Sa Corporate Real Estate Ltd. · JSE:SAC
Sa Corporate Real Estate — H1 2024 Earnings Presentation
64 slides from Sa Corporate Real Estate's earnings presentation, Sep 13, 2024
Slide 1: SA Corporate 2024 Interim Results Presentation
SA Corporate 2024 Interim Results Presentation 13 September 2024
Slide 2: Agenda
AGENDA Introduction & Overview 01 Rory Mackey 02 Reaffirming Our Strategy Samson Mojalefa 03 Financial Performance Sam Moodley Portfolio Performance 04 Nomzamo Radebe / Rory Mackey 05 Unlisted Residential Fund Rory Mackey Outlook 06 Rory Mackey
Slide 3: Introduction & Overview
INTRODUCTION & OVERVIEW RORY MACKEY
Slide 4: 2024 H1 Overview: Distribution
2024 H1 OVERVIEW DISTRIBUTION DISTRIBUTABLE INCOME DISTRIBUTION 6.3% Declared 12.11 cps vs 2023 H1 at 90% payout ratio (2023 H1: 11.39 cps at 90% payout ratio) R338.4 million or 13.46 cps (2023 H1: R318.2 million or 12.65 cps) 4
Slide 5: 2024 H1 Overview: Portfolio Performance
2024 H1 OVERVIEW PORTFOLIO PERFORMANCE TOTAL NET PROPERTY INCOME (“NPI”) TRADITIONAL PORTFOLIO VACANCIES % of gross lettable area (“GLA”) R734.5 million 1.6% (2023 H1: R592.6 million) (31 December 2023: 2.0%) TOTAL LIKE-FOR-LIKE NPI INCREASED BY RESIDENTIAL PORTFOLIO VACANCIES % of total units 4.8%
Slide 6: 2024 H1 Overview: Property Activity and Capital Structure
2024 H1 OVERVIEW PROPERTY ACTIVITY CAPITAL STRUCTURE DISPOSAL PIPELINE LOAN TO VALUE (“LTV”) RATIO SINCE 1 JANUARY 2024 TO 30 JUNE 2024 R224.7 million 41.9%* (R52.0 million transferred to 30 June 2024; R172.7 million contracted not yet transferred, (31 December 2023: 41.9%) of which R12.4 million ha
Slide 7: Disposal Pipeline (Transferred & Contracted)
DISPOSAL PIPELINE (Transferred & Contracted) Transferred disposals: Gross selling Property Transfer date price (Rm) Region Sector Residential apartments (1) Jan 24 - Jun 24 52.0 Gauteng Residential Total 52.0 Contracted and unconditional disposals: Expected transfer Gross selling Property date price
Slide 8: Disposal Pipeline (Contracted Post 30 June 2024)
DISPOSAL PIPELINE (Contracted Post 30 June 2024) Property Expected transfer date Gross selling price (Rm) Region Sector 155 Old Main Road, Pinetown Nov-24 68.0 KwaZulu-Natal Industrial Nobel Street Office Park, Bloemfontein Nov-24 39.0 Free State Commercial Forest Road Design & Décor Centre Extensio
Slide 9: Reaffirming Our Strategy
REAFFIRMING OUR STRATEGY SAMSON MOJALEFA
Slide 10: SA Corporate Strategy
SA CORPORATE STRATEGY Convenience Financial Orientated Retail Sustainability Portfolio Logistics Quality Focussed Residential Industrial Portfolio Portfolio 10
Slide 11: Strategy – Convenience Orientated Retail Portfolio
SA CORPORATE STRATEGY – CONVENIENCE ORIENTATED RETAIL PORTFOLIO Robust retail property portfolio focussed on convenience-orientated shopping centres which dominate their catchment areas Net Operating Income Growth (y-o-y) SAC Retail Property Split by Property Type 40,0 18% 2023 30,0 30% 20,0 52% 10,
Slide 12: Strategy – Logistics Focussed Industrial Portfolio
SA CORPORATE STRATEGY – LOGISTICS FOCUSSED INDUSTRIAL PORTFOLIO Quality logistics portfolio offering competitive rentals and that invests in established logistics precincts and properties optimised to meet tenant needs 2023 Net Operating Income Growth (y-o-y) SAC Industrial Portfolio Split by Proper
Slide 13: Logistics Focussed Industrial Portfolio: Total Return
