Vukile Property Fund Limited · JSE:VKE
Vukile Property Fund — H1 2020 Earnings Presentation
119 slides from Vukile Property Fund's earnings presentation, November 2019
Slide 1: Interim Results Presentation
Interim Results Presentation for the six months ended 30 September 2019 www.vukile.co.za
Slide 2: Agenda
AGENDA 1 Introduction Laurence Rapp 2 Southern African Retail Portfolio Overview Itumeleng Mothibeli 3 Castellana Properties Overview Alfonso Brunet 4 Debt, Treasury and Financial Performance Laurence Cohen Strategic plans and prospects 5 Laurence Rapp 6 Q&A 7 Appendices 2
Slide 3: Introduction
1 Introduction Laurence Rapp www.vukile.co.za 3
Slide 4: Profile
Profile INTRODUCTION Who we are High quality, low risk, Retail REIT operating in southern Africa and Spain SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Significant geographic diversification enhances the quality of earnings 45% of assets located in Spain with 47% of profits generated from Castel
Slide 5: Highlights
Highlights INTRODUCTION Clear strategic direction and a strong operational focus paying off 3.5% increase in dividends in line with guidance to 80.84 cents per share SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Outstanding retail performance in Spain − Investment property increased to €1 028m from
Slide 6: Group overview – consolidated property assets of R35bn
Group overview – consolidated property assets of R35bn INTRODUCTION Well diversified exposure across macro economic drivers SOUTHERN AFRICAN RETAIL United PORTFOLIO OVERVIEW Kingdom R1.3bn 4% of assets PROPERTIES OVERVIEW CASTELLANA 48% of assets Spain R17bn FINANCIAL PERFORMANCE DEBT, TREASURY AND
Slide 7: Clarity of vision and strategic intent
Clarity of vision and strategic intent INTRODUCTION Focus areas Maintain defensive position in SA with mid- to lower income retail focused assets SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − Keep driving operational efficiencies − Identify opportunities to expand and strengthen existing assets − V
Slide 8: Southern African Retail Portfolio Overview
2 Southern African Retail Portfolio Overview Itumeleng Mothibeli www.vukile.co.za 8
Slide 9: Key retail portfolio metrics
Key retail portfolio metrics INTRODUCTION Direct southern African Retail Portfolio SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Key Facts Tenant Operating Efficiency Valuations Profile metrics PROPERTIES OVERVIEW CASTELLANA Portfolio Value Average asset value National exposure Reversions Ren
Slide 10: Key themes driving the continued performance
Key themes driving the continued performance INTRODUCTION Operational efficiencies and innovation Focused operational efficiencies have driven improved portfolio metrics; SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − Robust portfolio composition process has ensured that our defensive nodally domina
Slide 11: Retail portfolio trading statistics for Top properties
Retail portfolio trading statistics for Top 15 properties INTRODUCTION Delivering strong growth off already high trading densities 4.2% 3.3% 8.0% 5.5% 10.0% 0.6% 11.3% * 21.2% * (5.2%) * 13.8% (2.1%) 12.8% 4.7% SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 1.6% 2.8% (1.3%) (0.6%) 6.1% 0.9% 12.4% * 2.5%
Slide 12: Rent-to-sales ratio by Top properties
Rent-to-sales ratio by Top 15 properties INTRODUCTION Continuing to provide very profitable centres for our tenants SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 10.6% PROPERTIES OVERVIEW CASTELLANA 7.7% 7.6% 7.6% 6.7% 6.7% 6.4% 6.0% 5.9% FINANCIAL PERFORMANCE DEBT, TREASURY AND 5.5% 5.0% 4.9% 4.8% 4.6
Slide 13: Retail insights
Retail insights INTRODUCTION Defensive portfolio with further potential for rental growth Segment Focus SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Rural and township centres that account for 53% of the portfolio value showed a year-on-year trading density growth of 3.2% The low rent to sales rat
Slide 14: Retail category performance
Retail category performance INTRODUCTION Increased exposure to strong performing health and beauty and second tier fashion tenants Decreased exposure to challenged department stores, restaurants and medical SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW R60 000/m² Food Cell Phones 2.5% PROPERTIES OVERVI
Slide 15: Tenant affordability
Tenant affordability INTRODUCTION Rent to sales holding steady across the portfolio through tough market conditions over the past 3 years SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 11.7% Average annual rent-to-sales ratio PROPERTIES OVERVIEW 9.6% CASTELLANA 9.0% 9.0% 8.7% 6.9% FINANCIAL PERFORMANCE
Slide 16: Tenant affordability
Tenant affordability INTRODUCTION Consistently strong metrics Retail Vacancy Profile by GLA Retail Average Base Rentals (excl. Recoveries) SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 139.26 134.78 130.44 122.88 3.9% 3.8% 114.61 3.5% 108.14 3.3% 3.0% 2.8% PROPERTIES OVERVIEW CASTELLANA 2015 2016 2017
Slide 17: Operational capital expenditure
Operational capital expenditure INTRODUCTION Continued investment in assets and statutory compliance Framework and knowledge base SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − Bottom up building condition assessments complete on all assets within the portfolio − Includes spend in respect of prevent
