Growthpoint Properties Limited · JSE:GRT
Growthpoint Properties — SACSC Breakfast (November 2014)
38 slides from Growthpoint Properties's conference presentation, Nov 20, 2014
Slide 1: SACSC Breakfast
SACSC BREAKFAST 20 November 2014
Slide 2: REIT Industry Overview: A short history
REIT INDUSTRY OVERVIEW 2 A short history: • 2006 Sector approaches National Treasury and SARS • 2006 REIT Reality Conference • 2007 National Treasury Discussion paper • 2009 Whitepaper • 2011 SEC 8G – TLAB • 2013 SEC 25BB – REIT Rules “The Regulation” SEC 13 of JSE Listing Requirements
Slide 3: Historic performance vs interest
REIT INDUSTRY OVERVIEW 3 Historic performance vs interest 800 SAPY vs Global REIT Indices 700 600 500 400 300 200 100 0 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-13 Mar-1
Slide 4: Swap rates (debt)
In % 4.5 5.5 6.5 7.5 8.5 4 5 6 7 8 9 2-Jan-12 DEBT 2-Feb-12 2-Mar-12 2-Apr-12 2-May-12 2-Jun-12 2-Jul-12 2-Aug-12 2-Sep-12 10-year swap rate 2-Oct-12 2-Nov-12 2-Dec-12 2-Jan-13 2-Feb-13 2-Mar-13 5-year swap rate 2-Apr-13 2-May-13 2-Jun-13 2-Jul-13 2-Aug-13 1-year swap rate 2-Sep-13 2-Oct-13 2-Nov-13
Slide 5: Strong Long Term Performance
Strong Long Term Performance 10.0% LISTED & REITs 9.0% 15-year annualised total 8.0% return in local currency DIRECT 7.0% 4.5% 6.0% 5.0% 4.9% 4.0% 1.3% 3.0% 3.9% 4.5% 2.0% 3.4% 1.0% 2.6% 0.0% 0.5% Global Bonds Global Equities Global Real Estate Global Listed Real Estate Capital Growth Yield Author:
Slide 6: REIT Industry Overview: Asset Type
REIT INDUSTRY OVERVIEW 6 Asset Type 2% 1% 1% Retail 15% Office Industrial Hotels 28% Residential 53% Other Source: STANLIB Research
Slide 7: Global Property Sectors
Global Property Sectors Self Storage Industrial/ Lodging & Offices 3% Resorts 2% 4% Industrial 6% Health Care Diversified 7% 30% 4% Residential 10% Offices 13% Retail Author: EPRA 25% 2012 Sources: FTSE, EPRA, NAREIT Data as of: August 30, 2014
Slide 8: Foreign exposure
REIT INDUSTRY OVERVIEW 8 Foreign exposure Foreign earnings as a % of total earnings 1 Australian Dollar British Pound 0.5 Euro US Dollar 0 Capital &… Investec… Redfine… Redfine… Rockcastle Emira Sycom Hyprop Fortress Acucap Capital Property Resilient NEPI Intu Growthpoint Source: Avior Research
Slide 9: South African Listed Real Estate
SOUTH AFRICAN LISTED REAL ESTATE 9 • The South African listed property sector has experienced significant growth over the past 10 years • South Africa’s listed largest property company, Growthpoint, now has a market capitalisation of R60 billion compared to R30 million in 2002 350 South African List
Slide 10: South African Listed Property Companies by Market Cap
Market Cap -R billions 10 20 40 50 60 70 30 0 Source: Mcgregor GRT (Post ACP & SYC) Growthpoint Redefine Resilient Hyprop Capital Fortress Acucap SA LISTED REAL ESTATE Vukile Fountainhead SA Corp Emira Arrowhead South African Listed Property Companies Sycom Investec Octodec Rebosis Dipula Hospitalit
Slide 11: South African Listed Real Estate (cont'd)
