Burstone Group Limited · JSE:BTN
Burstone — Investec Property Fund — H1 2016 Earnings Presentation
41 slides from Burstone's earnings presentation, Nov 20, 2015
Slide 1: Investor presentation: interim results 30 September 2015
investor presentation. interim results 30 September 2015 Investec Property Fund Limited 20 November 2015
Slide 2: Contents
Contents. 1. Summary 2. Market review 3. Property portfolio 4. Financial review 5. Acquisition update and rights offer status 6. Conclusion 2
Slide 3: Summary
1 summary. Property Fund o Investec Property Fund Limited
Slide 4: Highlights
Highlights Acquisition of Griffin and Zenprop 9.1%* First half dividend growth R7.9 billion** portfolio – to transfer in H2 +8.6% +8.2% Vacancy remained flat since +8.2% Quality portfolio underpinned by real 2.8% 31 March 2015 R16.4bn estate fundamentals +8.2% Long WALE +8.2% New debt funding negoti
Slide 5: Distribution growth
Distribution growth Consistent returns delivered to shareholders 9.1% 8.8%* 8.6%* 8.6% 8.3% 8.2% 7.8% 7.9% 7.5% 7.1% First Half Second Half Full year FY12 FY13 FY14 FY15 FY16 * After the removal of the once-off impact if the IAPF antecedent dividend. 5
Slide 6: Asset growth
Asset growth Portfolio growth 9.6x since listing including Griffin & Zenprop R16.4 bn* 128 properties R8.7 bn R8.7 bn 80 properties 80 properties R6.1 bn 71 properties R4.2 bn 50 properties R2.1 bn R1.7 bn 32 properties 29 properties At listing Mar 2012 Mar 2013 Mar 2014 Mar 2015 Sep 2015 Post Acqui
Slide 7: Fund Snapshot
Fund Snapshot Market at 30 September 2015 Market capitalisation • R7.0bn Share price • R15.65 Net asset value • R15.15 Gearing • 23.0% Portfolio (at 30 September 2015) Total Office Industrial Retail Aus Number of properties • 80 • 21 • 26 • 33 Asset value • R8.8bn • R3.2bn • R1.5bn • R3.6bn • R0.5bn
Slide 8: Market review
2 o Investec Property Fund Limited market review.
Slide 9: Property sector valuations
Property sector valuations 13.1% 12.9% 14.0% 11.2% 11.0% 10.4% 12.0% 9.9% 9.5% 9.0% 8.9% 8.9% 8.8% 8.7% 8.6% 8.6% 8.9% 8.5% 8.4% 7.8% 10.0% 7.1% 5.4% 8.0% 4.9% 4.1% 6.0% 3.7% 4.0% 2.0% 0.0% Capital Vukile SA Corporate Octodec Arrowhead Dipula Tower Hospitality Ascension A Fortress Equites Safari Del
Slide 10: Dividend growth vs peers
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -11.3% Sycom -7.9% Hospitality -1.5% Synergy Acucap 5.3% Fountainhead 5.5% Dipula 6.8% Ascension 7.1% Dividend growth Redefine 7.5% Growthpoint 7.5% Tower 7.7% Vukile 8.4% Emira 9.0% Capital 9.1% Investec 9.1% Octodec 9.3% Delta 9.6% Accelerate 10.0% T
Slide 11: IPF performance vs. peers since listing
IPF performance vs. peers since listing Superior returns over long term The Zenprop acquisition and 210% discounted rights issue was announced on 11 August 2015 190% Investec, 158% 170% SA Corporate, 154% 150% Redefine, 141% Growthpoint, 141% 130% Emira, 136% 110% Vukile, 129% 90% 70% 50% Investec V
Slide 12: Property portfolio
3 property portfolio.
