Redefine Properties Limited · JSE:RDF
Redefine Properties — H1 2013 Earnings Presentation
51 slides from Redefine Properties's earnings presentation, April 2013
Slide 1: Interim Results
We’re not landlords. We’re people. www.redefine.co.za INTERIM RESULTS For the six months ended 28 February 2013 1
Slide 2: Agenda
AGENDA OVERVIEW PROPERTY FINANCIAL PROSPECTS AND STRATEGY PORTFOLIO RESULTS Marc Wainer David Rice Andrew Konig Marc Wainer (CEO) (COO) (FD) (CEO) 2
Slide 3: Overview and Strategy
OVERVIEW AND STRATEGY Marc Wainer 3
Slide 4: Strategy
STRATEGY • Redefine is committed to being the property owner of choice (not to be the BIGGEST but THE BEST) • The company’s primary objective is to provide sustained and growing income for investors • Underscoring this is Redefine’s pursuit of revenue enhancing opportunities to: • Sustain increases
Slide 5: Redefine's Investment Proposition
REDEFINE’S INVESTMENT PROPOSITION • Attractive real yields Property Asset Porfolio (%) • Prospect of capital appreciation 7.3% • High visibility of earnings • Diversified portfolio 18.2% • Improved property portfolio quality • Limited speculative development • Geographically diversified • Element of
Slide 6: Understanding Our Strategy
UNDERSTANDING OUR STRATEGY We embarked on this strategy 18 months ago, which is centred on delivering sustained value to investors 6
Slide 7: Our Investment Philosophy
OUR INVESTMENT PHILOSOPHY • Bottom down process – deal turnaround times short • Investment criteria: o Tenants: long-term leases / consistent renewals o Property location: Key to attracting ideal tenant profile o Property size: Value in excess of R70 million which offer management economies of scale
Slide 8: Transformative Impact of the Strategy
TRANSFORMATIVE IMPACT OF THE STRATEGY • Investment proposition improved • Average value per property is now R83 million was R54 million • Single tenanted properties by value has increased to 31% • % of A grade properties by GLA has increased from 50% to 65% • % of properties outside Cape, Gauteng an
Slide 9: Changes to the Strategy
CHANGES TO THE STRATEGY • We have essentially stuck to the original plan • The acquisition of Fountainhead, however has resulted in Redefine switching a material portion of Hyprop into Fountainhead units • There is a shortage of well priced assets meeting Redefine’s investment criteria necessitating
Slide 10: Strategic Priorities for H2 2013
STRATEGIC PRIORITIES FOR H2 2013 • Reduce high exposure to government tenanted offices • Simplify RIN holding • Pursue pre-let / tenant demand driven development opportunities • Internalise recovery of electricity • Bed down Fountainhead property management • Focus on reducing cost of debt • Deepen
Slide 11: Property Portfolio
PROPERTY PORTFOLIO David Rice 11
Slide 12: Portfolio by Sector 28 February 2013
PORTFOLIO BY SECTOR 28 FEBRUARY 2013 VALUE % GLA % NUMBER OF PROPERTIES 19 34 62 35 45 100 36 82 31 Office Retail Industrial • Largest investment in offices • Approximately 30% of offices are government tenanted • GLA spread evenly across sectors • Total number of properties 244 • 73 Single tenanted
Slide 13: Future Portfolio by Sector
FUTURE PORTFOLIO BY SECTOR VALUE % GLA % NUMBER OF PROPERTIES 17 35 27 62 77 38 45 83 38 Office Retail Industrial Includes: • 90 Grayston Drive, 90 Rivonia (Webber Wentzel) and Matlosana Shopping Centre developments • Nicol Way Complex (Design Quarter) and East Rand Mall acquisitions Excludes: • Gov
Slide 14: Future Portfolio by Sector (continued)
FUTURE PORTFOLIO BY SECTOR (continued) • In line with the Strategy of acquiring / developing good quality properties in prime locations and disposing of Government occupied properties • Net result is a reduction of 21 properties with the portfolio value increasing to R23.7 billion and significant im
