Grit Real Estate Income Group (LSE:GR1T) — Investor Presentation

0:01 Good morning, ladies and gentlemen. Good morning, ladies and gentlemen, and welcome to the GRIT REAL ESTATE INCOME. Can you hear me there, Bronwyn? Yes. I can. Lovely. Thank you. Apologies, ladies and gentlemen. Good morning, and welcome to the GRIT REAL ESTATE INCOME GROUP Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. We do apologize for the delayed running of today's presentation. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. 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. I'd now like to hand over to CEO,

0:42 Bronwyn Knight. Good morning. Thank you everybody and thank you for joining our half year results presentation today. We look forward to taking you through the presentation and alongside me today will be my colleagues, Greg Pearson and Darren Vianes. Also, just a note around Leon Leon. We have announced today that he will be exiting as the CFO of the group. On behalf of myself and the team, we would like to thank him and thank him for his contribution to date. And we have announced to the market a new CFO, which will be taking the lead and supporting me going forward on the next journey of GRIT two point o.

1:31 So if we can just get into the presentation today. So five key fundamental points. And between Greg, Darren, and I, we'll be touching on these really key fundamental topics or basically what we will be focusing on in relation to the delivery of the GRIT two point o strategy. So number one is obviously through the presentation, we are still seeing very strong operational performance. You'll see growth in our operating NOI, net operating income line. You will see growth obviously in the property performance. The second aspect, which is obviously key, is the fact that we had committed under GRIT two point o to simplify the structure and really around defining the GRIT two point o strategy, the strategy implementation, what have we done to date, and what are we going to be doing going forward.

2:30 Number three, which is absolutely key and fundamental and also in line with making sure that we deliver sustainable returns to our investors is the significant work that's been done by the management team in relation to the cost reduction. This has also come in with the merger of the development company, GR, and the optimization of people and cost management in the business. Focus will be done really through Darren and the presentation of the results, the actual numbers on the balance sheets, and really around the ecosystem and the strategy of GRIT two point o is we are here to deliver impact and sustainable investments in Africa. So our ESG story where we have pioneered and where we lead from the front is absolutely significant and will be demonstrated through the presentation today.

3:22 So where do we start? Let's start at the beginning. The beginning of what we have delivered under GRIT two point o and effectively under GRIT one point o. We came to market some ten years ago in relation to delivering a multi geographic, multi asset class, hard currency, dealing with multinational global tenants across the South Africa across the African continent ex South Africa. We have delivered the strategy. Not only have we delivered the strategy, but the strategy has now been refined under GRIT two point o. And that refinement means that we are sitting excluding our retail with almost a 99% occupied portfolio.

4:07 We are delivering hard currency returns, servicing the real estate needs of global tenants in hard currencies. If you will look at this today, our number one tenant, which we have a core relationship with, key fundamental management relationship is the American Embassy. We are servicing the real estate needs of these global tenants across the African continent. Key family of partnerships, key fundamentals to the strength of our business model across Africa. Let's look at the highlights. What has been performed? Let's obviously realize that we are dealing with very tough macros. Darren will be touching on the interest cost and a number of other parameters, some within our control, some with out of our control.

4:58 But where have we seen performance and why? We've seen a very resilient property portfolio that has seen circa over 15 and a half percent growth. We've seen that because we are dealing with multinational tenants, multiglobal, and we are seeing performance out of the property portfolio on an internally managed structure. So everything gets managed. We control the entire value chain and ecosystem, property management, facilities management, and we are seeing the effects on our delivery of profitability. To the point that I've mentioned, there has been significant optimization of administrative costs with circa just over 15% reduction, and when we're to June, circa just over 19% reduction in the optimization of the business model, economies of scale, the merger with our development business career.

5:55 Greg will be touching on the significant development platform he and his team has created, and I dare say the best development team that has come out of Africa. They've delivered the hospital project impact, which Greg would be touching on today, which is not only the delivery of an impact real estate asset, but also generates circa a million dollars with a development income, which is the benefit to the GRIT stakeholders. So delivery of strategy has been one of the key fundamental components. Have we delivered on strategy? Absolutely. Yes. What is the GRIT two point o strategy? Okay. The GRIT two point o strategy is a combination of what you know in the business today.

6:41 It is the actual existing portfolio, which is performing. It is the co ownership structures that we have invested in, and also the new sector specialist funds. One that we will discuss today in Bora Africa, which you would have seen received an overwhelming vote of confidence in relation to our substructure creation. Then on the side is the monetization of our IP. We have circa a over a 150 staff of internal property management, facilities management, development management. The ability to utilize these staff to monetize this IP, which now derives another revenue line for us, which you'll see a circa over $6,500,000 of development fees, facilities management fees. It's the fee earning capacity of this business.

