Slide 1: Interim Results for the 6 months ended 31 March 2021
Interim Results for the 6 months ended 31 March 2021
Slide 2: Highlights
Highlights Overall tenant Improved retention of 85% covenant terms 57% increase 7.3 megawatt installed with a further in distributable earnings compared 20 assets Active investment 3.6 megawatt in process to the previous transferred at in solar power plants value of Energy generation 6-months ended
Slide 3: Strategic successes
Strategic successes Goal to sell all properties which do not have strong tenant demand and are not capable of long-term income growth • Sell all properties which do not meet this criteria and continue to invest in the balance of the properties • Transferred 20 properties in first 6 months • Busy tra
Slide 4: Strategic successes continued
Strategic successes continued Goal to improve tenant focus • COVID-19 relief of R5m • Tenant retention has increased from 69% in 2018 to 75% in 2019 and 83% in 2020 and is at 85% at March 2021 • Unlocking opportunities within our tenant base for additional space Goal to strengthen balance sheet • Tr
Slide 5: Strategic successes continued
Strategic successes continued Goal to strengthen property management • Continue to build and strengthen Company culture • Started implementation of MRI property management system • Surveys to better understand the team and JHI (Excellerate) • Aim to improve relationships and performance Goal to enha
Slide 6: An Arrow for Change: The project and its evolution
An Arrow for Change The project and its evolution • Funding started to provide relief during lockdown • Meal kits and hygiene essentials were distributed for emergency needs • Evolution towards sustainable projects and school projects surrounding the portfolio • The board approved a sustainable fund
Slide 7: Mall@theJunction Gauteng
Mall@theJunction Gauteng • Arrow for change partnered with Rise Against Hunger • Handover of meal kits and personal hygiene packs for victims of gender based violence • 3 beneficiaries that assist women and young girls Handover on 14 December 2020 in Mall@theJunction
Slide 8: Eersterust Shopping Centre Gauteng
Eersterust Shopping Centre Gauteng • Norridge Primary School, based a few streets away from Eersterust Shopping Centre • Partnered with stakeholders Tree planting with the foundation phase Motivational speaking • Tree planting and environmental awareness • Motivational talks to learners • Boxing dem
Slide 9: Arrowhead summary
Arrowhead summary Diverse portfolio 123 assets 1 024 097m2 of R9.3bn (excl. Indluplace) of GLA Sectoral split by revenue 60% 52% retail, 33% office in Indluplace and 15% industrial 9 Arrowhead Properties Interim Results 2021
Slide 10: Sales program
Sales program • Sold 125 assets since the launch of our disposal program in 2018 • Decrease in total assets from 228 to 103 properties • Average total discount to book of 2.9% Discount / Number of Book value Sales value Financial year (Premium) to properties (Rm) (Rm) book 2018 8 174 181 (4.2%) 2019
Slide 11: Sales for the 2021 financial year
Sales for the 2021 financial year • Transferred 20 assets totalling R498m • There are a further 20 assets to transfer of R647m • Total 40 assets at R1.15bn (4.2% discount to book) Total transferred to date: Asset Sales value Sector Number Average Yield GLA disposed Vacant GLA Vacancy % Class (Rm) Br
Slide 12: Property portfolio as at 31 March 2021
Property portfolio as at 31 March 2021 • 123 commercial (retail, office & industrial) properties (excluding Indluplace) • Sectoral by GLA: 37% retail, 31% office and 32% industrial • Overall vacancy 10.96% (7.06% retail, 18.92% office, 7.82% industrial) • Average gross (net) rent per sector R131.35/
Slide 13: Property portfolio as at 31 March 2021 continued
Property portfolio as at 31 March 2021 continued • New deals concluded per sector Retail R2 345 077 monthly income (R99 Gross Rental R/m2) Office R1 515 666 monthly income (R95 Gross Rental R/m2) Industrial R708 108 monthly income (R38 Gross Rental R/m2) Overall R4 568 851 monthly income • Total num
