Burstone Group Limited · JSE:BTN
Burstone — H1 FY2025 Earnings Presentation
89 slides from Burstone's earnings presentation, November 2024
Slide 1: Results for the six months ended 30 September 2024
Transform potential Results for the six months ended 30 September 2024 NOVEMBER 2024
Slide 2: Burstone at a glance as at 30 September 2024
Burstone at a glance as at 30 September 2024 We are a fully integrated international real estate business 30 years + c.R42bn c.R10bn 50+ 9 track record Total portfolio third-party assets real estate countries (GAV)* under management^ professionals Investing in best of breed assets in select markets
Slide 3: 1H25 financial highlights
1H25 financial highlights First half results in line with Fund and asset management guidance Stable operational performance business transition taking shape DIPS down 3.0% to 49.53cps SA LFL NOI: down 1.2% R34m in fee revenue Focused efforts to integrate (Sep-23: 51.07cps) EU LFL NOI: up 1.1% (EUR)
Slide 4: Overview of results
01 Overview of results Transform potential
Slide 5: Distributable earnings bridge
Distributable earnings bridge Increased interest rates on Group debt Rm Comprises Operational performance 8.5% of earnings (net of regional funding costs) 7 12 4 411 (3.0%) 14 3 5 399 -22 1 2 -23 1H24 SA operational EU operational income Fee revenue Operational Residual Group 1H25 distribution incom
Slide 6: Distributable earnings statement reconciliation
Distributable earnings statement reconciliation 6 months ended 6 months ended Rm IFRS (loss)/profit after taxation 30-Sep-24 (810) 30-Sep-23 467 DIPS in line with guidance Adjusted for: IFRS profit adjusted for non-cash Straight-line rental revenue adjustment 16 2 accounting adjustments including Fa
Slide 7: Net asset value bridge
Net asset value bridge NAV per share down 9.7% to R13.95 (FY24: R15.45), driven by decrease in PEL investment value (derecognition of portfolio premium) and strengthening of ZAR Rm New investments Funding of new investments 35 270 12,439 1 143 2 -496 (9.7%) 3 -1,034 4 11,232 -125 Opening SA acquisit
Slide 8: Significantly bolstered the Group's balance sheet
02 Significantly bolstered the Group’s balance sheet Transform potential
Slide 9: Key highlights
Key highlights Group refinancing completed in August 2024, alongside Blackstone Transaction which completed and returned €250m cash to settle debt • Post the Blackstone Transaction, the Group has c.R1.9bn of committed • SA ZAR swap book restructured available facilities to settle short Interest rate
Slide 10: Group funding profile and liquidity post Blackstone Transaction
Group funding profile and liquidity post Blackstone Transaction Limited risk with opportunistic refinance completed • No near term refinancing required • Healthy expiry profile with R1.9bn of committed undrawn debt • Post-Blackstone Transaction debt expiry of 3.5 years Group debt expiry post-Blackst
Slide 11: Group ZAR and Euro swap expiry
Group ZAR and Euro swap expiry Profile proactively managed, staggered with limited risk in any one year Saved 5bps on R3.5bn 7.29% swap rate (Mar 24: 7.34%) EUR debt and CCIRS expiry (EUR’m) ZAR swap expiry (Rm) Tenor extended to 3.0 years There are no EUR CCIRS 2500 (Mar 24: 2 years) post the Black
Slide 12: Effective capital allocation
03 Effective capital allocation Transform potential
Slide 13: Effective capital allocation is a key component of our strategy
Effective capital allocation is a key component of our strategy • Ensure we deploy/recycle capital into the best international/local opportunities that will support our longer- term strategic plan and continue to create shareholder value • We will continue to invest in our platforms as we build out
Slide 14: Expected LTV over the next 12 to 18 months
Expected LTV over the next 12 to 18 months* Clear deleveraging path through reduction of stake in PEL and execution of South African asset sales. Near term capital requirements to grow the funds and asset management business to support enhanced returns. •1 Acquisition of TNS completed 2.0% (1.0%) in