7:35 This is the GRIT two point o strategy. Has there been delivery already? Yes. It has. Will the delivery into the future be demonstrated? Absolutely. Yes. The simplification. So, yes, Africa is complicated. Yes. We operate across 12 African countries. Yes. We're in emerging markets. But the team has gone a long way to really look at this group and say, how do we simplify the structure? So we have removed many of the associates. Companies like GREA have now become subsidiaries of GRIP, which makes our reporting a lot more simplified. We've got the fee earning capacity of the business, which I've just mentioned now, and we've now got our income producing assets, really in the sub structures of what we're able to create around very specific asset classes.

8:25 And I will touch on what core is and noncore asset classes are into the future. So really under what what is the evolution to GRIT two point o? Where are we going into the future? What have we seen with the acquisition of GRIT, who significantly completed a number of developments as we've seen is a core strategy for the following. Core strategy for industrial under the creation of war. Core strategy for diplomatic housing, servicing the American embassy and other governments across the globe with real estate needs in Africa. The core functionality of data centers, the importance of data. These are core sectors today and going into the future. The ability to create impact assets, the delivery of our first hospital project, and what do we see as non core?

9:17 The non core is what we see out of hospitality and retail. And what are we doing with noncore? The ability to acid recycle. We made a commitment to investors somewhat eighteen months ago that we would deliver circa a $160,000,000 of acid recycling, which would demonstrate a couple of things. One, the ability to recycle at net asset value. One, secondly, the ability to dispose of assets in what is perceived as a fairly liquid market across Africa, and the ability to take that capital as will be demonstrated on the next slide and recycle that capital into other initiatives. So the question goes is that we are disposing of assets. Where is that capital going?

10:02 So let me show you a case study. Okay? And a case study that is already being achieved in the business today. The case study of the ability to under GRIT two point o, Capital Light, the ability to dispose of assets. Where does that where does that how how does that become a reality? You would have seen in the board transaction that minority interest strategically sold minority interest in assets, the recognition of the ability to actually still maintain control and consolidation, the ability that these vehicles borrow DH Africa into the future health care are able to generate fees back to GRITED stakeholders, the ability for fee income driven generation because we control the asset manager, we control the real estate manager. We're still able to consolidate this, and then an ability to take that capital to reduce debt and short term debt. Darren will touch on the slide around what the impact is with regards to a higher cost of debt facilities and what the impact of reducing to debtors.

11:08 So and then the final part of this is that over and above that, the third capital can go into these sort of non speculative development projects. We don't build on spec. We build for tenants. We have demonstrated, and Greg will further demonstrate what the importance of this and how this has actually been delivered in the last five years already. This particular slide is very important, and Darren will touch further on the debt. But really, one of the key components of the focus today and into the future of this business is the property portfolio is obviously performing significantly, but the key fundamental in relation to this is really looking at the cost of debt and looking at the ability to restructure our debt. So what does this mean where we are today?

11:59 We're sitting with over 78% of our US dollar debt hedged. Okay? Yes. Our cost of funding has increased to 39.6, but this is a combination of us taking out further hedges and the premiums involved in those taking out further hedges. The target LTV that we are still targeting is somewhat between 3540%. Yes. We've seen slight increases in LTV, but the intention is through the recycling of these assets, recycling of certain initiatives through these structures that we were able to reduce this debt going forward. What does that mean? It means that debt that sits over circa 11 and a half percent opportunity to settle that has a direct impact on the bottom line of circa $4,100,000.

12:48 That is significant to earnings. Okay? The second part is that we have now got GREA as a consolidated entity. The ability to move the GREA assets into the syndication reduces their cost of funding very significantly in the group. So, again, economies of scale size. And then the potential to refinance our debt on longer dated basis. We are dealing with all the DFIs. We've already concluded a transaction with IFC on the board structure. We are doing significant amount of work with the DFIs because they see GRIT as pioneering, impactful, and the ability to fulfill very pertinent ESG targets. So we are able to create that with the DFIs going forward. So on that note, I would really like to hand over to Greg. Greg is the CEO of GREA. And, obviously, Greg will take you through what actually has been delivered and the importance now with us concluding the acquisition and the consolidation of this very significant development company and what it has produced.

14:10 Good morning, ladies and gentlemen. Thank you for your time to go through our results presentation. So talking about GRIA. What is GRIA, and how does GRIA fit into the GRITS two point o strategy? So in 2018, GRIA was formed. It was a capitalized concept vehicle, and it partnered there with APDM. APDM is where the staff are housed and actually the development managers of the platform. So if we roll from 2018 to where we are today, on the initial capitalization of that company, APDM and GRIT have successfully developed north of $300,000,000 worth of revenue generating assets, and that is what sits in the portfolio to date.

15:04 In 2018, when we started this this company, we had a specific strategy. We've got working relationships with key clients that form three pillars in our organization, and that's been our strategy on execution of real estate across the continent. That relationship goes back circa twenty years with some of the management that are sitting in APDM today. So at the outset of GR1T, one of the key clients was American Embassy, commonly known as OBO. Second was information communication and technologies, so data centers. And in the global world, BPOs, which is commonly known as call centers, and then on the medical side, the the hospitals.

