SA Corporate Real Estate Ltd. · JSE:SAC
SA Corporate Real Estate — H1 2018 Earnings Presentation
30 slides from SA Corporate Real Estate's earnings presentation, September 2018
Slide 1: SA Corporate June 2018 Interim Results Presentation
SA Corporate June 2018 Interim Results Presentation September 2018 INDUSTRIAL | RETAIL | OFFICE | RESIDENTIAL | REST OF AFRICA Agenda • Highlights Rory Mackey • Financial Performance Antoinette Basson • Portfolio Review Rory Mackey • Unlocking Value in the Retail Portfolio Rory Mackey • Improving Th
Slide 2: Highlights: High Level Review
HIGHLIGHTS RORY MACKEY 3 High Level Review • Distribution Themes • Half year distribution 3.1% lower than H1 2017 • Decline from non recurring income and base affects in PY and additional financing cost excluding which DPS growth would have been circa 2% • Total NPI growth of 7.8%; LFL increasing by
Slide 3: Financial Performance: Distribution
FINANCIAL PERFORMANCE ANTOINETTE BASSON 5 Distribution HISTORY (CPS*) GROWTH (%) 45,00 25,0% 40,00 20,0% 35,00 21,58 22,54 10,5% 19,91 30,00 15,0% 18,02 9,4% 8,4% 16,47 9,9% 25,00 10,0% 20,00 4,4% 11,2% 15,00 8,6% 9,1% 21,44 22,38 21,70 5,0% 7,3% 17,68 19,66 4,4% 10,00 16,28 5,00 0,0% -3,1% - 2013 2
Slide 4: Distribution at a Glance
Distribution at a Glance Jun 2018 Jun 2017 % Rm Rm Variance Net Property Income - Like for Like 471.349 460.164 2.4 Net Property Income - Developments 163.046 144.052 5.9 Net Property Income - Acquisitions 83.786 40.556 106.6 Net Property Income - Buildings sold 8.230 29.183 (71.8) Net Property Inco
Slide 5: Growth in Assets and Market Capitalisation; Net Asset Value
Growth in Assets and Market Capitalisation R’bn cents 25,0 600 500 20,0 400 15,0 300 10,0 200 5,0 100 0,0 0 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Total Assets (Rbn) Market Cap (Rbn) NAV per share (cents) Share Price (cents) 9 Net Asset Value 550,0 1,8 11.6 21,7 525,0 (0.4) 500,0 (22.5) 475,0
Slide 6: Capital Structure
Capital Structure Sources of Capital Debt finance sources are diversified between banks and institutional borrowings. 1,0% 2,8% Absa 2,8% Standard Bank 11,0% Syndicated Investec Loans Nedbank 10,6% 28,2% * State Bank of India Institutional and DFI Debts 3,1% # Equity 68,7% Equity Institutional and D
Slide 7: Group Debt Structure (incl. fixes); Interest Rate Swaps
Group Debt Structure – at 30 June 2018 (incl. fixes) Maturity and interest rate profile of interest-bearing debt – WAR inclusive of fixes of 8.5%. Current LTV 33.1% * Amortising, 6,88% 102 Apr 2024 - Cross Currency (ZAR), -9,23% - 120 Jan 2023 - 138 Cross Currency (US$), 4,36% Jan 2023 - Term Loan (
Slide 8: Group Net Cash Flow
16 15 - 500 1 000 1 500 2 000 (500) (2 000) (1 500) (1 000) Rm Balance 31 December 2017 275 Cash generated from operations net of finance cost and taxation 526 Distributions paid (570) Acquisitions and Improvements to Investment Properties and Property, Plant and Equipment (698) Disposal of investme
Slide 9: Overview – Sectoral Analysis
Overview – Sectoral Analysis (excl. Rest of Africa JV) 2% Sectoral Profile (% of GLA) SA Corporate excluding 23% 20% Industrial Zambian JV • 199 Properties Retail • Total GLA 1,532,752m2 4% June • Total Portfolio R16.9bn June Commercial 2018 2017 51% (Dec-17: R16.4bn) 4% • Excludes development 48% A
Slide 10: Executed and Contracted Acquisitions
