Delta Property Fund Limited · JSE:DLT
Delta Property Fund — H1 2023 Earnings Presentation
59 slides from Delta Property Fund's earnings presentation, Aug 31, 2022
Slide 1: Results Presentation for the Period Ended 31 August 2022
RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022 Block G, Pretoria www.deltafund.co.za
Slide 2: Agenda
01 05 Introduction Conclusion 02 06 Business Update Questions and Answers 03 07 Strategy & ESG Update Annexures 04 Financial Review Delta Towers, Durban RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 3: Introduction
The Marine, Durban INTRODUCTION Siyabonga Mbanjwa
Slide 4: Introduction
INTRODUCTION 4 INTRODUCTION On 2 November 2022, Delta celebrated 10 years as a JSE listed REIT. RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 5: Introduction (continued)
INTRODUCTION 5 INTRODUCTION (CONTINUED) • Delta’s turnaround gained momentum. • The external environment is challenging: • Geopolitical factors, including the war in Ukraine, negatively affecting supply chains, imports and exports. • Economic growth in South Africa is under pressure. • Covid-19 is n
Slide 6: Key Metrics
INTRODUCTION 6 KEY METRICS Average collections B-BBEE Sovereign SA REIT underpinned Loan to value JSE listed SA REIT 105.4% Level 1 87.0% 58.2% (Feb 2022 : 112.7%) (Feb 2022 : Level 1) by revenue (2022 : 84.6%) (Feb 2022 : 57.8%) SA REIT Investment SA REIT Funds from Interest cover ratio Net asset v
Slide 7: Business Update
Unisa House, Johannesburg BUSINESS UPDATE Siyabonga Mbanjwa
Slide 8: Representation by Province and Major Tenants
BUSINESS UPDATE 8 REPRESENTATION BY PROVINCE AND MAJOR TENANTS North West Limpopo 2 7 6 1 GLA(m2) 5 780 GLA(m2) 44 885 Free State 1 15 32 11 Mpumalanga 2 GLA(m2) 83 025 9 2 BUILDINGS Northern Cape GLA(m2) 30 251 REPRESENTED 17 1 6 BY PROVINCE GLA(m2) 37 275 7 16 KwaZulu-Natal Total GLA (m2) Eastern
Slide 9: Business Update: Vacancies
BUSINESS UPDATE 9 BUSINESS UPDATE Vacancies • Vacancies throughout the South African property sector are on the increase and are currently at 16.4% (in excess of 3 million m²) as at September 2022. • According to the latest SAPOA Vacancy Report for the 3rd quarter of 2022, 20.5% of B-grade offices t
Slide 10: GLA and Vacancy Reconciliation
BUSINESS UPDATE 10 BUSINESS UPDATE (cont.) GLA AND VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2022 99 904 531 283 140 31.3% Disposals (1) (11 438) (2 853) New letting of vacant space (6 546) Major contributors: 17 Harrison Street 11 297 Lobed
Slide 11: New Leases and Lease Renewals
BUSINESS UPDATE 11 BUSINESS UPDATE (cont.) New Leases • New leases concluded for the reporting period amount to 6 546m2; • 1 679m² in new leases were concluded post the reporting period. Lease Renewals • Lease renewals for the reporting period amount to 156 032m2 for the entire portfolio; • 127 995m
Slide 12: Leasing Update: GLA and Vacancies by Province
BUSINESS UPDATE 12 BUSINESS UPDATE (cont.) LEASING UPDATE GLA BY PROVINCE VACANCIES BY PROVINCE NW MP EC MP EC WC NC NC GP (41%) GP (41%) LP KZN (31%) KZN (29%) FS (9%) FS (15%) LP (5%) FS LP (0%) FS GP GP NC (4%) NC (7%) WC (4%) WC (0%) MP (3%) MP (2%) EC (2%) EC (6%) NW (1%) NW (0%) KZN KZN RESULT
Slide 13: Valuations
BUSINESS UPDATE 13 BUSINESS UPDATE (cont.) Valuations • Reduction in valuations of R353.4 million representing 4.5% (Feb 2022: R314.6 million representing 3.8%). • Reduction in valuations have had a significant impact on LTV as at end Aug 2022 (58.2%). • The biggest drivers in reduced valuations inc
Slide 14: Disposals
BUSINESS UPDATE 14 BUSINESS UPDATE (cont.) Disposals • We previously reported that disposals would be fast tracked as part of our portfolio optimisation strategy. Significant progress has been made in the last few months. • We are disposing of assets which are deemed to be non- strategic on account
Slide 15: Transferred and Ongoing Disposals
BUSINESS UPDATE 15 BUSINESS UPDATE (cont.) TRANSFERRED Property name Disposal value GLA (m2) Transfer date Delta House R74 000 000 11 439 13 Jul 22 CNA building R 3 750 000 2 306 27 Oct 22 Total: R77 750 000 13 745 ONGOING DISPOSALS Property name Date of signature Cape Road R38 000 000 5 135 1 Jul 2
