Grit Real Estate Income Group (LSE:GR1T) — FY23 Results

0:01 Good morning, ladies and gentlemen, and welcome to the GRIT REAL ESTATE INCOME GROUP Full Year Results twenty twenty Results Investor Presentation. Today's recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today, we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And if you'd give that your kind attention, I'm sure the company will be most grateful. And now I'd

0:31 like to hand over to Head of Investor Relations, Darren Feenhaus. Good afternoon. Good morning. Thank you, Mark. Thank you and welcome to everybody who has joined us either in Mauritius or online. I'm going to welcome Bronwyn Knight, the group CEO, to take us through some of the key themes of the FY twenty three results presentation.

0:54 But before that, we'd like to pay you a short video. So in that meantime, can I invite Ronen up while we see this video? Thank you. Thank you, Darren, for the introduction.

2:45 And I would like just to welcome everybody. So obviously, we've got our Mauritian based audience and we've got everybody that's dialed in online. So the significance about that video and the significance about the three projects that you see in front of you today is that our concept about beyond buildings. What does that mean? So we have successfully, through our development partner, GR1T, completed three impact projects this year. We've successfully completed the American Embassy in Kenya, Roslyn Grove, the precinct that some of you have the honor of standing in today, the first five star green rated building in the Indian Ocean, and the project that you've just seen now, the Artemis Curepeep Hospital, a transformational project for the island of Mauritius for the Indian Ocean.

3:41 Why it's important that I start on that is that we have completed transformational projects this year, including the acquisition of our development company, GR. Not only have these projects been recognized from a Mauritian perspective, but they've also been recognized from an African perspective, from a global perspective and have been nominated for a huge amount of awards that attest to the success of what are we doing and why are we doing it. We are here to set the global benchmark in Africa and these assets attest to the global benchmark in Africa. Now let me take you through a journey, through the journey of the last nine years and the journey for the last twelve months and where we are going into the future.

4:38 Let me remind everybody around the GRIT 2.0 strategy. When we came to market somewhat a few months ago, we were originally nine years ago when we started a real estate business. It was bricks and mortar. What we have developed over nine years is the concept that we have gone beyond buildings. What does that mean? It means that today we have an investment platform. We have an existing property portfolio that has outperformed. We have a development company and real estate platforms from a co investment perspective. But more importantly, we've taken the ecosystem of what we've developed, we've taken the economies of scale of real estate across Africa and we have developed real estate services, which means for the first time this year you have seen a line item called other income, which is predominantly to our property management, facilities management, development management services and asset management.

5:49 The GRIT 2.0 concept, GRIT 2.0 journey has been born and that is depicted in the results and what we are going to present today.

6:02 Let me take you through the key takeaways, the key focus areas of what this business looks like. Let me remind the audience that we have navigated a huge amount of headwinds. The globe has been impacted by high interest costs. The slides that we will show you today will show you where we were historically, where we are today and where we are going into the future from an interest impact perspective. What has that meant for our business? What has that meant for GRIT?

6:40 So what's really important and one of the focal points today is that our operating assets have performed. We have seen strong operational performance. In the midst of rising interest rates, valuation pressures, our valuations have remained consistent. Our NOI, our net operating income, has grown over 5.5%. We have collected over 100% of what we have invoiced. And we have completed three significant projects through our development partner, GR1T. What has been an important theme and key semantic is around capital allocation.

7:27 What is our capital allocation strategy? What we did historically is not what we can do today and what we can do into the future and that is a very important theme today. Because what does that mean? It means that we have significantly deployed cash into two considerable items. One is a reduction of debt. We have seen a significant reduction on our loan to value and we have reduced our debt over $35,000,000 With rising interest costs, this has been absolutely critical for our bottom line. We have completed the acquisition of GR1T. Let me remind the audience why did we acquire GREA.

8:16 We acquired GREA because we wanted the growth story of Africa. We wanted the real estate growth story of Africa, which meant that we wanted access into impact assets, global tenants, tenants like the American Embassy, data centers, core centers, industrial assets. We wanted to ensure that we secure the development yields of properties, the upside. We wanted to secure our pipeline. We wanted the numbers to show the growth of African real estate. That is why we acquired GR1T. And we have put a considerable amount of capital out the door into the acquisition of GR1T, which doesn't just position the business for today, it positions the business for the future because we have control of our pipeline, we have access to our pipeline, we have access to the development yields and returns that we see across these asset classes.

9:21 When I sat in front of you twelve months ago, we had a strategy to recycle assets. Why recycle assets? Why dispose of assets? One, to demonstrate that assets carry the valuation that we have in our books today. Two, to dispose non core assets, low yielding assets and deploying that capital into either debt, high interest rates or secondly, into debt, which is obviously high interest rates and secondly, into making sure that we could complete the acquisition of GREA. These are key fundamentals. And when I go to capital strategy, what is our capital strategy?

