Fairvest Limited Class A · JSE:FTA
Fairvest Limited Class A — H1 2023 Earnings Presentation
49 slides from Fairvest Limited Class A's earnings presentation, 2023
Slide 1: Interim Results for the Six Months Ending 31 March 2023
INTERIM RESULTS FOR THE SIX MONTHS ENDING 31 MARCH 2023
Slide 2: Agenda
AGENDA Business/Operational update Solar/Backup power update Fairvest portfolio highlights Office portfolio highlights Industrial portfolio highlights Retail portfolio highlights Financial update Q&A
Slide 3: Business Update
DARREN WILDER CEO BUSINESS UPDATE
Slide 4: Fairvest at a Glance
FAIRVEST AT A GLANCE Diverse portfolio Market Cap 1 127 134 m2 of R11.9bn of GLA (excl. Indluplace) R5.3bn Sectoral split by revenue Retail: 66.6% Office: 22.3% Industrial: 11.1% Sectoral split by GLA Retail: 49.8% Office: 24.7% Industrial: 25.5% Investments Gearing levels 60.9% in Indluplace 5.1% i
Slide 5: Six Months to March 2023 Highlights
SIX MONTHS TO MARCH 2023 HIGHLIGHTS Disposals of 64.60 cps 20.97 cps 100% 4 assets distribution distribution Pay-out ratio transferred at per A share per B share value of R252.5m Like-for-like net Solar investments Positive rental Overall property income produced 11.7% reversions of Tenant retention
Slide 6: Strategic Focus Areas 12-Month View
STRATEGIC FOCUS AREAS 12-MONTH VIEW Recycle out of industrial, office and residential asset into retail Continue to build a platform to produce sustainable income Value extraction opportunities – internally focused KEY METRICS ▪ To maintain collectable arrears below 2% of gross income ▪ Weighted ave
Slide 7: Fairvest Disposals
FAIRVEST DISPOSALS (Discount)/ SALES TRANSFERRED Date Sales value Book value premium to Average Asset Class transferred (R'million) (R'million) book value % yield % GLA Vacancy % SARS Durban Office 12-Jan-23 230.0 230.0 0.0% 11.5% 23 105 0.0% 79 Hans van Rensburg Office 08-Mar-23 4.0 3.9 1.7% 13.1%
Slide 8: Indluplace Disposal
INDLUPLACE DISPOSAL *Fairvest owns 60.9% of the issued share capital of Indluplace Properties Limited ▪ An offer has been received from SA Corporate Real Estate for Fairvest’s entire stake in Indluplace at R3.40 per share. ▪ Expected proceeds of R651.4 million. ▪ Fairvest has concluded an irrevocabl
Slide 9: Solar and Backup Power Update
RIAZ KADER COO SOLAR AND BACKUP POWER UPDATE
Slide 10: Fairvest: Loadshedding Management
FAIRVEST: LOADSHEDDING MANAGEMENT ▪ Diesel cost vs recovery - currently at Hours of load shedding and diesel cost 86.9% diesel recovery. 2 500 300 ▪ Fairvest has spent R8.3 million in 250 2 000 Thousands 6 months and recovered R7.2 million 200 1 500 from tenants. 150 1 000 100 ▪ The YTD average dies
Slide 11: ESG: Solar and Water Projects
ESG: SOLAR AND WATER PROJECTS Solar Projects ▪ 38 solar plants in operation with 16.4 MW installed capacity. ▪ Plants produced 11.7% of the combined portfolio electricity costs. ▪ The solar plants produced clean Cleary Park energy to the value of R16.6m. ▪ Our first ground mounted solar farm at Clea
Slide 12: ESG: Solar and Water Projects
ESG: SOLAR AND WATER PROJECTS Water Projects ▪ Strategic installation of smart monitoring equipment to enable early leak detection on 12 properties. ▪ 13 ground water harvesting plants in operation and 2 new water saving projects are currently in planning phase. Randburg Trevallyn water project
