Redefine Properties Limited · JSE:RDF
Redefine Properties — H1 2015 Earnings Presentation
62 slides from Redefine Properties's earnings presentation, 2015
Slide 1: Redefine Properties Group Results and Strategic Review
REDEFINE PROPERTIES GROUP RESULTS AND STRATEGIC REVIEW HALF YEAR ENDED 28 FEBRUARY 2015 www.redefine.co.za
Slide 2: Agenda
AGENDA INTRODUCTION AND FINANCIAL RESULTS 01 SALIENT THEMES ANDREW KONIG LEON KOK 02 LOCAL PROPERTY RESHAPING THE 03 PORTFOLIO DAVID RICE PROPERTY PLATFORM ANDREW KONIG 04 CLOSING SUPPLEMENTARY 05 ANDREW KONIG INFORMATION 06
Slide 3: Introduction and Salient Themes
INTRODUCTION AND SALIENT THEMES ANDREW KONIG
Slide 4: First Half 2015: Salient Themes
FIRST HALF 2015: SALIENT THEMES Strategic intent focused on delivering sustained value Highlights Business confidence levels overall remain subdued • Efficient cost control • Effective tenant retention strategy • Tight asset management • Diversifying, growing and improving the quality of the portfol
Slide 5: Financial Results
FINANCIAL RESULTS LEON KOK
Slide 6: Half Year 2015 Financial Highlights
HALF YEAR 2015 FINANCIAL HIGHLIGHTS • Distribution growth of 7.1% to 39 cents • Distributable income of R1.47bn • In Rand terms distributable income has grown by 31.4% • Operating margins maintained despite tough trading conditions • Income producing assets under management now R56bn, up R5bn • Tota
Slide 7: Current Corporate Structure
CURRENT CORPORATE STRUCTURE Rand amounts reflect carrying values of assets 7
Slide 8: Distributable Income per Share
DISTRIBUTABLE INCOME PER SHARE Half year ended 28 February 2015 Distributable Per income share Y-o-Y (Rm) (Cents) change 2014 distributable income 1 116 36.4 Less dilution arising from new shares - -6.7 Local organic growth 335 8.9 International growth 15 0.4 2015 distributable income 1 466 39.0 7.1
Slide 9: First Half 2015 Contributors to Trading Results
FIRST HALF 2015 CONTRIBUTORS TO TRADING RESULTS Tailwinds Headwinds +R516m - R166m 1 750 1 650 20 9 41 43 (2) (8) (23) 1 550 44 (26) (30) 111 1 466 1 450 (77) 248 1 350 1 250 1 150 1 116 1 050 950 2014 Property Antecedent Australia Local Active German Higher Increased Higher Disposal UK Property Fin
Slide 10: Simplified Distributable Income Statement
SIMPLIFIED DISTRIBUTABLE INCOME STATEMENT Half year ended 28 February 2015 2015 2014 Change (Rm) (Rm) % Net operating income from investment properties 1 421 1 162 22.3% Listed security portfolio 274 230 19.1% Fee income 47 38 23.7% Property trading income 1 1 0.0% Total revenue 1 743 1 431 21.8% Ad
Slide 11: Active Portfolio Income Analysis
ACTIVE PORTFOLIO INCOME ANALYSIS Half year ended 28 February 2015 2015 2014 Change (Rm) (Rm) % Active portfolio revenue 1 242 1 187 4.6% Active portfolio costs* (251) (238) 5.5% Property income from active property portfolio 991 949 4.4% Net operating income from acquired/development properties 320
Slide 12: Active Portfolio Revenue Growth
ACTIVE PORTFOLIO REVENUE GROWTH Half year ended 28 February 2015 A tough leasing environment has diluted contractual lease escalations % of % of rental Growth vs property Contribution income 2014 revenue to growth Rental income 4.7% 4.7% 92.0% 4.3% Contractual lease escalations 76.0% 7.2% Renewals p
Slide 13: Active Portfolio Expenditure Analysis
ACTIVE PORTFOLIO EXPENDITURE ANALYSIS Half year ended 28 February 2015 2015 Change (Rm) % 2014 Property Costs 238 Net municipal recoveries benefitting from successful objections -1 -1.3% Net electricity recoveries worse due to increased costs 2 -15.9% Operating costs increased 8 9.7% Property manage
Slide 14: Active Portfolio Trading Efficiency
