Sa Corporate Real Estate Ltd. · JSE:SAC
Sa Corporate Real Estate — H1 2023 Earnings Presentation
54 slides from Sa Corporate Real Estate's earnings presentation, Sep 15, 2023
Slide 1: SA Corporate 2023 Interim Results Presentation
SA Corporate 2023 Interim Results Presentation 15 September 2023
Slide 2: Agenda
Introduction & Overview AGENDA 01 Rory Mackey 02 Strategy Update Rory Mackey 03 Portfolio Rory Mackey Performance 04 Financial Performance Sam Moodley 05 Outlook Rory Mackey
Slide 3: Introduction & Overview
INTRODUCTION & OVERVIEW RORY MACKEY
Slide 4: Distribution overview
OVERVIEW DISTRIBUTION DISTRIBUTABLE 12.2% 1.8% vs s i x months to 30 vs s i x months to DISTRIBUTION INCOME June 2022 (2022 H1) 31 December 2022 (2022 H2) Declared 11.39 cps R318.2 million or 12.65 cps (2022 H1: R362.3 mi l lion or 14.41 cps ; at 90% payout ratio 2022 H2: R312.5 mi l lion or 12.42 c
Slide 5: Distributable income extraordinary effects
DISTRIBUTABLE INCOME EXTRAORDINARY EFFECTS 450 400 14 6 38 350 362 300 376 318 250 200 150 H1 2022 H1 2023 Distributable Increase in interest Loadshedding costs Dilutionary impact of H1 2023 Distributable Distributable income income rates net of recoveries disposals income without these effects • R5
Slide 6: Portfolio performance overview
OVERVIEW PORTFOLIO PERFORMANCE TOTAL NET TRADITIONAL R592.6 million 2.1% of gros s lettable area (“GLA”) PROPERTY INCOME (2022 H1: R594.8 mi l lion; PORTFOLIO (30 June 2022: 2.7%) 2022 H2: R577.8 mi l lion) (31 December 2022: 2.3%) (“NPI”) VACANCIES TOTAL LIKE-FOR-LIKE NPI INCREASED BY AFHCO RESIDEN
Slide 7: Overview: property activity and capital structure
OVERVIEW PROPERTY ACTIVITY CAPITAL STRUCTURE DISPOSAL PIPELINE LOAN TO VALUE 36.9%* SINCE 1 JANUARY 2023 (“LTV”) RATIO (31 December 2022: 38.1%) *Net debt LTV excluding derivatives, which if included would be 36.3% (31 December 2022: 37.8%) R1.1 billion WEIGHTED AVERAGE COST OF FUNDING (Tra nsferred
Slide 8: Strategy Update
STRATEGY UPDATE RORY MACKEY
Slide 9: Retail strategy update
RETAIL STRATEGY UPDATE LFL NPI GROWTH = 1.2% Strategic Focus Convenience Orientated Retail Portfolio The drivers of portfolio performance: • Strengthen the tenant mix at centres • National & convenience orientated tenancy focus • Enhance the quality and sustainability of rental income through redeve
Slide 10: Retail leasing update
RETAIL LEASING UPDATE Strategic Focus Convenience Orientated Retail Portfolio 30-Jun-22 30-Jun-23 3.2% 3.1% VACANCY VACANCY NEW LEASING GLA (m2) 4 112 63.3% National 92.2% 66.5% tenancy NATIONAL NATIONAL TENANCY Convenience 82.8% TENANCY 59.2% 63.1% CONVENIENCE CONVENIENCE 10
Slide 11: Increased food exposure
INCREASED FOOD EXPOSURE Coachman's Crossing Musgrave Centre Montana Crossing Morning Glen 11
Slide 12: Industrial strategy update
INDUSTRIAL STRATEGY UPDATE LFL NPI GROWTH = 2.5% Strategic Focus Quality Industrial Property Portfolio Disposal criteria to achieve refinement • Motor showrooms • Poor logistics circulation at warehouse premises • Large component of office space within industrial property • Poor industrial nodes • L
