Burstone Group Limited · JSE:BTN
Burstone — Investec Property Fund — H1 2015 Earnings Presentation
46 slides from Burstone's earnings presentation, November 2014
Slide 1: Interim Results Presentation – 6 months ended 30 September 2014
Interim Results Presentation 6 months ended 30 September 2014 November 2014
Slide 2: Section 1: Highlights
Section 1 Highlights Out of the Ordinary® @ Investec Property Fund Limited
Slide 3: Financial highlights – results to 30 September 2014
Financial highlights – results to 30 September 2014 +8.3% 22.6% Conservative gearing and H1 distribution of 54.65cps 86% hedged All in cost of funding post 3.0% Vacancy remains low +1.7bn 8.2% IAPF rights issue and approved acquisitions Average escalations Weighted average debt +8.2% +1.7bn +R720m a
Slide 4: Distribution growth
Distribution growth Consistent returns since listing, underpinned by solid property fundamentals 120 8.2% 7.5% 100 80 cps 60 8.3% 7.9% 8.6% 7.8% 7.1% 40 20 0 First Half Second Half Full year FY12 FY13 FY14 FY15 4
Slide 5: Asset growth
Asset growth Portfolio grown 4.8x since listing in April ’11; 84% growth YOY 9 000 R8.1 bn 80 properties 8 000 7 000 R6.1 bn 71 properties 6 000 R4.4 bn 5 000 R4.2 bn 60 properties 50 properties 4 000 3 000 2 000 1 000 - Mar-13 Sep-13 Mar-14 Sep-14 Acquired Announced acquisitions IAPF 5
Slide 6: Fund snapshot - at 30 September 2014
Fund snapshot - at 30 September 2014 Market Market capitalisation R5.8 bn Share price R15.29 NAV per share R14.05 Portfolio Office Retail Industrial Aus Number of properties 74 Asset value R6.9 bn R2.6 bn R2.7 bn R1.3 bn R0.3 bn GLA 742 716 141 092 267 218 334 406 Value per m2 R8 895 R17 861 R10 149
Slide 7: Section 2: Market overview
Out of the Ordinary® @ Investec Property Fund Limited PWo Section 2 Market overview
Slide 8: Property sector valuations
Property sector valuations 14.0% 11.6% 10.3% 12.0% 9.8% 9.4% 9.3% 9.1% 9.1% 9.0% 8.9% 8.7% 8.6% 8.5% 8.5% 8.4% 8.4% 10.0% 8.5% 8.1% 7.6% 7.4% 7.3% 7.1% 7.1% 6.8% 8.0% 5.8% 5.4% 4.6% 6.0% 4.0% 2.0% 0.0% Acucap Vukile SA Corporate Octodec Arrowhead Hospitality Tower Fortress Dipula Growthpoint Resilie
Slide 9: Section 3: Acquisitions
Out of the Ordinary® @ Investec Property Fund Limited ThReS Section 3 Acquisitions
Slide 10: Acquisition summary
Acquisition summary Cost GLA Yield Completed acquisitions R'm m2 Sector % Date of transfer Dihlabeng Mall, Bethlehem 357.5 26 210 Retail 8.0% July 2014 McCarthy, Menlyn 115.4 7 346 Retail 7.8% May 2014 Barinors, Tyger Valley 91.0 5 394 Office 8.5% May 2014 Foschini Building, JHB CBD 77.6 6 305 Retai
Slide 11: IP portfolio transaction
IP portfolio transaction • R871m high quality portfolio acquired from IP – 8.25% yield - Above-inflation rental escalations of 7.7% across the portfolio - Income underpinned by a high quality tenant mix with long lease expiry profiles - Limited vacancy in 30 Jellicoe Avenue (2,800m2 of the space), w
Slide 12: 30 Jellicoe
30 Jellicoe Rosebank Fluxmans, S&P, Convergence Acquisition Price R351.5 million GLA – 10,750m² Yield – 8.0% Lease expiry – 6.7 years (Includes 3 year rental guarantee) 12
Slide 13: Fleurdal Mall
Fleurdal Mall Bloemfontein Checkers Hyper, Pepkor, Mr Price and Foschini Groups Acquisition Price R314.6 million GLA – 24,370m² Yield – 8.0% Lease expiry – 5.8 years 13
Slide 14: 52 Jakaranda
52 Jakaranda Centurion RMD Kwikform (subsidiary of FTSE listed Interserve) Acquisition Price R44.5 million GLA – 19,998m² (incl. yard) Yield – 9.1% Lease expiry – 7.4 years 14
Slide 15: 34 Ingersol
34 Ingersol Lynwood Glen, Pretoria Advtech Acquisition Price R47.1 million GLA – 2,376m² Yield – 8.5% Lease expiry – 4.9 years 15
Slide 16: Diesel Road
Diesel Road Isando Caterpillar Carrying value R113.6 million GLA – 22,057m² Yield – 9.25% Lease expiry – 4.6 years* *Break clause in 2017 16