Slide 14: Update on collections
Update on collections Gross Collections Net Collections BEFORE relief AFTER relief October 2020 92% 93% November 2020 93% 94% December 2020 97% 97% January 2021 97% 98% February 2021 96% 97% March 2021 96% 97% Total Average Collections 95% 96% • R5m in total COVID-19 relief • R4.4m in discounts and
Slide 15: Portfolio challenges and way forward
Portfolio challenges and way forward Tenant Sustainability Leasing in a COVID-19 environment • Major economic pressures primarily on office SME’s under 500m 2 • The common theme overall are shorter leases • We are closer to our tenants operations and the sectors they work • Flexibility is the tenant
Slide 16: Portfolio challenges and way forward continued
Portfolio challenges and way forward continued Utility Costs Community Pressures • Electricity is a critical criteria when selecting premises – in most • Risk of refurb & solar projects being delayed if instances has surpassed the importance of rental rates not managed correctly • Tenants engage ext
Slide 17: Portfolio challenges and way forward continued
Portfolio challenges and way forward continued System Conversion 3rd Party Suppliers • Migration from Nicor to MRI Property Central • In the current environment, it is critical that we partner with the right service providers • Poses a large operational risk if not implemented correctly • Medium to
Slide 18: Portfolio challenges and way forward continued
Portfolio challenges and way forward continued Cost of Placing Tenants Security • Constantly increasing • Unemployment has become one of the major negative impacts of COVID-19 • Driven by the aggressive approach of competing landlords • When there is an increase in unemployment, there is an increase
Slide 19: What's happening in the Arrowhead office portfolio?
Office - What’s happening in the Arrowhead office portfolio? We continue to implement our existing strategies, converting office space into mixed use environments, modular offices, serviced office concepts and a general drive to sub divide space. We are now at a phase, where these initiatives need t
Slide 20: What's happening in the Arrowhead office portfolio? continued
Office - What’s happening in the Arrowhead office portfolio? continued • Leveraging our relationship managers role, we are finding that there is a large untapped opportunity within our existing tenant base • In the current competitive market, it is extremely expensive to place a new office tenant, h
Slide 21: Operational success
• Dated and old façade / old interiors • Tenants exiting on expiry leases with vacancies exponentially increasing Operational success • We commissioned an internal and external refurb • Rebranded the asset • Resulted in over 6 000m2 new deals and concluding renewals with existing tenants • The build
Slide 22: Operational success
Operational success • Vacant during the hard lockdown period • Capital invested in a total revamp • Now fully let • 3 790m2 46 Steel 22 Arrowhead Properties Interim Results 2021
Slide 23: Operational success
Operational success • 2 large vacancies • Decision taken to invest and revamp the site • All large vacancies are now let 1 Range Road 23 Arrowhead Properties Interim Results 2021
Slide 24: Operational success
• Phase 1 continues to exceed the embedded production guarantees • Even though we faced numerous challenges, we have successfully Operational success implemented Phase 2 of the Arrowhead Solar programme • We now have Solar generation capacity of approximately 7.3 megawatt, which accounts for 4.7% of
Slide 25: Operational success
Operational success • We currently have 6 pilot projects in progress • Successfully implemented 2 natural spring projects including a filtration system and back-up water tanks to supplement the council supply • Further exploration within this utility is being undertaken Water 25 Arrowhead Properties
