Vukile Property Fund Limited · JSE:VKE
Vukile Property Fund — FY2013 Earnings Presentation
52 slides from Vukile Property Fund's earnings presentation, June 2013
Slide 1: Results for the year ended 31 March 2013
for the year ended 31 March 2013
Slide 2: Agenda
Agenda • Highlights Laurence Rapp • Strategic review Laurence Rapp • Financial performance Mike Potts • Portfolio performance and overview Ina Lopion • Prospects and plans Laurence Rapp • Acknowledgements Laurence Rapp • Questions Team 2
Slide 3: Highlights, Vision, Values and Strategic review
Highlights, Vision, Values and Strategic review LAURENCE RAPP 3
Slide 4: Highlights
Highlights • Annual distribution for the year up 5 5.4% 4% to 131 131.6 6 cents per linked unit • Impact of non-recurring income masks a much stronger underlying property performance • Normalised growth of 8% on core business • Significant achievement of strategic objectives and metamorphosis of the
Slide 5: Acquisitions and sales activity
Acquisitions and sales activity Long-term value decisions have focussed largely around portfolio composition and buying better quality assets whilst selling non non-core core properties Acquisitions Rm Sales Rm Pending transactions Rm • Project Gold – 20 properties 1 480 • Durban Embassy 238 • Bloem
Slide 6: Growing the portfolio
Growing the portfolio 58% growth since March 2012 30% growth since March 2012 6
Slide 7: Strategic review
Strategic review • Grow the portfolio to c.R10 billion in assets • Broaden our shareholding base and enhance market perception of an independent Vukile • Building sustainable partnerships • Improved customer and tenant focus • Optimise long and short-term returns for unitholders • Minimise funding c
Slide 8: Financial performance
Financial performance MIKE POTTS 8
Slide 9: Distribution history
9 131.6 2013 74.6 6 57.0 124.8 2012 7 70.5 Distribution history 54.3 117.7 2011 67.1 50.5 107.9 2010 60.9 Total 47.0 97.9 2009 Final 53.8 44.1 Interim 88.3 2008 48.0 40 0.3 76.8 2007 41.0 35.8 68.5 2006 36.0 Cents per linked unit 32.5 61.5 2005 31.5 30.0 140 120 100 80 60 40 20 0
Slide 10: Simplified income statement
Simplified income statement March 2013 March 2012 % Rm Rm Variance Group net rental income 696 5 696.5 598 9 598.9 16 3 16.3 Income from asset management business 95.6 53.3 79.4 Asset management expenditure (32 0) (32.0) (30 8) (30.8) (3 9) (3.9) Net finance costs (168.7) (152.1) (10.9) Corporate ad
Slide 11: Treatment of non-recurring income
Treatment of non-recurring non recurring income • Unitholders U ith ld were advised d i d iin th the iinterim t i results lt announcementt th thatt iin ffuture t non- recurring income would be paid as a separately identified special distribution. • Distinction between normalised and non-recurring g
Slide 12: Group balance sheet at 31 March 2013
Group balance sheet at 31 March 2013 12
Slide 13: Bad debt and arrears analysis
Bad debt and arrears analysis • T Tenant t arrears iincreased dbby R6 R6.6 6 million illi ffrom M March h 2012 tto R26 R26.9 9 million illi att year end. d • Impairment allowance increased from R10 million (March 2012) to R13.7 million at 31 March 2013. • Portfolio group of 26% over the same period.