Slide 17: Nicol Main E
Nicol Main E Bryanston Joe Public - UK advertising agency Acquisition Price R72.0 million GLA – 3 152m² Yield – 8.0% Lease expiry – 4.9 years 17
Slide 18: Dihlabeng Mall
Dihlabeng Mall Bethlehem Checkers, Pick ‘n Pay, Game Carrying value R357.5million GLA* – 26,680m² Yield – 8.0% Lease expiry – 5.8 years *Excludes 6,000 extension 18
Slide 19: McCarthy Menlyn
McCarthy Menlyn Menlyn Carrying value R115 million GLA – 7 346m² Yield – 7.8% Lease expiry – 9.0 years 19
Slide 20: Section 4: Property portfolio
Section 4 Property portfolio
Slide 21: Property portfolio performance
Property portfolio performance Completed acquisitions in R0.7bn Average in force escalations the period – 14% growth +8.1% across portfolio since March 4.3 years WALE - Long lease expiry 3.0% Vacancy remains low profile Leases expiring after 5 New lets and renewals 42.4% years 23 462m2 during the pe
Slide 22: Letting activity
Letting activity Renewals and new Expiry New Rental Average Expiries lets rental rental reversion escalation GLA GLA R/m² R/m² % % Office 3 848 1 701 110.33 123.35 11.8% 8.5% Industrial 18 947 15 701 39.93 27.62 (30.8%) 8.4% Retail 5 888 6 060 172.50 174.78 1.3% 8.0% Total 28 683* 23 462 8.2% • Tota
Slide 23: Vacancy levels – GLA
Vacancy levels – GLA 345 Rivonia – expiry rental guarantee and acquired vacancy 6.7% 5.1% 3.0% 3.0% 2.6% 2.0% 2.0% 1.1% Office Industrial Retail Total 31 March 2014 30 September 2014 23
Slide 24: Lease expiry profile by revenue
Lease expiry profile by revenue WALE of 4.3 years by revenue – one of the longest in the sector 60 +42% expires after 5 years 50 40 Office 30 Industrial Retail Total 20 10 0 2015 2016 2017 2018 2019 April 2019 onwards 24
Slide 25: Portfolio composition – by sector
Portfolio composition – by sector Revenue Asset value 38% 41% 24% 20% 39% 38% Split post acquisition activity: Office – 40% Office Retail Industrial Retail – 40% Industrial – 20% 25
Slide 26: Portfolio composition - geographic
Portfolio composition - geographic By revenue By GLA 10% 13% 7% 72% 5% 69% 14% 10% Gauteng Western Cape Free State Other 26
Slide 27: Office portfolio
Office portfolio KPI’s 2014 2013 +\- R150 m completed and R471m Net income (R’m) 103.6 67.2 54.2% announced acquisitions – Cost to income ratio 25.6% 24.7% (0.9%) predominantly single-tenanted Vacancy 6.7% 6.8% (0.1%) Arrears as % of collectibles 0.1% 0.0% (0.1%) Average escalations 7.9% 8.1% (0.2%)
Slide 28: Industrial portfolio
Industrial portfolio KPI’s 2014 2013 +\- NPI growth YOY - strong letting Net income (R’m) 66.3 47.3 40.2% activity in prior year supports Cost to income ratio 31.2% 36.6% 5.0% current growth Vacancy 3.0% 1.8% (1.2%) 3.0% Arrears as % of collectibles 1.2% 0.3% (0.9%) Improved cost to income ratio - A
Slide 29: Retail portfolio
Retail portfolio KPI’s 2014 2013 +\- NPI growth YOY Net income (R’m) 105.8 72.8 45.3% -electricity savings -rates reductions Cost to income ratio 33.7% 39.3% 5.6% -turnover rental Vacancy 1.1% 2.5% 1.4% Arrears as % of collectibles 0.9% 0.4% (0.5%) R574m completed and R315m Average escalations 7.7%
Slide 30: Tenant composition
Tenant composition • The Fund reviews tenant risk on a continual basis and it is a key factor when assessing new acquisitions. The Funds top ten tenants across the portfolio account for 38% of total gross income. Annual % of total Rank Tenant Gross Revenue Portfolio 1 Massmart 62.6 9.2% 2 Investec 5
Slide 31: Tenant composition – by revenue
Tenant composition – by revenue Multi / Single Tenant profile 46% 16% 69% 15% 54% Multi Single A B C 31
Slide 32: Tenant composition – by revenue