Slide 18: Effective brownfields investments
Effective brownfields investments INTRODUCTION Value add of recent redevelopment projects Average annual Average 3-year historical value density escalation net operating income SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW since redevelopment completion growth 6.2% 5.0% PROPERTIES OVERVIEW CASTELLANA 9
Slide 19: Extension and upgrade
Extension and upgrade INTRODUCTION Pine Crest Shopping Centre, Pinetown, KZN Upgraded centre relaunched 25 July 2019 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW New mall on Kings Road and Food Court with 20 new brands 5% comparable turnover growth with 20% growth R200m Total Capex overall since
Slide 20: New acquisition
New acquisition INTRODUCTION Mdantsane City Shopping Centre, Mdantsane, Eastern Cape Dominant asset located in Mdantsane, one of the SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW largest townships in South Africa. It is situated on the main arterial route through Mdantsane. Mdantsane City has over 90 s
Slide 21: Acquisitions and sales
Acquisitions and sales INTRODUCTION Transferred during the year SOUTHERN AFRICAN RETAIL Date of transfer PORTFOLIO OVERVIEW Property acquired Location Sector Price R'm Mdantsane City Shopping Centre Mdantsane, Eastern Cape Retail 516.5 Nov-19 PROPERTIES OVERVIEW Property sold Location Sector Price R
Slide 22: Retail of the future
Retail of the future INTRODUCTION Customer driven centres to prevail Positive customer experience will be the key differentiator in sustaining footfall in the future SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Data accumulation in order to listen, involve and interact on an individualised manner
Slide 23: Customer centricity and insights
Customer centricity and insights INTRODUCTION Developing core competence in customer centricity to drive better leasing decisions and tenant mix 3 primary pillars of customer insights journey SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − In-Mall Understand and interact with current tenants and cust
Slide 24: Alternative income management
Alternative income management INTRODUCTION Significant milestones achieved with platform now in place SOUTHERN AFRICAN RETAIL Fibre to the business project The shopper app is being PORTFOLIO OVERVIEW completed. Open Access finalised - to be deployed contracts for tenants now at Hillfox & Dobsonville
Slide 25: Energy and water management
Energy and water management INTRODUCTION Achievements Meadowdale Mall - phase 1 East Rand Mall Oshakati Hillfox - phase 1 Impact on cost-to-income ratio Electricity contributes 42% to total expenses, with an SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW average year-on-year escalation of 9% 4% of t
Slide 26: Castellana Properties Overview
3 Castellana Properties Overview Alfonso Brunet www.vukile.co.za 26
Slide 27: Highlights
Highlights INTRODUCTION A transformational period, now the eighth largest Socimi in Spain by market capitalisation Gross Asset Value exceeds €1bn for the first time SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW ₋ Accretive acquisitions and revaluation growth driven by increased NOI grew portfolio ove
Slide 28: Key portfolio metrics
Key portfolio metrics INTRODUCTION A premier retail SOCIMI in Spain SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Operating Key Facts Valuations Tenants Metrics PROPERTIES OVERVIEW CASTELLANA Portfolio Value of €1 028m Average asset value €57m 93% of retail space let to 19.17% increase in FINAN
Slide 29: Sales & footfall – continuing to grow
Sales & footfall – continuing to grow INTRODUCTION Sales performance up 3.2% Like-for-Like, Footfall up 5.3% YTD to September 2019 SOUTHERN AFRICAN RETAIL Total Sales €178.7m Total Footfall 16.5m PORTFOLIO OVERVIEW H1 2020: H1 2020: people Sales growth – H1 2020 vs H1 2019 Footfall YTD 2019 – Jan-Se
Slide 30: Leasing activity – positive reversions
Leasing activity – positive reversions INTRODUCTION Positive reversions across the portfolio over the period with strong collection rates OCCUPANCY INCREASED TO c.99% SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 74 €5.1m 30TH SEPT. 2019 98.61% LEASES SIGNED NEW RENT SIGNED 31ST MARCH 2019 97.86% PROPE
Slide 31: Value creation – GRI bridge and breakdown
Value creation INTRODUCTION GRI Bridge and Breakdown Life-for-Like Growth of 4.7% for H1FY20 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Potential Portfolio GRI Annualised over €65m Shopping Centres €52m 80% Retail Parks €11.4m 17% Offices €1.9m 3% PROPERTIES OVERVIEW CASTELLANA €m 65.3 Shopping Cent
Slide 32: Tenant mix
Tenant mix INTRODUCTION Highly diversified retail mix leading to sustainable, high quality and low risk income streams Assets GLA WALE (i) Occupancy SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 16 356 278 m2 14.2 years 98.6% Category profile by Rent Top 10 Tenants by Rent 30 September 2019 30 Septembe
Slide 33: Value creation – GAV bridge and breakdown
Value creation INTRODUCTION GAV Bridge and Breakdown Portfolio revaluation of €7.5m in 6 months from 31 March 2019 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW (1) Portfolio Gross Asset Value over €1bn with acquisitions of c.€100m during H1FY20 Current value does not include the expected NOI gro