10:09 That has been our capital strategy. So we've successfully disposed of $136,000,000 of assets close to NAV. We have focused on sustainability led growth, income to impact, sustainability that's been a key focus of ours. The balance sheet, we've reduced LTV. We have closed, as you're all aware, a significant sustainability linked financier bond at the end of last year. And the headwinds that we have faced, what have those been? Rising debt costs. Leon will take you through the slides today showing you where our interest rates are going, But we cannot deter from the fact that we are faced with rising interest costs and what does this mean.

10:59 We have to protect our balance sheet. We have to look at our hedging strategy, which Leon will take you through today. And we are significantly putting a big drive on our admin cost line. We have seen the admin cost line increase. This is driven by the fact that we have created the platform of growth into the future, which is absolutely key. So there is a big drive, which Leon will go through now. Our current admin cost line is sitting at a ratio of 2.4. We want to drive that to 1.8% into the future. This for me is a really important slide, okay. And why this is such an important slide is this is how we manage our world.

11:50 This is how we mitigate our risk. This is how we manage our real estate strategy from a returns perspective. You would have seen in 2021 interest costs were sitting at just over 5.5%. The blue line is your interest cost. Your yellow line is your NOI yield, your net operating income yield. What's important is that the interest costs have traditionally and historically tracked significantly below NOI, your property yield. What we have seen in this financial year is we have seen that gap significantly close. This means that we need to put strategies in place to understand how do we manage rising interest costs.

12:38 What we have successfully done as a management team to be able to do that and continue to do that in the next twelve, eighteen, twenty four months is, as I've mentioned, we have highlighted and identified and have disposed of low yielding assets to redeploy that capital into high yielding projects through GR1T. We are generating fee income through our development management company. There was a line item of fee income in our accounts of just over $16,000,000 this year. We will continue to generate fee income from development management, asset management, which enhances your revenue line, enhances earnings, which does not sit on this graph today. It creates a larger gap between those two items, interest costs and yield.

13:28 We will continue to reduce debt. We will continue to identify noncore assets to reduce debt. And this will be a significant component of whilst the entire globe is impacted by high interest rates by managing this particular risk. This slide is absolutely key to our fundamental strategy to mitigate rising interest costs. This is really a key slide. So what we have done and obviously what hasn't been seen before is we have considered GR1T now being merged into GRIT, the development company, which now gives us exposure across 11 African countries, 33 assets and again to the aspect of our core strategy multi geographic, multi asset class, reducing exposure to non core assets, focusing on impact assets and really looking at the structure that we are going into the future with around impact.

14:36 The fundamentals remain the same. The operations are performing considerably well. We are still collecting close on 95% of our revenue in hard currency.

14:48 You will see with the merger of GR1T into GRIT, our largest tenant today is the American Embassy. Historically, that was Beachcomo. So to give you an indication of recycling assets, disposing of non core, focusing on deploying that capital into core and having now over 10% of our revenue exposed to American embassy paper. This is an unbelievable mitigant of protection of revenue into the future.

15:24 Just really highlighting on this particular slide and just going back to the fundamentals is that on the operating assets, the bricks and mortar, we still saw revenue growth, we still saw growth in earnings, we still saw growth in the fundamentals of the property portfolio, the importance of the collections, the importance, as you are aware, that we completely control our property management, facilities management and leasing across the continent. This is all absolutely core focus in the leasing, the filling up of vacancies, the portfolio management is absolutely core for the fundamentals of the business. And if I go on to I think Darren's actually removed the vacancy slide, But just to sum up on the vacancy, so we have seen some pressure on our vacancies.

16:17 That pressure has been because we have obviously exited assets like Beachcomo, which were triple net 100% occupied. But what we have seen post year end as we have seen those office vacancies fold up. The asset management team is on the ground managing these assets every single day. So what's been really, really key is that that vacancy gets managed and is a considerable management around really around the operational performance of the portfolio, which is key.

16:50 The important slides coming up and just to reiterate to the audience, and I have really started with the significant corporate action that took place this year. We have been completing this asset acquisition and obviously the GREA acquisition of a Phase four approach. This has now been successfully closed and completed. A significant amount of capital has obviously been paid out for this particular transaction. But we have seen unbelievable performance from GR1T. One, we have seen the completion of the assets on time within budget, which has been significant. We have seen the NAV growth of these particular assets. Just to highlight to the audience that actually at year end, whilst we owned 51% of GR1T, we actually didn't consolidate GR1T.

17:41 We treated it as a JV. So what's important is that we are still in the process of closing our shareholders' agreement with our core and key investor and we should see the consolidation of in the up and coming month, which is very, very important. But we still held 51% of the asset over the financial year. So the acquisition of GREA, the fundamentals have been closed.

