Redefine Properties Limited · JSE:RDF
Redefine Properties — H1 2017 Earnings Presentation
50 slides from Redefine Properties's earnings presentation, April 2017
Slide 1: Group Results and Strategic Review
REDEFINE PROPERTIES LIMITED GROUP RESULTS AND STRATEGIC REVIEW FOR THE SIX MONTHS ENDED 28 FEBRUARY 2017 PROPERTIES We're not landlords. We're people.
Slide 2: Our Conversation
OUR CONVERSATION Section 01 A COMPELLING INVESTMENT CASE Section 02 OUR OPERATING CONTEXT Section 03 STRATEGIC CAPITAL REVIEW Section 04 DELIVERING ON OUR PROMISE Section 05 OUTLOOK Redefine Group results and strategic review for the six months ended 28 February 2017 2
Slide 3: A Compelling Investment Case
REDEFINE PROPERTIES INTERIM RESULTS 2017 A COMPELLING INVESTMENT CASE Section 01 90 RIVONIA ROAD, SANDTON 3
Slide 4: Our Investor Value Proposition
OUR INVESTOR VALUE PROPOSITION A STRATEGY THAT IS CENTRED ON SUSTAINED GROWTH Our Promise At Redefine, we know that top investors see great strategy beyond the brick and mortar, you see it in our results These results are accomplished through an astute, investor-driven strategy A strategy that infor
Slide 5: The Market's View: Redefine Trades at a Discount
THE MARKET’S VIEW ON A RELATIVE BASIS REDEFINE TRADES AT A DISCOUNT Clean forward Clean yields forward yieldvs vsgrowth growthfor forlocal localcounters counters Counter Share price Yield TEX 8.30 12.5% DLT 8.77 12.3% 13% TWR 7.80 11.3% DLT TEX REB 12.20 11.0% 12% EMI 14.00 10.8% EMI TWR DIA 10.15 1
Slide 6: Our Operating Context
REDEFINE PROPERTIES INTERIM RESULTS 2017 OUR OPERATING CONTEXT Section 02 90 GRAYSTON, SANDTON 6
Slide 7: Macro Environment
MACRO ENVIRONMENT POLITICS ARE DICTATING THE DIRECTION OF THE ECONOMY GDP Forecast Business confidence 2.0 1.6 1.5 1.4 1.5 1.2 1.2 % Forecast GDP 1.1 1.4 1.0 1.0 1.0 1.0 0.9 0.5 0.8 0.0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Pre-downgrade Post-downgrade Sovereign credit rating Consumer conf
Slide 8: Top Risk Themes Are Evolving
TOP RISK THEMES ARE EVOLVING PREPARE FOR THE UNEXPECTED Strong potential for further turmoil from sovereign credit rating reviews Political instability and policy uncertainty heightened Increasing scarcity, cost and competition for capital Our focus remains on managing the variables we can c
Slide 9: Our Strategic Response
OUR STRATEGIC RESPONSE THE LIFE OF A STRATEGY IS GETTING SHORTER In a constrained environment there is a flight to quality Geographic spread by value of the property asset base Continue to improve, expand and protect our domestic properties 4.3% 1.3% 7.6% Non-core assets (secondary properties,
Slide 10: How We Deliver
HOW WE DELIVER FOCUSING ON WHAT MATTERS MOST An integrated approach to making strategic choices in a counter intuitive environment Redefine Group results and strategic review for the six months ended 28 February 2017 10
Slide 11: Strategic Capital Review
REDEFINE PROPERTIES INTERIM RESULTS 2017 STRATEGIC CAPITAL REVIEW Section 03 BLUE ROUTE MALL, CAPE TOWN 11
Slide 12: A Good People Strategy Is the Key to Good Business