SA CORPORATE STRATEGY – LOGISTICS FOCUSSED INDUSTRIAL PORTFOLIO SAC industrial portfolio has yielded an annualised total return above benchmark over the 10-year period Industrial Total Return 12,0 11,4 2023 11,4 11,0 10,0 8,5 8,3 8,0 7,1 6,0 4,0 2,0 0,0 3 Year Annualised 5 Year Annualised 10 Year An
Slide 14: Logistics Focussed Industrial Portfolio: Rent and Vacancy
SA CORPORATE STRATEGY – LOGISTICS FOCUSSED INDUSTRIAL PORTFOLIO Average Monthly Base Rent Receivable per m² Vacancy (%GLA) 90,0 6,0% 5,7% 80,0 76,6 73,4 5,3% 4,9% 2023 5,0% 70,0 65,2 4,8% 60,0 56,8 54,5 4,0% 52,3 3,8% 50,0 3,6% R/m2 3,2% 3,0% 40,0 2,6% 30,0 2,3% 2,0% 2,1% 20,0 1,5% 1,5% 1,4% 1,0% 1,
Slide 15: Logistics Focussed Industrial Portfolio: Operating Costs
SA CORPORATE STRATEGY – LOGISTICS FOCUSSED INDUSTRIAL PORTFOLIO • SAC operating cost growth is slower than peers, reducing the cost to income ratio even further below the benchmark. • Competitive advantage of contracted triple net leases on the majority of logistics focussed properties. Industrial:
Slide 16: Logistics Focussed Industrial Portfolio: Strategic Intent
SA CORPORATE STRATEGY – LOGISTICS FOCUSSED INDUSTRIAL PORTFOLIO Strategic Intent • Remain invested in logistics warehousing industrial segment and grow investment exposure on a phased basis, improve the quality and relevance of the properties,2023 consequently strengthening rentals. o Upgrade proper
Slide 17: Strategy – Quality Residential Portfolio
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO A “best in class” residential rental portfolio in inner city precincts and suburban estates Global real estate returns by sector South Africa: Net operating income growth of residential property against other sectors 2023 Source: MSCI Real Assets
Slide 18: Quality Residential Portfolio: By GLA
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO By GLA 8.5% 91.5% Residential Retail / Commercial 18
Slide 19: Quality Residential Portfolio Footprint
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO FOOTPRINT Residential Footprint Unit Split by Area - units 10 000 8 000 8 789 6 000 7 516 4 000 5 545 4 136 2 000 3 380 3 244 - AFHCO INDLU Total Excl. student units Inner city Suburban Unit Split by Area - % 70% 63% 60% 55% 54% 50% 45% 46% 40% 3
Slide 20: Quality Residential Portfolio: Vacancies
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO • Residential vacancies of 4.4% at year end was below the National and Gauteng averages of 6.7% and 8.1% demonstrating robust performance. This improved further to 4.0% at 30 June 2024. • Low vacancies an indicator of strong residential rental se
Slide 21: Quality Residential Portfolio: Rentals and Vacancy
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO • Rental properties priced from below R3 000 and between R3 000 and R7 000 all remained above the national and Gauteng averages. • Afhco’s average vacancies of 4.4% at year end (4.0% at 30 June 2024) starkly contrast to this, demonstrating the po
Slide 22: Quality Residential Portfolio: Disposals and Acquisitions
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Disposals and acquisitions over the past 3 years of: • Poorer quality properties in precincts not dominated by Afhco. • Poorer quality apartments in suburban estates with poor property and financial fundamentals. • Retail properties where tenanti
Slide 23: Strategy – Recap
SA CORPORATE STRATEGY – RECAP SAC Retail portfolio comprises mainly smaller format open-air stores with a convenience offering (52% - Neighbourhood; 30% - Community; 18% - Small regional) • Post-COVID-19 Pandemic, smaller format stores have generated better income returns than larger format stores.
