you have there from a tax perspective? Let us say you would prefer, or the Board decides that the preference is sort of holding onto more capital. How much of a tax buffer do you have there to manage the potential tax leakage that could result in paying down less than, I would say, 100% from an SA perspective?
Mahir, if you look, I mean, we don't have a big assessed loss brought forward from previous years that one could use to shield. Let's say we decided we were going to declare 75% of the SA income only. We don't have a tax loss that could cover that. Our tax losses available are in the region of ZAR 30 million, I think is the number from last year. That's probably the short answer to the question.
Okay. I've pretty much gone through most of the questions from my side. I'm not sure if there's anybody else online who would maybe like to ask a final question before we hand over to the Hyprop team. If you'd like to ask a question, you can pop it in the chat or raise your hand. If not, then maybe I'll hand back to Morné with a few or perhaps a closing remark before we close off.
No, thank you very much, Mahir, and thanks for everyone's time. I must say, we're quite excited. I think if we could implement a transaction on our Africa investments, obviously, there's other benefits coming through with that as well, where a lot of time and effort is going into that, and management time can then be focused on the core business as we always want to. As we have communicated, we like to focus our energy in Eastern Europe as well as Western Cape. We are excited about some organic growth opportunities we can pursue in terms of our Cape Town portfolio. Then definitely the focus is going to find those recycling opportunities, and if we can implement them, obviously, how we reallocate that capital in the bigger group. I think it's actually quite exciting where we are at this point in time.
Obviously, there's also positive movements in terms of South Africa, but we are cautious about the infrastructure that's under pressure. So we need to spend some money to actually address those risks we see in the portfolio.
Thank you very much, Morné Wilken, and thank you, Wilhelm, and Brett as well. Given that no further questions have come through, I think we can call the meeting there. Thanks for the opportunity for allowing us to host you, and good luck with the last stretch of your financial results.
Thank you, Mahir.
Thanks. Cheers.
Thanks, everyone. Bye.
Thank you, everyone.
Bye-bye.