Slide 1: Annual Results 2020
wT ——— a eee mei | Annual Results 2020 ARROWHEAD PROPERTIES Focused on sustainable value
Slide 2: Highlights for the year
Highlights for the year Capex spend R230m Group Defensive South African focus – proximity COVID-19 and control performance SOLD R1.7 bn @ 7% discount to book Collections of 85% Gearing 41.2% for 6 months Pre-COVID-19 (April to September) to 39.3% Pre-COVID-19 relief Transferred (Gearing moved down R
Slide 3: Highlights for the year continued
Highlights for the year continued Low risk gearing (no cross currency swaps, no debt capital markets and no offshore borrowings) Dividend Available Group cash of Sales pipeline over being R900m paid R786m Vacancy well managed Sustainable decision to reduce the payout ratio to at 8.6% 75% 3 Arrowhead
Slide 4: 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 • Sold 75 properties which moves us closer to our target portfolio • Capex (excluding Indluplace) of R196m (R141
Slide 5: Strategic successes continued
Strategic successes continued Goal to strengthen the balance sheet • Transferred R840m worth of property • Debt reduced from R6.5bn to R5.6bn • Gearing reduced to 39.3% • 2021 expected transfers R900m before new sales • Renewed all expiring debt facilities • Group cash at R786m after spending R175m
Slide 6: Strategic successes continued
Strategic successes continued Goal to enhance ESG awareness • B-BBEE level 3 • An Arrow for Change launched • Investment in outlying properties using locally sourced labour with skills transfer • Solar and environmentally friendly initiatives • COVID-19 implementation plan • Improved ESG annual repo
Slide 7: Arrowhead team
• Team has increased from 20 to 36 over 2 years • Prior strong culture and relationships ensured top Arrowhead team performance and sustainability • Young and flexible team that could adapt to new environment • Innovative operational management and reporting required to manage during COVID-19 • Driv
Slide 8: An Arrow for Change
An Arrow for Change • Social initiative created out of the necessity to address the needs of the pandemic • Executives donated 1 month's salary • Non-executives donated generously • Suppliers, staff and other anonymous donations were also received • Company matched the amount raised • Total fund val
Slide 9: Westgate Mall in Western Cape
Westgate Mall in Western Cape Partnered with NGO to distribute: • 20 000 meals • 1 000 socks • 240 blankets • 40 trays lucky star tin fish • 40 additional blankets from Soxbox • Baby care goodies from Clicks • Blankets from Pep Stores • Cash donation from Woolworths • 1 000 party packs from Remax •
Slide 10: Louis Trichardt - Checkers Centre in Limpopo
Louis Trichardt - Checkers Centre in Limpopo Partnered with NGO to distribute: • 41 500 meals • R5 400 of Nutrigo Instant Meals • R18 700 of school uniforms • R3 400 worth of blankets • R5 000 worth of basic toiletries • 6 boxes of shoes and clothes from Legit
Slide 11: Cleary Park in Eastern Cape
Cleary Park in Eastern Cape Partnered with NGO to distribute: • 35 000 meals • 20 x R150 Shoprite vouchers • R3 000 worth of non-perishables from Boxer
Slide 12: Rosettenville Primary School - Mall@theJunction
Rosettenville Primary School – Mall@theJunction in Gauteng • Direct project with the school Before - Damaged unsafe stairways After – stairways meets the safety requirements • Repair damaged stairways • 1 050 masks • 100 litres sanitizer • 10 thermometers • Supplied safe-sand for the playground • Su
Slide 13: Rosettenville Primary School continued
Rosettenville Primary School – Mall@theJunction in Gauteng continued • Painted sick bay Entrance mural • Supplied paint for murals • Arrowhead, JHI, Indluplace and IDS staff assisted with painting • Project supervised by IDS Ablution block murals Sick bay
Slide 14: Arrowhead summary
Arrowhead summary Diverse portfolio of 143 assets 1 130 972 R9.7 billion m2 of GLA (excluding Indluplace) Sectoral split by revenue 60% 50% retail, 33% office in Indluplace & 17% industrial 14 Arrowhead Properties Annual Results 2020
Slide 15: Sales program
Sales program • Sold 105 assets since the launch of our disposal program in 2019 • Totalling R2.3bn • 75 assets valued at R1.4bn has transferred • 30 assets R900m still to transfer 15 Arrowhead Properties Annual Results 2020
Slide 16: Sales
Sales • Transferred 45 assets totalling R840m • There are a further 30 assets to transfer of R904m • Total sales of R1.7bn • Total recorded sales over the last 24 months of R2.3bn 105 assets • 113 total assets post transfer from 212 assets in 2019 • Target of another R500m in sales in 2021 Discount
Slide 17: Sales thought process
Sales thought process Strong tenant demand Risk vs Return Rental Growth Properties over Core R15m YES YES NO Properties under Sell NO NO YES R15m 17 Arrowhead Properties Annual Results 2020
Slide 18: So what have we sold?