18:07 So going back to the principle of effective capital deployment, what is our capital strategy? We have effectively moved out approximately just over $56,000,000 to the acquisition of GR1R. We have seen significant reduction of debt and refinancing costs and we have obviously seen a significant asset recycling. What's really important to note is that due to a couple of key parameters, one, that we have actually put a significant amount of capital into debt, and Leon will go through what that is and what it means from an interest saving perspective, and the fact that we have closed the GREA transaction.

18:56 We are awaiting GRIA consolidation and we are awaiting GRIA to finalize their dividend policy. So what we have opted for as management and the Board is to not declare a distribution now. We have declared and a reminder to the audience a $02 distribution in the first half of this year. What we have opted to do is to elect a special dividend towards the back end of this year. And that special dividend will be aligned to the consolidation of GREA, the finalization of the GREA dividend policy and key fundamentals around some of the asset recycling. But the capital deployment strategy has been one of the key focus areas and the consideration thereof has been key. And this has been the best capital deployment strategy in our minds to set us up for the future.

19:56 Just on the core focus and core sectors, just a reminder to the audience that historically we have been multi geographic and multi asset class.

20:08 What we have come to the market to state and through our acquisition of our development company is our asset focus will be impact going forward, which means that we will be recycling asset classes like hospitality and retail, which will be non core assets. We will be focusing on areas like office, medical and core sectors will be asset classes like data centers, call centers, industrial and American embassies. So that is a key focus area of the group going forward. And really just around one of the slides and one of the things that we even through the Capital Markets Day is that the group has been construed as relatively complex.

20:56 We have had a number of associate companies. We have had a number of complicated accounting disclosures. What we have done through one, the disposal of BEACHCOME, two, the now consolidation in the next month of GR1T we have simplified the group. What I mean by simplifying the group? We have categorized our assets into specific asset classes. We are in the process of closing substructures and capitalizing substructures, which Greg will touch on today. Bora Africa, which is an industrial substructure capitalized by the IFC by $30,000,000 has been born that is focusing on industrial. We have obviously now closed the acquisition of GR1T.

21:44 GR1T is in the process of being capitalized with a further $50,000,000 which will ultimately align to the pipeline, the delivery of the pipeline, which Greg will touch on today, but more importantly also the delivery of the fees that come back to the Group. So the simplification has been a key fundamental delivery and component of the group. So on that note, am going to hand over to Leon on the financial review and then Greg will then touch on the strategy and pipeline into the future. Thanks, Leo. Thanks, Bonnen. Before I get into the detail of the numbers, I'd just like to remind all of our investors how our return build up is basically made for the medium term.

22:31 So as a reminder, our property portfolio, which will comprise of about 80% of completed assets and 20% of development assets going forward, is the key driver to attain our 13% to 15% total return target.

22:45 This is achieved through the property yields, which will be circa 8% as it has been for the past few years. Once interest rates stabilize and come back to levels which are more normalized, we should be able to see the impact of leverage being positive again. Unfortunately, during this year, we'll have seen that reduce significantly. Admin costs, which are going to be achieved at a 1.8% of asset value, is driven by the increase in assets through the GRIT acquisition and the pipeline, but also through a significant reduction in admin costs over a period of time. In terms of the NAV growth on the completed assets, they generally track just around our weighted average lease escalations, which will be between 34% going forward and is linked to CPI.

23:32 The development returns, which is going to make up about 20% of our asset base, should achieve a 16% IRR as a minimum, which gives us 3% total growth. And then the fee income, which is derived predominantly from a 1.5% asset management fee, but

23:48 then also other income, which is related around the development management fees, which is derived from the rollout of projects over a period of time. At the Capital Markets Day, we went to great lengths to explain how to actually understand the GRIT numbers. And in this regard, we see here the buildup of the distribution, which has been made for the financial year. You'll see that there is still 3.5% growth in the total distributable revenue in terms of the property income.

24:19 This is even despite the fact that we did sell considerable number of assets during the year, which have then been replaced by a number of assets within the GRIA portfolio that have come on stream, most notably the last one, which was in May this year being the Artemis Curepep Clinic. With the mix of the entire properties, we are seeing that the operating costs are increasing.

24:41 This is as we reduce the number of properties that are single tenanted and triple net leases like Beachcombe. So that saw an increase of 20%, which is predominantly the new office assets that are coming on stream. Other income, as Bronwyn alluded to, this has seen significant growth. We went from GBP3.5 million last year to GBP18 million this year. This does, however, include a number of items which are considered once off in nature. But going forward, we should see a stabilized amount coming through here, which is linked to the property values at 1.5%. And then we'll see income which is derived from the developments, which generally going to be around 45% of the total projects that are being deployed at any one point in time. Admin expenses, this is one of the areas that we need to remain completely focused on. During the year, we've seen significant once off costs, and we'll go through a slide just now to take you through that and how we intend to actually reduce these costs going into the future.