Slide 15: Strategic overview
04 Strategic overview Transform potential
Slide 16: We have a clear strategic focus in the short and medium term
We have a clear strategic focus in the short and medium term Integration Optimise current Maintain a robust Growth Holistic portfolios balance sheet sustainability • Unlock distribution • Maintain stability • Maintain a medium- • Funds management • Further embed ESG synergies and capability term LTV
Slide 17: 1H25 strategic highlights
1H25 strategic highlights Significant progress made in executing our stated strategy With many of these initiatives expected to start delivering results in 2H25 and beyond • Accelerated the expansion of the Group’s fund and asset management strategy across all regions in which the Group operates • S
Slide 18: Funds and asset management strategy
4.1 Funds and asset management strategy Transform potential
Slide 19: Growth of our funds and asset management strategy
Growth of our funds and asset management strategy The Group has made significant progress in accelerating its funds and asset management strategy The Group is well positioned to execute this strategy, underpinned by management teams who have a successful track record of aggregating and realising val
Slide 20: Group portfolio snapshot as at 30 September 2024
Group portfolio snapshot as at 30 September 2024 Total portfolio (GAV) of c.R42bn Third-party AUM* (Rbn) with 24% third-party AUM GAV: Location GAV: Capital Allocation GAV: By Sector R10.1bn 3.6 14% 6% 15% 33% 10% 18% 61% 67% 8.9 76% 6.5 SA Offshore Opportunistic** Logistics / industrial Retail Core
Slide 21: Strategic partnership with Blackstone
Strategic partnership with Blackstone • Approved by shareholders on 28 October 2024; completed on 12 November 2024 • Launches Burstone’s European funds and asset management strategy • Burstone retains a 20% co-investment in PEL and asset management of the c.€1bn PEL portfolio • Net proceeds to Burst
Slide 22: Light industrial portfolio in Germany
Light industrial portfolio in Germany • Asset management mandate for c.€170m of a light industrial portfolio in Germany • Contributed R11m to earnings in 1H25 • Currently in negotiations on a co-invest opportunity and ongoing management; undergoing due diligence • Strategic rationale: o Strategic al
Slide 23: Irongate Group JV
Irongate Group JV New opportunity • Agreement to establish a new industrial platform backed by a leading global alternative asset management firm • An initial soft commitment of A$200m of equity has been earmarked with the aim to upsize upon successful deployment • Burstone, through Irongate, will h
Slide 24: South Africa
South Africa • The Group has built the foundation for a third-party fund management platform in which institutional capital can invest • Currently in exclusive discussions with cornerstone investors to build a core+ platform: o Will utilize a portion of existing SA assets as seed portfolio with Burs
Slide 25: Optimise current portfolios: stability maintained
4.2 Optimise current portfolios: stability maintained Transform potential
Slide 26: 4.2.1 Performance – South Africa
4.2.1 Performance – South Africa 26
Slide 27: SA snapshot of performance
SA snapshot of performance Mature portfolio which supports a sustainable level of earnings • Stable portfolio with marginal reduction in base LFL NOI of -1.2% Financial performance Letting performance YoY • -1.2% negative base LFL NOI growth • 99.7% of space expiring let - • Strong letting across th
Slide 28: SA office portfolio
SA office portfolio Sector still facing oversupply and negative reversionary pressure in the short term but stabilising Sector trends Financial and operational metrics • Outlook for sector is cautiously optimistic, driven mainly Gross income Arrears (% of growth (6.7%) collectibles) 3.0% by demand f
Slide 29: SA industrial portfolio
SA industrial portfolio Stable portfolio delivering strong returns Financial and operational metrics Sector trends • Positive supply-demand Arrears (% of LFL NOI growth 1.5% 3.2% collectibles) dynamics remain (Sep-23: 11.5%) (Mar-24: 0.8%) • Market rental growth in short-to-medium term Vacancy (by G