15:54 So my colleague, Darren, later will be going through slides that show you exactly how that strategy has come through in the numbers. If you look collectively at APDM as well, the the the company APDM has performed and and executed and completed over $500,000,000 worth of development across the continent. And bearing in mind, since 2018 to to today, we also had the effect of COVID. So this team is very well placed to execute and has got the delivery and track record, and it's got now the balance sheet within GRIT to prove that. If we look at a case study, the Artemis QPP Hospital, This was a project that started during COVID in Mauritius.

16:44 This was a dire need on the island. So forming part of, again, our our GRIT two point o strategy, what did we do here is not just build an asset, but it's created an asset for the country. So if you look at the the the NAV upside that has been achieved through this development, it is really beneficial. This development was done at north of 11% yield and obviously creates revenue back for the group. The fee income that we had through this was north of a million dollars, and the impact that it's had on the the society of Mauritius has been massive. It's got one of the most technically advanced theater, not just in Mauritius, but in Africa and Indian Ocean.

17:30 And there's already been new groundbreaking surgeries that have taken place through this asset. So looking at our strategy, how do we expand from here?

17:43 Again, going back to the GRIT two point o strategy where we are a bespoke development solution for for growing the assets or balance sheet and further revenue generation for our group. Africa has now been formed. DH Africa will house our data center developments as well as the BPOs or call centers. We have a building that has recently finished in in Kenya. We are at the forefront of growth with call centers and data centers in Africa, and we've aligned ourselves specifically with partners like CCI, which is the biggest call center operator across Africa, the likes of African data centers that management have got core strategic relationships with.

18:30 It helps them grow their strategy as well, but in the same time, mitigates the risk of of of development. Bora Africa, which is specifically coming out of Kenya, led by Donald Borthwick, Many, many years of experience on the industrial side. Touching back on DH Africa, that's the diplomatic housing growth. The pipeline that we have with American Embassy, We have those buildings tenanted prior to development and completion of development. And then the third tier is going to be the health care and impact investment, and we have got completed assets and revenue generation in all three of those subsectors that will be coming through. Just to touch on Bronwyn's slide there as well, she mentioned earlier, you know, how do we demonstrate the the growth?

19:32 So where is this this the the investment being focused? We can show you and demonstrate what we've been able to achieve to date is circa north percent north of 10 and a half percent growth with regards to our deployment and investment in in these substructures. So what gives us that competitive edge? We do our own facilities management and property management in these countries. So you would see a slight swell in our staff numbers. And the reason for that is we believed at the time until we got to a certain critical mass that to have the the the knowledge of what was happening on-site and having the people being able to service our buildings and service our tenants requirements was critical to our strategy that we set up the day we started this business. We've always believed on boots in the ground and making sure that we build around our local content rather than parachuting in gave us the competitive edge and the market knowledge that we needed to best suit our clients.

20:37 And to this, we've been able to provide a cost saving to our stakeholders of circa $750,000 to market norms. So the benefit of this is it's a cost reduction, therefore, giving back more to our stakeholders, but also gives us the benefit of knowing exactly what's happening on the ground at any point in time. And we've got some crazy stories about, you know, lifts going down or certain things within the buildings, and our staff at 11:00 at night are there to service our tenants' needs. Hence, why the repeat business and the family of partnerships that we have grown is specifically on target to grow around our strategy. So why do we do this? What is the impact that we have in Africa? So we have created a foundation, and that foundation is to look after the CSR and impact that we have across the continent.

21:30 Our carbon emissions, we wanna reduce by 25%. Are we online to do that? Absolutely. What we have done as well is we've gone for edge certification on the developments and the buildings that we have in our portfolio, And we were also proud to announce last year, we have the first Eco District certified building in Africa, and that is the the precinct head office building in Mauritius. That has been backed by Denton's Law, the the biggest law firm in the world, as well as some of the financiers as the anchor tenants to that building. Further to that, building efficiencies, we've approved about 25%. Again, that will be certified by 2025. And the other thing that we are very proud to announce is our woman led business.

22:15 We've got a 100% of our development managers that are women, and we've got some beautiful statistics that we can show and share ESG with regards to women led developments as well where we've got Build Her Foundation, which is a Kenya organization that brings women into construction where more recently we've completed ROSLIN GROUP, which was an award winning development for the American Embassy that was designed, delivered, and managed by women within the industry, which is a fantastic fantastic opportunity. So with that, I think this gives the credibility to the development business that I've just run through. And at that note, I'd like to invite my colleague, Darren, to take us through the numbers for the for the year.