25:42 I think the thematic of the entire world at the moment is rising interest costs. And you'll see there that we've got a significant increase of 34%. This is made up of a number of items. Most notably is obviously the increase in base interest rates. However, this was significantly offset by the hedging strategy that we had in place up to now. I think the key thing with GRIT is the strong portfolio, the ability for this portfolio to perform on the African Continent and still drive a lot of the growth that is inherent to our business. The key items which we need to focus on here is the fact that the properties that are going to continue operating, which are excluding the Beachcombe and LRR disposals, saw significant growth in revenue, 7.35.7% in net operating income.

26:33 This is significant due to the fact that a lot of the assets that are actually in this pool have not actually been in there for the full financial year. The precinct, the office you're sitting in now, was on stream for six months. The medical was on stream for only one month during this year. And the corporate accommodation, which forms part of the Roslyn Grove, was only in place for about eight months of this year, which bodes well for the increase in these going into the future. Admin costs. Unfortunately, this year has seen a significant increase in admin costs as we prepare ourselves for a lot of properties that are going to come on stream. We've invested significant amount of money in terms of the admin cost to create an office that's fully fledged in Kenya, which serves Roslyn Grove, serves Orbit, serves the upcoming building that will be completed and starts to deliver in the month of November, which is CCI.

27:28 And the income you'll see from that has already started to show fruit. From last year, we had $480,000 of fee income. This year that has increased 180% to 1.3, and we'll see that growing significantly into the future. The other items which we just need to consider here is that we've seen significant inflationary pressure on a number of items, most specifically insurance, travel costs and staff. The staff costs have actually been increasing to generate the fee income, whereas the other costs are costs of operations, which are unavoidable at this point in time. We, as a management team, have identified significant cost savings, which are going to come about from the increased digitization of our platform.

28:13 We've also found synergies within the merger of the teams. And we're seeing at least a $4,000,000 saving in terms of our admin cost line into the future. Cost of debt, this is obviously one of the key items. We've seen a 3.6% increase in our base rates over this financial year. When we look at the total movement that you're seeing there of GBP11.2 million, this is however made up of a number of items. It's not just the increase in interest rates. Interest rates, net of the hedging in the back to back was around about GBP4 million increase. You are seeing the impact of the full year acquisition of Orbit coming in there, the number of properties that have come on stream during this financial year.

28:58 In addition to that, we did see during the refinancing of the Zambian portfolio, which was historically financed at a very low rates of a margin of 4%, which has now increased to 5.8%, which is part of the syndicated loan, but creates a far better long term capital structure for that debt. Including those numbers as well is the number of associates, which have been converted to subsidiaries during the financial year. Interest rate management is obviously one of the very key thematics as we reduce risk of the portfolio going forward. The one key item is that during this year in October, a number of our hedging products actually expired. When we look at the weighted average cost of debt, you'll see that sits at 9% versus the weighted average cost of debt at the beginning of the financial year.

29:49 This is the impact that we've seen from the hedges coming into an end, which range from 0.58% to 1.85% over $100,000,000 This has obviously created a significant impact to our results. However, we have now replaced that with a new product, which is a collar and cap, which is capping the interest rate at 4.75%, while we enjoy savings down two years offer rate of 3% over the next two years. It's interesting to note that one of the key strategies when we were deciding on the deployment of capital, the GBP 35,000,000 that we've deployed to reduce debt will significantly offset this increase in weighted average cost of debt as we move forward. As we do see the rates still moving slightly, just to highlight the impact of the hedging, on a 25 basis point increase, we will see about a 0.1% increase in the cost of funding. However, we enjoy bigger savings as those rates come down into the future.

30:52 One of the key aspects that Bronwyn mentioned was the ability to reduce our total cost of funding as well as reducing our interest both through reduction of loan to value. Following the consolidation of GR1T, which is expected shortly, this will reduce significantly when we look at the GROUP balance sheet, which is far less geared than ours. And the combination of the two will result us getting close to our target of below 40%. One of the key concepts as well during the year was obviously the reduction of our risk of refinancing. We've made tremendous strides with the closure of the $3.00 $6,000,000 syndicated loan, as we discussed a number of times, which has actually pushed our debt expired to the 3.25% and is where we want to try and keep this going into the future.

31:43 Just focusing on a few key areas, just to remind everyone. Targeted returns of the medium term is 12% to 15%. Annual NAV growth from the existing properties and developments between 47%. Free income, we should see this increase significantly, especially once we see the deployment of capital from the recapitalization of GR1T3 million that comes into the Boris structure to really underpin the growth and offset the rising interest costs as we move into the future. The admin cost ratio, key target to get that down to the 1.8%. On that, I will now hand over to Greg, who's going to introduce you to one of our very exciting projects in Kenya.

