Vukile Property Fund Limited · JSE:VKE
Vukile Property Fund — FY2012 Earnings Presentation
64 slides from Vukile Property Fund's earnings presentation, May 29, 2012
Slide 1: Year ended 31 March 2012 results
for the year ended 31 March 2012
Slide 2: Agenda
Agenda • Highlights Laurence Rapp • Strategic review Laurence Rapp • Financial performance Mike Potts • Portfolio performance and overview Ina Lopion • Prospects and plans Laurence Rapp • Acknowledgements Laurence Rapp • Questions Team 2
Slide 3: Highlights, Vision, Values and Strategic review
Highlights, Vision, Values and Strategic review LAURENCE RAPP 3
Slide 4: Highlights
Highlights • A Annual l distribution di t ib ti iincreased dbby 6 6.1%. 1% • Successful acquisition of R1.5 billion property portfolio post year end, increasing our asset base by approximately 25%25%. • Improved quality of offices portfolio. • F Free-float fl t iindex d weighting i hti iincreased d
Slide 5: Vision and Values
Vision and Values “Through our dedicated team and network of trusted partners, Vukile aspires to be a leading property company by providing a top quality experience for our tenants and their customers through the active management and growth of our diversified portfolio and in so doing generate supe
Slide 6: Strategic review
Strategic review Eight critical success factors (“CSFs”) ( CSFs ) have been identified that will enable the company to bring our vision to fruition: • Grow the portfolio • Broaden our shareholding base and enhance market perception on an independent Vukile • Building sustainable partnerships • Impro
Slide 7: Financial performance
Financial performance MIKE POTTS 7
Slide 8: Distribution history
8 124.8 2012 70.5 54.3 3 11 17.6 2011 67.1 Distribution history 50 0.5 107.9 2010 60.9 4 47.0 97.9 Total 2009 53.8 8 44.1 Final 88.3 2008 4 48.0 Interim 40.3 76.8 2007 41.0 35.8 68.5 2006 36.0 32.5 61.5 2005 31.5 30.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0
Slide 9: Growth in distribution
Growth in distribution 18.0 17.1 16.0 15.0 14.0 14.3 13.9 13.2 12.0 12.6 12.1 12.0 11.4 10.9 10.0 10.2 10.2 10.0 9.6 9 2 2 9.0 8.0 8.3 7.5 7.5 6.0 6.6 6.1 5.1 4.0 2.0 0.0 2006 2007 2008 2009 2010 2011 2012 Interim Final Total 9
Slide 10: Simplified income statement
Simplified income statement March 2012 March 2011 % Rm Rm Variance Group net rental income 598.9 542.5 10.4 Income from asset management business 53.3 65.1 (18.1) Asset management expenditure (30.8) (20.2) (52.5) Net finance costs (152.1) (147.4) (3.2) Corporate administration costs (25.9) (25.5) (1
Slide 11: Make up of increase in distribution
Make up of increase in distribution Make-up 2012 2011 Cents per Cents per linked unit linked unit Contributions to increased rental income Increase in rentals on new and renewed leases 12.6 10.3 Additional rentals from property acquisition 9.3 12.8 Additional municipal service recoveries and other 5
Slide 12: Group balance sheet
Group balance sheet Rmillion 7000 6000 5806 5000 5084 4000 3910 2012 3315 3000 2011 2000 1668 1000 40 321 3 267 2 09 281 864 0 For sale Investment Current assets Non-current Current properties liabilities liabilities 12
Slide 13: Group debt structure
Group debt structure Maturity and interest rate profile of interest bearing debt at 31 March 2012 13
Slide 14: Group net cash flow