Slide 13: Industrial strategy update
INDUSTRIAL STRATEGY UPDATE Strategic Focus Quality Industrial Property Portfolio Refine the quality of industrial portfolio through disposals • 2 properties have transferred in H1 2023 & anticipate 5 property disposals in H2 2023 • 2 transfers were the remainder of the Maydon Wharf leasehold disposa
Slide 14: Industrial strategy update: disposals over the past years
INDUSTRIAL STRATEGY UPDATE Disposals over the past 3 years Property Name Transfer Date GLA (m2 ) Disposal Criterion 121 Malacca Road 15-Mar-21 3 751 Poor logistics circulation at warehouse premises 30/34 Hillclimb Road 16-Mar-21 10 132 Large component of office space within industrial property 6/8 M
Slide 15: Overview of disposal pipeline
INDUSTRIAL STRATEGY UPDATE Overview of disposal pipeline Number of Properties GLA (m2) Current (June 2023) 49 403 556 Contracted for disposal# 4 21 716 Earmarked for disposal * 2 12 244 Total 43 369 596 #15 Patrick Road and Corner Gielbasson & Nathan Mallach are contracted for sale to the motor deal
Slide 16: Portfolio metrics post disposal pipeline
INDUSTRIAL STRATEGY UPDATE Portfolio metrics post disposal pipeline • Logistics has increased from 72% in December 2020 to estimated 82% in December 2023 • Properties >10 000m2 is anticipated to increase from 61% in December 2020 to 65% in December 2023 Midi 500 - Maxi 1 000 - Medium 4 000 - Large 1
Slide 17: Industrial leasing update
INDUSTRIAL LEASING UPDATE Strategic Focus Quality Industrial Property Portfolio Lease Renewals Renewal Renewal Expiry 2023 YTD 30 June 2023 2023 Forecast % of Portfolio % Renewed Reversion % Renewed Reversion Comments Extent GLA Negative reversions in Total 55 642 13.8% 19.5% 3.7% 81.7% -2.9% H2'23
Slide 18: Afhco strategy update
AFHCO STRATEGY UPDATE LFL NPI GROWTH = 4.5% Strategic Focus Quality Residential Portfolio Improving Portfolio Quality • Increased average occupancy to 22 months • Continued amenity upgrade programme – projects completed at South Hills & Jeppe Post Office Refining Portfolio Through Disposals • Firstm
Slide 19: Afhco residential leasing lead analysis
AFHCO RESIDENTIAL LEASING LEAD ANALYSIS Lead Percentage Online Listings Platforms 65% Afhco Website 26% Telephone 6% Other 3% • A significant portion of the rental leads are generated via the on-line platforms, which has led to increased letting activity • Leads management will be further enhanced w
Slide 20: Indluplace transaction update
INDLUPLACE TRANSACTION UPDATE Financial Close • Scheme became commercially effective 1 July 2023 • ILU shares delisted from JSE on 1 August 2023 • ILU wholly owned subsidiary of Afhco Holdings as of 1 August 2023 Financial Effects • LFL NPI growth of 15% for the second half of 2023 • H2’23 NPI antic
Slide 21: Long term residential investment rationale
LONG TERM RESIDENTIAL INVESTMENT RATIONALE (MSCI RESIDENTIAL SECTOR RETURNS DATA) South Africa: Residential return over 5 years Recovered back to 2019 levels after Covid South Africa: 5 YR annualised sector returns Residential Total Return above Retail and Offices 21
Slide 22: Unlisted residential fund overview
