Delta Property Fund Limited · JSE:DLT
Delta Property Fund — FY2019 Earnings Presentation
48 slides from Delta Property Fund's earnings presentation, Feb 28, 2019
Slide 1: Results Presentation for the year ended 28 February 2019
RESULTS PRESENTATION for the year ended 28 February 2019 P RO P ERT Y F U N D www.deltafund.co.za
Slide 2: Agenda
AGENDA P RO P ERT Y F U N D 01 Introduction and Business Update 02 Financial Review 03 Portfolio Review 04 Conclusion 05 Questions & Answers 06 Annexures
Slide 3: Introduction and Business Update
P RO P ERT Y F U N D www.deltafund.co.za INTRODUCTION AND BUSINESS UPDATE Sandile Nomvete
Slide 4: Introduction to Delta
INTRODUCTION TO DELTA Sovereign Highly Market underpinned empowered fund capitalisation of JSE listed REIT 79.0% Level 2 R1.8bn B-BBEE of revenue from sovereign tenants Rating on new sector codes as at 28 February 2019 Average property Assets under Dominant in value of management of Pret
Slide 5: Business Update
BUSINESS UPDATE Delta experienced its toughest and most challenging year since its listing. Slow pace of lease renewals from DPW, increased vacancies and higher cost of debt resulted in distributable earnings declining. The board and management subsequently decided to retain 25% of earnings to facil
Slide 6: Business Update cont...
BUSINESS UPDATE cont… Debt Funding Low WALE and non-conclusion of DPW renewals significantly impacted our ability to renew expiring facilities for longer periods Our long-standing banking partners approved extensions, however, at higher interest costs and associated fees due to increased risk Di
Slide 7: Financial Review
P RO P ERT Y F U N D www.deltafund.co.za FINANCIAL REVIEW Shaneel Maharaj
Slide 8: Financial Performance 2019
FINANCIAL PERFORMANCE 2019 Loan to Extended Fixed value of facilities totalling debt of 45.1% R2.1billion 59.8% (Feb 2018 : 41.3%) (Feb 2018 : R941 million) (Feb 2018 : 85.4%) Debtors outstanding Property Interest at operating margin at cover ratio 31 days 67.8% 2.1 (Feb 2018 : 18.5 days
Slide 9: Five Year Review
FIVE YEAR REVIEW 2019 2018 2017 2016 2015 Revenue (R’000) 1 547 365 1 564 053 1 617 344 1 247 582 1 009 207 Net property income (R’000) 1 037 786 1 149 885 1 153 341 925 531 764 884 Finance costs (R’000) 537 281 482 179 470 580 412 713 316 380 Cost to income ratio - gross method 32.2% 26.5% 28.8% 26
Slide 10: Distributable Income Statement
DISTRIBUTABLE INCOME STATEMENT Feb 2019 Feb 2018 Net property income (excl. straight line accrual) 1 072 090 1 147 865 Administration expenses (79 727) (53 329) Net finance costs (511 249) (462 483) Dividend income - GRIT 39 187 35 666 Other income 6 356 20 287 Antecedent interest 569 257 Prior year
Slide 11: Analysis of Distributions Declared
ANALYSIS OF DISTRIBUTIONS DECLARED HISTORIC DISTRIBUTION PER SHARE (CENTS/SHARE) H1 – Interim 23.1% 9.6% 15.6% 7.2% 8.7% 8.0% 7.1% 7.1% 7.1% 1.0% (1.0)% 0% (15.1)% (68.5)% (43,0)% H2 – Final Total – Full year 97,24 97,24 90,8 84,1 72,7 55,39 51,3 50,8 47,9 45,9 46,4 44,1 42,9 40,2 40,0 39,4 32,5 23,
Slide 12: Distributable Earnings Bridge
DISTRIBUTABLE EARNINGS BRIDGE R’000 5 196 3 521 312 (3 378) (13 931) 691 641 6 466 (19 953) (36 642) (48 767) (57 240) 527 224 H2 Feb 2018 Net property Admin Dividend Antecedent Prior year Other income Vacancies Disposals Net finance Provisions H2 Feb 2019 income expenses income (Grit) dividend reta
Slide 13: Like-for-like Net Property Income Analysis
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS Amount Description % (R’000) Net property income (NPI) Feb 2018 1 147 865 Increased NPI from base portfolio held at 28 Feb 2018 (36 353) (3.2)% NPI attributable to disposals and non-core assets FY18 (39 422) (3.4)% NPI Feb 2019 (excl. straight line accrual)
Slide 14: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION R’000 Feb 2019 Feb 2018 Change % ASSETS Non-Current assets 10 377 347 10 919 425 (4.96%) Investment property 9 913 811 10 535 000 (5,96%) Fair value of property portfolio 9 755 209 10 342 418 (5.68%) Straight line rental income accrual 158 602 192 582 (17.64%) Investm
Slide 15: NAV Bridge
