Dipula Properties Limited Class B · JSE:DIB
Dipula Properties Limited Class B — Dipula Income Fund — FY2016 Earnings Presentation
51 slides from Dipula Properties Limited Class B's earnings presentation, November 2016
Slide 1: Annual Results
ANNUAL RESULTS For the year ended 31 August 2016 1 ANNUAL RESULTS – 31 AUGUST 2016
Slide 2: Agenda
AGENDA 01 BUSINESS & PORTFOLIO OVERVIEW 02 FINANCIAL OVERVIEW 03 LOOKING AHEAD 04 QUESTIONS & ANSWERS 2 ANNUAL RESULTS – 31 AUGUST 2016
Slide 3: Dipula at a Glance
DIPULA AT A GLANCE Real Estate Investment and Services: JSE sector Diversified REITS Date listed 17 August 2011 Closing price (31 Aug 2016) DIA R11.42 | DIB R9.00 Market capitalisation (31 Aug 2016) R4.2 billion External asset manager Dipula Asset Management Trust Property managers Broll | DPM | McC
Slide 4: Dipula at a Glance: Sectoral split by province
DIPULA AT A GLANCE Sectoral split by province (201 properties) Gauteng Limpopo Retail Office North West Industrial 71 28 24 25 21 4 Mpumalanga 11 1 12 123 7 Northern Cape 5 2 7 6 KwaZulu-Natal 7 7 Western Cape 6 10 Free State 4 1 3 Eastern Cape 4 2 1 4 ANNUAL RESULTS – 31 AUGUST 2016 9 1
Slide 5: Business and Portfolio Overview: Achievements
BUSINESS AND 01 PORTFOLIO OVERVIEW IZAK PETERSEN (CEO) ACHIEVEMENTS ACHIEVEMENTS VALUE PROPOSITION STRATEGY RISKS PORTFOLIO
Slide 6: 2016 Achievements
2016 ACHIEVEMENTS JSE REIT Dipula Income Fund - 74th on The Sunday Times Top 100 Companies ranking Properties Revamps Portfolio reached transferred completed R7,1bn Spanning >807 000m² R1,2bn R100m Up 27% y-o-y Tenant Non-core Positive retention disposals revaluations of R284m 89% R62m Positive rene
Slide 7: 2016 Achievements (continued)
2016 ACHIEVEMENTS (CONTINUED) JSE REIT Dipula Income Fund - 74th on The Sunday Times Top 100 Companies ranking Increase in turnover to Debt Net asset value refinanced R1,1bn R10,46 Up 46% y-o-y R760m Up 12% y-o-y Distributable earnings Full year distribution Retained credit rating R385m 185,97c BBB
Slide 8: Business and Portfolio Overview: Value Proposition
BUSINESS AND 01 PORTFOLIO OVERVIEW IZAK PETERSEN (CEO) ACHIEVEMENTS VALUE VALUE PROPOSITION PROPOSITION STRATEGY RISKS PORTFOLIO
Slide 9: Value Proposition and Fundamentals
VALUE PROPOSITION AND FUNDAMENTALS › Steady performance with an improving portfolio › Predominantly retail portfolio › Good quality income evidenced by A&B grade tenants occupying 87% of GLA (86% revenue) › Well diversified portfolio geographically and sectorally › Track record of portfolio enhancin
Slide 10: Value Proposition and Fundamentals (continued)
VALUE PROPOSITION AND FUNDAMENTALS (CONTINUED) › Fairly valued portfolio - overall yield of >10% › Disciplined strategy execution › Average rentals are between market and below - opportunity to renew at higher levels on expiry › Cost containment › Above inflation escalations at 8% › Interest rate ri
Slide 11: Business and Portfolio Overview: Strategy
BUSINESS AND 01 PORTFOLIO OVERVIEW IZAK PETERSEN (CEO) ACHIEVEMENTS VALUE PROPOSITION STRATEGY STRATEGY RISKS PORTFOLIO
Slide 12: Delivering on Our Strategy
DELIVERING ON OUR STRATEGY Acquiring well and managing brilliantly Size indicators Number of properties R bn GLA m² Market capitalisation 250 8 Portfolio value 1 000 000 GLA 200 6 800 000 201 150 175 176 181 181 177 600 000 4 400 000 100 2 200 000 50 0 - 0 At listing 2012 2013 2014 2015 2016 At list
Slide 13: Retail Sector Performance Since Listing
