Delta Property Fund Limited · JSE:DLT
Delta Property Fund — H1 2019 Earnings Presentation
49 slides from Delta Property Fund's earnings presentation, October 2018
Slide 1: Results Presentation for the six months ended 31 August 2018
PROPERTY FUND RESULTS PRESENTATION for the six months ended 31 August 2018
Slide 2: Agenda
88 Field Street, Durban AGENDA 01 Introduction, Updates & Performance 02 Financial Review 03 Portfolio Review 04 Conclusion 05 Questions & Answers 06 Annexures Notes:
Slide 3: Introduction, Updates and Performance
INTRODUCTION, UPDATES AND PERFORMANCE Sandile Nomvete Liberty Towers, Durban NOTES:
Slide 4: Introduction to Delta
INTRODUCTION TO DELTA Sovereign underpinned Most empowered fund Market JSE listed REIT capitalisation of Level 2 79.0% B-BBEE R4.4bn of revenue from rating on new sovereign tenants sector codes as at 31 August 2018 Dominant in Average property Assets under value of management of Pretoria & Durban CB
Slide 5: Update on Delta
UPDATE ON DELTA Leasing Update Bulk lease negotiations continue with renewals expected before December 2018 41.5% of bulk negotiation at stage 3 Increased vacancies due to ongoing challenges with the Free State Portfolio Interim review Total exposure to sovereign leases: 79.0% (Aug 2017: 75.
Slide 6: Interim Performance 2019
INTERIM PERFORMANCE 2019 Half-year distribution of Distributable earnings of Debtors days at 39.40 R281.2 31.6 days cents per share million Vacancy at Renewed Concluded 13.3% 52 422m2 9 613m² SAPOA: 11.1% of existing leases of new leases RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2018 6
Slide 7: Financial Review
FINANCIAL REVIEW Shaneel Maharaj Delta Towers, Durban NOTES:
Slide 8: Financial Performance Interim 2019
FINANCIAL PERFORMANCE INTERIM 2019 Loan to value of Facilities refinanced Fixed debt of temporarily 43.0% R1 366m 81.9% (Feb 2018: 41.3%) (Feb 2018: R941m) (Feb 2018: 85.4%) Debtors days at Property operating Interest cover ratio margin at 31.6 days 68.0% 2.2 (Feb 2018: 18.0 days) (Feb 2018: 73.5%)
Slide 9: Financial Review
FINANCIAL REVIEW 31 August 2018 31 August 2017 28 February 2018 Revenue (R’000) 794 506 782 341 1 564 053 Net property income (R’000) 525 560 576 376 1 149 885 Finance costs (R’000) 248 604 235 967 482 179 Cost to income ratio - gross method 17.9% 11.0% 26.5% Cost to income ratio - net method 32.0%
Slide 10: Distributable Income Statement - Non IFRS
DISTRIBUTABLE INCOME STATEMENT- NON IFRS 31 August 2018 31 August 2017 28 February 2018 Net property income 525 560 576 376 1 149 885 Straight-line rental income accrual 14 863 699 (2 020) Administration expenses (46 672) (45 949) (53 329) Realised foreign exchange gain/(loss) 51 (259) - Net finance
Slide 11: Trend in Distributions
TREND IN DISTRIBUTIONS HISTORIC DISTRIBUTION PER SHARE (CENTS/SHARE) 7.1% 0% H1 – Interim 8.0% 15.6% H2 – Final 97.2 97.2 Total – Full year 90.8 84.1 72.7 7.1% (1.0)% 8.7% 7.1% 1.0% 9.6% 7.2% (15.1)% 23.1% 51.3 50.8 47.9 45.9 46.4 44.1 42.9 40.2 40.0 39.4 32.5 23.7 FY2013 H1 Aug- H2 Feb- FY2014 H1 A
