Vukile Property Fund Limited · JSE:VKE
Vukile Property Fund — H1 2006 Earnings Presentation
36 slides from Vukile Property Fund's earnings presentation, September 2005
Slide 1: 2005 Interim Results
2005 INTERIM RESULTS for the six months ended 30 September 2005
Slide 2: Highlights
Highlights Distribution up 8.3% on strong property performance Overall portfolio vacancy rate reduced to 3.8% of gross rentals R80m expansion and upgrading project launched Securitisation will impact positively on full-year and future results
Slide 3: Salient features of results
Salient features of results Net profit before tax, debenture interest and fair value adjustment of R115m (2004: R75m) - includes R33.9m from MICC Net asset value per linked unit up to 654c from 494c at September 04 (+32.6%) Distribution up to 32.5c from 30c (+8.3%)
Slide 4: Group income statement
Group income statement Unaudited six months ended 30 Sept 2005 R000 Property revenue 275 196 Straight-line rental income accrual 13 797 Gross property revenue 288 993 Property expenses (95 599) Net profit from property operations 193 394 Administrative expenses (5 595) Investment and other income 1
Slide 5: Group income statement contd
Group income statement contd Unaudited six months ended 30 Sept 2005 R000 Debenture interest (94 518) Net profit before fair value changes 20 613 Fair value adjustment 161 765 Net profit before taxation 182 378 Taxation (28 149) Net profit 154 229 Attributable to: Linked unitholders of the company 1
Slide 6: Reconciliation
Reconciliation Unaudited six months ended 30 Sept 2005 R000 Attributable profit after taxation 143 375 Adjusted for: Change in fair value of investment properties (175 562) Straight-line rental accrual net of deferred taxation 11 766 Deferred taxation on change in fair value adjustment of investment
Slide 7: Group balance sheet at 30 Sept
Group balance sheetat 30 Sept Unaudited 2005 R000 ASSETS Non-current assets 3 338 154 Current assets 45 931 Total assets 3 384 085 EQUITY AND LIABILITIES Equity and reserves 422 865 Non-current liabilities 2 813 538 Current liabilities 147 682 Total equity and liabilities 3 384 085 Sept 05 Sept 04 N
Slide 8: The property portfolio
The property portfolio Vukile: 52 properties with GLA of 676 961m² MICC: 40 properties with GLA of 395 322m² (MICC to sell Sandton Sanlam Park for R60.25m cash, subject to conditions precedent) Vukile portfolio valued at R2.27 billion (up 6.4%) MICC valued at R1.051 billion (up 4.9%)
Slide 9: The Vukile portfolio
The Vukile portfolio National tenant groups - % of GLA and gross rentals
Slide 10: The Vukile portfolio
The Vukile portfolio Lease expiry profile - % of gross rentals
Slide 11: The Vukile portfolio
The Vukile portfolio Vacancy profile - % of gross rentals Figures in brackets as at 31 March 2005 (Commercial space in Randburg re-classified)
Slide 12: The Vukile portfolio
The Vukile portfolio Large vacancies (% of gross rentals) Sept 04 Mar 05 Sept 05 Bloemfontein Plaza 21.2% 19.4% 10.7% Randburg Square 23.6% 22.7% 23.7% If Randburg excluded, overall vacancy drops to ± 1.8%
Slide 13: The Vukile portfolio
The Vukile portfolio Sectoral spread - % of gross rentals Figures in brackets prior to commercial space in Randburg re-classified
Slide 14: The Vukile portfolio
The Vukile portfolio Geographical spread - % of GLA
Slide 15: The Vukile portfolio
The Vukile portfolio New leases and renewals Total contract value R124 million Total rentable area 71 060 m² Includes CCMA in Durban Embassy (R16.1m) Bateman in Bedfordview GIS (R9.7m) Y Hotels in Bloemfontein Plaza (R9.1m)
Slide 16: The MICC portfolio
The MICC portfolio National tenant groups - % of GLA and gross rentals
Slide 17: The MICC portfolio
The MICC portfolio Lease expiry profile - % of gross rentals
Slide 18: The MICC portfolio
The MICC portfolio Vacancy profile - % of gross rentals
Slide 19: The MICC portfolio
