Delta Property Fund Limited · JSE:DLT
Delta Property Fund — FY2022 Earnings Presentation
51 slides from Delta Property Fund's earnings presentation, May 24, 2022
Slide 1: Results Presentation for the Year Ended 28 February 2022
RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022 24 May 2022 www.deltafund.co.za
Slide 2: Agenda
01 05 Introduction Conclusion 02 06 Business Update Questions and Answers 03 07 Strategy Update Annexures 04 Financial Review 17 Harrison Street, Johannesburg RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 3: Introduction
Delta Heights, Pretoria INTRODUCTION Siyabonga Mbanjwa
Slide 4: Introduction
INTRODUCTION 4 INTRODUCTION • Delta is celebrating 10 years as a JSE listed REIT in 2022 • Delta is emerging as a turnaround story • External environment continued to be unforgiving • Economy remained under pressure resulting in record high vacancies and affecting all landlords • Delta’s sovereign u
Slide 5: Key Metrics
INTRODUCTION 5 KEY METRICS Investment Distributable Sovereign Loan to value property earnings per share underpinned (Incl assets held for sale) JSE listed SA REIT R7.9bn 36.9 cents 84.6% 57.0% (2021 : R8.2bn) (2021 : 31.3cents) by revenue (2021 : 81.3%) (2021 : 56.5%) Net asset value Average collect
Slide 6: Business Update
Embassy Building, Durban BUSINESS UPDATE Siyabonga Mbanjwa
Slide 7: Business Update
BUSINESS UPDATE 7 BUSINESS UPDATE • Vacancies have increased to over 3 million m² throughout South Africa, with the vacancy rate expected to weaken further in the medium term • B-grade offices hardest hit with national vacancies in excess of 18.8% as at the end of December 2022 • Delta's vacancies i
Slide 8: Business Update (cont.)
BUSINESS UPDATE 8 BUSINESS UPDATE (cont.) • 17 586m2 of new leases concluded; • Lease renewals for the year amounted to for 70 548m2 • Post year-end, 126 233m2 of expired month-to-month leases were renewed with DPWI • Additional 52 000m² of current month-to-month leases with DPWI in advanced stages
Slide 9: GLA and Vacancy Reconciliation
BUSINESS UPDATE 9 BUSINESS UPDATE (cont.) GLA AND VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2022 100 909 985 214 507 23.6% Disposals (1) (5 454) - New letting of vacant space (17 586) Major contributors: Isivunyo 21 339 Regents Place 8 209 1
Slide 10: Leasing Update
BUSINESS UPDATE 10 BUSINESS UPDATE (cont.) LEASING UPDATE GEOGRAPHICAL BY GLA GEOGRAPHICAL VACANCY NW LP NW WC MP EC EC MP WC NC NC GP (41.2%) GP (40.0%) LP KZN (30.5%) KZN (31.0%) FS (9.2%) FS (13.8%) LP (5.0%) FS NC (7.0%) FS GP GP NC (4.1%) EC (5.9%) WC (4.0%) MP (1.5%) MP (3.3%) LP (0.5%) EC (2.
Slide 11: Valuations and Disposals
BUSINESS UPDATE 11 BUSINESS UPDATE (cont.) Valuations • Reduction in valuations of R314.6 million representing 3.8% (2021: R553.1 million represented by 6.3%) • Reduction in valuations has had a major impact on LTV at year end (57%) • Biggest drivers: I. Slow economy II. Increased vacancies to recor
Slide 12: Capex Update
BUSINESS UPDATE 12 BUSINESS UPDATE (cont.) Capex Update • Capex remains a major focal point • R112.8 million Capex spent to February 2022 • Further capex earmarked for the 2023 financial year and to be funded from operations Projects Poynton Building • Fire lift project 98% complete • West block lif
Slide 13: Business Update (cont.)
