Delta Property Fund Limited · JSE:DLT
Delta Property Fund — H1 2017 Earnings Presentation
63 slides from Delta Property Fund's earnings presentation, Oct 25, 2016
Slide 1: Interim Results Presentation for the six months ended 31 August 2016
INTERIM RESULTS PRESENTATION for the six months ended 31 August 2016
Slide 2: Introduction & Highlights
NPA Cape Town INTRODUCTION & HIGHLIGHTS SANDILE NOMVETE
Slide 3: Introduction to Delta
INTRODUCTION TO DELTA •Sovereign Dsds underpinned JSE listed › asdasdas REIT Industry leading level 2 Market capitalisation# of 76.3% B-BBEE R5.3bn of revenue from empowered property fund up from R3.5bn at 29 Feb 2016 sovereign tenants Assets under management of Dominant in Average property value of
Slide 4: Highlights Since Listing
HIGHLIGHTS SINCE LISTING Investment Portfolio Growth Rands (bn) 13 12 Feb-14: Surpasses pre-listing target 11 of a R7 billion asset portfolio. REIT 10 Status approved 9 Jul-13: Launches R2 billion Domestic Medium Term Aug-16: Balance sheet 8 Note Programme strengthened, gearing 7 reduced to 41%. Por
Slide 5: Corporate Highlights of Past Months
CORPORATE HIGHLIGHTS OF PAST 6 MONTHS Distribution growth of Like-for-like net property income Gearing reduced to growth of 7.1% 41.0% 5.2% Fifth consecutive period of growth (Feb 2016: 47.2%) in half-year distribution in a challenging environment Vacancies largely unchanged at Reaffirmed GCR Proper
Slide 6: Snapshot
SNAPSHOT Listing date: 02 November 2012 JSE classification: Real Estate Holdings & Development Asset manager: Delta Property Asset Management (Pty) Ltd JSE code: DLT Asset management fee: 0.35% of enterprise value 31 August 2016 31 August 2015 29 February 2016 Shares in issue 710,632,183 542,316,733
Slide 7: Financial Review
Delta Towers, Durban FINANCIAL REVIEW SHANEEL MAHARAJ
Slide 8: Financial Highlights of Past Months
FINANCIAL HIGHLIGHTS OF PAST 6 MONTHS • Dsds › Gearing asdasdasreduced to Successfully refinanced or settled Interest cover ratio maintained 41.0% R832m 2.38 (Feb 2016: 47.2%) of debt (Feb 2016: 2.38, Aug 2015: 2.16) Property operating margin Net cost to income ratio Fixed debt of maintained at 8 10
Slide 9: Financial Review
FINANCIAL REVIEW 31 Aug 2016 31 Aug 2015 29 Feb 2016 Revenue (R’000) 757,292 587,160 1,247,582 Net property income (R’000) 550,585 429,142 925,531 Finance costs (R’000) (228,638) (194,701) (412,713) Cost to income ratio (net / gross) 10.2% / 27.2% 11.4% / 27.3% 12.2% / 26.4% Investment property (R’0
Slide 10: Distributable Income Statement
DISTRIBUTABLE INCOME STATEMENT Change % R’000 H1 Aug 16 H1 Aug 15 FY2016 (H1’16 vs H1’15) Net property income (excl. straight line accrual) 550,526 420,484 898,581 30.9% Administration expenses (41,330) (36,366) (82,744) 13.7% Realised foreign exchange loss 112 0 (39) - Net finance costs (215,055) (
Slide 11: Growth in Distributions
GROWTH IN DISTRIBUTIONS Historic distribution per share Cents / share 7 - 7.5% 100.00 8.0% 15.6% 90.79 80.00 84.06 72.69 H2 60.00 8.7% 9.6% 7.1% 7.2% 23.1% 47.90 45.93 45.93 40.00 44.05 42.89 40.18 40.01 H1 32.51 11 20.00 23.69 - FY2013 H1 Aug-13 H2 Feb-14 FY2014 H1 Aug-14 H2 Feb-15 FY2015 H1 Aug-15
Slide 12: Distributable Earnings Bridge