Slide 13: Fairvest Portfolio
DARREN WILDER CEO FAIRVEST PORTFOLIO
Slide 14: Fairvest Portfolio Key Highlights
FAIRVEST PORTFOLIO KEY HIGHLIGHTS Tenant retention 1 127 134 m2 137 assets Improved to 90.7% of GLA (Sep’22 – 87.4%) Vacancy Reversions Capex at 5.96% positive at 1.8% Expenditure of R91.2m (Sep’22 – 5.93%) (Sep’22 – -6.4%) 0.8% of value spend Average gross Weighted average WALE rental per m2 built
Slide 15: Fairvest Portfolio Composition
FAIRVEST PORTFOLIO COMPOSITION Retail Office Industrial Avg Avg Avg Vacancy property % of property % of property % of Total Band # value Value Total # value Value Total # value Value Total Value 0% - 4% 50 119 5 963 73% 17 66 1 120 44% 23 52 1 206 95% 8 289 4% - 8% 10 96 961 12% 4 60 240 10% 1 15 15
Slide 16: Fairvest Letting Activity
FAIRVEST LETTING ACTIVITY New deals Mar ’23 Mar ‘22 Fairvest Lease expiry profile by GLA Number of leases 188 209 300 000 22.8% Total GLA m2 49 430 35 268 250 000 18.0% 17.8% Average gross rental achieved (R/m2) 100.19 102.82 200 000 14.3% 14.8% 150 000 Weighted average escalations 6.7% 6.5% 100 000
Slide 17: Office Portfolio
ALON KIRKEL COO OFFICE PORTFOLIO
Slide 18: Office Portfolio Key Highlights
OFFICE PORTFOLIO KEY HIGHLIGHTS Tenant retention 278 331m2 35 assets at 85.9% of GLA (Sep’22 – 85.0%) Vacancy % of total portfolio Capex at 13.9% GLA – 24.7% Expenditure R40.3m (Sep’22– 13.6%) Value – 21.1% 1.6% of value spend Average gross Weighted average WALE rental per m2 built in escalation 21.
Slide 19: Office Leasing Activity
OFFICE LEASING ACTIVITY New deals Mar ‘23 Mar ‘22 Office Lease expiry profile by GLA Number of leases 46 49 70 000 21.8% Total GLA m2 21 336 7 745 60 000 50 000 15.5% 15.1% Average gross rental achieved (R/m2) 87.01 80.53 13.9% 12.8% 40 000 10.2% 10.7% Weighted average escalations 6.9% 8.0% 30 000 2
Slide 20: Offices Renewals
OFFICES RENEWALS SIGNIFICANT RENEWALS over the past 6 months Company Building GLA m² Private tenant 1 Urban Brew 2 578 Private tenant 2 Sunninghill Place 1 923 Mining tenant 1 127 Bethlehem Street 1 261 IT tenant 1 The District 1 167 Private tenant 3 1 Sturdee Avenue 1 093 Private tenant 4 1 Sturdee
Slide 21: Office New Deals
OFFICE NEW DEALS SIGNIFICANT LEASE NEW DEALS over the past 6 months Company Building GLA m² Private tenant 1 2Twenty Madiba 2 806 Private tenant 2 Media Shop 2 522 Private tenant 3 158 Jan Smuts 1 954 Private tenant 4 Bridge on Bond 1 061 Private tenant 5 Bridge on Bond 1 043 Private tenant 6 Sunnin
Slide 22: Office Comments
OFFICE COMMENTS Shared workspace rolling out well Self storage is filtered into our offering Minor refurbs and repurposing of assets Vacancy target of 10% is looking promising Sanlyn Office Park
Slide 23: Industrial Portfolio
ALON KIRKEL COO INDUSTRIAL PORTFOLIO
Slide 24: Industrial Portfolio Key Highlights
INDUSTRIAL PORTFOLIO KEY HIGHLIGHTS Tenant retention 287 105 m2 26 assets at 96.7% of GLA (Sep’22 – 88.6%) Vacancy % of total portfolio Capex at 1.5% GLA – 25.5% Expenditure R7.3m (Sep’22 – 1.0%) Value – 10.6% 0.6% of value spend Average gross Weighted average WALE rental per m2 built in escalation
Slide 25: Industrial Leasing Activity
