ANNUAL RESULTS PRESENTATION for the year ended 31 May 2015 1 - - PowerPoint PPT Presentation

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ANNUAL RESULTS PRESENTATION

for the year ended 31 May 2015

1. Financial Highlights 2. Operational Highlights 3. Tower Strategy 4. Tower At A Glance 5. Tower Asset Managers 6. Management Team 7. Financial Results 8. Borrowings 9. Operational Performance

• 10. Croatia Calling
• 11. Rationale and Opportunties
• 12. Building Information
• 13. VMD Grupa
• 14. Top 10 Properties by Value
• 15. Greening
• 16. Corporate Social Responsibility
• 17. Recent Major Acquisitions
• 18. Success Stories
• 19. Shareholders
• 20. Prospects

PRESENTATION OUTLINE

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• Total distribution of 86.8 cents per share exceeds
• Headline earnings of R125 million
• Distributable earnings of R137 million
• Portfolio expanded to 48 properties (July 2015)
• Portfolio value increased by 88% to R3.8 billion

(July 2015)

• Market capitalisation increased by 50% to

R2.4 billion (July 2015)

FINANCIAL HIGHLIGHTS

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• Vacancies reduced by 60%

(from Nov 2015) to 4%

• 15% expense ratio net of recoveries
• Greening projects returning greater than anticipated

results

• Fixed debt at 70% (July 2015)
• Large, well located properties to the value of R1.7bn

purchased

OPERATIONAL HIGHLIGHTS

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TOWER STRATEGY

Tower aims to generate competitive investment performance by adding value through property asset management and the cost effective greening of its property portfolio resulting in lower operational expenditure and increased tenant retention. Tower aims to expand its portfolio through management’s network of contacts throughout South Africa and abroad.

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Property portfolio value: R3.8bn* Rentable area (GLA): 285 000m2* Occupancy rate (GLA): 96%* Existing portfolio escalations: 7.8% Average gross rental: R107/m2 Gearing (LTV): 36%

TOWER AT A GLANCE

Retail Offjce Industrial

Sectoral profjle by revenue (May 2015) Geographic profjle by revenue (May 2015) 48.67% 42.20%

KZN Gauteng Western Cape

12.73% 54.98% 32.29% 9.13%

500000 000 1000000 000 1500000 000 2000000 000 2500000 000 3000000 000 3500000 000 4000000 000 4500000 000

TOWER ASSET GROWTH

Q3 2013 Q4 2013 Q1 2014Q 2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

* As at 31 July 2015

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TOWER ASSET MANAGERS

• Experienced team: TAM comprises Spire and ex

Mettle executives

• Successful track record of managing and assembling

Paramount Property Fund.

• Good mix of property and financial skills
• Demonstrated ability to add value and improve

underperforming properties

• Spire contracted to undertake national property

management

• Management to be internalised in the short term

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Keith Craddock

Executive Director Financial, administration, property management

Marc Edwards

Chief Executive Officer Strategy, acquisitions, debt and capital raising

MANAGEMENT TEAM

Bruce Kerswill

Executive Director Strategy, Marketing and Greening

Johan Malherbe

Asset Manager Western Cape

Bruce Rogerson

Asset Manager Gauteng and KwaZulu-Natal

Joanne Mabin

Chief Financial Officer Financial controls and management

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Reviewed year ended 31 May 2015 Audited year ended 31 May 2014 R’000 R’000 Revenue 247 721 191 270 Net property operating expenses (34 928) (19 785) Net property rental income 212 793 171 485 Administration expenses (14 952 ) (10 273) Other income 2 914 480 Net operating profit 200 755 161 692 Fair value adjustments on investment properties 101 740 (11 740) Fair value adjustments on interest rate derivatives 762 (1 442) Profit from operations 303 257 148 510 Net finance costs (76 683) (50 390) Indirect capital raising expenses (206) (11 487) Profit before taxation 226 368 86 633 Taxation

• Total comprehensive income for the period

226 368 86 633 Basic and diluted earnings per share - weighted average shares in issue (cents) 149,9 82,0 Basic and diluted headline earnings per share - weighted average shares in issue (cents) 82,6 93,1

Condensed consolidated statement of profit and loss and comprehensive income

FINANCIAL RESULTS

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Condensed consolidated statement of financial position

