Octodec Investments Limited · JSE:OCT
Octodec Investments — H1 2019 Earnings Presentation
43 slides from Octodec Investments's earnings presentation, May 13, 2019
Slide 1: Interim Results for the 6 months ended 28 February 2019
Unaudited Interim Results for the 6 months ended 28 February 2019 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 2: Agenda
agenda 1 about us 03 2 overview for the period 06 3 our portfolio performance 08 4 our results 24 5 outlook 34 6 questions and answers 37 7 contact details 38 8 appendices 39 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 3: About us
about us 1 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 4: About us
about us • Listed on the JSE in 1990: REIT status on 1 September 2013 • 294 properties (including joint venture) in portfolio • Strong operational focus with core competencies in property management • Properties managed by City Property Administration (Pty) Ltd o Over 40 years’ property management e
Slide 5: Overview of Tshwane and Johannesburg
overview Allocation of capital to ensure sustained value creation of Tshwane Portfolio value at R13 billion • Concentration of investments • Increased urbanisation Octodec properties in: • New developments improving node } Tshwane • Strong demand for space underpinned 1 076 937 m2 Total of 66% of ou
Slide 6: Overview for the period
overview for the period 2 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 7: Overview for the period
overview for the period Context Progress • Tough economic, political and operating environment • Property fundamentals sound • Residential increasingly competitive but demand is • Strategic upgrades to uplift key nodes strong • Active recycling of non-core assets – proceeds of • Tenant retention and
Slide 8: Our portfolio performance
our portfolio performance 3 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 9: Portfolio analysis: rental income
portfolio analysis: rental income 28 February 2019 Rental income (%) by geographical location Rental income (%) by sector 34.4 40 35 15.6 (FY18: 16.0) 30 31.9 21.3 25 (FY18: 31.1) 20 12.7 15 11.9 6.4 10 11.5 4.9 4.3 4.1 5 (FY18: 11.4) 0 Waverley, Gezina, Moot surrounding areas Silverton and Tshwane,
Slide 10: Portfolio analysis: GLA
portfolio analysis: GLA 28 February 2019 GLA (%) by geographical location GLA (%) by sector 31.5 35 25.2 (FY18: 25.2) 25.2 30 25 8.6 20 (FY18: 8.5) 15 9.0 8.7 7.1 6.0 10 4.5 4.3 3.7 5 24.1 0 (FY18: 23.8) 15.5 Waverley, Gezina, Moot Tshwane, Hatfield Tshwane, Arcadia Tshwane West surrounding areas Si
Slide 11: Residential
residential Portfolio sectors: Rental income (%) 6 months 12 months 28 Feb 2019 31 Aug 2018 Number of properties 73 73 Number of residential units 9 443 9 468 o Johannesburg (%) 37 37 o Tshwane (%) 63 63 Gross lettable area (GLA m2) 391 887 393 643 Rental income (R’million) 247 479 Rental income gro
Slide 12: Residential (continued)
residential (continued) Portfolio sectors: Rental income (%) • Tenant profile analysis, for applications during the period o Employed by government – 27% o Students – 35% of occupants o Churn at 42% per annum o Average gross salary per application of R28 480 o Gross salary above R35 000 – 17% • Stro
Slide 13: Retail – shops
Portfolio sectors: retail – shops 6 months 12 months Rental income (%) 28 Feb 2019 31 Aug 2018 Gross lettable area (GLA m2) 338 794 349 633 Rental income (R’million) 185 374 Rental income growth (like-for-like)*(%) 1.8 1.6 Total vacancies (% of GLA m2) 12.8 13.2 Core vacancies (% of GLA m2) 12.8 13.
