Delta Property Fund Limited · JSE:DLT
Delta Property Fund — FY2016 Earnings Presentation
59 slides from Delta Property Fund's earnings presentation, May 2016
Slide 1: Results Presentation for the year ended 29 February 2016
RESULTS PRESENTATION for the year ended 29 February 2016
Slide 2: Introduction
SARS Randburg INTRODUCTION SANDILE NOMVETE
Slide 3: Introduction to Delta
INTRODUCTION TO DELTA •Sovereign Dsds underpinned JSE listed › asdasdas REIT Diversifying $ investment Market capitalisation# of 74% 26.3% R4.7bn of revenue from in Mara Delta * up from R3.5bn at 29 Feb 2016 sovereign tenants Assets under management of Dominant in Average property value of Durban &
Slide 4: Highlights Since Listing
HIGHLIGHTS SINCE LISTING March November May July February June March September February 2010 2012 2013 2013 2014 2014 2015 2015 2016 March 2010 The company is founded - inaugural acquisition is the Forum Building in Pretoria November 2012 Delta lists on the JSE main board with a portfolio value of R
Slide 5: Snapshot
SNAPSHOT Listing date: 02 November 2012 JSE classification: Real Estate Holdings & Development Asset manager: Delta Property Asset Management (Pty) Ltd JSE code: DLT Asset management fee: 0.35% of enterprise value 29 February 2016 28 February 2015 Shares in issue 533,097,436 458,409,836 Market capit
Slide 6: Highlights
Auditor General Polokwane HIGHLIGHTS SANDILE NOMVETE
Slide 7: Highlights of FY2016
HIGHLIGHTS OF FY2016 Industry leading Distribution growth of Gearing reduced to 8% 42.3% Level 2 Fourth consecutive period of growth in half-year distribution at May 2016, from 47.2% at Feb 2016 B-BBEE rating Successfully concluded Tenant retention = Reaffirmed R1.76bn A2(za) 80% 7 Redefine and Free
Slide 8: Priorities and Strategy Review
CMH Building PRIORITIES AND STRATEGY REVIEW SANDILE NOMVETE
Slide 9: Priorities - Feedback
PRIORITIES - FEEDBACK Priorities Status Detail Replacement of CFO Complete Shaneel Maharaj appointed Dec 2015 Dispose non-core assets Ongoing Concluded R659m Strengthening of balance sheet Ongoing Gearing reduced to 42.3% at May 2016, - Gearing Increase in unencumbered assets - Improve credit rating
Slide 10: Financial Review
88 Field Street FINANCIAL REVIEW SHANEEL MAHARAJ
Slide 11: Financial Highlights of FY2016
FINANCIAL HIGHLIGHTS OF FY2016 • Dsds › Growth in assets of asdasdas Disposals of Weighted average cost of debt R1.6bn 8.75% R659m assets under management R108m transferred, R551m under > R10.5bn, R11.8bn at May 2016 sale agreement Gearing reduced to Fixed debt % of Extended ave. fix period to 42.3%
Slide 12: Four Year Review
FOUR YEAR REVIEW 29 Feb 2016 28 Feb 2015 28 Feb 2014 28 Feb 2013 Revenue (R’000) 1,247,582 1,009,207 654,023 139,949 Net property income (R’000) 925,531 764,884 502,503 112,396 Finance costs (R’000) (412,713) (316,380) (151,149) (55,446) Cost to income ratio (net / gross) 12.2% /26.4% 10.2% / 26.0%
Slide 13: Growth in Distributions
GROWTH IN DISTRIBUTIONS Historic distribution per share Cents / share 100.00 8.0% 90.00 15.6% 90.79 80.00 84.06 70.00 72.69 60.00 8.74% 50.00 9.63% 7.2% 47.90 23.07% 44.05 13 40.00 42.89 40.18 40.01 30.00 32.51 23.69 20.00 20.00 Nov-12 FY2013 HY Aug-13 HY Feb-14 FY2014 HY Aug-14 HY Feb-15 FY2015 HY
Slide 14: Distributable Income Statement
DISTRIBUTABLE INCOME STATEMENT R’000 FY2016 FY2015 Change % Net property income (excl. straight line accrual) 898,581 696,300 29.05% Administration expenses (82,744) (51,008) 62.00% Realised foreign exchange loss (39) - - Net finance costs (386,120) (312,415) 23.59% Dividend received from Mara Delta
Slide 15: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION R’000 29 Feb 2016 28 Feb 2015 Change % Assets Non-Current assets 9,085,759 8,396,823 8.20% Investment property 8,684,700 8,393,900 3.46% Fair value of property portfolio 8,500,183 8,213,035 3.50% Straight line rental income accrual 184,517 180,865 2.02% Investment in
Slide 16: Debt Summary
DEBT SUMMARY As at 29 February 2016 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 2,493 8.38% Fixed bank facilities 976 8.68% Revolving bank facilities 805 9.12% Total bank facilities 4,274 8.59% DMTN programme - floating 651 8.58% DMTN programme - fixed 100 8.01% Vendor loans 15 9.