A GOOD PEOPLE STRATEGY IS THE KEY TO GOOD BUSINESS THE FACTORS THAT DRIVE THE VALUE OF REAL ESTATE REVISITED Value is ultimately determined by the property’s ability to produce sustainable cash flow (income) Location, demographics, functionality, efficiency, environmental performance, aesthetics
Slide 13: Accessing Capital
ACCESSING CAPITAL SECURING CAPITAL IN A CONSTRAINED ENVIRONMENT R15bn sourced during the first half Redefine yield vs R186 yield vs 5 year swap rate % 9.5 9.0 -588 2 156 8.5 69 8.0 527 7.5 7.0 Rm 1 Sep 2016 1 Oct 2016 1 Nov 2016 1 Dec 2016 1 Jan 2017 1 Feb 2017 1 Mar 2017 1 Apr 2017 Redefine yield R
Slide 14: Capital Allocation
CAPITAL ALLOCATION SIGNIFICANTLY ADVANCING OUR STRATEGIC INTENT TO DIVERSIFY, EXPAND AND IMPROVE R15bn invested during first half Property asset platform Uses Deployment Local Offshore 65 4.3% 351 1.4% 5.7% 2.2% 1 318 1 741 4 664 30.3% 430 18.0% 1 435 290 % % Rm Rm 1 136 by value 38.8% by value 13 0
Slide 15: Top 10 - 52% of Retail Portfolio by Value
TOP 10 - 52% OF RETAIL PORTFOLIO BY VALUE CREATING OUTSTANDING PLACES FOR MODERN CONSUMER LIFESTYLES Centurion Mall Blue Route Mall East Rand Mall (50%) Kenilworth Centre Matlosana Mall Re-tenanting, space optimisation Upgrade at a cost of R935m Major refurbishment of R233m Upgrade of R281m to be Ne
Slide 16: Top 10 - 37% of Office Portfolio by Value
TOP 10 - 37% OF OFFICE PORTFOLIO BY VALUE REMAINING RELEVANT THROUGH REDEVELOPMENT AND REFURBISHMENT Alice Lane* Black River Office Park** 90 Rivonia Road* The Towers* 115 West Street* (50%) Crown jewel of Pivotal portfolio Winner in the Sustainable FM Redevelopment totalling R980m Upgrade to façade
Slide 17: Top 10 - 55% of Industrial Portfolio by Value
TOP 10 - 55% OF INDUSTRIAL PORTFOLIO BY VALUE INCORPORATING KEY DESIGN ELEMENTS TO FUNCTIONALLY DIFFERENTIATE OFFERING Macsteel portfolio Pepkor Isando Robor S & J Industrial Park (90%) Cato Ridge Triple net lease, 9 years Developed in 2014 with single Triple net lease, 7 years Prime industrial land
Slide 18: International Real Estate Exposure
INTERNATIONAL REAL ESTATE EXPOSURE GEOGRAPHIC DIVERSIFICATION IN HARD CURRENCY MARKETS Poland Australia Echo Polska Properties (39.5%) Northpoint (50%) Cromwell Property Group (25.4%) Supported recent €150m capital raise Vacancy constraints and Establishing a European Fund to Expanded asset portfoli
Slide 19: High Return Investments
HIGH RETURN INVESTMENTS INVESTMENTS WHERE VALUE CAN BE UNLOCKED Respublica (51%) First phase of Hatfield Square comprising 635 beds completed in March 2017 Conversion of ABSA campus to Yale Village with 330 beds leased to Wits Listed securities Possible disposal of Delta Properties (22.8%) thr
Slide 20: Delivering on Our Promise
REDEFINE PROPERTIES INTERIM RESULTS 2017 DELIVERING ON OUR PROMISE Section 04 115 WEST STREET, SANDTON 20
Slide 21: Salient Features
SALIENT FEATURES ADVANCING OUR STRATEGIC OBJECTIVES THROUGH WHAT MATTERS MOST Operate efficiently Invest strategically Optimise capital Engage talent Grow reputation Operating margin Property assets expanded Broadened funding Transformation Brand valued at R6.3bn improved to 82.6% by R11.4bn to R84.