Slide 24: Financial Performance
FINANCIAL PERFORMANCE SAM MOODLEY
Slide 25: Financial Sustainability
FINANCIAL SUSTAINABILITY Debt Refinancing The Group has R602.3 million of facilities expiring in 2024 that are being refinanced. Hedging R1.25 billion of swap contracts entered into in 2024: Convenience • R500 million 2 year swap in H1’24 to ensure hedging is >70%. Financial Orientated Sustainabilit
Slide 26: 2024 Interim Distributable Income Analysis
2024 INTERIM DISTRIBUTABLE INCOME ANALYSIS Like-for-like NPI Like-For-Like NPI • Improved rental largely due to reduced vacancies, positive reversions and escalations 4.8% ↑ R40.9m. • Improved recoveries due to reduced vacancies and municipal expense increases or ↑ R26.2m. R25.0m • Improved parking
Slide 27: Net Asset Value (cps)
NET ASSET VALUE (CPS)1 475,0 450,0 3 2 2 (1) (2) 425,0 400,0 CPS 375,0 443 439 350,0 325,0 300,0 Opening NAV 1 Revaluation of MTM swaps Foreign Other movements Distributable Closing NAV 30 January 2024 investment derivatives adjustment i.r.o. income net of June 2024 properties Zambia JV distribution
Slide 28: Investment Property Analysis
INVESTMENT PROPERTY ANALYSIS 144 80 18 000 17 000 (49) 16 000 15 000 14 000 13 000 12 000 11 000 Rm’s 10 000 17 721 17 896 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 Investment Properties Improvements / Disposals Fair value adjustment Investment Properties December 2023 Development 1 costs 1 Ju
Slide 29: Debt & Interest Rate Swap Facilities
DEBT & INTEREST RATE SWAP FACILITIES Debt Facilities Unutilised revolving Weighted average rate Term debt Average tenor credit facilities (“RCF”) (“WAR”) excluding swaps R8.8bn R503.1m 2.1 years 10.2% (Dec 2023: R8.8bn) (Dec 2023: R640.0m) (Dec 2023: 2.6 years) (Dec 2023: 10.2%) Swap profile Hedged
Slide 30: SA REIT Loan to Value and Net Interest Cover
SA REIT LOAN TO VALUE AND NET INTEREST COVER FV int rate SA REIT loan to Net debt LTV excl. 41.9% 41.7% value swap derivatives (Dec 2023: Swaps (Asset) (Dec 2023: 41.9%) 41.6%) R41.6m June 2023 Variance June 2024 Net interest cover Distributable income before 699 274 578 536 120 738 interest (R’000)
Slide 31: Portfolio Performance
PORTFOLIO PERFORMANCE NOMZAMO RADEBE RORY MACKEY
Slide 32: Overview – Sectoral Analysis of South African Portfolio
OVERVIEW – SECTORAL ANALYSIS OF SOUTH AFRICAN PORTFOLIO 32
Slide 33: SA Portfolio: Retail
VALUE OF SOUTH AFRICAN PORTFOLIO SA PORTFOLIO: RETAIL 38.8% (Jun 2023: 45.4%; Dec 2023: 38.7%) LIKE-FOR-LIKE 2.9% 97.9% COLLECTIONS (2023 H1: 97.2% NPI GROWTH1 (2023 H1: 1.2% 2023 FY: 5.3% ) 2023 FY: 97.4%) VACANCY1 2.8% ARREARS 5.4% (Jun 2023: 3.1% (Jun 2023: 5.1% Dec 2023: 2.7%) Dec 2023: 5.8%) RE
Slide 34: Retail Leasing
RETAIL LEASING National and Convenience Tenancy Growth In The Retail Portfolio 80,0% 300 000 245 630 70,0% 232 329 250 000 228 979 221 936 222 334 60,0% 214 148 205 017 200 000 50,0% 178 624 166 174 157 053 148 424 GLA (m2) 155 133 40,0% 150 000 70,1% 66,3% 63,3% 63,4% 63,3% 30,0% 59,2% 57,6% 100 00
Slide 35: Trading Density Trends
TRADING DENSITY TRENDS BEST PERFORMING TRADING CATEGORIES PER CENTRE TYPE 35
Slide 36: SA Portfolio: Industrial
VALUE OF SOUTH AFRICAN PORTFOLIO SA PORTFOLIO: INDUSTRIAL 18.8% (Jun 2023: 23.3%; Dec 2023: 18.5%) LIKE-FOR-LIKE 6.3% 100.1% (2023 H1: 2.5% COLLECTIONS (2023 H1: 101.5% NPI GROWTH 2023 FY: 101.5%) 2023 FY: 5.3%) 0.0% 2.5% VACANCY (Jun 2023: 0.0% ARREARS (Jun 2023: 3.0% Dec 2023: 0.2%) Dec 2023: 2.4%
Slide 37: SA Portfolio: Afhco
