Slide 1: Annual Results Presentation
Annual Results Presentation Year-End September 2019
Slide 2: Highlights of the year
Highlights of the year Disposal of 57 non-core assets at Merger of Arrowhead and Dividend marginally over R1 billion at an average of a Gemgrow completed ahead of merger target 2% discount to book value Gearing well positioned at 40.5% Acquisition of 36 properties at Vacancy reduced to 7.5% at (unde
Slide 3: Improved strategy
Improved strategy • South African focused • Investing in property capable of achieving long-term growth • Tenant-Centric value proposition • Invest in highly motivated team of skilled property professionals • Enhanced commitment to the principles of ESG (Environmental, Social and Governance) • Stren
Slide 4: Overview of merged portfolio and business
Overview of merged portfolio and business • Diverse portfolio (retail, office and industrial) of R10.8 billion • 188 assets • 1.25 million m2 of GLA • Sectoral split by revenue (47% retail, 37% office, 16% industrial) • 59.6% in Indluplace
Slide 5: Increased team
Increased team + Team has increased from 12 to 32 over 2 years + New in-house deal team to unlock vacant space + Asset management strengthened + Dedicated utilities manager to improve collections + Debt manager to improve collections + Relationship manager to enhance relationships with tenants and i
Slide 6: Total dividend
Total dividend R’000 2019 2018 Revenue (excluding straight line rental income) 2 419 947 2 283 158 Listed securities income 81 775 210 018 Property expenses (967 079) (851 812) Administration and corporate costs (89 424) (57 240) Finance charges (627 848) (560 156) Finance income 73 892 84 262 Non-c
Slide 7: Extract of statement of financial position
Extract of statement of financial position As at 30 September
Slide 8: Debt
Debt • Arrowhead loans of R5.0 billion and group of R6.5 billion • Arrowhead LTV Group of 40.5% (39% at reporting date) • Loans fixed – Group 77% (Company 82%) • ICR of 2.78 • Arrowhead weighted average interest rate of 9.59% and group weighted average interest rate of 9.48% for the year ended Septe
Slide 9: Core portfolio
Core portfolio Year-end 30 Sept 2019 30 Sept 2018 Growth R’000 R’000 % Revenue 1 511 883 1 442 615 4.8 Property expenses (603 226) (560 063) 7.7 Net operating 908 657 882 552 3.0 income Split by asset class Retail 4.3 Office 2.5 Industrial 1.0
Slide 10: Listed investments
Listed investments Asset Balance sheet Income 2019 % 2018 % 2019 % 2018 % Property 10 758 71 11 243 66 581 741 76 435 962 56 Indluplace 4 175 28 4 700 27 149 820 19 187 275 24 Listed Investments 210 1 1 178 7 37 700 5 154 114 20 Total 15 143 17 121 769 261 777 351
Slide 11: SA Property values/sqm (ZAR absolute terms)
SA Property values/sqm (ZAR absolute terms) Overall Office 12,000 21,000 19/000 11,000 ! 1 i 1 1 17,000 10,000 ' "45000 1 1 9,000 1 113.000 peewee 1 1 11,000 1 ! 8,000 1 : 1 9.000 ! ' ! ' 7,000 7,000 i I Fundt Funda Funds L_ Arrowhead I Fund Fund2 Funds Arrowhead aR al -—SS4 MFY15A mFY1GA =FYI7A @FY
Slide 12: SA Property cap rates by portfolio and sector
SA Property cap rates by portfolio and sector 11.0% row 108% 108% 105% too 196% 10% 20% gay as om 10.0% 9.0% ae 25% sos 20% 7.0% - ee se 25% ar s & $ 8.0% Ay Fundt Funda Funds Average Sector sme FY 15A met FY 168 moms FY 17A mmm FY 188 seme FY 19A—— Arrowhead we 103% 10.2% oon i oOo fo ‘fo ‘é & ? F
Slide 13: Opportunities that will impact the balance sheet
Opportunities that will impact the balance sheet LTV Dividend Further disposals Acquisitions Share buy backs Solar investments Dividend payout ratio
Slide 14: Our portfolio – R10.8 billion
Our portfolio – R10.8 billion • Total assets 188, average value per asset of R57 million • Sectoral split by value: 52% Retail; 32% office; 16% industrial • 81% of revenue in 4 provinces • Top 10 assets R3.6 billion • Top 20 assets R5.1 billion • Top 80 assets R9 billion averaging R113 million • R30
