Sa Corporate Real Estate Ltd. · JSE:SAC
Sa Corporate Real Estate — FY2017 Earnings Presentation
70 slides from Sa Corporate Real Estate's earnings presentation, March 2018
Slide 1: SA Corporate Year End 2017 Results Presentation
SA Corporate Year End 2017 Results Presentation February / March 2018
Slide 2: Agenda
Agenda • Highlights Rory Mackey • Financial Performance Antoinette Basson • South African Portfolio Review Rory Mackey • Unlocking Value in the Retail Portfolio Rory Mackey • Improving the Quality of the C&I Portfolio Rory Mackey • Zambian Portfolio Performance Rory Mackey • Building the Afhco Busin
Slide 3: Highlights
HIGHLIGHTS RORY MACKEY REAL ESTATE AFHCO Africa Housing Company
Slide 4: High Level Review
High Level Review • Distribution Themes • Full year distribution growth of 4.4% • NPI growth of 13.7%; LFL increasing by 5.7% • Industrial portfolio LFL NPI growth of 5.9%; strong retentions of 83.9%; low vacancies of 1.5% • Retail portfolio NPI growth of 14.2%; LFL increasing by 6.8%; strong retent
Slide 5: Financial Performance
FINANCIAL PERFORMANCE ANTOINETTE BASSON 5
Slide 6: Distribution
Distribution HISTORY (CPS*) GROWTH (%) 45.00 25.0% 40.00 35.00 22.54 20.0% 21.58 30.00 19.91 10.5% 18.02 15.0% 25.00 16.47 14.98 9.9% 9.4% 8.4% 20.00 10.0% 15.00 3.5% 22.38 4.4% 19.66 21.44 11.2% 10.00 15.17 16.28 17.68 5.0% 8.6% 9.1% 7.3% 5.7% 5.00 4.4% - 0.0% 2012 2013 2014 2015 2016 2017 2012 201
Slide 7: Distribution at a Glance
Distribution at a Glance Dec 2017 Dec 2016 % R’000 R’000 Variance Net Property Income - Like for Like 873,466 826,312 5.7 Net Property Income - Developments 335,736 279,894 20.0 Net Property Income - Acquisitions 144,584 31,666 356.6 Net Property Income - Buildings sold 16,730 67,138 (75.1) PY lease
Slide 8: Investment Properties Growth Analysis
Investment Properties Growth Analysis Portfolio growth underpinned by acquisitions, development expenditure and upward revaluation 18,000 17,500 ( 531 ) 17,000 667 16,833 439 16,500 1,058 16,000 15,500 178 15,022 15,000 14,500 14,000 13,500 Investment Acquisitions and Acquisitions Improvements / Dis
Slide 9: Growth in Assets and Market Capitalisation
Growth in Assets and Market Capitalisation R’bn cents 25.0 600 500 20.0 400 15.0 300 10.0 200 5.0 100 0.0 0 2013 2014 2015 2016 2017 Total Assets (Rbn) Market Cap (Rbn) NAV per share (cents) Share Price (cents) 9
Slide 10: Net Asset Value
Net Asset Value 550.0 0.7 1.1 520.0 13.9 (1.8) (21.6) 22.5 490.0 514.1 460.0 499.3 430.0 400.0 Opening NAV Revaluation Net exposure Net impact of Other Non- Distributions Distributable Closing NAV 1 January of to Zambian share distributable paid earnings 31 December 2017 Investment JV issuance incom
Slide 11: Capital Structure
Capital Structure Sources of Capital Debt finance sources are diversified between banks and institutional borrowings. 1.1% 2.9% 2.9% 11.5% Absa Standard Bank 9.1% Syndicated Loans Investec 27.5% * Nedbank State Bank of India Institutional and DFI Debts 3.3% # Equity 69.2% Equity Institutional and DF
Slide 12: Group Debt Structure – December 2017 (excl. fixes)
Group Debt Structure – at 31 December 2017 (excl. fixes) WAR of 8.4%, WAM of 1.67% and weighted average tenor of 2.7 years, which includes 2018 expiring debt without which the tenor would be 3.1 years. * Amortising, 6.88% Apr 2024 - 111 Term Loan (Syndication), 9.15% Dec 2022 700 300 Sep 2022 - Cros
Slide 13: Group Debt Structure – December 2017 (incl. fixes)