DISTRIBUTABLE EARNINGS BRIDGE R’000 380,000 4,794 (9,010) 95,625 360,000 (34,286) 340,000 (4,964) 320,000 (6,065) 313,119 300,000 280,000 34,417 260,000 240,000 12 232,608 220,000 200,000 H1 Aug 2015 Existing Acquisitions Dividends Antecedent Net finance Admin costs Other income H1 Aug 2016 portfoli
Slide 13: Like-for-Like Net Property Income Analysis
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS Description Amount (R) % Net Property Income (NPI) Aug 2015 420,484,000 Increased NPI from base portfolio held at 31 Aug 2015 34,417,000 8.2% NPI attributable to acquisitions post 31 Aug 2015 95,625,000 22.7% NPI Aug 2016 550,526,000 30.9% 13 Increased NPI
Slide 14: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Change % R’000 31 Aug 2016 31 Aug 2015 29 Feb 2016 (Aug’16 vs Feb’16) Assets Non-Current assets 10,567,801 9,227,782 9,085,759 16.3% Investment property 10,155,844 8,816,434 8,684,700 16.9% Fair value of property portfolio 9,969,666 8,633,026 8,500,183 17.3% Straight
Slide 15: NAV Bridge
NAV BRIDGE Rands 13.00 0.03 (2.65) 0.40 0.04 12.50 1.80 12.00 11.50 11.00 10.61 10.50 (0.36) 15 10.00 (0.01) 9.86 9.50 29 Feb 2016 Assets acquired Remaining Revaluation of Contribution of Issue of shares Dividend paid Disposals 31 Aug 2016 through impact from financial associate for acquisitions acq
Slide 16: Debt Summary
DEBT SUMMARY As at 31 August 2016 Facility Type R’ m Weighted Ave. Rate Weighted Ave. Term Floating bank facilities 2,913 9.0% 2.1 Fixed bank facilities 796 8.9% 1.7 Revolving bank facilities 640 9.4% 3.9 Total bank facilities 4,349 9.1% 2.3 DMTN programme - floating 587 9.0% 0.5 Vendor loans 15 9.5
Slide 17: Graphical Debt Analysis
GRAPHICAL DEBT ANALYSIS Sources of Debt Debt Classification 3.5% 0.3% 9.3% 2.5% 11.9% 0.3% 12.9% 16.1% 84.3% 58.9% Total: R4,951m Total: R4,951m ZAR Banking Facilities (R4,174m) DMTN Programme (R587m) Floating Bank Facilities (R2,913m) Fixed Bank Facilities (R796m) USD Banking Facilities (R175m) Ven
Slide 18: Debt Expiry Profile
DEBT EXPIRY PROFILE R mil 1,200 1,000 800 600 400 200 - 18 28-Feb-17 28-Feb-18 28-Feb-19 29-Feb-20 28-Feb-21 28-Feb-22 DMTN Programme Fixed Bank Facilities Floating Bank Facilities Revolving Bank Facilities Vendor Loans Swap Contracts
Slide 19: Debt Commentary
DEBT COMMENTARY • Cost of debt significantly increased across the industry in last 12 months • Liquidity in Debt Capital Markets has reduced for smaller funds such as Delta, and sentiment towards government has exacerbated this constraint • Nonetheless, Delta has › Successfully refinanced or settled
Slide 20: Portfolio Review
SARS Randburg PORTFOLIO REVIEW OTIS TSHABALALA
Slide 21: Portfolio Breakdown
PORTFOLIO BREAKDOWN Office - Office - Industrial Retail Total Sovereign * Other Number of properties 86 23 3 3 115 Gross lettable area (m2) 725,984 213,787 39,541 23,716 1,003,028 Vacancy (%) 7.3% 12.6% 28.8% 3.4% 9.2% Value R8.55bn R2.22bn R0.18bn R0.26bn R11.36bn Average rental (R/m2) 110.05 87.30
Slide 22: Sectoral Split
SECTORAL SPLIT GLA - by building GLA - by tenant * Office - Sovereign (71.1%) Office - Sovereign (72.4%) Office - Other (19.0%) Office - Other (21.3%) Industrial (2.4%) Retail (6.8%) Retail (3.9%) Industrial (3.1%) Rental - by building Rental - by tenant Office - Sovereign (79.2%) Office - Sovereign
Slide 23: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN Tenant Profile by GLA Tenant Profile by Rental 3.1% 1.5% 6.8% 6.9% 15.4% 40.4% 39.94% 19.0% 4.53% 4.2% 71.1% 11.73% 76.2% 11.8% 23 14.7% 20.11% Office - Sovereign Office - Other National Government Provincial Government Retail Industrial Local Government State-Owned Enterpr
