Sa Corporate Real Estate Ltd. · JSE:SAC
Sa Corporate Real Estate — FY2022 Earnings Presentation
58 slides from Sa Corporate Real Estate's earnings presentation, Mar 17, 2023
Slide 1: SA Corporate 2022 Year End Results Presentation
SA Corporate 2022 Year End Results Presentation 17 March 2023
Slide 2: Agenda
AGENDA 01 Introduction Rory Mackey & Overview 02 Strategy Update Rory Mackey 03 Portfolio Rory Mackey Performance 04 Financial Performance Sam Moodley 05 Outlook Rory Mackey 06 Residential Strategy Execution Rory Mackey
Slide 3: Introduction & Overview
INTRODUCTION & OVERVIEW RORY MACKEY
Slide 4: Overview: Portfolio and Distribution Performance
OVERVIEW PORTFOLIO DISTRIBUTION PERFORMANCE TOTAL NET DISTRIBUTABLE INCOME 5.5% PROPERTY INCOME R1.2 billion (2021: R1.1 billion) (“NPI”) R674.8 million or 26.83 cps TOTAL LIKE-FOR-LIKE NPI INCREASED BY (2021: R639.5 million or 25.43 cps) ANNUAL 6.7% R1.1 billion to DISTRIBUTION 5.5% (2021: R1.0 bil
Slide 5: Overview: Property Activity and Capital Structure
OVERVIEW PROPERTY ACTIVITY CAPITAL STRUCTURE DISPOSAL PIPELINE SINCE 1 JANUARY 2022 LOAN TO VALUE (“LTV”)`RATIO 38.1%* (2021: 37.4%*) *Net debt LTV excluding derivatives, which if included would be 37.8% (2021: 38.5%) WEIGHTED AVERAGE COST OF FUNDING R1.4 billion (Transferred to 31 December 2022: R5
Slide 6: Disposals Update
DISPOSALS UPDATE Transferred In 2022/2023 Contracted Sales Exit yield on sale Expected Transfer Description Sector Price price (%) Date (ETD) 147 - 149 Old Main Rd, Pinetown R68 000 000 8.5% May 22 Industrial Maxwell Hall, Johannesburg R50 000 000 9.8% May 22 Residential 102 Essenwood Road, Durban R
Slide 7: Disposals Update (continued)
DISPOSALS UPDATE (continued) Contracted and Conditional Description Contracted Sales Exit yield on sale ETD Sector Price price (%) Multi Glass, Johannesburg R3 600 000 11.0% Dec 23 Afhco Retail Hotel at Cullinan Jewel Shopping Centre, Pretoria R2 700 000 – Jun 23 Retail Portion of 11 Wankel Street,
Slide 8: Strategy Update
STRATEGY UPDATE RORY MACKEY
Slide 9: Strategy Update Overview
STRATEGY UPDATE OVERVIEW SAC STRATEGY SECTOR Retail Industrial Residential Resilient portfolio Best of class portfolio in Quality logistics portfolio FOCUS specialising in convenience offering cost effective rentals inner city precincts and oriented shopping centres suburban estates Like-for-like (“
Slide 10: Portfolio Performance
PORTFOLIO PERFORMANCE RORY MACKEY
Slide 11: Overview – Sectoral Analysis of South African Portfolio
OVERVIEW – SECTORAL ANALYSIS OF SOUTH AFRICAN PORTFOLIO 11
Slide 12: SA Portfolio: Retail
Value of South African portfolio SA PORTFOLIO: RETAIL 45.1% (2021: 43.4%) LIKE-FOR-LIKE 6.7% ECL AND RENT -67.6% NPI GROWTH RELIEF (2022: R9.1m; 2021: (2021: 21.5%) R28.0m) VACANCY1 3.2% COLLECTIONS 99.2% (2021: 4.6%) (2021: 98.9%) RENTAL 6.5% 5.0% ARREARS ESCALATION (2021: 6.9%) (2021: 6.1%) RENTAL
Slide 13: Y-o-Y Monthly Retail Trading Density Growth
Y-O-Y MONTHLY RETAIL TRADING DENSITY GROWTH
Slide 14: 2022 Retail Leasing Performance
2022 RETAIL LEASING PERFORMANCE 31-Dec-21 31-Dec-22 4.6% 3.2% VACANCY NEW LEASING VACANCY GLA (m2) 34 506 National 72.7% 57.6% tenancy Convenience 74.8% 63.3% NATIONAL NATIONAL TENANCY TENANCY 41.7% 59.2% CONVENIENCE CONVENIENCE
