Delta Property Fund Limited · JSE:DLT
Delta Property Fund — H1 2020 Earnings Presentation
55 slides from Delta Property Fund's earnings presentation, Nov 4, 2019
Slide 1: Results Presentation for the six months ended 31 August 2019
RESULTS PRESENTATION for the six months ended 31 August 2019 P RO P ERT Y F U N D www.deltafund.co.za
Slide 2: Agenda
AGENDA P RO P ERT Y F U N D 01 Introduction and Business Update 02 Financial Review 03 Operational Review 04 Conclusion 05 Questions & Answers 06 Annexures
Slide 3: Introduction and Business Update
P RO P ERT Y F U N D www.deltafund.co.za INTRODUCTION AND BUSINESS UPDATE Sandile Nomvete
Slide 4: Introduction to Delta
INTRODUCTION TO DELTA Assets under Highly Sovereign management of empowered fund underpinned JSE listed REIT R11.3bn Level 2 80.7% B-BBEE By 100% black-owned asset manager Rating on new sector codes of revenue from sovereign tenants Net asset value Average property Dominant in value of P
Slide 5: Business Update
BUSINESS UPDATE Exceptionally difficult trading conditions continued during the reporting period, characterised by weak economic growth and subdued investment within the economy. Policy uncertainty and protracted lease negotiations with DPW contributed to Delta’s challenges during this period, howev
Slide 6: Business Update cont.
BUSINESS UPDATE cont. Debt Funding Delta’s long-standing banking partners approved extensions totalling ca.R2.8 billion in expiring facilities during the period, with further extensions concluded post interim reporting Interest rates slightly more competitive than exit rates and are expected to
Slide 7: Business Update cont. (Proposed Rebosis merger)
BUSINESS UPDATE cont. Proposed Rebosis merger In line with Delta’s strategy to introduce an element of bulk and diversification into its portfolio, we are continuing to progress a proposed merger with Rebosis To date the parties have made good progress with both Delta and Rebosis committed to th
Slide 8: Financial Review
P RO P ERT Y F U N D www.deltafund.co.za FINANCIAL REVIEW Shaneel Maharaj
Slide 9: Interim Performance 2020
INTERIM PERFORMANCE 2020 Extended Loan to Interest facilities totaling value of cover ratio R2.8 billion 44.3% 1.9 (Feb 2019 : R2.1 billion) (Feb 2019 : 45.1%) (Feb 2019 : 2.1) Debtors Property operating Fixed managed at margin at debt of 28.0 days 67.2% 44.1% (Feb 2019 : 31.0 days) (Feb
Slide 10: Financial Review
FINANCIAL REVIEW 31 August 2019 31 August 2018 28 February 2019 Revenue (R’000) 759 031 779 643 1 547 365 Net property income (R’000) 507 261 525 560 1 037 786 Finance costs (R’000) 296 522 248 604 537 281 Cost to income ratio - gross method 32.8% 32.0% 32.2% Cost to income ratio - net method 17.8%
Slide 11: Distributable Income Statement
DISTRIBUTABLE INCOME STATEMENT 31 August 2019 31 August 2018 28 February 2019 Net property income (excl. straight line accrual) 514 775 540 423 1 072 090 Administration expenses (35 943) (46 672) (79 727) Net finance costs (285 255) (235 906) (511 249) Foreign exchange gain - 51 - Dividend income –
Slide 12: Analysis of Distributions Declared
ANALYSIS OF DISTRIBUTIONS DECLARED HISTORIC DISTRIBUTION PER SHARE (CENTS) H1 – Interim 23.1% 9.6% 15.6% 7.2% 8.7% 8.0% 7.1% 7.1% 7.1% 1.0% (1.0)% 0% (15.1)% (68.5)% (43.0)% (69.0)% H2 – Final Total – Full year 97.2 97.2 90.8 84.1 72.7 55.4 51.3 50.8 47.9 45.9 46.4 44.1 42.9 40.2 40.0 39.4 32.5 23.7
Slide 13: Distributable Earnings Bridge
DISTRIBUTABLE EARNINGS BRIDGE R’000 6 042 10 729 1 792 5 040 281 223 (51) (476) (497) (12 250) (24 479) 217 722 (49 349) H1 Aug 2018 Dividend Net property Provisions Admin Foreign Antecedent Other income Disposals Vacancies Net finance H1 Aug 2019 income (Grit) income raised expenses exchange loss d
Slide 14: Like-for-like Net Property Income Analysis
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS % Standing portfolio growth estimate (R’000) FY19 FY18 Change Rental income 766 544 794 506 (3.5)% Less: Property operating expenses (251 770) (254 083) (0.9% Net rental income 514 774 540 423 (4.7)% Less: Net income from disposals in FY18 (833) (7 928) Net
Slide 15: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION %Change R’000 31 August 2019 31 August 2018 28 February 2019 (Feb 19 – Aug 19) ASSETS Non-Current assets 10 332 482 11 016 677 10 377 347 (0.43%) Investment property 9 913 379 10 561 140 9 913 811 (0,01%) Fair value of property portfolio 9 762 271 10 383 457 9 755 209