Slide 30: SA retail portfolio
SA retail portfolio Retailer trading performance still optimistic in a challenging economic environment Financial and operational metrics Trading stats* Sector trends Arrears (% of Average turnover +4.3% • Consumer confidence and LFL NOI growth 1.8% 2.7% (Sep-23: 6.0%) collectibles) (Mar-24: +4.6%)
Slide 31: Integrating ESG – South Africa
Integrating ESG – South Africa Driving down cost of occupation for our clients and transforming the society in which we operate Strategy Description Solar • 14.8MWp solar PV Energy Performance Certificates • 29 buildings Carbon Disclosure Project • B-rating Climate and Reducing cost of occupation •
Slide 32: SA portfolio outlook
SA portfolio outlook • In South Africa the Group has a stable and mature portfolio which supports a sustainable level of earnings • However, growth expectations remain low given the domestic GDP growth profile and global macro-economic volatility and uncertainty continues • The South African portfol
Slide 33: 4.2.2 Performance – Pan-European Logistics (PEL) Portfolio
4.2.2 Performance – Pan-European Logistics (PEL) Portfolio 33
Slide 34: EU market overview
EU market overview • The European logistics sector remains solid, driven by strong demand and limited new supply; however, the landscape is evolving • Rental growth and indexation are slowing across European markets, despite a recent easing in interest rates • Occupier demand is declining in certain
Slide 35: PEL snapshot
PEL snapshot Growth in contracted rent offset by an increase in vacancies and adverse interest rate environment • Portfolio delivered rental reversion of c.10.2% on renewals and new lettings Financial performance Letting performance demonstrating the ability to capture • 1.1% base LFL NOI growth (Se
Slide 36: PEL income statement
PEL income statement Positive current year performance offset by increases in interest rates and increase in vacancies 6 months ended 6 months ended LFL NOI growth +1.1% €m 30-Sep-24 30-Sep-23 % change ERV unlock, indexation offset Net rental income 28.9 28.6 1.0% by increase in vacancy Property exp
Slide 37: Delivering ESG – Europe
Delivering ESG – Europe Continue to assess initiatives to further embed ESG into business practices Strategy Description Solar • The business has planned to deliver a photovoltaic roll-out which will produce around 4.5MWp across the portfolio over the next 12 to 18 months • Engaging with our new cap
Slide 38: PEL portfolio outlook
PEL portfolio outlook • The PEL portfolio continues to deliver stable operating metrics and is well positioned to leverage current market dynamics as interest rates stabilize at lower levels • A key strategic priority remains maximizing stakeholder value through our partnership with Blackstone • Tog
Slide 39: Looking ahead
05 Looking ahead Transform potential
Slide 40: Reflecting on the past 6 months
Reflecting on the past 6 months • Significant strides made to reposition from a property investment business into an integrated international real estate fund and asset management company • We believe that an integrated international offering will be a key differentiator as we implement our strategi
Slide 41: In conclusion
In conclusion Guidance* • Looking ahead to FY25, performance will be underpinned by: o A stable South African portfolio which is performing in line with expectations, with LFL NOI growth expected to be flat relative to FY24 o Further operational efficiencies; o Growth in fee revenue, driven by our a
Slide 42: We transform potential into value
We transform potential into value A successful history of creating, building and managing real estate businesses Real estate purists Dynamic capital allocation Hands on asset management and best of breed assets underpin Disciplined capital allocation and continued capital rotation all our decisions
Slide 43: Burstone's hybrid business model – generating enhanced returns on capital deployed
