Delta Property Fund Limited · JSE:DLT
Delta Property Fund — FY2023 Earnings Presentation
46 slides from Delta Property Fund's earnings presentation, Jun 14, 2023
Slide 1: Results Presentation for the Year Ended 28 February 2023
Hallmark Building, Pretoria RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2023 14 June 2023 www.deltafund.co.za
Slide 2: Agenda
01 Introduction AGENDA 02 Operational Overview 03 Strategy Update 04 Financial Review 05 Conclusion 06 Questions & Answers 07 Annexures The Marine Building, Durban INTRODUCTION
Slide 3: Introduction
North Ridge Road, Durban INTRODUCTION Bongi Masinga
Slide 4: Key Metrics
INTRODUCTION 4 KEY METRICS Investment Funds from Sovereign SA REIT Loan to property operations (FFO) per underpinned value (Incl assets held for sale) JSE listed SA REIT share R6.9bn 11.1 cents 76.7% 61.4% 2022 : R7.9bn) (2022 : 36.9 cents) by revenue (2022 : 84.6%) (2022 : 57.0%) SA REIT Net asset
Slide 5: Introduction
INTRODUCTION 5 INTRODUCTION • We present our results today, on the backdrop of re-organizing and repositioning the business • The office market remains challenging with significant oversupply in the commercial office space • The South African economic and social challenges are mounting, including th
Slide 6: Operational Review
Hensa Towers, Polokwane OPERATIONAL REVIEW Bongi Masinga
Slide 7: Operational Overview
OPERATIONAL OVERVIEW 7 OPERATIONAL OVERVIEW • Reduction in the number of properties to 92 (Feb 2022:99), we close the year with 857 506m2 (Feb 2022: 904 531m2) • Post financial year end, we disposed of 14 187m2 of a building in Durban • Majority of the DPWI leases expired representing 123 117m2 at f
Slide 8: Operational Overview (cont.)
OPERATIONAL OVERVIEW 8 OPERATIONAL OVERVIEW (cont.) • Delta’s portfolio vacancies increased to 32.9% (Feb 2022: 31.3% ) • Major contributors towards this vacancy increase, include: - 17 Harrison Street (JHB): 11 297m² - Johannesburg Water vacated - Harlequins Office Park (PTA): 2 707m² - Dept. of So
Slide 9: Operational Overview (cont.)
OPERATIONAL OVERVIEW 9 OPERATIONAL OVERVIEW (cont.) • Lease renewals for the year amounted to for 194 545m2; • Post year-end, 87 612m2 of expired month-to-month leases were renewed made up of 17 leases, of which 6 were with DPWI (82 093m2) related tenants. - Dept. of Home Affairs, Cape Town – initia
Slide 10: GLA & Vacancy Reconciliation
OPERATIONAL OVERVIEW 10 OPERATIONAL OVERVIEW GLA & VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2022 99 904 531 283 145 31.3% Disposals (7) (47 025) (29 143) New letting of vacant space (13 312) Major contributors: - 17 Harrison 11 297 - LexisN
Slide 11: Geographical Split by GLA and Vacancy
OPERATIONAL OVERVIEW 11 OPERATIONAL OVERVIEW GEOGRAPHICAL SPLIT BY GLA GEOGRAPHICAL CONTRIBUTION TO VACANCY 45% 45% 41,9% 41,0% 40% 40% MP EC EC MP 35% 32,6% 35% 32,2%WC 30% NC 30% NC 25% 25% LP 20% 20% 15% 15% FS 11,3% FS GP 10% GP 10% 7,5% 6,1% 6,0% 5,2% 4,2% 5% 5% 3,5% 3,5% 1,5% 2,2% 0,2% 0,2% 0,
Slide 12: Capex Update
OPERATIONAL OVERVIEW 12 OPERATIONAL OVERVIEW (cont.) Capex Update • Capex remains a major focal point • R79.0 million Capex spent to February 2023 • Further capex earmarked for the 2024 financial year end to be funded from operational cash, prioritizing; TI, Lease obligations, SHEQ Certification and
Slide 13: Capex Projects (cont.)