Slide 15: Portfolio by Geographical Spread - February 2013
PORTFOLIO BY GEOGRAPHICAL SPREAD - 28 FEBRUARY 2013 VALUE % GLA % PROPERTY COUNT 7 8 22 8 11 32 21 64 18 63 152 38 Gauteng Western and Eastern Cape KwaZulu-Natal Other • 64% of investment value in Gauteng - R13.8 billion 15
Slide 16: Future Portfolio by Geographical Spread
FUTURE PORTFOLIO BY GEOGRAPHICAL SPREAD VALUE % GLA % PROPERTY COUNT 10 10 20 8 10 30 18 64 19 61 37 135 Gauteng Western and Eastern Cape KwaZulu-Natal Other • Largest investment – Retail • Total number of properties reduced from 244 to 222 • Gauteng investment increases from R13.8 billion to R15.3
Slide 17: Average Property Value per Sector
AVERAGE PROPERTY VALUE PER SECTOR 94 M 114 M 117 M 100 000 000 87 M 120 000 000.00 90 000 000 100 000 000.00 80 000 000 67 M 70 000 000 80 000 000.00 67 M 60 000 000 Office Office 50 000 000 Retail 60 000 000.00 Retail Industrial Industrial 40 000 000 40 000 000.00 30 000 000 20 000 000 20 000 000.0
Slide 18: Acquisitions and Disposals
ACQUISITIONS AND DISPOSALS GLA Price Yield (m²) (R’m) (%) Acquisitions to 28 February 2013 6 750 64 8.57 Acquisitions to be transferred 98 488 2 459 7.77 TOTAL ACQUISITIONS 2 523 Disposals to 28 February 2013 36 936 208 9.68 Disposals to be transferred 31 617 116 10.58 TOTAL DISPOSALS 324 • East Ran
Slide 19: Tenant Grading
TENANT GRADING • A Grade tenants contribute: o 70% office income o 60% retail income o 60% industrial income • Occupy 65% of total GLA • Government, Banks and National Retailers contribute 53% of Portfolio income and occupy 51% of GLA 19
Slide 20: Leasing Activity
LEASING ACTIVITY • Vacancy % increased from 5.6% (173 752 m²) to 6.9% (214 167m²) by 40 415 m² • Major vacates were: o Premier Milling Building, Watloo (27 000m²) o Amalgamated Appliance property, Booysens (10 000m²) • Leases covering GLA of 528 872m² expired during the 6 month period • Tenant lease
Slide 21: Letting Activity for 6 Months
LETTING ACTIVITY FOR 6 MONTHS * Lease Renewals New Leases Renewal Area Ave rental Area renewed growth Average Lease let achieved Average Lease Sector (m²) (%) Escalation (%) (m²) (R/m² ) Escalation (%) Office 50 832 5.0 8.5 19 087 89 8.9 Retail 119 921 9.3 7.5 32 224 82 8.5 Industrial 88 736 4.6 8.8
Slide 22: Development
DEVELOPMENT Projected Initial Projected total cost Yield Start Property City (R’m) (%) Date Gauteng 90 Grayston Avenue, Sandown Johannesburg 504 8.5 March 2012 8.25 JD Distribution Centre, Rosslyn Tshwane 42 (50:50 JV / RDF Portion) March 2012 90 Rivonia Road, Sandown Johannesburg 906 8 April 2013 1
Slide 23: Develop for Long-Term Investment: Grayston Drive Sandton
DEVELOP FOR LONG-TERM INVESTMENT: GAUTENG – 90 GRAYSTON DRIVE SANDTON Before • Project: o Project: Redevelopment o Initial approved yield: 8.5% o Estimated capital cost: R505 million o Size: 19 343m² o Commencement date: March 2012 o Expected completion date: July 2014 After 23
Slide 24: Develop for Long-Term Investment: Rivonia Drive Sandton
DEVELOP FOR LONG-TERM INVESTMENT: GAUTENG – 90 RIVONIA DRIVE SANDTON Before • Project: o Project: Redevelopment o Initial approved yield: 8% o Estimated capital cost: R900 million o Size: 32 000 m² o Commencement date: April 2013 o Expected completion date: November 2015 After 24
Slide 25: Develop for Value-Uplift: Barbara Road, Isando
DEVELOP FOR VALUE-UPLIFT IN CURRENT PORTFOLIO: GAUTENG - 190 BARBARA ROAD, ISANDO • Project: o Project: Redevelopment o Initial approved yield: 9% o Estimated capital cost: R95 million o Size: 14 000m² o Commencement date: February 2013 o Expected completion date: May 2014 25
Slide 26: Develop for Long-Term Investment: Matlosana Mall, Klerksdorp
