Hyprop Investments Limited · JSE:HYP
Hyprop Investments — FY2014 Earnings Presentation
54 slides from Hyprop Investments's earnings presentation, 2014
Slide 1: Annual Results 30 June 2014
HYPROP INVESTMENTS LIMITED Annual Results ih ai ca al ais 30 J une 2014
Slide 2: Agenda
Agenda STRATEGIC & OPERATIONAL OVERVIEW Pieter Prinsloo OPERATING PERFORMANCE - SOUTH AFRICA Pieter Prinsloo INVESTMENT IN SUB-SAHARAN AFRICA (Excl. SA) Kevin Teeroovengadum FINANCIAL RESULTS Laurence Cohen PROSPECTS Pieter Prinsloo QUESTIONS & ANSWERS Panel 2
Slide 3: Strategic & Operational Overview
STRATEGIC & OPERATIONAL OVERVIEW Hyde Park, Johannesburg, Gauteng 3
Slide 4: A decade of growth
A decade of growth Compound annual growth rate ((2005 – 2014)) Distribution cpu 11 7% 11.7% Focus on sustainable income growth Invest in high quality shopping centres NAV/pu (excl def tax) 20 4% 20.4% i sub-Saharan in bS h Af Africa i Specialised & experience internal Unit price 18.4% management 32.
Slide 5: Distribution growth exceeds guidance
Distribution growth exceeds guidance Financial highlights 30 June 2014 30 June 2013 Change Distribution 472cpu 424cpu 11.3% Second half distribution 241cpu 213cpu 13.1% NAV (per unit) R76 02 R76.02 R68 43 R68.43 11 1% 11.1% Total property assets R26.4bn R22.5bn 17.3% Gearing 28 4% 28.4% 22 9% 22.9%
Slide 6: Increased shopping centre focus
Increased shopping centre focus Portfolio management Investments Somerset Mall ─ R2.3 billion African Land ─ Manda Hill ─ R1.3 billion Investment in Atterbury Africa up to R812 million Disposals Indirect ─ Sycom, Sycom Mantrablox amounting to R205 million Held-for-sale ─ Office Parks, Ston
Slide 7: Strategic progress: developments
Strategic progress Portfolio management Developments: Rosebank R b k Mall M ll (62 000m²) 000 ²) R932 million Final completion Sept 2014 Yield 7% West Hills, Accra (27 500m²) USD 94 million Rosebank Mall, Johannesburg, Gauteng Completion Oct 2014 Yield 9.6% Achimota Mall, Accra (13 000m²
Slide 8: Strategy - Progress: Energy initiatives
Strategy - Progress (cont.) ( ) Energy initiatives Savings generated FY2015 4,9 million kWh (over 22 months) R8m solar PV plant at Clearwater Mall R5.9 million Total electricity consumption Introduction of smart down 5.34% year-on-year metering Converted C t d 2 536, 536 50W down d li lighte
Slide 9: Strategy - Progress: Connecting with consumers
Strategy - Progress (cont.) ( ) Connecting with consumers 320 000 Facebook fans 210 000 website hits High speed Wi-Fi across portfolio = 88 000 registered users to date Gift cards rollout underway at Clearwater Clearwater, Woodlands Woodlands, CapeGate & Somerset Mall 9
Slide 10: Company structure
Company structure Hyprop Investments Limited South Africa Sub-Saharan Africa (Excl. SA) 100% 00% owned ow ed Co-owned Co ow ed Held-for-sale eld o sale 100% CapeGate Mall Canal Walk Stoneridge Hyprop Investments Mauritius Clearwater Mall (80%) Somerset Mall The Glen Th Gl 37.5% 50% Willowbridge Wood
Slide 11: Quality & focused growth
Quality & focused growth Rm 30 000 Sub Saharan Sub-Saharan Africa 25 000 R2,2bn Sub-Saharan Africa (Excl. SA) Held-for-sale R1,7bn 20 000 Stand-alone offices Listed property securities 15 000 Shopping centres Core portfolio R22,5bn 10 000 5 000 30 June 2011 30 June 2014 11
Slide 12: Operating Performance South Africa
OPERATING PERFORMANCE SOUTH AFRICA Clearwater Mall, Johannesburg, Gauteng 12
Slide 13: Strong operating performance
Strong operating performance 9.5% like-for-like growth in distributable earnings from regional, large regional & super regional malls (excludes Rosebank & Somerset Malls) Occupancy rate remains high at 97.6% Property expenses well contained – cost-to-income ratio 34.4% Arrears 0.4% of rental income