Slide 15: SA Portfolio: Retail Initiatives
SA PORTFOLIO: RETAIL INITIATIVES Springfield Value Centre: New Mcdonald’s drive thru Coachman’s Crossing upgrade introducing Woolworths Food and Totalsports extension Morning Glen Mall sports and lifestyle component Davenport Square improved convenience Musgrave Centre, new Checkers complemented by
Slide 16: SA Portfolio: Industrial
Value of South African portfolio SA PORTFOLIO: INDUSTRIAL 23.1% (2021: 23.5%) LIKE-FOR-LIKE 2.4% ECL AND RENT -82.9% NPI GROWTH (2021: 1.4 %) RELIEF (2022: -R1.0m; 2021: -R5.6m) VACANCY 0.2% COLLECTIONS 99.4% (2021: 0.7%) (2021: 101.4%) RENTAL 6.4% ARREARS 3.8% ESCALATION (2021: 6.7%) (2021: 2.8%) R
Slide 17: SA Portfolio: Afhco
Value of South African portfolio SA PORTFOLIO: AFHCO 29.9% (2021: 31.0%) TOTAL RESIDENTIAL RETAIL (85% of portfolio) (15% of portfolio) LIKE-FOR- LIKE NPI 13.1% VACANCY 2.9% VACANCY 5.5% (2021: 7.4 %) RESIDENTIAL 1 (2021: 8.5 %) RETAIL (2021: 5.8 %) INCREASE ECL AND RENTAL RENT -65.3% INCREASE 2.6%
Slide 18: Afhco Residential Leasing Performance
AFHCO RESIDENTIAL LEASING PERFORMANCE
Slide 19: Zambian Portfolio (JV)
50% Property value ZAMBIAN PORTFOLIO ZAMBIAN JV R1.4 bn (2021: R1.1bn) JV Distributable Income: 44.2% y-o-y 50% NPI Growth 63.7% (USD) 81.4% (ZAR) 2021: -9.8% (USD) -18.8% (ZAR) East Park Mall 67 311m2 (71.0% of Zambian Portfolio Value) Vacancy Rental escalation (USD) Expiries 2.3% 3.2% 100.0% (2021
Slide 20: Financial Performance
FINANCIAL PERFORMANCE SAM MOODLEY
Slide 21: 2022 Distributable Income Analysis
2022 DISTRIBUTABLE INCOME ANALYSIS Like-for-like LFL NPI • Improved rental largely due to reduced vacancies and lower relief & R69.9m deferment – R40.2m 6.7% • Improved recoveries due to reduced vacancies – R55.0m • Improved turnover rental and other income of R9.1m • Reduced ECL – R34.0m • Increase
Slide 22: Net Asset Value (cps)
NET ASSET VALUE (CPS)1 NAV (cps)1 425,0 3 1 9 (2) 400,0 (1) 375,0 410 350,0 400 325,0 300,0 Opening NAV 1 Revaluation of MTM swaps Foreign adjustment Insurance income Distributable income Closing NAV 31 January 2022 investment derivatives i.r.o. Zambian JV adjustment i.r.o. net of distributions Dece
Slide 23: Investment Property Analysis
INVESTMENT PROPERTY ANALYSIS 17 000 16 500 16 000 809 15 500 ( 583 ) (37) (23) 15 000 14 500 15 135 14 969 14 000 Investment Properties Improvements / Disposals Fair value adjustment Owner occupied Investment Properties December 2021 Development costs buildings transferred December 2022 to property,
Slide 24: 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 R7.1bn R597.1m 3 years 8.8% (2021: R6.8bn) (2021: R615.0m) (2021: 2 years) (2021: 5.5%) Swap profile Hedged % Swap margin Average
Slide 25: SA REIT Loan to Value and Net Interest Cover
SA REIT LOAN TO VALUE AND NET INTEREST COVER FV CCIRS SA REIT loan to Net debt LTV 38.1% (Liability) 38.1% FVFV intInt. rateRate 37.8% excl. swap (2021: R50.9m (less (2021: Swaps Swaps (Asset) (2021: value derivatives 37.4%) R50.6 notional 37.4%) (Asset) R60.2m 38.5%) value) R60.2m Variance 2022 202
Slide 26: Outlook
OUTLOOK
Slide 27: Retail 2023 Outlook
RETAIL 2023 OUTLOOK • 84.0% Non-expiring rental revenue • Contracted escalation 6.7% • Renewal expiries anticipated to be marginally above flat • Vacancy to reduce further • Operational expenses to be greater than inflation by circa 200bps