Slide 26: Significant lease renewals for the past 6 months
Significant lease renewals for the past 6 months Office Office Office Sunninghill 4 845m2 Tyger Park 4 297m2 Sanlyn 4 188m2 Retail Retail Retail Cleary Park 3 640m2 Boksburg 2 015m2 Odendaalsrus 2 993m2 Retail Industrial Industrial Matsulu 3 728m2 Kolbenco 3 940m2 Robertville 3 222m2 26 Arrowhead Pr
Slide 27: Current projects: Access Park
Current projects Access Park 27 Arrowhead Properties Interim Results 2021
Slide 28: Current projects: Kelvin Drive
Current projects Kelvin Drive 28 Arrowhead Properties Interim Results 2021
Slide 29: Current projects: Suntyger
Current projects Suntyger 29 Arrowhead Properties Interim Results 2021
Slide 30: Current projects: Taung
Current projects Taung 30 Arrowhead Properties Interim Results 2021
Slide 31: Trading densities
Trading densities March 2020 vs March 2021 RENT TO SALES RATIO OVERALL -1.8% OVERALL 4.5% 4 500 9,00% -0.3% 1.0% -5.5% -6.5% 8,00% 4 000 6.9% 8.6% 6.1% 3 500 7,00% -3.5% 12.5% 3 000 6,00% 19.3% -11.9% -7.1% 5,00% -0.5% 2 500 -6.2% 11.5% 2 000 4,00% 1 500 3,00% -1.5% 1 000 2,00% 500 1,00% 0 0,00% Acc
Slide 32: Top 10 retail tenant exposure
20.57% Top 10 retail tenant exposure 4.80% 3.47% 2.95% 2.61% 1.42% 1.13% 0.99% 1.29% 1.01% 0.90% 43 010 39 427 26 056 16 247 7 956 7 955 9 261 5 584 10 297 3 139 168 932 % of portfolio revenue GLA (m2) 32 Arrowhead Properties Interim Results 2021
Slide 33: Foot count trends
Foot count trends 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Westgate Mall Cleary Park Montclair Mall Mall@theJunction 33 Arrowhead Properties Interim
Slide 34: Combined lease expiry profile
Combined lease expiry profile BY REVENUE BY GLA 25% 14 000 000,00 30% 90 000,00 24% 80 000,00 12 000 000,00 13% 25% 70 000,00 10 000 000,00 11% 60 000,00 9% 8 000 000,00 50 000,00 11% 14% 10% 40 000,00 9% 5% 6 000 000,00 7% 30 000,00 4 000 000,00 20 000,00 4% 2 000 000,00 3% 10 000,00 0,00 - Monthly
Slide 35: Sustainability projects and performances October 2020 – March 2021
Sustainability projects and performances 1 October 2020 – 31 March 2021 Solar Phase 1 –100% owned plants: • 6 plants operational -3.1 megawatt • Energy generation YTD R4 296 171 Phase 2 –mix of purchase power agreements (PPA) and owned plants: • 8 plants – 4.2 megawatt • 1 plant currently operating
Slide 36: Distributable income analysis for the period ended 31 March 2021
Distributable income analysis for the year ended 31 March 2021 R’000 2021 2020 Revenue (excluding straight line rental income) 989 091 1 173 524 Property expenses (432 090) (473 139) Administration and corporate costs (53 352) (51 330) Finance charges (249 458) (303 281) Finance income* 2 740 9 212
Slide 37: Distributable income reconciliation
Distributable income reconciliation Description March 2021 March 2020 Movement Variance Cents per Cents per Cents per % share share share Arrowhead’s operations – core portfolio 44.69 50.24 (5.55) (11%) Income from assets sold including finance cost savings 5.11 8.56 (3.45) (40%) Net finance costs r
Slide 38: Core portfolio
Core portfolio 1 October 2020 to 1 October 2019 to Variance 31 March 2021 31 March 2020 (%) R’000 R’000 Revenue 664 224 734 182 (9.5) Property expenses (260 778) (280 654) (7.1) Net Operating income 403 446 453 528 (11.0) Commercial 129 616 153 638 (16%) Industrial 53 156 67 729 (22%) Retail 220 674
Slide 39: Arrears – analysis March 2021 vs March 2020
Arrears – analysis March 2021 vs March 2020 Description 2021 2020 Change Bad debts (written off and provided for) 6 996 3 621 (3 375) % of turnover during the period 1.0% 0.4% (0.6%) Evaluation of bad debt provisioning against arrears Bad debts Bad debt provisioning Current and 60 days provisioning
Slide 40: Condensed consolidated statement of financial position at 31 March 2021
Condensed consolidated statement of financial position at 31 March 2021 R’000 31 March 2021 30 September 2020 31 March 2020 Assets Investment property 13 151 967 13 539 459 14 652 139 Loans to participants of Group share purchase option schemes 211 687 180 446 187 632 Deferred tax 33 314 58 100 (10