215 947 14 Balance e March 2012 2 (152 076) Net fina ance costs (14 808) Acquisiition of availa able-for- sale e financial asssets Group net cash flow (202 675) Acquisiition/improvem ments to investment propertties and fixed assetss (426 233) Distribu ution 36 476 Proceeds on sale of investm ment pr
Slide 15: Contribution to NAV
Contribution to NAV 15 NAV 1109 Closing NA AV (31 March 2012) NAV bridge on Distributio -125 Net revenue before distrribution 125 Interest ra ate swap revalu uation 1 -1 Fair value surplus net off deferred tax 108 including share based payments p and other Amortisatiion of debenture premium 1 -1 100
Slide 16: Linked unit price
Linked unit price Cents 1800 1600 15 527 1400 1423 1200 1195 10 1000 077 1006 987 919 800 600 526 400 200 0 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 16
Slide 17: Trading volumes and liquidity
Trading volumes and liquidity VKE: closing g price p vs. monthly y volume Value traded as % of market capital p (%) ( ) traded Price Volume 15.60 60,000,000 15.40 15 20 15.20 50,000,000 15.00 40,000,000 14.80 14.60 30,000,000 14.40 14.20 20,000,000 14.00 10,000,000 13.80 13.60 0 Volume Traded Closin
Slide 18: Post year end transactions
Post year end transactions • Acquisition A i i i off R1 R1.5 5 billi billion portfolio f li successfully f ll concluded l d d on 25 April 2012. • P rchase price ffunded Purchase nded as follo follows: s – 59.5 million linked units issued at R14.60 – R868.7 million; – Bank debt raised of R612 million
Slide 19: Post year end transactions
Post year end transactions • R fi Refinancing i off R1.02 R1 02 billi billion CMBS Programme. P • Global Credit Rating Co. accorded Vukile a AA (RSA) rating to senior sec secured red notes notes. • Secured bonds of R1.02 billion issued on 8 May 2012 as follows: – R580 million due 8 May 2015 - margin
Slide 20: Property portfolio performance and overview
Property portfolio performance and overview INA LOPION 20
Slide 21: Overview
Overview • N b off properties Number i 72 • GLA 922 221m² • Valuation – Total p portfolio R6.113 billion 46% of portfolio valued externally, values in line with internal values – Average value per property R85 million – Average discount rate 12.7% – A Average exit it capitalisation it li ti rate t 1
Slide 22: 10 largest properties
10 largest properties Area m²² A V l (Rm) Value (R ) % off ttotal t l Durban Phoenix Plaza 24 342 495.4 8.1 Bellville Louis Leipoldt p Hospital p 22 311 287.8 4.7 Dobsonville Shopping Centre 23 177 229.4 3.8 Pine Crest (50%) 20 072 204.1 3.3 D rban Embass Durban Embassy 32 346 202 8 202.8 33 3.3 Osh
Slide 23: Sectoral profile
Sectoral profile Market Value (Rm) GLA (m²) Offices Offices29% 24% Retail 48% Retailil R 54% Industrial Industrial 17% 28% Market Value (R/m²) 10 000 10,000 7,457 7,911 8,000 6,568 7,005 6,591 5,764 6,000 R/m² 3,952 4 000 4,000 3 343 3,343 R 2,000 0 Retail Offices Industrial Average March/11 March/1
Slide 24: Portfolio composition
Portfolio composition • G Grow the h portfolio. f li • Overweight retail – Middle LSM (3 to 6) Centres. – Rural and Urban. • Improve quality of offices and industrial assets – Disposals of CBD properties. – Acquisition q of Sanlam p portfolio. • Yield versus quality debate. 24
Slide 25: Disposals
Disposals GLA % Yield Sales price Status Property Sector (m²) per annum (R000) transferred Benoni Kleinfontein Offices: Erf 4 Offices 439 17 3 17.3 1 700 June 2011 AAD (Goodwood) Industrial 3 024 10.1 15 250 Jan 2012 Botbyl Subaru Building Hatfield Retail 4 603 19.4 13 750 Nov 2011 Oshakati Beares F