Executed Acquisitions Property Forward Purchase Sector Yield % price (R000) Transfer date Northgate Heights Phase 1E, Northgate Residential 10.0 6,165 Jan-18 Calgro M3 Developments - Fleurhof 31, Randburg 1 Residential 10.0 45,946 Feb-18 Calgro M3 Developments - Scottsdene Erf 3833 Buildings 5 & 6,
Slide 11: Disposals; Lease Renewals Rental Reversions
Disposals Executed Exit Yield Gross price Property Sector % (R000) Transfer date Atterbury Décor, Pretoria Retail 8.5 86,786 Jan-18 Rhodesdene Shopping Centre, Kimberley Retail 8.8 52,000 Mar-18 22 Voortrekker Road, Vredenburg Commercial 8.8 78,500 May-18 Lebombo Road, Garsfontein (Portion) Commerci
Slide 12: Contracted Rental Escalation Profile; Lease Expiry
Contracted Rental Escalation Profile 9,5% 9,0% 8,9% 8,5% 8,0% 7,9% 7,9% 7,8% 7,6% 7,5% 7,0% 6,5% Industrial Retail Commercial Total (excl AFHCO) AFHCO Retail / Commercial Afhco residential increases ~ 4% 23 Group Lease Expiry – Traditional Portfolio 35,0% 120,0% 30,0% 29,2% 100,0% 25,0% 80,0% 19,7%
Slide 13: Lease Expiry – Afhco; Traditional Vacancy Profile
Group Lease Expiry – Afhco Retail / Commercial 35,0% 120,0% 30,0% 29,0% 100,0% 25,0% 80,0% 20,5% 20,0% % of GLA 17,9% 60,0% 15,0% 14,2% 40,0% 10,0% 7,2% 6,7% 4,5% 20,0% 5,0% 0,0% 0,0% Vacancies Monthly 2018 2019 2020 2021 2022+ % of GLA 4,5% 7,2% 6,7% 14,2% 20,5% 17,9% 29,0% Cumulative 4,5% 11,7% 18
Slide 14: Traditional and Afhco Vacancy Profiles
Traditional Vacancy Profile (% of gross rental) 7,0% 6,0% 6,0% 5,5% 5,5% 5,0% 4,0% 3,4% 3,2% 3,0% 3,0% 2,6% 2,5% 2,4% 2,0% 1,1% 1,0% 0,9% 1,0% 0,0% Industrial Retail Commercial Total June 2017 December 2017 June 2018 27 Afhco Vacancy Profile (Residential % of Units / Retail & Commercial % of GLA) 28
Slide 15: Unlocking Value in the Retail Portfolio
Arrears Tenant receivables as a % of rolling 12 months income 4,5% 3,9% 4,0% 3,8% 3,6% 3,5% 3,0% 2,8% 2,4% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 29 UNLOCKING VALUE IN THE RETAIL PORTFOLIO RORY MACKEY 30 SA Corporate June 2018 Interim Results Presentation
Slide 16: Retail Solar Installations; Jeppe Street Post Office Retail
Retail Solar Installations (ZAR Saved & KWH Generated) Rand Total Rand and KWH Saving KWH R 400 000 350 000 R 350 000 300 000 R 300 000 250 000 R 250 000 200 000 R 200 000 150 000 R 150 000 100 000 R 100 000 R 50 000 50 000 R0 0 Total Rand KWH 31 Jeppe Street Post Office Retail Anchored by Boxer Sup
Slide 17: 51 Prichard Re-development; East Park Mall Extension
51 Prichard Re-development From: October 2018 To: October 2019 GLA = 14,527m2 GLA = 15,039 m2 Edcon (1st Floor) = 4,349m2 Capex = R62mil Supermarket (Ground Floor) = Edcon = 14,419m2 3,430m2 6 Line Shops = 620m2 Line Shops (Ground Floor and lower ground) = 3,813m2 Gym and Storage (Basement) = 2,935m
Slide 18: East Park Mall Extension; Shoppertainment
Extension to East Park Mall, Lusaka (continued) 35 “Shoppertainment” Making Shopping Centres a Destinational Experience Musgrave Centre - Umlazi Mega City – Community Radio Station & Mega Talent Search Roof Top Night Market East Point - Katy Perry Witness Tour Event Town Square to Time Square 36 SA
Slide 19: Non-GLA Income
Non-GLA Income • Mall Ads • Mall TVTM • Mall RadioTM • Exhibitions • Pop-up shops particularly focused on experience, e.g. Combat Laser Tag and Escape Room at Musgrave Centre • Internet Connectivity/WiFi (20 Shopping Centre Roll-out) • Tenant line rental • Mobile Application (App) • Advertising • Lo
Slide 20: Industrial Portfolio; Industrial Expiries 2018