Slide 34: New acquisition – Puerta Europa
New acquisition – Puerta Europa INTRODUCTION Dominant shopping centre in Algeciras offering stable and growing NOI Dominant centre in port city of SOUTHERN AFRICAN RETAIL €56.8m PORTFOLIO OVERVIEW Algeciras with under-market rentals and above average sales Acquisition Price performance offers attrac
Slide 35: Additional acquisitions
Additional acquisitions INTRODUCTION Strategic acquisitions to enhance existing assets Key Tenants SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Accretive acquisition of Phase 2 at Pinatar Park to further strengthen the tenant mix PROPERTIES OVERVIEW Pinatar Park Phase II – Murcia CASTELLANA Acquisitio
Slide 36: Asset Management Growth Drivers
36 SOUTHERN AFRICAN RETAIL CASTELLANA DEBT, TREASURY AND STRATEGIC PLANS INTRODUCTION PORTFOLIO OVERVIEW PROPERTIES OVERVIEW FINANCIAL PERFORMANCE AND PROSPECTS Q&A APPENDICES Asset Management Growth Drivers Repositioning Projects
Slide 37: Value creation – repositioning project – Bahia Sur 1/2
37 SOUTHERN AFRICAN RETAIL CASTELLANA DEBT, TREASURY AND STRATEGIC PLANS INTRODUCTION PORTFOLIO OVERVIEW PROPERTIES OVERVIEW FINANCIAL PERFORMANCE AND PROSPECTS Q&A APPENDICES Value creation – repositioning project – Bahia Sur 1 / 2 Further entrenching the dominance of the centre
Slide 38: Value creation – repositioning project – Bahia Sur 2/2
Value creation – repositioning project – Bahia Sur 2 / 2 INTRODUCTION SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW CASTELLANA Acquisition of El Corte Ingles unit to reinforce the dominance of the centre, FINANCIAL PERFORMANCE DEBT, TREASURY AND bringing new and exciting tenants to
Slide 39: Value creation – repositioning project – Los Arcos 1/2
39 SOUTHERN AFRICAN RETAIL CASTELLANA DEBT, TREASURY AND STRATEGIC PLANS INTRODUCTION PORTFOLIO OVERVIEW PROPERTIES OVERVIEW FINANCIAL PERFORMANCE AND PROSPECTS Q&A APPENDICES Value creation – repositioning project – Los Arcos 1 / 2 Upgrading the dominant city centre shopping centre
Slide 40: Value creation – repositioning project – Los Arcos 2/2
Value creation – repositioning project – Los Arcos 2 / 2 INTRODUCTION SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW CASTELLANA Acquisition of Hipercor unit enabling improved tenant mix along with street FINANCIAL PERFORMANCE level reconfiguration DEBT, TREASURY AND CURRENT LAY OUT F
Slide 41: Value creation – repositioning project – El Faro 1/2
41 SOUTHERN AFRICAN RETAIL CASTELLANA DEBT, TREASURY AND STRATEGIC PLANS INTRODUCTION PORTFOLIO OVERVIEW PROPERTIES OVERVIEW FINANCIAL PERFORMANCE AND PROSPECTS Q&A APPENDICES Increasing the leisure and F&B component to further entrench dominance Value creation – repositioning project – El Faro 1 /
Slide 42: Value creation – repositioning project – El Faro 2/2
Value creation – repositioning project – El Faro 2 / 2 INTRODUCTION SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW CASTELLANA Unlocking value by transforming former DIY box into FINANCIAL PERFORMANCE DEBT, TREASURY AND attractive F&B Plaza Return Metrics FUTURE LAY OUT STRATEGIC PLAN
Slide 43: Growth drivers
Growth drivers INTRODUCTION Continued focus on Asset Management Leroy Merlin Habaneras SC enhanced tenancy Inditex Group consolidation SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW CASTELLANA FINANCIAL PERFORMANCE DEBT, TREASURY AND 5 units agreed to be converted from New F&B ar
Slide 44: Capex on the rest of the portfolio
Capex on the rest of the portfolio INTRODUCTION €25m of value-adding capex spread across the portfolio Project Est. Capex Progress SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 1 Vallsur Reconfiguration of first floor €10m In concept phase PROPERTIES OVERVIEW CASTELLANA Re-sizing of fashion boxes a
Slide 45: Focus on the customer
Focus on the customer INTRODUCTION The beginning of the journey New Data sources to better know our customers SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Signed agreement with leading telecoms business on accessing customer big data sources First phase already launched in pilot shopping centres
Slide 46: Debt, Treasury and Financial Performance
4 Debt, Treasury and Financial Performance Laurence Cohen www.vukile.co.za 46
Slide 47: Group debt and foreign exchange policy
Group debt and foreign exchange policy INTRODUCTION A prudent and structured approach to managing risk A multi-banked approach across diversified sources of funding SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Always maintain significant revolving credit facilities and undrawn debt facilities – to
Slide 48: Group debt overview
Group debt overview INTRODUCTION Group debt from diversified sources of funding SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Sep-19 Mar-19 Group Debt (Rbn) Rbn) No. of bank funders SA 7.4 5.9 SA 5 25% PROPERTIES OVERVIEW Spain 8.1 7.3 (iv) Spain 7 CASTELLANA Total 15.5 13.2 Total 12 FINANCIAL PERFORMA
Slide 49: Key debt and hedging metrics
Key debt and hedging metrics INTRODUCTION Interest rates and foreign currencies conservatively hedged Internal Policy SOUTHERN AFRICAN RETAIL Sep-19 Mar-19 PORTFOLIO OVERVIEW at Group level Interest-bearing debt hedged 86.5% 95.7% > 75% PROPERTIES OVERVIEW Maturity profile – fixed rates and swaps 3.
