Vukile Property Fund Limited · JSE:VKE

Vukile Property Fund — H1 2015 Earnings Presentation

33 slides from Vukile Property Fund's earnings presentation, November 2014

  1. Slide 1: Interim Results for the six months to 30 September 2014 - Agenda

    Interim Results for the six months to 30 September 2014 Agenda • Highlights Laurence Rapp • Financial performance Mike Potts • Portfolio performance and overview Ina Lopion • Acquisitions and disposals Sedise Moseneke • Corporate activity Laurence Rapp • Prospects and plans Laurence Rapp • Questions

  2. Slide 2: Introduction and highlights

    Introduction and highlights LAURENCE RAPP 3 Highlights • 7.8% increase in the first half normalised distribution to 59.1 cpu • Strong operational performance o Like for like net property revenue growth of 7.9% o Vacancies decreased from 6.5% to 5.4% and even lower post reporting period o Positive re

  3. Slide 3: Distribution history

    Financial performance MIKE POTTS 5 Distribution history A decade of unbroken growth in distributions Cents per linked unit 160.0 140.3 140.0 131.6 124.8 126.5 13.8 117.7 120.4 11.2 120.0 111.43 13.4 109.0 8.7 100.0 107.9 97.9 80.0 88.3 76.8 71.7 60.0 68.5 68.2 63.8 62.8 61.5 60.9 59.1 54.8 53.8 52.2

  4. Slide 4: Simplified income statement

    Simplified income statement Sept Sept 2014 2013 Variance Rm Rm % Group net rental income 469.0 406.9 15.3 Sales commission – asset management business - 67.0 >-(100) Asset management fees 11.8 11.5 2.6 Asset management expenditure (15.9) (19.6) 18.9 Net finance costs (104.6) (98.4) (6.3) Corporate a

  5. Slide 5: Group income

    Group income - (R000) Distributable Income 800 755.8 700 600 500 422 400 333.8 300 - = 200 100 0 Gross income Expenditure Distributable income 9 Group income - (R000) Income R755.8 million Rates and taxes recovered, R 36 075 5% Income from listed Asset management fee property securities, income, R 2

  6. Slide 6: Group expenditure and balance sheet

    Group expenditure - (R000) Expenses R422.0 million Asset management Corporate admin, Tax, expenses, R 18 545 4% R 7 942 R 15 875 2% 4% Property management fees, R 20 871 Finance costs, 5% R 140 746 33% Rates and taxes, R 48 799 12% Property expenses, R 52 161 12% Electricity and water costs, R 117 1

  7. Slide 7: Bad debt and arrears analysis; Group debt structure

    Bad debt and arrears analysis Prudent provisioning policy • Tenant arrears increased by R5.6 million from March 2014 to R38.2 million at September 2014 • Doubtful debt allowance increased by R5.8 million from March 2014 to R17.1 million at 30 September 2014. • Doubtful debt allowance expected to app

  8. Slide 8: Group debt structure

    Group debt structure Maturity and interest rate profile of fixed interest bearing debt Fixed rate debt (R’m) Fixed interest rate [%] September 2018 74.6 8.12 March 2018 190.0 8.51 May 2017 240.0 8.83 April 2017 163.4 9.07 March 2017 200.0 8.97 September 2016 310.0 8.29 May 2016 200.0 8.51 April 2016

  9. Slide 9: Group net cash flow and NAV bridge

    Group net cash flow R’000 1 800 300 1 600 300 723 971 1 400 300 1 200 300 (365 236) 1 000 300 80 337 (259 656) 800 300 456 816 600 300 400 300 298 175 (564 925) 214 212 200 300 (38 903) (11 750) (104 617) 300 Borrowings repaid Proceeds on sale of investment investment properties and fixed Net financ

  10. Slide 10: Linked unit price and trading volumes

    Linked unit price and trading volumes 1 October 2013 to 30 September 2014 Price Volume Rand (000) 18.00 25 000 000 20 000 000 17.00 15 000 000 16.00 10 000 000 15.00 5 000 000 14.00 0 Volume Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep traded 2013 2014 19 Property portfolio performance and overvi

  11. Slide 11: Overview: valuation parameters and tenant exposure

    Overview Valuation parameters • Number of properties 79 • GLA 1 141 383m² • Valuation o Total portfolio R10.582 billion 51% of portfolio valued externally, values in line with director’s valuations o Average value per property R134m o Average discount rate 14.4% o Average exit capitalisation rate 10