Tenant composition – by revenue +80% Listed and large corporates Tenant exposure Tenant profile – type by grade 23% 70% 60% 50% 10% 40% 30% 7% 20% 57% 3% 10% 0% A B C Listed companies Large corporates Privately owned companies Professional firms Smaller tenants 32
Slide 33: Ellerines Exposure
Ellerines Exposure •Ellerines went into business rescue (“BR”) administration on 7 August 2014 •IPF exposed to Ellerines Group in 6 locations: Annual gross Arrears at GLA income 1 Nov 2014 Location m2 R'000 R'0001 Status Reduced rent from 1 Dec 2014 until 31 January 2015 and Dial-a-bed, Bryanston 22
Slide 34: Section 5: Financials
Out of the Ordinary® @ Investec Property Fund Limited FIVE Section 5 Financials
Slide 35: Financial summary
Financial summary All in cost of funding post +8.3% +1.7bn H1 distribution of 54.65cps 8.2% IAPF rights issue and approved acquisitions Conservative gearing and +1.7bn Weighted average debt 22.6% 2.6 years expiry 86% hedged Revenue growth since Sept +1.7bn +39.1% Weighted average swap +39.1% 2014 du
Slide 36: Simplified income statement
Simplified income statement 6 months ended 30 September 2014 2013 +/- R’m R’m % Net property income 321.6 210.0 Operating expenses (5.1) (2.9) Asset Management fee (16.5) (12.6) Net finance costs (57.3) (13.4) Income from associate 8.5 0.0 Debenture interest 0.0 (119.9) Profit after taxation 236.6 3
Slide 37: Distribution reconciliation
Distribution reconciliation 6 months ended 30 September 2014 2013 +/- R‘m R’m Profit after tax 236.6 36.7 Add: Fair value adjustments 14.4 35.5 Add: Debenture interest 0.0 119.9 Less: Profit on disposals 0.0 (10.9) Less: Straight-lining adjustment (45.6) (21.0) Antecedent interest* 3.4 20.7 Distribu
Slide 38: Balance sheet
Balance sheet Reviewed Audited 6 months ended Year ended R'000 30 September 2014 31 March 2014 ASSETS Non-current assets 6 911 154 6 117 243 Investment Property 6 468 862 5 708 131 Straight-line rental revenue adjustment 162 292 116 702 Derivative financial instruments - 3 714 Investments 280 000 28
Slide 39: Capital management
Capital management 31 March 2014 30 Sept 2014 Forecast* Investments R6.1bn R6.9bn R8.1bn Total debt R1.0bn R1.6bn R2.2bn Gearing ratio 16.8% 22.6% 26.6% All-in cost of funding 9.2% 8.6% 8.2% Hedged position 110% 85.5% 75% % properties secured 35% 30.0% 25.0% Expiry profiles - debt 2.8 years 2.6 year
Slide 40: Debt and swap maturity profiles at 30 September 2014
Debt and swap maturity profiles at 30 September 2014 54% 32% 27% 15% 16% 15% 15% 13% 9% 4% 0% 0% FY15 FY16 FY17 FY18 FY19 FY20 Debt Swap 43% 42% 39% 22% 18% 15% 12% 4% 5% 0% 0% 0% FY15 FY16 FY17 FY18 FY19 FY20 Bank DMTN 40
Slide 41: Split of debt funding
Split of debt funding 57% 44% 46% 30% 13% 10% CP DMTN Bank At 30 Sep 2014 Post acquisitions 41
Slide 42: Funding facilities
Funding facilities Drawn Drawn Post Facility Available Expiry Rate 30 Sep 2014 period R’m R’m R’m R’m DMTN – tranche 11 - 134 - - April ’15 JIBAR + 140 bp DMTN – tranche 21 - 40 - - April ’16 JIBAR + 155 bp DMTN – tranche 31 - 50 - - April ’17 JIBAR + 165 bp DMTN – tranche 61 - 226 - - April ’17 Fix
Slide 43: Section 6: Conclusion
Section 6 Conclusion Out of the Ordinary® ~ @ Investec Property Fund Limited
Slide 44: Conclusion and key considerations
Conclusion and key considerations • Underlying property performance and tenant quality is stable and portfolio quality robust • Conservative balance sheet and debt well hedged • Quality acquisitions remain scarce and aggressively priced in SA • Tenant base is cautious on commitment and rent • Relati
Slide 45: Thank you
Out of the Ordinary® ~ © Investec Property Fund Limited Thank you Property Fund
Slide 46: Disclaimer
Disclaimer The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or professional advice. Although information has been obtained from sources believed to
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