Slide 50: Interest cover ratio (ICR)
Interest cover ratio (ICR) INTRODUCTION ICR reflects strong cashflows to comfortably service interest SOUTHERN AFRICAN RETAIL Southern PORTFOLIO OVERVIEW Group Spain Africa Interest cover ratio 6.4 times 8.0 times 5.3 times PROPERTIES OVERVIEW CASTELLANA Interest cover covenant level 2 times 2 times
Slide 51: Loan-to-value ratio (LTV)
Loan-to-value ratio (LTV) INTRODUCTION Stress testing reveals the strength of the balance sheet Internal SOUTHERN AFRICAN RETAIL Southern PORTFOLIO OVERVIEW Group Spain Policy at Africa Group level Loan-to-value 40.8 % 38.8% 42.9% 35% - 40% (net of cash and cash equivalents) PROPERTIES OVERVIEW CAST
Slide 52: Management plans to reduce LTV
Management plans to reduce LTV INTRODUCTION LTV target range: 35% - 40% Reduce LTV to ± 35% over the next 6 – 12 months SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Discussions progressing for introduction of strategic shareholder in Castellana to help fund further growth Current LTV 40.8% PROPERT
Slide 53: Simplified income statement
Simplified income statement INTRODUCTION Sep-19 Sep-18 Variance Rm Rm % Revenue 1 763 1 240 42.2 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW SA 1 040 930 11.8 Spain 723 310 100.0 Property Expenses (543) (426) 27.5 Net property income 1 220 814 49.9 PROPERTIES OVERVIEW CASTELLANA SA 640 574 11.5 Spain
Slide 54: Distributable earnings
Distributable earnings INTRODUCTION Reconciliation to dividends per share Sep-19 Sep-18 Variance SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Rm Rm % Attributable to Vukile Group 952 642 48.3 Non-IFRS adjustments: (105) 71 PROPERTIES OVERVIEW Profit before tax of subsidiary (Castellana) (111) - CASTEL
Slide 55: Geographical segment analysis
Geographical segment analysis INTRODUCTION Spain increased its contribution to 48% of net property income 6 months to September 2018 6 months to September 2019 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 25% 41% PROPERTIES OVERVIEW Revenue Revenue CASTELLANA 59% 75% FINANCIAL PERFORMANCE DEBT, TREASU
Slide 56: Group net cash flow
Group net cash flow – (Rm) INTRODUCTION Dividend fully covered by cash flows from operating activities SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 696 2 111 PROPERTIES OVERVIEW CASTELLANA (1 871) 152 (155) 1 046 FINANCIAL PERFORMANCE DEBT, TREASURY AND ( 615 ) ( 1 034 ) ( 62 ) STRATEGIC PLANS AND PRO
Slide 57: Group balance sheet
Group balance sheet – (Rm) INTRODUCTION Summarised movement in assets and liabilities Sep-19 Mar-19 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 30 946 29 334 PROPERTIES OVERVIEW CASTELLANA FINANCIAL PERFORMANCE 13 090 DEBT, TREASURY AND 11 548 STRATEGIC PLANS AND PROSPECTS 2 318 2 600 2 409 2 300 1 8
Slide 58: Distribution history
40.30 48 2008 88.30 44.10 53.8 Cents per share 2009 97.90 47.00 60.9 2010 107.90 Distribution history 46.20 62.8 2011 109.00 8.7 47.60 63.8 2012 111.40 Interim 13.4 52.20 68.2 Final 2013 120.40 11.2 54.80 71.7 2014 126.50 13.8 59.10 Continuing 16 year trend of unbroken growth in distributions Normal
Slide 59: Strategic plans and prospects
5 Strategic plans and prospects Laurence Rapp www.vukile.co.za 59
Slide 60: AIH transaction
AIH transaction – A powerful partnership to drive transformation between two complimentary partners INTRODUCTION Two aspects to the deal Sale of office and industrial portfolio to Mbako Property Fund Creation of a Property Asset Management Company SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Portfol
Slide 61: Listed investments
Listed investments INTRODUCTION Looking for opportunities to recycle into core strategies SOUTHERN AFRICAN RETAIL Arrowhead - (c.11.3%) Atlantic Leaf - (34.9%) Fairvest - (26.6%) PORTFOLIO OVERVIEW Remains non-core and ideally Satisfied with operations and Aligned to Vukile core retail focus P
Slide 62: Southern Africa
Southern Africa INTRODUCTION Internally focussed strategy to drive operational performance Anticipate another challenging period ahead for the local economy SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Portfolio is defensively positioned with 92% retail exposure with a specific focus on LSMs 1-7
Slide 63: Spanish strategy
Spanish strategy INTRODUCTION Building off a solid foundation with potential to become a dominant market participant Spanish retail and economic fundamentals remain positive; not an over-retailed market with 560 retail assets SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − Spanish consumer and social
Slide 64: Growth path optionality