23:11 Great. Thanks, Greg. I just want to confirm, Mark, that we're still okay on screen. Yep. Okay. Our screen in the room's gone down, but that's fine. Thank you. So I'll obviously be sitting in the hot seat today in Leon's absence. I think the team at GRITED has done a fantastic job getting the the results out. Some of the key stats and the key summaries and the key takeaways and highlights, think the board has been pleased to declare a dividend of 1.5. As you'll see, that has been paid out of distributable earnings, which is printed at just over 2¢. So the dividend paid is out of operational cash earnings. We'll go through some of the key metrics of the of the results as as we go through.

23:59 I think the important starting point is to demonstrate, firstly, that the simplification of the group structure is now going to result in us focusing on IFRS earnings going forward. On that basis, we've reported a 5.6% growth in revenue and a 6.1% growth in NOI for the six months. So that is evidence of the operating portfolio working, doing its job as as intended. I think the the minus 15.7% in administrative costs is one of the key features of the of the results. There was a strong commitment from the board to reduce admin costs by $4,000,000 for the full financial year, which would equate to about a 19% saving for the full year. Obviously, at the half year, we produced a 15.7% cost reduction.

24:49 That finance cost line there of plus 10.4 is obviously the thing that has created a little bit of earnings weakness in in the results. But once again, those are market conditions somewhat out of our control, and we'll get into some of the hedges shortly. But there are plans, as Bronwyn's alluded to earlier, to reduce those funding costs and to reduce the l the overall LTVs. So the the elements within our control are being well controlled and increasingly will, you know, start start turning as we as we see some of these new bills come online. So speaking of the buildings, if you look at that NOI six month reported column somewhere in the middle of the page, you're seeing the first evidence of GRIT two point o. Hospitality is down 42%, but that's because of disposals of the BHI asset.

25:40 And, actually, the portfolio outside of BHI produced a 28% growth in NOI. So what you're seeing is a reduced reduction to noncore sectors, and that's also evident in the LLR contribution for the period. Offsetting that is growth in where that capital is being redeployed into. So data centers have have demonstrated growth. Medical has demonstrated growth. And the corporate accommodation, which is the US embassy diplomatic housing compounds, we're seeing that growth starting to manifest in the numbers. So at a reported level, we had a 0.6%

26:14 growth in NOI. But if you strip out those disposals, that's where you get that 15.6% growth in in the NOI. If you flip over to the left hand side of the chart, you'll see we did experience some valuation pressure. We'll cover that on the next slide, but specifically those were in the completed asset portfolios. So if we're looking for portfolio and asset value growth over the next couple of years, we are already seeing it in our newly completed developments. Those are coming in. Those are being positive. The negative revaluations are coming from the existing property portfolio, and it's not completely dislocated from market dynamics. So we're seeing, you know, real estate valuation pressure all across the world. And in our instance, it's actually only some specific assets.

27:03 I won't go through this entire slide, but I think to allude to where some of that pressure was felt was in Anther Place vacant Anther Place. We we did have a rise more around down there, and that's on the increase of some some vacancies that we expect through the first quarter of this year and some of the releasing assumptions. So that that mall has done a great recovery for us. We've seen good earnings growth this year, because of some of the releasing risks associated with it, we've seen a little bit of valuation pressure. On the light industrial, the weak Kenyan economy and some of those FX challenges the corporates have faced there have resulted in some slower rent collections, but we do have plans in place, and those are being worked on as we speak. And then finally is that Vulcan lease expiry, and it's actually May of this year, and that renewal is under negotiation, but we did see some valuation pressure on those assets. Clearly, there's other bright lights. So the offsetting parts, and you can see some of the pictures on the right hand side, is the CapEx we've committed on the Club Med Resort in Senegal.

28:06 So you'll see some both earnings growth as well as some valuation growth from the hospitality sector. And, again, that's just on the capital we've committed there where we earn an 8% yield on any capital deployed. And finally, in the office sector, which is obviously a globally a relatively a relatively pressurized sector, we've managed to see some good leasing and specifically in Ghana with CCI, who are our partners within the call center businesses in Kenya, have also taken up space in some of our vacant Ghanaian office parks. So I think it shows the group have got some really good momentum on leasing, and I think that brings us into the slide on leasing. And the leasing team have done an unbelievably good job. So that green block there that you see is the office leasing we've done in Ghana. So that has helped to drop the the overall vacancy to 4.53%.

29:02 As Bronwyn alluded to earlier, if you strip out retail, which is a big component of the of the existing vacancy in the portfolio, we're only sitting at a 1% vacancy across, you know, the blended portfolio, which by international standards and, you know, by any sort of African standards is an unbelievably high leasing rate. There are further lease renewal negotiations negotiations underway, but I think our team have demonstrated their ability to release and to and to fill vacant space when that comes available. So it does bring us onto the EPRA NAV evolution. As we've discussed, the slight downward pressure in NAV for the for the for the reporting period is predominantly related to those portfolio evaluations of both ANFA and VDE.