Slide 24: Update on Sovereign Tenants
UPDATE ON SOVEREIGN TENANTS • 2nd dispensation (3 year terms, 5.5% escalations) ends in March 2017 • DPW in conjunction with National Treasury have gone on roadshows during October 2016 to communicate the new leasing framework going forward • Highlights of framework at this stage: › Occupy appropria
Slide 25: Update on Sovereign Tenants
UPDATE ON SOVEREIGN TENANTS • What this means for Delta: • Ongoing improved and effective communication • Providing long term leases for empowered landlords on a sliding scale › Indicatively, a 100% empowered company (incl. Mancos) = 9 year 11 month lease, 50% empowered = 5 year lease › Delta would
Slide 26: Leasing
LEASING Total leases concluded 1 March 2016 - 31 August 2016 No of Total Area W.A. Expiry W.A. Achieved W.A. Esc. Reversion Leases (m2) Rate (R / m2) * Rate (R / m2) * achieved Renewed leases (expiring FY Feb2017) 69 48,866 118.59 108.15 (8.8%) 7.3% Renewed leases (expiring FY Feb2018) 8 10,949 85.8
Slide 27: Leasing - Outlook
LEASING - OUTLOOK Anticipated sovereign renewals - leases on month-to-month or expiring by 28 February 2017 W.A. Proposed W.A. Expiry Sector No of Leases Total Area Reversion Rate / m2 * Rate / m2 * leases on month-to-month or expiring by 28 February 2017 National government 22 116,114 103.88 98.78
Slide 28: Lease Expiry Profile at 31 August 2016
LEASE EXPIRY PROFILE AT 31 AUGUST 2016 Total portfolio - by GLA Total portfolio - by rental 28 Vacant (9.2%) Month-to-month (16.7%) Month-to-month (18.1%) 28 Feb 17 (12.6%) 28 Feb 17 (11.5%) 28 Feb 18 (23.6%) 28 Feb 18 (23.1%) 28 Feb 19 (15.9%) 28 Feb 19 (12.0%) 29 Feb 20 (8.1%) 29 Feb 20 (9.7%) 28
Slide 29: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - by building Rental - by building Gauteng (43.3%) Gauteng (43.8%) Kwazulu-Natal (29.2%) Kwazulu-Natal (23.9%) Free State (8.5%) Limpopo (9.0%) Limpopo (4.5%) Free State (7.2%) Western Cape (4.2%) Western Cape (4.9%) Northern Cape (4.0%) Northern Cape (4.4%) Mpumalan
Slide 30: Government Precinct - Pretoria
GOVERNMENT PRECINCT - PRETORIA 30
Slide 31: Nodal Analysis - Pretoria
NODAL ANALYSIS - PRETORIA 31 1 – 9: Delta owned properties 10: ABSA Towers 11: Momentum building 12: Treasury 13: Telkom Towers 14: CGI Building (DPW Head Office) 15: AVN Building (DPW occupied) 16: State Theatre 17: Sammy Marks Shopping Centre 18: Intended new municipal HQ
Slide 32: Nodal Analysis - Durban
NODAL ANALYSIS - DURBAN 32 1 – 14: Delta owned properties 15: Durban International Convention Centre 16: Durban City Hall 17: Workshop Mall (Old Railway Workshop) 18: Durban Marina 19: SAHARA Park Kingsmead 20: South Beach 21: Redefine Towers 22: Commercial City Building 23: Durban Bay House
Slide 33: Nodal Analysis - Bloemfontein
NODAL ANALYSIS - BLOEMFONTEIN 33 1 – 13: Delta owned properties 14: Hoffman Square 15: Sand du Plessis Theatre 16: Waterfront Mall 17: Loch Logan 18: Appeal Court 19: “Fourth” Raadsaal 20: Bloemfontein City Hall 21: CR Swart Building 22: Lebohang Building 23: Bram Fisher Building 24: Liberty Life Bu
Slide 34: Acquisitions