NAV BRIDGE Rands 0.11 0.02 0.62 10,06 -0.93 -0.32 9.30 -0.20 -0.02 -0.02 -0.01 -0.01 28 Feb 2018 Contribution Fair value of Dividend Dividend paid Fair value of Deferred Fair value of Debt facilities Disposals FCTR recognised 28 Feb 2019 from operations listed reinvestment investment consideration f
Slide 16: Debt Summary
DEBT SUMMARY As at 28 February 2019 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 4 339 11.0% Fixed bank facilities 212 9.5% Revolving bank facilities 706 9.7% Total borrowings, net of accrued interest 5 257 10.2% Accrued interest 17 Debt Structuring fees (16) TOTAL 5 258 Total fixe
Slide 17: Debt Commentary
DEBT COMMENTARY Extended R2.1billion in expiring debt facilities during the year 59.8% (2018: 85.4%) of borrowings are fixed for an average period of 0.8 years (2018: 1.5) using a combination of interest rate swaps, cross currency swaps and fixed facilities. The deterioration in fix % was due to
Slide 18: Portfolio Review
P RO P ERT Y F U N D www.deltafund.co.za PORTFOLIO REVIEW Otis Tshabalala
Slide 19: Operational Performance 2019
OPERATIONAL PERFORMANCE 2019 Total lease A distinct focus on Capital renewals in a sovereign tenants expenditure challenging environment 73.6% R115 million 151 018m 2 Gross lettable area (GLA) (Feb 2018 : R185.4 million (Feb 2019 : 46 833m2) Bulk lease renewal Vacancies Total new leases
Slide 20: Representation by Province and Major Tenants
REPRESENTATION BY PROVINCE AND MAJOR TENANTS BUILDINGS REPRESENTED BY PROVINCE REPRESENTATIVE TENANTS No of Buildings GLA (m2) Gauteng 35 402 382 KwaZulu-Natal 17 278 264 Free State 17 85 980 Mpumalanga 11 30 251 Limpopo 7 44 885 Northern Cape 7 37 275 Western Cape 5 41 889 Eastern Cape 3 23 717 Nor
Slide 21: Portfolio Breakdown
PORTFOLIO BREAKDOWN Office - Office - Other Industrial Retail Total Sovereign 1 Number of properties 81 16 4 3 104 Gross lettable area (m2) by building type 4 693 737 192 711 40 258 23716 950 422 Vacancy (%) 10.9% 24.3% 33.1% 5.7% 14.4% Value R8.8bn R2.1bn R0.2bn R0.3bn R11.4bn Average rental (R/m2)
Slide 22: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN TENANT PROFILE BY GLA TENANT PROFILE BY RENTAL 1,7% 7,4%1,7% 3,3% 7,4% 6,9% Office - Sovereign National Government 11,9% 11,9% 38,6% 16,2% 38,7% Office - Other Provincial Government 7,2% Retail Local Government 6,8% 11,9% 73,6% Industrial State-Owned 79,0% 12,4% Enterprise
Slide 23: Update on DPW
UPDATE ON DPW New cabinet trimmed from 36 to 28 ministers • is in line with first world countries • 6 departments have been merged DPW has been expanded to include Infrastructure & Development and is now known as the Department of Public Works & Infrastructure Development Minister De Lille app
Slide 24: Update on DPW cont...
UPDATE ON DPW cont… Impact on Delta We believe there will be minimal impact on space requirement from the departments that have been merged • The staff component at operational level is expected to largely remain the same given that • Government is on a drive to create employment, which has culmina
Slide 25: DPW Leasing Update
DPW LEASING UPDATE Since the interim period, DPW has implemented Supply Chain Management (SCM) Circular 48 which governs the terms with which DPW transacts with landlords: The bulk lease renewal process is currently in its final stages Delta currently qualifies for a maximum of 5 years with DP
Slide 26: DPW Leasing Update cont...
DPW LEASING UPDATE cont… At present the final tenure is largely driven by the the user departments’ requirements Where the user department requires a short-term lease, for reasons such as the individual space requirements not meeting their needs, DPW is compelled to comply with the user’s reques
Slide 27: Update on Sovereign Tenants
UPDATE ON SOVEREIGN TENANTS Bulk renewal progress • Stage 1 (DPW) and Stage 2 (user department) are 100% complete • Stage 3 status: 37 leases totalling 88 185m² have been signed to date • The remaining 139 365 m2 anticipated to be signed between June & July Number Status GLA of Leases Lease agreem
Slide 28: Leasing Update
LEASING UPDATE Major leases concluded 151 018m2 were renewed of which 46 833m2 to the value of R113 million were renewed as at Feb 2019 The most notable renewals are: Building Tenant GLA In 2 Fruit Building In 2 Food 11 177 m² Unisa House UNISA 9 068 m² 101 De Korte MMI 6 610 m² 5 Simba Road ESK
Slide 29: Leasing Update cont....