Slide 41: Capex spend
Capex spend Breakdown of Capital spend (in Rm) March 2021 March 2020 Description 6 months 6 months Total 105 129 Retail 51 56 Industrial 12 27 Office 42 46 Investment property 9 332 10 484 Capital spend as a % of investment property 1.1% 1.2% 41 Arrowhead Properties Interim Results 2021
Slide 42: Debt levels
Debt levels • Group debt reduced from R6.5bn at 30 September 2019 to R5.4bn at 31 March 2021 • Group debt expected to be around R4.8bn at 30 September 2021 6 950 6 200 5 450 4 700 October 2019 April 2020 October 2020 April 2021 42 Arrowhead Properties Interim Results 2021
Slide 43: Debt
Debt • Arrowhead loans of R4.0bn and Group of R5.4bn (September 2020: R5.6bn) • Arrowhead Group LTV of 41.4% (39.8% excl. derivatives) • Loans fixed – Group 63% and 61% Arrowhead • Group ICR of between 1.89 and 2.04 (depending on funder definition) • Arrowhead Group weighted average interest rate of
Slide 44: Performance against portfolio level covenants
Performance against portfolio level covenants Interest Cover Ratio Loan to Value Covenant Actual Covenant Actual Funder 1 2.0 2.4 45.0% 39.2% Funder 2 2.0 2.4 55.0% 46.3% Funder 3 2.0 3.2 45.0% 38.2% Funder 4 2.0 2.5 50.0% 38.5% 44 Arrowhead Properties Interim Results 2021
Slide 45: Composition of investments
Composition of investments (comparing position at March 2020 vs March 2021) Asset Balance sheet (Rm) Income (R’000) 2021 % 2020 % 2021 % 2020 % Property 9 332 70% 10 484 71% 197 259 81% 254 119 82% Indluplace 3 819 29% 4 136 28% 28 241 11% 53 963 18% Dipula 96 1% 86 1% 20 557 8% - 0% Total 13 247 14
Slide 46: NAV Bridge per B share Group
NAV Bridge per B share Group 6.70 0.02 0.00 6.65 0.06 6.60 0.10 6.55 6.50 0.15 6.45 6.40 6.35 6.35 6.31 (0.29) 6.30 6.25 6.20 Movements for the period Increase Decrease Total 46 Arrowhead Properties Interim Results 2021
Slide 47: LTV Bridge
LTV Bridge 48.0% 47.0% 0.6% 0.1% 46.0% 3.1% (0.3%) 45.0% (1.1%) 44.0% 43.0% 3.3% (1.6%) 42.0% 41.4% 41.0% (2.0%) 40.0% 39.3% 39.0% 38.0% Movements for the period Increase Decrease Total 47 Arrowhead Properties Interim Results 2021
Slide 48: SA REIT Best Practice Metrics
SA REIT Best Practice Metrics The following REITS have published SA REIT Best Practice - Version 2 - Metrics: Arrowhead Arrowhead REIT Group Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Fund 6 Fund 7 Fund 8 Fund 9 Fund 10 (excl. Indlu) Ave. (incl. Indlu) Period length 6 months 6 months 6 months 6 months 6 mon
Slide 49: Arrowhead performance compared to MSCI South Africa Property Index
Arrowhead performance compared to MSCI South Africa Property Index for the 12 months ended 31 December 2020 Metric Arrowhead Performance MSCI Benchmark Total return (all assets) 4.73% - 6th out of 28 funds -3.15% Income return (all assets) 8.82% - 2nd out of 28 funds 7.02% Net operating income growt
Slide 50: Arrowhead performance compared to MSCI South Africa Property Index
Arrowhead performance compared to MSCI South Africa Property Index for the 12 months ended 31 December 2020 Total return Income return Capital growth MSCI MSCI MSCI Sector Arrowhead Benchmark Arrowhead Benchmark Arrowhead Benchmark Total portfolio 4.73% -3.15% 8.82% 7.02% -3.79% -9.55% Retail 6.16%
Slide 51: Indluplace
Indluplace • Think decision to defer the dividend was prudent • Lower LSM has been under pressure • Highest churn ever experienced • Strong letting performance but more than offset by churn • LTV 38.4% • Sales pipeline • Internalisation 51 Arrowhead Properties Interim Results 2021
Slide 52: Prospects
Prospects • Transfer majority of 20 properties worth R647m • LTV below 40% including derivatives • Implementation of current solar projects • Final and interim dividend • Explore Fairvest merger 52 Arrowhead Properties Interim Results 2021
Slide 53: Thank you
ARROWHEAD PROPERTIES Focused on sustainable value