Slide 14: Retail: shopping centres
retail: Portfolio sectors: Rental income (%) shopping centres 6 months 12 months 28 Feb 2019 31 Aug 2018 Gross lettable area (GLA m2) 95 012 95 009 Rental income (R’million) 78 155 Rental income growth (like-for-like) (%) 0.3 3.9 Total and core vacancies (% of GLA m2) 6.6 5.2 We have six high-qualit
Slide 15: Retail: shopping centres (continued)
Portfolio sectors: retail: shopping centres (continued) Rental income (%) • Woodmead Value Mart o Increase in vacancies during the period o At 28 February 2019 vacancies at 6%, reduced after 28 February 2019 to 2% o Strong rental growth • Killarney Mall o Rental growth and occupancy levels under pre
Slide 16: Offices
offices Portfolio sectors: Rental income (%) 6 months 12 months 28 Feb 2019 31 Aug 2018 Let to government (% of total rental income 49.7 49.7 from offices) Other (% of total rental income from 50.3 50.3 offices) Gross lettable area (GLA m2) 410 103 413 581 Office space held for development / mothbal
Slide 17: Offices (continued)
offices (continued) Portfolio sectors: Rental income (%) • Market conditions dictated by supply • Offices comprise of o Government office space o Corporates o Smaller units occupied by SMEs - Occupancy levels stable • Loss of two government tenants in FY2018 – 7 139 m2 – impacting on growth in the p
Slide 18: Industrial
industrial Portfolio sectors: Rental income (%) 6 months 12 months 28 Feb 2019 31 Aug 2018 Gross lettable area (GLA m2) 252 015 253 396 Rental Income (R’million) 55 109 Rental income growth (like-for-like*) (%) 3.0 0.3 Total vacancies at period end 12.3 15.0 (% of GLA m2) Core vacancies at period en
Slide 19: Industrial (continued)
industrial (continued) Portfolio sectors: Rental income (%) • Focus on tenant retention and reducing vacancies • Successful redevelopment of properties o Stronger demand after upgrades o Upgrade largely tenant driven o The Tannery Industrial Park (Silverton) and Rosemitch (Tshwane West) – improved o
Slide 20: Specialised and other
Portfolio sectors: specialised and other Rental income (%) 6 months 12 months 28 Feb 2019 31 Aug 2018 Total gross lettable area (GLA m2) 141 056 139 171 Rental income (R’million) 89 175 Rental income growth (like-for-like*) (%) 12.2 6.0 Total vacancies at period end (% of GLA m2) 3.8 3.7 Core vacanc
Slide 21: Specialised and other (continued)
specialised and other (continued) Portfolio sectors: Rental income (%) Specialised and other includes: • Hotels – City Lodge and Protea Hotels situated in Hatfield Pretoria: o total GLA of 13 458 m² o rental income growth – 6.5% • Auto dealerships – Three McCarthy dealerships and One Toyota dealersh
Slide 22: Vacancies by sector
vacancies by sector Total vacancies % Core vacancies % 28 February 2019 • Total vacancies in our portfolio as at Offices 43.9 19.3 28 February 2019 were at 17.7% of Retail – shops 12.8 12.8 our total GLA (31 August 2018: Retail – shopping centres 6.6 6.6 18.6% of our total GLA) Specialised and other
Slide 23: Lease expiry profile
lease expiry profile • Octodec’s portfolio features a mix of short- to Lease expiry profile by rental income (%) long-term leases with the majority of short- term leases providing for a monthly 2024 12 months to agreement at expiry, which is typical of the 2020 2021 2022 2023 and 28 February beyond
Slide 24: Our results
our results 4 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 25: Measuring performance
measuring performance • Distribution of 101.7 cents per share for the • Weighted average all-in cost of borrowings increased six-month period, in line with the prior comparative period to 9.4% • 2.2% like-for-like growth in rental income • Interest rate risk mitigated – hedged through interest (31 A
Slide 26: Distributable earnings simplified income statement
distributable earnings simplified income statement Unaudited Unaudited 6 months 6 months % 28 February 2019 28 February 2018 Change R’000 R’000 Joint ventures, Kempton Place, Revenue – earned on contractual basis 5.2 977 603 929 656 The Brooklyn and Gerlan 100% held, previously equity accounted, Pro
Slide 27: Condensed consolidated statement of financial position
condensed consolidated statement of financial position Unaudited Audited Unaudited Audited 28 February 2019 31 August 2018 28 February 2019 31 August 2018 R'000 R'000 R'000 R'000 ASSETS EQUITY AND LIABILITIES Non-current assets 12 765 459 12 590 121 1 Equity 7 763 260 7 824 398 Investment property 1
Slide 28: Key drivers in net asset value per share
