Delta Property Fund Limited · JSE:DLT
Delta Property Fund — FY2018 Earnings Presentation
55 slides from Delta Property Fund's earnings presentation, May 2018
Slide 1: Results Presentation for the year ended 28 February 2018
88 Field Street, Durban RESULTS PRESENTATION for the year ended 28 February 2018 www.deltafund.co.za Sleepy Hollow, Pietermaritzburg
Slide 2: Agenda
88 Field Street, Durban AGENDA 01 Introduction, Updates & Highlights 02 Financial Review 03 Portfolio Review 04 Conclusion 05 Questions & Answers 06 Annexures
Slide 3: Introduction, Updates and Highlights
INTRODUCTION, UPDATES AND HIGHLIGHTS Sandile Nomvete Liberty Towers, Durban
Slide 4: Introduction to Delta
INTRODUCTION TO DELTA Sovereign underpinned Most empowered fund Market JSE listed REIT capitalisation of Level 2 77.9% B-BBEE R4.3bn of revenue from Maintained on new sovereign tenants sector codes as at 28 February 2018 Dominant in Average property Assets under value of management of Pretoria & Dur
Slide 5: Update on Delta
UPDATE ON DELTA Update on lease negotiations Leasing policy promulgated in January 2018, favouring empowered landlords Bulk lease negotiations progressing in earnest with renewals expected before December 2018 Proactive and pragmatic engagement from the DPW and the user departments in structur
Slide 6: Update on Delta
UPDATE ON DELTA Capital recycling Disposal of non-strategic assets continued, portfolio down to 105 buildings from 112 as at 28 February 2017 Vacancies increased slightly Eskom consolidation in Sunninghill node Local supplier preferences impacting Free State portfolio Short-term performance
Slide 7: Corporate Highlights 2018
CORPORATE HIGHLIGHTS 2018 Distribution for FY2018 Distributable earnings Debtors well managed at for FY2018 97.24 R691.6 18.0 days cents per share million Vacancy at Renewed Concluded 11.8% 93 144m2 53 774m² SAPOA: 11.2% of existing leases of new leases RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEB
Slide 8: Financial Review
FINANCIAL REVIEW Shaneel Maharaj Delta Towers, Durban
Slide 9: Financial Highlights 2018
FINANCIAL HIGHLIGHTS 2018 Loan to value of Successfully refinanced Fixed debt of and settled 41.3% R941m 85.4% (Feb 2017: 41.5%) of debt facilities (Feb 2017: 85.1%) Debtors well managed at Property operating Interest cover ratio margin at 18.0 days 73.5% 2.4 in tough economic environment (Feb 2017:
Slide 10: Five Year Review
FIVE YEAR REVIEW 2018 2017 2016 2015 2014 Revenue (R’000) 1 564 053 1 617 344 1 247 582 1 009 207 654 023 Net property income (R’000) 1 149 885 1 153 341 925 531 764 884 502 503 Finance costs (R’000) 482 179 470 580 412 713 316 380 151 149 Cost to income ratio - gross method 26.5% 28.8% 26.4% 26.0%
Slide 11: Distributable Income Statement - Non IFRS
DISTRIBUTABLE INCOME STATEMENT- NON IFRS 28 Feb 2018 28 Feb 2017 29 Feb 2016 Net property income (excl. straight line accrual) 1,147,865 1,148,478 898,581 Administration expenses (53,329) (68,169) (82,744) Realised foreign exchange loss - - (39) Net finance costs (462,483) (443,412) (386,120) Divide
Slide 12: Growth in Distributions
GROWTH IN DISTRIBUTIONS HISTORIC DISTRIBUTION PER SHARE (CENTS/SHARE) 7.1% 0% H1 – Interim 8.0% 15.6% H2 – Final 97.24 97.24 Total – Full year 90.8 84.1 72.7 7.1% (1.0)% 8.7% 7.1% 1.0% 9.6% 7.2% 23.1% 51.3 50.8 47.9 45.9 46.4 44.1 42.9 40.2 40.0 32.5 23.7 FY2013 H1 Aug-13 H2 Feb-14 FY2014 H1 Aug-14
Slide 13: Distributable Earnings Bridge
DISTRIBUTABLE EARNINGS BRIDGE R’000 850,000 15 896 3 378 14 072 257 (2) (19 070) (97 096) 800,000 96 483 750,000 691 641 700,000 677 724 650,000 600,000 550,000 500,000 450,000 400,000 H2 Feb 2017 Existing portfolio Admin cost saving Prior year retained Other income Antecedent Dividends received Net