Slide 14: Trading indicators hold steady
Trading indicators hold steady 12% Trading density growth 10% Rent ratio (rental as % of turnover) Vacancies 8 0% 8.0% 7.8% 8% 7.0% 7.0% 6.8% 6.9% 7.0% 6.9% 6% 4% 3.30% 3.40% 2.70% 2 40% 2.40% 2% 0% 2011 2012 2013 2014 14
Slide 15: Core portfolio: Vacancies remain low
Core portfolio Vacancies remain low Vacancies 30 Jun 2014 30 Jun 2013 Retail 1 2% 1.2% 2 1% 2.1% Offices 13.8% 8.1% Total 2.4% 2.7% Significant reductions at value centres Office portfolio improves to 9.5% after year-end Rosebank Mall, Johannesburg, Gauteng 15
Slide 16: Leasing terms remain favourable
Leasing terms remain favourable 12.0% Rental growth Contractual escalation 10.0% 8.8% 8 0% 8.0% 8.3% 8 2% 8.2% 8.0% 7.4% 6.3% 6 0% 6.0% 4.3% 4.0% 3.4% 2.0% 0.0% 2011 2012 2013 2014 16
Slide 17: Leasing activity: Strong uplift
Leasing activity Strong uplift Rental Contractual Area No. of growth escalation ( ²) (m²) L Leases (%) (%) Retail New lettings 45 156 8.0% 8.0% 118 Renewals 68 050 9.0% 8.0% 136 Total 113 206 8.2% 8.2% 254 % of total portfolio 15.7% Offices New lettings 7 335 10.0% 8.0% 15 Renewals 14 416 7.0% 9.0%
Slide 18: Lease expiry profile
Lease expiry profile 2015 Total Area % GLA of Retail GLA m² m² centre Opportunities pp CapeGate Regional 63 699 34 452 54% Clearwater 86 028 24 649 29% The Glen 76 849 24 545 32% Replace underperforming tenants W dl d B Woodlands Boulevard l d 71 617 15 973 22% ‒ The Glen & Clearwater Mall Stoneridg
Slide 19: Developments
Developments Focus on continuous improvements Equipment replacement – R28 million Extensions planned – R150 million Sh Shopping i centre t P j t Project C Capex C Completion l ti d date t Canal Walk Mr Price & Forever 21 R14m Sept 2014 Will b id Willowbridge R l Relocation i off Dis-Chem Di Ch R12 R
Slide 20: Hyde Park: Various high-end tenants
Hyde Park Various high-end tenants 20
Slide 21: Investment in Sub-Saharan Africa (Excluding SA)
INVESTMENT IN SUB-SAHARAN AFRICA (Excluding SA) Manda Hill, Lusaka, Zambia 21
Slide 22: Sub-Saharan Africa (SSA): Long-term growth remains strong
Sub-Saharan Sub Saharan Africa (SSA) Long-term growth remains strong GDP growth % 6 53 5.3 5.0 5 4.4 4 3.2 3 2.4 1.9 1.8 2 1.7 1.3 1 0 2013 2014F 2015F Developed World Sub Saharan Africa Sub-Saharan South Africa Source: JP Morgan & NKC 22
Slide 23: Ghana and Zambia
Ghana and Zambia GHANA ZAMBIA Growth impacted, p but still strong g Solid economic growth Good appetite for government debt Pressure on local currency (Cedi) Ambitious infrastructure development Government committed to long term programme economic reform ‒ Major investment in roads & pow
Slide 24: The African consumer: Sustained middle-class growth
The African consumer Sustained middle-class growth Million households 180 160 140 120 100 80 60 40 20 0 2000 2014 2030 (est) Lower income Lower middle-class middle class Middle class Middle-class Upper middle-class middle class Source: Standard Bank 24
Slide 25: The African consumer: Zambia & Ghana well positioned
The African consumer Zambia & Ghana well positioned Middle-class households as a share of total households, % (2014) 35 Angola Sudan 30 25 Nigeria g 7.9 20 Ghana Zambia 15 10 Kenya South Sudan 5 Mozambique Uganda Tanzania 0 Ethiopia 0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Total middle-class househ
Slide 26: Market trends: Existing assets
Market trends Existing assets Pressure on yields Yield 15% Yield 12% Yield Yield 10% 8 5% 8.5% Yield to 9% 8.0% Yield to 8.5% 7.5% Further yield to 8% compression? 2000 2005 2010 2012 2013 2014 2015 2020 26
Slide 27: Market trends (cont.)