Slide 22: Financial Snapshot
FINANCIAL SNAPSHOT OUR MISSION IS TO DELIVER SUSTAINED GROWTH First half distribution up 7.5% to 44.82 cents per share CPS Distribution per share growth 100 86.0 80.0 74.5 Distributable income has grown by 24.8% to R2.3bn 80 68.7 60 41.0 44.3 35.0 38.1 Core portfolio net operating income growt
Slide 23: Outlook
REDEFINE PROPERTIES INTERIM RESULTS 2017 OUTLOOK Section 05 ROSEBANK TOWERS, ROSEBANK 23
Slide 24: Outlook
OUTLOOK STRIVING TO BUILD A BUSINESS WITH SOLID CORE PROPERTY FUNDAMENTALS In summary Lease expiry profile by GLA m² Political and fiscal stability go to the heart of restoring the 1 200 000 economy to a sustainable growth path In the absence of a catalyst for change, our strategy has 1 000 000
Slide 25: Supplementary Information
REDEFINE PROPERTIES INTERIM RESULTS 2017 SUPPLEMENTARY INFORMATION WONDERBOOM JUNCTION, PRETORIA 25
Slide 26: Simplified Distributable Income Statement
SIMPLIFIED DISTRIBUTABLE INCOME STATEMENT 2017 2016 Change Rm Rm % Net operating income from investment properties 2 433 2 137 13.9% Listed security portfolio 128 47 172.3% Fee income 12 15 -20.0% Total income 2 573 2 199 17.0% Administration costs (81) (73) 11.0% Net operating profit 2 492 2 126 17
Slide 27: Contributors to Trading
CONTRIBUTORS TO TRADING Tailwinds Headwinds R777m (R313m) Rm 2 750 11 7 7 5 2 650 46 83 (10) (13) 2 550 (18) 107 (35) 2 450 (39) 199 (39) 2 350 (159) 2 250 312 2 150 2 050 2 335 1 950 1 850 1 872 1 750 Feb 2016 Pivotal net Echo Polska Active List security Property Spain Northpoint German Cromwell Fo
Slide 28: Active Portfolio Income Analysis
ACTIVE PORTFOLIO INCOME ANALYSIS 2017 2016 Change Rm Rm % Active portfolio revenue* 2 316 2 202 5.2% Active portfolio costs** (388) (382) 1.6% Property income from active property portfolio 1 928 1 820 5.9% Net operating income from acquired/development properties 463 116 299.1% Net operating income
Slide 29: Active Portfolio Expenditure Analysis
ACTIVE PORTFOLIO EXPENDITURE ANALYSIS 2017 Change Rm % 2016 HY Property costs 382 Net electricity recoveries substantially improved (21) 98.3% Management fees reduced due to realloaction of portfolios (2) -10.7% Net municipal costs benefitting from improved recoveries (2) -1.6% Letting commission fl
Slide 30: International Income Analysis
INTERNATIONAL INCOME ANALYSIS 2017 2016 Rm Rm Echo Polska Properties N.V. 199 - Cromwell Property Group 198 193 Redefine International PLC 150 188 German portfolio 48 41 CPT – Northpoint 37 30 Pivotal – Mara Delta & Oanda Wings 23 - Spain 11 - International Hotel Properties 7 7 Bondi - 39 Other (2)
Slide 31: Diversified Property Asset Platform
DIVERSIFIED PROPERTY ASSET PLATFORM Redefine Properties Direct local property portfolio Local listed securities Direct international properties International listed securities Delta Property Fund Journal Student Redefine International Property Portfolio 100% R64.1bn 22.8% R1.6bn 90% R0.3bn 29.8% R4.