Slide 15: What have we sold and why
What have we sold and why • Assets with weak property fundamentals • Properties that are not sustainable in the long run • Sold small scattered assets from R1 million up to R85 million • Total sales of R1 030 000 000, 57 buildings, average R18 million • Sales totalling R130 million since year-end
Slide 16: Breakdown of sales
Breakdown of sales • Sales by value per sector: 64% office; 27% retail; 9% industrial • R365 million DPW sales • Total discount to book value of 2% • Vacancy on sales 12% • Cap rate on actual income of 9.1% • R551 million transferred in 2019, 32 properties • R119 million transferred October 2019, 3
Slide 17: Examples of what we have sold
249 Commissioner Street Parmac Examples of what we have sold 137 Sivewright Tarry’s FB Motors Simgold Lynnwood Atrium Witbank Home Affairs Middelburg Corpgro Welkom Greytown Kimberley Building 188 Longmarket Kimberley Printing Perm Pietermaritzburg Perm Kimberley Perm Durban Wilcon House Star Foods
Slide 18: Arrowhead experience of sales in this market
Arrowhead experience of sales in this market • Diversification of small to medium sized assets assisting sales • Larger pool of investors • Assets have value compared to replacement cost • Selling to tenants, localised landlords, property investors • Contrarian investors are active and buying • Swee
Slide 19: Sales going forward
Sales going forward At pre-close, communicated R500 million Sales of R130 million since year-end Further sales expected Positive will reach target
Slide 20: As at 30 September 2019
As at 30 September 2019 • 188 commercial (retail, office & industrial) properties • Sectoral by GLA: 37% retail, 28% office and 35% industrial • Overall vacancy 7.5% (6.2% retail, 11.5% office, 5.6% industrial) • Average gross (net) rent per sector R127/m2 retail (R118/m2), R126/m2 office (R105/m2),
Slide 21: Top core properties
Top core properties Access Park Claremont Western Cape R903 863 000 Vacancies GLA – 334 2% Vacant GLA (m2) – 20 442
Slide 22: Top core properties
Top core properties Cleary Park Port Elizabeth Eastern Cape R565 600 000 Vacancies GLA – 951 3% Vacant GLA (m2) – 36 283 Annual foot count 7 440 594 – 6.3% up year on year
Slide 23: Top core properties
Top core properties Westgate Mall Mitchells Plain Western Cape R409 400 000 Vacancies GLA – 260 1% Vacant GLA (m2) – 28 373 Annual foot count 6 696 021 – 3.4% up year on year
Slide 24: Top core properties
Top core properties Bellville Tijger Park Bellville Park Western Cape R300 343 000 Vacancies GLA – 511 3% Vacant GLA (m2) – 20 238
Slide 25: Top core properties
Top core properties Rosebank 158 Offices Rosebank Gauteng R254 300 000 Vacancies GLA – 2 506 13% Vacant GLA (m2) – 19 274
Slide 26: Top core properties
Top core properties Midtown Mall Rustenburg North West R246 675 000 Vacancies GLA – 997 6% Vacant GLA (m2) – 16 721
Slide 27: EDCON
EDCON OUR EXPOSURE • GLA (m2) 1.85% • Revenue (R) 1.32% OUR EDCON PER BRAND IS AS FOLLOWS: • Edgars 59% (6 tenants) • Jet 41% (9 tenants) GOING FORWARD • Further reduce exposure to Edcon by 4 leases (3 Edgars & 1 Jet). 2019 would have been around 0.87% by revenue and 1.11% by GLA
Slide 28: Trading densities
Trading densities September 2018 vs September 2019 RENT TO SALES RATIO 3% 4000 2% 9.00% 7% 6% 3500 8.00% 5% 0% 3000 4% 7.00% 9% 17% 14% 6.00% 4% 3% 2500 5% 5.00% 11% 2000 0% 1% 4.00% 1500 3.00% 1000 2.00% 500 1.00% 0 0.00% Access Westgate Montclair Midtown Cleary KWT Jane Game Access Westgate Montcl
Slide 29: Combined lease expiry profile
Combined lease expiry profile BY REVENUE BY GLA 20% 20% 19% 18% 14 000 000 24% 23% 90 000 80 000 12 000 000 12% 70 000 21% 10 000 000 60 000 13% 15% 8 000 000 50 000 8% 6 000 000 40 000 30 000 4 000 000 2% 3% 20 000 2 000 000 1% 10 000 1% 0 0 Monthly 2019 2020 2021 2022 2023 >2023 Vacancy Monthly 20