The MICC portfolio Large vacancies (% of gross rentals) Fredman Drive sold – commercial vacancy reduces to 11.8% (4.6% total) With Fredman Drive out – Hillview, Randburg contributes 35% of commercial vacancy (0.8% total) i.e. if Fredman and Hillview out, overall vacancy drops to 3.8%
Slide 20: The MICC portfolio
The MICC portfolio Sectoral spread - % of gross rentals
Slide 21: The MICC portfolio
The MICC portfolio Geographical spread - % of GLA
Slide 22: Combined portfolio
Combined portfolio Number of properties 92 GLA 1 072 283m² Market value R 3.32 billion Vacancy (% of gross rentals) 4.7% Sectoral spread • Retail 54% • Commercial 34% • Industrial 12%
Slide 23: Strategic objectives (annual report)
Strategic objectives (annual report) Enhancement of existing properties Debt funding structure Improvement of liquidity of linked units
Slide 24: Capex project
Capex project Board has approved R80m to upgrade and expand Phoenix Plaza and Dobsonville Phoenix Plaza GLA to be increased by 3 500m² and Dobsonville by 5 000m² Initial yield of ± 11% expected Work to start in January and finish August 2006
Slide 25: CMBS Overview
CMBS Overview Commercial Mortgage Backed Securitisation (CMBS) used worldwide since late 1980s as alternative to bank loans for commercial property owners Part of growing move towards disintermediation (i.e. reduced reliance on traditional bank finance)
Slide 26: CMBS Overview contd
CMBS Overview contd Cumulative Issuance Number of New USD Millions CMBS Deals 140,000 54 48 120,000 42 100,000 33 36 80,000 30 26 23,844 60,000 22 21 24 13,801 20 18,120 18 40,000 13 13 21,100 18,045 11 12 5,900 20,000 2,300 1 4,200 4 6 300 200 0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 (
Slide 27: CMBS Overview contd
CMBS Overview contd CMBS ± $120bn currently outstanding in Europe South Africa’s first CMBS was launched in November 2004. Vukile launched second on 31 October, Growthpoint third on 23 November
Slide 28: CMBS Structure
CMBS Structure CMBS is a substitute for bank debt through the use of a special purpose vehicle (SPV) The SPV makes a loan to the borrower and funds this loan by issuing highly rated securitisation notes to capital markets investors The properties are generally (not always) held in an insolvency-remo
Slide 29: CMBS Structure
CMBS Structure Owner Trust Borrower CMBS Secured Loan Notes Property Securitisation Investors Portfolio SPV
Slide 30: CMBS funding costs and benefits
CMBS funding costs and benefits Notes issued by SPV are rated by rating agency (e.g. Moody’s or Fitch) Due to high credit rating of the notes, capital market investors prepared to purchase with low margin This low margin translates to lower cost of funds for SPV, which benefit is passed back to borr
Slide 31: Vukile's securitisation programme
Vukile’s securitisation programme R2 billion CMBS programme arranged by ABSA launched on 31 October 2005 First issuance of 5 and 7 year floating rate notes totalling R770 million Floating rate notes converted into fixed-rate exposure through interest rate swaps Overall debt cost, after all expenses
Slide 32: Liquidity
Liquidity Trading volumes continue to improve : 6 months to end March 2005 - R137 million 6 months to end September 2005 – R174 million (± 27%) Average monthly trade 6 months to end March 2005 – R22.8 million 6 months to end September 2005 – R29.0 million
Slide 33: BEE initiatives
BEE initiatives Discussions underway which may lead to substantial portion of Sanlam shareholding (58%) sold to BEE consortium
Slide 34: Acquisition of MICC
Acquisition of MICC Vukile currently owns 75.003% of MICC’s issued linked units Making good progress towards acquiring balance and delisting MICC Cautionary announcement made on 22 November 2005
Slide 35: Prospects
Prospects Continued strong performance expected from property portfolio Prospects for further reduction in vacancies Benefits of securitisation will start flowing through in 2nd half and following years Full-year distribution growth could be similar to interims
Slide 36: Questions
Questions ? END