  12. Slide 12: Sectoral profile and portfolio composition

    Sectoral profile Direct property Value: R10 582m GLA: 1 141 383m² Motor Hospital Motor Hospital Related Related 2% Sovereign 3% 1% Sovereign 1% 10% 10% Industrial 10% Industrial Retail Retail 21% 43% 54% Offices 22% Offices 23% Retail exposure at 56,5% with Fairvest and Synergy 23 Portfolio composit

  13. Slide 13: 10 largest properties; Geographic profile

    10 largest properties Retail dominant Directors’ Rentable valuation at area Sep 2014 % Valuation Property Location Sector m² R000 of total R/m² East Rand Mall * Boksburg Retail 31 258 993.8 9.4 31 794 Durban Phoenix Plaza Durban Retail 24 363 624.4 5.9 25 630 Pretoria Navarre Building Pretoria Sover

  14. Slide 14: Vacancy profile

    Vacancy profile Further reductions post reporting period to 4.2% Vacancy [% of GLA] Vacancy [% of Rent] 17.5% 17.5% 14.1% 14.9% 14.0% 4.3% 10.7% 11.9% 5.1% 13.2% 8.9% 6.2% 8.9% 6.5% 4.8% 6.7% 7.0% 5.4% 4.8% 1.2% 3.8% 3.3% 4.7% 2.8% 3.4% 2.7% 2.7% 2.2% 1.1% 2.9% 5.8% 4.2% Retail Offices Industrial So

  15. Slide 15: Expiry profile

    Expiry profile 30% of the portfolio expiring in 2019 and beyond % of GLA 89% 100% 76% 70% 84% 50% 70% 34% 60% 39% 20% 6.5% 5.4% 15% 19% 21% 10% 14% 16% Vacant Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Beyond March 2019 100% % of Contractual Rent 90% 74% 66% 87% 46% 70% 58% 26.7% 36% 0% 16% 20% 22% 12% 17%

  16. Slide 16: Expiry profile: Offices and Industrial

    Expiry profile Offices % of GLA 87% 93% 100% 82% 68% 92% 86% 46% 73% 55% 31% 17.5% 14.0% 24% 17% 18% 13% 6% 8% Vacant Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Beyond March 2019 100% 94% % of Contractual Rent 81% 88% 65% 91% 85% 71% 37% 51% 28% 0% 23% 20% 15% 6% 9% Vacant Mar/15 Mar/16 Mar/17 Mar/18 Mar/19

  17. Slide 17: Expiry profile: Sovereign, Hospital and Motor Related

    Expiry profile Sovereign % of GLA 95% 100% 95% 44% 46% 43% 49% 16% 46% 14% 6.2% 30% 10% 13% 3% 5% 3.8% 6% 3% Vacant Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Beyond March 2019 96% 100% % of Contractual Rent 95% 36% 38% 58% 8% 35% 37% 6% 0% 7% 29% 2% 5% 4% 2% Vacant Mar/15 Mar/16 Mar/17 Mar/18 Mar/19 Beyond

  18. Slide 18: Lease renewals and contracted rental escalation profile

    Lease renewals and new leases concluded Positive reversions across all sectors Lease renewals - % escalation on expiry rentals 9.4% 7.5% * 7.3% 6.6% 3.0% * Retail Offices Industrial Sovereign Average * Excluding the renewal of Mahle Behr South Africa at Durban Valley View Industrial Park which skews

  19. Slide 19: Weighted average base rentals R/m²

    Weighted average base rentals R/m² (excluding recoveries) 8.0% 10.8% 7.5% 106.11 7.8% 9.0% 104.50 7.1% 102.56 100.38 98.27 95.77 91.36 91.18 90.56 89.09 89.09 86.80 86.69 84.59 83.82 83.44 83.39 80.95 3.3% 40.74 40.16 39.43 Retail Offices Industrial Sovereign Hospital Motor Related Total Sep-13 Mar-

  20. Slide 20: Office and industrial weighted average base rentals

    Office portfolio - weighted average base rentals R/m² (excluding recoveries) Pretoria Hatfield Festival Street Offices Jhb Houghton Estate Oxford Terrace Pretoria Lynnwood Sanlynn Sandton Hyde Park 50 Sixth Road Cape Town Bellville Suntyger Jhb Houghton 1 West Street Pretoria Hatfield 1166 Francis B