Slide 26: Properties held for sale
Properties held for sale % Yield Sales GLA per price Property Sector (m²) annum (R000) Status Johannesburg Glencairn Building Offices 13 378 23 520 CPs fulfilled Retail/ 78 7.8 Johannesburg Truworths Building Offices 6 919 43 680 CPs fulfilled Pretoria VWL Building Offices 16 933 12.5 103 000 CPs ou
Slide 27: Geographic profile (GLA m²)
Geographic profile (GLA m²) Mpumalanga Northwest 2% Northern Cape 3% 1% Limpopo Free State 4% Eastern Cape 4% 1% Western Cape 6% Namibia 7% Gauteng 55% KwaZulu Natal 17% Top four regions account for 85% of exposure 27
Slide 28: Tenant profile (GLA m²)
Tenant profile (GLA m²) Large national and listed tenants and major franchises 35% 49% National and listed tenants, franchised and medium to large professional firms Government 7% 9% Other 28
Slide 29: Weighted average base rentals R/m²
Weighted average base rentals R/m² (excluding recoveries) 9.0% 90 4.3% 77.79 7.5% 80 74.96 71.36 71.86 70 65.73 61.11 60 50 6.3% 40 34.58 36.77 30 20 10 - R t il Retail Offi Offices I d ti l Industrial T t l Total March/11 March/12 29
Slide 30: Weighted average base rental R/m²: Retail
Weighted average base rental R/m² - (excluding recoveries): Retail Durban Phoenix Plaza Qualbert Centre - Durban Truworths Centre C Nelspruit Grosvenor Shopping Centre Windhoek 269 Independence Avenue Pine Crest (50%) Barlows Audi - Kenilworth Daveyton Shopping Centre Oshikango Dobsonville Shopping
Slide 31: Weighted average base rental R/m²: Offices
Weighted average base rental R/m² - (excluding recoveries): Offices Hyde Park 50 Sixth Road Jhb Houghton 2446 Barlow Place Rivonia DLV Building Waymark De Tijger Office Park Pretoria e o a Sa Sanwood ood Park a Sandton Sunninghill Place Jhb Parktown Oakhurst Arivia.kom Building 259 West Street Centu
Slide 32: Weighted average base rental R/m²: Industrial
Weighted average base rental R/m² - (excluding recoveries): Industrial Supra Hino Sony Building (Midrand) Hellman International Centurion N1 Mid d Sanitary Midrand S it Cit City Randburg Tungsten Midrand Allandale Park Richmond Park Germiston R24 Randburg Trevallyn Pinetown Westmead Kyalami Park Vil
Slide 33: Lease renewals - % escalation on expiry rentals
Lease renewals - % escalation on expiry rentals 7.0% 6 6% 6.6% 6.0% 5.0% 4.6% 4.4% 4.0% 3.5% 3.0% 2 0% 2.0% 1.0% 0.0% Retail Office Industrial Average 33
Slide 34: New leases concluded
New leases concluded (Ratio of rental concluded against budget) 104% 103% 102% 101% 100% 100% 98% 96% 95% 94% 92% 90% Retail Office Industrial Average 34
Slide 35: Contracted rental escalation profile
Contracted rental escalation profile 9.5% 9.3% 9.0% 8.5% 8.2% 8.1% 8.0% 8.0% 7.5% 7.0% Retail Offices Industrial Total 35
Slide 36: Group lease expiry
Group lease expiry % of GLA 100% 80% 60% 40% 20% 0% Beyond March March March March March Vacant March 2013 2014 2015 2016 2017 2017 GLA 6% 37% 21% 14% 7% 7% 8% Cumulative 6% 43% 64% 78% 85% 92% 100% 36
Slide 37: Lease expiry (cont.)
Lease expiry (cont.) (cont ) • Included in the 37% expiries for 2013 are a number of leases that expired during 2012 that are in the process of being renewed. renewed • Once these leases are concluded, the expiries for 2013 reduces d tto 33%, 33% which hi h iis iin liline with ith our average llease
Slide 38: Lease expiry (cont.)