Slide 17: Debt Expiry Profile
DEBT EXPIRY PROFILE R’m 1,000 800 600 400 200 - 17 28-Feb-17 28-Feb-18 28-Feb-19 29-Feb-20 28-Feb-21 28-Feb-22 DMTN Programme Fixed Bank Facilities Floating Bank Facilities Revolving Bank Facilities Vendor Loans Swap Contracts
Slide 18: Pro-forma Statement of Financial Position
PRO-FORMA STATEMENT OF FINANCIAL POSITION R’000 29 Feb 2016 16 May 2016 28 Feb 2017 Assets Non-Current assets 9,085,759 10,334,647 11,080,900 Investment property 8,684,700 9,933,588 10,679,841 Investment in associate 383,327 383,327 383,327 Other non-current assets 17,732 17,732 17,732 Current asset
Slide 19: Portfolio Review
142 - 144 4th Street Parkmore PORTFOLIO REVIEW SANDILE NOMVETE
Slide 20: Portfolio Breakdown
PORTFOLIO BREAKDOWN By Building Sector unless Office - Office - Industrial Retail Total stated other ways Sovereign * General Number of properties 74 20 3 3 100 Gross lettable area (m2) 540 558 204 872 39 955 28 120 813 505 Vacancy (%) 5.9% 13.7% 28.5% 5.4% 9.0% Value R7.39bn R2.13bn R0.18bn R0.40bn
Slide 21: Acquisitions
ACQUISITIONS Purchase Effective Property Sector Location Yield GLA WALE Price Date Tembisa Retail Tembisa, Midrand 230,316,000 9.40% 14,025 2015-03-02 10.45 ABSA Florida Office - Sovereign Johannesburg 77,000,000 11.00% 6,531 2015-03-10 6.82 142 - 144 4th Street Office - Sovereign Johannesburg 84,00
Slide 22: Disposals
DISPOSALS Property Sector Location GLA Sales price (R) Transfer Date Transferred Richmond Forum Office - Other Johannesburg 3,968 22,500,000 2015-05-14 SAPS - Bell Street Office - Sovereign Nelspruit 590 5,070,000 2015-12-04 Yarona Shopping Centre Retail Tembisa, Midrand 5,979 80,000,000 2015-11-02
Slide 23: Sectoral Split
SECTORAL SPLIT GLA - by building GLA - by tenant * Office - Sovereign (66.4%) Office - Sovereign (67.5%) Office - Other (25.2%) Office - General (21.4%) Industrial (4.9%) Retail (7.2%) Retail (3.5%) Industrial (3.9%) Rental - by building Rental - by tenant Office - Sovereign (74.8%) Office - Soverei
Slide 24: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN Tenant Profile - GLA National Government (27.2%) Provincial Government (25.9%) State-Owned 67.5% Enterprise (14.0%) Local Government (0.4%) Tenant Profile - Rental National Government (29.1%) Provincial 24 Government (30.7%) State-Owned Enterprise (13.7%) 73.9% Local Govern
Slide 25: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - by building Rental - by building Gauteng (36.5%) Gauteng (38.0%) Kwazulu-Natal (31.2%) Kwazulu-Natal (24.9%) Free State (10.5%) Limpopo (10.8%) Limpopo (5.5%) Free State (8.4%) Northern Cape (4.9%) Northern Cape (5.3%) Western Cape (4.7%) Western Cape (5.1%) Mpumal
Slide 26: Lease Expiry Profile
LEASE EXPIRY PROFILE Total portfolio - by GLA Total portfolio - by rental 26 vacant (9.0%) 28 Feb 17 (34.6%) 28 Feb 17 (39.1%) 28 Feb 18 (18.8%) 28 Feb 18 (20.1%) 28 Feb 19 (11.1%) 28 Feb 19 (14.7%) 29 Feb 20 (7.6%) 29 Feb 20 (7.3%) 28 Feb 21 (11.1%) 28 Feb 21 (12.4%) Beyond 28 Feb 2021 (7.4%) Beyon
Slide 27: Leasing
LEASING Total leases concluded since 1 March 2015 Weighted Ave. Weighted Ave. No of Leases Total Area Rate / m2 Escalation Renewals 115 62,515 m2 (50.3%1) R 115.10 7.52%2 Historic exit rentals R113.09 New leases 61 11,515 m2 (23.1%3) R 90.27 7.49% Of the 124,282 m2 up for renewal as at 28 February 2