Slide 14: Group debt structure
Group debt structure Maturity and interest rate profile of fixed interest bearing debt at 31 March 2013 14
Slide 15: Group debt structure
Group debt structure Maturity and interest rate profile of variable interest bearing debt at 31 March 2013 15
Slide 16: Group net cash flow
1 267 304 (168 670) (9 316) (1 827 856) (481 763) 1 192 666 364 832 | bad a Group net cash flow 1 243 263 738 201 €T0Z YsEW Te aourjeg $}SO9 BIUPUI} JON sjasse jeIoueuly ajes -10J-a]q E/!eAR JO UOISINboYy sjasse paxly pue salpadoid juawysanutl 0} sjuawaaosduuy| /uolsinboy uonnquysiq syun paxuly jo a
Slide 17: NAV bridge
NAV bridge Cents per linked unit 17
Slide 18: Linked unit price
1500 1000 Linked unit price 1898 March 2005 _— VUKILE PROPERTY FUND AWAKEN THE POTENTIAL WITHIN March 2006 March 2007 March 2008 March 2009 March 2010 March 2011 March 2012 March 2013 18
Slide 19: Trading volumes and liquidity
Trading volumes and liquidity VALUE TRADED AS % OF MARKET CAPITALISATION % 60 50 EMI 40 GRT SAC RDF 30 VKE HYP ACP 20 10 0 0 10 000 20 000 30 000 40 000 50 000 60 000 Market capitalisation (Rm) as at 28 March 2013 19
Slide 20: Post year end transactions
Post year end transactions • East Rand Mall – Acquisition of 50% of East Rand Mall successfully concluded – transfer effected 2 April 2013 – Financed as follows: Rm • Equity raised 342 • Corporate bonds issued 300 • Commercial paper issued 250 • Surplus cash from property sales utilised 220 1 112 −
Slide 21: Property portfolio performance and overview
Property portfolio performance and overview INA LOPION 21
Slide 22: Overview
Overview • N b off properties Number i 78 • GLA 1 028 960m² • Valuation – Total p portfolio R7.694 billion 48% of portfolio valued externally, values in line with internal values – Average value per property R98.6 million – Average discount rate 14.4% – A Average exit it capitalisation it li ti rate
Slide 23: 10 largest properties
10 largest properties Area Value % of Property Location Sector m² Rm total Durban Phoenix Plaza Durban Retail 24 348 541.0 7.0 Cape Town Bellville Louis Leipoldt Bellville Offices 22 311 313.0 4.1 Pinetown eo Pine eCCrest es (50%) * Pinetown eo Retail ea 20 0 056 277.5 5 3.6 3 6 Jhb Isle of Houghton
Slide 24: Sectoral profile
Sectoral profile Market value ((Rm)) GLA ((m²)) Industrial Industrial 13% 24% Retail 45% Retail 50% Offices 37% Offices 31% Market Value ((R/m²)) 10,000 7,457 8,394 7,911 8,750 7,442 6,591 R/m² 5,000 3,952 4,026 0 Retail Offices Industrial Average Mar-12 Mar-13 24
Slide 25: Disposals
Disposals Yield Sales GLA per price Status Property Sector (m²) annum (R000) transferred Pretoria VWL Offices 16 933 12.5 103 000 31-Aug-12 Midrand 179 15TH Road (Sony Building) Industrial 11 001 81 8.1 57 000 18 Oct 12 18-Oct-12 Truworths Building Jhb Retail 6 919 7.8 43 680 19-Jul-12 Glencairn Bui
Slide 26: Properties held for sale
Properties held for sale % Yield Sales GLA per price Property Sector (m²) annum (R000) Status g Midtown Building Offices 8 086 tbc No sale y yet Lichtenburg Shopping Centre Retail 8 423 tbc No sale yet Midrand Allandale Land (Halfway House Ext 65) Industrial 21 850 CPs outstanding CP = Conditions pr
Slide 27: Geographic profile (GLA m²)
Geographic profile (GLA m²) Limpopo Mpumalanga North West Northern Cape 2% 2% 1% Eastern Cape 3% 1% Free State 5% Western Cape Gauteng 8% 54% Namibia 6% KwaZulu-Natal 18% Top four regions account for 86% of exposure 27
Slide 28: Tenant profile (GLA m²)
Tenant profile (GLA m²) Large national and listed tenants, government (i.e. 37% local, provincial and national) and major franchises National and listed tenants tenants, franchised and medium to 54% large professional firms Other 9% 28
