1 Redefine group interim results for the six months ended 28 - - PowerPoint PPT Presentation
1 Redefine group interim results for the six months ended 28 February 2019 Our conversation 2 Section Key features 1 Section Property asset platform 2 Section Financial review 3 Section In conclusion 4 Section Supplementary
1 Redefine group interim results for the six months ended 28 February 2019
2 Redefine group interim results for the six months ended 28 February 2019
Section Key features Section Property asset platform Section Financial review Section In conclusion Section Supplementary information
1 2 3 4 5
3 Redefine group interim results for the six months ended 28 February 2019
1
Section
Key features
4 Redefine group interim results for the six months ended 28 February 2019
Key features
5 Redefine group interim results for the six months ended 28 February 2019
Key features
→ Our strategy which has been tweaked for opportunities and risks remains largely unchanged → There is however a key shift in stakeholder emphasis as we recalibrate to a new normal to be
A source of sustained growth in total returns for investors and funders − Improving the quality of earnings delivered organically − Reducing the LTV ratio to levels in keeping with our operating context An employer of choice for employees − Adopting a self-disruption approach by focusing on skills and roles to meet new challenges − Entrenching accountability to ensure everyone delivers to their best potential A differentiated provider of relevant space to tenants − Consistently upholding our brand promise to every tenant − Introducing a tenant experience management programme A preferred business partner for brokers and suppliers − Ensuring our spaces remain relevant to users’ needs − Demanding that all suppliers (including all our business partners) are aligned with our values A responsible community participant − Having a collective responsibility to ensure impactful and meaningful contributions to communities − Adding value sustainably to each community through meaningful engagement
6 Redefine group interim results for the six months ended 28 February 2019
Invest strategically
Deployed R3.5 billion into property assets Property assets under management expanded by R700 million to R92.0 billion Offshore expansion totalled R1.9 billion Local development activity totalled R1.3 billion NTAV declined by 23.8 cents per share to 953.1 cents per share
Optimise capital
Moody’s investment grade credit rating reaffirmed Average cost of debt decreased by 10bps to 6.2% LTV of 42.3% Agreed refinance terms for all near term debt maturities Interest rates hedged on 78.2% of total debt
Operate efficiently
Active portfolio margin maintained at 82.2% Active portfolio occupancy
Tenant retention rate at 96.6% Total solar PV capacity now at 23.5 MWp 225 363 m2 renewed at an average reversion
Engage talent
Top employer status maintained Ongoing succession planning 53 learners enrolled for 2019 programme Research underway to gain insight into how to promote a health integrated work-lifestyle Structures reviewed to identify transformation
Grow reputation
Sipho Pityana appointed as independent non- executive chairperson AA ethics rating from Ethics Monitor Second Challenge Convention held First Innovation Challenge concluded Additional 30 Green Existing Buildings ratings underway
Key features
7 Redefine group interim results for the six months ended 28 February 2019
Environment Overall carbon footprint reduced by 15% in 2018 Continue to install online monitoring and leak detection, smart shutoff valves and sensors to reduce water consumption Expanded external waste management to office buildings Social Four SDG’s identified to which we can contribute the most Improved to level 3 BBBEE contributor status S&J expropriation notice set aside Governance Remuneration policy approval at 77% Remuneration committee chairperson conducted
Audit and risk oversight responsibilities split into separate board committees Our people Upskilling for future challenges and career development Reward and recognition programme to encourage performance refreshed Implemented staff management systems
Key features
Sustainable Development Goals (SDG’s) most relevant to us
8 Redefine group interim results for the six months ended 28 February 2019
2
Section
Property asset platform
9 Redefine group interim results for the six months ended 28 February 2019
Rm Property portfolio 100.0% R68.5bn
Retail R28.0bn Office R26.0bn Industrial R13.7bn Specialised R0.8bn
Loans receivable R1.9bn Student accommodation R2.5bn R72.9bn
33 50 80 830 1 017 2 250
55 Empire Road JD Rosslyn (50%) Torre Modderfontein Working capital EPP shares Development activities and capex
534 450 390 380 273 112 111 Europe Logistics Platform Retail Office AUS student accommodation Industrial Local student accommodation Residential
Portfolio valued at R92.0 billion
Direct local property portfolio Direct international properties International listed securities
EPP N.V. 44.4% R7.5bn RDI REIT PLC 29.4% R3.4bn Cromwell Property Group 2.7% R0.7bn GRIT Real Estate Income Group 3.6% R0.2bn R11.8bn Europe Logistics Platform 95.0% R4.1bn Journal Student Accommodation Fund 90.0% R1.6bn Chariot Top Group BV 25.0% R1.0bn Oando Wings Development Limited 39.9% R0.6bn R7.3bn
Capital deployed of R4.3 billion Capital allocated to developments and capex
79% 2% 1% 4% 14% Local Australia Africa UK Poland
Geographic spread by value
Carried at fair value Equity accounted
Property asset platform Rm
Respublica 53.6% R1.3bn Directly held R1.2bn
10 Redefine group interim results for the six months ended 28 February 2019
Carrying value
R72.9bn
(FY18 | R72.4bn)
Retail 39%
(FY18 | 40%)
73% located in Gauteng
(FY18 | 73%)
Industrial 19%
(FY18 | 19%)
18% located in Western Cape
(FY18 | 17%)
Office 37%
(FY18 | 37%)
10 903 10 093 11 096 12 870 14 382 15 581 270 333 312 327 315 314 50 100 150 200 250 300 350 5 000 10 000 15 000 20 000 FY14 FY15 FY16 FY17 FY18 HY19
Impact of portfolio restructure
Average value per m² (R) Number of properties (#) # R Property asset platform
11 Redefine group interim results for the six months ended 28 February 2019
Active portfolio capital growth
Average value per property of R226m
(FY18 | R222m)
Developments in progress total R944m at average projected yield of 8.9% Total letting at 456 717m²
(FY18 | 493 995m²)
Total active vacancy of 5.7%
(FY18 | 4.5%)
Disposals totalling
R548m
at yield of 9.8% Tenant retention by GLA
96.6%
(FY18 | 90.4%)
Completed new developments totalling R1.7bn at average yield of 8.6%
8.6% 8.6% 9.2% 9.6% 11.0%
0% 5% 10% 15%
Retail Office Industrial Specialised Student accommodation
Exit cap rate per sector
Property asset platform 3% 4% 13% 13% 15% 8% 37% 7% 400 800 1 200 1 600 2 000
Monthly 2019 2020 2021 2022 2023 Beyond 2023 Vacancy
Thousands
Lease expiry profile by GLA
12 Redefine group interim results for the six months ended 28 February 2019
Footfall
4.1%*
(FY18 | -2.0%)
Market
→ Continued pressure on total cost of occupation driving down rent and escalations → Retailers continue to focus on ‘right sizing’ → Excess retail space impacting centre footfall and sales → Fashion retailers appearing in convenience centres → Entertainment and food are key drivers of footfall and spend
Activity
→ No acquisitions during period → Disposals R315 million at 10.0% yield → Concluded development of Centurion Lifestyle Walk and Park Meadows Builders
Express
→ Increased food and restaurant offering at larger malls → Edcon exposure contained
− Equity contribution R54.6 million − Rental from profitable stores totalling 56 788 m² to be received in full − Rental reduction on expiring leases or where Redefine has right to take back space total 21 972 m² − Rental reduction over two-year period amounts to R14 million
Priorities
→ Occupancy management → Completion of Centurion Mall (July) and Leroy Merlin, Little Falls (August) → Extension to Maponya Mall - 10 000 m² → Conclusion of agreements and further reduction of space with Edcon → Driving sales growth to support rental levels → Portfolio negotiations with national retailers and focus on underperforming stores → Continued focus on underperforming assets
− Kyalami Corner: increased fashion offering and introduction of Dis-Chem − Matlosana Mall: completion of N12 link road and reduction of vacancy − Cradlestone Mall: free parking and renewal of fashion tenant leases
→ Management of operating costs → Sustainability initiatives such as water efficiency, waste management and renewable
energy solutions
Note: *Figures are based on 19 top shopping centres
Value
R28.0bn
(FY18 | R27.8bn)
GLA
1.4 million m²
(FY18 | 1.4 million m²)