Lease expiry (cont.) (cont ) Property p y Tenant GLA ((m²)) Randburg Square OK Bazaars 8 062 Durban Embassy Road Accident Fund 7 605 Randburg Square Woolworths 4 472* Bloemfontein Plaza & Parkade Dept of Public Works 3 843 Bloemfontein Plaza & Parkade Ackermans 2 736 Masingita Spar Centre Spar 2 612
Slide 39: New leases and renewals
New leases and renewals • For the yyear ended 31 March 2012 leases were concluded with a: – Total contract value R579.5 million – Total rentable area 202 129 m m² • Largest contracts concluded Contract Lease l value d duration ti Tenant Property Sector (Rm) (years) Shoprite Checkers (Pty) Ltd Germis
Slide 40: Vacancy profile - % of gross rental
Vacancy profile - % of gross rental 12 0% 12.0% 10.0% 9 7% 9.7% 8.0% 8.6% 6.8% 0.9% 6.0% 5.0% 5.9% 4.0% 1.7% 3.3% 2.0% 0.0% Retail Offices Industrial Total Trading g vacancy y Development p vacancy y 40
Slide 41: Vacancy profile - % of gross rental
Vacancy profile - % of gross rental 12% 10% 9.7% 8.9% 8.6% 7.9% 8% 7.1% 6.9% 6.8% 5.8% Dev. 6% vacancy 5 0% 5.0% 5 0% 5.0% 5 1% 5.1% 0 9% 0.9% Dev. 4.2% vacancy 5.9% 4% 1.7% 3 3% 3.3% 2% 0% Retail R t il Offices Offi Industrial I d ti l Total T t l March/11 September/11 March/12 41
Slide 42: Vacancy profile - % of GLA
Vacancy profile - % of GLA • Overall vacancy reduced from 6.5% in September 2011 to 6.1% at end March. • Retail and Industrial vacancies reduced, while offices increased. 12 0% 12.0% 10.0% 9.7% 8.7% 8.0% 7.7% 7 7% 7.0% 6.5% 6.0% 6.1% 6.0% 5.5% 5.3% 4.8% 4.6% 4.0% 3.6% 2.0% 0.0% Retail Offices Indust
Slide 43: Individual properties vacancy profile
Individual properties vacancy profile (% of GLA) (vacancy > 500m²) Jhb Eva Park (52%) Midrand Allandale Park (22%) Randburg Trevallyn (11%) Germiston R24 (10%) Randburg Square (7%) Durban Embassy (11%) Pretoria Sanwood Park (49%) Sandton St Andrews Complex (27%) Roodepoort Hillfox Power Centre (7%)
Slide 44: Ratio of gross recurring cost to property revenue
Ratio of gross recurring cost to property revenue - stable portfolio 40% 36.6% 34.4% 34.2% 35% 33.0% 32.4% 32.3% 30% 25% 20.5% 20.4% 20% 19.2% 19.3% 18.4% 18.0% 15% 10% 5% 0% Mar-07 Mar/08 Mar/09 Mar/10 Mar/11 Mar/12 All recurring expenses All recurring expenses excluding rates & taxes and electrici
Slide 45: Recurring expense categories
Recurring expense categories Bad B d debt d bt Asset management fee 2% Insurance premiums 2% Sundry expenses 3% 4% Maintenance contracts 6% Property management fee 8% Government services 48% Cleaning & security 10% Rates & taxes 17% 83% of costs from top four categories 45
Slide 46: Property portfolio - bad debt and arrears analysis
Property portfolio - bad debt and arrears analysis • Tenantt arrears reduced T d dbby R0 R0.7 7 million illi ffrom M March h 2011 tto R20 R20.3 3 million illi att year end. • Impairment allowance increased marginally from R9 R9.9 9 million (March 2011) to R10 million at 31 March 2012. R000 • Impairm
Slide 47: Asset management vs property management
Asset management vs property management • V kil has Vukile h worked k d on an outsourced t d property t managementt model d l since i lilisting. ti • Asset management provides strategic direction, guidance and mandates in which the property managers need to manage the properties on a daily basis. •
Slide 48: Leasing initiatives
Leasing initiatives • F Focus groups were conducted d t d with ith lleasing i b brokers k d during i F February b 2012 2012. • As a result of these, a number of initiatives will be implemented to improve: – The relationship between Vukile and the broker fraternity. – Communication of vacancy informa
Slide 49: Vacancy website
Vacancy website Home BrokerZone | Broker Registration | Contact Details ¢ MIDRAND IBG Already registered » Join here.# Login » \Vukile Property Fund Limited ("Vukile") will introduce a broker incentive program To download the broker pack you need to be registered with Vukile Property Fund if you are
Slide 50: Sanlam acquisition