Slide 28: Update on Government - National Government
UPDATE ON GOVERNMENT Delta tenant • National Government (NDPW) breakdown - GLA › 2nd Treasury directive - renewals between 1 - 3 years, max. esc. of 6%. Over 3 years - tender 27.2% 32.5% › NDPW engagement 0.4% › Rode report as guideline. Renewed leases at market rentals 14.0% 25.9% › New system auto
Slide 29: Update on Government - Provincial and Local
UPDATE ON GOVERNMENT Delta tenant • Provincial Government breakdown - GLA › Operates independently 25.9% › Secure long term leases 27.2% › Pay rentals on time 14.0% 0.4% 32.5% • Local Government National Government › Governed by Municipal Finance Management Provincial Government State-Owned Enterpri
Slide 30: Update on Government - State-owned enterprises
UPDATE ON GOVERNMENT Delta tenant • State-owned enterprises breakdown - GLA › SARS, Eskom, DTI and various Chapter 9 institutions. › Not governed by Treasury directive 25.9% 14.0% › Own lease negotiations 0.4% › Concluded 3 - 5 years at market related rates and escalations 27.2% 32.5% › These tenant
Slide 31: Capex - Existing Portfolio
CAPEX - EXISTING PORTFOLIO Property CMH Commission Embassy 88 Field The Forum Total Dealership House Building (All figures in Rands) Approved budget 156,000,000 85,000,000 28,250,000# 21,843,000 - 291,093,000 Spent in FY2015 37,976,214 - - - - 37,976,214 Spent in FY2016 117,357,082 37,037,624 - 1,59
Slide 32: Redevelopment Strategy
REDEVELOPMENT STRATEGY • Delta to deploy CAPEX into existing portfolio and Redefine assets › Enhancing earnings and value uplift › Securing long term stable returns • Spend of approximately R250m for FY2017 (including projects on previous slide) • Appointed Head of Capital Projects to oversee all De
Slide 33: Redevelopment Strategy - Redefine
REDEVELOPMENT STRATEGY - REDEFINE • SENS announcement on 03 December 2015, anticipated spend of › R600m over 3 years › To be committed on the back of long term lease renewals • First tranche of projects › Pine Parkade › Approximately R38m to upgrade façade, retail offering and structural refurbishme
Slide 34: Mara Delta
MARA DELTA • Shareholding 26.34% at 30 April 2016 › Valued at R472.5m at Feb 2016 • Interim dividend (July - Dec 2015) received of US$6.17c / share › Equates to R22.8m for Delta › Total FY2016 earnings of R36.8m for Delta • Highlights * › Total investment property US$257m › Approval of Pivotal Merge
Slide 35: Looking Forward
Phamoko Towers LOOKING FORWARD SANDILE NOMVETE
Slide 36: Key Focus Areas
KEY FOCUS AREAS Risks / Challenges Mitigants / Response Sovereign downgrade & Cost of debt economic headwinds › 83% of debt fixed › Increased cost of debt › Multi-banked › Liquidity › Debt mix (Short & long term; banks & DCM) › Government spending › Optimal use of assets through flexible securit
Slide 37: Key Focus Areas
KEY FOCUS AREAS Risks / Challenges Mitigants / Response Capital management Gearing levels › Gearing levels › Consolidation approach moving forward, limited acquisitions › Large redevelopment expected strategy › Disposals of non-core assets and pay-down of debt › Sustainable returns › Intensive a
Slide 38: Conclusion
CONCLUSION • Distribution target met and significant inroads made in strengthening balance sheet • Delta will continue to focus on its sovereign underpin › Further entrench - dominant player in National and Provincial government and parastatal tenants › Leverage excellent empowerment credentials and