Tenant retention by GLA 96.7%
(FY18 | 90.7%)
Completed new developments of R117m at yield of 11.0% Active vacancy
4.6%
(FY18 | 4.5%)
Trading density
1.6%*
(FY18 | 3.3%)
Sales growth
4.5%*
(FY18 | 3.7%)
Rent to turnover
8%*
(FY18 | 7.9%)
Renewal reversion
(FY18 | 0.1%)
Highlights
Property asset platform
13 Redefine group interim results for the six months ended 28 February 2019
Market
→ Lack of confidence impacting leasing decisions → Continued increase in vacancy levels compounded by nodal development → Continued pressure on rentals and escalations → Increases in rates and cost of electricity → Demand is driven by consolidation, densification, public transport and parking → Lease break clauses are more prevalent → Back-up power supply more important than ever → Flexible work trend driving expansion of coworking accommodation
Activity
→ Completed development of Rosebank Link and The Advocates → Conclusion of two leases with WeWork over 23 000 m² → Renewed leases over 79 044 m² with rent reversion of -5.5% → Rejuvenation of Bryanston and Midrand properties → Continued focus on deepening tenant and broker relationships → Consistent customer service
Priorities
→ Tenant retention and reducing vacancies → Constant trade-off between renewal rentals and longer leases → Sale of nine government tenanted properties for R1.16 billion at 12.6% yield → Sale of Durban office portfolio for R100 million at 14.8% yield → Completion of 155 West street redevelopment → Continued refreshing of properties for best and highest use → Management and potential expansion of coworking business → Remodel accommodation to allow greater densification and building efficiency → Optimise parking particularly for coworking businesses → Management of operating costs → Sustainability initiatives such as water efficiency and waste management
Highlights Tenant retention by GLA
95.8%
(FY18 | 87.7%)
Value R26.0bn
(FY18 | R25.9bn)
GLA
1.3 million m²
(FY18 | 1.3 million m²)
Completed new developments of R1.4bn at yield of 8.3% Redevelopments in progress R247m at yield of 6.4% Disposals
R75m
at yield of 9.0% Active vacancy 12.1%*
(FY18 | 9.5%)
Renewal reversion
(FY18 | -3.1%)
*Active vacancy at 30 April 2019 10.5%
Property asset platform
14 Redefine group interim results for the six months ended 28 February 2019
Market
→ Logistics (especially third party) tenants demanding shorter leases linked to their
service contract duration
→ Eskom load-shedding a major concern → Rental growth remains under pressure notwithstanding low vacancy → Local authority infrastructure deterioration affecting established nodes → Development yields under pressure due to competitive deal terms → Lease negotiations taking longer to conclude → Floor to eave height minimum 13 metres
Activity
→ Portfolio vacancy increased to 1.8% - still below national average of 3.3% → Proceeds of land sales amount to R90 million → Hirt & Carter development completed at Cornubia at 8.5% initial yield → Constant trade-off between renewal rentals and longer leases → Continued refreshing of properties for best use → Leases renewed over 60 417 m² (3.4% of portfolio) with rental reversion of -17.3%
Priorities
→ Tenant retention → Sale of Atlantic Hills land → National retailer development at Brackengate 2 over 52 500 m² → S&J Industrial Estate development (speculative building 18 568 m²) and land sales → Selective acquisitions to improve the quality of the portfolio → Management of operating costs → Disposal of non-core properties
Highlights Value R13.7bn
(FY18 | R13.1bn)
GLA
1.8 million m²
(FY18 | 1.8 million m²)
Renewal reversion
(FY18 | 2.9%)
Tenant retention by GLA
96.9%
(FY18 | 91.8%)
Completed new developments of R209m at yield of 8.7% New developments in progress of R173m at yield of 9.4% Active vacancy 1.8%
(FY18 | 1.0%)
Acquisitions of R130m at average yield of 9.8%
Property asset platform
15 Redefine group interim results for the six months ended 28 February 2019
Retail Industrial
GLA: 17 153 m² Lease commencement date: 1 July 2019 Total development cost: R540 million (Phase 2: R176 million) Initial yield: 8.5%
Industrial
Road infrastructure put in place GLA: 18 568 m² Lease commencement date: 1 April 2020 Total development cost: R121 million Initial yield: 9.4%
Leroy Merlin, Little Falls Hirt & Carter, Cornubia S&J Industrial Estate, Germiston
GLA: 19 575 m² Tenants: Leroy Merlin 17 063 m² and Decathlon 2 512 m² Development cost: R298 million Yield: 8.3% Trading commencement: 1 September 2019 Phase 2 under assessment
Property asset platform
16 Redefine group interim results for the six months ended 28 February 2019
Student accommodation Loans High yielding
Asset profile Current bed capacity at 8 378 Loans of R1.9 billion to various third parties attracting commercial interest rates Solar PV plants LED screens, exterior media, kiosks and wi-fi Park Central residential development GRIT shares Oando Wings Operational activity Completed developments Hatfield Square (Pretoria) - 2 331 beds Lincoln House (Bloemfontein) - 469 beds Roscommon House (Cape Town) - 582 beds Loan to BEE consortium for Delta shares disposal reflected in the books at the lower
value of Delta shares 23 Solar PV plants generate 23.5 MWp Non-GLA income growing by 21% Park Central comprising 160 units - 38% by value sold and complete by end of May Priorities Enlarge Yale Village by 196 beds Extend Yale Village to adjoining property Expand into Pietermaritzburg - 576 beds Build capacity to 10 000 beds Provide loan funding to secure strategic partners and provide transformed
Downside risk on Delta loan to be mitigated Solar PV projects will add another 767 MWp Leverage non-GLA opportunities off property base Complete Park Central project Subsequent to February, sold 6.8 million GRIT shares for R18 per share Discussion underway to sell Oando Wings
Property asset platform
17 Redefine group interim results for the six months ended 28 February 2019
Proportional share
R35.5bn
(FY18 | 32.6bn)
18% 13% 66% 3% Geographic spread by value United Kingdom Australia Poland Africa 59% 17% 14% 4% 6% Sectoral spread Retail Offices Industrial Student accommodation Hotels
*Including Redefine’s foreign borrowings
**Including local assets and borrowings net of cash
Carrying value
R19.1bn
(FY18 | R18.9bn)
Listed securities
R11.8bn
(FY18 | 11.9bn)
Direct properties
R7.3bn
(FY18 | 7.0bn)
Proportional share
R32.5bn
(FY18 | R29.9bn)
Redefine see- through LTV**
50%
(FY18 | 46.1%)
Property asset platform
18 Redefine group interim results for the six months ended 28 February 2019
Invested R1.5bn into Poland RDI impaired by
R194.0m
Chariot portfolio underpinned by Metro AG head lease to
2024
Acquired 44.3 million EPP shares for
EUR64.9m
EPP NAV per share
EUR1.35 EUR150.0m
exchangeable bond refinance a top priority Expansion of logistics through developments
costing EUR134m Leicester street
Property asset platform
Market
→ The UK commercial market continues to experience shocks and headwinds → Demand for student accommodation in Melbourne massively outstrips supply → Continued growth in consumer spending in Poland sustains retail sales growth → Poland’s strategic location in central Europe, supply chain reconfiguration,
e-commerce and an expanding manufacturing sector poses opportunities for logistics in Poland
Activity
→ Leicester street occupancy at 78% for first semester → Value uplift post development of Leicester street amounts to AUD51 million
Europe Logistics Platform activity and priorities covered separately Refer to RDI and EPP results presentations for activity
Priorities
→ Provide ongoing strategic and financial support to our local partners → Options to stem value destruction by RDI being explored → Establish Leicester street as premier student accommodation facility → Complete Swanston street development for second semester 2020 → Bring equity investor on board to expand logistics platform in Poland
19 Redefine group interim results for the six months ended 28 February 2019
Activity
→ Completed developments: Strykow → Developments in progress → Bielsko Biala Phase I → Lublin II Phase I → Land acquired for development: Warsaw Airport VI
Priorities
→ Tenant retention → Filling vacancies on new developments → Replacing the vacating tenant at Lodz III → Increasing weighted average lease expiry profile → Improving portfolio quality through new developments → Completing the developments of Bielsko Biala Phase I, Lublin II Phase I and
Warsaw Airport VI Phase I
→ Increasing weighting of the portfolio in primary logistics nodes
Tenant type by GLA
Value of income producing assets
EUR232m
Active GLA
391 184 m²
GLA under construction
143 664 m²
Active vacancy
6.8%