ACTIVE PORTFOLIO TRADING EFFICIENCY Half year ended 28 February 2015 Every R100 of property revenue converts into property income as follows 2015 2014 % % Property revenue 100.0 100.0 Less property costs 20.2 20.1 Municipal charges net of recoveries 3.1 3.2 Electricity charges net of recoveries (0.9
Slide 15: Simplified Statement of Financial Position
SIMPLIFIED STATEMENT OF FINANCIAL POSITION At February 2015 28 Feb 15 31 Aug 14 RDF FPT Global Group RDF FPT Global Group (Rm) (Rm) (Rm) (Rm) (Rm) (Rm) (Rm) (Rm) Property assets 35 893 11 921 8 153 55 967 31 471 12 168 7 429 51 068 Intangible assets 4 404 893 - 5 297 4 436 893 - 5 329 Other assets 8
Slide 16: Growth in Net Asset Value
GROWTH IN NET ASSET VALUE Half year ended 28 February 2015 1 060 45.2 (39.6) 1 020 (4.0) 90.5 (4.8) 990.9 976.0* (91.9) 980 940 19.5 900 860 820 780 740 700 31 Aug 2014 Dilution arising Revaluation Capital Statutory profit Forex Distributions Other net 28 Feb 2015 NAV from additional of assets raise
Slide 17: Contributors to Growth
CONTRIBUTORS TO GROWTH Half year ended 28 February 2015 Distribution contributors (cents) Net asset value composition (cents) Germany, Emira, Germany, Emira, 27.6 cents, 2.8% 12.5 cents, 1.3% 1.1 cents, 2.7% 0.5 cents, 1.3% United Kingdom, 2.5 cents, 6.4% Australia, 87.0 cents, 8.9% Australia, 3.4 c
Slide 18: Funding Profile
FUNDING PROFILE At February 2015 Redefine Fountainhead International Group Funding snapshot (Rm) (Rm) (Rm) (Rm) Bank borrowings 13 689 2 833 917 17 439 Debt capital markets 3 542 - - 3 542 Total borrowings 17 231 2 833 917 20 981 Key debt statistics* Feb 2015 Aug 2014 Loan to value (management targe
Slide 19: Debt Maturity Profile
DEBT MATURITY PROFILE At February 2015 Cost of funding 2015 (%) Average JIBAR 6.1% Bank margin 1.3% Floating rate 7.4% Cost of fixing 0.9% Average cost of debt 8.3% Rbn 7 Yield on equity issued 8.4% Weighted average cost of debt 8.3% 6 5.74 4.92 5 4.71 3.88 4 2.90 3 1.92 2.08 2 1.49 1.46 1.50 1 0.78
Slide 20: The Cash Value Created by Redefine
THE CASH VALUE CREATED BY REDEFINE Half year ended 28 February 2015 Minorities, Employees, 3.5% 2.2% Government Rm (Taxation) Revenue 3 088 1.7% Interest received 128 Municipalities Equity accounted result of associates 147 21.0% Property and other operating expenses (359) Cash value created 3 004 E
Slide 21: Local Property Portfolio
LOCAL PROPERTY PORTFOLIO DAVID RICE
Slide 22: Sectoral Split
SECTORAL SPLIT Value (%) Value (%) Value (%) August 2014 February 2015 Post February 2015 0% 1% 1% 18% 20% 22% 34% 39% 42% 40% 40% 43% Office Retail Industrial Specialised Notes: Feb 2015 includes 66% Fountainhead Post Feb 2015 includes 66% Fountainhead + Stoneridge + Leaf Capital Specialised includ
Slide 23: Highlights
HIGHLIGHTS • Tenant renewal retention by GLA – 89% • Leases covering 290 000m² renewed • Renewal rental growth of 2% with escalations of 8.3% (excludes short-term leases) • Vacancy 6.4% (FY14: 5.5%) • Average property value R114m • 46% of the portfolio by GLA and 45% by GMR expires beyond 2018 • Acq
Slide 24: Office Review
OFFICE REVIEW • Tenant renewal retention by GLA - 82% Office portfolio by grade • Renewal rental growth of 10% with rental escalations of 8.7% % • Market conditions continue to be challenging with no real 60 growth in rentals expected in the foreseeable future 53 51 • Cost of new leases remains at 1
Slide 25: Office Developments
OFFICE DEVELOPMENTS The Towers 90 Rivonia Road Rosebank Towers Essex Gardens • Cape Town CBD • Sandton, Gauteng • New development (RDF share: 42.5%) • Durban, Kwazulu Natal • Redevelopment project - parking • New office development • Total cost: R276m • Redevelopment project • GLA: 22 965m² • GLA: 5
Slide 26: Industrial Review