Slide 39: Q&A Thank You
Hallmark Building Q&A THANK YOU
Slide 40: Annexures
LexisNexis 4 | : _— —= - ANNEXURES
Slide 41: Annexures
ANNEXURES › Board of directors › Shareholder profile › Top 10 properties by value › Mara Delta investment timeline › GLA and vacancy reconciliation › Income and expense components › Property operating expenses breakdown › Admin expenses breakdown › Profitability ratios 41 › Municipal expense ratios
Slide 42: Board of Directors - Executive Management
BOARD OF DIRECTORS - EXECUTIVE MANAGEMENT Executive Directors Sandile Nomvete Bronwyn Corbett Shaneel Maharaj Chief Executive Officer Chief Investment Officer & Chief Financial Officer Chief Operating Officer (appointed 1 December 2015) Exec Dep. & Prop Dev. Prog. BCom (Acc) (Hons) (Univ. of BCom (A
Slide 43: Board of Directors - Continued
BOARD OF DIRECTORS - CONTINUED Non-Executive directors JB Magwaza Nooraya Khan Jorge Da Costa Paul Simpson Ian Macleod Independent Lead Independent Independent Independent Independent Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director C
Slide 44: Shareholder Profile
SHAREHOLDER PROFILE As at Feb 2016 Units held Holding Coronation Fund Managers 81 791 864 15.34% Public Investment Corporation 73 305 126 13.75% Stanlib Asset Management 67 001 005 12.57% Grindrod Asset Management 54 427 714 10.21% Sanlam Investment Management 47 613 150 8.93% Kagiso Asset Managemen
Slide 45: Shareholder Profile - Continued
SHAREHOLDER PROFILE - CONTINUED As at April 2016 Units held Holding Redefine 155 230 521 22.55% Coronation Fund Managers 80 933 628 11.76% Stanlib Asset Management 62 231 417 9.04% Grindrod Asset Management 56 821 767 8.26% Public Investment Corporation 53 364 482 7.75% Sanlam Investment Management
Slide 46: Top 10 Properties (by Value)
TOP 10 PROPERTIES (BY VALUE) Forum Building Hallmark Building Liberty Towers Delta Towers Location Pretoria Location Pretoria Location Durban Location Durban Office - Office - Office - Office - Sector Sector Sector Sector Sovereign Sovereign Other Other 46 GLA 41,003 m2 GLA 26,255 m2 GLA 40,095 m2 G
Slide 47: Top 10 Properties - Continued
TOP 10 PROPERTIES - CONTINUED Hensa Towers Embassy Building The Marine Delta Heights Location Polokwane Location Durban Location Durban Location Pretoria Office - Office - Office - Office - Sector Sector Sector Sector Sovereign Sovereign Other Sovereign 47 GLA 13,675 m2 GLA 32,788 m2 GLA 24,591 m2 G
Slide 48: Top 10 Properties - Continued
TOP 10 PROPERTIES - CONTINUED Phomoko Towers Beacon Hill King Williams Location Polokwane Location Town Office - Office - Sector Sector 48 Sovereign Sovereign GLA 13,058 m2 GLA 13,648 m2 Vacancy Nil Vacancy 0% Valuation R262mil Valuation R228 mil
Slide 49: Delta Africa / Mara Delta Investment Timeline
DELTA AFRICA / MARA DELTA INVESTMENT TIMELINE May July December February March - April July - October November February April 2014 2014 2014 2015 2015 2015 2015 2016 2016 May 2014 Shares in shell company acquired Delta International lists on AltX and Bermuda Stock Exchange. By end of July, Delta own
Slide 50: GLA and Vacancy Reconciliation