DEVELOP FOR LONG-TERM INVESTMENT: NORTH WEST – MATLOSANA MALL, KLERKSDORP • Project: o Project: New development o Initial approved yield: 8.25% o Estimated capital cost: R1 030 billion o Size: 64 000m² o Commencement date: April 2013 o Expected completion date: November 2014 26
Slide 27: Develop for Value-Uplift: Cape Town Standard Bank
DEVELOP FOR VALUE-UPLIFT IN CURRENT PORTFOLIO: CAPE TOWN – STANDARD BANK Before • Project: o Project: Redevelopment o Initial approved yield: 6.4% o Estimated capital cost: R495 million o Size: 57 058m² o Commencement date: June 2013 o Expected completion date: February 2015 After 27
Slide 28: Specialist Property Management Focus
SPECIALIST PROPERTY MANAGEMENT FOCUS • National and Regional Heads • Retail Analyst • Leasing Divisions by Sector • Property / Shopping Centre Managers • Accounting and administration support • Facilities management division • CRM – Tenant Relationship Manager • Call Centre • Development management
Slide 29: Specialist Property Management Focus
SPECIALIST PROPERTY MANAGEMENT FOCUS • Fountainhead Property Management o Management outsourced o 7 properties directly managed by Redefine o Executive and asset management through Manco o Full support of Redefine divisions 29
Slide 30: Financial Results
FINANCIAL RESULTS Andrew Konig 30
Slide 31: Half Year 2013 Financial Highlights
HALF YEAR 2013 FINANCIAL HIGHLIGHTS • Half year distribution 33.7 cents per unit at upper end of market guidance • Accounting treatment of Redefine International simplified • Total tangible assets R31 billion and Net Asset Value of 831 cents (2012: 801 cents) • Market capitalisation R30 billion • Pr
Slide 32: Corporate Structure
CORPORATE STRUCTURE Redefine Properties Limited 100% 49% 90% Listed Securities Redefine Properties Redefine Direct Property Hyprop 30%* International International Fund Portfolio Fountainhead 2% * Limited Managers Arrowhead 1% 4% ** 66% Cromwell Redefine Property 22% International Group P.L.C. * Fol
Slide 33: Distributions
DISTRIBUTIONS FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 Distributable Income Per linked unit Change (R’m) Cents % 2012 846 31.5 Less 2012 non-recurring (17) (0.6) Less dilution arising from new units (0.9) 2012 core recurring 829 30.0 Organic growth 2013 75 2.8 2013 recurring 904 32.8 9.3% Add 2013 n
Slide 34: Contributors to Distribution per Linked Unit
CONTRIBUTORS TO DISTRIBUTION PER LINKED UNIT - CENTS 45.0 2.4 - 2.3 6.6 - 13.7 35.0 3.4 37.3 33.7 30.3 25.0 Property Listed securities Fee and trading Administration Net interest Local International Distribution per portfolio income costs contribution contribution linked unit • Property portfolio pr
Slide 35: Drivers of Growth in Distributable Income
DRIVERS OF GROWTH IN DISTRIBUTABLE INCOME FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 1 000 980 1 - 12 -5 960 44 940 -2 - 53 920 15 R millions 900 96 880 930 860 840 820 846 800 2012 Net operating Listed securities Fee income Property trading Administration Share of Net finance Foreign 2013 Distributab
Slide 36: Distributable Income Statement Extract
DISTRIBUTABLE INCOME STATEMENT EXTRACT FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 2013 2012 Change (R’m) (R’m) % Net operating income from investment properties 1 030 934 10.3% Listed securities portfolio 181 183 (1.1%) Fee income 64 20 220.0% Property trading income 2 1 100.00% Total revenue 1 277 1
Slide 37: Analysis of Income from Core Properties
ANALYSIS OF INCOME FROM CORE PROPERTIES FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 Growth in income in spite of churn arising from restructure: 2013 2012 Change (R’m) (R’m) % Core property revenue 1 079 1 030 4.8% Core property costs (251) (251) 0.0% Property income from core property portfolio 828 77
Slide 38: Core Property Revenue Performance