FINANCIAL RESULTS (continued)

Reviewed year ended 31 May 2015 Audited year ended 31 May 2014 (Restated) R’000 R’000 Assets Non-current assets 3 140 990 2 060 847 Current assets 98 795 75 053 Total assets 3 239 785 2 135 900 Equity and liabilities Equity Stated capital 1 518 389 1 251 034 Retained income 146 650 46 713 1 665 039 1 297 747 Liabilities Non-current liabilities 857 341 769 518 Current liabilities 717 405 68 635 Total equity and liabilities 3 239 785 2 135 900

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• Targeted loan to value - 40%
• Current LTV - 36%
• Total borrowings - R1.1bn
• Fixed debt - 60% (July 2015 - 70%)
• Weighted average rate - 7.73%

BORROWINGS

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OPERATIONAL PERFORMANCE

• Vacancies reduced by 60% to 4%
• Active management resulting in expense

reduction through contractor management and green initiatives

• Green initiatives are reducing operating costs

and “future proofing” properties at an accretive yield

• Mini refurbishment at Cape Quarter with

Deloitte expanding

• Average property size R100m

5000 10000 15000 20000 25000 30000

V a c a n t M

• n

t h l y M a y 1 6 M a y 1 7 M a y 1 8 M a y 1 9 M a y 2 M a y 2 1 M a y 2 2

500000 1000000 1500000 2000000 2500000 3000000 3500000

M

• n

t h l y M a y 1 5 M a y 1 6 M a y 1 7 M a y 1 8 M a y 1 9 M a y 2 M a y 2 1

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OPERATIONAL PERFORMANCE (continued)

• Over 19 000m2 of space let
• 9 000m2 of new space let
• 10 000m2 of renewable space let
• Active letting strategies should further reduce

vacancies in the short term

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CROATIA CALLING

Population: 4.3m Capital City: Zagreb (Population 1m) Main Economic driver: Tourism and Exports Currency: Kuna (HRK)

• Included in the Eurozone in July 2013
• Expected to move to the Euro in 2020

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RATIONALE AND OPPORTUNITIES

• Increase Tower’s distributable income
• Tower can be a dominant player in the market

– a “top feeder”

• Property prices are extremely attractive

– presents upside rental growth

• Country has bottomed out after the recession
• Strongest possible partner in VMD

– in country expertise

• Yield accretive acquisitions
• Strong capital growth and rental growth expected
• High quality diversification
• On the ground expertise

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BUILDING INFORMATION

Location: Ulica grada Vukovara 269d/ VIII, 10000 Zagreb Grade: Premium Size: 18 200m2 Floors: 26 Towers Purchase size: 10 650m2 (15 floors) Parking Bays: 280 Green Status: A Grade

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VMD GRUPA

Founded: 1995 Development and Residential and Construction Commercial Employees: 79 Turnover: Euro 58m p.a. Profile: Extremely highly regarded developers in Croatia Only 5% of sales are through advertising

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TOP 10 PROPERTIES BY VALUE

Property Sector Value Location Cape Quarter Square Mixed use R603m Cape Town VMD Kwart Office R320m Zagreb, Croatia Link Hills Shopping Centre Retail R228m Waterfall, KZN De Ville Shopping Centre Retail/Office R220m Durbanville Sunclare Office R192m Claremont Upper Grayston Office R175m Sandton 6 - 8 Sturdee Avenue Office R153m Rosebank Cape Quarter Piazza Retail/Office R133m Cape Town Medscheme Office R120m Florida North Evagold Shopping Centre Retail R110m Evaton, Gauteng

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• Lighting retrofits completed at Cape Quarter and

De Ville resulting in an anticipated 69% KWH and carbon emission reduction

• Solar PV rolled out to five additional properties
• Well advanced in rolling out other initiatives including lighting

and water. Yields of 12% - 25%

• Cape Quarter being reviewed by the Green Building Council for

their Existing Building Performance Tool

GREENING

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• Tower will be funding a bursary in the BSc Property Studies

Degree at UCT

• Tower funded a book prize at UCT for the property

studies course

• Tower along with Tower Asset Managers are making a

monthly CSR donation to the Ubuntu Trust.

• The Ubuntu Football Academy offers intensive coaching,

quality education and holistic mentorship to exceptional young players over a sustained period of 6 years (13-18 years).