INDUSTRIAL LEASING ACTIVITY New deals Mar ‘23 Mar ‘22 Industrial Lease expiry profile by GLA Number of leases 28 29 120 000 35.2% Total GLA m2 13 860 10 128 100 000 Average gross rental achieved (R/m2) 53.31 41.73 80 000 22.5% 60 000 15.7% Weighted average escalations 7.4% 7.3% 12.8% 40 000 9.3% WAL
Slide 26: Industrial Comments
INDUSTRIAL COMMENTS Successful in our pre-emptive strategy on future vacancies Core portfolio growing comfortably Security at our large parks is a key focus Reduce vacancy to 1% by year end Silverton Industrial Park
Slide 27: Retail Portfolio
RIAZ KADER COO RETAIL PORTFOLIO
Slide 28: Retail Portfolio Key Highlights
RETAIL PORTFOLIO KEY HIGHLIGHTS Tenant retention 561 698m2 76 assets at 90.1% of GLA (Sep’22 – 88.0%) Vacancy % of total portfolio Capex at 4.3% GLA – 49.8% Expenditure R43.6m (Sep’22 – 4.3%) Value – 68.2% 0.5% of value spend Average gross Weighted average WALE rental per m2 built in escalation 29.7
Slide 29: Retail Leasing Activity
RETAIL LEASING ACTIVITY New deals Mar ‘23 Mar ‘22 Retail Lease expiry profile by GLA Number of leases 114 131 23.9% 140 000 20.5% Total GLA m2 14 234 17 394 120 000 17.0% 17.4% 100 000 Average gross rental achieved (R/m2) 165.59 146.89 80 000 10.9% Weighted average escalations 6.7% 6.2% 60 000 6.0%
Slide 30: Retail Top Tenant Exposure by Revenue and GLA
RETAIL TOP 10 TENANT EXPOSURE BY REVENUE & GLA 36.1% 8.6% 8.2% 6.4% 2.9% 2.8% 2.7% 1.8% 1.2% 0.8% 0.7% GLA m² 66 948 58 222 44 533 17 819 13 356 19 225 8 507 5 443 6 072 4 669 Monthly revenue (% of total retail revenue)
Slide 31: Retail New Deals and Renewals
RETAIL NEW DEALS AND RENEWALS SIGNIFICANT NEW LEASES over the past 6 months 3 095 m² 540 m² 427 m² 344 m² 316 m² SIGNIFICANT LEASE RENEWALS over the past 6 months 3 653 m² 2 764 m² 2 576 m² 2 258 m² 1 876 m²
Slide 32: Annualised Trading Density
Annualised trading density - 100 000 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 Building 1 10.5% 90 000 Building 2 7.9% Building 3 32.6% Building 4 -6.7% Building 5 23.8% Building 6 -6.7% Building 7 4.1% Building 8 -4.6% Building 9 17.6% Building 10 5.6% Building 11 9.1% TRADING DENSITI
Slide 33: Rent to Sales Ratio
Percentage 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0% 18,0% 20,0% RATIO Building 1 -0.1% Building 2 -0.7% Building 3 -2.0% Building 4 2.2% Building 5 -0.7% Building 6 0.7% Building 7 -0.1 RENT TO SALES Building 8 0.1% Building 9 -0.6% Building 10 0.6% Building 11 -0.4% Building 12 -0,2% Buildi
Slide 34: Retail Comments
RETAIL COMMENTS National retailers continue to look for new opportunities Approx. 40% of portfolio by number, has renewable energy capacity Continued implementation of expense optimization Executing on yield enhancing opportunities Implementation of integrated backup power strategy Montclair Mall
Slide 35: Financial Update
JACQUES KRIEL CFO FINANCIAL UPDATE
Slide 36: Distributable Earnings
DISTRIBUTABLE EARNINGS Unaudited Unaudited for the six for the six months ended months ended 31 March 31 March Cents per share – Unaudited 2023 2022 Distributable income Fairvest’s operations – Core portfolio 39.25 37.31 Fairvest’s operations – Income attributable to sold assets 0.33 0.20 Net financ
Slide 37: Condensed Consolidated Statement of Financial Position