32:32 Thanks, Leon. And good morning and good afternoon to everyone. So maybe just to touch on our pipeline and our new parent company GRIT, The reason why the acquisition was done this year is the amount of opportunity that GR1T has in front of it right now. So what I'm going do is just touch on the pipeline of what we're going to be focusing on and the different substructures that we've set up as well just to make the investment case through the development pipeline a lot easier to understand. Before I go into that detail, I wanted to just touch on the development that we're doing in Kenya right now so we can understand the metrics of the returns and how we look at a development within the life of GRIT that ends up in the returns of GRIT and ultimate the shareholders.

33:26 So INCOME, we started at the end of last year. It's been a very fast track project. The anchor tenant to this is CCI. CCI Global is the biggest call center in Africa, servicing predominantly 80% of American clients. They have moved into Kenya circa three years ago, and have had a tremendous growth, story. Enya will be home to 4,000 new jobs that has been created in Kenya. So the impact story that it has is absolutely tremendous. Through this development, we have partnered with the likes of Build Her Foundation, which is a woman led initiative in construction, which is an anomaly by itself and has been a fantastic product for us to work with. This has also been done through the GRIT Foundation, which I'll touch on a little bit earlier.

34:26 So if we look at INCO at the moment, as Leon mentioned earlier, the client will be occupying the building in seven days' time. And this is a staggered handover as they come online with these new projects. The project will be completed in Q2 of twenty twenty four. The exciting thing with CCI is we've actually signed a framework with them across Africa. So not only are we going to be looking at Kenya with them, we're going to be moving into new countries, which will be announced shortly. Maybe just to touch on BPO and call centers and the impact that that's having in Africa. A year and a half ago, The US made an announcement that they were going to look to diversify their core focus on BPOs, not just to India and Philippines, but to look at Africa as well.

35:22 What that meant is that between now and the next five years, there will be about 1,500,000 jobs moving to Africa if we can get the African governments to work with us to get to the right cost base that the BPOs require in order to move those seats into our continent. We've set up a very strategic partnership with CCI. We understand their business. We understand how we can reduce their cost per seat, and we understand how we can move those jobs into Africa. So this is a very exciting initiative that we're working on at the moment. Just to give some high level numbers, it's a 25,000 square meter or 250,000 square feet GLA. The development yield is circa 11% and the IRRs are greater than 15%.

36:13 This is a new territory for GRIT. It's not normally that we expose our returns, but through the listed company of GRIT, a lot of this will be transparent moving forward. Maybe moving on to our specific core focus, as Bronwyn mentioned, we're going to be focusing on specific sectors. Within our organization, the team that we have together that we have been working with across over 40 African countries for circa fifteen years, what we've done is we've taken the specialists within our organization and we've put them into these specialized substructures. To touch on medical first, as we know, we have recently completed the Artemis Kirpeep Hospital.

37:02 We've got a second development in Mauritius, which will be underway shortly. We have got a further medical hospital that we are doing in Kenya. And the pipeline and the strategic partnership with Artemis is going to take us into many more African countries, the details of which we will be publishing in the very near future. So medical is a core focus of ours moving forward. Moving on to diplomatic housing. This has been a huge growth area for us recently and will continue to be so in the near future. If you look at where we're sitting at the moment, we've recently completed DH3 in Kenya. We have a diplomatic housing project in Ethiopia.

37:50 We have commenced in Mali. We have Mozambique. So to Bronwyn's point is the U. S. Embassy has become our largest client across the continent and is a key focus area for us in our growth moving forward. We have more than $200,000,000 worth of pipeline with the same client in various stages of signature. Moving on to the industrial. We've recently launched Bora Africa. The exciting thing about Bora Africa is it's being capitalized by IFC. That has now been concluded, and we have raised funding. Bora Africa will be focusing on industrial and data centers, the pipeline of which is huge.

38:40 Bora is actually based out of Kenya, so there's a full development team led by our CEO, Donald Borthwick, who has got probably forty years' worth of experience. So it does make him one of the wise grey old men in the industry, and we have given our trust for him to to lead this with his track record. Bora Africa will be linking very closely with GR1T. GR1T has got the development expertise. Bora Africa with the the new capitalization gives us the bandwidth that we need to do the industrial developments. And then the data center ICT part of the business, we've got tremendous growth here. Our partnership with African data centers and what we did and completed during COVID in Nigeria.

39:31 We've got some very exciting announcements that will be coming through in November about the partnership and the strategy that we have with Africa, The new hyperscalers that they've brought on board in the likes of West Africa are now moving into East Africa as well. We have got a colo strategy with ADC that will be inked in the very near future. So please watch out for these announcements. We believe in the strategy that they've put forward in the colo, in the slightly smaller data center space, not looking at the bigger 10 megawatt hyperscalers, and this is going to bring us tremendous growth across our continents. Partnered with CCI Global on the BPO and the call center, I think that space that we've been focusing on and the track record of what we've delivered in the last two years, we are far in front of our competitors to date.