Slide 28: Industrial 2023 Outlook
INDUSTRIAL 2023 OUTLOOK • 86.0% Non-expiring rental revenue • Contracted escalation 6.37% • Forecast renewal reversions marginally negative • Vacancy to remain negligible but with downtime of circa 8 000m2 over 3 months • Operational expenses to be well-controlled approximating inflation
Slide 29: Afhco 2023 Outlook
AFHCO 2023 OUTLOOK Residential • Rental increases on renewals for the year are expected to be between 4% and 6% • Vacancy anticipated to remain below 3% for much of the year on the back of improving market conditions and the high interest rate environment Retail • Escalation remains @ circa 6% with
Slide 30: 2023 FY Distributable Income Forecast
2023 FY DISTRIBUTABLE INCOME FORECAST 2023 FY Distributable Income Forecast Excluding Indluplace Transaction 2023 vs 2022 R'm 2023 vs 2022 % LFL NPI excluding loadshedding provision 4.5% to 5.0% Loadshedding provision (10) to (20) LFL NPI including loadshedding provision 3.0% to 4.0% Increase in int
Slide 31: Residential Strategy Execution
RESIDENTIAL STRATEGY EXECUTION Unlisted Residential Fund • Capital favouring direct impact investments rather than listed sector Indluplace Transaction • Acquisition of listed property trading at substantial discount to NAV attractive compared with direct property
Slide 32: Unlisted Residential Fund Overview
UNLISTED RESIDENTIAL FUND OVERVIEW • SAC shares in Afhco will be sold to NewCo in exchange for new shares in NewCo SA Corporate New Real Estate Investors • SAC will retain a significant interest with the objective to participate in the long- term value accretion from the unlisted Portfolio NewCo • S
Slide 33: Unlisted Residential Fund Rationale
UNLISTED RESIDENTIAL FUND RATIONALE Rationale for • SAC (through Afhco with its track record and ability) is well placed to raise capital from investors wishing to diversify away from traditional real estate sectors threatened by the Fund technological change and/or increase their exposure to social
Slide 34: Unlisted Residential Fund Rationale: Reasons to Invest
UNLISTED RESIDENTIAL FUND RATIONALE (continued) Reasons to invest Management • Long term partners focused on building sustainable long-term growth and value for investors • Experienced management team with extensive residential property experience • Strong network and relationships in the residentia
Slide 35: Unlisted Residential Fund Rationale: Reasons to Invest
UNLISTED RESIDENTIAL FUND RATIONALE (continued) Reasons to invest Financial prospects • Reliable cashflows less sensitive to economic downturns • Defensive NOI -during economic downturns, demand for affordable yet high-quality and centrally located living environments increases due to down-sizing an
Slide 36: Unlisted Residential Fund Parameters
UNLISTED RESIDENTIAL FUND PARAMETERS Investments • NewCo to invest in affordable and social housing assets to achieve the greatest social impact in the communities it invests in • NewCo to invest in assets with a competitive edge providing, inter alia, the following: o Inner-city and lifestyle compl
Slide 37: Indluplace Transaction Summary