Slide 29: Weighted average base rentals R/m²
Weighted average base rentals R/m² (excluding recoveries) 100.00 11.7% 10.8% 90.00 86.86 12.7% 83.05 80 00 80.00 77 79 77.79 74.96 74.09 70.00 65.73 60.00 6.6% 50.00 39.19 40.00 36.77 30.00 20.00 10.00 - Retail Offices Industrial Total March-12 March-13 29
Slide 30: Weighted average base rentals R/m²
Weighted average base rentals R/m² (excluding recoveries) Stable portfolio (excluding sales and acquisitions) 100.00 9.1% 6.1% 90.00 85.10 82.28 7.8% 80.00 78 00 78.00 77.58 71.58 70.00 66.43 60 00 60.00 6.9% 50.00 39.32 40.00 36.80 30.00 20.00 10 00 10.00 - Retail Offices Industrial Total March-12
Slide 31: Weighted average base rentals R/m²
Weighted average base rentals R/m² (excluding recoveries) Remaining portfolio (excluding sales) 140.00 120.00 116.42 100.00 86.86 84.00 86.72 85.10 82.28 83.05 80.00 71.58 74.09 60.00 39.32 39.19 40.00 35.14 20.00 - Retail Offices Industrial Total Stable Portfolio Portfolio purchased from Sanlam Apr
Slide 32: Weighted average base rental R/m²: Retail
Weighted average base rental R/m² - (excluding recoveries): Retail Durban Phoenix Plaza Durban Workshop Durban Qualbert Centre Mbombela Truworths Centre (Truworths Centre Nelspruit) Windhoek 269 Independence Avenue Pinetown Pine Crest (50%) Sandton Bryanston Grosvenor Shopping Centre Cape Town Kenil
Slide 33: Weighted average base rental R/m²: Offices
Weighted average base rental R/m² - (excluding recoveries): Offices Sandton Hyde Park 50 Sixth Road Cape Town Bellville Suntyger Pretoria Lynnwood Sanlynn Sandton Rivonia 36 Homestead Road (Barlow Place… Jhb Houghton 1 West Street (Jhb Houghton 2446) Pretoria Hatfield 1166 Francis Baard Street (DLV
Slide 34: Weighted average base rental R/m²: Industrial
Weighted average base rental R/m² - (excluding recoveries): Industrial Sandton Linbro Galaxy Drive Showroom (Supra Hino) Kempton Park Spartan Warehouse (Hellman International) Centurion Samrand N1 Randburg Tungsten Industrial Park Midrand Sanitary City Midrand Allandale Industrial Park Pinetown Rich
Slide 35: Lease renewals
Lease renewals % escalation on expiry rentals 14.0% 12.0% 11.6% 10.0% 8.2% 8 0% 8.0% 6.7% 6.0% 4.0% 4.0% 2.0% 0.0% Retail Offices Office Industrial * Average * Excludingg the short-term renewal at Pretoria Rosslyn y Warehouse where the previous rentals exceeded market rentals significantly. 35
Slide 36: New leases concluded
New leases concluded (Ratio of rental concluded against budget) 110% 108% 104.7% 105% 101% 100% 95% 94% 90% 85% * Retail Offices Office Industrial Average * Excluding the Durban Workshop transaction on the old cinema premises which are converted to retail space to obtain much higher rental rates. 36
Slide 37: Contracted rental escalation profile
Contracted rental escalation profile 8.8% 8.7% 8.6% 8.4% 8.2% 8.1% 8.1% 8.0% 8.0% 7.8% 7.6% Retail Offices Industrial Total 37
Slide 38: Group lease expiry
Group lease expiry 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Beyond Vacant Mar/14 Mar/15 Mar/16 Mar/17 Mar/18 March 2018 GLA 6.7% 35% 18% 15% 9% 6% 10% Cumulative 6.7% 42% 60% 75% 84% 90% 100% 38
Slide 39: New leases and renewals
New leases and renewals • For the yyear ended 31 March 2013 leases were concluded with a: – Total contract value R1 015 million – Total rentable area 277 911m² 911m • Largest contracts concluded Contract Lease value duration Tenant Property Sector (Rm) (years) Pretoria Society of Advocates Pretoria
Slide 40: Vacancy profile - % of GLA