Slide 13: Property Highlights
Property Highlights The Fund continues to deliver on its objective of focusing on real estate fundamentals Strong base NPI growth – +8.8%1 focus on underlying property > 40% Leases expiring after 5 years fundamentals Vacancy remains flat since Space let or renewed during +2.8% year end > 62 000m2 th
Slide 14: Letting activity
Letting activity Continued ability to achieve above market escalations & positive reversion 61 915m2 Expiries & cancellations (37 588m2) Renewals 23 546m2 Opening vacancy 23 813m2 Closing vacancy Added vacancy# 780m2 (through extension) (24 840m2) New lets* * 13 814m2 of new lets were made immediate
Slide 15: Letting activity
Letting activity Continued ability to achieve above market escalations & positive reversion • 83% of space expiring in the period was either renewed with existing tenants or let to new tenants. Renewals Rental Average Expiries Expiry rental New rental & new lets reversion1 escalation GLA GLA R/m2 R/
Slide 16: Vacancy levels (GLA)
Vacancy levels (GLA) Vacancy levels remain flat, with space consistently being let with positive reversions 5.4% 4.9% 3.0% 3.1% 2.8% 2.8% 1.4% 1.2% Office Industrial Retail Total March 2015 30 September 2015 16
Slide 17: Lease expiry profile (revenue)
Lease expiry profile (revenue) WALE of 4.0 years, one of the longest in the sector 40% expires after 5 years 40% 18% 16% 15% 14% 13% 13% 8% 7% 7% 7% 7% 5% 5% 4% 4% 3% 3% 3% 2% 2% 2% 1% 1% 2016 2017 2018 2019 2020 April 2020 onwards Office Industrial Retail Total 17
Slide 18: Portfolio composition by sector
Portfolio composition by sector Current portfolio By revenue By asset value By GLA 21% 18% 43% 41% 36% 45% 38% 39% 19% Post acquisitions* 23% 44% 26% 36% 49% 33% 18% 30% 41% Office Industrial Retail * Post acquisition of Griffin and Zenprop acquisition 18
Slide 19: Portfolio composition by geography
Portfolio composition by geography* Geographic spread by revenue* Geographic spread by GLA Current portfolio 10% 11% 4% 2% 3% 4% 71% 3% 3% 3% 68% 1% 9% 8% Post acquisitions* 9% 10% 2% 1% 2% 2% 2% 2% 13% 69% 67% 10% 6% 5% Gauteng Western Cape Limpopo Other Mpumalanga KZN Free State “Other” includes E
Slide 20: Tenant composition (by revenue)
Tenant composition (by revenue) 84% of tenants are listed, large nationals or professional firms Current portfolio Pre acquisition 18% Monthly % total Rank Tenant gross portfolio revenue 66% 16% R’m % 1 Massmart 4.7 6.8 2 Investec 4.3 6.1 3 Shoprite Checkers Group 3.1 4.5 Post acquisitions* 4 Woolwo
Slide 21: Total portfolio
Total portfolio Positive base NPI growth of 8.8%, driven by top line revenue growth Actual Actual +/- 30 Sep 2015 30 Sep 2014 R‘000 R‘000 % Base NPI growth underpinned by contractual escalations of Base net property income 282 454 259 627 8.8 8.0%, positive reversions on Acquisitions 76 471 15 496 r
Slide 22: Office portfolio
Office portfolio • Consistent positive reversions negotiated and reduced vacancy • Minimal letting risk in the next three years • Low exposure to over-supplied or weakening nodes (e.g. Sandton) • Zenprop portfolio will further enhance the quality and defensiveness of the office portfolio • 80% blue
Slide 23: Industrial portfolio
Industrial portfolio • Sector under pressure – tenants contracting and consolidations occurring • Demand for functional space at competitive prices remains • More than 42 000m2 let during the period at positive reversions with the exception of one tenant • Vacancy flat year on year, despite challeng
Slide 24: Retail portfolio
Retail portfolio • High quality, niche or dominant centres – remains almost fully let • Ability to negotiate positive reversions in renewal cycles due to underlying fundamentals • Strong relationships with national tenant base • Cost to income ratios maintained year on year • Focused asset managemen
Slide 25: Financial review
4 © Investec Property Fund Limited financial review.