UNLISTED RESIDENTIAL FUND OVERVIEW SA Corporate New Real Estate Investors Investors Appetite Progress Anticipated commitment Afhco Property NewCo Investor 1 R1.0bn+ In Due Diligence Q1’24 Asset & Management Property Investor 2 R800m – R1.0bn In Due Diligence Q4’23 Management (Pty) Ltd Investor 3 R50
Slide 23: Zambia portfolio strategy update
ZAMBIA PORTFOLIO STRATEGY UPDATE Strategic Focus Zambia Portfolio Investment Zambian Tailwinds • Improving Zambian macroeconomic environment ➢ GDP is forecast to grow by 4.2% in 2023, 4.8% in 2024 & 4.7% in 2025 ➢ Positive developments regarding restructuring of country’s debt o August 2022 - IMF ap
Slide 24: Capital structure strategy update: disposals
CAPITAL STRUCTURE STRATEGY UPDATE Strategic Focus Financial Sustainability Disposals update 2023 Disposal Pipeline R1.1 billion Previously Contracted in 2022 R861.3 million Transferred R792.2 million Conditional R36.3 million Unconditional R32.8 million Newly Contracted in 2023 R225.3 million Transf
Slide 25: Capital structure strategy update
CAPITAL STRUCTURE STRATEGY UPDATE Strategic Focus Financial Sustainability Debt Refinancing • Successful conclusion of the refinance of R1.2 billion facilities which were meant to expire in 2024 as well as new facilities amounting R500.0 million • Improved debt tenor from 2.6 years at 30 June 2023 t
Slide 26: Energy sustainability update
ENERGY SUSTAINABILITY UPDATE Solar PV • 10.5% of the total electricity consumed by the traditional portfolio, excluding diesel, was generated from solar PV. Solar PV Installed In Progress Retail 10.254 MWp i nstalled 17 properties out of 17 properties* Industrial 3.467 MWp i nstalled 1.625 MWp to be
Slide 27: Portfolio Performance
PORTFOLIO PERFORMANCE RORY MACKEY
Slide 28: Overview – sectoral analysis of South African portfolio
OVERVIEW – SECTORAL ANALYSIS OF SOUTH AFRICAN PORTFOLIO Market Value per m² 18,081 17,905 17,721 25,000 12,156 11,882 11,695 11,215 11,181 10,463 10,328 10,258 10,253 20,000 8,629 8,281 7,996 15,000 10,000 5,000 - Industrial Retail Office Afhco Average Market Value Jun 2022 Market Value Dec 2022 Mar
Slide 29: SA portfolio: Retail
Value of South African portfolio SA PORTFOLIO: RETAIL 45.4% (Jun 2022: 44.2%; Dec 2022: 45.1%) LIKE-FOR-LIKE 1.2% 97.2% (2022 H1: 4.1%; COLLECTIONS (2022 H1: 98.3%; NPI GROWTH 2022 FY: 99.2%) 2022 FY: 6.7%) VACANCY1 3.1% ARREARS 5.1% (Jun 2022: 3.2%; (Jun 2022: 6.1%; Dec 2022: 3.2%) Dec 2022: 5.0%)
Slide 30: Retail trading density growth
RETAIL TRADING DENSITY GROWTH 12-month Rolling Trading Density Trading density Trading density (R/m2 ) growth (%) 3000 6.0% 4.8% 5.1% 2900 4.0% 3.6% 3.1% 2800 2.3% 2.0% 2700 0.0% 2600 -2.0% 2500 -4.0% 2400 -6.0% -6.8% 2300 -8.0% 2018 2019 2020 2021 2022 2023 Trading density (R/m2) Trading density gr
Slide 31: SA portfolio: Industrial
Value of South African portfolio SA PORTFOLIO: INDUSTRIAL 23.3% (Jun 2022: 23.5%; Dec 2022: 23.1%) LIKE-FOR-LIKE 2.5% 101.5% (2022 H1: 2.3%; COLLECTIONS (2022 H1: 96.0%; NPI GROWTH 2022 FY: 99.4%) 2022 FY: 2.4%) VACANCY 0.0% ARREARS 3.0% (Jun 2022: 0.7%; (Jun 2022: 5.3%; Dec 2022: 0.2%) Dec 2022: 3.