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Group Group 31 March 30 September R’000 2023 2022 Investment property 11 944 138 12 100 924 Financial assets incl. loans 309 360 414 698 Cash and cash equivalents 138 490 74 892 Trade receivables 184 155 175 148 Net derivatives 21 336 19 422 Rem
Slide 38: NAV Bridge per B Share
NAV BRIDGE PER B SHARE (CENTS PER SHARE) As at Profit for NAV Accretive Dividends paid Change in Other Indluplace As at 30 September the period share-buy value of A movements valued to 31 March 2022 backs Share NAV sales price 2023 Increase Decrease Total
Slide 39: Capital Expenditure
CAPITAL EXPENDITURE Capital Property % of expenditure Value Value (R’million) (R’billion) Spend Total 91.2 11.9 0.8% Retail 43.6 8.1 0.5% Industrial 7.3 1.3 0.6% Office 40.3 2.5 1.6%
Slide 40: Capital Allocation
CAPITAL ALLOCATION Fairvest embarked on a share buy back program The total shares acquired to date: ▪ During March 2023 we have repurchased 32.5 million Fairvest B-shares at an average price of R3.07 on the open market. ▪ Buy backs are income accretive. Southview Centre: Soshanguve
Slide 41: Debt and Hedge Maturity Profile
DEBT AND HEDGE MATURITY PROFILE 2 314 2 500 1 698 2 000 1 227 R Million 1 500 1 057 1 000 920 528 500 500 - - Expiring in the next Expiring in the next Expiring in the next Expiring in the next 12 months 24 months 36 months 48 months Debt Swaps
Slide 42: Debt Update
DEBT UPDATE DEBT CONSOLIDATION Streamline borrowing structures, ABSA appointed as lead arranger Well received, nearly 3x oversubscribed Significant improvement in margin R2.1bn of debt secured, expect to close in the next 6 weeks All maturities for the next 12 months refinanced Weighted average matu
Slide 43: Debt Facilities
DEBT FACILITIES R’000 31-Mar-23 30-Sep-22 Loan to value (SA REIT BP) % 38.4% 38.1% % of debt fixed % 71.1% 65.6% Weighted average cost of funding % 9.2% 8.9% Weighted average margin above 3 months JIBAR on % 1.9% 2.1% floating debt Interest cover Times 2.5 2.5 Weighted average maturity of debt Month
Slide 44: LTV Bridge
LTV BRIDGE As at Dividend Share Capital Transactions Fair value Property Operational As at 30 September paid buy backs expenditure with adjustments sales cashflow 31 March 2022 incurred minorities 2023 Increase Decrease Total
Slide 45: Merged Group: Share Price to Book Value
MERGED GROUP:SHARE PRICE TO BOOK VALUE 12 000 0% -22% -42% -23% -36% -32% -50% 10 000 -63% -100% 8 000 -150% 6 000 -200% -250% 4 000 -300% 2 000 -350% - -400% 2018 2019 2020 2021 2022 Mar 2023 Market price NAV
Slide 46: Prospects and Conclusion
PROSPECTS AND CONCLUSION
Slide 47: Prospects
PROSPECTS Guidance - Distributable earnings per B share of between 40.50 - 42.00 cents per share Continue with internal focus Remain conservatively geared Continue to simplify the business Strong focus on tenant retention Maintain 100% payout ratio
Slide 48: Thank You
THANK YOU Q&A
Slide 49: Regional and Sectoral Split
REGIONAL & SECTORAL SPLIT TOTAL GLA PER REGION TOTAL REVENUE PER REGION 51% Gauteng 36% 13% Western Cape 19% 9% KwaZulu-Natal 12% 8% Eastern Cape 11% 6% Limpopo 6% 5% North West 6% 4% Northern Cape 5% 3% Free State 4% 1% Mpumalanga 1% TOTAL GLA PER SECTOR TOTAL REVENUE PER SECTOR 50% Retail 67% 25%