Slide 16: Disposal of Assets: Geographical Split
BUSINESS UPDATE 16 DISPOSAL OF ASSETS (cont.) GEOGRAPHICAL SPLIT BY SALE PRICE VALUE (%) & BUILDING COUNT Gauteng - GP Free State - FS GP Northern Cape - NC 50.7% Eastern Cape - EC 4 FS 26.2% NC 10.4% 4 1 EC 12.7% 1 RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 17: Capex Update
BUSINESS UPDATE 17 BUSINESS UPDATE (cont.) Capex Update • Capex remains a major focal point • R32.9 million Capex spent for the period ended 31 August 2022 Projects Hallmark • Replaced floor finishes in common areas • Installed new emergency evacuation system, upgraded emergency escapes • In the pro
Slide 18: Servamus Building Repairs
BUSINESS UPDATE 18 18 BUSINESS UPDATE (cont.) Servamus Building • All fire damaged and old equipment was completely removed from the floor and returned to a shell. • The structural damage to the concrete was repaired where the fire started and washed before any works commenced. • New HVAC system was
Slide 19: Capex Projects: Commissioner House, Poynton, WB Centre
BUSINESS UPDATE 19 BUSINESS UPDATE (cont.) Commissioner house • Replacement of palisade fencing due to corrosion and damage. • Repair of waterproofing on top of the canopy over the Butchery shopfront. • Replaced carpets in tenant areas and offices. • Poynton building • Replacement of 16 passenger li
Slide 20: Capex Projects: Du Toits Pan, Veritas, Forum
BUSINESS UPDATE 20 BUSINESS UPDATE (cont.) Du Toits Pan • Standby generator installed • Veritas building • Replacement of 2 passenger lifts underway and scheduled for completion before year end. • Replacement of floor finishes with vinyl flooring, 5 off the 7 floors completed • Electrical upgrade co
Slide 21: Geographical Split by Capex
BUSINESS UPDATE 21 BUSINESS UPDATE (cont.) GEOGRAPHICAL SPLIT BY CAPEX LP 8.9% Gauteng - GP Free State - FS Limpopo - LP GP MP NW 36.3% 1.7% KwaZulu Natal - KZN 0.5% Northern Cape - NC North West - NW Mpumalanga - MP KZN FS 38.9% Eastern Cape - EC NC 4.8% Western Cape - WC 6.0% EC 0.1% WC 2.7% RESUL
Slide 22: Servamus Building Fire Damage Repairs
BUSINESS UPDATE 22 SERVAMUS BUILDING | FIRE DAMAGE REPAIRS Before After RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 23: Poynton Building Lift and Fire System Upgrades
BUSINESS UPDATE 23 POYNTON BUILDING LIFT AND FIRE SYSTEM UPGRADES RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 24: Hallmark Building Flooring Upgrades
BUSINESS UPDATE 24 HALLMARK BUILDING | FLOORING UPGRADES Before After RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 25: Strategy & ESG Update
Temo Towers, Polokwane STRATEGY & ESG UPDATE Siyabonga Mbanjwa
Slide 26: Strategy Update
STRATEGY UPDATE 26 RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 27: Portfolio & Capital Structure Optimisation
STRATEGY UPDATE 27 STRATEGY UPDATE Portfolio & Capital Structure Optimisation • Disposals: • 2 properties transferred & 8 properties in process of being transferred. • Negotiations underway for disposal of 5 properties with disposal value of approximately R190 million. • Properties earmarked for dis
Slide 28: Leasing & Business Development
STRATEGY UPDATE 28 STRATEGY UPDATE (CONTINUED) Leasing & Business Development • Capacity created with new leasing manager appointed. • Focus on bids continues. • Appointment of service providers underway to boost non GLA income RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 29: People Centred
STRATEGY UPDATE 29 STRATEGY UPDATE People Centred • Capacity created with senior appointments in Human Resources and Asset Management departments. • Climate survey results receiving attention. • New STI scheme approved by REMCO. RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 30: Operational Efficiency and Rebuild Trust
STRATEGY UPDATE 30 STRATEGY UPDATE (CONTINUED) Operational Efficiency • Various systems in facilities management, finance and property management implemented to improve operational efficiency. • Continuous improvement. Rebuild Trust • Key stakeholder engagements taking place regularly. • Visibility