Sanlam acquisition • R1 5 billi R1.5 billion portfolio tf li purchased h d ffrom S Sanlam, l ttransferred f d 25 A Aprilil 2012 2012. • Assets integrated into Vukile. • The handover between property managers is in process for 1 June 2012. • Upgrading/extension projects are being considered for: – Du
Slide 51: Sanlam acquisition
Sanlam acquisition Update on vacancy and expiries: 70,000 100% 60,000 89% 100% 84% 50,000 73% 86% 78% 40,000 m²) GLA (m 50% 63% 30,000 39% 20,000 , 14% 10,000 26,441 24,767 65,871 46,722 41,290 44,905 21,346 26,458 15,740 20,096 25,058 8,640 13% - Vacant Mar/13 Mar/14 Mar/15 Mar/16 Beyond March 2016
Slide 52: Re-developments / upgrades
Re developments / upgrades Re-developments Projects completed Property Project detail Total Yield Completion date Notes Additional 36.50 Mala Plaza , Malamulele Extension and upgrade 1,112 m² 20.10 9.3% Jun 2011 Grosvenor Crossing, Bryanston Upgrade ‐ 7.50 - Nov 2011 (1) Hillfox Value Centre New pre
Slide 53: Randburg Square upgrade
Randburg Square upgrade • The upgrade Th d is i mostly tl income i protecting t ti in i nature t and d will ill iinclude l d th the following: – Upgrading of the Mall areas areas, ii.e. e replacing floor tiles tiles, shop fronts fronts, bulkheads and light fittings. – Creating new premises in the Ma
Slide 54: Randburg Square upgrade - costs and timing
Randburg Square upgrade - costs and timing Combined phase 1 & 2 capex New work Services Total (Rmillion) Tenant Upgrade cost Phase 1 7.5 55.2 18.1 80.8 Phase 2 19.6 54.3 52.8 126.7 Final estimated capex 27 1 27.1 109 5 109.5 70 9 70.9 207 5 207.5 Building Programme Start Finish Phase 1 June 2011 Jun
Slide 55: Randburg Square upgrade - market value per m² comparison
Randburg Square upgrade - market value al e per m² comparison At completion l ti th the projected j t d market k t value l ffor Randburg R db S Square ((offices ffi included) will be R417 million, or R8 118/m². This compares as follows with the R/m² value of a few other properties: Property GLA /m²
Slide 56: Randburg Square upgrade - tenant profile
Randburg Square upgrade - tenant profile • Aft completion After l ti the th ttenantt profile fil will ill consist i t off ± 90% national ti l ttenants. t • The following national retail groups have either committed to lease or are seriously considering leasing premises for one or more of their brand
Slide 57: Randburg Square - architects' perspectives
Randburg Square - architects’ perspectives 57
Slide 58: Prospects, plans, acknowledgements and closing
Prospects, plans, acknowledgements and closing LAURENCE RAPP 58
Slide 59: Strategic priorities for current year
Strategic priorities for current year • Grow the portfolio – Hammersdale: 19 000m², R194 million, completion date April 2013. – Strong pipeline being evaluated in middle (LSM 3 – 6) income shopping centres. Broaden shareholder base – Proactive approach to dealmaking. Building Grow the sustainable po
Slide 60: Strategic priorities for current year
Strategic priorities for current year • Mi i i ffunding Minimise di costs t – Refinance of R450 million ABSA facility in June 2012. • Invest in our people Broaden – Focus on remuneration structures. shareholder base – Strengthening the investment team. Building Grow the sustainable portfolio – Intro
Slide 61: Prospects
Prospects • Economy still fragile and susceptible to global weakness. • Retail should continue to p perform well with strong g tenant demand. • Industrial looking more promising. promising • Offices still challenging but may have stabilised. • Underlying property fundamentals are generally positive
Slide 62: Prospects
Prospects • O Overall ll we expect reasonable bl growth h iin di distributions ib i ffor next year: 9 Underlying property fundamentals intact. 9 Big sales commission from Sanlam acquisition. 9 Better funding costs. x Base effects are a challenge due to non recurring lease payment in March 2012 year.
Slide 63: Acknowledgements
Acknowledgements • Board B d • Property managers • Service providers • Brokers and developers • Tenants • Investors • Funders • Colleagues 63
Slide 64: Questions and answers
Questions and answers CLOSING 64