LEASING UPDATE cont…. Several new leases were concluded measuring 12 537m2 to the value of R71.6 million The most notable new deals are: Building Tenant GLA Liberty Towers Mr Price 3 833 m² 5 Walnut Merchants SA 1 524 m² TOTAL 5 357 m² Tenant Retention Tenant retention remains a significant fo
Slide 30: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - BY BUILDING RENTAL - BY BUILDING Gauteng (42.3%) Gauteng (44.7%) KwaZulu-Natal (29.3%) KwaZulu-Natal (24.4%) Free State (9.1%) Limpopo (9.3%) 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 31: Valuations
VALUATIONS The portfolio including non-current assets held for sale decreased by 1.96% to R10.4 billion Value Feb 2019 Value Feb 2019 Number of Properties Growth/(Loss) Percentage Pre Valuation Post Valuation 104 properties R11 577 330 103 R11 350 330 000 (R227 000 103) (1.96%) 94 properties* R10
Slide 32: Disposal of Non-Current Assets
DISPOSAL OF NON-CURRENT ASSETS During the 2019 financial year, Delta sold one building, 12 New Street, for a total of R15.8 million. Subsequently Top Trailers site 1 transferred post year end, for R45 million Property Building Classification Location GLA (m2) Sales price (R) Transfer Date 12 New S
Slide 33: Capex | Existing Portfolio
CAPEX | EXISTING PORTFOLIO Budget Tenant FY 2020 FY 2021 FY 2022 Total Capex Installation FY2020 Bulk Renewals 70 000 000 98 300 000 117 500 000 68 800 000 354 600 000 Balance of properties 95 000 000 113 000 000 77 900 000 284 900 000 Total Portfolio 70 000 000 193 300 000 230 500 000 146 700 000 6
Slide 34: Sustainability & Greening Initiatives
SUSTAINABILITY & GREENING INITIATIVES Delta Property Fund is investigating the implementation of a Solar PV solution This would reduce Delta’s carbon footprint There is renewed focus on environmentally conscious landlords by tenants and investors Benefits to Delta would include Generation of c
Slide 35: Conclusion
P RO P ERT Y F U N D www.deltafund.co.za CONCLUSION Sandile Nomvete
Slide 36: Conclusion
CONCLUSION The conclusion of South Africa’s sixth democratic election is expected to provide much needed political stability and improved business confidence within the economy. This transition is expected to materialise within twelve months, whereby we envisage positive capital inflow and further s
Slide 37: Thank You
P RO P ERT Y F U N D www.deltafund.co.za THANK YOU Questions & Answers
Slide 38: Annexures
ANNEXURES P RO P ERT Y F U N D 01 Government Precinct Pretoria 02 Top 10 properties by value 03 Lease Expiry Profile 04 Sectorial Split 05 GLA and vacancy reconciliation 06 Leasing Outlook 07 Growth / Reversion
Slide 39: Government Precinct | Pretoria
GOVERNMENT PRECINCT | PRETORIA RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 39
Slide 40: Top 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 41: Top Properties | Continued
TOP 10 PROPERTIES | CONTINUED Isivuno House Embassy Building Hensa Towers The Marine NPA Building Location Pretoria Location Durban Location Polokwane Location Durban Location Cape Town Office - Office - Office - Office - Sector* Sector* Sector* Sector* Office - Other Sector* Sovereign Sovereign Sov
Slide 42: Lease Expiry Profile at 28 February 2019
LEASE EXPIRY PROFILE AT 28 FEBRUARY 2019 TOTAL PORTFOLIO - BY GLA TOTAL PORTFOLIO - BY RENTAL Vacant (14.4%) Month to Month (38.6%) 2,8% 3,0% 14,4% 6,3% 2,5% 2,4% Month to Month (34.0%) 2,1% 29 Feb 20 (17.8%) 8,3% 29 Feb 20 (15.7%) 9,8% 38,6% 28 Feb 21 (22.9%) 28 Feb 21 (19.4%) 19,4% 28 Feb 22 (9.8%
Slide 43: Sectoral Split
SECTORAL SPLIT GLA - BY BUILDING GLA - BY TENANT* 2,5% 4,2% 6,9% 3,3% Office - Sovereign (73.0%) Office - Sovereign (73.6%) Office - Other (20.3%) 16,2% Office - Other (16.2%) 20,3% Retail (2.5%) Retail (6.9%) 73,0% Industrial (4.2%) Industrial (3.3%) 73,6% RENTAL - BY BUILDING RENTAL - BY TENANT 2,
Slide 44: 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 1 (2 368) - Leases terminated - - 36 789 New letting of vacant space - - (12 537) Adjustments - 361 508 As at 28 February 2019 104 950 422 136 986 14.
Slide 45: 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 31 August 2019 National government 49 198 559 109.87 100.74 (8.31%) Provincial government 12 53
Slide 46: Growth / Reversion
GROWTH / REVERSION Total leases concluded 1 March 2018 – 28 February 2019 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 50 46 833 19.12 112.22 107.93 (3.82%) 7.04% Renewals by Sector W.A
Slide 47: Notes
NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 47
Slide 48: Notes
NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2019 48