Hyprop Investments Limited · JSE:HYP
Hyprop Investments — FY2018 Earnings Presentation
54 slides from Hyprop Investments's earnings presentation, 2018
Slide 1: Summarised consolidated results for the year ended 30 June 2018
Summarised consolidated results for the year ended 30 June 2018 30 years of property investment excellence
Slide 2: Strategic & Operational Overview
STRATEGIC & OPERATIONAL OVERVIEW Canal Walk, Cape Town, Western Cape 2
Slide 3: Strategy & highlights
Strategy & highlights Strategy ▪ Invested in South-Africa, sub-Saharan Africa and South-Eastern Europe ▪ Dominant quality shopping centres in major metropolitan areas ▪ Ownership in 21 shopping centres across 9 countries Highlights ▪ Acquired 3 major shopping centres – EUR 439 million in EU countrie
Slide 4: Financial highlights
Financial highlights 30 Jun 2018 30 Jun 2017 Change (%) Distributable earnings (Rbn) 1,9 1,7 10,5 Distribution 756,5 cps 695,1 cps 8,8 Total investments (Rbn) 37,3 35,5 5,1 Loan-to-value (%) 28,1 28,9 (2,8) NAV (R per share) 102,98 99,78 3,2 Cost to income ratio (SA) - Gross (%) 33,0 33,3 (0,9) - Ne
Slide 5: Distribution growth
Distribution growth Cents per share 8,8% 800 12,1% 757 14,2% 695 700 15,0% 620 600 543 500 14,9% 16,6% 8,0% 8,3% 9,3% 13,4% 13,7% 16,3% 376 380 400 347 348 322 280 298 300 263 200 100 0 2015 2016 2017 2018 1st Half 2nd Half Total % growth 5
Slide 6: Operating Performance
OPERATING PERFORMANCE CapeGate (Brackenfell, Cape Town, Western Cape) 6
Slide 7: South African property locations
South African property locations Gauteng region Super regional mall Canal Walk (80%) Large regional malls CapeGate H Y D E P A R K Clearwater C O R N E R Rosebank Mall Somerset Mall The Glen (75,15%) Woodlands Western Cape region Regional mall Hyde Park Corner Value/ lifestyle centre Atterbury Value
Slide 8: Performance & market conditions
Performance & market conditions South Africa Operating in a challenging trading and consumer environment Distributable earnings growth of 4% - With second half growth of 6% CapeGate and Somerset Mall – best performers 8,7% CapeGate (Brackenfell) Vacancies reduced Retaining good contractual escalatio
Slide 9: Leasing activity
Leasing activity 30 June 2018 Contractual % of total Rentable area Rental growth Contractual lease value Leasing portfolio (m²) (%) escalation (%) (Rm) Retail 17,2 114 272 1,5 7,7 1 836 Offices 32,5 19 175 (6,7) 7,6 104 Total 18,5 133 447 1,0 7,7 1 940 30 Jun 2018 30 Jun 2017 Change EDCON Group (m2)
Slide 10: Lease expiry profile
Lease expiry profile 2018 / 2019 2019 / 2020 Expiring area % Rentable area Expiring area % Rentable area Retail (m²) of centre (m²) of centre Canal Walk 18 277 12 23 118 16 Somerset Mall 7 848 11 9 880 14 CapeGate 11 986 19 30 435 48 The Glen 11 547 14 14 952 19 Atterbury Value Centre 11 119 23 6 18
Slide 11: Vacancies
Vacancies Vacancies 30 Jun 2018 30 Jun 2017 30 Jun 2016 Retail (%) 1,6 1,9 0,8 Offices (%) 5,5 7,9 4,5 Total (%) 1,9 2,4 1,1 Vacancies Rentable area (m²) Change (m²) Retail 10 713 (2 132) Offices 3 255 (1 459) 13 968 (3 591) 11
Slide 12: Comparison to IPD Trading Density Index
Comparison to IPD Trading Density Index March 2018 Trading density growth Rent to turnover ratio Hyprop IPD Hyprop IPD Super regional 0,6% 0,0% 9,9% 11,0% Canal Walk Regional Clearwater, Rosebank 1,4% 0,5% 8,5% 8,8% Mall, Somerset Mall, CapeGate, Woodlands, Hyde Park Corner Small regional 1,0% 0,8%
Slide 13: Trading performance
Trading performance Trading % of density total % of Primary category growth turnover area Department stores: Clicks, Dis-Chem, Edgars, Game, Woolworths 2,6 28,1 25,8 Apparel (2,9) 18,2 20,7 Food/supermarket 0,6 11,8 10,9 Electronic/photography/music/mobile 2,8 7,5 4,3 Food service 6,1 6,4 5,9 Sporti
Slide 14: Developments
DEVELOPMENTS Rosebank Mall, Johannesburg, Gauteng 14