INDLUPLACE TRANSACTION SUMMARY 100% acquisition of all the issued ordinary shares in Indluplace Properties Transaction Limited (“Indluplace”), by way of scheme of arrangement • Anticipated effective date 1 July 2023 Yield • Distribution yield will be accretive On Strategy • Furthers strategic aim to
Slide 38: Key Transaction Process
KEY TRANSACTION PROCESS Key acquisition workstreams In order to satisfactorily meet the commercial rationale and enact the post acquisition outcomes, key workstreams carried out as per the below Due diligence carried out by expert teams: corporate and compliance, human resources, legal, commercial a
Slide 39: Summary of Historic Indluplace Portfolio Metrics
SUMMARY OF HISTORIC INDLUPLACE PORTFOLIO METRICS Property Portfolio – Valuation Metrics 2022 Property Valuation R3 306 million Implied Property Acquisition Valuation R2 360 million Net Replacement Value R4 886 million Property Portfolio – Average Rentals Average Rentals Rooms Bachelors One bed Two b
Slide 40: Summary of Historic Indluplace Portfolio Metrics
SUMMARY OF HISTORIC INDLUPLACE PORTFOLIO METRICS No. of Units Location % Total Rooms Bachelor 1 Bed 2 Bed 3 Bed 4 Bed Bloemfontein 1% 71 - 35 10 25 - 1 Hillbrow 27% 1 613 243 538 275 231 236 90 Inner City 26% 1 595 165 249 498 573 81 29 Jhb East 24% 1 488 292 56 519 590 31 - Jhb North 6% 358 5 32 21
Slide 41: Summary of Indluplace Portfolio Categorisation
SUMMARY OF INDLUPLACE PORTFOLIO CATEGORISATION Framework for Assessing Breakdown of Value per Property Type the Portfolio 1,60 1,40 R’ billion 1,20 SAC categorisation of properties in 1,00 respect of strategic fit: 0,80 1) High – manage to Afhco 0,60 standards 0,40 2) Moderate – bring to Afhco 0,20
Slide 42: Summary of Indluplace Portfolio Categorisation
SUMMARY OF INDLUPLACE PORTFOLIO CATEGORISATION Overall Portfolio Categorisation by Value Geographic Spread by Value
Slide 43: Indluplace Transaction Salient Terms & Financial Impact
INDLUPLACE TRANSACTION SALIENT TERMS & FINANCIAL IMPACT Cash Offer Price R3.40 Post Clean out distribution net of maximum of R85m primarily attributable to capital expenditure and executive contractual entitlement costs Property Portfolio 2022 Valuation R3 306 million Offer Price R3.40 Implied NAV R
Slide 44: Transaction Funding
TRANSACTION FUNDING Sources of Funding Quantum Cost Comments Certain properties earmarked for disposal at an implied Disposal proceeds from SAC's 656 9.20% transaction yield of 8.97% but proceeds were assumed to portfolio settle funding at JIBAR plus 175bps Proceeds from sale of Safari Sold at a yie
Slide 45: Strategic Recycling of Capital
STRATEGIC RECYCLING OF CAPITAL Sold at value exploiting period of global economic stimulus Disposal Properties 8.97% Exploit listed sector Improvement of discount to NAV capital structure Indluplace transaction property yield Debt Settlement 10.76% → 11.69% 9.20% (assuming 5% vacancy)
Slide 46: Questions
QUESTIONS | NG
Slide 47: Appendices
APPENDICES
Slide 48: Distributable Income at a Glance for the Year Ended 31 December 2022
DISTRIBUTABLE INCOME AT A GLANCE FOR THE YEAR ENDED 31 DECEMBER 2022 Dec 2022 Dec 2021 % Rm Rm Variance Net Property Income – Like-for-like 1 113.666 1 043.804 6.7 Net Property Income - Developments 23.112 24.657 (6.3) Net Property Income – Acquisitions 3.283 - - Net Property Income - Buildings sold