40:25 So that closes our pipeline that is over circa 300,000,000 to 500,000,000 worth of pipeline. As Leon and Bronwyn mentioned, we have got a recapitalization of Grier, which is fantastic, which gives us the opportunity and the bandwidth to complete our pipeline. And during this pipeline, our key focus is always ESG. If you look at what we did on the precinct with regards to the Eco District, first of its kind in Africa, the five star green rating. If we look at where we're tracking on our ESG, we are either on target or above target across all of our different metrics, which is fantastic to report on. On that note, I'm going to hand over back to Bronwyn.

41:13 Thank you. Thanks, Greg. So just to close off today and just to leave you with some key takeaways and really around key focus areas for 2024, and really what our team is going to be managing very, very closely. So the continuation of focusing on the operations, the property fundamentals, Strong operations will continue. A focused team will be focused on the asset management thereof. Ensuring that we extract the value out of the capital allocation strategy, capital deployed into GR1T and ensuring that we are able to deliver the fee income, the fee income that comes from the development management, property management, facilities management, asset management.

42:10 Extraction of value is absolutely paramount into the next twelve months. We will continue to focus on targeted noncore disposals, low yielding assets noncore to redeploy that capital into either debt reduction of debt or into further GREER pipeline, high yielding impact focused pipeline. Sustainability and impact, as mentioned by Greg now, is a key fundamental and at the end of this presentation, we will be showing you a video which will give you the narrative of how we drive impact, real impact on the ground. The balance sheet management, finance costs, ensuring that we continue to reduce debt, ensuring that we continue to manage interest through hedging instruments is absolutely paramount.

43:07 The capital allocation strategy this year for June 2023 to allocate money to reduce debt was paramount with high interest rates. Admin cost management. The commitment to get our admin costs from 2.4% to 1.8% is a key deliverable for this management team. And just to finalize on the point with regards to the dividend, which is a key fundamental component of this investment strategy, We have declared a dividend for the first half of this year of $02 The intention is that the Board will consider a special dividend upon the consolidation of GREA, the finalization of the dividend policy and certain key aspects before the end of this financial year. This is a very, very key component.

44:02 So in summary, I'd like to thank everybody. I'd like to thank our investors. I'd like to thank some of our financiers in the audience and on the line. We've received a tremendous amount of support. Our entire business is about relationships. Yes, we have bricks and mortar, but without bricks and without relationships, our bricks and mortar wouldn't be able to do what it does today and that is perform at optimal levels because of the people in our team and because of our relationships and partnerships. And I just want to thank everybody because this is a very paramount component to what we do. So on that note, am going to leave you with our impact video. Thank you, and then Darren will go across to questions. Thanks, everybody.

45:00 Since 2014, we've been finding the way in providing world class real estate to multinationals across high growth and investment grade African economies. As pioneers, we hold ourselves accountable to set global benchmarks in African real estate that generate not only smart business solutions, but also long term sustainability. We strive for positive social and environmental change. Our ESG objectives are not set in the distant future, but focus on changing whatever we can now. Like actively integrating sustainable development goals and climate related financial disclosures into our everyday business practices.

45:48 For this reason, we won't stop at developing the precinct. The highest green rated commercial building in the Indian Ocean Islands region and first Eco District certified commercial building in Africa. We will continue to lower our carbon footprint by further improving building methods, clever design, and the use of local materials. As a woman led business, our journey to impactful income includes empowering even more females in the built environment through skills transfer and job creation. And we continue to shatter glass ceilings in the workplace through competent representation and equal pay for work of equal value.

46:36 Young boys and girls will continue to be inspired through sport for good, affording them an education and life experiences they could only dream of. Our team. Team. Are proud proud of providing a forever home for abused and neglected animals, We educating communities on animal welfare. And through our family of partnerships, we will build on contributing to prosperous countries and communities supported by our development projects and investments as power catalysts for social upliftment and growth in Africa.

47:23 We will continue to find the way by doing good. Thank you, Bronwyn, Greg, and Leon, for the insightful presentation. We're gonna open for q and a now. I'm gonna invite all three of the of the presenters to come and stand up front. Just by way of process, anybody dialed in online, please submit your questions online, which we will collate. And then right towards the end, we'll go to questions in the room. Obviously, people in the room, you can you can continue asking questions afterwards at the coffee break. Okay. So without further ado, let me see if I can paraphrase a couple of the questions that have come through.