ACQUISITIONS • Strategy is to continue to (opportunistically) focus on › Significant assets (> R100m) › Underpinned by (or have potential for) long term sovereign leases › Located in nodes attractive to sovereign tenants • Past 6 months: › Transferred 17 assets 34 › Aggregate purchase price of R1.34
Slide 35: Acquisitions - Redefine Portfolio Update
ACQUISITIONS - REDEFINE PORTFOLIO UPDATE • Rationale: › Yield accretive at 13.3% › Enhanced presence in nodes of Jhb, Pta, Dbn where Delta has existing exposure and representation › Provided opportunity to decrease LTV through 100% share issuance › Delta best placed to extract value from a sovereign
Slide 36: Disposal of Non-Core Assets
DISPOSAL OF NON-CORE ASSETS • Rationale: › Recycling of capital from non-core or non-performing assets to reduce gearing, fund CAPEX, create liquidity for future acquisitions • Past 6 months: › Transferred Tembisa Megamart – R206m, 9% yield, transfer date 25 Aug 2016 › 10 assets subject to signed sa
Slide 37: CAPEX
CMH Durban CAPEX OTIS TSHABALALA
Slide 38: Redevelopment Strategy
REDEVELOPMENT STRATEGY • Delta to deploy CAPEX into portfolio › Enhancing earnings and value uplift › Securing long term stable returns › Provide competitive offering and excellent accommodation to tenants • Identify assets where greatest value can be added, through value enhancing developments, ren
Slide 39: CAPEX - Existing Portfolio
CAPEX - EXISTING PORTFOLIO Property Commission Embassy Isivuno 88 Field Beacon Hill Pine Parkade Shell House House Building House Approved 89,400,000 28,250,000 21,843,000 40,000,000 40,800,000* 77,000,000* 43,800,000* budget Spent in FY2016 39,728,783 11,118,424 7,982,801 - - - - Spent in H1 2017 3
Slide 40: Conclusion
Hensa Towers, Polokwane CONCLUSION SANDILE NOMVETE
Slide 41: Mara Delta
MARA DELTA • Shareholding 23.9% at 31 August 2016 › valued at R459m1 at Aug 2016 › R18.8m included in H1 2016 distribution from Jan - Jun 2016 dividend • Delta in process of migrating its Mara Delta holding to SEM › Shares trading on JSE @ R19.25, and on SEM @ $1.74 as at 31 Aug 2016 › Value would b
Slide 42: Conclusion
CONCLUSION Executive & senior management changes Completed • CFO: Shaneel Maharaj appointed Dec 2015 • COO: Otis Tshabalala promoted from Head of Investments June 2016 • Head of Capital Projects: Andries Schoeman appointed Dec 2015 • Operations: Sandra Mqina now Head of Operations • Enriched non-exe
Slide 43: Conclusion
CONCLUSION Sovereign leasing Progress made, ongoing task • Difficult environment, HOWEVER most leasing ever concluded in a 6 month period • Significant work done to educate market on sovereign tenants’ leasing policies, renewals expected to pick-up after policy announcement in April 2017 • Delta rem
Slide 44: Thank You
142 - 144 4th Street Parkmore Q&A THANK YOU
Slide 45: Annexures
Embassy Building, Durban ANNEXURES
Slide 46: Annexures
ANNEXURES › Board of directors › Shareholder profile › Acquisitions › Disposals › Top 10 properties by value › GLA and vacancy reconciliation › Income and expense components › Property operating expenses breakdown › Profitability metrics 46 › Detailed lease expiry tables and graphs
Slide 47: Executive Management
EXECUTIVE MANAGEMENT Executive Directors Sandile Nomvete Shaneel Maharaj Otis Tshabalala Chief Financial Officer Chief Executive Officer Chief Operating Officer BCom (Acc) (Hons) (Univ. of Exec Dep. & Prop Dev. Prop Dev. Prog, CCPP Natal), CA(SA), HDipTax Prog. (Wits & UCT Business Schools) Appointe