Growth path optionality INTRODUCTION Additive strategies but will need strong shareholder support to quickly lead the market Higher Deal led SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW − Portfolios − Corporate activity − Introduction of a strategic shareholder − Quickest route to market dominance P
Slide 65: Castellana is the seventh largest institutional retail owner in Spain
Castellana is the seventh largest institutional retail owner in Spain by GLA INTRODUCTION On the cusp of a market leading position 600 000 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 500 000 PROPERTIES OVERVIEW 400 000 Estimated m² GLA CASTELLANA 300 000 FINANCIAL PERFORMANCE DEBT, TREASURY AND 200 0
Slide 66: Castellana relative to its Spanish and European peers
Castellana relative to its Spanish and European peers INTRODUCTION Castellana offers an attractive dividend yield vs EPRA NAV relative to European and Spanish peers 6.6% SOUTHERN AFRICAN RETAIL 6.3% PORTFOLIO OVERVIEW 5.5% 5.2% 5.0% 4.7% 3.9% DPS/EPRA NAVps PROPERTIES OVERVIEW 3.8% 3.7% 3.5% CASTELL
Slide 67: How we think about the business
How we think about the business INTRODUCTION Value lies in the sum of the parts Castellana valued based on its European-denominated and SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW sourced income streams Very much a rand hedge and the use of FECs removes the volatility in earnings making them more
Slide 68: Prospects
Prospects INTRODUCTION The Vukile business remains in very good shape; operationally, financially and strategically SOUTHERN AFRICAN RETAIL Clearly focused retail strategy and specialisation in both South Africa and PORTFOLIO OVERVIEW Spain is providing benefits in each of these markets as seen
Slide 69: Acknowledgements
69 SOUTHERN AFRICAN RETAIL CASTELLANA DEBT, TREASURY AND STRATEGIC PLANS INTRODUCTION PORTFOLIO OVERVIEW PROPERTIES OVERVIEW FINANCIAL PERFORMANCE AND PROSPECTS Q&A APPENDICES Brokers and developers Property managers Service providers Colleagues Investors Funders Tenants Board Acknowledgemen
Slide 70: Q&A
6 Q&A www.vukile.co.za 70
Slide 71: Appendices
7 Appendices www.vukile.co.za 71
Slide 72: Southern Africa retail footprint
Southern Africa retail footprint INTRODUCTION Retail portfolio profile (Top 15 properties 65% of portfolio by value) SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 12 11 8% PROPERTIES OVERVIEW 1 CASTELLANA 6% 7 5 10 13 36% 14 4% 15 1 East Rand Mall 9 Bloemfontein Plaza 4% 2 10 Meadowdale Mall 9 Pine Cre
Slide 73: High quality retail assets
High quality retail assets INTRODUCTION Top 15 assets East Rand Mall Pine Crest Phoenix Plaza Maluti Crescent Kolonnade Retail Park SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW GAV R1 448m R1 155m R 939m R 808m R 547m CASTELLANA Region Gauteng KwaZulu-Natal KwaZulu-Natal Free State
Slide 74: High quality retail assets (cont.)
High quality retail assets INTRODUCTION Top 15 assets (cont.) Gugulethu Square Dobsonville Mall Nonesi Mall Bloemfontein Plaza Meadowdale Mall SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW GAV R 545m R 545m R 507m R 458m R 454m CASTELLANA Region Western Cape Gauteng Eastern Cape Fre
Slide 75: High quality retail assets (cont.)
High quality retail assets INTRODUCTION Top 15 assets (cont.) Oshakati Shopping Daveyton Shopping Thavhani Mall Randburg Square Moruleng Mall Centre Centre SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW GAV R 447m R 428m R 428m R 413m R 411m CASTELLANA Region Limpopo Namibia Gauteng
Slide 76: Retail tenant exposure
Retail tenant exposure INTRODUCTION Direct Southern African Retail Portfolio Tenant profile - by Contractual Rent Top 10 tenants - by Contractual Rent SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Largest brand exposure 8.5 2.6 2.6 Other 6.2 20% 5.2 PROPERTIES OVERVIEW 0.4 CASTELLANA 5.6 4.4 0.6 4.9 To
Slide 77: Retail category exposure
Retail category exposure INTRODUCTION Well diversified mix of tenant categories Category profile by rent Category profile by GLA SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 29% Fashion 24% 13% Grocery/ Supermarket 22% PROPERTIES OVERVIEW CASTELLANA 8% Banking 5% 7% Food 5% 6% Home Furnishings/ Art/ D
Slide 78: Retail tenant expiry profile
Retail tenant expiry profile INTRODUCTION 47% of contractual rent expiring in FY2023 and beyond (WALE 3.8 years) % of Contractual Rent Cumulative SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 100 68 PROPERTIES OVERVIEW CASTELLANA 53 32 FINANCIAL PERFORMANCE DEBT, TREASURY AND 15 32 17 21 15 March 2020
Slide 79: Retail vacancies