Slide 49: Group Debt Structure – At 31 December 2022 (Excl Fixes)
GROUP DEBT STRUCTURE – AT 31 DECEMBER 2022 (EXCL FIXES) -120 Cross Currency (ZAR), 8.47% Jan 2023 - 170 Cross Currency (US$), 4,36% Jan 2023 - 107 Term Loan, 9.11%% Mar 2024 - 147 Term Loan, 9,11% Mar 2024 47 585 Term Loan, 8,29% May 2024 - May 2024 564 - Term Loan, 9,07% Sep 2024 100 100 Revolving
Slide 50: Group Debt Structure – At 31 December 2022 (Incl Fixes)
GROUP DEBT STRUCTURE – AT 31 DECEMBER 2022 (INCL FIXES) -120 Cross Currency (ZAR), 8.83% Jan 2023 - 170 Cross Currency (US$), 4,36% Jan 2023 - 107 Term Loan, 9.47%% Mar 2024 - 147 Term Loan, 9,47% Mar 2024 47 585 Term Loan, 8,65% May 2024 - May 2024 564 - Term Loan, 9,43% Sep 2024 100 100 Revolving
Slide 51: Group Debt Profile at 31 December 2022
GROUP DEBT PROFILE AT 31 DECEMBER 2022 3 000 10,5% 9,0% 9,5% 8,9% 9,1% 8,6% 8,5% 2 500 7,5% 6,5% 5,5% 2 000 4,5% 147 197 3,5% 2,5% 1 500 300 1,5% 0,5% -0,5% 1 000 -1,5% -2,5% 500 -3,5% -4,5% -5,4%1 -5,5% 51 1 816 1 639 1 632 1 318 0 -6,5% 2023 2024 2025 2026 2027 Total Drawn R'm Total Undrawn R'm Ra
Slide 52: Group Debt Structure Swaps at 31 December 2022
GROUP DEBT STRUCTURE SWAPS AT 31 DECEMBER 2022 290 6,98% Jul/2023 120 6,97% Jul/2023 150 4,10% Aug/2023 295 7,04% Sep/2023 350 7,37% Jul/2024 Jul/2024 100 7,00% 150 7,60% Oct/2024 460 1,41% Nov/2024 Dec/2024 150 7,65% Jan/2025 150 6,83% Jan/2025 400 6,93% 300 7,38% May/2025 350 6,82% May/2025 150 7,
Slide 53: Interest Rate Swap Expiry at 31 December 2022
INTEREST RATE SWAP EXPIRY AT 31 DECEMBER 2022 1 500 8,0% 7,9% 7,0% 7,0% 6,5% 6,0% 1 000 5,1% 5,0% 4,0% 3,0% 500 2,0% 1,0% 855 1 210 1 200 1 180 0 0,0% Total swaps at Dec 22 Rate at Dec 22
Slide 54: Retail Portfolio
RETAIL PORTFOLIO Portfolio1,2 Portfolio value R6.8bn 41 Properties Top 10 tenants National exposure GLA 35.6% 62.9% GLA 385 635m2 22.9% Grocer GLA Rental 31.7% 63.3% of total Tenant retention success rate 84.2% Cost to revenue (Like-for-like) 43.9% (2021: 43.6%) Lease Expiries 40,0% 120,0% 35,0% 100
Slide 55: Industrial Portfolio
INDUSTRIAL PORTFOLIO Portfolio Portfolio value R3.5bn 51 Properties GLA 424 173m2 31.4% GLA of total portfolio Cost to revenue (Like-for-like) 29.9% (2021: 27.6%) 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 2023 2024 2025
Slide 56: Afhco Portfolio Overview
AFHCO PORTFOLIO OVERVIEW Portfolio1 Portfolio value R4.5bn 58 Properties GLA Apartments 370 235m2 Retail 65 377m2 Cost to revenue (Like-for-like) 44.6% (2021: 48.6%) By GLA 15,0% 85,0% Residential Retail / Commercial 1 Excludes bulk of 53 958m2 being developed, valued at R74.4m.
Slide 57: Commercial Portfolio Overview
COMMERCIAL PORTFOLIO OVERVIEW Portfolio Portfolio value R0.3bn 3 Properties GLA 25 591m2 1.9% GLA of total portfolio Cost to revenue (Like-for-like) 73.1% (2021: 67.7%) 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 2023 202
Slide 58: SA Portfolio: Commercial
Value of South African portfolio SA PORTFOLIO: COMMERCIAL 1.9% (2021: 2.1%) LIKE-FOR- TENANT 4.8 LIKE NPI -27.8% RETENTION 56.0% WALE DECLINE (2021: -36.6%) SUCCESS RATE (2021: 68.7%) years (2021: 3.1 years) ECL AND VACANCY 17.7% RENT -64.5% BUILDINGS 1 (2022: R2.1m; SOLD (2021: 4 (2021: 18.9%) RELI
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