VALUE OF SOUTH AFRICAN PORTFOLIO SA PORTFOLIO: AFHCO 41.0% (Jun 2023: 29.7%; Dec 2023: 41.3%) TOTAL RESIDENTIAL INNER CITY RETAIL (91.5% of portfolio) (8.5% of portfolio) VACANCY VACANCY RENTAL NPI GROWTH RESIDENTIAL 1 RETAIL ESCALATION AFHCO LIKE-FOR-LIKE AFHCO AFHCO AFHCO 4.9% 6.5% 7.0% 3.4% (Jun
Slide 38: Improving Portfolio Quality Through Amenity Upgrades
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Improving Portfolio Quality Through Amenity Upgrades • Amenity upgrade programme continued. o South Hills walking trail and external painting – complete. o Jeppe Post Office gym – complete. o Newgate recreational area – in progress. o Montere ext
Slide 39: Residential Digitisation Strategy
RESIDENTIAL DIGITISATION STRATEGY Automated Leasing Facilities Social Media Management Presence & BMS DIGITISATION VALUE UNLOCK Marketing & CRM Tenant AI 39
Slide 40: Automated Leasing
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Automated Leasing Capture your Sign your application lease details 40
Slide 41: Facilities Management and Building Management Systems
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Facilities Management and Building Management Systems 41
Slide 42: Customer Relationship Management (CRM)
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Customer Relationship Management (CRM) 42
Slide 43: Marketing & Tenant AI
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO Marketing & Tenant AI Deliverables • Focussed marketing. • Predict tenant behaviour i.r.o. credit worthiness, occupancy period & future apartment sale propensity during tenanting vetting. Social Media Presence • Annual follower growth target = 2X
Slide 44: Zambia Investment Update
SAC SHARE PROPERTY VALUE ZAMBIA INVESTMENT UPDATE LFL NPI (USD) : 1.82% y-o-y R1.8 bn (Jun 2023: R1.6 bn; Dec 2023: R1.8 bn) PROPERTY PERFORMANCE • East Park Mall (50% exposure valued @ USD 68.8m) Vacancy Rental Escalation (USD) Expiry Renewals Renewal Reversions (USD) 2.7% 2.7% 100% 0.8% • Acacia O
Slide 45: Energy Sustainability Update
ENERGY SUSTAINABILITY UPDATE Solar PV Rollout Cumalative Industrial Retail Residential 20,00 18,44 18,00 16,33 16,00 14,00 13,23 12,00 11,01 10,42 MWP 10,00 9,10 8,00 6,00 4,00 2,00 - 2019 2020 2021 2022 2023 2024 H1 YEAR 1st residential suburban estate with “off-grid” capability to be completed by
Slide 46: Unlisted Residential Fund
UNLISTED RESIDENTIAL FUND RORY MACKEY
Slide 47: Unlisted Residential Fund Update
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO UNLISTED RESIDENTIAL FUND UPDATE Investor 1 • Equity investment appetite = R1.25 billion. • Due diligence completed. • Anticipated internal approvals in week of 30 September 2024. • Flow of funds expected in December 2024. Investor 2 • Equity inv
Slide 48: Portfolio Refinement
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO PORTFOLIO REFINEMENT Total Residential R 7.08 billion Unlisted Residential Fund R 5.29 billion Portfolio to be Disposed R 1.79 billion Properties to be Disposed R 1.79 billion Property Sales R 670.4 million Sales of above contracted R 438.8 milli
Slide 49: Portfolio Refinement – Sectional Sales Case Studies
SA CORPORATE STRATEGY – QUALITY RESIDENTIAL PORTFOLIO PORTFOLIO REFINEMENT – SECTIONAL SALES CASE STUDIES Property No. of Average Total Sales Premium to Average Sales Apartments Price Value Valuation % Exit Yield % Timeframe Sold North Park Mall (ex Afhco) 123 R 345 000 R 42 500 000 31% 8.4% 3 Years
Slide 50: Outlook
OUTLOOK RORY MACKEY | SA CORPORATE AFHCO { REAL ESTATE aes tong
Slide 51: 2024 Year End Outlook