Slide 48: Board of Directors - Continued
BOARD OF DIRECTORS - CONTINUED Non-Executive directors JB Magwaza Nooraya Khan Ian Macleod Dumo Motua Independent Lead Independent Independent Independent Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Committees: NRC*, SETC Committees: IC, ARC*, NRC Comm
Slide 49: Shareholder Profile
SHAREHOLDER PROFILE As at Aug 2016 Units held Holding Redefine Properties 162 043 079 22.80% Coronation Fund Managers 76 283 121 10.73% Stanlib Asset Management 60 639 223 8.53% Grindrod Asset Management 57 593 038 8.10% Public Investment Corporation 52 541 118 7.39% Sanlam Investment Management 49
Slide 50: Acquisitions - Detail
ACQUISITIONS - DETAIL Rent/ Purchase Property name Location Sector GLA m2 Tenancy Vacancy m2 Price 2 Devonshire Place Durban Office - Sovereign 8,123 Single 76.39 0.61% 39,000,000 17 Harrison Street & Kay St Parking Johannesburg Office - Sovereign 12,379m2 & 61 bays Single 96.82 0.96% 87,600,000 Com
Slide 51: Disposal of Non-Core Assets
DISPOSAL OF NON-CORE ASSETS Property Sector Location GLA Sales price (R) Transfer Date Transferred 14,025 206,000,000 22 Aug 2016 Tembisa Retail Midrand 14,025 206,000,000 Sale agreements concluded 67,883 578,100,000* Block G Office - Sovereign Pretoria CBD 7,992 225,800,000 End Nov 2016 Presidia Of
Slide 52: Top 10 Properties (by Value)
TOP 10 PROPERTIES (BY VALUE) Forum Building Hallmark Building Liberty Towers Delta Towers Location Pretoria Location Pretoria Location Durban Location Durban Office - Office - Office - Office - Sector Sector Sector Sector Sovereign Sovereign Other Other 52 GLA 41,003 m2 GLA 26,255 m2 GLA 40,095 m2 G
Slide 53: Top 10 Properties - Continued
TOP 10 PROPERTIES - CONTINUED Poyntons Hensa Towers Embassy Building The Marine Location Pretoria Location Polokwane Location Durban Location Durban Office - Office - Office - Office - Sector Sector Sector Sector Sovereign Sovereign Sovereign Other 53 GLA 73 396m2 GLA 13,675 m2 GLA 32,781 m2 GLA 24,
Slide 54: Top 10 Properties - Continued
TOP 10 PROPERTIES - CONTINUED Delta Heights Phomoko Towers Location Pretoria Location Polokwane Office - Office - Sector Sector 54 Sovereign Sovereign GLA 19,122 m2 GLA 13,058 m2 Vacancy 1.8% Vacancy Nil Valuation R275 mil Valuation R262mil
Slide 55: GLA and Vacancy Reconciliation
GLA AND VACANCY RECONCILIATION Properties Total GLA Vacant GLA Vacancy (No.) (m2) (m2) (%) As at 29 February 2016 100 813,505 73,016 8.98% Disposals (1) (14,025) (1,065) Acquisitions 17 199,355 12,653 6.85% Leases terminated - - 16,238 New letting of vacant space - - (10,860) Adjustments - CMH Build
Slide 56: Income and Expense Components
INCOME AND EXPENSE COMPONENTS Income Expense 56 Contractual rental income - R757.2m Property operating expenses - R206.7m Administrative expenses - R41.3m Foreign exchange profit- R18.4m Finance costs - R228.6m Interest income - R 13.6m Share of loss in associate - R23.7m
Slide 57: Property Operating Expenses
PROPERTY OPERATING EXPENSES 25,453 (R'000s) 14,454 6,098 Municipal expenses (68.9%) 5,161 Service contracts (12.3%) Property management and letting fees (7.0%) 4,235 Repairs and maintenance (3.0%) 3,781 Rental paid (2.5%) 3,258 953 Onsite staff costs (2.0%) 957 Other expenses (1.8%) 57 Insurance (1.