Slide 14: Like-for-like Net Property Income Analysis
LIKE-FOR-LIKE NET PROPERTY INCOME (NPI) ANALYSIS Amount Description % (R’000) NPI Feb 2017 (excl. straight line rental income accrual) 1 148 478 Increased NPI from base portfolio held at 28 Feb 2017 96 483 8.4% NPI attributable to disposals and non-core assets FY17 (97 096) (8.5)% NPI Feb 2018 (excl
Slide 15: Summarised Statement of Financial Position
SUMMARISED STATEMENT OF FINANCIAL POSITION R’000 28 Feb 2018 28 Feb 2017 Change % ASSETS Non-Current assets 10 919 425 10 448 271 15,0% Investment property 10 535 000 10 053 921 15,8% Fair value of property portfolio 10 342 418 9 861 449 16,0% Straight line rental income accrual 192 582 192 472 4,3%
Slide 16: Net Asset Value Bridge
NET ASSET VALUE BRIDGE RANDS 11.50 0.02 0.01 (0.98) 0.37 11.00 0.83 10.50 (0.11) 10.06 10.00 9.91 9.50 28 Feb 2017 Contribution from Fair value of Fair value of financial Contribution of Dividend paid Disposals 28 Feb 2018 operations investment property instruments & forex associate after gains impa
Slide 17: Debt Summary
DEBT SUMMARY As at 28 February 2018 Facility Type R’ m Weighted Ave. Rate Floating bank facilities 3,483 9.2% Fixed bank facilities 796 8.9% Revolving bank facilities 629 9.1% Total borrowings, net of accrued interest 4,908 9.2% Accrued interest 64 - Debt structuring fees (19) - TOTAL 4,953 Total fi
Slide 18: Graphical Debt Analysis
GRAPHICAL DEBT ANALYSIS SOURCE OF DEBT TOTAL: R4,908M DEBT CLASSIFICATION TOTAL: R4,908M 2.9% 12.8% Floating Bank Facilities (R3,483m) ZAR Banking Facilities (R4,767m) 16.2% Fixed Bank Facilities (R,796m) USD Banking Facilities (R141m) Revolving Bank Facilities (R,629m) 97.1% 71.0% FIXED DEBT BREAKD
Slide 19: Debt Expiry Profile
DEBT EXPIRY PROFILE Fixed Bank Facilities Floating Bank Facilities Revolving / Liquidity Bank Facilities Swap Contracts 1,700 1,600 1,500 1,400 1,300 1,200 1,100 Rand (million) 1,000 900 800 700 600 500 400 300 200 100 0 28-FEB-19 28-FEB-20 28-FEB-21 28-FEB-22 RESULTS PRESENTATION FOR THE YEAR ENDED
Slide 20: Debt Commentary
DEBT COMMENTARY The weighted average all-in cost of funding is 9.2% (2017: 9.2%) 85.4% (2017: 84.1%) of borrowings fixed for an average period of 1.5 years (2017: 2.2 years). The average debt facility expiry period is 1.5 years (2017: 1.9 years) Interest cover ratio at 2.4 (2017: 2.5) Inte
Slide 21: Portfolio Review
PORTFOLIO REVIEW Otis Tshabalala Embassy Building, Durban
Slide 22: Operations Highlights FY2018
OPERATIONS HIGHLIGHTS FY2018 A distinct focus on sovereign Rental income attributed to Total lease renewals in a tenants sovereign tenants challenging environment 72.8% 77.9% 93 144m² being sovereign tenants (by GLA) Vacancies of Total new leases concluded (GLA) 11.8% 53 774m² 227 550m² Bulk lease r
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 36 404 721 KwaZulu-Natal 17 278 404 Free State 17 85 507 Mpumalanga 11 30 251 Limpopo 7 44 885 Limpopo Northern Cape 7 37 275 Western Cape 5 41 889 Mp
Slide 24: Government Precinct | Pretoria
GOVERNMENT PRECINCT | PRETORIA RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018 24
Slide 25: Portfolio Breakdown
PORTFOLIO BREAKDOWN Office - Office - Other Industrial Retail Total Sovereign * Number of properties 77 21 4 3 105 Gross lettable area (m2) 637,246 251,208 40,258 23,716 952,428 Vacancy (%) 7.2% 23.0% 19.0% 3.1% 11.8% Value R8.3bn R2.7bn R0.2bn R0.3bn R11.5bn Average rental (R/m2) # 118.4$ 86.2 53.1
Slide 26: Sectoral Split
SECTORAL SPLIT GLA - BY BUILDING GLA - BY TENANT* 4.2% 2.5% 6.9% 3.9% Office - Sovereign (66.9%) Office - Sovereign (72.8%) Office - Other (26.4%) 16.4% Office - Other (16.4%) 26.4% Industrial (4.2%) Retail (6.9%) 66.9% Retail (2.5%) Industrial (3.9%) 72.8% RENTAL - BY BUILDING RENTAL - BY TENANT 2.