Transform potential Burstone’s hybrid business model – generating enhanced returns on capital deployed NOVEMBER 2024
Slide 44: Introduction – overview of our business model
01 Introduction – overview of our business model Transform potential
Slide 45: Hybrid model: fully integrated international real estate business
Hybrid model: fully integrated international real estate business Two distinct businesses operating in tandem to drive significantly increased value INVESTMENT FUNDS AND ASSET MANAGEMENT On-balance sheet real estate investments Off-balance sheet fund and asset management platforms Balance sheet c.R1
Slide 46: Global reach with local presence
Global reach with local presence Integrated real estate investor, acting as manager across all platforms Europe Australia^ GAV: c.€1.2bn GAV: c.A$1.2bn Third-party AUM: c.€0.8bn Third-party AUM: c.A$1.1bn BTN investment: c.€80mn BTN investment: c.A$60mn • c.€1.0bn (GAV) PEL portfolio: 20% ownership
Slide 47: Group portfolio snapshot
Group portfolio snapshot* TOTAL PORTFOLIO (GAV): c.R42bn; 67% offshore Total Location By Sector Capital Allocation 6% 14% 7.1 15% 13.8 33% 10% R42bn R42bn R42bn R42bn 18% 61% 67% 76% 21.1 Logistics / industrial Retail South Africa PEL Australia SA Offshore Opportunistic** Core Core-plus Office Resid
Slide 48: Capital allocation and growth
02 Capital allocation and growth Transform potential
Slide 49: Burstone's capital allocation framework
Burstone’s capital allocation framework Our model allows us to: • Invest in all risk and return profiles across the full lifecycle of real estate • Integrated approach in terms of fund management, investment management, asset management and development management to enhance return and decrease balan
Slide 50: Utilisation of the Group's balance sheet
Utilisation of the Group’s balance sheet Shift from 100% direct ownership to co-investment in Burstone managed third-party fund and asset management platforms INVESTMENT FUNDS AND ASSET MANAGEMENT • Support existing and new co-investments / growth (co- • Predominantly an off-balance sheet strategy i
Slide 51: Capital sources: funding our strategy
Capital sources: funding our strategy JSE • Dependent on market conditions • Blackstone • Ivanhoe Cambridge • Phoenix • F&G JV capital • New partner in Australia • SA: partners in core-plus platform LP capital • EU/AUS: Capital pools in EU, Aus, Middle East, Canada, US, Asia, South Africa Cross-sell
Slide 52: Funds and asset management model
03 Funds and asset management model Transform potential
Slide 53: Our funds and asset management strategy
Our funds and asset management strategy Growth of the funds and asset management model • Strong progress made on the funds and asset management strategy: I. Strategic partnership with Blackstone in Europe II. New industrial platform in Australia backed by a leading global alternative asset managemen
Slide 54: The funds and asset management opportunity
The funds and asset management opportunity Illustrative return build-up Plus upside from Aim to grow our funds and asset management platform as we continue to build performance fees 1 our capabilities as a fund and asset manager Integrated real estate and investment managers return Alignment of inte
Slide 55: Impact of investment strategy: 250bps uplift
Impact of investment strategy: 250bps uplift Illustrative scenario For every €100m (R2bn) GAV acquired* ON-BALANCE SHEET INVESTMENT FUNDS AND ASSET MANAGEMENT Burstone investment R160m Third-party AUM ↑ R1.6bn (c.20%) Platform equity yield^ Fees** Gross ↑ R8m ↑ R10.8m Net ↑ R4m (investment income) O
Slide 56: Income drivers
04 Income drivers Transform potential
Slide 57: Hybrid model: income drivers
Hybrid model: income drivers FUNDS AND ASSET INVESTMENT MANAGEMENT On-balance sheet real estate investments Off-balance sheet fund and asset management platforms • Net property income • Annual asset, investment and fund • Investment income management fees • Stable returns • Upside through performanc
Slide 58: Group portfolio snapshot