Slide 31: Commitment to Progressing Our ESG Performance
STRATEGY UPDATE 31 DELTA’S COMMITMENT TO PROGRESSING OUR ESG PERFORMANCE 1. In recent months Delta has initiated a project to align to ESG good practice through: • The appointment of an external service provider to assist us progress our commitments to managing ESG. • Establishing a baseline around
Slide 32: ESG Disclosure Frameworks and Standards
STRATEGY UPDATE 32 DELTA’S COMMITMENT TO PROGRESSING OUR ESG PERFORMANCE CONT. 2. International and domestic ESG and sustainability disclosure frameworks and standards: • Delta will continue to closely monitoring any updates from the IFRS/ISSB Sustainability Standards for progress made on the Exposu
Slide 33: Delta's Draft ESG Framework
STRATEGY UPDATE 33 DELTA’S DRAFT ESG FRAMEWORK 3. Delta’s draft fit-for-purpose ESG framework : • Framework development informed by the JSE’s Sustainability and Climate Disclosure Guidelines, which draws on some of the most notable international sustainability and climate change disclosure framework
Slide 34: Overview of ESG Framework
STRATEGY UPDATE 34 OVERVIEW OF ESG FRAMEWORK • Key partner enabling & supporting GUIDING PRINCIPLES ESG FOCUS THEMES GOOD PRACTICES OPERATIONS AND INVESTMENT APPROACH transformed listed property sector which provides equality of opportunity; Principle 1: ESG VISION • Contributing to a sustainable pr
Slide 35: Financial Review
Hallmark Building, Pretoria FINANCIAL REVIEW Marelise de Lange
Slide 36: Financial Overview
FINANCIAL REVIEW 36 FINANCIAL OVERVIEW Group Aug 2022 Aug 2021 Variance Rental income including recoveries (R’000) 631 747 723 984 (12.7%) Net property income (R’000) 368 513 449 229 (18.0%) Net finance costs (R’000) 202 387 193 874 (4.4%) SA REIT Cost to income ratio* 47.7% 45.1% 5.8% Investment pr
Slide 37: Statement of Financial Position
FINANCIAL REVIEW 37 STATEMENT OF FINANCIAL POSITION Aug 2022 Feb 2022 Variance Group R’000 R’000 ASSETS Non-current assets Investment property 6 572 830 7 101 110 (7.4%) Investment in listed securities 76 279 110 984 (31.3%) Other non-current assets 8 643 10 280 (15.9%) Current assets 298 931 354 51
Slide 38: Statement of Profit or Loss and Other Comprehensive Income
FINANCIAL REVIEW 38 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Aug 2022 Aug 2021 Variance Group R’000 R’000 Revenue Rental income 631 747 723 984 (12.7%) Straight line rental income accrual (11 958) (1 965) (508.5%) 619 789 722 019 (14.2%) Property operating expenses (251 276) (272 7
Slide 39: SA REIT Funds From Operations
FINANCIAL REVIEW 39 SA REIT FUNDS FROM OPERATIONS Aug 2022 Aug 2021 Group R’000 R’000 Loss per IFRS Statement A (306 992) 147 920 Fair value adjustment loss/(gain) to: − Investment property 374 467 - − Debt and equity instrument held at fair value 42 120 37 310 Straight-lining operating lease adjust
Slide 40: SA REIT Funds From Operations Bridge
FINANCIAL REVIEW 40 SA REIT FUNDS FROM OPERATIONS BRIDGE 6.6 4.7 3.9 177.5 (1.2) (3.0) (3.2) (4.0) (4.5) (19.1) 65.7 (92.0) SA REIT FFO Utilities Property R&M Other Tax Dividend Interest Interest Increase in Rent reversion SA REIT FFO - AUG 2021 expenses income expense income provision for AUG 2022
Slide 41: Valuations
FINANCIAL REVIEW 41 VALUATIONS • At every reporting period we assess changes in assumptions that underpin the valuations. • An additional R525 million of assets were moved from Investment property to Non-current assets held-for-sale • We expect non-current assets held-for-sale to be recovered throug
Slide 42: Debt Funding
FINANCIAL REVIEW 42 DEBT FUNDING • Interest-bearing borrowings decreased by 4.0% due to further amortisation of facilities and disposal of Delta House • Investec: Renewed approximately R575 million for 2 years and R135 million for 18 months post period-end • Nedbank and Bank of China syndicated faci
Slide 43: Debt Summary
FINANCIAL REVIEW 43 DEBT SUMMARY Facility type R’m Weighted Ave. Rate Nedbank* 2 787 8.5% Standard Bank 715 8.5% Investec 708 8.8% Bank of China 136 8.2% Total 4 346 8.6% Accrued interest and structuring fees 16 Total borrowings including interest and fees 4 361 Interest rate swap contracts 1 860 7.