Market trends (cont.) (cont ) Existing assets Increasing number of players (both development and non-development) Regional International Local Demand from retailers to expand Increasing presence of regional/local retailers Deepening of tenant base with new breed of international retailers ‒ fr
Slide 28: Restructure Atterbury Africa & African Land
Restructure Atterbury Africa & African Land Pre-Merger Post-Merger Focus FY2015 Consolidate C lid t AttAf AttAfrica i tteam Ensure 100% hands-on asset management (Manda Hill, Accra Mall and West Hills) Opening of West Hills Achimota & Kumasi City Mall developments Future pipeline in key ma
Slide 29: Operating Assets: Accra Mall, Ghana
Operating Assets Accra Mall, Ghana GLA 19 000m² Market value USD 82.5 82 5 million (USD 4 548/m²) Fully let Strong trading density growth ‒ 3 million illi visitors i it – Jan J tot Jun J 2014 ‒ Over 100 000 Facebook fans Leasing trends ‒ Strong demand from existing tenants ‒ Good pipeline
Slide 30: Operating Assets: Manda Hill, Zambia
Operating Assets Manda Hill, Zambia GLA 43 400m² Market value USD 153 million (USD 3 525/m²) Fully let Trading density up 7% in USD (six months to June 2014) Leasing trends ‒ Strong demand ‒ Expansion of 10 000m² planned Lease expiry profile FY2015 GLA % of Total GLA No. of leases 4 499m2
Slide 31: Developments
Developments West Hills Mall Achimota Mall Kumasi City Mall Location: Location: Location: West of Accra on main Northern suburb of Accra South of Kumasi western highway 13 400m² 27 000m² Phase 1: 27 500m² Anchored by Shoprite, Anchored by Shoprite, 99% let Jet Mr Price Jet, and Gam
Slide 32: Financial Results
FINANCIAL RESULTS Hyde Park, Johannesburg, Gauteng 32
Slide 33: Highlights
Highlights Distribution growth exceeds guidance at 11.3% Second half growth of 13.1% Strong S performance f from f super and d llarge regional i l centres Savings on interest costs Acquisition of African Land Dilution from Rosebank Mall in line with budget g Investment in sub-Saharan Africa (e
Slide 34: Distributable earnings: Existing portfolio drives growth
Distributable earnings Existing portfolio drives growth R’000 1 400 000 1 300 000 33 643 116 017 (16 124) 1 200 000 106 785 1 468 1 148 600 (111 507) (13 809) 1 100 000 1 032 127 1 000 000 900 000 800 000 700 000 600 000 500 000 30 June Existing Somerset Sub-Saharan Rosebank Sycom Net Other 30 June
Slide 35: Income statement - extracts
Income statement ‒ extracts 30 June 2014 30 June 2013 Rm Rm Revenue 2 392 2 172 Investment property 2 355 2 023 16.4% Listed investments 37 149 (75.0%) Property expenses (821) (697) 17 8% 17.8% Net property income 1 571 1 475 6.5% Other operating expenses (56) (56) Operating income 1 515 1 419 6.8%
Slide 36: Net Income: Stronger contribution from shopping centres
Net Income Stronger contribution from shopping centres June 2014 June 2013 2% 3% 2% SA shopping centres 10% 3% Stand-alone offices Sycom 93% Sub-Saharan Africa 87% (excl. SA) 36
Slide 37: Sound Balance Sheet
Sound Balance Sheet 30 June 2014 30 June 2013 (Rm) (Rm) Investment property 24 081 19 846 21.3% Atterbury Africa 812 337 141.2% Other assets 267 398 Held-for-sale 1 705 2 401 Total assets 26 865 22 982 16 9% 16.9% Gross debt 7 199 5 384 33.7% NAV pu (R) 76.02 68.43 11.1% 37
Slide 38: Improved property valuations
Improved property valuations Hyprop % change Size share (from Value Average Category (m²) (Rm) June 2013) (R/m2) yield Super regional 157 031 6 064 7.8% 48 271 6.7% Large regionall 399 892 11 718 37.1%* 31 006 7.1% Regional 38 345 1 769 13.7%* 46 134 7.0% Value centres 151 758 2 316 6.3% 15 578 8.4%
Slide 39: Diligent debt management
Diligent debt management Borrowings 30 June 2014 30 June 2013 Net borrowings R7.1 bn R5.1 bn Gearing 28.4% 22.9% Debt at fixed rates 71% 87% Average fixed rate/swap 4.2 years 4.3 years maturity Average debt maturity 3.0 years 3.5 years Debt Capital Market (DCM) 32% 31% % of total debt 39
Slide 40: Sources of funding: US dollar debt increases
Sources of funding US dollar debt increases R million 3 509 49% Bank facilities (SA) 3 404 63% 30 June 2014 2 297 32% 30 June 2013 DCM funding (SA) 1 648 31% % of total debt Atterburyy Africa 1 393 19% 603 US dollar debt 790 Manda Hill 333 6% 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 40
Slide 41: Cost of funding
Cost of funding Average interest rate 30 June 2014 30 June 2013 Total debt 7 5% 7.5% 8 1% 8.1% SA debt 8.2% 8.4% US Dollar debt 4.6% 4.2% Debt to acquire African Land (SA bank facility) currently unhedged Following African Land restructure, restructure fixed rate debt to increase to ~80% 80% 41
Slide 42: Prospects
PROSPECTS Hyde Park, Johannesburg, Gauteng 42
Slide 43: Prospects
Prospects Risks Slow economic growth in South Africa Mature shopping centre market in South Africa Distressed tenants in South Africa Exclusivity clauses Focus Opening of Rosebank Mall & West Hills Extensions & refurbishments at existing centres Renewal of leases & tenant mix improveme
Slide 44: Questions & Answers
QUESTIONS & ANSWERS Clearwater Mall, Johannesburg, Gauteng 44
Slide 45: Appendices
APPENDICES Woodlands Boulevard, Pretoria, Gauteng 45
Slide 46: Top 8 properties by value
Top 8 properties by value Canal Walk Clearwater Woodlands (80% undivided share) Mall Somerset Mall Boulevard Region Cape Town Region Johannesburg Region Cape Town Region Pretoria Valuation (Rm) 6 064 Valuation (Rm) 3 473 Valuation (Rm) 2 252 Valuation (Rm) 2 196 Total GLA (m²) 157 031 Total GLA (m²)
Slide 47: Top 8 properties by value (cont.)