Slide 16: NAV Bridge
NAV BRIDGE Rands 0.03 0.21 (0.03) (0.06) 9.30 9.29 (0.16) 31-Aug-18 Contribution from Fair value of Net debt facilities Fair value of listed Dividend paid 31-Aug-19 operations financial raised instruments instruments & forex gains RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 16
Slide 17: Debt Summary
DEBT SUMMARY As at 31 August 2019 Weighted Ave. Facility Type R’ m Rate Floating bank facilities 4 565 9.9% Revolving bank facilities 648 9.6% Total borrowings, net of accrued interest 5 213 9.9% Accrued interest 9 Debt structuring fees amortized (12) Total borrowings, including interest and fees 5
Slide 18: Graphical Debt Analysis
GRAPHICAL DEBT ANALYSIS SOURCE OF DEBT TOTAL: R5 213M DEBT CLASSIFICATION TOTAL: R5 213M 3.5% 12.4% Floating Bank Facilities (R4 565m) ZAR Bank Facilities (R5 029m) 0.0% Fixed Bank Facilities (Rm) USD Bank Facilities (R184m) Revolving Bank Facilities (R649m) 96.5% 87.6% FINANCIER SPLIT TOTAL: R5 213
Slide 19: Debt Expiry Profile
DEBT EXPIRY PROFILE 5000 4500 4000 3500 3000 Rand (million) 2500 2000 1500 1000 500 0 28-Feb-20 28-Feb-21 28-Feb-22 28-Feb-23 28-Feb-24 28-Feb-25 Total Floating Bank Facilities Revolving/Liquidity Bank Facilities Swap Contracts RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 19
Slide 20: Debt Commentary
DEBT COMMENTARY Extended R2.8 billion in expiring debt facilities during the period. These facilities were further extended post the interim reporting period to year-end, with the intention for a permanent refinance once the DPW lease renewals are concluded The weighted average cost of debt decr
Slide 21: Operational Review
P RO P ERT Y F U N D www.deltafund.co.za OPERATIONAL REVIEW Otis Tshabalala
Slide 22: Interim Performance 2020
INTERIM PERFORMANCE 2020 Defensive Bulk lease renewal Total lease Sovereign tenants proposal to DPW (PMTE) renewals in a challenging environment 76.6% 44.3% 156 846m² Gross lettable area (GLA) (Feb 2019: 73.6%) Renewed 95 523m² (40 leases) by Aug 19 (Feb 2019 : 46 833m2) Total new leases W
Slide 23: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - BY BUILDING RENTAL - BY BUILDING Gauteng (41.2%) Gauteng (45.2%) Kwazulu-Natal (29.8%) Kwazulu-Natal (23.4%) Free State (9.2%) Limpopo (9.9%) Limpopo (4.8%) Free State (6.0%) Western Cape (4.5%) Western Cape (5.2%) Northern Cape (4.0%) Northern Cape (3.7%) Mpumalan
Slide 24: Portfolio Breakdown
PORTFOLIO BREAKDOWN Office - Office - Other Industrial Retail Total Sovereign Number of properties 81 16 3 3 103 Gross lettable area (m2) 1 576 478 108 916 11 177 56 481 753 052 Income (R’ 000) 75 052 9 877 7 115 1 006 92 996 Vacancies Including assets held for sale (%)2 14.2 34.2 54.4 5.9 19.3 Valu
Slide 25: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN TENANT PROFILE BY GLA TENANT PROFILE BY RENTAL 1,1% 7,6% 1.1% 1.5% 7.6% Office - Sovereign 10,6% 7.5% National Government 10.6% 14.5% 40.3% 41.6% Office - Other Provincial 7.5% Government 7.3% Retail Local Government 12.1% 76.5% Industrial State-Owned 80.7% 13.1% Enterprise
Slide 26: Operations at a Glance
OPERATIONS AT A GLANCE It is a tough time for our sector, as we battle to halt rising vacancies as well as rental reversions Most tenants are adopting ultra conservative approaches by optimizing their real estate needs We have managed to secure a significant number of leases notwithstanding te
Slide 27: DPW Update
DPW UPDATE There is a great need for DPW leasing policy certainty to bring back much needed confidence in our sovereign sector o A meeting with the DPW Minister, SAPOA and landlords of significance is in the pipeline. Notwithstanding , Delta is continuing engagements with the Minister’s office and
Slide 28: Leasing Update - Sovereign Tenants
LEASING UPDATE - SOVEREIGN TENANTS Bulk renewal progress Initial submission - 227 550 m² Tenants vacated - Stats House Nelspruit (892m²), balance of bulk renewal of 226 609m 2 40 Leases signed to date totalling 95 523m² (67.6% - 5 years, 29.7% - 3 years, 2.7% - 1 year) While our Bulk Renewal
Slide 29: Bulk Renewal Update
BULK RENEWAL UPDATE Building Name Area User Department Lease Term LEASE AGREEMENTS CONCLUDED & SIGNED Defence Force - Old Pretoria Road 2 504 Defence Force -Yard 5 Years Defence Force Logistics 2 430 Defence - Logistics 5 Years Mayors Walk 235 SAPS 5 Years SAPS Flying Squad 1 125 SAPS Flying Squad 5
Slide 30: Bulk Renewal Update cont.