29:52 We can get into further details, but, essentially, that's what's driven the the small valuation pressure, and it's only from the completed asset portfolio. We believe we're gonna have development assets coming through, which will start seeing some valuation improvements over the period.

30:09 So as we discussed upfront, I think the key thematic on the on the controllable elements of the income statements are the finance cost line. But, fortunately, we don't have a problem with maturity profile. We've managed to extend the duration of the debt, and that that sustainability linked debt refinance has given us a good a good facility to potentially leverage and grow the group going forward. So the intentions are that as assets come into a completed asset portfolio, income producing asset portfolio, they're absolutely suitable and and and have the right characteristics to be packaged within that syndication. And we believe over time that is able to scale and help us optimize the the group the group weighted average cost of debt.

30:56 And the key important part to state here is that our family of partnerships extends into the banking and financing sector, and we've got a very diverse funding mix. But, obviously, on all counts, we believe our partners there are are sort of long term partners who have who have stood by us through the through the cycles. The long term intention is still to move the group to a 35 to 40% LTV. That in itself, as Bronwyn has said earlier, combined with some of the other opportunities to reduce debt cost of debt should see us normalize the the finance cost line in the in the in the income statement.

31:37 So at the moment, the balance sheet is well managed. We are still trending down towards our medium term targets of 35 to 40%. And upon consolidation of GREA, we should see some downward movements.

31:52 Finally, we are cognizant of some of the illiquid dynamics in the share trading, which unfortunately does lead to volatility in the share price. The board is keenly aware of it and is looking at a few different remedies. So firstly, the GRIT two point o execution. The board believes in the strategy, and as as we continue to execute on that strategy, we should see accelerating earnings and capital recycling, and that in itself should be good for the share price dynamic. We're seeing that capital allocation process being more pronounced. So we're reducing the debts, funding the pipelines, and there is an opportunity for us to return capital to shareholders as and when we free up additional capital.

32:37 And then finally, we're looking at some index inclusion strategies. We've mentioned all of this because I think it's important to understand who our shareholders are, and our shareholders are seeking long term growth in both income and net asset value. And the management, I need to remind you, is over a 10% stake in this business, so keep me aligned with with our with our shareholders. On that front, Mark, I'm now take the camera down once again. I think I'm just going to hand back over to Bronwyn shortly to take us through some closing remarks, and then we'll open up for q and a after that. Thank you. Thank you, Darren, and thank you, Greg. I think they both clearly articulated, obviously, what we are demonstrating under the GRIT two point o strategy delivery. So really just some closing remarks from myself. So you would have heard me mention upfront around five key fundamentals that we are working on and the importance of what we have done, which is obviously to align to strategy delivery and what we are continuing to do now into the future. So as has been demonstrated by both Darren and Greg, these are really important components.

34:04 So the underlying property portfolio today, the sustainable operations, yes, we are delivering. As you've seen, it's significant NOI growth. We've seen significant cash collection. Darren and myself alluded to the 99% occupancy, excluding, obviously, retail, The strong leasing activity. So Greg made mention the ability that we have an in source solution to the entire ecosystem of real estate ensures that we can deliver the leasing activity because our core tenants are focused on delivery by our core management team. The simplification of the group structure has been absolutely fundamental and the implementation of the strategy. The acquisition of GREA, the closure of the acquisition of GREA, the fact that now we are consolidating GREA and we've had a reduction in a number of associates, the fee income, the revenue side of the business that we are demonstrating that we can achieve outside of property related revenue. This is monetizing our

35:09 actual IP. Our people that sit in the team today, we have generated over close on just over $6,500,000 of revenue from that line. We have demonstrated to date and will continue to demonstrate up to the financial year end that with the merger of GR1T, with the constructor borrower, we seek significant cost optimization. We have already seen that in the numbers today, and we will continue to see that in the numbers for next financial year, June 2024. That has a significant impact on return to investors, to stakeholders.

35:45 The balance sheet is a key fundamental focus of ours. We are hedged. We have hedged circa over 78% of our US dollars. We have entered into some very good hedges in relation to that.

35:59 The main focus now is the reduction of the LTV, the recycling of capital, the further recycling of assets, and the ability to once we've paid the higher cost of funding, we will see circa over $4,000,000 of finance cost reduction, and that is the target. What is important again and what is definitively to my heart and that of the management team is why do we do this? Yes. We do this for stakeholder return. Yes. We as management are over 10% have 10% shareholding in this business. But we do this to change the face of Africa. We have through all of our significant initiatives as Greg has mentioned earlier, build her woman in construction, we have not only pioneered, we are leading definitively from the front.