Industrial Dec 2014 Jun 2018* 93 properties 76 properties Sales (Avg. Exit Yield=8.2%) GLA = 793,395 m2 GLA = 674,139 m2 # 1.4% Vacancy 0.7% Vacancy** IHS Pharmaceutical DC Redevelopment 42,000m2 Avg. Rental = R 52.16/m2 Avg. Rental = R 62.35/m2 * Excluding contracted disposals. # Including IHS exte
Slide 21: Reducing Commercial Exposure
Reducing Commercial Exposure • Sectional title divestment of Green Park • 640m2 floorplates offer one or two tenant “address” per floor • Mixed office & residential node offers live & work lifestyle in central Sandton • Premium for ownership offers attractive exit opportunity • Value to be realised
Slide 22: Residential Rental Analysis; Tenant Preferences
Residential Rental Analysis (Stable Portfolio) Average of Average of Rental Vacancy Row Labels Current Rent per m2 % Inner City - Affordable Product 3,570 125 7.0% Inner City – Low End Product 2,195 139 1.0% Suburban - Lower LSM 4,262 97 5.7% Suburban - Middle LSM 6,642 94 8.0% 43 Inner City & Subur
Slide 23: Vacancy Reductions Success Stories; Rental Pricing Sensitivity
Vacancy Reductions Success Stories Vacancies Property Interventions Prior After Time period Wi-Fi; Common area 120 End Street 11% 2% 5 months upgrade Wi-Fi; Indoor Gym; Tenant Shuttle; Common area upgrade; Braai facilities; Rental Greatermans 30% 5% 8 months rebasing. Outdoor Gym; Tenant Shuttle; Br
Slide 24: Menlyn East End Development Transaction
Menlyn East End Development Transaction • High quality high rise apartments • Located directly adjacent Menlyn Maine in Menlyn • Sky bridge from development to Menlyn Maine Precinct • Phase 1: 240 apartments in joint initiative • 452 above ground and subterranean parking bays 47 Menlyn East End Deve
Slide 25: SA Corporate June 2018 Interim Results Presentation
49 SA Corporate June 2018 Interim Results Presentation
Slide 26: Strategy & Prospects: Recent Detractors to H2 Prospects
STRATEGY & PROSPECTS RORY MACKEY 50 Recent Detractors to 2018 H2 Prospects Item Negative Impact Comments Transnet ground rentals iro -R5 million Ground rentals almost doubled Industrial leasehold properties at R8.52 to R16.17 per m2 & Maydon Wharf backdated to October 2017 Industrial H2 reversions -
Slide 27: Strategy & Prospects; Acknowledgements
Strategy & Prospects Focus: • Consolidating a quality industrial property portfolio • Divesting from remaining commercial properties • Concentrating retail portfolio on food services & convenience • Establishing a quality residential rental portfolio to offer investors diversification to other South
Slide 28: Questions
QUESTIONS 54 ADDITIONAL SLIDES 55 SA Corporate June 2018 Interim Results Presentation
Slide 29: Trading Volumes and Liquidity; Geographical Analysis
Trading Volumes and Liquidity SAC: closing price v monthly volume traded Value traded as % of market capital 120% 600 250 000 000 500 100% 200 000 000 GRT 400 FFA 150 000 000 80% FFB RES 300 100 000 000 EMI 60% HYP SAC RDF 200 VKE 50 000 000 100 40% 0 - IPF 20% Mar-18 Oct-17 Nov-17 Dec-17 Jan-18 Apr
Slide 30: Sectoral Analysis (Afhco); Tenant Grading by GLA
Overview – Sectoral Analysis (Afhco) By GLA Retail / Commercial 19% (Jun 2017 62 Properties 30%) GLA 356,405m2 Market Value R3.7bn Residential 81% Weighted average capitalisation rate (Jun 2017 10.3% 70%) Afhco also owns residential bulk of 114,470m2 to be redeveloped 58 Overview – Tenant Grading by
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