SOUTH AFRICAN LISTED REAL ESTATE (cont’d) 11 • Attractiveness of the sector keeps improving: Attracting new listings to the sector Equity raising well supported by local institutions Increase in interest from offshore investors Increase in liquidity and tradability 80% Sector Liquidity 70% H
Slide 12: Sector corporate activity and consolidation
AFHCO SARETAIL <—— MARTPROP <— ATTFUND <—— ATTERBURY ATTERBURY —— AFRICA Tis a STD BANK re RMB ae w—_* VUNANI MOMENTUM FOUNTAINHEAD MONYETLA SANLAM KUPER LEGH me — IFOUR SIYATHENGA FORTRESS GRAYPROP GRAYVEST MAINPRO RICHWAY MINES PENSION JIKA PRIMEGRO FUND ATLAS DIVERSIFIED % GEORGJOU METBOARD ins G
Slide 13: Capital Raised
REIT INDUSTRY OVERVIEW 13 Capital Raised Year Amount Raised 2011 R16bn 2012 R11bn 2013 R18bn 2014 (up to November) R35bn R80bn Source: STANLIB Research
Slide 14: South Africa entered a new REIT era
SOUTH AFRICA ENTERED A NEW REIT ERA 14 • 75% of South Africa’s listed property companies were not REITs • These companies now synthetically created rental flow through the Property Loan Stock structure – share stapled to debentures • South Africa’s weighting in the global REIT indices could potentia
Slide 15: Regional Breakdowns
Regional Breakdowns 150 constituents Mkt Cap EUR 119 Bn. Developed Emerging 18% 16% Asia Pacific EMEA Americas 56% North America 26% Asia 52.6% EMEA 32% Sth Africa Gross Index Wgt % Yield Global Dev & EM 1.3% 3.7% 306 constituents EMEA Dev 9.0% 3.6% Mkt Cap EUR 927 Bn. EMEA EM 45.0% 3.8% Sources: FT
Slide 16: Who could become the largest REIT market globally?
WHO COULD BECOME THE LARGEST REIT MARKET GLOBALLY? 16 • US REITs still dominate globally • South Africa could become significant REIT market Turkey Belgium 2% 2% Hong South Kong Africa 5% Australia Singapore 6% Non-US 24% 9% global REITs 39.0% UK US REITs France 11% 61.0% 15% Canada Japan 13% 13%
Slide 17: FTSE EPRA/NAREIT Global Index
FTSE EPRA/NAREIT Global Index Weight = 1.3% Global Developed Emerging Global Global North Developed Developed Emerging Emerging Emerging America EMEA Asia Americas EMEA Asia Developed Developed Emerging Emerging Europe MEA Europe MEA 2 16 1 6 5 5 9 8 Countries Countries Country Countries Countries C
Slide 18: FTSE EPRA/NAREIT Global Index
FTSE EPRA/NAREIT Global Index Gross Mkt Cap South Global Europe South Africa Co’s Yield (FF) EUR Africa % Emerging % Equal 86 co Rank Growthpoint 6.7% 3,624 26.8% 3.2% INTU 6 Redefine 7.6% 2,243 16.6% 2.0% Icade 20 Hyprop 5.4% 1,529 11.3% 1.3% Cofinimmo 24 Resilient 4.2% 1,369 10.1% 1.2% Wereldhave
Slide 19: FTSE EPRA/NAREIT Global Index
FTSE EPRA / NAREIT GLOBAL INDEX 19 South Africa weights in the index Gross Index Wgt % Yield Global Dev & EM 1.3% 3.7% EMEA Dev 9.0% 3.6% EMEA EM 45.0% 3.8% Global EM 11.8% 3.9% South African companies gross yield +6%
Slide 20: FTSE EPRA/NAREIT Global Index
FTSE EPRA/NAREIT Global Index 20 Index Use: •Specialist Managers •Pension Funds •Global ETFs market •US$ 10.5bn AUM You need to •Futures contracts – Europe be on •OTC products investors radar!