Slide 44: LTV Bridge
FINANCIAL REVIEW 44 LTV BRIDGE 0.2% 0.2% 0.3% 2.7% (0.3%) (0.4%) 58.2% 57.8% (2.3%) LTV Revaluation of Revaluation Change in Other CAPEX Disposal of Amortisation LTV Feb 2022 Property of GRIT cash & cash spent Delta House of debt Aug 2022 Portfolio equivalents RESULTS PRESENTATION FOR THE PERIOD END
Slide 45: SA REIT NAV per Share Bridge
FINANCIAL REVIEW 45 SA REIT NAV PER SHARE BRIDGE cents 0.04 0.26 (0.01) (0.06) (0.10) 4.77 (0.10) 4.27 (0.52) SA REIT NAV – Reduction in Other Cash and Cash Investment Working Disposal of Revaluation of NAV per Feb 2022 Debt equivalents in GRIT Capital Delta House Property share- 2022 changes portfo
Slide 46: Conclusion
Auditor General, Polokwane CONCLUSION Siyabonga Mbanjwa
Slide 47: Conclusion
CONCLUSION 47 CONCLUSION • Geopolitical and macro-economic headwinds remain a challenge. • Delta’s strategic plan is sound and will enable Delta to navigate the tricky terrain ahead. • Implementation of the strategic plan is well underway and gaining momentum. • Optimising Delta’s capital structure
Slide 48: Thank You and Questions
Mayor’s Walk, Pietermaritsburg THANK YOU AND QUESTIONS
Slide 49: Annexures: Showcase Properties and Leasing Outlook
01 04 Showcase Properties Geographical split 02 05 By province and major tenant Leasing Outlook 03 06 Lease expiry profile Portfolio Breakdown Hallmark Building, Pretoria RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 50: Showcase Properties
ANNEXURES 50 SHOWCASE PROPERTIES POYNTON HALLMARK HENSA PHAMOKO BUILDING TOWERS TOWERS Location Pretoria Location Pretoria Location Limpopo Location Limpopo Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign GLA 73 396 m2 GLA 26 255 m2 GLA 13 675
Slide 51: Showcase Properties continued
ANNEXURES 51 SHOWCASE PROPERTIES continued EMBASSY DELTA LIBERTY NPA BUILDING TOWERS TOWERS BUILDING Location KwaZulu-Natal Location KwaZulu-Natal Location KwaZulu-Natal Location Cape Town Sector Office - Sovereign Sector Office – Other Sector Office – Other Sector Office - Sovereign GLA 32 723 m2 G
Slide 52: Lease Expiry Profile August 2022
ANNEXURES 52 LEASE EXPIRY PROFILE 31 AUGUST 2022 TOTAL PORTFOLIO - BY GLA TOTAL PORTFOLIO- BY GLA 40% 35% 34% 30% 27% 25% 20% 15% 12% 10% 10% 8% 6% 5% 3% 0% Vacant MTM 2023 2024 2025 2026 2027 RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 53: Geographic Split (City/Town)
ANNEXURES 53 GEOGRAPHIC SPLIT (CITY/TOWN) 29.9% 27.2% 10.8% 9.0% 5.0% 4.2% 4.0% 3.5% 3.3% 1.5% 0.6% 0.4% 0.2% 0.2% 0.2% Durban Nelspruit Pretoria Potchefstroom Johannesburg Cape Town Port Elizabeth Kimberley Springs Welkom Polokwane King Williams Klerksdorp Bloemfontein Pietermaritzburg Town Contine
Slide 54: Leasing Update
ANNEXURES 54 LEASING UPDATE Lease renewals concluded • For the financial year ended 28 February 2022, lease renewals were concluded for a total GLA of 70 548m² • The notable renewals during the reporting period were: Building GLA (m²) Term - months 110 Hamilton 4 511 12 Sleepy Hollow 4 349 60 Commis
Slide 55: Leasing Update continued
ANNEXURES 55 LEASING UPDATE continued New leases concluded • 6 546m2 in new leases were concluded • The notable new leases concluded during the reporting period were: Building GLA (m²) Term - months The Marine 1 233 36 Delta House* 1 257 114 Sediba Fountains 766 36 *Delta House was transferred on 13
Slide 56: Portfolio Breakdown
ANNEXURES 56 PORTFOLIO BREAKDOWN Office - Sovereign Office - Other Industrial Retail Total Number of properties 78 15 2 3 98 Gross lettable area (m2) 672 340 183 768 13 267 23 716 893 091 Vacancies (%) 53.4 41.1 3.7 1.8 33.9 Value (R billions) 5.5 1.7 0.1 0.2 7.5 Weighted average rental (R/m2) 135 9
Slide 57: Notes
ANNEXURES 57 NOTES RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 58: Notes
ANNEXURES 58 NOTES RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022
Slide 59: Results Presentation for the Period Ended 31 August 2022
RESULTS PRESENTATION FOR THE PERIOD ENDED 31 AUGUST 2022 Block G, Pretoria www.deltafund.co.za