Weighted average unexpired lease term
3.9 years
Completed new development
EUR35.6m
at yield of 6.3% Under construction
EUR98.8m
at yield of 6.8%
41% 12% 15% 4% 17% 4% 7%
Retail distribution Automotive Third party logistics Logistic services e-commerce Other Vacant
Property asset platform
20 Redefine group interim results for the six months ended 28 February 2019
Property asset platform
Phase 1 development of 77 673 m² commenced in May 2018 and was completed in February 2019 Total land size of 203 862 m² Development of Phase 1 underpinned by a 43 139 m² lease with anchor tenant Arvato expiring in 2025 The property is currently 71% let. The remaining 22 305 m² is under advanced negotiations with two tenants 22 314 m² of remaining bulk, which is anticipated to be developed in Q4 2019 to facilitate tenant expansion requirements in Phase 2 The total development cost is anticipated to be EUR50m on completion
The completed development is anticipated to yield 6.3% net of all fees and generate a post-tax ROE of 14.4% Capital value uplift of 14% forecasted on completion
Strykow Bielsko Biala
Total land size of 156 525 m² Phase 1 development of 27 483 m² commenced in October 2018 and is expected to be completed in April 2019 Development of Phase 1 underpinned by two pre-lets for a total of 11 466 m² on lease terms of three and seven years Phase 1 is currently 42% let. Of the remaining 16 017 m², approximately 15 000 m² is under advanced negotiations with three tenants Phase 2 consists of 43 242 m² of remaining bulk, which will be developed subject to favourable market conditions and pre-lets being achieved following the full occupancy of Phase 1 The total development cost is anticipated to be EUR42m on completion
The completed development is anticipated to yield 6.7% net of all fees and generate a post-tax ROE of 12.4% Capital value uplift of 15% forecasted on completion
21 Redefine group interim results for the six months ended 28 February 2019
3
Section
Financial review
22 Redefine group interim results for the six months ended 28 February 2019
International income contribution of 25.4%
(HY18 | 25.3%)
Operating margin maintained at
82.2%
Interest rates on 78.2%
(FY18 | 81.2%)
First half distribution of
4.0% to 49.2 cents
(HY18 | 5.5%)
Market capitalisation at
R57bn
(FY18 | R56.2bn)
Distributable income has grown by
4.8% to R2.7bn
(HY18 | 8.6%)
Total assets now
R99.2bn up R500m
(FY18 | R98.7bn)
Financial review
Moody’s investment grade rating reaffirmed
52.8 56.2 68.7 72.4 72.9 11.0 16.5 15.4 18.9 19.1 19.3 18.7 23.6 20.8 21.6 4.2 9.3 11.1 15.7 17.3
20 40 60 80 100 120 Local property assets Local debt (net of cash) International property assets International debt
FY15 FY16 FY17 FY18 HY19
LTV% Rbn 63.8 23.5 72.7 28.0 84.1 34.7 91.3 36.5 92.0 38.9
Analysis of property assets and debt
36.8% 36.5% 41.1% 40.0% 42.3%
23 Redefine group interim results for the six months ended 28 February 2019
HY19 Rm HY18 Rm change % Net operating income from investment properties 2 561 2 532 1.1% Sundry income 39 19 105.3% Total income 2 600 2 551 1.9% Administration costs (133) (113) 17.7% Net operating profit 2 467 2 438 1.2% Net finance charges (484) (542)
South African distributable income 1 983 1 896 4.6% International distributable income 675 640 5.5% Distributable income 2 658 2 536 4.8% Rm Cents per Share Change % HY18 distributable income 2 536 47.3 Less HY18 non-recurring income (116) (2.2) HY18 recurring distributable income 2 420 45.1 Less dilution arising from new shares (0.4) Organic growth 114 2.1 HY19 recurring distributable income 2 534 46.9 3.9% Add HY19 non-recurring income 124 2.3 HY19 distributable income 2 658 49.2 4.0%
Financial review
24 Redefine group interim results for the six months ended 28 February 2019
2 536 2 658 (3) (16) (20) (49) (50) (56) (84) (180) 164 121 86 86 58 42 23
950 1 450 1 950 2 450 2 950 3 450
* Net of funding costs
Rm
Tailwinds R580 million Headwinds (R458 million)
HY18 distributable income Chariot income increase* Cromwell and CPT disposal* Active portfolio NOI growth Prior year realised FX gains RDI income decrease* NOI of property disposals Increased admin costs HY19 distributable income Property acquisitions EPP income increase* Lower net local finance costs Europe Logistics Platform income increase* Land trading income Lower fee income NOI of properties under redevelopm ent
Financial review
GRIT and Oando income decrease*
25 Redefine group interim results for the six months ended 28 February 2019
36% 43% 20% 1% 36% 43% 20% 1%
* Properties owned for 12 months in both periods ** Net of recoveries
HY19 HY18 Active portfolio NOI contribution
Office Industrial Retail HY19 Rm HY18 Rm Change % Active portfolio revenue* 2 867 2 728 5.1% Active portfolio costs** (509) (456) 11.6% Property income from active portfolio 2 358 2 272 3.8% Net operating income from acquired/development properties 156 163
Net operating income from disposed properties 47 97
Net operating income from investment properties 2 561 2 532 1.1% Active portfolio margin % 82.2% 83.3%
Financial review
Specialised
26 Redefine group interim results for the six months ended 28 February 2019
1 083.3 1 058.8 (1.5) (2.3) (2.5) (3.6) (10.8) (18.0) (49.8) 41.0 16.1 6.9
950 1 000 1 050 1 100 1 150 1 200
Financial review
31 Aug 2018 NAV FY18 NAV Statutory profit excluding revaluation, forex & impairments Revaluation
property portfolio Forex loss on international investments FV of Delta FY18 distributions paid HY19 NAV Forex profit on foreign denominated loans Revaluation of hedges & exchangeable bonds Impairment
Other
EUR 11.30 USD 0.60 AUD 1.20 GBP 3.00 EUR (11.8) USD (0.7) AUD (0.9) GBP (4.6)
NAV decrease of international assets NTAV 976.9 NTAV 953.1
27 Redefine group interim results for the six months ended 28 February 2019
*Moody’s credit rating was refreshed in April 2019. Maintained global scale rating Baa3 and national scale rating Aa1.za, with a stable outlook
Funding snapshot HY19 Rbn FY18 Rbn Bank borrowings 13.2 12.4 Listed bonds and commercial paper 7.1 5.5 Foreign-listed bonds 2.4 2.5 Unlisted bonds 16.2 15.7 Total interest-bearing borrowings 38.9 36.1 Loan-to-value ratio 42.3% 40.0% Average term of debt 3.5 years 3.6 years % of debt secured 67.1% 70.4% % of asset secured 67.7% 67.2% Weighted average cost of ZAR debt 9.2% 9.3% Weighted average cost of FX debt 1.6% 2.3% Weighted average cost of total debt 6.2% 6.3% % of ZAR debt hedged 79.2% 81.9% % of FX debt hedged 76.5% 79.8% % of total debt hedged 78.2% 81.2% Average term of hedges 2.9 years 2.8 years Undrawn facilities (Rbn) 6.2 3.8 Interest cover ratio 4.6x 4.3x
Financial review 381 558 3 321 1 000 2 000 3 000 4 000
Vendor loan repaid Recycling of capital Debt raised Sources of capital of R4.3 billion
Rm
7.0% 8.0% 9.0% 10.0% 11.0% 12.0% May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Drivers of the cost of capital Redefine forward yield R186 yield 5 year swap rate
28 Redefine group interim results for the six months ended 28 February 2019
* Net of cash and cash deposits on cross currency swaps
** The over exposure to GBP debt is due to the impairment of RDI The debt has no recourse to the GBP assets, therefore it does not create liquidity risk but only NAV risk
HY19 FY18
Currency
Property assets Rbn Debt Rbn LTV % Weighted average cost % Property assets Rbn Debt Rbn LTV % Weighted average cost % Net ZAR* 72.9 21.5 29.5% 9.2% 72.4 20.9 28.9% 9.3% AUD 2.3 1.8 78.3% 4.4% 2.1 1.4 66.7% 4.1% EUR 12.6 10.9 86.5% 1.6% 11.9 9.4 79.0% 1.6% GBP** 3.4 4.1 120.6% 3.1% 4.0 4.2 105.0% 3.0% USD 0.8 0.6 75.0% 4.9% 0.9 0.6 66.7% 4.1% Total 92.0 38.9 42.3% 6.2% 91.3 36.5 40.0% 6.3%
Financial review
29 Redefine group interim results for the six months ended 28 February 2019
4
Section
In conclusion
30 Redefine group interim results for the six months ended 28 February 2019
Strategic matter Strategic challenge Strategic response Second half key focus area Invest strategically Creating sustained value for all
Considered deployment of capital to ensure highest and best use Strengthen the balance sheet through continued focus
development activity and taking action on value destroyers Optimise capital Securing capital in a constrained and costly environment Recycle capital, lower LTV ratio and improve investor appeal Enable access to cost-effective funding through heightened focus on capital management through issuing equity, recycling capital and lowering gearing Operate efficiently Operating in a low growth, rising cost environment Maintain operating margins and sustain core income growth Improve quality of earnings through relentless emphasis on organic growth, solar PV interventions, non-GLA income activities, utility management and robust cost control Engage talent Harnessing our people’s skills, abilities and attitude Accelerate transformation, entrench Redefine’s values and embed a culture