Retail vacancies INTRODUCTION 36 Properties Fully let or with vacancies lower than 1 000m² Fully Let Durban Workshop Germiston Meadowdale Mall SOUTHERN AFRICAN RETAIL Giyani Plaza PORTFOLIO OVERVIEW Mbombela Truworths Centre Piet Retief Shopping Centre Pretoria Kolonnade Retail Park Queenstown Nones
Slide 80: Ratio of net cost to property revenue – retail portfolio
Ratio of net cost to property revenue – retail portfolio INTRODUCTION Good progess in cost containment SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Average 17.7 PROPERTIES OVERVIEW Average 16.7 CASTELLANA 20.2 19.4 18.6 18.1 FINANCIAL PERFORMANCE 17.8 17.0 DEBT, TREASURY AND 17.0 16.9 16.3 16.1 16.1 1
Slide 81: Southern African total portfolio composition
Southern African total portfolio composition INTRODUCTION Top 15 assets make up 60% of the total portfolio Sectoral Profile - by Value Sectoral Profile - by GLA SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Top 15 Top 15 By Value By GLA Properties Properties 92% Retail 87% 60% 46% PROPERTIES OVERVIEW 3
Slide 82: Southern African total portfolio tenant exposure
Southern African total portfolio tenant exposure INTRODUCTION Low risk with 77% national tenants Top 10 Tenants - by Contractual Rent Top 10 Tenants - by occupied GLA SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Other Other 23% 23% Top 10 Diversified across Top 10 Tenants 1 226 tenants Tenants 41% 46%
Slide 83: Southern African total portfolio tenant expiry profile
Southern African total portfolio tenant expiry profile INTRODUCTION 47% of contractual rent expiring in FY2023 and beyond (WALE 3.7 years) % of Contractual Rent % of Contractual Rent Cumulative SOUTHERN AFRICAN RETAIL 100 PORTFOLIO OVERVIEW 68 53 32 33 15 14 19 20 PROPERTIES OVERVIEW CASTELLANA Mar-
Slide 84: Southern African total portfolio vacancy profile
Southern African total portfolio vacancy profile INTRODUCTION Vacancy contained at 3.6% of contractual rent 19.6 18.3 SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Vacancy 9.5 3.6% of 5.3 3.6 3.6 3.0 3.0 2.9 Rent PROPERTIES OVERVIEW CASTELLANA Retail Industrial Offices Residential * Total Mar-19 Sep-19
Slide 85: Southern African total portfolio lease renewals
Southern African total portfolio lease renewals INTRODUCTION Positive reversions Lease renewals SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 8.8 percentage escalation on 8.0 expiry rentals PROPERTIES OVERVIEW CASTELLANA Out of 201 retail leases renewed 70% were FINANCIAL PERFORMANCE positive, 18% DEBT
Slide 86: Trading density growth
Trading density growth INTRODUCTION Sustained trading density growth at competitive occupancy costs SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Rent-to-sales 5.4% 5.5% Rent-to-sales Trading density growth Rent-to-sales PROPERTIES OVERVIEW 5.3% 7.0% CASTELLANA Rent-to-sales 4.2% Rent-to-sales 5.9% 4.0
Slide 87: Tenant category, affordability and performance
Tenant category, affordability and performance INTRODUCTION Capacity for growth remains 12.2% SOUTHERN AFRICAN RETAIL 11.5% PORTFOLIO OVERVIEW 10.8% Average annual rent-to-sales ratio 10.5% 10.2% 10.1% 9.9% 9.7% 9.6% 9.5% 9.4% 9.3% 9.3% 8.7% 8.6% 8.5% 8.4% 8.3% 8.1% 8.1% 7.8% 7.6% 7.5% 7.3% 5.8% 5.7
Slide 88: Contracted rental escalation profile
Southern African total portfolio contracted rental escalation profile INTRODUCTION Rental escalations still ahead of inflation SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Escalation percentage 8.2 7.9 7.8 7.6 7.5 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 PROPERTIES OVERVIEW CASTELLANA FINANCIAL PERFORMANCE
Slide 89: Weighted average base rentals – R/m2
Southern African total portfolio weighted average base rentals – R/m2 INTRODUCTION Excluding recoveries 25.8% SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 165.70 3.3% 3.5% 146.67 139.26 134.78 132.06 131.68 127.54 PROPERTIES OVERVIEW 6.2% CASTELLANA 101.20 95.32 FINANCIAL PERFORMANCE 2.6% DEBT, TREASU
Slide 90: Weighted average base rentals R/m2 (excluding recoveries)
Weighted average base rentals R/m2 (excluding recoveries) INTRODUCTION Southern African Retail portfolio Durban Phoenix Plaza Boksburg East Rand Mall SOUTHERN AFRICAN RETAIL Durban Workshop PORTFOLIO OVERVIEW Pinetown Pine Crest Mbombela Truworths Centre Windhoek 269 Independence Avenue Thohoyandou
Slide 91: Growth in net profit from southern African property operations
Growth in net profit from southern African property operations INTRODUCTION Like-for-like growth of 6.1% SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 7.5% 6.8% 6.5% PROPERTIES OVERVIEW 6.1% CASTELLANA 5.8% FINANCIAL PERFORMANCE DEBT, TREASURY AND 3.4% STRATEGIC PLANS AND PROSPECTS Q&A 2015 2016 2017 2