48:14 I think, Brandon, maybe this is for you to start off with. But in aggregate, it looks like on the ground and operationally, the company is doing particularly well. However, there seems to be a disconnect between what's happening on the ground to what we're seeing in the numbers. And so can you give some thoughts as to how long you think it will take to manifest and when we can start seeing even more evidence of of the strategy playing out? And, you know, linked to that is that the share prices, obviously, you've significantly disconnected to what we're seeing in terms of operations. So some thoughts around, you know, when you think first the numbers will show it and then secondly, you know, when the market will recognize it, please. Yes. Thanks, Darren. So I think to answer that question, I mean, in a few parts. So the first component is, as I've mentioned earlier in the presentation and to the point, I mean, if you're looking at the operational performance, the net operating income, the growth thereof, the collections, the vacancies, the actual real estate on the ground, that is obviously fundamentally performing.

49:22 I think we all need to be cognizant of the fact that we have had, with Leon's presentation, an illustration of rising significant rising interest costs. Okay? So, you know, Darren, with obviously, we've got a relatively hedge strategy, so we have some line of sight of what that looks like. And, you know, we have stress tested those numbers with rates that could go up by another I think we've worked on another half, another probably cup cup up to 1%. So the reality is we obviously don't control what's gonna happen from a macro interest rate perspective. What we do control, and I'm glad you've put up the slide, Darren, is what happens in between. Okay? And where we are seeing and we are seeing the ability to implement strategies is we're seeing the ability, as I've mentioned, to, one, reduce debt.

50:19 So dispose of noncore assets. And I think I must say probably eighteen months ago when we put the strategy up, a lot of people didn't believe we could actually exit a $136,000,000 of assets, especially in Africa. So we have demonstrated the ability to sell noncore assets, the ability to redeploy that money both into, obviously, expensive debt facilities and, obviously, redeploy that money into high yielding GREA projects and assets. So, you know, to answer the question, how long does that take to come to fruition? You know, we are already seeing an impact on our numbers today bearing bearing in mind that you have a relatively large other income play, which has already been demonstrated from the development fee income, the fee income that's coming into the business.

51:06 But, Darren, whilst we see these rising interest rates and while we see concern around where interest rates are going, you know, that is the macro wind that we all still need to navigate. So, you know, I like to believe that we probably are in that for at least the next twelve months, which takes us to June 2024. And the ability to now see the fruition of the GREA acquisition, the fruition of the GREA project completion, Greg did allude to the fact that we have recapitalized GRIA now, which means projects will now commence in quarter one of next year. So the importance of the developments to be completed, the importance of that capital to now be deployed in projects and also, obviously, understanding where rising interest costs are going. You know, for me, it's probably gonna take another eighteen months to really see those numbers play out in the strategy.

52:02 So my my upfront point was we have set up the business not for today, but for tomorrow, and that is for what we can control. So and what we can control are the initiatives that I've just highlighted there, which is very, very significant actually and very, very important that when interest rates do decide at a point and where we look at them now tracking down, there will be significant upside in this business because of the initiatives that have been implemented today and because of the acquisition of our development company and the development yields that we're seeing from the development company that are completing today and in the up and coming sort of eighteen to twenty four months. On the impact of the share price, Darren, I mean, I think the interesting thing about the share price is that, you know, we somebody actually said to me, one of the senior investment bankers in The UK, we're not in bad company.

52:59 I don't know if that was made made to make myself feel better. But the reality is that, to the point, is that all property companies are severely impacted by high interest rates. The globe is severely impacted by high interest rates. People are wanting to hold on to dollars. They're not wanting to invest dollars. So, you know, when we're looking at our share price and the recovery thereof, we are going to have to see an incremental upside, one, in the delivery of our strategy, but secondly, in interest rates reducing. And we have seen a significant impact on global REITs trading at significant discounts to net asset value because of exactly this. So we what we can control is our business. We can't control the globe. So we need to continue to focus on our business and focus on the operations and the delivery of these key semantics, which are absolutely paramount for the up and coming years.

53:55 Thank you, Ronan. I'm gonna give Leon a chance to talk. So, Leon, I think there's been a couple of questions about can we just revisit the the capital that's been deployed over the financial year and as well as, you know, the special dividend, what does that mean? What yeah. And and and essentially, the gates that are gonna get to you to having confidence about declaring potentially a special dividend, please. Sure. So I think just to reiterate, the asset recycling program did raise about $86,000,000 We've taken those funds and we've reinvested them into the GREA acquisition and APDM acquisition. We've effectively reduced the debt by CAD35 million and had to fund the upfront costs on the syndication, which left us with a shortfall of CAD12 million.

54:43 When you have a shortfall of CAD12 million, you can either make two decisions. We can either utilize our gearing facilities and finance debt or we can take the decision to utilize our operating cash in the interim to finance these costs. While we're looking at a number of strategies asset disposals amongst them, we think it's the wise decision not to actually over gear the balance sheet additionally by this GBP12 million and the pressure this would put on the operations going forward. What we are seeing is the ability to actually replenish this cash flow from operations through the asset recycling, the recapitalization and the fee income that's going to be coming forward. The other item which just needs to be highlighted is through the disposal of the assets.