Slide 26: Financial highlights
Financial highlights Dividend growth on prior New swaps locked in for Zenprop 9.1% year 59.63cps R1.2bn with a swap expiry of 4.8 years at average rate of 7.79% New term funding secured to All-in cost of funding pre part fund the Zenprop 8.5% Zenprop. +R3.6bn acquisition at average margin of 1.75% a
Slide 27: Income Statement to 30 September 2015
Income Statement to 30 September 2015 Actual Actual +/- 30 Sep 2015 30 Sep 2014 R‘m R‘m % Revenue 438.9 336.2 30.5 Straight line rental adjustment 68.8 45.6 50.9 Revenue 507.8 381.8 33.0 Property expenses (78.5) (60.2) (30.4) Net property income 429.3 321.6 33.5 Fund operating expenses1 (7.3) (5.1)
Slide 28: Distribution recon
Distribution recon to 31 March 2015 9.1% distribution growth Actual Actual +/- 30 Sep 2015 30 Sep 2014 R‘m R‘m % Profit 371.2 236.3 57.1 Less: Net fair value adjustments (36.5) 14.4 Less: profit on disposal (2.6) - Less: straight line rental adjustment (68.8) (45.6) Antecedent dividend* 2.0 3.5 Tota
Slide 29: Balance Sheet
Balance Sheet 30 Sep 2015 31 March 2014 +/- R’m R’m Assets 9 099 8 832 267 Investment property 8 323 8 202 121 Investment in IAPF 530 502 28 Trade and other receivables 102 67 35 Cash and cash equivalents 144 61 83 Total assets 9 099 8 832 267 Shareholders interest 6 857 6 616 241 Stated capital 5 8
Slide 30: Capital management
Capital management Balance sheet well placed 30 September 2015 31 March 2014 Investments R8.8 bn R8.7 bn Total debt R2.0 bn R2.1 bn Available bank facilities R894m R865m Gearing 23.0% 23.6% Interest cover ratio 4.5x 4.4x All in cost of funding 8.5% 8.5% Hedged position 91% 83% % properties secured R
Slide 31: Funding Facilities – 30 September 2015
Funding Facilities – 30 September 2015 Active capital management Drawn Facility Available Expiry Rate 30 Sept 2015 R’m R’m R’m DMTN – Tranche 11 100 April 18 JIBAR + 150bp DMTN – Tranche 21 40 April 16 JIBAR + 155bp DMTN – Tranche 31 50 April 17 JIBAR + 165bp DMTN – Tranche 61 226 April 17 Fixed at
Slide 32: Debt and swap maturity profile
Debt and swap maturity profile at 30 September 2015 29% 28% 21% 21% 20% 20% 16% 16% 10% 7% 8% 4% 0% FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Debt Swaps 32
Slide 33: Foreign currency hedging (AUD)
Foreign currency hedging (AUD) Management continue to monitor the AUD/ZAR rate and enter forwards to lock in growth 12 52% hedged 11.5 +9.5% 11 Average ZAR rate 78% hedged 85% hedged +3.5% +5.4% 10.5 85% hedged +3.1% 93% hedged 76% hedged +5.1% 10 (2.3)%1 9.5 9 Sep 15 Mar 15 Sep 16 Mar 17 Sep 17 Mar
Slide 34: Zenprop acquisition update and rights offer status
5 Zenprop acquisition update and rights offer status. 34
Slide 35: Zenprop transaction update
Zenprop transaction update The Fund announced the R7.06 Iconic R7.06 billion portfolio billion Zenprop acquisition on 11 August Excellent property fundamentals adding to the quality, defensiveness and income predictability of the Fund Competition Tribunal approval No material queries raised an
Slide 36: New debt - Zenprop
New debt - Zenprop Significant levels of interest received from investors Post acquisition New debt metrics Overall debt metrics Total debt R3.65 bn R5.9 bn Gearing 50% 35.0% Encumbrance ratio 48% 36% % debt unsecured 52% 60% Average credit margin 1.75% 1.68% Weighted average debt expiry 5.4 years 4
Slide 37: Debt expiry profile post Zenprop
Debt expiry profile post Zenprop Expiry profile further extended and de-risked 23% 21% 12% 11% 10% 9% 6% 5% 3% 0% 0% FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 37
Slide 38: DCM/ Bank split post Zenprop
DCM/ Bank split post Zenprop Risk spread across tenors and across lenders 13% 13% 10% 8% 8% 7% 7% 6% 5% 4% 4% 4% 3% 3% 3% 2% 0% 0%0% 0%0% 0% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 DCM Bank 38
Slide 39: Conclusion
Out of the Ordinary” 6 Investec Property Fund Limited conclusion. Property Fund
Slide 40: Conclusion
Conclusion 1. Quality portfolio of R16.4bn, underpinned by real estate fundamentals, 2. Existing portfolio & Griffin to deliver in line with H1 growth 3. H1 results driven by base portfolio NPI growth and conservative balance sheet management 4. Full year growth will be impacted by the Zenprop trans
Slide 41: Disclaimer
disclaimer. The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or professional advice. Although information has been obtained from sources believed t
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