Group Debt Structure – at 31 December 2017 (incl. fixes) Maturity and interest rate profile of interest-bearing debt – WAR inclusive of fixes of 8.6%. Current LTV 32.4% * Amortising, 6.88% Apr 2024 - 111 Term Loan (Syndication), 9.35% Dec 2022 700 300 Sep 2022 - Cross Currency (US$), 3.98% 124 Sep 2
Slide 14: Group Interest Rate Swap Profile – December 2017
Group Interest Rate Swap Profile – 31 December 2017 Rate of 6.88% (weighted swap margin 0.205%) and weighted average tenor of 3.3 years. 68.82% of variable rate debt hedged by interest rate swaps. 70.09% of effective debt fixed (incl fixed rate debt) 240 8.45% 2023 1,234 7.45% 2022 650 7.60% 2021 1,
Slide 15: Group Net Cash Flow
15 - Rm 500 1,000 1,500 2,000 (500) (2,000) (1,500) (1,000) Balance 31 December 2016 191 Cash generated from operations 1,392 Net finance costs (362) Distributions paid (1,088) Net Acquisition of Property, Plant and Equipment Acquisition of subsidiaries (13) (102) Acquisitions and Improvements to In
Slide 16: South African Portfolio Review
SOUTH AFRICAN PORTFOLIO REVIEW RORY MACKEY 16
Slide 17: Overview – Sectoral Analysis
Overview – Sectoral Analysis (excl. Rest of Africa JV) Sectoral Profile (% of GLA) 2% 23% 15% Industrial 5% SA Corporate excluding Retail Zambian JV Dec 48% Dec Commercial • 196 Properties 4% 2017 2016 53% • Total GLA 1,537,063m2 AFHCO • Total Portfolio R16.4bn 27% (Dec-16: R15.0bn) Storage • Exclud
Slide 18: Property Portfolio
Property Portfolio Acquisitions, Disposals and Developments 1,800 12.00% 1,600 10.00% 1,400 1,200 8.00% 1,000 6.00% 800 10.6% 10.1% 9.6% 10.5% 8.9% 600 8.2% 4.00% 400 2.00% 200 1,205 1,450 1,650 539 978 - 0.00% Committed Acquisitions Contracted Disposals Contracted Group WACC Developments Acquisitio
Slide 19: Executed Acquisitions
Executed Acquisitions Forward Purchase price Property / Listed Property Investment Sector Yield % (R000) Transfer date Steelport Residential, Steelport Residential 10.3 79,781 Jan-17 Friendship Town, Midrand Residential 11.0 72,047 Feb-17 Long Street Precinct Bulk, Jeppestown Residential # 29,658 Fe
Slide 20: Contracted Acquisitions
Contracted Acquisitions Contracted and unconditional Forward Purchase price Expected Property Sector Yield % (R000) transfer Northgate Heights Phase 1E, Northgate Residential 10.0 3,452 * Jan-18 Calgro M3 Developments Phases 1-5 Residential 10.7 759,420 Feb-18 - Nov-18 Northgate Heights Phases 2 & 3
Slide 21: Disposals
Disposals Executed Exit Yield Gross price Property Sector % (R000) Transfer date 35 Circuit Road, Westmead Industrial 7.6 15,000 Jan-17 Pine Crest Shopping Centre, Pinetown 1 Retail 8.2 406,959 Mar-17 36 Wankel Street, Jet Park Industrial 7.1 37,000 May-17 African Diamond, Johannesburg CBD Residenti
Slide 22: Lease renewals - % Rental Reversions
Lease renewals - % Rental Reversions 8.0% 6.0% 5.5% 4.0% 2.0% 0.8% 0.2% 0.0% -2.0% -2.4% -4.0% -6.0% -8.0% -10.0% -12.0% -12.3% -14.0% Industrial Retail Commercial Total (excl. AFHCO) AFHCO Retail / Commercial 12 months to December 2017 No reversions have been disclosed for the Storage sector as lea
Slide 23: Contracted Rental Escalation Profile
Contracted Rental Escalation Profile 9.5% 9.0% 9.0% 8.5% 8.0% 8.0% 7.9% 7.8% 7.6% 7.5% 7.0% 6.5% Industrial Retail Commercial Total (excl AFHCO) AFHCO Retail / Commercial Residential increases were flat due to marketing interventions, rebasing rentals and the introduction of a loyalty programme. 23
Slide 24: Group Lease Expiry – Traditional Portfolio