Slide 12: Distributable Earnings Bridge
DISTRIBUTABLE EARNINGS BRIDGE R’000 360 000 1,084 476 310 (723) (3,378) 3,158 340 000 329,724 (11,006) (11,392) 320 000 (12,778) (14,254) 300 000 281,222 280 000 260 000 240 000 220 000 200 000 H1 Aug 2017 Dividends Other income Antecedent Realised Admin cost Prior year Disposals Existing Net financ
Slide 13: Like-for-Like Net Property Income Analysis
LIKE-FOR-LIKE NET PROPERTY INCOME (NPI) ANALYSIS Amount Description % (R’000) NPI Aug 2017 (excl. straight line rental income accrual) 577 075 Increased NPI from base portfolio held at 31 Aug 2017 # (25 646) (4.4)% NPI from disposals in FY17 (11 006) (1.9)% NPI Aug 2018 (excl. straight line rental i
Slide 14: Summarised Statement of Financial Position
SUMMARISED STATEMENT OF FINANCIAL POSITION Change % R’000 31 August 2018 31 August 2017 28 February 2018 Aug ‘18 v Feb ‘18) ASSETS Non-Current assets 11 016 677 10 525 979 10 919 425 0.9% Investment property 10 561 140 10 124 585 10 535 000 0.2% Fair value of property portfolio 10 383 457 9 934 190
Slide 15: Net Asset Value Bridge
NET ASSET VALUE BRIDGE RANDS 10.50 0.02 0.03 0.04 0.10 10.06 10.00 0.19 9.93 (0.52) 9.50 28 Feb 2018 Contribution from Fair value Fair value of Related parties and Dividend income Dividend paid 31 Aug 2018 operations adjustment to financial vendor loans from Grit investment in GRIT instruments & for
Slide 16: Debt Summary
DEBT SUMMARY As at 31 August 2018 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 3 673 9.1% Fixed bank facilities 796 8.9% Revolving bank facilities 629 8.9% Total borrowings, net of accrued interest 5 098 9.0% Accrued interest 37 - Debt structuring fees (13) - TOTAL 5 122 Total fixe
Slide 17: Graphical Debt Analysis
GRAPHICAL DEBT ANALYSIS SOURCE OF DEBT TOTAL: R5 098M DEBT CLASSIFICATION TOTAL: R5 098M 3.1% 12.4% Floating Bank Facilities (R3 673m) ZAR Bank Facilities (R4 940m) 15.6% Fixed Bank Facilities (R796m) USD Bank Facilities (R 158m) Revolving Bank Facilities (R629m) 96.9% 72.0% FINANCIER SPLIT TOTAL: R
Slide 18: Debt Expiry Profile
DEBT EXPIRY PROFILE Debt Expiry Profile 2000 1800 1600 1400 1200 Rand (million) 1000 800 600 400 200 0 43466 28-Feb-19 43831 28-Feb-20 44197 28-Feb-21 44562 28-Feb-22 Fixed Bank Facilities Floating Bank Facilities Revolving / Liquidity Bank Facilities Swap Contracts RESULTS PRESENTATION FOR THE SIX
Slide 19: Debt Expiry Profile
DEBT EXPIRY PROFILE As at 31 August 2018 Financier Type Expiry R’ m FY2019 EXPIRY Nedbank 2 &5 year term facility 1 Sep 2018 730 Investec 3 month term facility 7 Sep 2018 100 Nedbank 5 year term facility 23 Sep 2018 100 Standard Bank 3 year revolver facility 30 Oct 2018 140 Nedbank 2 & 4 year term f
Slide 20: Debt Commentary
DEBT COMMENTARY The weighted average all-in cost of funding is 9.3% (Aug 2017: 9.2%) 81.9% (Aug 2017: 82.3%) of borrowings fixed for an average period of 1.1 years (Aug 2017: 1.8 years). The average debt facility expiry period is 1.1 years (Aug 2017: 1.6 years) Interest cover ratio at 2.2 (A
Slide 21: Portfolio Review
PORTFOLIO REVIEW Otis Tshabalala Embassy Building, Durban NOTES:
Slide 22: Operations Highlights Interim 2019
OPERATIONS HIGHLIGHTS INTERIM 2019 A distinct focus on sovereign Rental income attributed to Total lease renewals in a tenants sovereign tenants challenging environment 73.0% 79.0% 52 422m² being sovereign tenants (by GLA) Vacancies of Total new leases concluded (GLA) 13.3% 9 613m² 227 550m² Bulk le
Slide 23: A Strategy Designed to Maximise Secure and Stable Income
A STRATEGY DESIGNED TO MAXIMISE ON SECURE AND STABLE INCOME BUILDINGS REPRESENTED BY PROVINCE REPRESENTATIVE TENANTS No of GLA Buildings (m2) Gauteng 36 404 748 KwaZulu-Natal 17 278 313 Free State 17 85 980 Mpumalanga 11 30 252 Limpopo 7 44 885 Northern Cape 7 37 275 Limpopo Western Cape 5 41 889 Ea
Slide 24: Government Precinct | Pretoria
GOVERNMENT PRECINCT | PRETORIA RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2018 24 Notes:
Slide 25: Portfolio Breakdown
PORTFOLIO BREAKDOWN Office - Office - Other Industrial Retail Total Sovereign 1 Number of properties 77 21 4 3 105 Gross lettable area (m2) 628,755 260,109 40,258 23,716 952,839 Vacancy (%) 7.9% 26.0% 19.0% 5.1% 13.3% Value R8.2bn R2.8bn R0.2bn R0.3bn R11.5bn Average rental (R/m2) 2 125.03 85.8 55.2
Slide 26: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN TENANT PROFILE BY GLA TENANT PROFILE BY RENTAL 1.9% 7.0%1.9% 3.9% 7.0% Office - Sovereign National Government 12.1% 6.8% 12.1% 38.6% 39.1% Office - Other 16.3% Provincial Government 7.2% Retail Local Government 6.7% 73.0% 12.2% Industrial State-Owned 79.0% Enterprise 12.2%
Slide 27: Update on Sovereign Tenants
UPDATE ON SOVEREIGN TENANTS DPW oversees all National Government’s accommodation needs DPW has focused on • decreasing the amount of space per government employee • consolidating departments in under utilised buildings The Presidency and Ministry of Finance are considering • consolidating depa
Slide 28: DPW Leasing Update
DPW LEASING UPDATE Stage 1 Initial Negotiation with • Landlord • National Bid Adjudication Leasing Committee (NBALC) ▪ DPW o Valuers o Supply Chain Management ▪ Treasury 59 Leases totalling 227 550m2 have been finalised. Stage 2 NBALC & User Departments • Pricing • Maintenance plan • BEE score
Slide 29: Leasing Update
LEASING UPDATE Mostly 3 year leases resulting from past treasury dispensations DPW and treasury now focusing on longer term leases, 9 years 11 months. Major leases concluded A total of 95 leases were renewed measuring 52,422m2 for the value of R145 million. The most notable renewals are : Buil
Slide 30: Leasing Update cont.
LEASING UPDATE cont…. A total of 42 new leases were concluded measuring 9 613m2 for value of R 54million. Our most notable new leases are : Building Tenant GLA Escalation Term Liberty Towers Mr Price 3 833 m² 6.5% 109 months 25 months 5 Walnut Merchants SA 1 524 m² 7.0% TOTAL 5 357 m² Tenant Reten
Slide 31: Growth / Reversion
GROWTH / REVERSION Total leases concluded 1 March 2018 – 31 August 2018 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 # 49 52 422 24.77 108.75 111.80 2.80% 7.34% Renewals by Sector W.A.