Support market relevance, spur innovation and create sustainable structures through harnessing the power of diversity Grow reputation Living our purpose Enhancing stakeholder engagement strategies to strengthen key relationships Safeguard Redefine’s brand and futureproof our business through mentorship and innovation
In conclusion
31 Redefine group interim results for the six months ended 28 February 2019
Expansion into Poland buffers domestic headwinds Quality in the local market will be the driver of differentiated performance We will remain relevant through a values-driven service culture that embraces change and encourages innovation
In summary
We strive to look beyond the current cycle
In conclusion
We anticipate distribution per share for the full 2019 financial year to grow in line with the first half Enabled by a purpose-driven strategy, Redefine is well-positioned to rise above the rest to take advantage of the resultant opportunities
912 943 913 977 953 1 034 1 056 1 023 1 083 1 059
1 148 1 102 1066 1035 971 600 800 1 000 1 200 1 400
FY15 FY16 FY17 FY18 HY19
CPS
Net asset value per share growth NTAV NAV Share Price
39.0 41.7 44.8 47.3 49.2 41.0 44.3 47.2 49.8 80.0 86.0 92.0 97.1 20 40 60 80 100 120
FY15 FY16 FY17 FY18 FY19
CPS
Distribution per share growth Interim Final
Forecast 51.8 101.0
32 Redefine group interim results for the six months ended 28 February 2019
5
Section
Supplementary information
33 Redefine group interim results for the six months ended 28 February 2019
→ Our purpose-driven strategy is aligned with long-term trends – we adopt an agile approach, readily adapting to seize opportunities and
mitigate risks as they arise
→ Our focus is on real estate and related investments – not a particular sector → We are dynamic and invest where we believe the best market opportunities lie → We will continue to build an asset platform that sustains organic growth through:
− Continuously improving, expanding and protecting our domestic portfolio − Recycling capital through the sale of assets at the end of their investment life cycle − Unlocking value from active asset management opportunities in offshore markets
→ We will broaden sustainability beyond environmental considerations → We will implement an integrated approach to stakeholder engagement to ensure that we understand our stakeholders’ needs while managing
their impact on us
→ We actively manage and grow our reputation → We drive innovative business projects to ensure we remain relevant and achieve our long-term goals
Supplementary information
34 Redefine group interim results for the six months ended 28 February 2019
Uncertainty pertaining to long-term impact of geo-political and socio-economic growth factors Financial market volatility Impact of disruptive technologies Inability to effectively manage our reputation Information security resilience Failure to comply with local and international laws and regulations Damage to property and security-related threats Misalignment with international partners (in-country) Inability to attain maximum desired score against property sector scorecard Increased competition for tenants, capital and property assets Lack of sustainable growth in total return (distribution plus NAV) Inability to maintain strong ethical and governance culture Inability to be environmentally resilient Deteriorating public/state infrastructure and poor administrative delivery locally Insufficient or ineffective third-party management (tenants and suppliers)
Supplementary information
Elevated top risk Unchanged top risk Reduced exposure
35 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Contain LTV at 40% or below HY19 LTV: 42.3% In order to reduce this, assessing asset acquisitions to be equity funded on a non- dilutive earnings basis and actively managing recycling activities to fund our development pipeline. Depending on market conditions we will offer a DRIP alternative for HY19 distribution, as-well-as issue shares for assets and where possible for cash Lengthen funding and hedging maturity profiles Weighted average term of debt HY19: 3.5yrs vs FY18: 3.6yrs Weighted average term of hedges HY19: 2.9yrs vs FY18: 2.8yrs Maintain and strengthen credit metrics Moody’s updated their credit opinion on 23 April 2019 and maintained Redefine’s Baa3/Aa1.za rating, with a Stable outlook Noted as follows: “Key credit metrics are adequately positioned within the rating guidance but with limited headroom” Maintain liquidity Agreed refinance terms for all near-term debt maturities (within next 12 months) Funding capacity in place for all known capital commitments, with sufficient funding headroom in the form of committed undrawn bank facilities to absorb shocks and take advantage of opportunities Optimise working capital Net working capital HY19: R561m vs FY18: R1 042m
Supplementary information
36 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Tenant retention is top-of-mind, as well as reducing vacancies and extending lease maturity profiles The achieved retention rate is 96.6% with an active vacancy of 5.7%. The WALE term by GMR is 3.7yrs (FY18 - 3.6yrs) Implement innovative non-GLA income opportunities We have installed a digital screen at Rosebank Link and a screen will be installed at Alexander Forbes in the next three months Maintain operating margins and optimise energy and water usage and recoveries in our existing buildings We have successfully objected to increased municipal rate valuations with a number still under assessment and have introduced a recovery mechanism for the cost of borehole water being supplied to properties – active portfolio margin maintained at 82.2% Continued focus on tenant and broker relationship management We continue the ongoing process of tenant engagement to develop broader relationships not restricted to lease renewals. In addition our integrated engagement to enhance broker relationships attempting to place us “top-of-mind” within the broking community Facilities and utility management interventions to further improve
After the successful pilot project at Boulders (saving R948k in the first year), we are planning the roll out of new smart water valve technology across the portfolio. We continue to review and re-negotiate service contracts Focus on growth in renewal rentals Portfolio rent reversion of -6% over 225 000 m2 (4.9% of total GLA of the portfolio) Non-core assets to be recycled Disposed of assets for R548m at a yield of 9.8% Expand international income and capital growth opportunities at low risk Invested R1.9bn offshore – EPP shares (R1bn), student accommodation in Australia (R0.4bn) and Logistics developments in Poland (R0.5bn)
Supplementary information
37 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Equip leadership with the capabilities required to align with our strategy, brand and culture Commenced a 360 Leadership style assessment. The process is a powerful development tool for courageous and committed leaders seeking to improve their leadership skills Enrich employee engagement practices and work-life integration Employee benefits hold significant value in our overall employment offering. Enhancements to group risk and retirement fund offerings took effect in April and were communicated at regional employee benefit workshops hosted by the HR team Research is underway to gain insight into how we can promote a health integrated work-lifestyle without sacrificing employee productivity Assess our remuneration governance practices to ensure that we uphold the principle of fair and responsible remuneration Annual market positioning exercise scheduled for June completion, ongoing data collections Enhancements to employee benefits (group risk and retirement fund) Ongoing focus on talent management through succession planning and career development Talent reviews will be conducted during July Accelerate transformation to create an environment that embraces diversity and inclusivity In-depth review of structures underway to identify transformation opportunities
Supplementary information