Slide 15: Developments
Developments Hyprop Shopping centre Project share (Rm) Completion date Rosebank Mall Additional 4 300m2 rentable area 127,0 April 2018 Food court enclosure and The Glen 90,9 April 2018 additional retail Canal Walk Additional retail in La Piazza area 41,6 November 2017 Woodlands Nu Metro refurbishmen
Slide 16: Hyprop sustainability
Hyprop sustainability Completed solar PV project at Clearwater Mall Various water saving initiatives in the Western Cape (use of borehole, capturing run off water, treatment of effluent grey water) Use of grey and borehole water at The Glen Installation of waterless urinals and aerators in the publi
Slide 17: Investment in Sub-Saharan Africa
INVESTMENT IN SUB-SAHARAN AFRICA (excluding SA) Ikeja City Mall, Lagos, Nigeria 17
Slide 18: Sub-Saharan Africa property locations
Sub-Saharan Africa property locations Hyprop ownership Accra, Ghana ▪ West Hills Mall 16,8% ▪ Accra Mall 17,6% ▪ Achimota Retail Centre 28,1% Nigeria Ghana Kumasi, Ghana ▪ Kumasi City Mall 28,1% Lagos, Nigeria ▪ Ikeja City Mall 75,0% Zambia Lusaka, Zambia ▪ Manda Hill Shopping Centre 68,8% 18
Slide 19: Performance and market conditions
Performance and market conditions Sub-Saharan Africa Economic prospects in Ghana continue to improve, while Zambia and Nigeria are stable AttAfrica and Manda Hill ▪ Financial performance impacted by vacancies and tenant portfolio replacements during the year ▪ Trading conditions and rent collection
Slide 20: Income producing properties
Income producing properties Investment in Sub-Saharan Africa (excl. SA) Vacancy % Vacancy % Rentable rentable area rentable area Centre City & country area m² 30 Jun 2018 30 Jun 2017 Ikeja City Mall Lagos, Nigeria 22 223 3,1 - Manda Hill Lusaka, Zambia 42 002 4,1 5,4 Accra Mall Accra, Ghana 21 311 6
Slide 21: Investment in South-Eastern Europe
INVESTMENT IN SOUTH- EASTERN EUROPE Delta City (Podgorica, Montenegro) West Hills Mall, Accra, Ghana 21
Slide 22: Hystead property locations
Hystead property locations Macedonia, Skopje GLA (m²) ▪ Skopje City Mall 36 241 Serbia, Belgrade ▪ Delta City 29 850 Croatia Montenegro, Podgorica ▪ Delta City 23 718 Serbia Bulgaria, Sofia Bulgaria ▪ The Mall 51 211 Montenegro Zagreb, Croatia Macedonia ▪ City Center one - East 47 191 Zagreb, Croati
Slide 23: Hystead at a glance
Hystead at a glance A UK company, modelled on Hyprop Six high quality dominant shopping centres in capital cities of five countries – scale, credibility, bargaining power Hyprop and PDI strategic shareholders – vast retail experience Strong operational focus with a core competence in active asset ma
Slide 24: Investment rationale
Investment rationale Wide spread between funding costs and initial yield (margin of safety) Markets catching up to Western peers in terms of development EU members or EU candidates (60/40 by value) Strong macroeconomic fundamentals and favourable retail environment Stable currencies closely linked t
Slide 25: Acquisitions
Acquisitions City Center one, City Center one, The Mall East West Location Sofia, Bulgaria Zagreb, Croatia Zagreb, Croatia Acquisition date Oct 2017 April 2018 April 2018 Price EUR 155 m EUR 283,5 m (90% share) Yield 7,25% 7,00% Expansion opportunities (m²) 12 000 10 000 13 600 City Center one - Eas
Slide 26: Operating performance
Operating performance Leasing 30 Jun 2018 Trading conditions and consumer spend positive Vacancies 0,1% All shopping centres growing NOI, most showing strong growth WALE 5,4 years LFL NOI growth well in excess of inflation Euro based or linked leases 99% All acquisitions performing in line or Leases
Slide 27: Balance sheet
Balance sheet Successfully converted bridge loan into non-recourse Debt maturity term loan with EBRD/IFC (EUR 134m) in June 2018 profile < 1 year 0% Property value €740 m 1-2 years 0% LTV* 47% 2-3 years 14% Average cost of debt* 3,6% 3-4 years 0% Weighted average loan tenor* 4,5 years 4-5 years 86%