55:29 We've had a number of cash flows, which are generally monthly, quarterly, which have now come to an end through the sale of BHI and are effectively replaced by the income that will be coming from the GROUP acquisition. This will come through in the next six months, which will then allow us to replenish those cash flows and then be in a position to declare dividends later on in this year. Thank you. Maybe let's go to Greg. As a question for both, I suppose, all three of you, what are the biggest risks to GRIT two point o? And, you know, if you had to worry about something, what would that be of how it manifests for the group? Thanks, Darren. So, you know, when we are the author of our own book, we can set our destiny.

56:18 So what I mean by that is when we're going out on fee income and we have other clients that we are relying on to push their projects forward, often we have to be careful that we don't bring it into the wrong reporting period, especially in the listed space with regards to the income of those fees. So as phase one moves forward, what we've done is we've rather looked at partnerships where we put some equity in so we are in control of when those projects start, but we're getting more fee in than we're putting equity out. So the net effect for the the the group is cash positive. So some of the risks that we we we do need to adhere to is the starting of these bigger projects and when they actually get to ground. Because as I always say, it takes twelve months from the start of a project to actually breaking ground and and earning that fee. There are a magnitude of projects that we are working on at the moment.

57:18 So things like that, we we do definitely need to be cognizant of. And then moving into that two point o, you know, we've got some big clients, the likes of American Embassy, that wanna contract with the GRITS of the Worlds, and that has huge fee income for us there as well. But it's just making sure that that is set up to win and that we are ready to take on those new fees that come through. With regards to the developments and the acquisition that GRIT has done with APDM, which is the asset manager of GREA, though, that's where that fee income starts coming through with the new projects that we we take online. So there are things that we need to be worried about, but there's more positives in this working with, you know, the amount of clients that we have. We need to also make sure that we don't take on too much and that projects all start at the same time and our bandwidth gets stretched thin. So there are things that we are are managing on a day to day basis.

58:27 Great. Great. To add on to that point is that one of the one of the biggest risks is the ability to raise capital. The ability to raise capital for Africa, for emerging markets, and generally globally is is very difficult. We know that GRIT sits at a substantial discount, and we don't wanna raise capital GRIT level, and we don't have the ability to. The reconstruction and the ability to create these substructures, Bora, to be able to now control GR1T the ability to use these vehicles to raise capital to deploy into pipeline to effectively, one, build up projects and secondly, fees. So capital raising, Darren, is a key risk. We've been working for somewhat probably, I did say, might be mistaken, about thirteen months to close the IFC on Bora.

59:15 It is now officially closed. We have been also working on the capitalization for GREA probably approximately the long the the same time and maybe I should dare say fourteen months. So a lot of the capital raising initiatives, Darren, that needed to be done for these substructures has been done over the last fourteen months. So now it's about the capital allocation strategy. Where does this money go effectively? And that wherever that money goes, to Greg's point, allows us to now start the construction. The projects have been identified. They have been worked on. Greg has just mentioned now CCI, a key partner. That project's already in the ground. Phase two is on its way. So the fact of the matter is that that is a key risk. And what we've done is that we haven't just been sitting back in the last couple of months. We have actually effectively been doing capital raising at that substructure level to ensure that we have the capital to deploy, which ignites the GRIT two point o strategy.

1:00:17 Great. I'd like to invite any questions from the room. Shivani, if you would take around a microphone because we're just about to close off. But if there are any questions in the room, please raise your hand. And while we wait for that, maybe another one is some of the risks of the building in The Middle East and in Africa, are there any impacts on on on the business? And and if so, how are those being mitigated? I think, Darren, it does create a level of uncertainty in the world. You know, anywhere where you've got additional wars or tensions could have a number of impacts, which, you know, the tensions in The Middle East at this stage could go either way. We do need to keep a close eye on this and what how it impacts our operations.

1:01:02 But I I think the the key thing for us is to watch its impact on inflation and which would have a knock on impact to, obviously, interest rates. Great. Guys, I think unless there's any questions in the room that are pressing, we have already reached 11:00 UK time and 3PM Mauritian time. So without further ado, I think we will close off there. For any further questions, please contact IR at GRITED dot group or obviously the team will be around and the drinks and coffee break afterwards. So with that, I'm going to hand back over to Mike and thank all of the people for attending and thank you for Brom and for the call. Thank you. That's great. Darren, Brumm, and Leon, thank you very much once again for updating investors this morning. Could I please ask investors not to close this session as we'll now automatically redirect you to the opportunity to provide your feedback in order the company can better understand your views and expectations?

1:01:52 This might take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of GRIT REAL ESTATE INCOME GROUP, we'd like to thank you for attending today's presentation. Thank you, everybody. Thank you for joining us.