Slide 92: Ratio of cost to property revenue
Southern African total portfolio – ratio of cost to property revenue INTRODUCTION Containing cost ratios Net cost to property revenue SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Average 17.1 Average 16.2 19.4 18.0 17.9 17.5 16.9 16.9 16.3 16.3 16.2 16.1 15.7 15.5 15.4 15.2 PROPERTIES OVERVIEW CASTELL
Slide 93: Valuation methodology
Valuation methodology INTRODUCTION Southern African property portfolio Valuations are based on multiple assumptions which involve some subjectivity. The key is consistency in applying the SOUTHERN AFRICAN RETAIL Science vs. art same methodology over time. We’ve applied consistent views and methodolo
Slide 94: Appendix B: Spanish Portfolio
7 Appendix B Spanish Portfolio www.vukile.co.za 94
Slide 95: Spanish market outlook and political environment
Spanish market outlook and political environment INTRODUCTION Spain still outperforming European peers Spain Economic Indicators (1) Retail Sales (% change pa) (1) SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Real GDP (% change pa) Spain France Germany Netherlands UK Private Consumption (real % change
Slide 96: Spanish portfolio footprint
Spanish portfolio footprint INTRODUCTION Spain portfolio profile Property rank SOUTHERN AFRICAN RETAIL by value PORTFOLIO OVERVIEW 9 3% Geographic profile % by value 1 El Faro 10 Marismas del Polvorín 5 9% 2 11 PROPERTIES OVERVIEW Bahía Sur Edificio Alcobendas CASTELLANA 3 Los Arcos 12 La Heredad 11
Slide 97: Spanish vacancy profile
Spanish vacancy profile INTRODUCTION Vacant Area Mar 19 Vacant Area Sep 19 Portfolio Shopping Centres SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Vacancy Vallsur (35 212m²) 3.1% Los Arcos (29 696m²) 1.4% of Puerta Europa (29 742m²) 4.3% 2.0% GLA Habaneras (24 166m²) 2.0% El Faro (43 407m²) 1.4% PROPE
Slide 98: Spanish portfolio overview
Spanish portfolio overview INTRODUCTION Top 10 assets El Faro Bahía Sur Los Arcos Granaita Retail Park (i) Vallsur SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW GAV €164.1m €142m €136.4m €114.9m €93.4m CASTELLANA Province Extremadura Andalucia Andalucia Andalucia Castilla Leon Gross
Slide 99: Spanish portfolio overview
Spanish portfolio overview INTRODUCTION Top 10 assets Habaneras Puerta Europa Parque Oeste (i) Parque Principado Marismas del Polvorín SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW PROPERTIES OVERVIEW GAV €89.8m €62.6m €51.8m €34.7m €28.5m CASTELLANA Province Com. Valenciana Andalucia Madrid Asturias A
Slide 100: Retail lease expiry profile
Retail lease expiry profile INTRODUCTION 50% of contractual rent expiring in FY2029 and beyond (WALE 14.2 years to expiry and 2.8 years to break) Expiry Profile (% Rent) SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW % of Contractual Rent Cumulative 100 PROPERTIES OVERVIEW 54 46 50 CASTELLANA 40 45 37 2
Slide 101: Retail tenant exposure
Retail tenant exposure INTRODUCTION Low risk with 93% national and international tenants Top 10 tenants by rent Tenant profile - by contractual rent SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Other 11.1 7% 4.4 1.8 1.6 1.4 PROPERTIES OVERVIEW 1 CASTELLANA 0.5 0.3 0.1 Top 10 tenants 4.5 3.1 FINANCIAL
Slide 102: Spanish total portfolio composition
Spanish total portfolio composition INTRODUCTION Sectoral Profile - by Value Sectoral Profile - by GLA SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Top 10 Top 10 Properties By Value By GLA Properties 89% 66% Shopping Centres 53% 81% PROPERTIES OVERVIEW 30% Retail Parks 42% CASTELLANA of Total of Total
Slide 103: Appendix C: Financial Results Overview
7 Appendix C Financial Results Overview www.vukile.co.za 103
Slide 104: Group net income analysis
Group net income analysis INTRODUCTION Distributable income of R847m for the six month ended 30 September 2019 Income R2 033 million SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Rm % Rental income 1 382 68.0 Municipal and rates recoveries 381 18.7 Investment and other income 229 11.3 Income from assoc
Slide 105: Group loan repayment and hedging expiry profile
Analysis of Group loan repayment and hedging expiry profile INTRODUCTION Well hedged with low risk expiry profile Group loan and hedging (swap & fixed debt) expiry profile SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 68.2% (vii) Internal Policy (viii) R1.2bn of No more than 25% available of total inte
Slide 106: Southern African loan repayment and swap expiry profile
Analysis of southern African loan repayment and swap expiry profile INTRODUCTION Well hedged with low risk expiry profile Southern African loan and hedging (swap & fixed debt) expiry profile SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 50.4% (xii) 34.5% PROPERTIES OVERVIEW CASTELLANA 23.9% 29.2% 17.2%