38 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Invest in enhanced technology to facilitate engagement and experience management with all our stakeholders Development of CRM system near complete. Work commenced on the development on a refreshed employee intranet as well as research into latest interactive stakeholder engagement platforms Improve tenant experience to be a key differentiator Manco think tank hosted to secure business buy-in and expedite finalisation of the customer journey map Formulate an improved engagement strategy with suppliers, including revising procurement processes Procurement process assessment completed and development of a procurement strategy commenced – including a supplier engagement strategy (comprising a supplier on-boarding programme and communication plan that drives advocacy) Roll out and implementation of Challenge Revolution and fine-tuning key projects and outcomes Second Challenge Convention held at Maponya Mall and first Innovation Challenge concluded Re-assess and improve the use of social media and other platforms to ensure we remain ahead of the curve in terms of marketing and communications New social media platforms launched for specific initiatives (i.e. Mentorship Challenge, Innovation Challenge etc.). Wider corporate strategy being fine-tuned based on learnings and will be implemented while ensuring sufficient reputational risk mitigation
Supplementary information
39 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Deepen ethics awareness and prioritise corporate conduct practices that outline how the ethics capital will be maintained Ethics survey conducted during November. Our overall ethics rating improved from A to AA. Feedback on survey results to all staff and launched an awareness campaign on Code of Conduct Identify key opportunities to streamline business processes and functions to meet our tenants’ needs more efficiently Finalising the “customer journey map” with a view of identifying all tenant touchpoints and then to prioritise and assess which of the associated business processes can/should be enhanced/optimised Focus on embedding IT governance standards and aligning IT services with current and future business needs, while maintaining an adequate, effective and agile level of IT operational management The IT Operational Model has been revised against Enterprise Architecture (EA) governance standards and principles. This approach ensures efforts are targeted at specific components of the EA landscape, at the same time providing a comprehensive overview of the entire ICT ecosystem as it applies to business strategic objectives Maturing and bedding down the combined assurance approach Combined Assurance has been built into risk identification analysis processes while the combined assurance framework is to be tabled at the Q3 risk and compliance committee for adoption as it applies to enterprise governance, risk and compliance. The assurance dashboard has been tabled in Q2 at audit committee
Supplementary information
40 Redefine group interim results for the six months ended 28 February 2019
Top priority HY19 progress
Continue investment in long-term renewable energy solutions (i.e. solar PV, energy storage) An additional 1 MWp capacity was added bringing our total capacity to 23.5 MWp Two projects are under construction which will add another 767 kWp with more projects to follow Explore water efficiency projects to ensure security of supply and reduce consumption We continue to install various technologies such as online monitoring and leak detection, smart shutoff valves and sensors in bathrooms to reduce water
ground water solutions and will implement these where feasible Pursue Green Star ratings to validate the overall environmental performance of our properties We have recently submitted 30 buildings for Existing Building Performance ratings and expect an outcome on these projects from the GBCSA within the next eight to 10 weeks Improve waste management efforts to reduce waste-to-landfill from buildings We have expanded external waste management to office buildings as part of our Green Star project and will continue to appoint external waste management contractors to reduce waste-to-landfill Engage with supplier/supply chain to ensure environmental best practice and procurement of environmentally sound products and solutions We have extensively engaged with suppliers providing services to our Green Star buildings and will expand these engagement efforts in to non-Green Star rated properties
Supplementary information
41 Redefine group interim results for the six months ended 28 February 2019
2 4 6 8 10 2019 2020 2021 2022 2023 2024 2025 2026
Maturity of South African debt
Debt Hedges
73% 71% 58% 68% 70% 67% 68% 60% 53% 63% 67% 68%
0% 20% 40% 60% 80%
FY14 FY15 FY16 FY17 FY18 HY19 Secured debt / secured assets
Secured debt Secured assets %
36.6 47.1 56.4 60.4 65.9 66.5
10 20 30 40 50 60 70 FY14 FY15 FY16 FY17 FY18 HY19
Equity headroom for the unsecured lender 27% 33% 35% 36% 35% 43%
0% 10% 20% 30% 40% 50% FY14 FY15 FY16 FY17 FY18 HY19
Unsecured debt / unencumbered assets
% Rbn Rbn Supplementary information 1 2 3 4 5 2020 2021 2022 2023 2024 2025
Maturity of foreign debt
Debt Hedges Rbn
0% 0% 2% 1% 4% 2% 5% 4% 3% 0% 6% 6% 12% 8% 12% 35% 1% 2% 2% 3% 3% 4% 5% 5% 5% 8% 11% 15% 33%
RMB Offshore Pekao Commercial paper National Bank of Australia RMB Liberty Nedbank ING Bank Investec Standard Bank IOM Standard Chartered Exchangable bond Standard Bank ABSA Listed bonds Unlisted bonds
Sources of debt (%)
HY19 FY18
42 Redefine group interim results for the six months ended 28 February 2019
HY19 Rm HY18 Rm Chariot trading profit 80
23
21
Lease cancellation
124 116
Supplementary information
43 Redefine group interim results for the six months ended 28 February 2019
HY19 Rm % change Half year ended February 2018 456 Net municipal costs improved as a result of successful valuation objections and an improved focus on recoveries 1 1.5% Net electricity costs improved through a focus on renewable energy (10) 17.1% Operating costs increased and as a result of developed properties service warrantees coming to an end 21 11.2% Repairs and maintenance increased in line with planned preventative maintenance strategies on ageing infrastructure 9 18.3% Tenant installation costs are deal driven 8 33.7% Letting commissions are deal driven 1 12.0% Management fees reduction due to the insourcing of property management (2)
Bad debts provided for on a specific basis 17 87.1% Property admin costs increase in line with inflation 8 5.6% Half year ended February 2019 509 11.0%
Supplementary information
44 Redefine group interim results for the six months ended 28 February 2019
Office Retail Industrial Specialised Total Active portfolio average rental escalation 7.6% 6.9% 7.7% 9.0% 7.3% Renewal plus new lets net of expiries
Growth in rental income 5.5% 4.2% 6.7% 8.9% 5.2% Growth in other income
0.2% 0.0%
Growth in 2019 property revenue 5.3% 4.0% 6.9% 8.9% 5.1% Active portfolio NOI growth 3.8% 3.2% 5.2% 9.0% 3.9% Total vacancy August 2018 % 16.0% 5.8% 1.2% 3.0% 6.9% Total vacancy February 2019 % 15.6% 4.6% 1.8% 6.4% 6.6% Vacant properties under redevelopment 1.9% 0.0% 0.0% 0.0% 0.5% Vacant properties held-for-sale 1.6% 0.0% 0.0% 0.0% 0.4% Active vacancy February 2019 12.1% 4.6% 1.8% 6.4% 5.7% Net letting activity post February 2019
0.0% 0.0%
Current vacancy 10.5% 4.1% 1.8% 6.4% 5.3%
Supplementary information
45 Redefine group interim results for the six months ended 28 February 2019
HY19 Rm HY18 Rm EPP N.V. 436 278 Cromwell Property Group 23 194 Chariot 141 10 RDI REIT PLC 93 137 Redefine Europe 95
Oando Wings 33 46 GRIT 9 11 International Hotel Group
Other (5) (6) Realised foreign gains 1 90 Total foreign income 826 803 USD funding expense (12) (11) GBP funding expense (61) (49) EUR funding expense (57) (44) AUD funding expense (21) (59) Total foreign funding expense (151) (163) Total net foreign income 675 640
Supplementary information
46 Redefine group interim results for the six months ended 28 February 2019
UK Europe Australia Africa Other Total International RDI EPP Chariot RDF Europe Cromwell Journal GRIT Oando Wings Contractual rental income
Investment income
Total revenue
22 684 5 879 9 815
Operating costs
Administration costs (265) (311) (5 416) (24 400) (526) (11 838)
Net operating profit (265) (311) (5 416) 95 872 22 158 (8 498) 9 815
Other gains 233
Distributable equity income 109 085 436 560
1 624
Net distributable profit before finance costs and taxation 109 053 436 249 4 742 100 396 23 782 (8 498) 9 815
Net interest costs
(12 711)
148 597 (97 769)
2 419 67 361
(12 711)
(165 130) Distributable foreign exchange gain
1 253 Net distributable profit before taxation 109 053 436 249 30 846 87 873 23 782 (8 493) 9 815 37 430 (147 532) 579 023 Current and withholding taxation (15 881)
(769)
Net income from operations before NCI share 93 172 436 249 30 846 86 872 23 013 (8 493) 9 815 33 041 (147 532) 556 983 NCI share of distributable income
Net income before distributable adjustments 93 172 436 249 30 846 82 812 23 013 (7 644) 9 815 33 041 (147 532) 553 772 Below the line distributable income adjustments:
Distributable income 93 172 436 249 140 868 94 646 22 815 (7 644) 9 310 33 041 147 532 674 925
Supplementary information
Values are rounded to the nearest R'000
47 Redefine group interim results for the six months ended 28 February 2019
2019 2020 2021 2022 2023 2024 EUR EUR amount (€m) 6.5 17.0 14.5 8.0 8.0 2.0 FEC rate (R: €1) 17.83 18.89 20.32 21.98 23.84 25.09 GBP GBP amount (£m) 2.5 5.0 2.5
20.44 21.51 22.67
AUD amount (A$m) 2.0 4.0
11.24 11.68
48 Redefine group interim results for the six months ended 28 February 2019
HY19 R’000
Net cash inflow from operating activities (as per statement of cashflows) 1 863 781 Items in cash flow from operating activities, but not related to distributable income 479 615 Working capital changes 506 879 Decrease in trade receivables 189 975 Decrease in trade payables (696 854) Merger costs 13 916 Capital gains tax (41 180) Non-cash flow items included in distributable income (36 379) Realised foreign exchange gain 1 253 Amortisation of tenant installations and letting commissions (44 365) Depreciation on property, plant and equipment (10 688) Share incentive schemes – difference between accrual and payment 17 421 Adjustments to distributable income, not included in IFRS statement of profit and loss 51 153 Delta – difference between interest accrual and distribution received 27 959 Trading profit (included in P & L but shown under investing activities) 23 194 Timing differences 311 675 Equity-accounted investments (net of withholding tax) – difference between dividend received and dividend accrual 74 573 Taxation – difference between income and withholding taxation accrued not yet paid /received 12 415 Chariot – difference between income received and accrual 110 022 Listed investment (Cromwell) – difference between dividend received and dividend accrual (198) Listed investment (GRIT) – difference between dividend received and dividend accrual (505) Interest income - accrued not yet received 120 339 Interest expense – accrued not yet paid (4 971) Non-controlling interest share of distributable income (11 419) Distributable income for HY19 2 658 426 Supplementary information
49 Redefine group interim results for the six months ended 28 February 2019
Rm August 2018 property asset platform 91 335 Deployment of capital 3 712 Disposals (1 265) Impairments (200) Fair value adjustments (178) Foreign exchange adjustments (1 234) Net equity accounted profit (284) Interest raised on loans receivable 109 Interest settled on loans receivable (26) February 2019 property asset platform 91 969
Supplementary information
50 Redefine group interim results for the six months ended 28 February 2019
Continued expansion across traditional sectors Exposure to key economic nodes Locations that have solid infrastructure to reduce leasing risk Continue to expand and improve existing well-located properties through development Invest in younger (more efficient), well-located and better-quality properties with longer leases and A-grade tenants Recycle non-core assets to position the portfolio for sustained organic growth Continued implementation of long-term strategy on an asset-by-asset basis Expand in under-represented regions and to complement existing assets Investment criteria Our focus
Supplementary information
51 Redefine group interim results for the six months ended 28 February 2019
Description Office Retail Industrial Specialised^ HY19 FY18 Number of properties 115 76 108 4 303 305 Number of tenants 1 204 3 160 427 2 4 793 4 954 Total GLA (m²) (million) 1.3 1.4 1.8 0.0 4.6 4.6 Vacancy (%) active 12.1 4.6 1.8 6.4* 5.7* 4.5* Vacancy (%) held-for-sale and development 3.5 0.0 0.0 0.0 1.0 2.4 Vacancy (%) total 15.6 4.6 1.8 6.4* 6.6* 6.9* Asset value (R billion) 26.0 28.0 13.7 0.8 68.5 67.4 Average property value (R'm) 226 368 127 213 234 221 Value as % of portfolio 36.6 39.4 19.3 1.2 97.0 97.0 Average gross rent per m² (R) 158.9 163.4 54.8 184.8* 116.4* 112.3* Weighted average retention rate by GLA 95.8 96.7 96.9 97.3* 96.6* 90.4* Weighted average retention rate by GMR 95.9 96.3 95.9 94.8* 96.1* 89.4* Weighted average renewal growth rate (%) (5.5) (5.4) (17.3) 0.0* (6.0)* (1.5)* Weighted average enforce lease escalations by GMR (%)** 7.5 6.9 7.7 9.0* 7.3* 7.4* Weighted average unexpired lease term (remaining) by GMR (years) 3.7 3.3 4.8 2.3* 3.7* 3.6*
Supplementary information ^Excludes student accommodation portfolio *Includes Hatfield retail portion **New calculation method for weighted average lease escalation
52 Redefine group interim results for the six months ended 28 February 2019
Description Valuation (R'000) Value (%) Number of Properties Number of Properties (%) GLA (m²) GLA (%) GMR (R'000) Sector Office 26 021 519 37% 115 37% 1 302 422 29% 174 649 Retail 27 972 740 39% 76 24% 1 392 742 30% 217 012 Industrial 13 722 848 19% 108 34% 1 833 372 40% 98 685 Specialised 853 440 1% 4 1% 26 970 1% 4 989 Student accommodation 2 466 527 4% 11 4% 2 815
Grand total 71 037 074 100% 314 100% 4 558 321 100% 495 497 Province Gauteng 51 619 239 73% 213 68% 3 216 079 71% 351 787 Western Cape 12 570 047 18% 50 16% 726 089 17% 86 091 KwaZulu-Natal 3 157 755 4% 27 8% 292 629 6% 26 638 Other 3 690 033 5% 24 8% 323 524 6% 30 981 Grand total 71 037 074 100% 314 100% 4 558 321 100% 495 497
Supplementary information
53 Redefine group interim results for the six months ended 28 February 2019
37% 39% 19% 5% BY VALUE (%) 29% 30% 40% 1% BY GLA (%) 35% 44% 20% 1% BY GMR (%) 37% 24% 34% 5% BY NUMBER OF PROPERTIES (%) Office Retail Industrial Specialised/Student accommodation
Supplementary information
54 Redefine group interim results for the six months ended 28 February 2019
73% 18% 4% 5% BY VALUE (%) 71% 16% 6% 7% BY GLA (%) 71% 17% 6% 6% BY GMR (%) 68% 16% 8% 8% BY NUMBER OF PROPERTIES (%) Gauteng Western Cape KwaZulu-Natal Other
Supplementary information
55 Redefine group interim results for the six months ended 28 February 2019
16% 33% 39% 6% 6% BY VALUE (%) 9% 29% 44% 10% 8% BY GLA (%) 0.7% 1.0% 1.8% 0.6% 0.5%
0.0% 0.5% 1.0% 1.5% 2.0%
BY ACTIVE VACANCY (%) 13% 32% 42% 7% 6% BY GMR (%) Super regional Regional Community / Small regional Other Neighbourhood
Supplementary information
56 Redefine group interim results for the six months ended 28 February 2019
50% 34% 15% 1% VALUE BY GRADE (%) 3.2% 4.5% 4.4%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Premium A Grade Secondary
BY ACTIVE VACANCY (%) 73% 23% 2% 2% GMR BY LOCATION (%) Premium A Grade Secondary Gauteng Western Cape KwaZulu-Natal Other
Supplementary information
Land 75% 23% 1% 1% VALUE BY LOCATION (%)
57 Redefine group interim results for the six months ended 28 February 2019
49% 15% 25% 10% 1% BY GLA (%) Land Big box retailer
47% 13% 22% 7% 1% 10% BY VALUE (%) 52% 15% 21% 11% 1% BY GMR (%) Warehousing / Logistics Industrial units Light manufacturing Heavy grade industrial 0.5% 0.6% 0.7%
0.0% 0.2% 0.4% 0.6% 0.8%
BY ACTIVE VACANCY (%)
Supplementary information
58 Redefine group interim results for the six months ended 28 February 2019
Office GLA m² Retail GLA m² Industrial GLA m² Specialised GLA m² Total GLA m² Gauteng 174 710 43 976 24 799 1 908 245 393 Western Cape 11 035 747 7 544
KwaZulu-Natal 4 508 4 908 944
Other 12 849 15 024
Total 203 102 64 655 33 287 1 908 302 952 Vacancy % 15.6 4.6 1.8 6.4 6.6 Active vacancy, excluding held-for-sale or under development 12.1 4.6 1.8 6.4 5.7 Total GLA 1 302 422 1 392 742 1 833 372 29 785 4 558 321
Supplementary information
59 Redefine group interim results for the six months ended 28 February 2019
68% 20% 12% OFFICE (%) 82% 11% 7% INDUSTRIAL (%) 74% 14% 12% RETAIL (%) Grade A Grade B Grade C
Supplementary information
76% 14% 10% TOTAL (%)
60 Redefine group interim results for the six months ended 28 February 2019
10 000 20 000 30 000 40 000 50 000 60 000 70 000 Monthly 2019 2020 2021 2022 2023 Beyond 2023 Thousands
GMR
Total GMR: R495 497 100 200 300 400 500 600 700 800 900 1 000 Monthly 2019 2020 2021 2022 2023 Beyond 2023 Vacancy Thousands
GLA
Total GLA: 4 558 321 m²
Office Retail Industrial Specialised
Supplementary information
61 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m² Tenant GLA m² GMR (R)