36:51 And we are showing the market what it's like and what it means to make an impact. And what is the benefit of that? It means that we are able to track capital, DFI money, IFC, significant partners, family of partnerships to this group to fund projects, to be partners, to pioneer, to change the landscape of Africa. This is the ability of impact. This is what we have demonstrated, and we will continue to demonstrate this. So really in summary, amidst a a global sort of economic environment that we've seen, We've obviously seen businesses come out of COVID. We've seen ourselves come out of COVID. We've seen continuous rising interest rates. Amidst all of that, we have delivered a solid set of results. So that not only shows delivery to strategy already, but will continue to show delivery to GRIT two point o strategy going forward.

37:46 So on that note, I would really like to thank our audience, our investors. From the board, I'd like to thank the board for the continuous support, our management team, our people that work relentlessly across the African Continent every day, including ourselves, people that are positioned across the continent. And on that note, I would like to close with a video, which is obviously the Artemis Hospital, our impact project that Greg and his team delivered in the last six months, and then we will open up to questions. Thank you for joining us today. That's great. Ladies and gentlemen, thank you very

40:05 much indeed. Bromwyn, Greg, Darren, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of the screen just by the company. Take a few moments to review your questions submitted already. I'd just like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via the Investor Meet company dashboard. I'll just bring your cameras back up for the Q and A session. And if I may just hand back to you to read through those questions submitted from investors and I'll pick up from you at the end. Thank you, Mark. So yes, please submit questions. We've actually got quite a few coming through. So what we'll try and do is collate them and sort of answer as many of them to sort of in in one in one sort of collation as as possible.

40:53 So I think possibly, Bronwyn, let's start with just ESG. It's obviously a very topical narrative across real estate. But can we both measure and define what impact it's having, and secondly, what it might mean for our funding and what it might mean for our tenant demand across the portfolio having high impact ESG buildings? Yeah. So I think this has been a major focus for us and exactly for those two components. So one, definitively, can we measure it? Absolutely. So one, we have almost completed a full rating on our ESG components. So we will have a a rating that can be utilized in the market. And and what does that rating do and why? So one, I did make mention of the fact that the importance of securing DFI money, which is impact money for Africa.

41:44 So this money is definitively available, and it's definitively available to the GRIT group. And the impact of this money is that it is significantly reduced in cost of funding. And we should we and when we see a replacement of some of our existing dates in future projects, there is a major saving in the cost of funding. Secondly, there's also a increased tenor of dates that's available from these DFIs. We've already secured our first instrument through the IFC, and we're working with a number of DFIs now across the continent. So the the actual impact on our bottom line, obviously, returns is definitely done through, obviously, the cost of funding and and, obviously, the DFIs. And then to your point, Darren, around our tenants. So like the building that I'm sitting in today in in Roche, which is the first five star green rose rated building in the Indian Ocean, Because of our rating in relation to this building, our tenants in the building today also get the benefit of that rating. Okay?

42:47 So what that means is that they can leverage that. So Dentons, which is a global multi legal practice that you find all over the globe, because they sit in a five star rated building, they can use that to their ESG components or targets. And that happens across the globe. So somebody like CCI, Greg mentioned, we're building a a very significant facility for CCI in Kenya. We'll also be able to leverage off that. So what does that mean? It means that these buildings become very attractive to global tenants and very attractive to leverage of the impact that we do. Again, as a team and what we possess from our real estate, we are not only pioneering in this regard, but we are actually leagues ahead of others.

43:32 So our competitive advantage is huge. I think if I can just overlay, Ron, and I think the leasing activity has demonstrated that we're able to charge at the market or at a slight premium. Absolutely. It's a it's a combination of the premium product and some of the bespoke natures and the relationships, but there's an absolute underpin and requirement from those tenants to be in in in green buildings. Absolutely. Could we maybe move on to just the mix of of tenants? So multinationals tenants have dropped somewhat in this reporting period. Maybe you can talk us through some of the mix effects of some of the disposals and why they might have had a near term impact on the multinational percentages. Yeah. So, you know, as as I mentioned, the strategy is very clear. So the strategy is to deal with global conglomerates and be able to service those real estate needs. So you will see sort of a gain of what's been demonstrated in in the likes of American Embassy now sitting as number one rated tenant from sort of 10% of our earnings.

44:36 So what we've seen is with some of the disposals that we've seen around our hospitality assets and also certainly some of the retail, we've seen that mix slightly change and reduce. But with our sort of non core assets disposals, which are going to be retail, once we remove retail from the portfolio over a period of time, that goes into sort of really high 90% again. And again, when you look at the strategy of our pipeline and you look at the strategy of GREA under the data centers, under the call centers, under the American Embassy, these are all multinationals. So as these projects get delivered, naturally, the the increase in this number happens. Thank you. I'm gonna invite Greg to come and join you. Greg, I think some of the questions are around those call centers, maybe in the data centers. Can you give us some idea of the potential and the scope for how big that partnership could be, and what are some of the key drivers and and hurdles to the relationships?