Slide 32: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - BY BUILDING RENTAL - BY BUILDING Gauteng (42.5%) Gauteng (45.3%) Kwazulu-Natal (29.2%) Kwazulu-Natal (23.6%) Free State (9.0%) Limpopo (9.4%) Limpopo (4.7%) Free State (6.3%) Western Cape (4.4%) Western Cape (5.5%) Northern Cape (3.9%) Northern Cape (3.7%) Mpumalan
Slide 33: Acquisitions & Disposals
ACQUISITIONS & DISPOSALS Delta did not embark on any new acquisitions during the current year, choosing to rather focus inwardly on acquisitions, filling up vacancies and renewal of leases Investment strategy Strategy is to continue to focus on: • Significant assets (> R100million) • Underpinned
Slide 34: Valuations
VALUATIONS Moderate growth of 2.3% as at 28 February 2018 The independent external valuers factored in the lease terms, potential reversions on lease renewals and the existing month to month leases at the time. Revaluations will be done as and when new significant leases are signed. RESULTS PR
Slide 35: Disposal of Non-Core Assets
DISPOSAL OF NON-CORE ASSETS 35 Delta has approximately R969.4m on the disposal list of which R324.6m has been concluded. Expected transfer Property Location GLA Sales price (R) Date Sale agreements concluded 31 035 324 550 000 Block G Office - Sovereign Pretoria CBD 7 992 225 800 000 End December
Slide 36: Redevelopment Strategy
REDEVELOPMENT STRATEGY Delta to deploy CAPEX into portfolio • Create value uplift to assets • Securing long term stable returns • Provide improved accommodation offering to tenants • Long term benefit to portfolio Lease driven to identify assets where greatest value can be added, through value e
Slide 37: Capex | Existing Portfolio
CAPEX | EXISTING PORTFOLIO Commission Embassy Sleepy Poyntons Fire 17 Harrison Property 88 Field Beacon Hill House Building Hollow Project Street Approved budget 89 400 000 12 340 750 28 000 000 40 000 000 4 500 000 32 500 000* 4 500 000 Spent in FY2017 85 628 700 19 194 559 1 232 000 - - Spent in F
Slide 38: Conclusion
CONCLUSION Sandile Nomvete Harlequins, Pretoria Notes:
Slide 39: Conclusion
CONCLUSION Conclude bulk lease renewals and increase WALE Investment in both defensive and accretive capital – lease renewals and retention Refinance debt facilities on longer term, reduce gearing and improve credit rating Emphasis on filling vacant space and greater effort into disposal pro
Slide 40: Thank You
88 Field Street, Durban THANK YOU Questions & Answers www.deltafund.co.za Sleepy Hollow, Pietermaritzburg Notes:
Slide 41: Annexures
88 Field Street, Durban ANNEXURES www.deltafund.co.za Sleepy Hollow, Pietermaritzburg NOTES:
Slide 42: Annexures
88 Field Street, Durban ANNEXURES 01 Top 10 properties by value 02 Lease Expiry Profile 03 Sectorial Split 04 GLA and vacancy reconciliation 05 Leasing Outlook Notes:
Slide 43: 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 44: Top 10 Properties cont.
TOP 10 PROPERTIES | Cont…. Embassy Building Isivuno House Hensa Towers Phomoko Towers The Marine Location Durban Location Pretoria Location Durban Location Pretoria Location Polokwane Office - Office - Office - Sector* Office - Other Sector* Sector* Sector* Sector* Office - Other Sovereign Sovereign
Slide 45: Lease Expiry Profile
LEASE EXPIRY PROFILE AT 28 FEBRUARY 2018 TOTAL PORTFOLIO - BY GLA TOTAL PORTFOLIO - BY RENTAL Vacant (13.3%) Month to Month (31.0%) Month to Month (28.5%) 28 Feb 19 (15.8%) 28 Feb 19 (11.5%) 29 Feb 20 (15.3.%) 29 Feb 20 (13.4%) 28 Feb 21 (22.5%) 28 Feb 21 (19.9%) 28 Feb 22 (8.7%) 28 Feb 22 (7.4%) 28
Slide 46: Sectoral Split
SECTORAL SPLIT GLA - BY BUILDING GLA - BY TENANT* 4.2% 2.5% 6.8% 3.9% Office - Sovereign (66.0%) Office - Sovereign (73.0%) Office - Other (27.3%) 16.3% Office - Other (16.3%) 27.3% Industrial (4.2%) Retail (6.8%) 66.0% Retail (2.5%) Industrial (3.9%) 73.0% RENTAL - BY BUILDING RENTAL - BY TENANT 2.
Slide 47: GLA and Vacancy Reconciliation
GLA AND VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2018 105 952 428 112 225 11.8% Disposals - - - Acquisitions - - - Leases terminated - - 24 007 New letting of vacant space - - (9 680) Adjustments - 411 (222) As at August 2018 105 952 839 12
Slide 48: 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 28 February 2019 National government 51 205 889 106.36 97.97 (7.89%) Provincial government 14 70
Slide 49: www.deltafund.co.za
www.deltafund.co.za