Group portfolio snapshot* Third-party AUM^(Rbn) Fund and asset management fees Driving increased returns on capital deployed R23.4bn Fund and asset management fees: An increase of c.2.6x • R61m at FY24 comprising c.7% of earnings 16.9 • Fund and asset management fees are expected to more than double
Slide 59: Overview of our portfolio
05 Overview of our portfolio Transform potential
Slide 60: Hybrid model: fully integrated international real estate business
Hybrid model: fully integrated international real estate business INVESTMENT FUNDS MANAGEMENT On-balance sheet real estate Off-balance sheet fund and asset investments management platforms On-the ground • Net property income management • Fee revenue Investment income teams with • demonstrable • Enha
Slide 61: Closing
06 Closing Transform potential
Slide 62: Burstone investment proposition
Burstone investment proposition Fully integrated, international real estate business • Traditional South African REIT delivering stable returns • Globally diversified with capability to invest across all aspects of the real estate life cycle Ability to generate enhanced returns on capital deployed •
Slide 63: Annexures
Annexures Transform potential
Slide 64: Results for the six months ended 30 September 2024
Transform potential Results for the six months ended 30 September 2024 NOVEMBER 2024
Slide 65: Financial review
Financial review (©) Burstone REAL ESTATE PARTNERS 65
Slide 66: Distributable earnings statement
Distributable earnings statement Rm 6 months ended 30-Sep-24 6 months ended 30-Sep-23 % change DIPS in line with SA portfolio1 432 461 (6.3%) guidance • Stable operational performance (3%) Net property income 533 582 (8.4%) • Results impacted by higher Finance costs (101) (121) (16.5%) interest cost
Slide 67: Summarised balance sheet
Summarised balance sheet As at As at Rm 30-Sep-24 31-Mar-24 % change SA valuations stable Property related investments Stable portfolio; disposals during the period South Africa 14,008 14,450 (3.1%) 1 Europe - PEL 7,250 8,289 (12.5%) Australia 488 491 (0.6%) PEL portfolio FV adjustment Goodwill and
Slide 68: SA REIT BPR ratios
SA REIT BPR ratios Notes: Burstone 1. SA REIT NAV per share adjusts NAV by the H2 FY24 dividend Note SA REIT BPR methodology declared. FFO per share (cps) 49.53 49.53 2. MTM on derivative instruments is included in SA REIT LTV and not included in Burstone’s calculation. NAV per share (cps) 1 1 263 1
Slide 69: Performance – South African property portfolio
Performance – South African property portfolio 69
Slide 70: Total SA portfolio
Total SA portfolio TOTAL OFFICE INDUSTRIAL RETAIL Portfolio 30-Sep-24 31-Mar-24 30-Sep-23 30-Sep-24 31-Mar-24 30-Sep-23 30-Sep-24 31-Mar-24 30-Sep-23 30-Sep-24 31-Mar-24 30-Sep-23 Number of properties 62 73 77 24 27 29 22 28 30 16 18 18 Asset value (R'bn) 13.8 14.2 14.2 4.7 5.0 5.1 3.0 3.3 3.3 6.1 5
Slide 71: SA income statement
SA income statement Mature portfolio which supports a sustainable level of earnings 6 months ended 6 months ended Rm Gross income 30-Sep-24 633 30-Sep-23 639 % change (0.9%) LFL NOI growth (1.2%) Net expense (158) (158) - • Strong letting activity Base net property income 475 481 (1.2%) across all s
Slide 72: SA office portfolio
SA office portfolio Continued market oversupply resulting in negative reversions 6 months ended 6 months ended Key portfolio metrics Sep 2024 Mar 2024 Rm 30-Sep-24 30-Sep-23 % change Gross income 251 269 (6.7%) No. of properties 24 27 Net expense (75) (82) 8.5% Property asset value R4.7bn R5.0bn Bas
Slide 73: SA industrial portfolio
SA industrial portfolio Stable portfolio delivering strong returns 6 months ended 6 months ended Key portfolio metrics Sep 2024 Mar 2024 Rm 30-Sep-24 30-Sep-23 % change Gross income 162 158 2.5% No. of properties 22 28 Net expense (30) (28) 7.1% Base net property income 132 130 1.5% Property asset v
Slide 74: SA retail portfolio
SA retail portfolio Continued improvement in trading metrics and growth momentum maintained 6 months ended 6 months ended Key portfolio metrics Sep 2024 Mar 2024 Rm 30-Sep-24 30-Sep-23 % change Gross income 220 212 3.8% No. of properties 16 18 Net expense (53) (48) (10.4%) Base net property income 1