Slide 28: The way forward
The way forward Deliver the supermarket conversion project at The Mall (Sofia) Execute asset management & redevelopment initiatives Align with Hyprop from a managerial and operational perspective Selective acquisitions to bolster scale and diversification 28
Slide 29: Financial Results
FINANCIAL RESULTS Woodlands (Pretoria East, Gauteng) 29
Slide 30: Distributable earnings
Distributable earnings 30 Jun 2018 30 Jun 2017 Change (R’000) (R’000) (%) South African property portfolio 1 937 661 1 916 927 1,1 - Continuing operations 1 929 055 1 854 471 4,0 - Properties sold 8 606 62 456 Investments in sub-Saharan Africa (excl. SA) 78 368 56 972 37,6 Investments in South-Easte
Slide 31: Reconciliation to dividend declared
Reconciliation to dividend declared 30 Jun 2018 30 Jun 2017 (R’000) (R’000) Dividend for 6 months – first half 933 127 861 423 Dividend for 6 months – second half 971 387 862 149 Total dividend 1 904 514 1 723 572 Shares in issue – first half 247 995 018 248 030 619 Shares in issue – second half 255
Slide 32: Balance sheet extracts
Balance sheet extracts 30 Jun 2018 30 Jun 2017 Change (Rm) (Rm) (%) Hyprop’s share Investment property (South Africa) 28 785 27 860 3,3 Investments in sub-Saharan Africa 4 470 4 482 (0,3) (excl. South Africa) South-Eastern Europe 3 843 2 681 43,3 Held-for-sale 199 427 Other assets (includes cash) 1
Slide 33: Investment profile
Investment profile South-Eastern Europe R3,8bn Sub-Saharan Africa 10% (excluding SA) R4,5bn 12% 78% Core South African portfolio R29,0bn 33
Slide 34: Property valuations
Property valuations South African portfolio Rentable Hyprop % change area share (from Value Cap rate Category (m²) (Rm) 30 Jun 2017)* (R/m2) (%) Shopping centres 653 258 27 352 3,3% 45 965 6,3 – 7,0 Value centres 48 848 1 303 4,4% 26 675 7,8 Stand-alone offices 20 354 323 3,9% 15 869 8,3 – 8,8 Total
Slide 35: Property valuations
Property valuations Sub-Saharan Africa South-Eastern Europe (Excluding SA) 30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017 (USD million) (USD million) (EUR million) (EUR million) Total value 638 629 Total value 740 300 Ikeja City Mall 151 151 Hyprop share 444 180 AttAfrica & 487 478 Manda Hill Hypro
Slide 36: Effective debt management
Effective debt management 30 Jun 2018 30 Jun 2017 (Rm) (Rm) South African debt 2 950 4 114 ▪ Bank debt 600 1 814 ▪ Corporate bonds 2 350 2 300 USD bank debt (Rand equivalent) 4 513 4 391 EUR bank debt (Rand equivalent) 3 795 2 673 Cash and cash equivalents (715) (1 126) Net borrowings 10 543 10 052
Slide 37: Sources of funding
Sources of funding R million 30 Jun 2018 600 5% Bank facilities (SA) 30 Jun 2017 1,814 16% % of total debt 2,350 21% DCM funding (SA) 2,300 21% USD debt 4,513 40% (Rand equivalent) 4,391 39% EUR debt 3,795 34% (Rand equivalent) 2,673 24% 0 1000 2000 3000 4000 5000 37
Slide 38: Rand denominated debt
Rand denominated debt South African portfolio Maturity profile 30 June 2018 (years) 30 Jun 2017 (years) Fixed rates and swaps 3,8 3,9 Facilities 3,8 2,2 % of debt fixed 113,6 100,9 Average cost of funding 9,4 8,9 Rand debt Maturity date Status R300m bond Sept 2017 Repaid R450m bond Apr 2018 Repaid R
Slide 39: USD debt
USD debt Sub-Saharan Africa Debt maturity profile 30 Jun 2018 (years) 30 Jun 2017 (years) Fixed rates and swaps 2,4 2,7 Facilities 2,7 2,6 % of debt fixed 63,5 70,4 Average cost of funding 4,8 4,7 USD debt Maturity date Status USD 40m Oct 2017 Re-financed for 3 years USD 20m Nov 2018 as one facility
Slide 40: EUR debt
EUR debt South Eastern Europe 30 Jun 2018 (%) 30 Jun 2017 (%) % of debt fixed - - Average cost of funding 1,7 2,2 EUR debt Maturity date Status Replaced with asset-backed EUR 134,1m bridge loans Mar 2018 finance EUR 104,5m bridge loan Oct 2018 To be refinanced with 3-year term loans at an estimated