CORE PROPERTY REVENUE PERFORMANCE FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 Letting activity drives the period’s core property growth of 4.8% as follows: Retail Industrial Total Contribution to Offices (R’m) (R’m) (R’m) (R’m) Growth 2012 property revenue 512 386 132 1 030 Add Letting activity 14 26 9
Slide 39: Core Property Expenditure Analysis
CORE PROPERTY EXPENDITURE ANALYSIS FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 Keeping the core property cost in line with the prior period achieved as follows: 2013 2012 Change (R’m) (R’m) % Net municipal charges 31 38 (18.4%) Net electricity charges 16 17 (5.9%) Operating costs 88 81 8.6% Property ma
Slide 40: Core Property Trading Efficiency
CORE PROPERTY TRADING EFFICIENCY FOR THE HALF YEAR ENDED 28 FEBRUARY 2013 Every R100 of property revenue converts into property income as follows: 2013 2012 2011 2010 Rand Rand Rand Rand Property revenue 100.0 100.0 100.0 100.0 Less property costs 23.3 24.4 24.9 26.8 Municipal charges net of recover
Slide 41: Abridged Statement of Financial Position
ABRIDGED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2013 2012 2013 Deconsolidated ASSETS (R’m) (R’m) Investment properties 21 601 21 281 Listed securities 2 664 5 640 Intangibles 4 609 4 659 Interest in associates 1 585 1 120 Other non-current assets 885 365 Current assets 428 829 Non-current
Slide 42: Net Asset Value
NET ASSET VALUE AT 28 FEBRUARY 2013 Net asset value (excluding deferred tax and non-controlling interests) has increased 850.0 830.0 -10 9 810.0 - 22 21 790.0 81 cents 770.0 831 801 750.0 730.0 752 710.0 NAV - February Local - 6 months International - 6 Dilution arising NAV - August RIN Local - 6 mo
Slide 43: Funding
FUNDING AT 28 FEBRUARY 2013 2013 2012 (R’m) (R’m) Bank borrowings 9 162 8 257 Debt capital market (Management target 30% of debt) 821 821 Third party borrowings 69 82 Local debt (average term 31 months) 10 052 9 160 International debt 181 181 Total borrowings 10 233 9 341 Loan to value (Management t
Slide 44: Abridged Cashflow
ABRIDGED CASHFLOW FOR THE HALF YEAR ENDED 28 FEBUARY 2013 Local International 2013 2012 (R’m) (R’m) (R’m) (R’m) Opening cash 58 293 351 660 Arising from deconsolidation of RIN - (243) (243) - Adjusted opening cash 58 50 108 660 Generated by operations 1 354 26 1 380 3 124 Net interest paid (379) (2)
Slide 45: Unitholder Profile
UNITHOLDER PROFILE Top 10 beneficial unitholders at end February 2013 Number of units % STANLIB 183 559 708 6.6 Government Employees Pension Fund 151 326 631 5.5 State Street 139 472 331 5.0 Old Mutual 128 998 280 4.7 Investec 112 278 031 4.1 Investment Solutions 104 636 782 3.8 Eskom Pension and Pr
Slide 46: Country Classification
COUNTRY CLASSIFICATION BENEFICIAL UNITHOLDERS Switzerland 1.1% United Kingdom 3.9% Balance 2.7% United States 6.6% South Africa 85.5% Change in international ownership: 2008: 1.4% 2009: 6.0% 2010: 10.1% 2011: 12.2% 2012: 14.9% 2013: 14.5% 46
Slide 47: Redefine and Asset Class Returns
REDEFINE AND ASSET CLASS RETURNS 12 MONTHS TO END FEBRUARY 2013 130.0% 125.0% 120.0% 115.0% 110.0% 105.0% 100.0% 95.0% RDF SA Listed Prop - J253 ALSI - J203 Bonds - ALBI Cash 47
Slide 48: Total Return
TOTAL RETURN FOR THE 12 MONTHS TO END FEBRUARY 2013 cents % Return Opening Price 1 March 2012 785.0 Closing Price 28 February 2013 980.0 Increase in price 195.0 24.9% H.2 2012 distribution 32.5 8.4% H.1 2013 distribution 33.7 Total return 261.2 33.3% 48
Slide 49: Prospects
A ReDerine Marc Wainer PROPERTIES PROSPECTS 49
Slide 50: Prospects
PROSPECTS REDEFINE’S 2013 DISTRIBUTION • Outlook for the economy remains subdued – no improvement in outlook for offices expected in the medium term • Restructuring of the core property portfolio to continue to bear fruit in 2013 • A strict focus on cost containment and sweating the assets will be m
Slide 51: Questions?
QUESTIONS? REDEFINE PROPERTIES