RETAIL SECTOR PERFORMANCE SINCE LISTING Average property size m² Average value per m² R/m² 4 000 12 000 3 500 10 000 3 575 3 000 3 360 9 848 2 500 8 000 8 969 2 749 7 754 2 565 7 416 2 000 6 000 2 136 5 953 1 500 1 938 5 446 4 000 1 000 500 2 000 - - At listing 2012 2013 2014 2015 2016 At listing 20
Slide 14: Office Sector Performance Since Listing
OFFICE SECTOR PERFORMANCE SINCE LISTING Average property size m² Average value per m² R/m² 4 000 4 000 3 500 3 696 3 696 3 500 3 696 3 696 3 584 3 526 3 584 3 526 3 000 3 000 2 500 2 786 2 709 2 500 2 786 2 709 2 000 2 000 1 500 1 500 1 000 1 000 500 500 0 - At listing 2012 2013 2014 2015 2016 At li
Slide 15: Industrial Sector Performance Since Listing
INDUSTRIAL SECTOR PERFORMANCE SINCE LISTING Average property size m² Average value per m² R/m² 7 000 6 000 6 000 6 589 5 000 6 216 5 107 5 000 4 536 4 000 4 930 4 921 4 000 3 887 4 288 4 288 3 000 3 508 3 000 3 038 3 038 2 000 2 000 1 000 1 000 0 - At listing 2012 2013 2014 2015 2016 At listing 2012
Slide 16: Building and Tenant Profile
BUILDING AND TENANT PROFILE Office grading Space exposure Retail GLA 1% 14% A Grade 25% Urban* 43% Single B Grade 19% Small Town 56% Multi 67% C Grade 75% Rural * Including urban townships Single tenanted Multi tenanted 12% Retail 36% 64% 88% Office 62% Industrial 38% 16 ANNUAL RESULTS – 31 AUGUST 2
Slide 17: Business and Portfolio Overview: Risks
BUSINESS AND 01 PORTFOLIO OVERVIEW IZAK PETERSEN (CEO) ACHIEVEMENTS VALUE PROPOSITION STRATEGY RISKS RISKS PORTFOLIO
Slide 18: Risks & Opportunities in the Trading Environment
RISKS & OPPORTUNITIES IN THE TRADING ENVIRONMENT › Falling disposable incomes affecting retail › Short lease expiry profile presents sales - defensive retail portfolio opportunity to renew higher › Cannibalisation by grocery retailers › Dipula rentals at defensive levels - dominant retail sites › Op
Slide 19: South African Unemployment Rate
SOUTH AFRICAN UNEMPLOYMENT RATE % 32 30 28 26 24 22 20 2001 2004 2007 2010 2013 2016 19 ANNUAL RESULTS – 31 AUGUST 2016 Source: Mergence Africa Capital and STATS SA
Slide 20: Historic Sector Performance Relative to Economic Indicators
HISTORIC SECTOR PERFORMANCE RELATIVE TO ECONOMIC INDICATORS Property return 20% 140% SA GDP growth SA listed property Unemployment 120% 15% 100% 10% 80% 60% 5% 40% 0% 20% 0% -5% -20% -10% -40% Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Sep-14 Mar-15 Mar-16 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 De
Slide 21: National Average Gross Rental Growth - Offices
NATIONAL AVERAGE GROSS RENTAL GROWTH - OFFICES Indexed 250 A grade nominal B grade nominal A grade real B grade real 200 150 100 50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 21 ANNUAL RESULTS – 31 AUGUST 2016 Source: SAPOA, MSCI and Bloomberg
Slide 22: Regional Gross Rental Growth - Offices
REGIONAL GROSS RENTAL GROWTH - OFFICES A grade nominal B grade nominal Indexed Indexed 350 350 JHB CBD 300 Sandton Central 300 Rosebank 250 250 Pretoria CBD 200 Pretoria East 200 Cape Town Central 150 150 Durban CBD 100 Umhlanga/LaLucia 100 CPI 50 50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 23: Gross Rental Growth - Industrial
GROSS RENTAL GROWTH - INDUSTRIAL National Indexed 240 Nominal Real 200 160 120 80 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Regional nominal Regional real Indexed Indexed 240 240 200 Gauteng 200 160 Western Cape 160 120 KwaZulu-Natal 120 Industrial average 80 80 23 ANNUAL RESULTS – 31 A
Slide 24: Business and Portfolio Overview: Portfolio
BUSINESS AND 01 PORTFOLIO OVERVIEW IZAK PETERSEN (CEO) ACHIEVEMENTS VALUE PROPOSITION STRATEGY RISKS PORTFOLIO PORTFOLIO
Slide 25: Our Portfolio at 31 August 2016