Slide 32: SA portfolio: Afhco
Value of South African portfolio SA PORTFOLIO: AFHCO 29.7% (Jun 2022: 30.2%; Dec 2022: 29.9%) TOTAL RESIDENTIAL RETAIL (84.9% of portfolio) (15.1% of portfolio) LIKE-FOR- LIKE NPI 4.5% VACANCY 3.1% VACANCY 5.5% (2022 H1: 19.2%; RESIDENTIAL 1 (Jun 2022: 4.0%; RETAIL (Jun 2022: 5.4%; GROWTH 2022 FY: 1
Slide 33: Zambian portfolio
50% Property value ZAMBIAN PORTFOLIO ZAMBIAN JV R1.6 bn (Jun 2022: R1.1 bn; Dec 2022: R1.4 bn) JV Distributable Income: 20.1% y-o-y (ZAR) LFL NPI Growth 17.3% (USD) East Park Mall 67 244m2 (71.0% of Zambian Portfolio Value) Vacancy Rental escalation (USD) Expiries 1.6% (Jun 2022: 3.9%; 2.8% No expir
Slide 34: Financial Performance
FINANCIAL PERFORMANCE SAM MOODLEY
Slide 35: 2023 H1 distributable income analysis
2023 H1 DISTRIBUTABLE INCOME ANALYSIS Like-for-like NPI Like-For-Like NPI • Improved rental largely due to reduced vacancies – R12.2m 2.5% • Improved recoveries due to reduced vacancies – R16.7m • Improved turnover rental and other income – R3.8m • Expenses increased – (R19.2m) or 4.8% R13.5m - Incr
Slide 36: Net asset value (cps)
NET ASSET VALUE (CPS)1 The SA REIT defined NAV is calculated as NAV per the Condensed Consolidated Interim Statement of Financial Position, less goodwill and intangible assets, deferred taxation and any interim dividend declared, and still to be paid in respect of the reporting period. The SA REIT N
Slide 37: Investment property analysis
INVESTMENT PROPERTY ANALYSIS 15,500 92 (373) 15,000 30 15 135 14,500 14 884 14,000 Investment Properties Improvements / Disposals Fair value adjustment Investment Properties December 2022 Development costs June 2023 37
Slide 38: 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 R916.5m 2.6 years 10.2% (Dec 2022: R7.1bn) (Dec 2022: R597.1m) (Dec 2022: 3 years) (Dec 2022: 8.8%) Swap profile Hedged % S
Slide 39: SA REIT loan to value and net interest cover
SA REIT LOAN TO VALUE AND NET INTEREST COVER 36.9% 36.3% SA REIT loan to Net debt LTV excl. swap FV int rate derivatives (Dec 2022: (Dec 2022: value Swaps (Asset) R106.5m 38.1%) 37.8%) June 2022 Variance June 2023 Net interest cover Distributable income before 578 536 587 641 (9 105) interest (R’000
Slide 40: Outlook
OUTLOOK
Slide 41: Outlook
OUTLOOK 2023 LFL NPI Retail • Vacancy to remain low • Renewal reversions improving • Due to continued load shedding LFL NPI growth 4% to 6% for 2023 Industrial • Negligible vacancy • Positive lease renewal reversions to support performance in H2 • LFL NPI growth 4% to 6% for 2023 Afhco Residential •
Slide 42: Questions
QUESTIONS
Slide 43: Appendices
APPENDICES
Slide 44: Distributable income at a glance for the period ended June 2023
DISTRIBUTABLE INCOME AT A GLANCE FOR THE PERIOD ENDED 30 JUNE 2023 H1 2023 H1 2022 % Rm Rm Variance Net Property Income – Like-for-like 561.880 548.340 2.5 Net Property Income – Developments 14.719 6.796 116.6 Net Property Income – Acquisitions 9.589 - - Net Property Income – Buildings sold 6.382 39
Slide 45: Group debt structure – excluding fixes
