Vukile Property Fund Limited · JSE:VKE
Vukile Property Fund — H1 2012 Earnings Presentation
55 slides from Vukile Property Fund's earnings presentation, November 2011
Slide 1: Interim Results for the six months ended 30 September 2011
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 1 Measuring M i our success, planning our future INTERIM RESULTS for the six months ended 30 September 2011
Slide 2: Agenda
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 2 Agenda Highlights Laurence Rapp Financial performance Mike Potts Portfolio performance and overview Ina Lopion Prospects for remainder of 2012 Laurence Rapp Acknowledgements Laurence Rapp Unveiling the new strategy Laurence Rapp Proposed Sanlam ac
Slide 3: Highlights
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 3 Highlights Distribution for the six months up 7.5% to 54.31 cents per linked unit. Net property revenue up 8% over comparable period. Weighted average cost of debt reduces to 9.38%. Acquisition of R1.5 billion property portfolio announced on 14 No
Slide 4: Distribution history
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 4 Distribution history
Slide 5: Growth in distribution
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 5 Growth in distribution
Slide 6: Income and expenditure
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 6 Income and expenditure Income (R474 million) Expenditure (R281 million) Tax Asset Interest Income 2% Management 2% Income Finance costs 5% 30% Property Corporate Expenses admin 59% 4% Property Asset Income Management 93% Expenses 5% Distributable
Slide 7: Simplified income statement
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 7 Simplified income statement Sept p 2011 Sept p 2010 % R’m R’m Variance Group net rental income 276.2 255.2 8.2 Income from asset management business 23.0 33.8 (32.0) Asset management expenditure (13.9) (10.0) (39.0) Net finance costs (75 0) (75.0)
Slide 8: Make-up of increase in distribution
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 8 Make-up Make up of increase in distribution Cents per p linked unit Contributions to increased rental income Increased rentals 10.8 Increase in vacancies (2.2) Additional municipal service recoveries and other 5.0 13 6 13.6 Increase in property ex
Slide 9: Group debt structure
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 9 Group debt structure Maturity and interest rate profile of interest bearing debt at 30 September 2011
Slide 10: Group balance sheet
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 10 0 Group balance sheet
Slide 11: Group net cash flow
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 11 1 Group net cash flow
Slide 12: NAV bridge
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 12 2 NAV bridge
Slide 13: Linked unit price-index performance
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 13 3 Linked unit price-index price index performance
Slide 14: Trading volumes
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 14 4 Trading volumes
Slide 15: Property portfolio
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 15 1 5 Property portfolio Number of properties 74 GLA 930 405m² Valuation Total portfolio R5.870 bn External valuation (on ( 51% off portfolio) tf li ) R2 882 bn R2.882 (R86 m - 2.9% less than directors’ valuation) Average discount rate 13.2% Averag
Slide 16: Property portfolio largest properties
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 16 6 Property portfolio 10 largest properties Area Value % of m² (R’m) total Durban Phoenix Plaza 24 342 453 77 7.7 Belville Louis Leipoldt 22 311 263 4.5 Dobsonville Shopping Centre 23 177 212 3.6 Randburg Square 51 370 206 3.5 Pine Crest (50%) 20
Slide 17: Property portfolio
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 17 7 Property portfolio Market Value (R’m) GLA (m²) Offices 30% Industrial 28% Retail R t il Retail 48% Industrial 54% 16% Offices 24% Market Value (R/m²) 10 000 7 091 7 676 8 000 6 568 7 005 6 272 5 764 6 000 3 343 3 651 4 000 2 000 0 Retail Office
Slide 18: Property portfolio geographic profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 18 8 Property portfolio Geographic profile (GLA m²) Northwest Mpumalanga 2% Northern Cape 3% Limpopo 1% Eastern Cape 4% % 1% Free State 4% Western Cape 6% Namibia 7% Gauteng 55% KwaZulu Natal 17%% Top four regions account for 85% of exposure
Slide 19: Property portfolio tenant profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 19 9 Property portfolio Tenant profile measured in GLA Large national and listed tenants, government and major franchises 39% National and listed tenants, 52% franchised and medium to large professional firms Other 9%
Slide 20: Portfolio growth rates
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 20 0 Property portfolio Portfolio growth rates (six months year to date vs corresponding period previous year) Retail Offices Industrial Total Gross income growth 15.8% 9.4% 4.9% 12.2% Net income growth 11.7% 0.8% 8.6% 7.8%
Slide 21: Weighted average base rentals
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 21 1 Property portfolio Weighted average base rentals R/m² (excluding recoveries) 100.00 90.00 8.1% 9.1% 80.00 75.00 73.70 8.6% 69.40 67.55 70.00 63.75 58.73 60.00 50.00 9 3% 9.3% 40.00 35.95 32.88 30.00 20.00 10.00 - Retail Offices Industrial Total
Slide 22: Base rentals: Retail