45:35 Yep. Absolutely, Darren. Thanks for that. So maybe to talk about BPO or or call centers at the beginning, there has been a big drive globally to move large a part of growth into Africa, and we are at the forefront of that growth at the moment. So we have partnered with the likes of CCI. We are moving through from Kenya now to Ghana, and there's a few other countries that we are looking towards. So the growth potential there is huge. The good thing is it's it's it's the the risk is mitigated by that, you know, we've got a strong relationship with them, and they are the total occupants of the the building. So we recently completed a building with them in Kenya in a a new city called Tatu City.

46:24 Great partnership between Tartu City, the GRIT group, and CCI. So on the BPO call center side, Darren, that opportunity is huge. But, obviously, we need to make sure that we are mitigating all the risks in the countries and and and jurisdictions that we go into. On the data center side, we've actually got some exciting news that will be coming to market soon. There has been a huge growth with regards to Africa and the the the data and communication storage. You've had the likes of, you know, Microsoft moving in. Africa data centers have been on the forefront of that growth trajectory, and the partnership that we have with them is is fantastic. The big thing there is the numbers. You know? One, maybe what's in Africa cost the same as it does in in Europe or or America, and it's numbers that we haven't really seen in real estate in Africa.

47:19 So we just need to be very guided and and and very sure of our way forward there because of the heavy cost that comes with those data centers. Again, making sure that the ESG side comes through because they are very heavy when it comes to energy consumption. So, yes, there is a a a massive opportunity, but we can't we we also wanna manage our risk exposure to to a single tenant or single sector. Greg, while you have the hot seat, maybe we can quickly discuss the outlook and the capacity for development revenue generation. So this additional revenue income, what is the capacity of the team, and what is the visibility of your pipeline? So if you if you look at what we've been able to achieve and and it's take from 2018 as much as the track record of the development team is a lot longer than that, if we take from 2018 to where we are today, we successfully completed north of a $100,000,000 worth of development a year. If we turn that back into the the revenue generation that it does for GRIP, that is circa $6.05 to $6,000,000 of annualized income that goes, you know, straight onto the profitability of the of the GRIP.

48:34 What we have what has been very interesting now is the company has been capitalized on a long term basis, so it's evergreen or going concern. And the strong part of that now is our partners. We we are able to do developments with them where it's capitalized, but the revenue creation for the group is fantastic. And we've got some great examples of that where we are are doing developments where our equity contribution is less than 5%, but we're getting full fees through the generation of putting the developments together, the development management, the leasing fees, and everything else that goes with it. So is this a sustainable business? Absolutely. And it is adding significantly to the profitability of the group.

49:22 Brian, maybe we can ask you to clarify on capital allocation, please. I think the questions are what are the hurdles and what are the considerations? And, ultimately, if and when we ever do return capital to shareholders by way of buyback or tender offers, are there specific markets you would do it on or not? But I think I think the question is broader than that. The question is more about how are you approaching capital allocation? What are those decisions? What's driving the the the discipline? Yeah. So, I mean, capital allocation is obviously quite fundamental, and I think it's a combination of we have shown the ability to recycle assets. So as I mentioned upfront, Darren, we're sitting in a fairly illiquid market across the continent and the ability to recycle those at that.

50:09 And then effectively, even through future capital raises, GREA has also sort of successfully concluded the capital raise of circa $100,000,000. The fact is where does that capital go in the group, and what is that capital allocation strategy? So as I demonstrated on the slide, which you did as well, Darren, we do sit with high cost of funding in the group, which, you know, being able to reduce debt is obviously a key component. The reduction of debt has a direct impact, obviously, on LTV and earnings. Okay? So that is a really important consideration for us. The consideration as well through the development money that GRIA raises and continues to raise is the ability to produce these projects, which Greg has mentioned now, at least developing yields and returns.

50:54 You will see the impact already of the CCR completion of that building in May of this year on what that does to our net asset value at group and also the fee generation to ourselves. So the importance of continuing a strategy where, yes, you need to look at the balance sheet and the debt, which is a key component. And then the second part is obviously putting it into these mitigated development projects that Greg has spent some time on. And then the idea is where our share price is trading today and significant discounts for your net asset value, it makes sense to look at the share buyback, Darren. And, obviously, the allocation of capital has historically gone towards repayments of debt. But going forward around the ability to actually start returning capital to investors and share buybacks obviously the most income's ability to do that, especially when we're sitting from a pricing perspective.

51:47 But all of this is under consideration and a key component of what we need to deliver now and demonstrating, obviously, ultimate return to all stakeholders. And a reminder, obviously, management owns also over 10% of this business. So we are as motivated to, one, deliver on a sustainable dividend and making sure that that goes sustainable, and then, obviously, the the net asset value growth of this business, and then, obviously, the share price. So making sure that we can get the share price bit closer back to net asset value is a key key KPI for us. Thanks, Brian. I think we'll probably expand on that same thematic because few of the questions are coming through probably not understanding the strategy of what we've done with Bora. So the internal it's in inverted commas, internal transaction.