Centurion Mall Gauteng 4 629 344 117 784 Macsteel 552 641 26 559 637 Macsteel Various 3 782 646 552 641 Pepkor 221 571 20 899 858 Alice Lane Gauteng 3 014 507 77 531 Government 177 644 23 767 227 115 West Street Western Cape 1 763 600 41 091 Shoprite 152 490 14 318 345 Black River and Observatory Office Park Western Cape 1 617 800 71 547 Robor 120 277 5 187 259 Blue Route Mall Western Cape 1 606 000 56 145 Edcon 102 157 12 604 066 East Rand Mall (50% share) Gauteng 1 476 244 33 746 Pick n Pay 102 040 9 840 449 Kenilworth Centre Western Cape 1 449 800 53 433 Massmart 98 668 10 285 653 90 Rivonia Road Gauteng 1 325 000 39 864 Woolworths 93 595 8 143 771 Golden Walk Gauteng 1 309 945 45 225 Standard Bank 60 072 12 019 061 Total top 10 properties 21 974 886 1 089 007 Total top 10 tenants 1 681 155 143 625 326 Balance of portfolio 49 062 188 3 469 314 Balance of portfolio 2 877 166 351 871 749 Total portfolio 71 037 074 4 558 321 Total portfolio 4 558 321 495 497 075 % of total portfolio 30.9% 23.9% % of total portfolio 36.9% 29.0%
Supplementary information
62 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m² Tenant GLA m² GMR (R)
Centurion Mall Gauteng 4 629 344 117 784 Shoprite 120 783 12 407 903 Blue Route Mall Western Cape 1 606 000 56 145 Pick n Pay 102 040 9 840 449 East Rand Mall (50% share) Gauteng 1 476 244 33 746 Edcon 78 760 11 433 785 Kenilworth Centre Western Cape 1 449 800 53 433 Woolworths 66 326 5 184 170 Golden Walk Gauteng 1 309 945 45 225 Massmart 62 687 7 884 215 Stoneridge Centre Gauteng 1 168 000 67 816 Pepkor 56 472 10 777 148 Matlosana Mall North West 1 153 324 64 972 Mr Price 45 016 8 848 341 Centurion Lifestyle Centre Gauteng 1 027 570 62 297 Foschini 43 591 11 015 225 The Boulders Shopping Centre Gauteng 946 973 48 310 Government 28 655 4 927 118 Goldfields Mall Free State 909 013 37 789 Virgin Active (SA) 28 081 4 652 347 Total top 10 retail properties 15 676 213 587 517 Total top 10 retail tenants 632 411 86 970 701 Balance of portfolio 12 296 527 805 226 Balance of portfolio 760 331 130 040 873 Total portfolio 27 972 740 1 392 743 Total portfolio 1 392 742 217 011 574 % of total retail portfolio 56.0% 42.2% % of total retail portfolio 45.4% 40.1%
Supplementary information
63 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m² Tenant GLA m² GMR (R)
Alice Lane Gauteng 3 014 507 77 531 Government 125 818 16 724 822 115 West Street Gauteng 1 763 600 41 091 Standard Bank 49 342 8 896 711 Black River and Observatory Office Park Western Cape 1 617 800 71 547 Alexander Forbes 44 611 11 034 961 90 Rivonia Road Gauteng 1 325 000 39 864 Webber Wentzel 34 883 6 032 206 The Towers Western Cape 1 172 000 59 375 Bowman Gilfillan 29 957 5 267 365 Wembley Office Park Western Cape 806 700 33 626 Nedbank 20 795 3 903 296 Boulevard Office Park Western Cape 776 100 31 816 Amazon Development Centre (SA) 20 130 3 360 723 Rosebank Link Gauteng 708 180 22 277 Santam 22 160 3 140 232 90 Grayston Drive Gauteng 590 000 19 932 Murray & Roberts 19 309 2 070 108 Ballyoaks Gauteng 580 684 24 722 Medscheme Holdings 14 397 2 394 494 Total top 10 office properties 12 354 571 421 781 Total top 10 office tenants 381 402 62 824 918 Balance of portfolio 13 666 948 880 641 Balance of portfolio 921 020 111 824 480 Total portfolio 26 021 519 1 302 422 Total portfolio 1 302 422 174 649 399 % of total office portfolio 47.5% 32.4% % of total office portfolio 28.3% 36.0%
Supplementary information
64 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m² Tenant GLA m² GMR (R)
Macsteel Various 3 782 646 552 641 Macsteel 552 641 26 559 637 Pepkor Isando Gauteng 886 000 107 017 Pepkor 165 099 10 122 709 Robor Gauteng 761 250 120 277 Robor 120 277 5 187 259 Hirt & Carter Cornubia KwaZulu-Natal 478 236 30 565 Isuzu Motors (SA) 38 515 1 948 420 Cato Ridge DC KwaZulu-Natal 356 000 50 317 Kintetsu World Express (SA) 35 358 1 966 823 Wingfield Park Gauteng 334 830 56 486 Massmart 32 355 2 022 644 GM - COEGA Eastern Cape 254 800 38 515 Hirt & Carter (SA) 30 565 2 826 308 34 Wrench Road Gauteng 206 700 24 452 Shoprite 30 148 1 600 221 Mifa Industrial Park Gauteng 200 455 34 729 Coricraft Group 24 253 1 030 473 Ushukela Industrial Park KwaZulu-Natal 192 900 27 226 Ciba Packaging 23 803 1 854 184 Total top industrial properties 7 453 817 1 042 226 Total top 10 industrial tenants 1 053 014 55 118 678 Balance of portfolio 6 269 031 791 147 Balance of portfolio 780 358 43 566 562 Total portfolio 13 722 848 1 833 372 Total portfolio 1 833 372 98 685 240 % of total industrial portfolio 54.4% 56.8% % of total industrial portfolio 57.4% 55.9%
Supplementary information
65 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m²
Park Central Gauteng 428 131
Gauteng 344 700 12 817 Loftus Park Hotel (25% share) Gauteng 42 108
Gauteng 38 500 14 153 Total portfolio 853 439 26 970 % of total specialised portfolio 100.0% 100.0%
Supplementary information
66 Redefine group interim results for the six months ended 28 February 2019
Property Region Value (R'000) GLA m² Beds
Hatfield Square Gauteng 856 300 2 815 2 331 Midrand Varsity Lodge Gauteng 587 100
Saratoga Village Gauteng 254 573
Roscommon House Western Cape 240 840
West City Gauteng 142 690
Lincoln House Free State 113 180
Yale Village Gauteng 105 085
Urban Nest Gauteng 62 510
Paton House* KwaZulu-Natal 12 046
Gauteng 58 950
55 Empire Road* Gauteng 33 254
2 466 528 2 815 8 378 % of total student accommodation 100.0% 100.0% 100.0%
Supplementary information
As at 28 February, the student accommodation portfolio had an average occupancy of 79.0% (FY18: 91.7%) *Held for future development
67 Redefine group interim results for the six months ended 28 February 2019
** Held-for-trading properties
*** 25% of the Loftus Hotel (classified as PPE)was disposed after development before operations commenced
Property Province Date
GLA (m²) Proceeds (R'000) Yield (%) Office 9 617 75 000 9.0% Allhart Office Park Gauteng 07-Dec-18 4 668 30 000 7.9% The Ambridge Gauteng 28-Feb-19 4 949 45 000 9.8% Retail 57 331 315 039 10.0% China Town Ottery Western Cape 23-Oct-18 8 227 85 706 9.3% Jewel City Gauteng 14-Nov-18 42 531 178 000 10.1% Standerton Centre Mpumalanga 10-Dec-18 6 573 51 333 10.8% Specialised Loftus Hotel (25%) *** Gauteng 30-Nov-18
89 594 R300 - Stikland (Industrial)** Western Cape 23-Oct-18
Western Cape 03-Jan-19
KwaZulu-Natal 08-Jan-19
1 132
21 671
66 948 547 895 9.8%
Supplementary information
68 Redefine group interim results for the six months ended 28 February 2019
*Acquisition yield not applicable because the property is vacant and will be developed into student accommodation
Property Region Date of transfer Purchase price (R'000) Acquisition yield % Industrial 130 000 9.7% Torre Modderfontein Gauteng 16-Nov-18 80 000 9.9% JD Rosslyn (50%) Gauteng 05-Feb-19 50 000 9.5% Student accommodation 55 Empire Road* Gauteng 06-Dec-18 33 000
163 000
Supplementary information
69 Redefine group interim results for the six months ended 28 February 2019
* Land sales do not have GLA or yields
Property Region GLA m² Proceeds (R'000) yield % Office 55 406 383 425 6.1% 26 - 28 Christian Avenue Western Cape 13 727 75 844 9.2% Fedsure Forum Gauteng 28 721 207 581 0.8% BDO House KwaZulu-Natal 2 214 18 750 11.5% Delmat House KwaZulu-Natal 4 187 31 000 17.0% Kent House KwaZulu-Natal 2 774 20 500 16.9% Odyssey Place KwaZulu-Natal 2 100 16 750 13.4% Sevenfold KwaZulu-Natal 670 4 750 13.6% The Ridge KwaZulu-Natal 1 013 8 250 11.9% Kyalami Ridge land* Gauteng
UK
455 408
Supplementary information
70 Redefine group interim results for the six months ended 28 February 2019
GLA (m²) Development cost (R'000) Initial yield (%) Completion date Retail 9 262 117 306 11.0% Centurion Lifestyle Walk - Decathlon and Stodels 6 162 85 624 10.8% Dec-18 Park Meadows - Builders Express 3 100 31 682 11.4% Sep-18 Industrial 23 442 208 707 8.7% Brackengate Planet Fitness (50.1% share) 6 289 32 406 10.0% Nov-18 Hirt & Carter 17 153 176 301 8.5% Feb-19 Office 33 752 1 339 004 8.3% Rosebank Link 20 164 863 485 8.5% Oct-18 2 Pybus 13 588 475 519 8.0% Dec-18 Grand total 66 456 1 665 017 8.6%
Supplementary information
71 Redefine group interim results for the six months ended 28 February 2019
Supplementary information
GLA (m²) Projected development cost (R'000) Initial yield (%) Expected completion date Still to spend (R’000) Retail Leroy Merlin - Little Falls 19 575 298 223 8.3% Mar-19 28 662 Industrial 26 675 173 089 9.4% 163 639 Brackengate Brights (50.1% share) 8 107 51 686 9.3% Oct-19 43 655 S&J - Spec Jupiter (90% share) 18 568 121 403 9.4% Sep-19 119 984 Specialised Park Central 14 949 472 412 9.2% Jun-19 80 388 Grand total 61 199 943 725 8.9% 272 689 Number of beds Projected development cost (R'000) Initial yield (%) Expected completion date Still to spend (R’000) Student accommodation Roscommon House 582 231 682 10.0% Apr-19 11 281 Grand total 1 175 407 9.2% 283 970
72 Redefine group interim results for the six months ended 28 February 2019
Number of beds Projected development cost (R'000) Initial yield (%) Project start date Student accommodation Paton House 538 108 080 10.6% Oct-19 Grand total 108 080 10.6%