Group Lease Expiry – Traditional Portfolio 30.0% 120.0% 25.4% 25.0% 100.0% 23.1% 20.0% 80.0% 16.2% 16.3% % of GLA 13.7% 15.0% 60.0% 10.0% 40.0% 5.0% 20.0% 3.0% 2.3% 0.0% 0.0% Vacancies Monthly 2018 2019 2020 2021 2022+ % of GLA 2.3% 3.0% 23.1% 16.2% 13.7% 16.3% 25.4% Cumulative 2.3% 5.3% 28.4% 44.6%
Slide 25: Group Lease Expiry – Afhco Retail / Commercial
Group Lease Expiry – Afhco Retail / Commercial 30.0% 120.0% 25.1% 25.0% 100.0% 21.9% 20.0% 80.0% 17.8% % of GLA 15.0% 60.0% 11.1% 11.4% 10.6% 10.0% 40.0% 5.0% 20.0% 2.1% 0.0% 0.0% Vacancies Monthly 2018 2019 2020 2021 2022+ % of GLA 2.1% 11.1% 17.8% 11.4% 25.1% 10.6% 21.9% Cumulative 2.1% 13.2% 31.0
Slide 26: Traditional Vacancy Profile
Traditional Vacancy Profile (% of GLA) 12.0% 11.1% 10.0% 8.8% 8.0% 6.4% 6.0% 4.5% 4.5% 4.0% 3.1% 2.7% 2.3% 2.3% 2.0% 1.5% 1.1% 0.3% 0.0% Industrial Retail Commercial Total December 2015 December 2016 December 2017 26
Slide 27: Traditional Vacancy Profile
Traditional Vacancy Profile (% of gross rental) 9.0% 8.0% 8.0% 7.0% 6.0% 6.0% 5.4% 5.0% 4.0% 3.3% 2.8% 3.0% 3.0% 2.4% 2.5% 2.4% 2.0% 0.9% 1.0% 1.0% 0.3% 0.0% Industrial Retail Commercial Total December 2015 December 2016 December 2017 27
Slide 28: Afhco Vacancy Profile
Afhco Vacancy Profile (Residential % of Units / Retail & Commercial % of GLA) 12.0% 10.4% 10.0% 8.7% 8.0% 7.3% (5.7% *) 7.0% 6.0% 5.6% 5.3% 4.8% 4.0% 3.4% 2.1% 2.0% 0.0% Retail / Commercial Residential Total December 2015 December 2016 December 2017 * Excluding the vacant acquisition into the Calgro
Slide 29: Afhco Residential Vacancies
Afhco Residential Vacancies (excluding developments in initial tenanting) 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2017 2018 29
Slide 30: Arrears
Arrears Tenant receivables as a % of rolling 12 months income 4.5% 4.0% 3.9% 3.6% 3.5% 3.0% 3.0% 2.8% 2.5% 2.4% 2.0% 1.5% 1.0% 0.5% 0.0% Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 30
Slide 31: Unlocking Value in the Retail Portfolio
UNLOCKING VALUE IN THE RETAIL PORTFOLIO RORY MACKEY 31
Slide 32: Unlocking Value in the Retail Portfolio
UNLOCKING VALUE IN THE RETAIL PORTFOLIO STRENGTHS • Community and neighbourhood centre outperformance • Dominant grocer offering • Branded outlet strategy REDEVELOPMENT PROGRAMME • Addressing accessibility bottlenecks • Enhanced convenience offering • Eat-out and fast food destination for the commun
Slide 33: Strengths
STRENGTHS YTD Sept 2017 Source: MSCI Real Estate 33
Slide 34: Grocer offering represents 30.65% of retail GLA
STRENGTHS Grocer offering represents Grocer offering focussed on 30.65% of the total retail GLA catchment’s demand Country Meat Dirk’s Meat Market 34
Slide 35: Branded outlet stores drive performance
STRENGTHS Branded outlet stores drive performance Springfield East Point Average trading density /m² = R 9 588 Average trading density /m² = R 7 054 35
Slide 36: Rejuvenation through redevelopment programme
STRENGTHS Rejuvenation and realignment with consumer demand through redevelopment programme 36
Slide 37: Redevelopment Programme
REDEVELOPMENT PROGRAMME Property Estimated Cost (Rm) @ Yield % East Point 499.0 9.0 Hayfields Mall 37.3 9.1 Umlazi Mega City (Phase 1, 2 & 3) 278.0* 9.5 Midway Mews 32.7 8.8 (ex Def capex – 11.8) Cambridge Crossing 61.8 9.0 (ex Def capex – 11.5) Completed Subtotal 908.8 9.1 Cullinan Jewel Shopping C
Slide 38: Addressing accessibility bottlenecks
REDEVELOPMENT PROGRAMME Addressing accessibility bottlenecks Cambridge Crossing Comaro Crossing 38
Slide 39: Enhanced convenience offering
REDEVELOPMENT PROGRAMME Enhanced convenience offering New 500m² Clicks, Comaro Crossing Upgraded Sorbet, Cambridge Crossing Cambridge Medical Suites, Cambridge Crossing East Point Bluff 39