Slide 30: Solar report
Solar report Summary December 2018 to September 2019 Plant Rand value 2019 tonnes CO2 Number of ~ SA Solar plant kWh produced Property commission produced until Emissions savings people CO2 Emissions size (kWp) until 30/9/2019 date 30/9/2019 until 30/9/2019 absorbed Grosvenor Crossing 73.70 15/8/201
Slide 31: Previous challenges and update
Previous challenges and update SIMUNYE • Perpetual vacancy due to node being overtraded and 3 159 m2 vacant of 6 538 m2 • Building under offer and expect transfer early 2020 LYNDHURST • 1 441 m2 of 6 352 m2 • Now fully let
Slide 32: Previous challenges and update
Previous challenges and update THE ATRIUM • GLA – 2 695 m2 vacant of 5 037 m2 • Currently under offer and busy with a due diligence • If not sold – we will execute an internal and external refurb MALL@THEJUNCTION - ROSETTENVILLE • 3 923 m2 vacant of 14 198 m2 • Reduced to 1 243 m2 – 835 m2 to be use
Slide 33: New challenges
New challenges STUDIOS ON HARLEY (formerly Urban Brew) • Liquidation – 9 804 m2 • Highly specialised space • Limited pool media tenants KAROO JUNCTION • Limited disposable income in Beaufort West • Building design and location • Competition from the high street RUSTENBURG AS A NODE • Future competin
Slide 34: Way forward on challenges
Way forward on challenges STUDIOS ON HARLEY (formerly Urban Brew) • Let 2 200 m2 to an office tenant • Remaining space is highly specialised – media studios • Currently considering 3 media proposals, a sports facility and office conversion • Location ideally suited to media tenants KAROO JUNCTION •
Slide 35: Way forward on challenges
Way forward on challenges RUSTENBURG AS A NODE • Ensure retail assets remain competitive through platinum cycles – continue to invest (defensive capex) • Appointed local security company, with larger presence – massive improvement • Midtown Mall – busy with phase 1 of the revamp • Phase 2 – improvem
Slide 36: Operational successes
Operational successes ABSA CASH CENTRE • Identified potential • Converted space from highly specialised to offices • Re-let before completion of the project 4 LARGE INDUSTRIAL PARKS IN GAUTENG (Route 24, Tungsten, Robertville, Trevallyn) • Large scale revamp projects implemented • Resulted in strong
Slide 37: Operational successes
Operational successes LOUIS TRICHARDT • Potential threat of new mall • Pro-active action taken – revamped and rebranded assets • Improvements to council common areas • Secure national tenants on medium to long-term leases • Tenant turnovers increasing • Positive media coverage
Slide 38: Indluplace
Indluplace • Long-term investor • Strong balance sheet • 6% to 9% dividend reduction forecast for 2020 • Team strengthened substantially • Expect to be sustainable from the base of 2020
Slide 39: Rebosis
Rebosis • Holding at these values • Exit in the long-term • Dividend correctly removed from our numbers • Waiting to see details on potential merger • Potential buyers who want to privatise (see large upside at these levels)
Slide 40: Dipula
Dipula • Long-term exit • Holding as trading at massive discount to NAV • Small impact on our numbers • Forecast of 81.05 cents per share for September 2020 • Only 3% of income forecast for 2020 • Rebosis and Dipula under 1% of total assets
Slide 41: Focus in year ahead
Focus in year ahead • Further strengthen balance sheet • Targeted sales • Tenant retention • Move quickly on tenant failures • Box smart in competitive letting environment • Aggressive letting of vacant space (no vacant space forecast to let)
Slide 42: Prospects
Prospects Well positioned to weather declining market Careful capital allocation AHA dividend forecast to grow by 5% AHB dividend forecast to reduce by 4% LTV around 37%
Slide 43: Thank you
Thank you ARROWHEAD PROPERTIES Focused on sustainable value