Slide 41: Outlook & Focus
OUTLOOK & FOCUS City Center one - East (Zagreb, Croatia) 41
Slide 42: Outlook & focus
Outlook & focus South Africa ▪ Very cautious outlook on the South African economy ▪ Focus on tenant retention and retaining the quality of the portfolio Sub-Saharan Africa (Excl. SA) ▪ Continue to focus on operational improvement ▪ Consider opportunities to reduce investment exposure South-Eastern E
Slide 43: Questions & Answers
QUESTIONS & ANSWERS Delta City (Podgorica, Montenegro) 43
Slide 44: Appendices
APPENDICES City Center one - West (Zagreb, Croatia) 44
Slide 45: Company structure
Company structure South African portfolio Clearwater Mall Somerset Mall Hyde Park Corner Rosebank Mall Woodlands Boulevard CapeGate 100% owned Offices Atterbury Value Mart Cradock Heights SOUTH AFRICA Canal Walk (80%) The Glen (75,15%) Co-owned Offices: Lakefield Held-for-sale 45
Slide 46: Company structure
Company structure Sub–Sahara African portfolio Hyprop Investments Mauritius 37,5% 50% 75% SUB- AttAfrica 50% Manda Hill Ikeja City Mall SAHARAN (Mauritius) (Zambia) (Nigeria) AFRICA 100% owned 47% 45% 75% 75% West Hills Achimota Retail Kumasi City Accra Mall Mall Centre Mall (Ghana) (Ghana) (Ghana)
Slide 47: Company structure
Company structure South-Eastern Europe portfolio Hystead Limited (established in the UK) SOUTH- EASTERN 100% 100% 100% 100% 90% 90% EUROPE 60% owned City Center City Center Delta City Delta City Skopje City The Mall one - East, one - West, Belgrade Podgorica Mall Sofia Zagreb Zagreb (Serbia) (Monten
Slide 48: Credible track record
Credible track record Rbn LTV % 36 34.0 60% Investment property 33.4 33.3 32 29.4 31.6 Market cap 28.6 29.0 28 26.4 26.2 45% LTV % 24 20.2 19.3 20 18.7 19.0 17.4 17.7 26.2% 30% 16 30,8% 28.9% 28.1% 12.9 26.6% 12 23.1% 22.9% 23.1% 15% 8 4 0 0% Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun
Slide 49: % Gross rent to turnover
% Gross rent to turnover Deterioration Improvement 13% 12% 10% Portfolio average: +9,1% (2017: +8,6%) 11% 7% 11.2% 8% 10% 10.6% 10.1% 2% 3% 9% 3% 7% 9.0% 8.9% 7% 8% 8.7% 8.3% 7.8% 1% 7% 6% 6.6% 5% 4% 3% 2% 1% 0% The Glen Hyde Park Corner Canal Walk Atterbury Value Clearwater Mall Rosebank Mall Woodl
Slide 50: Trading density
Trading density Per month (R/m²) 5 000 4 500 3% Average portfolio growth: +0,5% (2017: +1,4%) 4 000 3 990 1% 3 500 0% 3 413 4% 3 330 3 000 7% 2% 3 042 1% 2 500 2 754 2 748 3% 2 549 6% 2 000 2 263 2 128 1 500 1 000 500 Hyde Park Corner Canal Walk Somerset Mall Clearwater Mall CapeGate Mall Rosebank M
Slide 51: Rent ratio
Rent ratio Rental as % of turnover 10% 9.1% 8% 8.5% 7.1% 7.3% 6.9% 6% 4% 2% 0% Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 51
Slide 52: Top 8 SA properties
Top 8 SA properties Canal Walk Clearwater Woodlands (80% undivided share) Rosebank Mall Region Cape Town Region Johannesburg Region Johannesburg Region Pretoria Total rentable Total rentable Total rentable Total rentable 158 396 87 083 65 886 71 643 area (m²) area (m²) area (m²) area (m²) Vacancy le
Slide 53: Top 8 SA properties (cont.)
Top 8 SA properties (cont.) The Glen Somerset Mall (75,15% undivided share) Hyde Park Corner CapeGate Region Cape Town Region Johannesburg Region Johannesburg Region Cape Town Total rentable Total rentable Total rentable Total rentable 69 054 80 428 38 764 63 765 area (m²) area (m²) area (m²) area (
Slide 54: Disclaimer
Disclaimer Forward-looking statements ▪ This document contains forward-looking statements that, unless otherwise indicated, reflect the group’s expectations as at 30 June 2018 ▪ Actual results may differ materially from the group’s expectations if known and unknown risks or uncertainties affect its