key drivers in net asset value per share Movement in NAV (CPS) 14 9 3 050 1 102.7 3 000 101.7 2 950 2 939 2 900 2 916 2 850 2 800 NAV at 31 August 2018 Distributable profit Other portfolio Revaluation of property Revaluation of swaps Distributions paid 2019 NAV at 28 February 28 Octodec Investments
Slide 29: Cash flow for the period ended 28 February 2019
cash flow for the period ended 28 February 2019 R'000 Distributions aligned with cash generated from operations 1 000 000 after taking finance costs into account 800 000 485 741 600 000 400 000 (218 489) (270 723) 98 769 (74 779) (34 223) 62 912 49 208 200 000 0 -200 000 -400 000 -600 000 1 Septembe
Slide 30: Capital management – funding at 28 February 2019
capital management – funding at 28 February 2019 • Prudent management of debt % R’Million Interest rate o LTV – at 38.3% (target – to decrease LTV) Total borrowings – Banks 3 910 9.0 o Interest rate hedging – 75.5% of DMTN programme – unsecured 688 8.6 borrowings (target to maintain at DMTN programm
Slide 31: Funding split as at 28 February 2019
funding split as at 28 February 2019 Process to further diversify funding ongoing 28 February 2019 31 August 2018 Standard Bank – Standard Bank – R1 502m (30%) R1 229m (25%) DMTN Programme (unsecured) – DMTN R929m Programme (19%) (unsecured) – R688m (14%) Nedbank – Nedbank – R2 689m (56%) R2 777m (5
Slide 32: Interest bearing debt expiry profile
interest bearing debt expiry profile as at 28 February 2019 Expiry profile per financial year (Rm and %) 22.5% Debt maturing in the next 6 months: • Short term borrowings include commercial 21.8% 20.8% 1 200 paper (DMTN programme) of R170 million • 3.4% 19.1% 170 Weighted average term of loans 1083
Slide 33: Interest rate hedges expiry profile
interest rate hedges expiry profile Actively monitoring and managing risk Expiry profile per financial year (Rm and %) Swaps – total of R4.250 billion Average weighted expiry – 2.3 years Rm 2 000 • At 28 February 2019, interest rates in 41.2% Thousands 1 800 respect of 75.5% of borrowings hedged 1 6
Slide 34: Outlook
outlook 5 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 35: Outlook
outlook • The economic outlook for the • Demand is expected to remain strong driven by country remains subdued and will urbanisation and population growth however continue to impact business and affordability remains a concern consumer confidence • The forecast dividend for the second six month • No
Slide 36: Investment case
investment case • Tried and tested strategy • Sustainable model – urban renewal and middle-class growth • Well-balanced portfolio with significant synergies across sectors in the CBDs • Strong potential development pipeline – unlock value of current portfolio (new and redevelopments) • Proven track
Slide 37: Questions and answers
questions and answers 6 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 38: Contact us
contact us 7 Jeffrey Wapnick Anthony Stein Managing Director Financial Director Tel: +27 12 319 8708 Tel: +27 12 319 8780 E-mail: jeffw@octodec.co.za E-mail: anthony@octodec.co.za www.octodec.co.za 38 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 39: Appendices
appendices 8 Octodec Investments Limited | Unaudited interim results presentation 2019
Slide 40: Corporate structure as at 28 February 2019
corporate structure as at 28 February 2019 39% 38% 23% Wapnick family Institutional Other & directors investors Greater than 2% Beneficial institutional shareholders 6.8% 6.2% 3.8% 2.4% 2.3% 2.0% Old Mutual Nedbank Government Stanlib Allan Gray Prudential Group Group Employees Pension 40 Fund Octode
Slide 41: Our strategy
our strategy • Offer innovative property investment opportunities • Increase the profitability of our existing portfolio by: that create and deliver long-term sustainable o Continually improving and protecting well returns by: located properties o Building a diversified portfolio in the Tshwane o En
Slide 42: Top 10 properties
top 10 properties Account for 27% of the Octodec investment property portfolio by value Property Location Sector Size (m2) The Fields Hatfield, Tshwane Mixed use 57 034 Killarney Mall Killarney, Johannesburg Shopping centre 46 945 Woodmead Value Mart Woodmead, Johannesburg Shopping centre 18 049 Cen
Slide 43: Recent sales
recent sales In line with our strategy to dispose of non-core assets, the following properties were sold and transferred during the period under review Total Profit/(loss) consideration on disposal Transfer Exit yield Property Location R’million R’million date % Medical Towers Johannesburg CBD 25.2