Slide 40: Eat-out & fast food destination for the community
REDEVELOPMENT PROGRAMME Eat-out & fast food destination for the community Off the Grid, Cambridge Crossing New Burger King Drive Thru – Comaro Crossing Cambridge Crossing New Chicken Licken Drive Thru – Midway Mews Pizza Vino, Cambridge Crossing 40
Slide 41: Environment designed to meet & be seen
REDEVELOPMENT PROGRAMME Environment designed to meet & be seen 41
Slide 42: New and Installed Solar Photovoltaic Projects
REDEVELOPMENT PROGRAMME New and Installed Solar Photovoltaic Projects Property Size(kW) Cost(Rm) Yield(%) Installed Projects Comaro Crossing 380 5.9 12.8 Midway Mews 200 3.1 13.1 Willow Way 400 4.5 14.5 Rhodesdene 200 2.8 13.1 Montana Crossing 900 9.9 14.2 New Projects Forest Road Design & Décor 350
Slide 43: Repositioning Morning Glen Shopping Centre to Mixed Use Node
REDEVELOPMENT PROGRAMME Repositioning Morning Glen Shopping Centre to a Mixed Use Node – “LIVE, WORK, PLAY” Re-tenanting of existing space with quality tenants Proposed 7 storey residential development of 208 units. including: Direct access to the shopping centre having it’s own • Pick ‘n Pay upgrad
Slide 44: Improving the Quality of the C&I Portfolio
IMPROVING THE QUALITY OF THE C&I PORTFOLIO RORY MACKEY 44
Slide 45: Commercial Dec 2014 vs Dec 2017
Commercial Dec 2014 Dec 2017* 11 properties GLA = 54 269 m2 19 properties Sales 8.37% Vacancy GLA = 85 575 m2 2 properties 12.7% Vacancy Residential Redevelopment GLA = 5 287 m2 10.2% Yield * Excluding contracted and unconditional disposals 45
Slide 46: Industrial Dec 2014 vs Dec 2017
Industrial Dec 2014 Dec 2017* 93 properties 83 properties Sales (Avg. Exit Yield=8.32%) GLA = 793 395 m2 GLA = 731 015 m2 # 1.4% Vacancy 0.9% Vacancy Avg. Rental = R 52.16/m2 Avg. Rental = R 62.16/m2 IHS Redevelopment * Excluding contracted and unconditional disposals # Including IHS extension 46
Slide 47: Zambian Portfolio Performance
ZAMBIAN PORTFOLIO PERFORMANCE RORY MACKEY 47
Slide 48: Zambian Portfolio Performance
Zambian Portfolio Performance East Park Mall Acacia Office Park Jacaranda Mall Physical address Cnr Thabo Mbeki Cnr Thabo Mbeki and Great East Road, Cnr Kabwe and Mushili Road, Ndola and Great East Lusaka Road, Lusaka Office Retail Category Retail % of total portfolio 56.3% 20.3% 23.4% GLA GLA (m2)
Slide 49: East Park Mall Development Master Plan
East Park Mall Development Master Plan 49
Slide 50: Building the Afhco Business
BUILDING THE AFHCO BUSINESS RORY MACKEY 50
Slide 51: Under Representation of Residential Property in SA Listed Sector
Under Representation of Residential Property in the SA Listed Property Sector SA Residential is circa 1% 51
Slide 52: Residential Rental Growth Has Historically Exceeded Inflation
Residential Rental Growth Has Historically Exceeded Inflation Weighted Average YoY Rental Growth Rates vs Inflation Rates 8% 8% 7% 7% 7% 7% 7% 7% 7% 6% Source: PayProp, Rental Index 2017 6% 5% 5% 5% DEC-16 JAN-17 FEB-17 MAR-17 APR-17 MAY-17 JUN-17 Rental Growth (YoY) Inflation (YoY) 52
Slide 53: Upper Price Brackets Growing Ahead of the Lower Brackets
Upper Price Brackets Growing Ahead of the Lower Brackets Distribution of Rentals Within Price Bands 35.00% 30.00% 25.00% Source: PayProp, Rental Index 2016 Annual Report 20.00% 15.00% 10.00% 5.00% 0.00% <R1 000 R1 000 - R2 500 R2 500 - R5 000 R5 000 - R7 500 R7 500 - R10 000 R10 000 - R15 000 >R15 0
Slide 54: High Earners Spend Disproportionately More on Rent