Slide 27: Detailed Tenant Breakdown
DETAILED TENANT BREAKDOWN TENANT PROFILE BY GLA TENANT PROFILE BY RENTAL 1.9% 3.9% 7.4% Office - Sovereign National Government 6.9% 12.8% 37.5% 38.2% 16.4% Office - Other Provincial Government 6.9% Retail Local Government 6.6% 72.8% 11.9% Industrial State-Owned 77.9% Enterprise 12.1% 21.6% 16.0% Exc
Slide 28: Update on Sovereign Tenants
UPDATE ON SOVEREIGN TENANTS Update on the DPW Leasing Policy The policy was signed by the Minister of DPW on 31st January 2018. The policy takes into account the following 3 axes - Ownership, Management and Board Control. • Delta scores highly on the Management and Board Control The Policy fav
Slide 29: Leasing Update
LEASING UPDATE Major leases concluded A total of 95 leases were renewed measuring 93,144m2 for the value of R309 million. Our most notable renewals are : Building Tenant GLA Rate/m² Escalation Term Capital Towers Dept. of Health 13 484 m² R 100.00 6.0% 24 months Smart Exchange Durban Technology 7
Slide 30: Leasing Update cont.
LEASING UPDATE cont…. A total of 65 new leases were concluded measuring 53 774m2 for value of R 199million. Our most notable new leases are : Building Tenant GLA Rate/m² Escalation Term Embassy & Delta Ethekwini Municipality 14 680 m² R 80.00 7,5% 36 months Towers Delta Heights Compensation Fund 1
Slide 31: Reversion
REVERSION Total leases concluded 1 March 2017 – 28 February 2018 W.A Term W.A. Expiry W.A. Achieved Escalation / W.A. Esc. No of Leases Total Area (m2) (months) Rate (R / m2) * Rate (R / m2) * (Reversion) achieved Renewed leases # 95 93 144 33.07 107.46 101.36 (5.68%) 7.06% Renewals by Sector W.A. N
Slide 32: Geographical and Grade Split
GEOGRAPHICAL AND GRADE SPLIT GLA - BY BUILDING RENTAL - BY BUILDING Gauteng (42.5%) Gauteng (44.2%) Kwazulu-Natal (29.2%) Kwazulu-Natal (24.6%) Free State (9.0%) Limpopo (9.3%) Limpopo (4.7%) Free State (6.6%) Western Cape (4.4%) Western Cape (5.3%) Northern Cape (3.9%) Northern Cape (3.7%) Mpumalan
Slide 33: Acquisitions
ACQUISITIONS 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 by (or have
Slide 34: Disposal of Non-Core Assets
DISPOSAL OF NON-CORE ASSETS 34 Property Sector Location GLA Sales price (R) Transfer Date Transferred 35 403 316 000 000 Samora House Office - Sovereign Durban 6 920 45 238 000 07-Mar-17 Damelin Building Office - Other Durban 3 933 55 000 000 05-Jul-17 1 Ferreira Street Office - Other Nelspruit 961
Slide 35: 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 enhan
Slide 36: 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 37: Conclusion
CONCLUSION Sandile Nomvete Harlequins, Pretoria
Slide 38: Conclusion
CONCLUSION Focus on property fundamentals by renewing leases, reducing vacancies and refinancing debt Increase WALE, reduce gearing and improve credit rating Investment in both defensive and accretive capital – lease renewals and retention Recapitalise the business to inject much needed capi
Slide 39: Thank You
88 Field Street, Durban THANK YOU Questions & Answers www.deltafund.co.za Sleepy Hollow, Pietermaritzburg
Slide 40: Annexures
88 Field Street, Durban ANNEXURES www.deltafund.co.za Sleepy Hollow, Pietermaritzburg
Slide 41: Annexures
88 Field Street, Durban ANNEXURES 01 Executive management 02 Board of directors 03 Shareholder Profile 04 Snapshot 05 Disposal of non-core assets 06 Top 10 properties by value 07 GLA and vacancy reconciliation 08 Leasing Outlook 09 Lease Expiry Profile 10 Nodal Analysis