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 22 2 Property portfolio Weighted average base rentals R/m² (excluding recoveries): Retail Durban Phoenix Plaza Qualbert Centre ‐ Durban Truworths Centre Nelspruit Barlows Audi ‐ Kenilworth Grosvenor Shopping Centre Pine Crest (50%) Windhoek 269 Inde
Slide 23: Base rentals: Offices
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 23 3 Property portfolio Weighted average base rentals R/m² (excluding recoveries): Offices Hyde Park 50 Sixth Road Barlow Place Rivonia Jhb Houghton 2446 De Tijger Office Park DLV Building Wymark Pretoria Sanwood Park Jhb Parktown Oakhurst Arivia.ko
Slide 24: Base rentals: Industrial
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 24 4 Property portfolio Weighted average base rentals R/m² (excluding recoveries): Industrial Supra Hino Sony Building (Midrand) Hellman International AAD (Goodwood) Randburg Tungsten Centurion N1 Midrand Allandale Park Midrand Sanitary City Richmon
Slide 25: Lease renewals: escalation on expiry rentals
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 25 2 5 Property portfolio Lease renewals: % escalation on expiry rentals 9% 8% 7.7% 7% 6.5% 6.2% 6% 5% 4.7% 4% 3% 2% 1% 0% Retail Office Industrial Average
Slide 26: New leases concluded against budget
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 26 6 Property portfolio New leases concluded: Ratio of rental concluded against budget 120% 114% 102% 105% 100% 93% 80% 60% 40% 20% 0% Retail Office Industrial Average g
Slide 27: Contracted rental escalation profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 27 7 Property portfolio Contracted rental escalation profile 9.4% 9.2% 9.2% 9.0% 8.8% 8.6% 8.4% 8.2% 8.2% 8.1% 8.1% 8.0% 7.8% 7 6% 7.6% 7.4% Retail Offices Industrial Total
Slide 28: Lease expiry profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 28 8 Property portfolio Lease expiry profile 100% 100% 91% 90% 84% 80% 72% 70% 60% 53% 50% 40% 31% 30% 24% 22% 19% 20% 12% 7% 7% 9% 10% 0% Vacant Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Beyond March 2017 GLA Cumulative
Slide 29: New leases and renewals
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 29 9 Property portfolio New leases and renewals ((for the six months ended 30 September p 2011)) Total contract value R252.7 million Total rentable area 94 847m² Tenant retention 57% Largest contracts concluded Contract Lease value duration Tenant P
Slide 30: Vacancy profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 30 0 Property portfolio Vacancy profile (% of gross rental) 10% 9% 8.9% 8% 7.9% 6.9% 7% 5.8% 1.0% 6% 5 9% 5.9% 5% 1.9% 4% 3.9% 3% 2% 1% 0% Retail Offices Industrial Total Trading vacancy Development vacancy
Slide 31: Vacancy profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 31 1 Property portfolio Vacancy profile (% of gross rental) 10% 8.9% 9% 7.9% 8% 7.0% 7.1% 6.9% 7% 1.0% 6% 5.8% 5.6% 5.3%5.1% 5.0% 5 0% 5 9% 5.9% 5% 1.9% 4.3% 4.2% 4% 3% 3 9% 3.9% 2% 1% 0% Retail Offices Industrial Total September p 2010 March 2011 S
Slide 32: Individual properties vacancy profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 32 2 Property portfolio Individual properties vacancy profile (% of GLA) (vacancy > 1 000m²) Parow Industrial Park (25%) Midrand Allandale Park (21%) Randburg Square (8%) Jhb Eva Park (37%) Botbyl Subaru Bulding Hatfield (84%) Randburg Trevallyn (11
Slide 33: Ratio of gross recurring cost to property revenue
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 33 3 Property portfolio Ratio of gross recurring cost to property revenue: stable portfolio 40% 37.2% 34.4% 34.2% 35% 32.8% 3 8% 32 3% 32.3% 32 3% 32.3% 30% 25% 20.4% 20.4% 19.3% 19.4% 20% 18.1% 18.8% 15% 10% 5% 0% Mar 2007 Mar 2008 Mar 2009 Mar 201
Slide 34: Recurring expense categories
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 34 4 Property portfolio Recurring expense categories Sundry Expenses Asset 4% Management Fee Bad Debt 3% Insurance 3% Premiums 3% Maintenance & Contracts 5% Government Property Services Management Fee 47% 8% Cleaning & Security 10% Rates & Taxes 17%
Slide 35: Bad debt and arrears analysis
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 35 5 Property portfolio Bad debt and arrears analysis R'000 Impairment allowance 1 April 2011 9 911 Allowance for receivable impairment for six months 4 674 Receivables written off as uncollectable (243) Impairment allowance 30 September 2011 per st
Slide 36: Property managers
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 36 6 Property portfolio P Property t managers Outsourced Vukile has worked on an outsourced property management model since listing. Tender During the first half of this year 24 companies were approached to submit data, and ultimately six companies
Slide 37: Acquisitions and potential sales
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 37 7 Property portfolio A Acquisitions i iti Pipeline activity of R523 m retail developments being evaluated Potential sales Property Sector GLA (m²) AAD (Goodwood) Industrial 3 024 y Subaru Building Botbyl g Hatfield ((transferred 4 Nov 11)) Retail
Slide 38: Re-developments / upgrades
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 38 8 Property portfolio Re-developments / upgrades Randburg Bellville: Louis Square Grosvenor Malamulele: Leipoldt maintenance Oshakati: Corner: Mala Plaza Hospital and upgrade: Standard Bank upgrade extension upgrade Phase 1 redevelopment Approved