Slide 75: SA letting activity
SA letting activity Strong letting performance across all sectors with 99.7% of expiring space (and early letting) re-let at -8.4% negative reversion Weighted Weighted As at Expiries and Renewals and Rental Average average gross average gross Incentive Retention WALE 30 September 2024 cancellations
Slide 76: SA portfolio composition
SA portfolio composition Sectoral spread by NOI Sectoral spread by GLA Sectoral spread by asset value 26% 22% 32% 40% 43% 44% 34% 34% 25% Retail Office Industrial Retail Office Industrial Retail Office Industrial Industrial Retail Office 4% 7% 11% High Tech Industrial 11% Standard Units Motor Dealer
Slide 77: SA lease expiry profile
SA lease expiry profile The Group maintains a well-staggered lease expiry profile with 88.1% of leases expiring in FY26 and beyond 38.9% 25.8% 18.3% 16.1% 14.6% 11.9% 11.8% 9.3% 8.8% 7.3% 7.3% 6.2% 5.1% 4.9% 3.9% 2.6% 2.3% 2.0% 1.9% 1.0% FY25 FY26 FY27 FY28 FY29+ Retail Industrial Office Total 77
Slide 78: SA top 10 clients
SA top 10 clients Based on gross revenue and as % of total SA portfolio Retail % Office % Industrial % Shoprite Checkers 5.6% Woolworths 3.2% RTT Group (Pty) Ltd 2.1% Foschini Retail Group 2.9% Clidet No 887 (Pty) Ltd 2.6% Reload Aquarius Shipping International 1.9% Mr Price Group 2.7% Clover SA 1.5
Slide 79: Performance – PEL
Performance — PEL (©) Burstone REAL ESTATE PARTNERS 79
Slide 80: PEL portfolio
PEL portfolio Portfolio 30-Sep-24 31-Mar-24 30-Sep-23 Number of properties 32 32 32 Asset value (€'bn) 1.1 1.1 1.1 LFL base NOI growth 1.1% 6.2% 7.9% Cost to income (excl. bad debts) 8.5% 8.5% 8.7% Arrears as a percentage of collectibles 2.2% 1.4% 2.0% GLA (m2) 1,124,555 1,124,555 1,124,649 Vacancy
Slide 81: PEL summarised balance sheet
PEL summarised balance sheet Investment property €m 30-Sep-24 31-Mar-24 % change Valuation remained stable Investment property 1 055 1 055 0.0% Derivative financial instruments 9 17 (47.1%) Trade and other receivables 42 36 16.7% Interest rate cap MTM (47.1%) Cash 19 20 (5.0%) Hedge valuation decre
Slide 82: PEL portfolio letting
PEL portfolio letting Strong start to leasing with 96% of space expiring re-let at positive 5.2% reversion Weighted Weighted Rental As at Expiries and Renewals and average gross average gross reversion Incentive Retention WALE 30 September 2024 cancellations new lets expiry rental new rental (renewa
Slide 83: PEL lease expiry profile (by SQM)
PEL lease expiry profile (by SQM) Extended lease expiry profile with 44.6% of leases expiring between FY25 to FY28 55.4% 16.6% 12.4% 12.1% 3.5% FY25 FY26 FY27 FY28 FY29+ Note: WAULTe (Weighted Average Unexpired Lease term to Expiry) equates to 4.90 years (WAULTb (Weighted Average Unexpired Lease ter
Slide 84: PEL top 10 clients
PEL top 10 clients Based on contracted rent and showing as % of total portfolio income Client name % Rhenus 10.1% LT Foods Europe 4.6% Geodis Logistics 4.5% CHI Deutschland Cargo Handling GmbH 4.3% Empik 3.6% Tiesse S.p.a. 3.3% Neele-Vat Air B.V. 3.1% H.Essers Logistics Company N.V. 3.0% AF Logistik
Slide 85: Balance sheet and treasury
Balance sheet and treasury 85
Slide 86: Balance sheet metrics
Balance sheet metrics Post the Blackstone Transaction As at 31 March 2024 Group PEL Group PEL ZAR debt EUR debt Total Group Europe ZAR debt EUR debt Total Group Europe Quantum R4.9bn R1.5bn R6.4bn €611m R9.9bn R2.0bn R11.9bn €566m Debt maturity (years) 3.6 3.3 3.5 5.0 2.8 2.4 2.2 1.3 Swap maturity (
Slide 87: Glossary
Glossary (©) Burstone REAL ESTATE PARTNERS 87
Slide 88: Glossary
Glossary Term Definition Board Board of directors of Burstone Group Limited Burstone or The Group Burstone Group Limited including its subsidiaries, investments in joint-ventures and any other investments CCIRS Cross currency interest rate swaps CGT Capital gains tax Cps Cents per share DIPS Distrib
Slide 89: Disclaimer
Disclaimer The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or professional advice. Although information has been obtained from sources believed to