OPERATIONAL OVERVIEW 13 OPERATIONAL OVERVIEW (cont.) Parkmore Building 1 • Building 1 HVAC & Fresh Air upgrade – Completed Azmo Building 2 • Building Upgrade Project ( Ablutions) – Completed 3 88 Field Steet Building • Aircon Chiller Unit Replacement - Completed The Marine Building 4 • Upgrading HVA
Slide 14: Geographical Split by Capex
OPERATIONAL OVERVIEW 14 OPERATIONAL OVERVIEW (cont.) GEOGRAPHICAL SPLIT BY CAPEX LP 7.9% Gauteng GP Free State FS GP MP NW 47.5% 2.4% Limpopo LP 1.0% KwaZulu Natal KZN Northern Cape NC KZN FS 30.7% North West NW NC 2.5% 2.6% Mpumalanga MP Eastern Cape EC Western Cape WC EC 0.4% WC 5.0%
Slide 15: Strategy Update
Delta Heights, Pretoria STRATEGY UPDATE Bongi Masinga
Slide 16: Strategic Update
STRATEGIC UPDATE 16 STRATEGIC UPDATE The Fund’s objective and strategic intents are: • Asset disposals - To accelerate the rate of disposals - Disposing of assets that are a cash drag on our portfolio (negative ICR’s) • Reduction of debt - To reduce the amount paid towards interest • Improvement of
Slide 17: Strategic Update: Disposals
STRATEGIC UPDATE 17 STRATEGIC UPDATE (cont.) Disposals • Disposal programme is intensifying and is being accelerated • Relative to FY2022 (1 asset), the FY2023 (7 assets) Disposal Programme; • Targeting 43 assets this financial year FY2024 • We continue to dispose of properties in non – strategic ge
Slide 18: Disposal Properties and GLA
STRATEGIC UPDATE 18 STRATEGIC UPDATE (cont.) # of Disposal Properties Disposal GLA (sq. m) 400 000 50 349 050 350 000 45 43 300 000 40 35 250 000 30 200 000 25 20 150 000 15 100 000 10 7 47 024 50 000 5 1 5 454 - - FY2022 FY2023 FY2024 (f) FY2022 FY2023 FY2024 (f) FY2022 FY2023 FY2024 (f)
Slide 19: Strategic Interventions for Disposals
STRATEGIC UPDATE 19 STRATEGIC UPDATE (cont.) In order to achieve our targets accelerated disposal programme, the following strategic interventions have been made: • We have expanded the numbers of sales channels employed to include the use of a digital sales platform; • Formulation of a “Super Broke
Slide 20: Geographical Split: Disposal Portfolio
STRATEGIC UPDATE 20 STRATEGIC UPDATE (cont.) GEOGRAPHICAL SPLIT: DISPOSAL PORTFOLIO BY NUMBER & GLA NORTH WEST LIMPOPO 1 Property 1 Property 3 705m2 1 951m2 FREE STATE 11 Properties 59 292m2 MPUMALANGA 1 Property 2 827m2 NORTHERN CAPE 5 Properties 26 686m2 KWAZULU-NATAL 5 Properties EASTERN CAPE 101
Slide 21: Financial Review
Poyntons Building, Pretoria FINANCIAL REVIEW Marelise de Lange www.deltafund.co.za
Slide 22: Financial Overview
FINANCIAL REVIEW 22 FINANCIAL OVERVIEW 2023 2022 Variance Rental income including recoveries (R’000) 1 229 121 1 388 704 (11.5%) Net property income (R’000)# 746 124 910 661 (18.1%) Net finance costs (R’000) 452 368 388 395 16.5% SA REIT Cost to income ratio 54.3% 48.0% 6.3% SA REIT Administrative c
Slide 23: Financial Performance 2023
FINANCIAL REVIEW 23 FINANCIAL PERFORMANCE 2023 SA REIT SA REIT Loan to value of Average cost of debt 61.4% 8.8% (2022 : 57.0%) (2022 : 7.4%) SA REIT Funds from Interest Operations cover ratio R79.4 million 1.4 times (2022 : R263.6 million) (2022 : 1.9 times) African Life Building, Bloemfontein