GROUP DEBT STRUCTURE – AT 30 JUNE 2023 (EXCL FIXES) 585 Term Loa n, 9.73% May 2024 - 564 Term Loa n, 10.36% May 2024 - Sep 2024 100 100 Revol ving Credit, 10.24% 509 Term Loa n US$, 8.90% Nov 2024 - Dec 2024 107 - Term Loa n, 9.81% Term Loa n, 9.91% May 2025 308 - May 2025 300 - Term Loa n, 10.47% J
Slide 46: Group debt structure – including fixes
GROUP DEBT STRUCTURE – AT 30 JUNE 2023 (INCL FIXES) 585 Term Loa n, 9.04% May 2024 - May 2024 564 - Term Loa n, 9.67% Sep 2024 100 100 Revol ving Credit, 9.55% Nov 2024 509 - Term Loa n US$, 4.96% 107 Term Loa n, 9.12% Dec 2024 - 308 Term Loa n, 9.22% May 2025 - 300 Term Loa n, 9.78% May 2025 - Jun
Slide 47: Group debt profile at 30 June 2023
GROUP DEBT PROFILE AT 30 JUNE 2023 4,500 11.5% 10.3% 10.2% 4,000 10.4% 9.7% 9.5% 3,500 3,000 7.5% 2,500 5.5% 2,000 100 564 1,500 300 3.5% 1,000 1.5% 500 1765 1420 1632 1318 0 -0.5% 2024 2025 2026 2027 Total Drawn R'm Total Undrawn R'm Rate 47
Slide 48: Group debt structure swaps at 30 June 2023
GROUP DEBT STRUCTURE SWAPS AT 30 JUNE 2023 290 6.98% Jul 23 Jul 23 120 6.97% 150 4.10% Aug 23 Sep 23 295 7.04% Jul 24 350 7.37% Jul 24 100 7.00% Oct 24 150 7.60% Nov 24 509 1.41% 150 7.65% Dec 24 150 6.90% Jan 25 400 6.93% Jan 25 300 7.11% May 25 350 6.82% May 25 400 7.31% Jan 26 150 7.50% Feb 26 Fe
Slide 49: Interest rate swap expiry at 30 June 2023
INTEREST RATE SWAP EXPIRY AT 30 JUNE 2023 1,500 8.0% 7.7% 6.9% 7.0% 6.5% 6.0% 1,000 5.0% 5.0% 4.0% 3.0% 500 2.0% 1.0% 855 1,259 1,200 1,580 0 0.0% 2023 2024 2025 2026 Total swaps at Jun 23 Rate at Jun 23 49
Slide 50: Retail portfolio
RETAIL PORTFOLIO Portfolio1,2 Portfolio value R6.8bn 40 Properties Top 10 tenants National exposure GLA 38.4% 66.5% GLA 374 043m2 22.7% Grocer GLA Rental 33.3% 65.4% of total Tenant retention success rate 78.4% Cost to revenue (Like-for-like) 43.8% (2022 H1: 41.3%) Lease Expiries 40.0% 120.0% 35.0%
Slide 51: Industrial portfolio
INDUSTRIAL PORTFOLIO Portfolio Portfolio value R3.5bn 49 Properties GLA 403 556m2 31.0% GLA of total portfolio Cost to revenue (Like-for-like) 26.4% (2022 H1: 27.8%) Lease Expiries 35.0% 120.0% 30.0% 100.0% 25.0% 80.0% % of GLA 20.0% 60.0% 15.0% 40.0% 10.0% 5.0% 20.0% 0.0% 0.0% Vacancy Monthly 2023
Slide 52: Afhco portfolio overview
AFHCO PORTFOLIO OVERVIEW Portfolio1 Portfolio value R4.4bn 56 Properties GLA Apartments 358 263m2 Retail 63 930m2 Cost to revenue (Like-for-like) 51.5% (2022 H1: 52.3%) By GLA 15.1% 84.9% Residential Retail / Commercial 1 Excludes bulk of 53 958m2 being developed, valued at R74.4m. 52
Slide 53: Commercial portfolio overview
COMMERCIAL PORTFOLIO OVERVIEW Portfolio Portfolio value R244.0m 2 Properties GLA 21 823m2 1.7% GLA of total portfolio Cost to revenue (Like-for-like) 65.0% (2022 H1: 67.5%) Lease Expiries 25.0% 120.0% 20.0% 100.0% 80.0% % of GLA 15.0% 60.0% 10.0% 40.0% 5.0% 20.0% 0.0% 0.0% Vacancy Monthly 2023 2024
Slide 54: SA portfolio: Commercial
Value of South African portfolio SA PORTFOLIO: COMMERCIAL 1.6% (Jun 2022: 2.1%; Dec 2022: 1.9%) LIKE-FOR- 4.6% TENANT 100.0% 2.5 years LIKE NPI (2022 H1: -13.4%; RETENTION (2022 H1: 67.6%; WALE (Jun 2022: 2.9 years; GROWTH 2022 FY: -27.8%) SUCCESS RATE 2022 FY: 56.0%) Dec 2022: 4.8 years) VACANCY 16
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