Slide 32: Growth in Net Asset Value per Share
GROWTH IN NET ASSET VALUE PER SHARE CPS 1 200 43.1 1 100 0.4 3.0 2.9 7.3 14.3 11.8 (44.3) (34.3) 1 000 1 055.8 1 060.0 900 31 Aug 2016 Accretion due Revaluation Revaluation Revaluation Forex loss on Forex gain Accretion due to Statutory profit Distributions 28 Feb 2017 NAV per to issue of of propert
Slide 33: Funding Profile
FUNDING PROFILE Feb 2017 Aug 2016 Funding snapshot Rbn Rbn Bank borrowings 28.1 25.2 Debt capital markets 4.1 2.9 Foreign listed bond 2.0 - Total borrowings 34.2 28.1 Key debt statistics Loan to value - including held for sale 39.8% 38.5% Average term of debt 2.7 years 2.2 years % of debt secured 72
Slide 34: Funding Profile
FUNDING PROFILE Feb 2017 Aug 2016 Sources of funding Weighted Weighted Currency analysis of borrowings Rbn avg cost Rbn avg cost ZAR debt 29.2 9.2% 21.5 8.8% Standard Bank Currency derivatives (3.6) 8.4% (2.7) 8.1% Nedbank Euro debt 4.1 1.8% 4.9 2.7% RMB AUD debt 2.7 4.2% 2.9 4.7% Unlisted bonds GBP
Slide 35: Portfolio Activity
PORTFOLIO ACTIVITY INCLUDING PIVOTAL Value R63.6bn Developments Acquisitions GLA 4.9 million m² Total activity R6.07bn including Pivotal (Yield 8.19%) R8.2bn (Average yield: 8.8%) Vacancy 5.5% Core portfolio: 4.3% Completed Disposals Secondary portfolio 10.2% (excluding properties held for sale and
Slide 36: Office
OFFICE Themes Areas of focus Outcomes Nationally office vacancies increased to 10.7% Tenant retention remains our greatest Value R23.8bn (2016: R18.7bn) (Q4:16 SAPOA) challenge GLA 1.4 million m² (2016: 1.3 million m²) Vacancy 8.5% Rentals generally moving sideways, however Early renewal of major le
Slide 37: Retail
RETAIL Themes Areas of focus Outcomes Slowing consumer market and plethora of new Continuous reviewing of each properties’ Value R26.3bn (2016: R21.5bn) retail strategy GLA 1.5 million m² (2016: 1.25 million m²) Tenants are requesting rental assistance and Introduced category based leasing Vacancy 4
Slide 38: Industrial
INDUSTRIAL Themes Areas of focus Outcomes JHB North & East nodes experiencing growth Tenant retention and early renewal of major Value R12.2bn (2016: R11bn) leases GLA 2 million m² (2016: 1.93 million m²) Properties with low eaves, multiple columns, lack of adequate yard space, parking, as well Main
Slide 39: Portfolio Overview
PORTFOLIO OVERVIEW Office Retail Industrial Specialised Total Number of properties 128 90 117 4 339 Total GLA (m²) (million) 1.4 1.5 2.0 - 4.9 Vacancy (%)* 8.5 4.4 4.2 - 5.5 Asset value (R billion) 23.8 26.3 12.2 1.0 63.3 Average property value (Rm) 186 293 104 240 187 Valuation per m² (excluding un
Slide 40: Sectoral Spread
SECTORAL SPREAD GLA (%) Number of properties (%) 1% 1% 29% 34% 38% 40% 30% 27% Value (%) Office Retail Industrial Specialised GMR (%) 1% 1% 19% 19% 38% 36% 42% 44% Redefine Group results and strategic review for the six months ended 28 February 2017 40
Slide 41: Geographic Spread
GEOGRAPHIC SPREAD GLA (%) Number of properties (%) 8% 8% 6% 9% 18% 17% 68% 66% Value (%) Gauteng Western Cape KwaZulu-Natal Other GMR (%) 6% 7% 4% 5% 20% 20% 70% 68% Redefine Group results and strategic review for the six months ended 28 February 2017 41