Slide 24: Statement of Profit or Loss and Other Comprehensive Income
FINANCIAL REVIEW 24 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 2023 2022 Variance Revenue Rental income 1 229 121 1 388 704 (11.5%) Straight line rental income accrual (12 401) 521 (2 480.2%) 1 216 720 1 389 225 (12.4%) Property operating expenses (482 997) (571 345) (15.5%) Other in
Slide 25: SA REIT Funds from Operations
FINANCIAL REVIEW 25 SA REIT FUNDS FROM OPERATIONS (R’000) Group 2023 2022 Loss per IFRS Statement A (728 273) (144 970) Accounting specific adjustments: Fair value adjustment loss/(gain) to: 869 176 476 990 − Investment property 833 637 428 323 − Debt and equity instrument held at fair value 35 539
Slide 26: SA REIT Funds from Operations Bridge
FINANCIAL REVIEW 26 SA REIT FUNDS FROM OPERATIONS BRIDGE SA REIT FFO - Reduction in Reduction in Reduction in Rental Additional Reduction in Increase in Other Reduction in Reduction in SA REIT FFO - 2022 taxation bad debt write doubtful debt reversions interest recoveries municipal operating dividen
Slide 27: Statement of Financial Position
FINANCIAL REVIEW 27 STATEMENT OF FINANCIAL POSITION R’000 Feb 2023 Feb 2022 Variance ASSETS Non-current assets Investment property 6 073 071 7 101 110 (14.5) Investment in listed securities 91 267 110 984 (17.8%) Other non-current assets 7 824 10 280 (23.9%) Current assets 192 500 354 516 (45.7%) No
Slide 28: Valuations
FINANCIAL REVIEW 28 VALUATIONS • The valuations for the year ended February 2023 have been concluded at R6.9 billion (2022: R7.9 billion) • A combination of discounted cash flows and capitalisation rates were used in arriving at the values • Devaluation due to reverted rentals, low overall market re
Slide 29: Debt Funding
FINANCIAL REVIEW 29 DEBT FUNDING • Interest-bearing borrowings decreased by 7.7% due to repayment of debt to the extent of R352.8m with R208.9m from disposal proceeds and R143.9m from operation cash. • Standard Bank: Facility has 21 months remaining to 30 November 2024 • Investec: Facilities in proc
Slide 30: Debt Summary
FINANCIAL REVIEW 30 DEBT SUMMARY Facility type Feb 2023 Feb 2023 Feb 2022 Feb 2022 Weighted R’m Weighted Ave. Rate R’m Ave. Rate Nedbank* 2 749 875 2 903 674 Standard Bank 700 903 807 813 Investec 622 164 737 138 Bank of China 123 918 149 625 Total 4 196 860 10.6% 4 545 090 7.5% Accrued interest and
Slide 31: Conclusion
CONCLUSION Bongi Masinga Embassy Building, Durban www.deltafund.co.za
Slide 32: Conclusion
CONCLUSION 32 CONCLUSION • Since late 2020, the fund has been continuously refining its medium- term strategy • We believe we can execute on disposals for the next 24 months • We want to ensure we are within our debt covenants • We will focus on ensuring efficiencies • Improving profitability • Payi
Slide 33: Thank You & Questions
THANK YOU & QUESTIONS Liberty Towers, Durban
Slide 34: Annexures
ANNEXURES ANNEXURES 01 04 Showcase properties Geographical split 02 05 By province and major tenant Leasing outlook 03 06 Lease expiry profile Portfolio breakdown Delta Towers, Durban