BUSINESS UPDATE 13 13 BUSINESS UPDATE (cont.) Servamus Building • Replacement of main chiller unit – completed Mayors Walk Building • Upgrading of ablution facilities, retiling of walls and floors and new ceilings – completed Smart Exchange • Structural repairs and repainting of facade – completed H
Slide 14: Geographical Split by Capex
BUSINESS UPDATE 14 BUSINESS UPDATE (cont.) GEOGRAPHICAL SPLIT BY CAPEX LP 0.2% Gauteng - GP Free State - FS Limpopo - LP GP MP NW 40.9% 5.3% KwaZulu Natal - KZN 2.2% Northern Cape - NC North West - NW Mpumalanga - MP KZN FS 31.2% Eastern Cape - EC NC 8.1% Western Cape - WC 5.3% EC 0.0% WC 6.8% RESUL
Slide 15: Embassy Building Phase 1 Cooling Tower Replacement
BUSINESS UPDATE 15 EMBASSY BUILDING PHASE 1 COOLING TOWER REPLACEMENT Cooling towers Installation in progress RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 16: Poynton Building Lift Upgrades
BUSINESS UPDATE 16 POYNTON BUILDING LIFT UPGRADES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 17: Covid-19, Unrest and Floods
BUSINESS UPDATE 17 BUSINESS UPDATE (cont.) COVID-19 • Delta is closely monitoring latest developments regarding Covid-19 • There was minimal rental relief required due to our sovereign dominant portfolio July 2021 Unrest / Looting • We sympathise with those that were hardest hit • Some of Delta’s re
Slide 18: Strategy Update
Embassy Building, Durban STRATEGY UPDATE Siyabonga Mbanjwa
Slide 19: Our Journey Then and Now
STRATEGY UPDATE 19 OUR JOURNEY THEN AND NOW 10 Legend 2012 04 05 B-BBEE Level 2022 2 Number of properties Net operating 1 20 Loan to Value profit* 11 R 59 million 09 40% 99 R 734 57.0% Average cost of debt Total investment 02 million 8.91% Number of staff property 7.4% 08 employed R2.12 billion 8 R7
Slide 20: Strategy Update
STRATEGY UPDATE 20 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 21: Strategic & Financial Objectives
STRATEGY UPDATE 21 STRATEGIC & FINANCIAL OBJECTIVES ST R AT EG I C FINANCIAL • Diversify portfolio by 2025, however, min of 50% of the • To achieve an ICR of 2,5 by 2025 portfolio to remain anchored by sovereign tenants • To achieve an LTV of 40% by 2025 • Vacancy factor to be on par or below SAPOA
Slide 22: Delta's ESG Commitment
STRATEGY UPDATE 22 DELTA’S ESG COMMITMENT Delta has initiated a project to align to ESG good practice through: • The appointment of a team of subject matter experts • Establishing a baseline around our ESG performance and disclosure through conducting an ESG peer benchmarking exercise against our in
Slide 23: Delta's ESG Framework Under Development
STRATEGY UPDATE 23 DELTA’S ESG FRAMEWORK UNDER DEVELOPMENT PHASE ONE PHASE TWO PHASE THREE ESG Peer Benchmarking Development of a Technical implementation of research (to fit-for-purpose ESG the proposed ESG inform Phase 2) framework/roadmap framework/roadmap Delta’s fit-for-purpose ESG framework un
Slide 24: Financial Review
Hensa Towers, Polokwane FINANCIAL REVIEW Marelise de Lange
Slide 25: Financial Performance 2022
FINANCIAL REVIEW 25 FINANCIAL PERFORMANCE 2022 Loan to value of Average cost of debt 57.0% 7.4% (2021 : 56.5%) (2021 : 8.2%) Distributable earnings Interest cover ratio R263.6 million 1.9 times (2021 : R223.7 million) (2021 : 1.9 times) Hallmark Building, Pretoria RESULTS PRESENTATION FOR THE YEAR E
Slide 26: Financial Overview
FINANCIAL REVIEW 26 FINANCIAL OVERVIEW 2022 2021 Variance Rental income including recoveries (R’000) 1 388 704 1 445 893 (4.0%) Net property income (excluding straight-line rental adjustments) (R’000) 817 880 851 613 (4.0%) Net finance costs (R’000) 388 395 413 612 (6.1%) Cost to income ratio - gros