INDUSTRIAL REVIEW • National Head of Industrial portfolio appointed – significant asset management experience Industrial portfolio by type • Tenant renewal retention by GLA - 94% % • Renewal rental growth of -7% with rental escalations of 80 76 8.3% due to negative reversions on Buco and 70 Le Sel r
Slide 27: Industrial Developments
INDUSTRIAL DEVELOPMENTS uShukela (Cornubia) Waltloo Industrial Park Fabric Park • Durban, Kwazulu-Natal • Pretoria • Midrand, Gauteng • Development of midi units • Total cost: R173m • Redevelopment of well located property • Well located between Umhlanga and the • GLA: 26 285m² • Total cost: R103m a
Slide 28: Retail Review
RETAIL REVIEW • Retention rate by GLA – 91% Retail portfolio by type • Renewal rental growth of 3% with rental % escalations of 7.9% 50 44 • Vacancies increased to 5.5% (FY2014 : 3.9%) due 45 41 to Matlosana Mall, the impact of Ellerines and 40 development vacancies 35 35 30 • The Kopanong, Hammansk
Slide 29: Retail Developments
RETAIL DEVELOPMENTS Matlosana Mall South Coast Mall East Rand Mall • North West • Shelly Beach, Kwa-Zulu Natal • Boksburg, Gauteng • New development • Redevelopment – installation of Food • Total cost: R153m (RDF 50% share) • Regional shopping centre Lovers Market, extension of Checkers and • Extens
Slide 30: Category Performance
CATEGORY PERFORMANCE 5 000 16% 4 500 14% 4 000 12% 3 500 Trading density Rent / turnover 3 000 10% 2 500 8% 2 000 6% 1 500 4% 1 000 500 2% 0 0% Department Fashion & Fast food & Grocery & Health & Homewares Music & Shoes stores accessories restuarants supermarket beauty & furniture movies Density Ren
Slide 31: Major Tenants Performance Comparison
MAJOR TENANTS PERFORMANCE COMPARISON 12% 10% Foschini Average Rent/Turnover Ratio Edcon MRPG 8% Truworths 6% Pepkor 4% Massmart Shoprite Clicks 2% Woolworths Pick n Pay 0% 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 Average Monthly Density The above data is based on the 12 months end
Slide 32: Reshaping the Property Platform
RESHAPING THE PROPERTY PLATFORM ANDREW KONIG
Slide 33: Strategic Priorities
STRATEGIC PRIORITIES Focus on creating value over property cycles Redefine’s business model is people centric Strategic focus areas: • Refine asset allocation and active portfolio management • Focused and efficient property management • Disciplined growth and diversification of the local property as
Slide 34: Sources of Capital
SOURCES OF CAPITAL Size and liquidity do matter 2015 Drivers of interest rate sentiment 110 13.0 100 12.5 90 12.0 80 37% 11.5 70 11.0 60 50 10.5 63% 40 10.0 15-Apr-14 15-Jul-14 15-Oct-14 15-Jan-15 15-Apr-15 Brent Crude(LHS) USDZAR(RHS) Equity Debt Source : RMB Investments of R6.3bn in property asset
Slide 35: Allocation of Capital
ALLOCATION OF CAPITAL Growing, diversifying and improving the platform Property assets Total return on assets Australia 8% 50% 42.5% 40% Europe Redefine 7% property 30% portfolio 20% 12.0% 12.8% 10.5% 64% 10.1% 9.0% 10% 0% Fountainhead Redefine Fountainhead Emira Europe Australia Group Property 21%
Slide 36: Local Investment Strategy
LOCAL INVESTMENT STRATEGY South Africa is a unique market with fixed lease escalations • Strategy centred on optimising risk and reward • Continued expansion across traditional sectors • Focus on younger (more efficient), bigger and better quality properties • Diversify into higher yielding student
Slide 37: Major Acquisitions
MAJOR ACQUISITIONS Local properties acquired • R2.7bn portfolio • R4.1bn portfolio • New opportunity • 8.7% acquisition yield • 9 office properties - 3 in Cape Town have • R204m for 51% interest • Triple net lease an average value of R930m • 4 student housing facilities offering 2 734 • 8% lease esc