BULK RENEWAL UPDATE cont. Du Toitspan 623 SAPS 3 years SAPS – Ferreira Street 4 637 SAPS 3 years 88 Field Street 4 617 Dept of Water Affairs 5 years Edgars Kroonstad 322 Dept of Correctional Services 5 years Campus Building 3 488 Dept of Water Affairs 5 years Azmo Place 5 225 Dept of Water Affairs 5
Slide 31: Leasing Update
LEASING UPDATE Lease renewals concluded For the six months ending 31 August 2019, lease renewals were concluded for a total GLA of 156 846m 2, to the value of R671 million RAF has put out a tender for a 10 year lease for 7 200 m². Currently a tenant at Embassy Building – Durban Mayors Walk Soc
Slide 32: Leasing Update cont.
LEASING UPDATE cont. . Several new leases were concluded measuring 6 400m2 to the value of R 21.5 million over the lease term Prospective new deals: SARS in Randburg have initiated discussions with regards to re-occupying 2 700m² of the 2nd floor that they previously vacated. Discussions are at
Slide 33: Vacancies
VACANCIES Vacancies Our total portfolio vacancies have increased to 19.3% due to the loss of some key tenants • UNISA (JHB) in Unisa House – 9 069m2 • Department of Health (PMB) in Capital Towers – 13 485m2 • We are in advanced negotiations with replacement tenants National office vacancies rema
Slide 34: Valuations
VALUATIONS Currently evaluating the entire portfolio as part of the due diligence on the proposed merger between Delta and Rebosis o Market related cap rates and discount rates are being applied o In cases where higher than market rentals are being achieved, these rentals are being reverted to mar
Slide 35: Disposal of Assets
DISPOSAL OF ASSETS During the 2020 financial year, Delta sold Top Trailers site 1, for R45 million Building Property Classification Location GLA (m2) Sales price (R) Transfer date Transferred 15 741 45 000 000 Top Trailers site 1 Industrial Wadeville, Johannesburg 15 741 45 000 000 09-May-19 As
Slide 36: Disposal of Assets cont.
DISPOSAL OF ASSETS cont. Disposing of the Free State Provincial Government Portfolio continues to be a priority as vacancies continue to escalate o Delta continues to work with reputable local brokers and have issued mandates to these brokers Vacancies in Sunninghill remain a focus area with inc
Slide 37: Capex Update
CAPEX UPDATE Capital Expenditure Our main focus is on compliance and defensive expenditure o predominantly to maintain the value of the properties and counter competition Following the signing of the DPW leases TI and Capex will be required to comply with the Schedule C requirements and the impr
Slide 38: Green Building and Sustainability
GREEN BUILDING AND SUSTAINABILITY Buildings consume a third of the world’s energy and are responsible for a fifth of global emissions Over and above the usual initiatives like energy efficiency through efficient lighting and optimised HVAC upgrades, water-saving interventions etc. , we have iden
Slide 39: Conclusion
P RO P ERT Y F U N D www.deltafund.co.za CONCLUSION Sandile Nomvete
Slide 40: Conclusion
CONCLUSION The national economic outlook remains challenging with investment levels expected to remain subdued with a lacklustre outlook on future business conditions, especially in light of a possible further credit rating downgrade Management’s focus will continue to be on • Concluding the rem
Slide 41: Thank You - Questions & Answers
P RO P ERT Y F U N D www.deltafund.co.za THANK YOU Questions & Answers
Slide 42: Annexures
ANNEXURES P RO P ERT Y F U N D 01 Government Precinct Pretoria 02 Top 10 properties by value 03 Lease Expiry Profile 04 Sectorial Split 05 GLA and vacancy reconciliation 06 Leasing Outlook 07 Growth / Reversion