Slide 27: Statement of Profit or Loss and Other Comprehensive Income
FINANCIAL REVIEW 27 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 2022 2021 Variance Revenue Rental income 1 388 704 1 445 893 (4.0%) Straight line rental income accrual 521 (37 624) 98.8% 1 389 225 1 408 269 (0.9%) Property operating expenses (571 345) (556 656) 3.7% Net property renta
Slide 28: SA REIT Funds From Operations
FINANCIAL REVIEW 28 SA REIT FUNDS FROM OPERATIONS (R’000) (Previously Distributable Earnings) Group 2022 2021 Loss per IFRS Statement A (144 970) (454 456) Fair value adjustment loss/(gain) to: − Investment property 428 323 517 137 − Debt and equity instrument held at fair value 48 667 67 548 Straig
Slide 29: SA REIT Funds From Operations Bridge
FINANCIAL REVIEW 29 SA REIT FUNDS FROM OPERATIONS BRIDGE 168 SA REIT FFO Reduction Bad debts Tax Savings of Saving on Reduction Other Dividend Property Reduction in SA REIT FFO 2021 of bad written off finance costs COVID relief of ECLs income expenses contractual 2022 debt prov rentals RESULTS PRESE
Slide 30: Statement of Financial Position
FINANCIAL REVIEW 30 STATEMENT OF FINANCIAL POSITION R’000 Feb 2022 Feb 2021 Variance ASSETS Non-current assets Investment property 7 101 110 8 227 800 (13.7%) Investment in listed securities 110 984 157 072 (29.3%) Other non-current assets 10 280 11 228 (8.4%) Current assets 354 516 390 631 (9.2%) N
Slide 31: Valuations
FINANCIAL REVIEW 31 VALUATIONS • The valuations for the year ended February 2022 have been concluded at R7.9 billion (2021: R8.2 billion) • A combination of discounted cash flows and capitalisation rates were used in arriving at the values • Devaluation due to slow recovery of the economy and increa
Slide 32: Debt Funding
FINANCIAL REVIEW 32 DEBT FUNDING • Interest-bearing borrowings decreased by 4.4% • Standard Bank: Delta re-negotiated an extension for three years • Nedbank and Investec: Currently engaging for further periods • Bank of China: Facility was restructured for a period of 6 years to December 2026 • Stat
Slide 33: Debt Summary
FINANCIAL REVIEW 33 DEBT SUMMARY Facility type R’m Weighted Ave. Rate Nedbank* 2 837 7.8% Standard Bank 805 6.9% Investec 735 7.5% Bank of China 149 6.6% Total 4 526 7.5% Accrued interest and structuring fees 19 Total borrowings including interest and fees 4 545 Interest rate swap contracts (fixed v
Slide 34: LTV Bridge
FINANCIAL REVIEW 34 LTV BRIDGE LTV Revaluation of Change in Revaluation Disposal CAPEX spent Amortisation LTV Feb 2021 properties cash & cash of GRIT of Domus of debt Feb 2022 and derivates equivalents RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 35: SA REIT NAV per Share Bridge
FINANCIAL REVIEW 35 SA REIT NAV PER SHARE BRIDGE cents NAV per Debt repaid Reduction of Disposal Working Cash utilised Revaluation – Revaluation of NAV per share tax liability of Domus capital GRIT shares properties and share 2021 changes derivatives 2022 RESULTS PRESENTATION FOR THE YEAR ENDED 28 F
Slide 36: Conclusion
Phomoko Towers, Polokwane CONCLUSION Siyabonga Mbanjwa
Slide 37: Conclusion
CONCLUSION 37 CONCLUSION • Delta's 10-year milestone as a JSE listed REIT in 2022 provides us with an opportunity to reflect on the journey travelled • The journey has certainly not been smooth but there is a lot to celebrate and build from • Macro-economic headwinds remain a challenge • A strategic
Slide 38: Thank You and Questions
THANK YOU AND Temo Towers, Polokwane QUESTIONS