Slide 21: Benefits of REITs
BENEFITS OF REITs 21 • The smallest investor can obtain exposure to large commercial property e.g. V & A Waterfront, Hyde Park Shopping Centre etc. • Property is a separate asset class that has different correlations to cash, bonds and equity • Investment is liquid and tradable with low transaction
Slide 22: SA REIT Regime
22 SA REIT REGIME
Slide 23: Why did we need REITs
WHY DID WE NEED REITS 23 • Disparate and inconsistent tax regime for property investment entities • Internationally recognised tax dispensation optimal for the growing industry • Current listed property entities have inherent tax problems • Usurious/excessive interest on debentures • Debenture inter
Slide 24: Structure of regime
STRUCTURE OF REGIME 24 Listed on JSE REIT Board Company REIT Taxation PLSs 20 JSE “Regulator” Legislation Amendment Bill PUTs 6 (2013) (TLAB) Trust REIT Tax Dispensation” Section 25BB Listings Requirements Section 13
Slide 25: Regulation
REGULATION 25 • Objective: - Provide investor protection • Ensure prudent management without unnecessarily removing flexibility • Transparency and good governance • Regulator: Johannesburg Stock Exchange (JSE) Initial On-going • Regulatory R300 Rules: million – Property AssetsListings Requirement Se
Slide 26: Taxation
TAXATION 26 • Tax Act remains applicable in full and each REIT has to submit tax returns annually for the listed entity and its subsidiaries • REITs retain tax losses accrued to date • Applicable to controlled property companies - subsidiary as defined by IFRS • Section 25BB provides the tax dispens
Slide 27: Implication for investors
IMPLICATION FOR INVESTORS 27 Local Investor • Will receive gross distribution in the form of taxable dividend free of dividend withholding taxes • Tax on distribution at each shareholder’s applicable tax rate • Shareholders can use debt to acquire REITs and the interest paid should be deductible in
Slide 28: Remaining REITs tax items for attention
REMAINING REITs TAX ITEMS FOR ATTENTION 28 • Disposal - <20% of holdings in property companies • Depreciation of leasehold improvements and machinery and equipment • Property company liquidations • Inwardly listed property companies and foreign REIT income • “Saving incentive” • Unlisted property co
Slide 29: Sector Update
29 SECTOR UPDATE
Slide 30: Fundamentals
FUNDAMENTALS 30 • Office • Industrial • Hotel
Slide 31: Retail: Our shopper
RETAIL: OUR SHOPPER 31 Upper Income Shopper - Solid • High debt levels but mainly limited to asset finance and has experience on how to manage debt. • High employment levels with relative strong growth in income • Appreciating assets But, • Negative sentiment on future – Rand collapse, politics, gov
Slide 32: Portfolio trading performance
PORTFOLIO TRADING PERFORMANCE 32 TRADING DENSITY AND COST OF OCCUPATION RATIOS Including Anchor Tenants Excluding Anchor Tenants Average Trading % Gross Rent to Average Trading % Gross Rent to Growthpoint Malls Densirty (12 Ave. T/O (12 Densirty (12 Ave. T/O (12 months) month) months) month) Brookly
Slide 33: Retail category trading performance
RETAIL CATEGORY TRADING PERFORMANCE 33 Average T/D % Gross Rent to Retail Category Sept – 14 T/D (12 month) Ave. T/O (12 month) Food – Supermarkets 2,648 2,549 2.33% Credit Fashion 2,057 2,173 8.03% Value Fashion 2,308 2,621 7.17% Sporting Goods and Wear 1,825 1,915 9.00% Department Stores 2,191 2,3
Slide 34: Retail: Footcount / sqm
RETAIL: FOOTCOUNT / SQM 34 Oct-12 - Sep-13 Average Oct-13 - Sep-14 Average 30 28 26 25 20 17 15 13 14 14 14 15 12 12 13 12 11 9 10 5 0
Slide 35: Industry issues and trends
INDUSTRY ISSUES AND TRENDS
Slide 36: Industry issues
INDUSTRY ISSUES 36 • Rates and Taxes • Government Local National • Legislation and Regulation • Lack of investment opportunities • Growth in the economy • Over renting • Change in office layouts • Online shopping • Green buildings • Empowerment
Slide 37: Future trends
FUTURE TRENDS 37 • Less capital • More expensive capital • Consolidations • Continued pressure on institutional property owners for liquidity • Development exposure • Sustainable buildings & Electricity generation • Emerging Africa • Bigger, more transparent sector
Slide 38: Thank you
SPACE TO THRIVE GROWTFEPOINT Thank you
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