Slide 38: International Investment Strategy
INTERNATIONAL INVESTMENT STRATEGY Redefine offers exposure to Australia and European markets • Strategy centred on geographic diversification and taking advantage of attractive yield spreads • 15% of group portfolio invested offshore – expected to grow to circa 25% • Invest in international markets
Slide 39: International Review
INTERNATIONAL REVIEW German Portfolio Cromwell Property Group Northpoint Tower • First direct investment in Europe • Acquired leading European real estate • Purchased 50% in December 2013 with manager, for €145m – Valad Cromwell • Co-investment with Redefine International due to portfolio size – €15
Slide 40: Black Economic Empowerment
BLACK ECONOMIC EMPOWERMENT Proactive steps taken to address BEE score Redefine Empowerment Trust • Empowerment Trust established – Redefine’s commitment to long term economic and social development • Objectives of the Trust will be to focus on: • The provision of scholarships and bursaries • Career
Slide 41: Black Economic Empowerment | Continued
BLACK ECONOMIC EMPOWERMENT | CONTINUED Addressing BEE integral to being a good corporate citizen Fountainhead empowerment transaction • Fountainhead being a PUT is not permitted to provide financial assistance for BEE initiatives • During December 2014 Redefine agreed in principle an empowerment arr
Slide 42: Redefine's Sustainability Strategy
REDEFINE’S SUSTAINABILITY STRATEGY Building a responsible business • Redefine’s sustainability strategy is built on four pillars: governance, environmental, social and economic • A balance between these factors create the foundation upon which to create a sustainable, well-governed business • Our ef
Slide 43: Offer for Fountainhead's Assets
OFFER FOR FOUNTAINHEAD’S ASSETS Completion in sight of a process that began three years ago • Swop ratio of 85 Redefine shares for every 100 Fountainhead units • Irrevocable undertakings received from 35.7% of eligible voters • Non-binding indications of support received from 14.3% of those capable
Slide 44: Closing
CLOSING A \RRRYS whys af Yar wn # PROPERTIES
Slide 45: Key Investment Attraction
KEY INVESTMENT ATTRACTION A highly liquid opportunity to invest in real estate What sets Redefine apart • Committed staff aligned with Redefine’s values Total return to February Cents % return Change in price 240.0 25.4% • Unique hands-on management approach 2014 distributions 74.5 7.9% • Quality di
Slide 46: Outlook
OUTLOOK Agility is a key advantage In summary ZAR and emerging market currencies vs USD • Subdued trading environment • Upward interest rate cycle looming • Preservation of margins critical • Focus on reducing vacancies • Equity funding preferred • Heightened risk management • Astute execution of re
Slide 47: Supplementary Information
SUPPLEMENTARY INFORMATION A ae Re: OA pa DIN Be PROPERTIES
Slide 48: IFRS Distributable Income Reconciliation
IFRS DISTRIBUTABLE INCOME RECONCILIATION Half year ended 28 Feb 2015 Statutory Income Distributable IFRS adjustments income Revenue (Rm) (Rm) (Rm) Notes Property portfolio 3 017 (80) 2 937 Contractual rental income 2 937 - 2 937 Straight-line rental income accrual 80 (80) - Non cash entry Listed sec
Slide 49: Active Portfolio Expenses
ACTIVE PORTFOLIO EXPENSES Half year ended 28 February 2015 2015 2014 Change (Rm) (Rm) % Net municipal charges 38 38 -1% Net electricity recoveries (11) (13) -16% Operating costs 92 84 10% Property management 59 60 -3% Repairs and maintenance 27 27 3% TI costs 18 15 20% Letting commission 8 8 0% Mana
Slide 50: Abridged Statement of Financial Position