Slide 43: Government Precinct | Pretoria
GOVERNMENT PRECINCT | PRETORIA RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 43
Slide 44: Representation by Province and Major Tenants
REPRESENTATION BY PROVINCE AND MAJOR TENANTS BUILDINGS REPRESENTED BY PROVINCE REPRESENTATIVE TENANTS No of Buildings GLA (m2) Gauteng 34 384 559 KwaZulu-Natal 17 278 269 Free State 17 85 980 Mpumalanga 11 30 2521 Limpopo 7 44 885 Northern Cape 7 37 275 Western Cape 5 41 889 Eastern Cape 3 23 717 No
Slide 45: Top 10 Properties
TOP 10 PROPERTIES Forum Building Poyntons Liberty Towers Hallmark Building Delta Towers Location Pretoria Location Pretoria Location Durban Location Pretoria Location Durban Office - Office - Office - Sector* Sector* Sector* Office - Other Sector* Sector* Office - Other Sovereign Sovereign Sovereign
Slide 46: Top 10 Properties | Continued
TOP 10 PROPERTIES | CONTINUED Isivuno House Embassy Building Hensa Towers The Marine NPA Cape Town Location Pretoria Location Durban Location Polokwane Location Durban Location Cape Town Office - Office - Office - Office - Sector* Sector* Sector* Sector* Office - Other Sector* Sovereign sovereign So
Slide 47: Lease Expiry Profile at 31 August 2019
LEASE EXPIRY PROFILE AT 31 AUGUST 2019 TOTAL PORTFOLIO - BY GLA TOTAL PORTFOLIO - BY RENTAL Vacant (19.3) Month to Month (36.1%) 11.8% 10.4% 19.3% Month to Month (28.1%) 29 Feb 20 (9.5%) 2.4% 3.1% 29 Feb 20 (5.8%) 7.7% 7.1% 36.1% 28 Feb 21 (22.7%) 28 Feb 21 (17.1%) 8.4% 28 Feb 22 (10.5%) 10.5% 29 Fe
Slide 48: Sectoral Split
SECTORAL SPLIT GLA - BY BUILDING GLA - BY TENANT* 2.6% 2.6% 7.5% 1.5% Office - Sovereign (73.6%) Office - Sovereign (76.5%) Office - Other (21.0%) 14.5% Office - Other (14.5%) 21.0% Retail (2.6%) Retail (7.5%) 73.8% Industrial (2.6%) Industrial (1.53%) 76.5% RENTAL - BY BUILDING RENTAL - BY TENANT 2
Slide 49: Lease Expiry by GLA | Sectoral Tabular Representation
LEASE EXPIRY BY GLA | SECTORAL TABULAR REPRESENTATION Month to Beyond 29 Sector Month 29 Feb 20 28 Feb 21 28 Feb 22 28 Feb 23 29 Feb 24 Feb 2024 TOTAL National Government 131 025 17 066 43 668 17 967 28 063 16 846 58 377 313 012 Provincial Government 55 669 16 754 12 368 15 750 1 876 - 6 820 109 237
Slide 50: WALE by Tenant Type
WALE BY TENANT TYPE WALE by Tenant Type Total GLA WALE by GLA Revenue WALE by Revenue Sector (m2) (yrs) ( R’000 ) (yrs) National Government 313 012 1.63 37 437 1.44 Provincial Government 109 237 0.76 19 358 0.66 Local Government 55 281 0.89 6 994 0.67 State - Owned Enterprise 98 948 1.85 11 208 1.76
Slide 51: GLA and Vacancy Reconciliation
GLA AND VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2019 104 950 422 136 986 14.4% Disposals (1) (15 741) - Leases terminated - - 49 032 New letting of vacant space - - (6 465) Adjustments: Forum 1 - (5 098) Chambers of Change 2 3 043 Other (2
Slide 52: Leasing | Outlook
LEASING | OUTLOOK Anticipated budgeted sovereign renewals W.A. Expiry W.A. Proposed Escalation / Sector No of Leases Total Area Rate / m2 * Rate / m2 * (Reversion) Leases on month-to-month or expiring by 29 February 2020 National government 19 136 166 120.91 96.87 (19.76%) Provincial government 16 7
Slide 53: Growth / Reversion - Annexure
GROWTH / REVERSION - Annexure Total leases concluded 1 March 2019 – 31 August 2019 W.A Term W.A. Expiry W.A. Achieved Growth / W.A. Esc. No of Leases Total Area (m2) (months) Rate (R / m2) * Rate (R / m2) * (Reversion) achieved Renewed leases # 81 156 846 44.99 100.77 94.46 (6.26%) 6.46% Renewals by
Slide 54: Notes
NOTES RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019
Slide 55: Notes
NOTES RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019