Supplementary information
Projected development cost (R'000) Initial yield (%) Completion date Still to spend (R’000) Retail Centurion Mall Phase 3 and 4 543 833 5.8% Jul-19 223 691 Office 155 West 247 225 6.4% Sep-19 93 402 Grand total 791 058 6.0% 317 093
73 Redefine group interim results for the six months ended 28 February 2019
Projected development cost (R'000) Initial yield (%) Project start date Retail Centurion Lifestyle Centre 68 146 3.0% Aug-19
Supplementary information
Number of beds Projected development cost (R'000) Initial yield (%) Project start date Student accommodation Yale Village (Phase 2) 196 53 910 8.9% Jul-19 Grand total 122 055 5.6%
74 Redefine group interim results for the six months ended 28 February 2019
Infrastructure projects completed
Total development cost (R'000) Completion date Industrial S & J Infrastructure Jupiter (90% share) 30 082 Nov-18 Retail Matlosana access road 57 563 Dec-18 Grand total 87 645
Supplementary information
Infrastructure projects in progress
Projected development cost (R'000) Expected completion date Still to spend (R'000) Industrial S & J Infrastructure Phase 1 (90% share) 133 605 Jul-19 65 196 S & J Infrastructure Phase 2 (90% share) 19 872 Apr-19 5 472 Atlantic Hills Phase 1 and 2 (55% share) 118 703 Sep-19 20 529 Grand total 272 180 91 197
75 Redefine group interim results for the six months ended 28 February 2019
Local partner representation and aligned with Redefine’s interests Provide opportunities for scale Liquid real estate market Free flow of currency Sophisticated tax regimes and rules of law Limited to Poland, United Kingdom and Australia Provide ongoing strategic and financial support to our partners in-country Invest directly where there is potential for capital, uplift through active asset management Support-listed investments in corporate activities Actively hedge income as and when the rand shows weakness Hedge balance sheet naturally through matching currency gearing Responsibly manage geographic concentration risk Investment criteria Our focus
Supplementary information
76 Redefine group interim results for the six months ended 28 February 2019
Redefine’s interests
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RDI REIT PLC 29.4% Platform profile
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46% exposure to retail, 21% to offices, 23% to hotels and 10% to industrial assets Carrying value
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R3.4 billion See through value of assets
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R8.9 billion See through LTV
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89.9% Redefine activity in first half of 2019
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The re-election of the deputy CEO and property director to the board of RDI was not supported as four executive directors are deemed to be excessive relative to the size of RDI and also creates an imbalance between independent and non-independent directors
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Discussions with Cromwell were held to progress offer to the board of RDI Redefine’s strategy
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RDI’s management (in the main) and Redefine’s view on the strategic direction of RDI has become polarised
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Alternatives to stem ongoing destruction of value to be explored
Supplementary information
77 Redefine group interim results for the six months ended 28 February 2019
Redefine’s interests
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Cromwell 2.7%
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Journal 90% Platform profile
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36% exposure to offices, 2% to industrial assets and 62% to student accommodation Carrying value
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R2.4 billion See through value of assets
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R2.3 billion See through LTV
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45.4% Redefine activity in first half of 2019
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Provided financial support Redefine’s strategy
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Establish Leicester street as the premier student accommodation facility in Melbourne
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Swanston street development to be completed by mid-2020 in time for the second semester
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Excellent prospects for capital uplift on student accommodation and perhaps capital recycling if scale in this market segment is not possible
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Cromwell to be sold once credit support to Journal is no longer required
Supplementary information
78 Redefine group interim results for the six months ended 28 February 2019
Redefine’s interests
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EPP 44.4%
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European Logistics 95%
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Chariot Top Group 25% Platform profile
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73% exposure to retail, 10% to office and 17% logistics assets Carrying value
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R12.6 billion See through value of assets
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R23 billion See through LTV
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95.7% Redefine activity in first half of 2019
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In addition to the two logistics development projects (Strykow and Bielsko) that are in progress, another two developments underway
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In Warsaw, the development project will be undertaken over two phases. The initial phase, costing EUR31 million with a GLA of 48 774 m2, will provide premises principally to Rohlig Suus, a well-established Polish logistics and supply chain services company
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The presence in Warsaw adds significantly to the investment appeal of the overall logistic platform
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In Lublin, located in the east of Poland, the development project will also be undertaken over two phases. The initial phase, costing EUR36 million with a GLA of 45 123 m2, will provide premises principally to Varroc Lighting Systems, a global automotive supplier of exterior vehicle lighting. Phase 1 is anticipated to generate a return on equity of 12.9%
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The presence in Lublin expands the reach of the overall logistic platform
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During January, Redefine acquired a further 44.3 million EPP shares from Pimco / Oaktree for a consideration of EUR64.9 million as part
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During May, Redefine will acquire a further 44.3 million EPP shares from Pimco / Oaktree for a consideration of EUR64.9 million as part of the Chariot Put arrangement
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Post EPP’s capital raise, Redefine’s shareholding in EPP will stand at 45.4% Redefine’s strategy
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Support EPP to become a pure retail play
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Grow logistics platform through development pipeline
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To assist in funding the expansion of the logistics platform we will look to introduce another investor
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Establish the office in Europe into a functional unit
Supplementary information
79 Redefine group interim results for the six months ended 28 February 2019
Completed during the year
Country GLA (m²) Development cost Initial yield (%) Industrial Stykow Poland 77 673 EUR36m 6.3%
Supplementary information
Country Number of beds Development cost Initial yield (%) Student accommodation Leicester Street Australia 804 AUD130m 9.5%
In progress
Country GLA (m²) Development cost Initial yield (%) Completion date Still to spend Industrial Strykow (extension) Poland 22 314 EUR15m 6.3% Nov-19 EUR15m Bielsko (Phase 1) Poland 27 483 EUR17m 6.1% May-19 EUR13m Lublin (Phase 1) Poland 45 123 EUR36m 7.6% June-19 EUR34m Warsaw Airport (Phase 1) Poland 48 744 EUR31m 6.7% June-20 EUR31m 143 664 EUR99m 6.8% EUR93m Country Number of beds Development cost Initial yield (%) Completion date Still to spend Student accommodation Swanston Street Australia 587 AUD110m 9.2% Jun-20 AUD79m