  21. Slide 21: Other base rentals; Ratio of gross recurring cost

    Other - weighted average base rentals R/m² (excluding recoveries) Pretoria Navarre Building Pretoria Koedoe Arcade Pretoria De Bruyn Park Sovereign Bloemfontein Fedsure House Cape Town Bellville Louis Leipoldt Hospital Cape Town Bellville Barons Motor Related Sandton Linbro Galaxy Drive Showroom - 2

  22. Slide 22: Recurring expenses and Refurbishments

    Recurring expenses 82% of costs from top four categories Bad Debt Insurance Premiums Asset Management Sundry Expenses 3% 2% Fee 1% 6% Maintenance contracts 6% Property Government Management Fee Services 8% 44% Cleaning & security 11% Rates & Taxes 19% 43 Refurbishments Meadowdale Mall • Redevelopmen

  23. Slide 23: Refurbishments: East Rand Mall; Acquisitions and disposals

    Refurbishments East Rand Mall • Joint development with co-owner Redefine Properties • The gross lettable area will increase by 6 785m² to 69 299m² • The total capex for the Vukile portion is R168,25 million • The extension will be anchored by Mr Price Emporium • Other major tenants in the centre are

  24. Slide 24: Acquisitions and Disposals

    Acquisitions Transferred during H1 F2015 Purchase GLA Yield per price Transfer Property Sector (m²) annum (R'000) date Houghton Estate Oxford Terrace Office 2,460 8.5% 51,000 Apr-14 Maake Plaza (30%) Retail 4,560 13.5% 32,000 Jul-14 Midrand New Road (Undeveloped Land) Land n/a n/a 10,500 Mar-14 TOTA

  25. Slide 25: Deals concluded

    Deals concluded Linbro Park • 15 000m² mini factory/warehousing unit in Linbro Park, which is a prime industrial node in Johannesburg • 22 units ranging in size from 350m² to 1 870m² • Total capex of R124 million on a yield of 10% with a 1 year income guarantee • Completed 1 October 2014 • 15% let w

  26. Slide 26: Deals in progress

    Deals in progress Nonesi Mall – Queenstown Eastern Cape • 27 700m² dominant small regional shopping centre. • Anchored by Checkers, Pick n Pay, Game, Woolworths (National Component: 96%). • The centre offers a complete lifestyle and convenience shopping experience for the Queenstown consumer. • The

  27. Slide 27: Deals in progress

    Deals in progress Batho Plaza – Soshanguve Gauteng • 12 500m² community shopping centre • Anchored by Shoprite and Cashbuild (National component: 80%) • Batho Plaza is a convenient, well located community retail offering servicing the Soshanguve community. • The centre will be acquired for R140 mill

  28. Slide 28: Corporate activity: Sanlam Property Asset Management

    Corporate activity LAURENCE RAPP 55 Sanlam Property Asset Management • Agreement has been finalised to sell the Sanlam Asset Management business back to Sanlam • Effective date of 1 November 2014 but deal still subject to Competition Authority approval which is expected by end February 2015 • Vukile

  29. Slide 29: Sanlam pricing parameters; Synergy

    Sanlam Property Asset Management Pricing parameters • Following the PWC report, the price agreed between the parties is R167m o Money is held in escrow by Vukile’s attorneys and to be released to Vukile on closing date o Anticipated to be received by end February 2015 • Further payments to be made t

  30. Slide 30: Synergy: investment case for Vukile

    Synergy Investment case for Vukile • Strong synergistic fit of the Synergy assets with Vukile’s lower income retail portfolio of c.R5.7bn o very experienced lower income retail management team within Vukile who can easily and readily absorb management of the portfolio • Introducing the Synergy portf

  31. Slide 31: Synergy deal timelines; Strategy and prospects

    Synergy Deal timelines • Offer circular to be posted to Synergy unitholders on or about 4 December 2014 • Offer opens for acceptance on that date • Deal is still subject to Competition Authority approval o Expected in mid- to late February 2015 • Offer to remain open for 10 business days post receip

  32. Slide 32: Strategy update and prospects

    Strategy Update • Strong Operational focus to continue o Vacancies o Energy management o Alternative income management (AIM), non-GLA revenue o Bad debt and arrears management o New property management agreements concluded; full benefits to flow in F2016 • Continued cautious approach to balance shee

  33. Slide 33: Acknowledgements; Questions and answers

    Acknowledgements • Board • Property managers • Service providers • Brokers and developers • Tenants • Investors • Funders • Colleagues 65 Questions and answers CLOSING 66 56 Unaudited condensed consolidated interim results for the six months ended 30 September 2014

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