Slide 39: Strategic priorities for previous year
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 39 3 9 Strategic priorities for previous year Appointment of new CEO 1 August Further acquisitions of retail properties in selected low Giyani Plaza income areas Broadening g the shareholder PIC transaction base Revamps and upgrades to Randburg, Gro
Slide 40: Prospects
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 40 0 Prospects Economy remains vulnerable to local and international pressures Retail assets performing adequately with no anticipated large vacancies for remainder of financial year Industrial still challenging but there is an increase in activity
Slide 41: Acknowledgements
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 41 1 Acknowledgements B d Board Service providers JHI Broll Hermans & Roman Kuper Legh Old Mutual Investment Group Property Investments Brokers and developers p Tenants Investors Funders Colleagues
Slide 42: The Vukile Team
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 42 2 The Vukile Team – over 300 years of experience Laurence Rapp CEO Johann Neethling Company Secretary (8 years property experience xperience)) Mike Potts Ina Lopion Financial Director Executive Director: Asset (10 years property Management SALES
Slide 43: Future strategy
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 43 3 Future strategy VISION “Through Through our dedicated team and network of trusted partners, partners Vukile aspires to be a leading property company by providing a top quality experience for our tenants and their customers through the active ma
Slide 44: Values
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 44 4 Values W actt with We ith integrity i t it andd show h respectt to t allll people l We make a difference as a team O clients Our li t are att the th centre t off everything thi we do d We are passionate about success W deliver We d li results l
Slide 45: Critical success factors
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 45 5 Critical success factors • Value enhancing deals • Upgrades to existing properties, acquisitions, JV developments, Grow the portfolio portfolio acquisitions and corporate activity • Current strong pipeline of potential retail opportunities bein
Slide 46: Critical Success Factors
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 46 6 Critical Success Factors •Introduce additional bank funders Minimise funding f di costs and •Explore alternate funding structures and durations refinance risks •Remain conservatively hedged •Introduce more flexibility across instruments, provid
Slide 47: VUKILE!
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 47 7 Out of the blocks … VUKILE!
Slide 48: Proposed acquisition of R1.5 bn portfolio
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 48 8 Proposed acquisition of R1.5 bn portfolio G Grows the th value l off the th portfolio tf li by b 25% Low risk acquisition due to management knowledge of the properties Improves quality, quality especially of the office portfolio (+29% by R/m²)
Slide 49: Financing the deal
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 49 9 Financing the deal P Proposed d ffunding di structure t t to t include i l d Debt of ±36% Look to introduce new bank funders Exploring alternate structures Equity of ±64% Issue of new units Evaluating alternatives Broaden the shareholder base I
Slide 50: High level impact: geographic spread
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 50 0 High level impact Geographic spread Existing Vukile Combined Acquisition portfolio portfolio m² % m² % m² % Gauteng 120 438 66 511 010 55 631 448 57 KwaZulu Natal 23 314 13 161 097 17 184 411 17 Western Cape 33 377 18 55 232 6 88 609 8 Namibia
Slide 51: High level impact: vacancies and expiry profile
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 51 1 High level impact Vacancies and expiry profile Existing Vukile Combined Acquisition portfolio portfolio m²² % m²² % m²² % Vacant and mothballed 26 441 14 68 508 7 94 949 9 To Mar 2012 16 383 9 220 566 24 236 949 21 To Mar 2013 49 488 27 200 979
Slide 52: High level impact: tenant spread
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 52 2 High level impact Tenant spread Existing Vukile Combined Acquisition portfolio portfolio m²² % m²² % m²² % Government parastatals and national tenants 70 050 38 421 183 45 491 233 44 Oth Other 87 192 47 440 715 47 527 907 47 Vacant 26 441 14 68
Slide 53: High level impact: R/m²
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 53 3 High level impact R/m² Acquisition Current portfolio (purchase (market value Combined price) i ) 30 SSep 11) portfolio tf li R'm R/m² R'm R/m² R'm R/m² Retail 222 6 619 3 153 7 091 3 375 7 058 Offices 1 243 8 714 1 733 7 676 2 976 8 078 Industr
Slide 54: Deal process and timelines
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 54 4 Deal process and timelines DD and d external t l valuations l ti already l d completed l t d Architectural review of key properties underway to identify revamp/upgrade potential Financial effects to be published on or around 30 November 2011 Ci
Slide 55: Questions and Answers
VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS VUKILE PROPERTY FUND LIMITED INTERIM GROUP RESULTS 5 5 55 Q Questions ti and d Answers A