52:35 But I think what's key to point out is if you have a look at that transaction, we have managed to sell it to GREA, and at the same time, we are seeing a capital subscription, a cash capital subscription that recapitalizes GREA simultaneously. So although it looks like an internal transaction, it's an internal transaction that facilitates an equity raise at the GROUP level. The questions are coming around dilution of earnings, and I think it's probably important to clarify here that the the transaction is structured in such a way that it does not result in earnings dilution. The reason being is that bottom block where you see the ability to reduce debt, if your debt is currently costing you almost 10% and these assets are yielding you eight Right. The near term cash that you've generated is accretive to shareholders to go and pay down the more expensive debt.

53:30 And at a point in the future when interest rates have normalized and when you get to a place where interest costs are probably below the yield of assets, it will be accretive to redeploy that capital elsewhere. So I think I think it's worth clarifying that that transaction is not dilutive to shareholders. In fact, that transaction is accretive to shareholders because we are able to deploy that capital and that cash into repaying expensive facilities. Yeah. And just as a reminder, you know, Bora has been capitalized as well by external capital. So the likes of the DFIs have capitalized that vehicle. And, ultimately, GRIT still consolidates that vehicle and then gets the benefit of running the asset manager. So we are managing the assets. We are entire ecosystem of real estate, which I alluded to earlier, is effectively generating significant fees back up to stakeholders.

54:19 So we're creating an additional revenue stream through these substructures. But definitively to Darren's point, it is not a dilution. I think let's go with some of the easier ones to answer is is there research on the company? So at the moment, I think I can take that one. We have a couple of research houses that cover the stock. If you look on the website, those analyst reports are all on there. So retail investors as well can access those. But as you'd appreciate, smaller companies don't often get full blown research coverage, so there are a couple of houses we have write written on us. Please have a look at the website if you want any further detail on on those. I think let's maybe finish off.

55:06 And, clearly, we're not we haven't given explicit guidance, but I think if, Roman, if you can just give us some outlook on what will shape the second half of the financial year, And I suppose going back to what we believe is some version of a sustainable earnings profile and therefore dividend profile. Yeah. So I think, obviously, what you see, you see significant initiatives already in the numbers and, obviously, the impact now of GRIT two point o coming through. So really for the next six months of the financial year, we obviously entered already is we're obviously seeing the ability to continue their operations, the actual properties themselves are delivering and are delivering growth, which is fantastic to see. So the actual operating business is very, stable.

55:52 We've seen obviously through the optimization of costs, a significant reduction in admin costs and a further reduction with the combination economies of scale and a number of other very significant cost initiatives that are being done in the business. There is a considerable amount of work around what Greg has mentioned now, the the projects and the delivery of this revenue line item, these fees. And I think we had made mention of it earlier, but it's currently sitting even the numbers of surplus at $6,800,000 already. And then, obviously, the finance cost line. So, yes, we are seeing pressure today on the higher interest rate costs, and, obviously, that has dropped the dividend. We will ensure that all of those significant initiatives will continue to make sure that we can deliver a dividend into, obviously, June 2024, and then the importance of growth thereafter.

56:45 So as the portfolio comes through and as Greg continues to complete further assets, the the speed generation, and as this refinancing of this expensive debt happens through this asset recycling, we just need the sustainability of the dividends being quite significant going forward. And, yes, we see some pressure now. The reality is we do sit in a macro environment where our cost of funding has increased substantially over the last eighteen months. But with these hedges and and where the significance of what's been put into place, we see the stabilization of those numbers going forward. Great. Thank you. I think with that, we've reached the hour. So, Mark, I'm going to hand back to you if that's okay. That's great, Darren. Great. Bromwin, thank you very much indeed. Bromwin, I know that investor feedback will be particularly important to you and to the rest of the team, and I'll shortly redirect those on the call to give you their feedback.

57:37 But before doing so, I wondered if I may, Bromwin, just come back to you for a couple of closing comments, and then I'll send investors to give you their feedback. Thank you. And I think I just would like to thank the audience and, you know, thank, obviously, the investors that have dialed in and our key stakeholders, financiers and partners. You know, it's as we are aware, as I've mentioned, you know, the global sort economics makes running a real estate business of this nature, and especially across 12 African countries quite challenging. But, you know, the management team and myself who are significantly aligned are very sort of, you know, they've been putting some key components to the business, which you've already seen in numbers today. And we look forward to delivering on those into the future. And, you know, the board and ourselves, both Greg and I and the management team, the GRIT two point o strategy.

58:26 We've delivered already. We see further delivery, and we're actually really excited to what's to come. And then, obviously, overall is the impact. We are making pioneering impact and have already across the African continent, and we look forward to continuing to do so. Thank you very much, and thanks for joining us today. Brilliant. Thank you very much indeed. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure be greatly valued by the company. On behalf of the board of GRIT, we'd like to thank you for attending today's presentation, and good morning to you all.