So what have we sold? At merger date 212 assets Core portfolio of 113 assets post transfer of the remaining 30 assets Gaborone Gaborone Bloemfontein Bloemfontein Lesotho Lesotho Cape Town Port Elizabeth Cape Town Port Elizabeth Sold assets Core portfolio 18 Arrowhead Properties Annual Results 2020
Slide 19: Top properties per sector by value
Top 10 properties per sector by value Gaborone • R5.8bn 60% of portfolio value • 50% of portfolio GLA Bloemfontein Lesotho Retail R3bn (60%) Office R1.9bn (60%) Industrial R900m (57%) Cape Town Port Elizabeth Industrial Top 10 Office Top 10 Retail Top 10 19 Arrowhead Properties Annual Results 2020
Slide 20: Distributable income analysis for the year ended September 2020
Distributable income analysis for the year ended 30 September 2020 R’000 2020 2019 Revenue (excluding straight line rental income) 2 189 241 2 419 947 Listed securities income 18 325 81 775 Property expenses (954 869) (967 079) Administration and corporate costs (104 052) (89 424) Finance charges (5
Slide 21: Distributable income and dividend reconciliation
Distributable income and dividend reconciliation Variance Variance 2020 Forecast Actual 2020 (cents) (%) Total distributable income Allocated to the A shares 117.09 115.46 (1.63) (1%) Allocated to the B shares 66.00 45.39 (20.61) (31%) Reconciliation of B share distributable income to forecast Arrow
Slide 22: Core portfolio
Core portfolio Actuals Actuals Variance 12 months 12 months 12 months Oct – Sep 2019 Oct - Sep 2020 Oct - Sep R’000 R’000 (%) Revenue 1 466 226 1 370 910 (6.5%) Property expenses (569 782) (544 984) (4.4%) Net Operating income 896 444 825 926 (7.9%) Commercial (8.6%) Industrial (6.5%) Retail (7.8%)
Slide 23: Tenant arrears and COVID-19 relief
Tenant arrears and COVID-19 relief Evaluation criteria COVID-19 Bad debts Applicable to tenants in good standing whose rentals Tenant Applicable to tenants in poor standing with arrears were up to date prior to COVID-19 Period Relief only available for during COVID-19 Bad debt write-offs or provisio
Slide 24: Condensed consolidated statement of financial position
Condensed consolidated statement of financial position at 30 September 2020 Audited for the year ended Audited for the year R’000 30 September 2020 ended 30 September 2019 Assets Investment property (incl. properties held for sale) 13 539 459 14 934 305 Loans to participants of Group share purchase
Slide 25: Arrowhead property portfolio overview (excluding Indluplace)
Arrowhead property portfolio overview (excluding Indluplace) Portfolio Value Group (excluding Indluplace) • R9.7bn • 2% devaluation (3,7% devaluation including capex incurred) Portfolio Value Group (including Indluplace) • 3.5% devaluation (5.1% devaluation including capex incurred) Portfolio Averag
Slide 26: Impact of valuation growth - Arrowhead vs MSCI
Impact of valuation growth - Arrowhead vs MSCI (2017 to 2020) DESCRIPTION 2017 2018 2019 2020 TOTAL Peers 2.74% 1.73% 0.84% (5.91%) (0.61%) Arrowhead 1.50% (0.79%) (1.36%) (3.72%) (4.37%) Variance (YOY) 1.23% 2.53% 2.20% - - Variance (Cumulative) - - 5.96% (2.19%) 3.76% Capital growth – MSCI vs Arro
Slide 27: Capitalisation rates
Capitalisation rates MSCI Benchmark Arrowhead - 2020 June 2020 Asset class: Industrial – Multiple Parks 11.1% 9.5% Industrial – Warehousing & Distribution 10.8% 8.7% Office – City Decentralised 10.2% 8.8% Office – Inner city (excl. Sandon CBD) 11.2% 9.5% Office – Provincial 11.3% 9.5% Retail – Commu
Slide 28: Rate per square meter
Rate per square meter MSCI Benchmark Arrowhead - 2020 June 2020 Asset class: Industrial – Multiple Parks 4 008 5 356 Industrial – Warehousing & Distribution 3 849 7 591 Office – City Decentralised 9 805 18 617 Office – Inner city (excl. Sandon CBD) 9 553 10 481 Office – Provincial 7 985 13 501* (Rem
Slide 29: Capex spend