High Earners Spend Disproportionately More on Rent Rent to Income Ratio per Rental Bracket 35.50% 34.00% 31.10% 30.00% 27.30% 26.00% Source: PayProp, Rental Index 2017 R1 000 - R2 500 R2 500 - R5 000 R5 000 - R7 500 R7 500 - R10 000 R10 000 - R15 000 >R15 000 54
Slide 55: Afhco Leasing Lessons
Afhco Leasing Lessons • Price is paramount • Customer service is King 55
Slide 56: Afhco Leasing Lessons (continued)
Afhco Leasing Lessons (continued) • Market is vulnerable to development stock influxes • Portfolio attractiveness is dependent on brand equity 56
Slide 57: Afhco Leasing Lessons (continued)
Afhco Leasing Lessons (continued) • Crime hotspots move • Prime contributors to product are apartment condition, maintenance and common area cleanliness 57
Slide 58: Afhco Leasing Lessons (continued)
Afhco Leasing Lessons (continued) • Insatiable appetite for WIFI. (Usage per account = 40Gb per month; devices per account = 5) • Amenities differentiate. Recreational and gym facilities are preferred 58
Slide 59: Afhco Leasing Lessons (continued)
Afhco Leasing Lessons (continued) • Marketing interventions close vacancies 59
Slide 60: Residential Asset Management Heatmap
Residential Asset Management Heatmap 60
Slide 61: Strategy & Prospects
STRATEGY & PROSPECTS RORY MACKEY 61
Slide 62: Strategy
Strategy SA Corporate's objective in 2018 is to consolidate the Group’s asset base and position its portfolio for sustainable future growth This is to be achieved by: • Divesting industrial and commercial properties that are at risk of vacancies / -ve reversions. Will only take industrial redevelopm
Slide 63: Prospects
Prospects 2016 Base Effects R30.1m • Municipal Recoveries, reversals & back charges R20.1m • Lease Cancellation R10.0m 2017 Base Effects R30.0m • Municipal Recoveries, reversals & back charges R11.8m • Lease Cancellation R0.7m • Structuring Fee R10.7m • Safari cum Dividend R6.8m 2018 Guidance YE = F
Slide 64: Acknowledgements
ACKNOWLEDGEMENTS REAL ESTATE
Slide 65: Questions
QUESTIONS gf SAcoRPorate t AFHCO f REAL ESTATE Abc Housing 65
Slide 66: Additional Slides
ADDITIONAL SLIDES REAL ESTATE AFHCO Africa Housing
Slide 67: Trading Volumes and Liquidity
Trading Volumes and Liquidity SAC: closing price v monthly volume traded Value traded as % of market capital 600 200,000,000 100% 180,000,000 90% 500 160,000,000 EMI 80% 140,000,000 400 70% GRT 120,000,000 FFA 60% 300 100,000,000 RDF 80,000,000 50% HYP 200 SAC 60,000,000 FFB 40% VKE 40,000,000 RES 1
Slide 68: Overview – Geographical Analysis
Overview – Geographical Analysis (excl. Rest of Africa JV) Geographical Profile (% of GLA) 5% 5% 1% 5% 5% Gauteng KwaZulu Natal Dec Limpopo 26% Dec 30% 2016 2017 60% Western Cape 63% South Africa: Other Geographical Profile (% of Market Value) 2% 1% 5% 5% 2% Gauteng KwaZulu Natal 30% Dec 34% Dec Lim
Slide 69: Overview – Sectoral Analysis (Afhco)
Overview – Sectoral Analysis (Afhco) By GLA Retail / Commercial 24% (Dec 2016 56 Properties 32%) GLA 351,254m2 Market Value R3.4bn Residential Weighted average capitalisation rate 76% 10.3% (Dec 2016 68%) Afhco also owns residential bulk of 93,531m2 to be redeveloped 69
Slide 70: Overview – Tenant Grading by GLA – Traditional Portfolio
Overview – Tenant Grading by GLA – Traditional Portfolio Total Portfolio per sector C 12% 70% 64% A 61% 61% 60% 56% 57% 50% 40% 28% 27% 27% B 30% 24% 27% 17% 19% 20% 12% 10% 8% 0% Industrial Retail Commercial TOTAL A B C "A": large national tenants, large listed tenants, government and major franchi
SA Corporate Real Estate — FY2017 Earnings Presentation on 6ix