Slide 42: Office Sector
OFFICE SECTOR Office value by grade Office value by location 1% 2% 22% 17% Premium Grade 25% A Grade 45% Secondary Land 11% 28% 32% 17% Office GMR by location Greater Johannesburg Sandton Bryanston Office vacancy by location Pretoria Western Cape KwaZulu-Natal Other 4% 11% 21% 22% 3% 25% 10% 15% 13%
Slide 43: Retail Sector
RETAIL SECTOR Value by type Retail GMR by type 6% 7% 18% 7% 8% 21% 19% 20% 50% 44% Retail GLA by type Community Centre Regional Shopping Centre Retail vacancy by type Small Regional Centre Neighbourhood Centre Other 11% 10% 24% 23% 35% 10% 18% 10% 37% 22% Redefine Group results and strategic review
Slide 44: Industrial Sector
INDUSTRIAL SECTOR Industrial value by type Industrial GMR by type 5% 6% 2% 8% 30% 29% 36% 32% 13% 15% 11% 13% Industrial GLA by type Warehousing Heavy Grade Industrial Industrial vacancy by type Light Manufacturing Industrial Units 3% 8% Modern Logistics Other 5% 19% 23% 35% 50% 16% 26% 15% Redefine
Slide 45: Tenant Grading by GLA
TENANT GRADING BY GLA Office Retail 15% 17% 18% 13% 67% 70% Industrial A Grade B Grade C Grade Total GLA 8% 12% 19% 17% 73% 71% Redefine Group results and strategic review for the six months ended 28 February 2017 45
Slide 46: Lease Expiry Profile
LEASE EXPIRY PROFILE m² GLA GMR 1 200 70 Thousands Millions 60 1 000 50 800 40 600 30 400 20 200 10 0 0 Monthly 2017 2018 2019 2020 2021 Beyond Monthly 2017 2018 2019 2020 2021 Beyond 2021 2021 Office Retail Industrial Specialised Office Retail Industrial Specialised Redefine Group results and strat
Slide 47: Top 10 Office Properties and Tenants
TOP 10 OFFICE PROPERTIES AND TENANTS Value Top 10 Office properties Region R'000 GLA m² Top 10 Office tenants GLA m² Alice Lane Gauteng 2 412 700 70 758 Government 158 869 Black River Office Park Western Cape 1 009 919 52 605 Discovery Health 42 487 90 Rivonia Road Gauteng 990 143 39 297 Webber Went
Slide 48: Top 10 Retail Properties and Tenants
TOP 10 RETAIL PROPERTIES AND TENANTS Value Top 10 Retail properties Region R'000 GLA m² Top 10 Retail tenants GLA m² Centurion Mall Gauteng 4 158 522 120 408 Edcon 142 660 Blue Route Mall Western Cape 1 414 871 55 496 Shoprite 137 755 East Rand Mall (50%)* Gauteng 1 288 872 31 257 Pick 'n Pay 111 14
Slide 49: Top 10 Industrial Properties and Tenants
TOP 10 INDUSTRIAL PROPERTIES AND TENANTS Value Top 10 Industrial properties Region R'000 GLA m² Top 10 Industrial tenants GLA m² Macsteel Various 3 265 197 552 641 MacSteel 552 641 Pepkor Isando Gauteng 776 295 107 017 Steinhoff Group 132 903 Robor Gauteng 666 194 120 277 Robor 115 993 S & J Industr
Slide 50: Top Specialised Properties
TOP SPECIALISED PROPERTIES Property Region Value (R000) GLA m² Midrand Varsity Lodge* Gauteng 502 352 - Hatfield Square* Gauteng 432 843 - Bedford Gardens Hospital Gauteng 327 749 12 817 Saratoga Village* Gauteng 231 480 - West City* Gauteng 127 850 - Yale Village* Gauteng 124 050 - Southern Sun O.R