ABRIDGED STATEMENT OF FINANCIAL POSITION At February 2015 2015 2015 2014 2014 Group Redefine Redefine Group (Rm) (Rm) (Rm) (Rm) Assets Investment properties 45 113 33 455 29 715 40 906 Listed securities 3 934 3 937 2 753 2 751 Goodwill and intangible assets 5 297 4 404 4 435 5 329 Interest in associ
Slide 51: Summarised Cash Flow
SUMMARISED CASH FLOW Half year ended 28 February 2015 Redefine Fountainhead International 2015 2014 (Rm) (Rm) (Rm) (Rm) (Rm) Opening cash 72 258 21 351 359 Generated from operations 1 512 475 (348) 1 639 3 794 Net interest paid (528) (104) (24) (656) (1 324) Distributions paid (1 134) (340) - (1 474
Slide 52: Sensitivity Analysis
SENSITIVITY ANALYSIS Half year ended 28 February 2015 Forecast 2015 Impact vs 2014 Event (cps) % Change in vacancy by 10 000 m2 0.4 0.5 Increase in municipal charges by 5% 0.2 0.3 Increase in electricity cost by 5% 0.1 0.1 Bad debts increase by R5 million 0.3 0.4 All acquisitions change by one month
Slide 53: Portfolio Overview
PORTFOLIO OVERVIEW Half year ended 28 February 2015 Office Retail Industrial Total Number of properties 107 85 99 291 GLA (m²) 1 171 802 1 128 191 1 722 213 4 022 206 101 Vacancy (m²) 62 422 91 701 255 834 711 Vacancy % 8.7 5.5 5.3 6.4 Valuation (R'm) 12 658 12 139 8 469 33 266 Average Property Valu
Slide 54: Sectorial Split
SECTORIAL SPLIT Half year ended 28 Feb2015 Half year ended 28 Feb2015* Post February 2015** Value (%) Value (%) Value (%) 1% 1% 25% 22% 20% 38% 34% 40% 37% 43% 39% GMR (%) GMR (%) Number of properties (%) 1% 1% 24% 30% 35% 32% 38% 40% 38% 34% 27% GLA (%) GLA (%) GLA (%) 1% 0% 29% 28% 31% 43% 41% 39%
Slide 55: Geographical Split
GEOGRAPHICAL SPLIT Half year ended 28 February 2015 Value (%) GLA (%) GMR (%) 9% 9% 10% 8% 10% 9% 18% 16% 18% 65% 65% 63% Gauteng Western Cape KwaZulu-Natal Other 55
Slide 56: Acquisitions and Disposals
ACQUISITIONS AND DISPOSALS Half year ended 28 February 2015 GLA Price (Rm) Yield Price/m2 Acquisitions transferred between 1 Sept 2014 and 576 435 R 3 000 510 8.56% R 5 190 28 Feb 2015 Acquisitions transferred or to be transferred after 286 722 R 6 014 893 7.95% R 17 601 28 Feb 2015 Unconditional ac
Slide 57: Top 10 Properties
TOP 10 PROPERTIES Half year ended 28 February 2015 Value GLA Property Sector Region (Rm) m² East Rand Mall (50%)* Retail Gauteng 1 174 62 541 Matlosana Mall Retail North West 982 64 574 Golden Walk Retail Gauteng 834 45 129 115 West Street (50%)* Office Gauteng 831 35 064 Standard Bank Centre Office
Slide 58: Top 10 Tenants
TOP 10 TENANTS Half year ended 28 February 2015 GMR (R000) GMR GLA Government 35% Tenant (R000) m² MacSteel 18% Government 38 419 396 923 Edcon 10% MacSteel 19 583 558 676 Pepkor 8% Edcon 10 859 126 301 Shoprite 7% Pepkor 9 108 136 752 Standard Bank 5% Shoprite 7 534 103 789 Pick 'n Pay 5% Standard
Slide 59: Tenant Grade
TENANT GRADE Half year ended 28 February 2015 Industrial tenant grading Retail tenant grading Office tenant grading 4% 14% 21% 48% 48% 54% 27% 59% 25% A B C 59
Slide 60: Lease Expiry Profile
LEASE EXPIRY PROFILE Half year ended 28 February 2015 Lease expiry profile by GMR (R000) 80 000 60 000 40 000 20 000 0 Monthly 2015 2016 2017 2018 Beyond 2018 Lease expiry profile by GLA 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 Monthly 2015 2016 2017 2018 Beyond 2018 Vacant Office Retai
Slide 61: Top 10 Properties
TOP 10 PROPERTIES Half year ended 28 February 2015 Value (%) Value GLA Property Sector Region (Rm) m² 24% Centurion Mall (66%)* Retail Gauteng 2 374 75 766 East Rand Mall (50%)* Retail Gauteng 1 174 62 541 Matlosana Mall Retail North West 982 64 574 76% Golden Walk Retail Gauteng 834 45 129 115 West
Slide 62: www.redefine.co.za 0860DEFINE
www.redefine.co.za 0860DEFINE