Slide 58: Profitability Metrics
PROFITABILITY METRICS Profitability per sector Municipal recoveries 90% 85% 86% 120% 80% 105% 80% 75% 76% 100% 70% 90% 86% 81% 60% 80% 50% 40% 40% 60% 40% 36% 49% 30% 27% 40% 25% 20% 18% 20% 17% 10% 20% 9% 11% 10% 0% 0% 58 Office - Office - Retail Industrial Total Sovereign Other Rates Electricity C
Slide 59: Lease Expiry by GLA and Rental Tabular Representation
LEASE EXPIRY BY GLA AND RENTAL TABULAR REPRESENTATION Expiry Period GLA (m2) % Cumulative % Rental (%) Cumulative % Vacant 91,942 9.2% 9.2% - - Month to Month 167,339 16.7% 25.9% 18.1% 18.08% 28-Feb-17 115,447 11.5% 37.4% 12.7% 30.8% 28-Feb-18 236,823 23.6% 61.0% 23.1% 53.9% 28-Feb-19 120,106 12.0%
Slide 60: Lease Expiry by GLA Sectoral Tabular Representation
LEASE EXPIRY BY GLA SECTORAL TABULAR REPRESENTATION Month to Beyond 28 Sector 28 Feb 17 28 Feb 18 28 Feb 19 29 Feb 20 28 Feb 21 TOTAL Month Feb 2021 National Government 79,729 36,385 145,343 11,521 16,194 55,610 22,885 367,667 Provincial Government 43,439 24,471 297 30,434 5,754 8,865 21,043 134,303
Slide 61: Lease Expiry Profile by GLA Graphical Representation
LEASE EXPIRY PROFILE BY GLA GRAPHICAL REPRESENTATION 16,499 10,803 16,980 2,751 9,281 48,170 144,978 Total Portfolio Sectoral Breakdown (Inner ring) (Outer ring) 75,472 Month to month (18.4%) 85,146 167,338 Office - sovereign 19,583 114,158 2,777 (647,593) 28-Feb-17 (12.7%) 10,942 23,975 88,987 Offi
Slide 62: Lease Expiry Profile by Tenant Sector
LEASE EXPIRY PROFILE BY TENANT SECTOR GLA - Office Sovereign Rental - Office Sovereign Month to Month (22.4%) Month to Month (21.4%) 28 Feb 17 (13.7%) 28 Feb 17 (13.0%) 28 Feb 18 (27.3%) 28 Feb 18 (23.5%) 28 Feb 19 (8.7%) 28 Feb 19 (12.8%) 29 Feb 20 (7.2%) 29 Feb 20 (7.3%) 28 Feb 21 (13.2%) 28 Feb 2
Slide 63: Lease Expiry Profile by Tenant Sector
LEASE EXPIRY PROFILE BY TENANT SECTOR GLA - Retail Rental - Retail Month to Month (4.5%) Month to Month (4.9%) 28 Feb 17 (12.1%) 28 Feb 17 (13.2%) 28 Feb 18 (19.8%) 28 Feb 18 (20.7%) 28 Feb 19 (14.8%) 28 Feb 19 (18.7%) 29 Feb 20 (17.7%) 29 Feb 20 (20.8%) 28 Feb 21 (4.4%) 28 Feb 21 (5.5%) Beyond 28 F