Slide 42: Executive Management
EXECUTIVE MANAGEMENT EXECUTIVE DIRECTORS Sandile Nomvete Otis Tshabalala Shaneel Maharaj Chief Executive Officer Chief Operating Officer Chief Financial Officer Exec Dep. & Prop Dev. Prop Dev. Prog, CCPP BCom (Acc) (Hons) Prog. (Wits & UCT (Univ. of Natal), CA(SA), Business Schools) Appointed: 7 Jun
Slide 43: Board of Directors
BOARD OF DIRECTORS Board Committees Non-Executive directors IC = Investment Committee, ARC = Audit, Risk and Compliance Committee, NRC = Nomination and Remuneration Committee, SETC = Social, Ethics & Transformation Committee * Denotes chairperson JB Mfundiso JJ Caswell Nooraya Magwaza Njeke Rampheri
Slide 44: Shareholder Profile
SHAREHOLDER PROFILE As at Feb 2018 Units held Holding Cornwall Crescent (Pty) Ltd 162 043 079 22.8% Bridge Fund Managers 84 077 968 11.8% Public Investment Corporation 70 435 240 9.9% Director's holdings 58 444 308 8.2% Coronation Fund Managers 50 645 566 7.1% Stanlib Asset Management 48 992 066 6.9
Slide 45: Snapshot
SNAPSHOT Listing date: 02 November 2012 JSE classification: Real Estate Holdings & Development Asset manager: Delta Property Asset Management (Pty) Ltd JSE code: DLT Asset management fee: 0.35% of enterprise value 28 February 2018 31 August 2017 28 February 2017 Shares in issue 711,844,486 710,632,1
Slide 46: 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 47: 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 48: GLA and Vacancy Reconciliation
GLA AND VACANCY RECONCILIATION Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%) As at 28 February 2017 112 981 777 105 119 10.7% Disposals (7) (36 013) (9 331) Acquisitions - - - Leases terminated - - 64 200 New letting of vacant space - - (47 763) Adjustments – Commission - - 6 157 House
Slide 49: 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 2018 National government 39 187 718 99.03 97.87 (1.17%) Provincial government 9 36 149
Slide 50: Lease Expiry Profile at February 2018
LEASE EXPIRY PROFILE AT 28 FEBRUARY 2018 TOTAL PORTFOLIO - BY GLA TOTAL PORTFOLIO - BY RENTAL Vacant (11.8%) Month to Month (18.1%) Month to Month (16.8%) 28 Feb 19 (33.9%) 28 Feb 19 (29.1%) 29 Feb 20 (13.9.%) 29 Feb 20 (12.2%) 28 Feb 21 (21.5%) 28 Feb 21 (19.6%) 28 Feb 22 (7.0%) 28 Feb 22 (5.4%) 28
Slide 51: Nodal Analysis | Pretoria
NODAL ANALYSIS | PRETORIA 1–8 13 Delta owned CGI Building properties (DPW Head Office) 14 9 AVN Building ABSA Towers (DPW occupied) 10 15 Momentum building State Theatre 16 11 Sammy Marks Treasury Shopping Centre 17 12 Intended new Telkom Towers municipal HQ RESULTS PRESENTATION FOR THE YEAR ENDED 2
Slide 52: Nodal Analysis | Durban
NODAL ANALYSIS | DURBAN 1 – 12 17 Delta owned SAHARA Park properties Kingsmead 13 18 Durban International South Beach Convention Centre 14 19 Durban City Hall Redefine Towers 15 20 Workshop Mall Commercial City (Old Railway Building Workshop) 16 21 Durban Marina Durban Bay House RESULTS PRESENTATION
Slide 53: Nodal Analysis | Bloemfontein
NODAL ANALYSIS | BLOEMFONTEIN 1 – 13 19 Delta owned “Fourth” Raadsaal properties 14 20 Hoffman Square Bloemfontein City Hall 15 21: Sand du Plessis Theatre CR Swart Building 16 22 Waterfront Mall Lebohang Building 17 23 Loch Logan Bram Fisher Building 18 24 Appeal Court Liberty Life Building RESULTS
Slide 54: Notes
NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018
Slide 55: Notes
NOTES RESULTS PRESENTATION FOR THE YEAR ENDED 28 FEBRUARY 2018