Capex spend Breakdown of Capital spend (in Rm) 2020 2019 Description Full year Full year Total 141 140 Retail 64 49 Industrial 30 27 Office 46 63 Investment property 9 732 10 759 Capital spend as a % of investment property 1.5% 1.3% Note: Capex of R56m over and above the R141m accrued at year-end 29
Slide 30: Debt
Debt • Arrowhead loans of R4.2bn and Group of R5.6bn • Arrowhead Group LTV of 39.3% • Loans fixed – Group 91.5% and 98.6% Arrowhead • ICR of 2.2 (1 Funder had a ICR 2.25X but has condoned) • Arrowhead Group weighted average interest rate of 9.15% Looking forward 12 months from 1 October 2020: Debt e
Slide 31: 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% 40.6% Funder 2 2.0 2.4 60.0% 45.4% Funder 3 2.0 2.8 45.0% 33.1% Funder 4 2.0 2.2 50.0% 39.9% 31 Arrowhead Properties Annual Results 2020
Slide 32: Listed investments
Listed investments (comparing position at September 2020 vs September 2019) Asset Balance sheet (Rm) Income (R’000) 2020 % 2019 % 2020 % 2019 % Property 9 732 71% 10 759 71% 409 266 83% 581 742 76% Indluplace 3 808 29% 4 175 28% 84 325 17% 149 820 19% Listed Investments 98 0% 210 1% - 0% 37 699 5% T
Slide 33: NAV Bridge per B share Group
NAV Bridge per B share Group 7.60 0.39 7.40 7.20 7.05 7.00 (0.39) NAV in R’s 6.80 (0.26) 6.60 (0.25) 6.40 (0.13) 6.31 (0.07) (0.03) 6.20 6.00 Movements for the period Increase Decrease Total * The A share NAV is based on the 60-day VWAP of the share based on the MOI 33 Arrowhead Properties Annual Re
Slide 34: Property portfolio as at 30 September 2020
Property portfolio as at 30 September 2020 • 143 commercial (retail, office & industrial) properties • Sectoral by GLA: 35% retail, 29% office and 36% industrial • Overall vacancy 8.6% (7.0% retail, 17.3% office, 3.2% industrial) • Average gross (net) rent per sector R129/m2 retail (R120/m2), R127/m
Slide 35: Property portfolio continued
Property portfolio as at 30 September 2020 continued • New deals concluded per sector Retail R2 801 232 monthly income (R111 Gross Rental R/m2) Office R3 317 764 monthly income (R82 Gross Rental R/m2) Industrial R2 117 449 monthly income (R37 Gross Rental R/m2) Overall R8 236 445 monthly income • To
Slide 36: Update on collections
Update on collections Gross Collections Net Collections BEFORE relief AFTER relief April 2020 79% 98% May 2020 76% 92% June 2020 88% 96% July 2020 90% 95% August 2020 92% 96% September 2020 93% 97% Total Average Collections 85% 96% • R77m in total COVID-19 relief • R10m in defferals and R67m in disc
Slide 37: Collection statistics
Collection statistics Gross collections before COVID-19 relief % of monthly April 2020 May 2020 June 2020 July 2020 August 2020 September 2020 Average billing A Grade 44% 88% 85% 97% 96% 97% 97% 93% B Grade 14% 79% 63% 82% 87% 94% 91% 82% C Grade 42% 69% 68% 80% 84% 85% 88% 79% Essential 18% 95% 93%
Slide 38: Collection statistics continued
Collection statistics continued Collections per sector for the period April to September 2020 Gross collections before relief Net collections after relief Commercial 89% 95% Industrial 84% 96% Retail 85% 96% Total 86% 96% Collections per sector per month based on gross billings 95 90 85 80 75 70 65
Slide 39: Portfolio challenges and way forward
Portfolio challenges and way forward 1 Rustenburg Node Tenant sustainability Utility Costs Community Pressures and cashflow • Threat of new • Threat of continuous • Increase dialogue / shopping centres • Especially amongst unsustainable tariff communication SME’s increases • Continued defensive • Ex
Slide 40: Portfolio challenges and way forward continued
Portfolio challenges and way forward continued 3rd party suppliers Over supply of Property 220 Madiba • Sustainability question • Tenants (Buyers), market • Single largest vacancy • Closely monitor • Innovative letting strategies • Internal and external revamp underway • Continue to engage • Aggress
Slide 41: Operational success
Operational success 3 Key variables: Create visual impact via low cost, low maintenance design scheme. Enhancing basic building form through texture. Post redevelopment new 10 year lease signed. Beka Schreder 41 Arrowhead Properties Annual Results 2020