Top 8 properties by value (cont.) The Glen (75% undivided share) Hyde Park CapeGate Regional Atterbury Value Mart Region Johannesburg Region Johannesburg Region Cape Town Region Pretoria Valuation (Rm) 2 059 Valuation (Rm) 1 769 Valuation (Rm) 1 400 Valuation (Rm) 1 105 Total GLA (m²) 76 849 Total G
Slide 48: Continued growth in trading density
Continued growth in trading density Per month (R/m²) 4500 4000 Average portfolio growth: +7.0% (2013: +6.8%) 3500 12% 8% 3000 3 186 1% 6% 2 974 8% (1%) 2 809 2 770 2500 2 696 2 542 8% 6% 5% 2 248 2 246 2000 2 195 16% 9% 1 837 1 766 1500 9% 1 299 1000 500 0 Hyde Park Canal Walk Clearwater Somerset Wi
Slide 49: Rentals remain affordable
Rentals remain affordable Deterioration % Gross rent to turnover Improvement 12% Portfolio average: +6.9% (2013: +6.9%) 10% 0.2% ((0.3%)) (0 2%) (0.2%) 9.1% 0.7% 8.9% 8.7% 8% 8.3% 0.6% (0.1%) 0.1% (0.5%) (0.6%) 7.4% 7.2% 7.0% 0.2% 6% 6.6% 6.4% 6.3% (0.1%) (0.1%) 5.0% 4% 4.2% 2% 0% Canal Walk Atterbu
Slide 50: Lease expiry profile 2016
Lease expiry profile 2016 Total GLA Area % GLA Retail m² m² of centre Canal Walk 146 941 45 872 31% Willowbridge 40 519 17 116 42% Clearwater 86 028 11 445 13% S Somerset M ll Mall 66 831 9 969 15% % Atterbury Value Centre 47 786 9 032 19% Woodlands Boulevard 71 617 6 413 9% CapeGate Regional 63 699
Slide 51: Retail rental dominates revenue
Retail rental dominates revenue re en e Revenue spread 12 months to June 2014 June 2014 June 2013 1% 1% 1% Retail rental 2% 4% Municipal cost recovery 4% 6% 5% 8% Operating cost recovery 7% Customer parking 58% 23% 58% 22% Storerooms & other Office rental Turnover rental 51
Slide 52: Debt maturity profile: Bank facilities and DCM
Debt maturity profile Bank facilities and DCM Rm Average maturity 3.03 years 1 800 Bank facilities 1 600 1 536 Bonds/CP* 1 400 1 316 USD Funding 1 200 1 000 800 750 697 656 603 590 600 450 400 400 200 200 0 June 2015 June 2016 June 2017 June 2018 June 2019 June 2020 * CP: Commercial Paper 52
Slide 53: Maturity profile: Fixed rate debt
Maturity profile Fixed rate debt Rm Average maturity 4.24 years 1 800 1 640 1 600 1 400 1 250 1 200 1 000 900 900 800 600 450 400 200 0 June 2015 June 2016 June 2017 June 2018 June 2019 June 2020 53
Slide 54: Disclaimer: Forward-looking statements
Disclaimer Forward-looking statements This document contains forward-looking statements that, unless otherwise indicated reflect the group’s indicated, group s expectations as at 30 June 2014. 2014 Actual results may differ materially from the group’s expectations if known and unknown risks or u