GLA AND VACANCY RECONCILIATION Total GLA Vacant GLA Vacancy m2 m2 % As at 28 February 2015 703,103 49,856 7.09% Disposals (10,536) (2,738) Acquisitions 119,864 7,881 Leases terminated - 30,334 Head leases 5,249 Regular leases 25,085 50 New letting of vacant space - (11,515) Adjustments 1,074 (801) A
Slide 51: Income and Expense Components
INCOME AND EXPENSE COMPONENTS Income Expense Finance costs - R412.7m 51 Contractual rental income - R1.22 bn Fair value adjustments - R259.1m Property operating expenses - R322.1m Share of profit in associate - R33.5m Administration expenses - R82.7m Straight line rental income accrual - R27.0m Loss
Slide 52: Property Operating Expenses
PROPERTY OPERATING EXPENSES Municipal expenses (66.22%) (R'000s) Service contracts (10.79%) Property Management fees (7.00%) 10,350 34,722 22,542 Repairs and maintenance (3.22%) 10,001 Sundry property manager expenses (3.11%) 8,274 7,232 Staff costs - onsite (2.57%) 5,346 Rental paid - Parking renta
Slide 53: Admin Expenses
ADMIN EXPENSES Asset Management fees (37.8%) (R'000s) Directors fees (15.8%) Reversal of prior year accrual (12.1%) 2,958 Professional fees (8.6%) 2,954 4,604 Rental paid Head office (5.6%) 7,161 2,267 Travel and entertainment (3.6%) 1,721 10,000 1,495 Audit fees, reporting and announcements (3.6%)
Slide 54: Profitability Metrics
PROFITABILITY METRICS Profitability per sector Municipal recoveries 100% 90% 85% 93% 82% 81% 90% 79% 85% 80% 80% 80% 81% 80% 70% 70% 60% 60% 50% 50% 43% 40% 40% 36% 35% 31% 30% 30% 26% 23% 23% 18% 20% 20% 10% 12% 12% 10% 7% 10% 0% 0% 54 Office - Office - Retail Industrial Total Sovereign Other Rates
Slide 55: Municipal Recoveries by Sector
MUNICIPAL RECOVERIES BY SECTOR 120% 110% 105% 104% 100% 100% 93% 93% 85% 80% 80% 80% 70% 66% 64% 60% 56% 53% 48% 48% 40% 40% 34% 32% 28% 18% 19% 20% 20% 0% 0% 55 Office - Sovereign Office - Other Retail Industrial Rates Electricity Water & effluent Refuse Levies, meter reading and other Total
Slide 56: Lease Expiry Profile by Building Sector
LEASE EXPIRY PROFILE BY BUILDING SECTOR GLA - Office Sovereign Rental - Office Sovereign vacant (5.9%) 28 Feb 17 (41.5%) 28 Feb 17 (40.5%) 28 Feb 18 (17.2%) 28 Feb 18 (19.0%) 28 Feb 19 (13.7%) 28 Feb 19 (9.4%) 29 Feb 20 (5.5%) 29 Feb 20 (6.2%) 28 Feb 21 (12.7%) 28 Feb 21 (14.9%) Beyond 28 Feb 2021 (
Slide 57: Lease Expiry Profile by Building Sector
LEASE EXPIRY PROFILE BY BUILDING SECTOR GLA - Retail Rental - Retail vacant (5.4%) 28 Feb 17 (11.4%) 28 Feb 17 (13.7%) 28 Feb 18 (9.4%) 28 Feb 18 (5.9%) 28 Feb 19 (8.2%) 28 Feb 19 (5.9%) 29 Feb 20 (31.2%) 29 Feb 20 (25.8%) 28 Feb 21 (1.3%) 28 Feb 21 (1.5%) Beyond 28 Feb 2021 (42.0%) Beyond 28 Feb 20
Slide 58: Lease Expiry Profile by Tenant Sector
LEASE EXPIRY PROFILE BY TENANT SECTOR GLA - Office Sovereign Rental - Office Sovereign 28 Feb 17 (44.0%) 28 Feb 17 (42.9%) 28 Feb 18 (21.7%) 28 Feb 18 (18.1%) 28 Feb 19 (9.0%) 28 Feb 19 (13.0%) 29 Feb 20 (6.4%) 29 Feb 20 (5.4%) 28 Feb 21 (12.8%) 28 Feb 21 (13.9%) Beyond 28 Feb 2021 (6.1%) Beyond 28
Slide 59: Lease Expiry Profile by Tenant Sector
LEASE EXPIRY PROFILE BY TENANT SECTOR GLA - Retail Rental - Retail 28 Feb 17 (26.8%) 28 Feb 17 (24.6%) 28 Feb 18 (12.5%) 28 Feb 18 (14.4%) 28 Feb 19 (9.7%) 28 Feb 19 (12.9%) 29 Feb 20 (18.1%) 29 Feb 20 (20.8%) 28 Feb 21 (4.9%) 28 Feb 21 (4.9%) Beyond 28 Feb 2021 (28.0%) Beyond 28 Feb 2021 (22.4%) GL