CORPORATE SOCIAL RESPONSIBILITY

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RECENT MAJOR ACQUISITIONS

Title Sector Purchase price Location

Sunclare Office R192m Claremont, CPT Evagold Centre South Retail R111m Evaton, JHB 15 Wellington Rd Office & Retail R81m Parktown, JHB HBW Portfolio Industrial R375m Gauteng & KZN TOTAL R760m

45 000 40 000 35 000 25 000 20 000 15 000 10 000 5 000

New Acquisitjons Expiry Profjle

2 1 5 2 1 6 2 1 7 2 1 8 2 1 9 2 2 2 2 1 2 2 2 2 2 3 2 2 4

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SUNCLARE

• Desirable location close to public transport
• Acquisition yield – 9%
• Close to retail amenities including Cavendish Square
• Strong demand for office space in the area
• Claremont vacancies below 1%
• Flexible use of space with natural light through atria

and balconies

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EVAGOLD SHOPPING CENTRE, EVATON

• Evagold Shopping Centre commenced trading approximately

16 months ago

• Acquisition yield – 9.5%
• Convenience centre that caters for the mass [lower LSM]

market in the immediate neighbourhood

• The 12 500sqm centre is fully let and is anchored by Cambridge

Foods, Build Rite, OBC Chicken and McDonald’s

• A BP garage will be built at the entrance to the centre once it is

granted its licence and should commence construction Q4 2015

• The centre is located on the Golden Highway (R553) in Evaton

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MEADOWBROOK DISTRIBUTION CENTRE, EDENVALE, JHB

• The 15 630sqm distribution centre is to be let out to a national

brand on a 7 year lease

• The seller has provided a 24 month head lease over the property
• We are currently in advanced negotiations with a number of

national tenants

• The property will be handed over following a full refurbishment

which was triggered after the previous tenant vacated

• The property is prominently located at the Meadowbrook inter

change on the N12 highway, immediately east of the Gillooly’s interchange

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PICK ‘N PAY DISTRIBUTION CENTRE, PINETOWN

• The 12 000sqm distribution centre is located in the Mahogany

Ridge industrial node

• Pick ‘n Pay occupies the centre on a triple net lease basis

expiring in 2020

• The property has been well maintained by the tenant and is in

impeccable condition

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LINK HILLS SHOPPING CENTRE, WATERFALL, KZN

• GLA of 13 230sqm anchored by a Pick ‘n Pay corporate store

expiring in 2023

• Located in Waterfall which is an exciting growth node in KZN,

approximately 30km’s North West of Durban

• 70% national tenant profile

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Cape Quarter

• Fully let (structural vacancy for Deloitte)
• Anchor tenants including Deloitte and JWT expanding
• Award-winning Spar
• Residential development triggered at 12% yield
• Solar and lighting retrofits returning greater than

expected results

SUCCESS STORIES

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382 Jan Smuts - Craighall Park

• Property refurbished for main tenant - London listed MDM
• Solar and lighting retrofits expected to reduce power demands

substantially

• Long term lease signed with tenant as a result of upgrades

SUCCESS STORIES (continued)

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Upper Grayston Blocks E and F - Sandton

• Fully let
• Block E rated 5 star with the Green Building Council
• Block F rated 6 star with the Green Building Council
• One of the smaller properties in South Africa to attract

such a prestigious rating

SUCCESS STORIES (continued)

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SHAREHOLDERS

Major fund managers

Rank Fund manager % holding 1 Coronation Fund Managers 20,29 2 STANLIB Asset Management 17,79 3 Allan Gray Asset Management 16,25 4 Grindrod Asset Management 10,10 5 Prescient Investment Management 5,20 6 Personal Trust International 2,75 7 Plexus Wealth 2,39 8 Sanlam Investment Management 1,95 9 3 PM Investments 1,86 10 Ampersand Asset Management 0,96 79,53

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• Macro economic factors contributing to volatile property market
• R1.5bn local pipeline
• R1.5bn off shore pipeline
• Stronger cash flows being acquired
• R500m capital raised being deployed on new acquisitions and yield

enhancing green projects

• Development pipeline of R400m of high quality property in well

located and popular nodes

PROSPECTS

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Thank you, any questions?