Slide 42: Operational success
Operational success 4 Key variables: Prominent entrance façade, colour and form definition, vegetation and laser cut panels. Post redevelopment 1 000m2 let. The Aviary 42 Arrowhead Properties Annual Results 2020
Slide 43: Operational success
Operational success 3 Key variables: Emphasise the view, maximise floor area and letting potential, light laboratory space that is flexible and comfortable. Post redevelopment 5 year lease with national tenant. Wear Check 43 Arrowhead Properties Annual Results 2020
Slide 44: Upcoming projects
Upcoming projects Access Park The Fashion Mill 44 Arrowhead Properties Annual Results 2020
Slide 45: Upcoming projects
Upcoming projects Eersterust Square 45 Arrowhead Properties Annual Results 2020
Slide 46: Upcoming projects
Upcoming projects Suntyger 46 Arrowhead Properties Annual Results 2020
Slide 47: Office: work from home is okay for now
Office “Work from home is okay for now, work from work is the future“ New York Corporate CEO • Why is there a future? • Remote working relies heavily on responsible staff • The lack of connectivity and power shortages throughout South Africa (International trends aren’t always applicable in South Af
Slide 48: Office continued
Office continued How are we adapting the Arrowhead office portfolio: • Introducing flexibility into our spaces and leasing process • Modular office spaces – 2 office sites implemented, with 2 more potential sites • Partnered with a specialised 3rd party – flexible work-space operator and identified
Slide 49: Trading densities
Trading densities SEPTEMBER 2019 vs SEPTEMBER 2020 RENT TO SALES RATIO 4 000 10,00% 14% -5.5% -6.5% 38% -7.6% 9,00% 3 500 3.5% 10.6% 8,00% 3 000 7,00% 6% -11.1% -6.3% 5.1% 2 500 6,00% 2% 14% 2 000 5,00% 2% 13% 4,00% 1 500 -7.2% 3,00% 1 000 2,00% 500 1,00% 0 0,00% Access Park Westgate Montclair Midto
Slide 50: Foot count trends
Foot count trends 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 Oct 2019 Nov 2019 Dec 2019 Jan 2020 Feb 2020 Mar 2020 Apr 2020 May 2020 Jun 2020 Jul 2020 Aug 2020 Sep 2020 Westgate Mall Cleary Park Montclair Mall Mall@theJunction 50 Arrowhead Properties Annual Results 2020
Slide 51: Combined lease expiry profile
Combined lease expiry profile BY REVENUE BY GLA 20% 22% 13% 27% 20% 14 000 000 90 000.00 80 000.00 12 000 000 22% 70 000.00 24% 10 000 000 60 000.00 9% 8 000 000 50 000.00 8% 40 000.00 5% 6 000 000 7% 10% 7% 30 000.00 4 000 000 3% 20 000.00 2 000 000 3% 10 000.00 0 - Monthly 2021 2022 2023 2024 2025
Slide 52: Sustainability projects and performances
Sustainability projects and performances 1 October 2019 – 30 September 2020 Solar Phase 1 – 100% owned plants: • 6 plants operational - 3.1 megawatt • Energy generation YTD R4 951 748 • Total clean energy produced 2% of annual consumption value • 3 633 Tonnes of CO2 emissions savings • 403.6 South A
Slide 53: Sustainability projects and performances continued
Sustainability projects and performances 1 October 2019 – 30 September 2020 continued Energy saving projects • LED lighting conversion projects completed - 33 properties • Backup power solutions in exploration phase • COVID-19 lock down protocols implemented and runtime management of air-conditionin
Slide 54: Indluplace
Indluplace • Not proceeding with merger • Balance sheet is strong • LTV 34.7% • Cash of over R200m • Strong COVID-19 performance 54 Arrowhead Properties Annual Results 2020
Slide 55: Prospects
Prospects • Sales pipeline and transfers • Balance sheet strength • Management of debt • Investment into assets • Greater focus on ESG • Sustainable properties • Tenant centric value proposition • Further simplification of business • No intention to raise capital at massive discounts to NAV 55 Arrow
Slide 56: Thank you
(leary Park < STEERS Thank you ARROWHEAD PROPERTIES Focused on sustainable value