OUR PORTFOLIO AT 31 AUGUST 2016 Portfolio Total Average Average Average value Average value GLA property size property value per m² by GLA escalation R7bn 807 100m² 4 015m² R35m R8 743 8% 201 properties Geographic split by GLA Sectoral split by GLA Gauteng 3%2%1% 3% Limpopo 4% 15% Retail Eastern Cap
Slide 26: Vacancies
VACANCIES Vacancies 8.5% (31 Aug 2015: 8.0%) Current vacancies Retail 8.5% (31 Aug 2015: 8.2%) Office 12.8% (31 Aug 2015: 8.3%) 7.8% Industrial 5.9% (31 Aug 2015: 7.4%) 26 ANNUAL RESULTS – 31 AUGUST 2016
Slide 27: Weighted Average Escalations & Rentals
WEIGHTED AVERAGE ESCALATIONS & RENTALS Escalations Retail Office Industrial Portfolio By income 7.6% 9.0% 8.0% 7.9% By GLA 7.6% 8.9% 8.1% 7.8% Gross rentals (R/m²) Retail Office Industrial Portfolio By income 111.52 97.79 52.11 101.01 By GLA 99.91 93.72 46.42 85.22 27 ANNUAL RESULTS – 31 AUGUST 2016
Slide 28: Tenant Profile
TENANT PROFILE By GLA By rental income Top 10 tenants by GLA Shoprite Group 8% Department of Public Works 7% 14% 14% Pepkor Group 3% Mass Stores 3% 15% 20% Pick 'n Pay Group 3% 67% General Motors South Africa 2% 71% Edcon Group 2% Cashbuild 2% Spar Group 2% A grade B grade C grade Standard Bank 2% 2
Slide 29: Lease Expiry Profile
LEASE EXPIRY PROFILE Total portfolio GLA (000m²) Rm Average monthly gross income 300 20 21 Vacant 250 15 18 Expiring before 31 Aug 2017 250 15 Expiring before 31 Aug 2018 200 12 10 12 150 184 Expiring before 31 Aug 2019 9 Expiring before 31 Aug 2020 100 122 130 4 6 Expiring after 31 Aug 2020 50 67 3
Slide 30: Lease Activity - 1 Sep 2015 to 31 Aug 2016
LEASE ACTIVITY - 1 Sep 2015 to 31 Aug 2016 New leases Retail Office Industrial Total Number of leases 136 30 8 174 Value of leases 183 562 144 18 177 848 6 871 274 208 611 266 Weighted average gross rental (R/m²) 75.27 69.38 33.08 71.40 Total GLA let (m²) 42 046 5 320 6 727 54 093 Weighted average e
Slide 31: Lease Activity (continued)
LEASE ACTIVITY (CONTINUED) New leases Tenant retention rate Number of new leases: 174 Total new GLA let: 54 093m² 5% › Overall 89% 12% 17% › Retail 87% 10% › Offices 92% 78% 78% › Industrial 90% Renewals Number of leases renewed: 250 Total GLA renewed: 111 778m² 6% 14% 26% 55% 19% 80% 31 ANNUAL RESU
Slide 32: Redevelopments & Revamps
REDEVELOPMENTS & REVAMPS Capex amount Original New GLA / Anticipated Property Description Property type (Rm) GLA units completion FY Completion 2016 Atlas Road Chicken Lickin added and offices upgraded Retail 6,4 3 221 3 431 Completed Score Ivory Park Extension and upgrade to Pick n Pay Retail 11,0
Slide 33: Select Completed Upgrade
SELECT COMPLETED UPGRADE Sector Retail Total GLA 2 312m² Cost of revamp R6.5m Progress Completed 40 Scott Street - KwaZulu-Natal 33 ANNUAL RESULTS – 31 AUGUST 2016
Slide 34: Select Upgrade in Progress
SELECT UPGRADE IN PROGRESS Sector Office Total GLA 5 042m² Cost of revamp R42.5m Progress 50% complete Nemisa Offices - Gauteng 34 ANNUAL RESULTS – 31 AUGUST 2016
Slide 35: Select Planned Upgrade & Extension
SELECT PLANNED UPGRADE & EXTENSION Existing building Sector Retail Total GLA 18 435m² Cost of revamp R18.1m Progress Leasing stage Gezina Galleries - Gauteng 35 ANNUAL RESULTS – 31 AUGUST 2016
Slide 36: Select Planned Enhancement
SELECT PLANNED ENHANCEMENT Existing building Sector Retail Total GLA 11 286m² Cost of revamp R13.0m Progress Completion 2017 Hammanskraal - Gauteng 36 ANNUAL RESULTS – 31 AUGUST 2016
Slide 37: Select Planned Upgrade
SELECT PLANNED UPGRADE Existing building Sector Retail Total GLA 6 307m² Cost of revamp R4.0m Progress Completion 2017 Palm Court - Gauteng 37 ANNUAL RESULTS – 31 AUGUST 2016