2024 YEAR END OUTLOOK Retail • Vacancy anticipated to remain low. • Lease escalations are expected to be above current inflation levels. • Renewals forecast to be flat to marginally positive. Industrial • Negligible vacancy. • Lease escalations expected to be above inflation. • Renewal reversions le
Slide 52: Questions
QUESTIONS f SA CORPORATE BE asco { REAL ESTATE aes easing
Slide 53: Appendices
APPENDICES | SA CORPORATE AFHCO f REAL ESTATE Ae Heng
Slide 54: Distributable Income at a Glance
DISTRIBUTABLE INCOME AT A GLANCE FOR THE INTERIM PERIOD ENDED 30 JUNE 2024 June 2024 June 2023 % Rm Rm Variance Net Property Income – Like-for-like 543.671 518.690 4.8 Net Property Income – Developments 44.418 44.016 0.9 Net Property Income – Acquisitions 144.205 - 100.0 Net Property Income – Held f
Slide 55: Group Debt Structure at 30 June 2024 (Excl Fixes)
GROUP DEBT STRUCTURE – AT 30 JUNE 2024 (EXCL FIXES) 55
Slide 56: Group Debt Structure at 30 June 2024 (Incl Fixes)
GROUP DEBT STRUCTURE – AT 30 JUNE 2024 (INCL FIXES) 56
Slide 57: Group Debt Expiry Profile at June 2024
GROUP DEBT EXPIRY PROFILE AT 30 JUNE 2024 4 500 11,5% 10,2% 10,2% 10,1% 4 000 10,4% 10.2% 9,5% 3 500 3 000 7,5% 241 2 500 5,5% 2 000 300 1 500 3,5% 2 703 2 314 1 000 10 1,5% 1 458 500 1 149 602 0 -0,5% 2024 2025 2026 2027 2028 Total Drawn R'm Total Undrawn R'm Rate 57
Slide 58: Group Debt Structure Swaps at June 2024
GROUP DEBT STRUCTURE SWAPS AT 30 JUNE 2024 Jul 2024 350 7,37% Jul 2024 100 7,00% Oct 2024 275 7,07% Oct 2024 275 7,07% Oct 2024 28 7,13% Oct 2024 28 7,13% Oct 2024 145 7,68% Oct 2024 145 7,68% Oct 2024 150 7,60% Nov 2024 491 1,41% Dec 2024 150 7,65% Jan 2025 50 6,55% Jan 2025 50 6,55% Jan 2025 150 6
Slide 59: Interest Rate Swap Expiry at June 2024
INTEREST RATE SWAP EXPIRY AT 30 JUNE 2024 2 500 8,0% 7,7% 7,0% 6,9% 2 000 6,0% 6,0% 5,0% 1 500 2 725 4,0% 2 139 1 000 3,0% 1 300 2,0% 500 1,0% 0 0,0% 2024 2025 2026 Total swaps at Jun 24 Rate at Jun 24 59
Slide 60: Retail Portfolio
RETAIL PORTFOLIO Portfolio1,2 Top 10 tenants National exposure Portfolio value R6.9bn 40 Properties GLA 37.6% 70.1% Rental 33.4% 72.1% GLA 371 275m2 22.2% Grocer GLA of total Tenant retention success rate 83.8% Cost to revenue (Like-for-like) 46.2% (2023 H1 43.6%) Lease Expiries 30,0% 120,0% 25,0% 1
Slide 61: Industrial Portfolio
INDUSTRIAL PORTFOLIO Portfolio Portfolio value R3.4bn 45 Properties GLA 381 030m2 22.4% GLA of total portfolio Cost to revenue (Like-for-like) 27.5% (2023 H1: 27.8%) Lease Expiries 45,0% 120,0% 40,0% 100,0% 35,0% 30,0% 80,0% % of GLA 25,0% 60,0% 20,0% 15,0% 40,0% 10,0% 20,0% 5,0% 0,0% 0,0% Vacancy M
Slide 62: Afhco Portfolio
AFHCO PORTFOLIO Afhco Portfolio1 Indluplace Portfolio Portfolio value R4.2bn 53 Properties Portfolio value R3.1bn 127 Properties GLA Apartments 338 215m2 Retail 61 740m2 GLA Apartments 483 771m2 Retail 14 385m2 Cost to revenue (Like-for-like) 52.7% (2023 H1: 51.9%) AFHCO by GLA Indluplace by GLA 2,9
Slide 63: Commercial Portfolio
COMMERCIAL PORTFOLIO Portfolio Portfolio value R246.0m 2 Properties GLA 21 749m2 1.3% GLA of total portfolio Cost to revenue (Like-for-like) 65.7% (2023 H1: 65.0%) Lease Expiries 30,0% 120,0% 25,0% 100,0% 20,0% 80,0% % of GLA 15,0% 60,0% 10,0% 40,0% 5,0% 20,0% 0,0% 0,0% Vacancy Monthly 2024 2025 202
Slide 64: SA Portfolio: Commercial
VALUE OF SOUTH AFRICAN PORTFOLIO SA PORTFOLIO: COMMERCIAL 1.4% (Jun 2023: 1.6%; Dec 2023: 1.5%) LIKE-FOR- 30.2% TENANT 96.6% 2.4 years LIKE NPI (2023 H1: 4.6% RETENTION (2023 H1: 100.0% WALE (2023 H1: 2.5 years GROWTH 2023 FY: 26.9%) SUCCESS RATE 2023 FY: 78.0%) 2023 FY: 2.5 years) TENANT VACANCY 8.
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