Slide 39: Showcase Properties Geographical Split
01 04 Showcase Properties Geographical split 02 05 By province and major tenant Leasing Outlook 03 06 Lease expiry profile Portfolio Breakdown Hallmark Building, Pretoria RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 40: Showcase Properties
ANNEXURES 40 SHOWCASE PROPERTIES POYNTON HALLMARK HENSA PHAMOKO BUILDING TOWERS TOWERS Location Pretoria Location Pretoria Location Limpopo Location Limpopo Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign GLA 73 396 m2 GLA 26 255 m2 GLA 13 675
Slide 41: Showcase Properties continued
ANNEXURES 41 SHOWCASE PROPERTIES continued EMBASSY DELTA LIBERTY NPA BUILDING TOWERS TOWERS BUILDING Location KwaZulu-Natal Location KwaZulu-Natal Location KwaZulu-Natal Location Cape Town Sector Office - Sovereign Sector Office – Other Sector Office – Other Sector Office - Sovereign GLA 32 723 m2 G
Slide 42: Representation by Province and Major Tenants
ANNEXURES 42 REPRESENTATION BY PROVINCE AND MAJOR TENANTS North West Limpopo 2 7 6 1 GLA(m2) 5 780 GLA(m2) 44 885 Free State 1 15 34 11 Mpumalanga 2 GLA(m2) 83 025 9 2 BUILDINGS Northern Cape GLA(m2) 30 251 REPRESENTED 17 1 6 BY PROVINCE GLA(m2) 37 275 7 16 KwaZulu-Natal Total GLA (m2) Eastern Cape
Slide 43: Lease Expiry Profile February 2022
ANNEXURES 43 LEASE EXPIRY PROFILE 28 FEBRUARY 2022 TOTAL PORTFOLIO - BY GLA 35% 31% 30% 28% 25% 20% 15% 13% 12% 10% 7% 4% 5% 3% 1% 0% Vacant M-T-M 2023 2024 2025 2026 2027 Beyond 2027 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 44: Geographic Split (City/Town)
ANNEXURES 44 GEOGRAPHIC SPLIT (CITY/TOWN) Pretoria 0.2% 0.2% 0.2% 0.4% 0.6% Durban 1.5% Johannesburg 3.3% Bloemfontein 3.5% 4.0% Polokwane 4.1% 30.8% Kimberley 4.9% Cape Town Pietermaritzburg 8.9% Nelspruit King Williams Town Port Elizabeth 10.6% Potchefstroom 26.9% Klerksdorp Springs Welkom Forum B
Slide 45: Disposal of Assets
ANNEXURES 45 DISPOSAL OF ASSETS During the 2022 financial year, Delta sold Domus for R25 million Property Building classification Location GLA (m2) Sales price (R) Transfer date Domus Office - Sovereign Pretoria, Gauteng 5 454 25 000 000 31 May 21 RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY
Slide 46: Leasing Update
ANNEXURES 46 LEASING UPDATE Lease renewals concluded • For the financial year ended 28 February 2022, lease renewals were concluded for a total GLA of 70 548m² • The notable renewals during the reporting period were: Building GLA (m²) Term - months Block G 2 132 24 17 Harrison Street Building & Kay
Slide 47: Leasing Update continued
ANNEXURES 47 LEASING UPDATE continued New leases concluded • 17 586m2 in new leases were concluded • The notable new leases concluded during the reporting period were: Building GLA (m²) Term - months 13 Elliot 2 266 6 Delta House 5 506 119 Liberty Towers 1 500 36 Standard Bank Greyville 1 777 60 Blo
Slide 48: Portfolio Breakdown
ANNEXURES 48 PORTFOLIO BREAKDOWN Office - Sovereign Office - Other Industrial Retail Total Number of properties 79 15 2 3 99 Gross lettable area (m2) 683 779 183 769 13 267 23 716 904 531 Vacancies (%) 62.5 31.7 3.9 1.8 31.3 Value (R billions) 5.6 1.9 0.1 0.3 7.9 Weighted average rental (R/m2) 110 1
Slide 49: Notes
ANNEXURES 49 NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 50: Notes
ANNEXURES 50 NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022
Slide 51: Results Presentation for the Year Ended 28 February 2022
RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2022 24 May 2022 www.deltafund.co.za