Slide 107: Debt expiring in FY2020
Debt expiring in FY2020 INTRODUCTION R574m of Term debt and R613m of access facilities Maturity Date Amount Drawn Comments SOUTHERN AFRICAN RETAIL '000 PORTFOLIO OVERVIEW ABSA Multicurrency Revolving Credit Facility (ZAR portion) 31 Oct 2019 R100 507 ABSA Multicurrency Revolving Credit Facility (EUR
Slide 108: Undrawn facilities
Undrawn facilities INTRODUCTION R1.2bn of available bank facilities Facility Amount Amount Drawn Facility Undrawn SOUTHERN AFRICAN RETAIL '000 '000 '000 PORTFOLIO OVERVIEW ABSA Multicurrency Revolving Credit Facility (ZAR portion) R337 026 R100 507 R 236 519 ABSA Multicurrency Revolving Credit Facil
Slide 109: Spanish loan repayment and swap expiry profile
Analysis of Spanish loan repayment and swap expiry profile INTRODUCTION Low refinance risk over the next six years Spanish loan and hedging (swap & fixed debt) expiry profile SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW (vii) 81.7% (viii) 64.4% PROPERTIES OVERVIEW CASTELLANA FINANCIAL PERFORMANCE 90%
Slide 110: Cost of funding
Cost of funding INTRODUCTION Reduction in Group cost of finance due to funding mix Group Debt by Currency SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 9.21% 9.55% 9.49% 2.70% 2.46% 2.43% 3.45% 3.41% 3.44% 4.53% 3.97% 3.94% R15.536bn PROPERTIES OVERVIEW R13.23bn R12.070bn CASTELLANA R9.462bn FINANCIAL
Slide 111: GBP foreign exchange hedging
GBP foreign exchange hedging INTRODUCTION Maintaining sustainable predictable income while reducing currency volatility SOUTHERN AFRICAN RETAIL £'000 Nov-19 May-20 Nov-20 PORTFOLIO OVERVIEW Fixed GBP/ZAR rate 19.9029 20.6072 21.3622 To minimise the adverse foreign exchange fluctuations Vukile’s ta
Slide 112: EUR foreign exchange hedging
EUR foreign exchange hedging INTRODUCTION Maintaining sustainable predictable income while reducing currency volatility SOUTHERN AFRICAN RETAIL €'000 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 PORTFOLIO OVERVIEW Fixed EUR/ZAR rate 17.4997 18.1463 18.4702 19.2738 20.1694 20
Slide 113: Cross currency interest rate swap exposure
Cross currency interest rate swap exposure INTRODUCTION Prudent currency management EUR Nominal ZAR Nominal EUR/ZAR Initial EUR Fixed Rate ZAR Average SOUTHERN AFRICAN RETAIL Maturity PORTFOLIO OVERVIEW €'000 R'000 Rate over Term Rate over Term Nedbank CCIRS June 2018 (€93.2m) €93 200 R1 346 240 14.
Slide 114: Overview of DMTN secured property portfolio
Overview of DMTN secured property portfolio (Group 1 notes) INTRODUCTION Quality Secured Portfolio Property Value R2 616m 41% of income from top 10 tenants SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW 7 Properties WALE of 4.0 years PROPERTIES OVERVIEW GLA 160 708m² Retail Tenant Retention 91
Slide 115: Overview of unencumbered assets
Overview of unencumbered assets INTRODUCTION Quality Unencumbered Assets Total Unencumbered Assets R8 711m 44% of income from top 10 tenants SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW Property Value R3 272m WALE of 2.8 years PROPERTIES OVERVIEW 24 Properties Retail Tenant Retention 83% CAS
Slide 116: Corporate bond issuances
Corporate bond issuances INTRODUCTION Balance of secured and unsecured debt Corporate Bonds Security Amount Reference Rate Margin Maturity Date Initial Term SOUTHERN AFRICAN RETAIL PORTFOLIO OVERVIEW VKE07 Secured R200m 3M JIBAR 1.65% 08/06/2020 5.1 years VKE09 Secured R378m 3M JIBAR 1.64% 08/07/202
Slide 117: “See-through” loan-to-value ratio
“See-through” loan-to-value ratio INTRODUCTION Low risk conservative balance sheet SOUTHERN AFRICAN RETAIL Interest bearing debt Property Assets Cash PORTFOLIO OVERVIEW LTV Shareholding R'000 R'000 R'000 Vukile Company, MICC and 100% of Clidet No. 1011 R7 392 350 R15 915 827 R353 352 44.23% 100.0% P
Slide 118: Notes to treasury management slides
Notes to treasury management slides INTRODUCTION Aligned with industry best standards (i) Loan-to-Value ratio calculated as a ratio of nominal interest-bearing debt less cash and cash equivalents (excluding tenant deposits & restricted cash) divided by the sum of (i) SOUTHERN AFRICAN RETAIL the amou
Slide 119: Notes to treasury management slides (continued)
Notes to treasury management slides (continued) INTRODUCTION Aligned with industry best standards (xv) Percentage Net GBP dividend hedged calculated as FEC hedge divided by Net GBP forecast dividend over the respective period. The Net GBP forecast dividend is calculated as SOUTHERN AFRICAN RETAIL th