Slide 38: Financial Review
02 FINANCIAL REVIEW RIDWAAN ASMAL (CFO)
Slide 39: Financial Highlights
FINANCIAL HIGHLIGHTS › Revenue (excl. straight-line) 41% › Distributable earnings 16% › Total assets 27% › Total liabilities 38% 39 ANNUAL RESULTS – 31 AUGUST 2016
Slide 40: Key Return Indicators
KEY RETURN INDICATORS Distribution growth Net asset value per share per share ALL 8.0% 12% DIA 5.0% DIB 11.5% 40 ANNUAL RESULTS – 31 AUGUST 2016
Slide 41: Distribution Growth
DISTRIBUTION GROWTH cps A-share B-share Total 200 8.0% 180 7.1% 185,97 7.2% 172,18 160 7.0% 160,84 140 149,98 140,19 120 100 5.0% 5.0% 11.5% 5.0% 5.0% 9.5% 96,47 91,88 89,49 80 87,50 10.0% 83,34 9.6% 80,30 79,37 73,34 60 66,64 60,82 40 20 0 Aug 2012 Aug 2013 Aug 2014 Aug 2015 Aug 2016 41 ANNUAL RESU
Slide 42: Combined Market Price to NAV
COMBINED MARKET PRICE TO NAV cents Market price NAV Premium / Discount 2500 25% 22% 21% 20% 16% 2286 2000 2092 2092 2042 15% 12% 1965 1819 1825 1868 10% 1715 1500 1630 1570 5% 1416 0% 1000 -2% -5% -6% -10% 500 -15% 0 -20% Aug 2012 Aug 2013 Aug 2014 Aug 2015 Aug 2016 Current* 42 ANNUAL RESULTS – 31 A
Slide 43: Statement of Comprehensive Income (Extracts)
STATEMENT OF COMPREHENSIVE INCOME (EXTRACTS) 31 Aug 2016 31 Aug 2015 R 000 R 000 Variance Revenue 1 023 475 725 032 41% Property expenses (349 646) (250 216) 39% Net property income 673 829 474 816 42% Administration and corporate costs (32 013) (25 789) 27% Net operating profit 641 816 449 027 43%
Slide 44: Sectoral Performance (Aug 2016 v. 2015)
SECTORAL PERFORMANCE (Aug 2016 v. 2015) Revenue Property expenses Net property income Aug 2016 16% 18% 16% 14% 12% 14% 70% 70% 70% Aug 2015 22% 27% 30% 11% 61% 12% 58% 67% 12% 44 ANNUAL RESULTS – 31 AUGUST 2016
Slide 45: Statement of Financial Position (Extracts)
STATEMENT OF FINANCIAL POSITION (EXTRACTS) 31 Aug 16 31 Aug 15 Variance (R 000's) (R 000's) (%) Non-current assets 7 017 087 5 562 466 26% Current assets 206 704 161 234 28% Non-current assets held for sale 93 850 49 366 90% Total assets 7 317 641 5 773 066 27% Non-current liabilities 2 631 664 1 75
Slide 46: Cash Flow
CASH FLOW - Rm 31 Aug 2016 31 Aug 2015 63 Opening balance 32 577 Cash generated from operations 461 (242) Net finance cost (142) (364) Distribution paid (265) (1 283) Acquisitions and capex (1 253) 61 Disposals 93 128 Non-controlling interest 0 275 Equity raised 693 845 Debt funding raised 445 59 Cl
Slide 47: Debt Profile
DEBT PROFILE 45% 38,9% Debt expiry Hedge expiry 40% 35% 30,0% 30% 27,7% 25% 20% 15,9% 15% 13,5% 10,7% 11,4% 10% 8,4% 4,1% 5% 0% 0% FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 › 60.8% of debt hedged (48% at 29 Feb 2016, 70.7% at 30 Oct 2016 ) › R255m debt maturing FY2017 › Weighted average cost of debt 8
Slide 48: Looking Ahead
03 LOOKING AHEAD IZAK PETERSEN (CEO)
Slide 49: Looking Ahead – 2017 Priorities
LOOKING AHEAD – 2017 PRIORITIES › Widen investor base, make it into SAPY and improve liquidity › Non GLA and non-traditional revenue including solar installations › Take advantage of low average rentals to achieve positive rental renewals › Improve and incentivise talent pool within DPM and Manco ›
Slide 50: Looking Ahead – 2017 Priorities - Continued
LOOKING AHEAD – 2017 PRIORITIES - CONTINUED › Acquire selectively and undertake select greenfield developments › Open to sensible corporate action › Contain arrears and focus on leasing and tenant retention › Avoid obsession with size at the detriment of value creation, being nimble and focusing of
Slide 51: Questions & Answers
63dipula INCOME FUND Sustainable Property Returns