Vacancy profile - % of GLA 16.0% 14.0% 13.4% 13.6% 12.0% 10.0% 9.7% 8.2% 8.0% 7.6% 7.0% 6.8% 6.1% 6.0% 5.1% 4.0% 3.6% 3.1% 3.1% 2.0% 0.0% Retail Offices Industrial Total March-12 September-12 March-13 40
Slide 41: Individual properties vacancy profile
Individual properties vacancy profile (% of GLA) (vacancy > 1 000m²) Pretoria Arcadia Suncardia (32%) Durban Embassy (20%) Bloemfontein Bree Street Warehouse (59%) Roodepoort Hillfox Power Centre (10%) Pretoria Lynnwood Excel Park (100%) Pretoria Lynnwood Sunwood Park (54%) Cape Town Bellville Tijge
Slide 42: Ratio of gross recurring cost to property revenue
Ratio of gross recurring cost to property revenue - stable portfolio 40% 36.6% 35.4% 35% 33.0% 33.2% 31.2% 30.3% 30.7% 30% 25% 20% 18 2% 18.2% 17 8% 17.8% 17.7% 17 7% 17 8% 17.8% 17.2% 16.9% 17.0% 15% 10% 5% 0% 2007 2008 2009 2010 2011 2012 2013 All recurring expenses All recurring expenses excludin
Slide 43: Recurring expense categories
Recurring expense categories Insurance Asset Sundry expenses premiums management fee 3% Bad debt 2% Maintenance 4% 2% contracts 6% Property Government management fee services 8% 48% Cleaning and security 10% Rates and taxes 17% 83% of costs from top four categories 43
Slide 44: East Rand Mall acquisition
East Rand Mall acquisition • R1 112 billion purchase in conjunction with Redefine (50%) R1.112 (50%), transferred 2 April 2013 2013. • Asset integrated into Vukile. • Management committee with Redefine established established. Portfolio composition post East Rand Mall acquisition Market value Pre ER
Slide 45: Re-developments / upgrades: projects completed
Re developments / upgrades Re-developments Projects completed Additional Total Yield Completion Property Project detail GLA capex % date m² Rm Upgrade and maintenance Randburg Square 80.8 June 2012 Phase1 Roodepoort Hillfox Power Phase 1 of the upgrade to the 6.5 April 2012 Centre exterior of the ce
Slide 46: Re-developments / upgrades: projects approved
Re developments / upgrades Re-developments Projects approved and in process Additional Total Yield Completion Property Project detail GLA capex % date m² Rm Upgrade and maintenance Randburg Square - 207.5 (1) August 2013 Ph Phases 2&3 Bellville Louis Leipoldt Hospital Upgrade for Medi Clinic - 33.5
Slide 47: Prospects, plans, acknowledgements and closing
Prospects, plans, acknowledgements and closing LAURENCE RAPP 47
Slide 48: Update on Transactions
Update on Transactions • Encha deal: o Commercially driven BEE deal o Acquiring four properties for c.R1.04 billion o Earnings enhancing at a purchase yield of 9 9.5% 5% o Option to acquire the Pretoria Momentum Building at a 9.5% yield once new five year lease has been signed, will increase value o
Slide 49: Strategic priorities
Strategic priorities • Grow the portfolio – In line with stated strategy – Will consider strategic investments in other li t d ffunds listed d • Stakeholder engagement – Debt, equity and foreign Markets • Customer and tenant focus Optimise short and long-term returns for – Closer to retailers unit-h
Slide 50: Prospects
Prospects • Economy remains stubbornly sluggish with next year very much in line with F2013 • Retail to continue performing well, well offices will remain tough with added impetus to move vacant space • Solid deal pipeline with yield enhancing acquisitions and developments that will add positively t
Slide 51: Acknowledgements
Acknowledgements • B d Board • Property managers • Service providers • Brokers and developers p • Tenants • I t Investors • Funders • Colleagues 51
Slide 52: Questions and answers
Questions and answers CLOSING 52