Slide 35: Showcase Properties
ANNEXURES 35 SHOWCASE PROPERTIES POYNTON HALLMARK BUILDING HENSA TOWERS PHAMOKO 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 36: Showcase Properties
ANNEXURES 36 SHOWCASE PROPERTIES EMBASSY BUILDING DELTA TOWERS LIBERTY TOWERS NPA BUILDING Location KwaZulu-Natal Location KwaZulu-Natal Location KwaZulu-Natal Location Cape Town Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign Sector Office - Sovereign GLA 32 723 m2 GLA
Slide 37: Representation by Province and Major Tenants
ANNEXURES 37 REPRESENTATION BY PROVINCE AND MAJOR TENANTS North West Limpopo 2 7 6 1 GLA(m2) 5 780 GLA(m2) 44 885 Free State 1 12 30 11 Mpumalanga 2 GLA(m2) 64 149 9 2 Northern Cape GLA(m2) 30 251 17 6 BUILDINGS GLA(m2) 36 189 6 13 KwaZulu-Natal REPRESENTED Eastern Cape 8 2 7 BY PROVINCE 2 GLA(m2) 2
Slide 38: Lease Expiry Profile February 2023
ANNEXURES 38 LEASE EXPIRY PROFILE 28 FEBRUARY 2023 TOTAL PORTFOLIO - BY GLA 40,0% 37,7% 35,0% 33,0% 30,0% 25,0% 20,0% 15,0% 12,9% 10,3% 10,0% 5,0% 2,9% 1,9% 1,2% 0,0% Vacant M-T-M 2023 2024 2025 2026 Beyond 2026
Slide 39: Geographic Split (City/Town)
ANNEXURES 39 GEOGRAPHIC SPLIT (CITY/TOWN) Pretoria Durban 1,6% Johannesburg Bloemfontein 3,5% 3,5% Polokwane 3,7% 4,2% 30,3% Cape Town Pietermaritzburg 5,2% Nelspruit 7,3% Kimberley King Williams Town Port Elizabeth 10,6% Potchefstroom 28,5% Klerksdorp Springs 142-144 4th Street, Parkmore Welkom
Slide 40: Disposal of Assets
ANNEXURES 40 DISPOSAL OF ASSETS During the 2023 financial year, Delta sold 7 buildings for R208.9 million. Post year end, Standard Bank Greyville also transferred for R44 million. Property Building classification Location GLA (m2) Sales price (R) Transfer date Delta House Office - Sovereign Pretoria
Slide 41: Leasing Update
ANNEXURES 41 LEASING UPDATE Lease renewals concluded • For the financial year ended 28 February 2023, lease renewals were concluded for a total GLA of 194 545m² • The notable renewals during the reporting period were: Building GLA (m²) Term - months Sleepy Hollow 4 500 60 SARS Randburg 5 873 36 Shel
Slide 42: Leasing Update (cont.)
ANNEXURES 42 LEASING UPDATE (cont.) New leases concluded • 13 312m2 in new leases were concluded • The notable new leases concluded during the reporting period were: Building GLA (m²) Term - months Structura 1 257 12 Sediba Fountains 766 36 Parkmore 1 216 36 • A total of 41 leases were concluded in
Slide 43: Portfolio Breakdown
ANNEXURES 43 PORTFOLIO BREAKDOWN Office - Sovereign Office - Other Industrial Retail Total Number of properties 73 15 2 2 92 Gross lettable area (m2) 644 393 183 769 13 267 16 077 857 506 Vacancies (%) 26.5 57.0 84.3 5.9 32.9 Value (R billions) 5.5 1.2 0.1 0.2 6.9 Weighted average rental (R/m2) 140
Slide 44: Notes
NOTES 44 NOTES
Slide 45: Notes
NOTES 45 NOTES
Slide 46: Results Presentation for the Year Ended 28 February 2023
Embassy Building, Durban RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2023 14 June 2023 www.deltafund.co.za