INTERIM RESULTS PRESENTATION for the six months ended 30 November - - PowerPoint PPT Presentation

1

INTERIM RESULTS PRESENTATION

for the six months ended 30 November 2014

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. Portfolio Growth 11. Corporate Social Responsibility

• 12. Shoprite Brits

13. Shoprite Ennerdale 14. Shoprite Modimolle (Nylstroom) 15. Sunclare

• 16. Cape Quarter Residential Initiative

17. Shareholders

• 18. Prospects

PRESENTATION OUTLINE

1

• Interim distribution of 42 cents per share
• Headline earnings up 73% to R61 million
• Distributable earnings up 59% to R63 million
• Annualised historical total return of 19%
• Portfolio expanded to 32 properties
• Portfolio value increased to R2.2 billion
• Market capitalisation increased to R1.35 billion

FINANCIAL HIGHLIGHTS

2

• Expense ratio reduced to 13.7% (net of recoveries)
• Lighting retrofit completed at Cape Quarter and rolled out to

De Ville Shopping Centre

• Solar project, at a 17% IRR, completed at Cape Quarter
• Cape Quarter residential bulk to be developed in the short term
• Greening programme showing returns

OPERATIONAL HIGHLIGHTS

3

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.

4

Property portfolio value: R2.2bn Rentable area (GLA): 139 000m2 Occupancy rate (GLA) (31 Jan 2015): 90% Existing portfolio escalations: 8.4% Average gross rental: R129/m2 Gearing (LTV): 34%

TOWER AT A GLANCE

Retail Offjce Industrial

Projected sectoral profjle by value (Apr 2015) Projected geographic profjle by value (Apr 2015)

49% 6% 45% Gauteng Western Cape KwaZulu-Natal 66% 33% 1% Retail Offjce Industrial

Sectoral profjle by value (Nov 2014) Geographic profjle by value (Nov 2014)

Gauteng Western Cape KwaZulu-Natal 50% 5% 45% 1% 60% 39%

5

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
• Spire highly regarded as a niche, hands on property manager by

listed and private clients

6

Keith Craddock

Executive Director Financial, administration, property management

Marc Edwards

Chief Executive Officer Strategy, acquisitions, debt and capital raising

Joanne Mabin*

Chief Financial Officer Financial controls and management *Joanne Mabin replaced Fred Jenkings as CFO from 1 January 2015

MANAGEMENT TEAM

Bruce Kerswill

Executive Director Strategy, Marketing and Greening

Johan Malherbe

Asset Manager Western Cape

Bruce Rogerson

Asset Manager Gauteng and KwaZulu-Natal

7

Condensed consolidated statement of comprehensive income

FINANCIAL RESULTS

Unaudited as at 30 November 2014 R’000 Revenue 117 896 Net property operating expenses (14 167) Net property rental and related income 103 729 Administration expenses (7 236) Net operating profit 96 493 Fair value adjustments 36 577 Profit from operations 133 070 Net finance costs (34 052) Capital raising expenses (80) Profit before taxation 98 938 Taxation

• Total comprehensive income for the period

98 383 Basic and diluted earnings per share - weighted 69.0 average shares in issue (cents) Basic and diluted headline earnings per share - 42.7 weighted average shares in issue (cents)

8

Condensed consolidated statement of financial position

FINANCIAL RESULTS (continued)

Assets Non-current assets 2 216 781 Current assets 103 424 Total assets 2 320 205 Equity and liabilities Equity 1 456 475 Stated capital 1 367 905 Retained income 88 570 Liabilities Non-current liabilities Secured financial liabilities 811 314 Current liabilities 52 416 Total equity and liabilities 2 320 205

9

• Targeted loan to value - 40%
• Current LTV - 34%
• Total borrowings - R811m
• Fixed debt - 74%
• Weighted average rate - 8.3%
• Investec debt to be refinanced through Standard Bank.

Saving of 87 basis points translates to approximate savings

• f R4.1m per annum (excluding opportunity cost)
• LTV to increase to 40.9% prior to dropping below the 40% mark

due to the acquisition of Sun Clare.

BORROWINGS

Debt providers (Feb 2015)

R12m R799m

Standard Bank Nedbank

Debt providers (Nov 2014)

R12m R474m R325m

Standard Bank Investec Nedbank

10

Tower Loan Facilities

BORROWINGS (continued)

Name of Bank Start Date End Date Months Loan Amount Access Facility Interest Rate Investec Bank 22-Jul-13 22-Jul-16 36 347 921 600 Not Applicable 7.79% Investec Bank 15-Aug-13 15-Aug-16 36 126 068 750 Not Applicable 9.91% Standard Bank 27-Aug-13 31-Aug-16 36 200 000 000 40 000 000 8.61% Standard Bank 17-Apr-14 17-Apr-17 36 157 300 000 31 460 000 7.58% Nedbank 6-Dec-13 6-Dec-18 60 11 900 000 500 000 min 8.30% Tower Swap Facilities Name of Bank Start Date End Date Months Swap Amount Interest Rate Investec Bank 19-Jul-13 19-Jul-15 24 344 000 000 7.79% Investec Bank 3-Apr-14 3-Apr-17 36 126 000 000 9.91% Standard Bank 8-Apr-14 8-Apr-17 36 130 000 000 9.08%

11

OPERATIONAL PERFORMANCE

• Vacancies increased to 10% (Jan 2015)
• Positive letting in Constantia View,

De Ville Shopping Centre, Cape Quarter and 31 Beacon Road

• Refurbishment of 31 Beacon Road has

resulted in a fully let property

• Refurbishment of 382 Jan Smuts under way

Lease Expiry by Gross Rental (30 Nov 14)

M

• n

t h l y N

• v

1 4 < 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

0% 10% 23% 17% 14% 2% 6% 28%

Lease Expiry By GLA (30 Nov 2014)

V a c a n t M

• n

t h l y N

• v

1 4 < 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

11,7% 3,8% 9,5% 17,8% 17,2% 11,4% 6,7% 8,7%

> M a y 2

13,2%

12

OPERATIONAL PERFORMANCE (continued)

• Over 6 000m2 of space let
• 1 940m2 of new space let
• 4 430m2 of renewable space let
• Active letting strategies should further reduce vacancies

in the short term

• Vacancies post new acquisitions of 7.6%

13

PORTFOLIO GROWTH

Property deals concluded during and post interim period

Property Sector Purchase price Location Medscheme Office R110m Florida North Section 3, Constantia View Office R12m Quellerina *Sunclare Office R192m Claremont *Brits Shoprite Retail R85m Brits *Ennerdale Shoprite Retail R71m Ennerdale *Nylstroom Shoprite Retail R82m Modemolle

*4 Properties purchased / announced post Nov 2014

14

• Funding a bursary in the BSc Property Studies Degree at UCT
• Funding a book prize at UCT for the property

studies course

• Partnering with UCT in a community based

initiative aimed at assisting in the creation of educational facilities from creche-going age. Looking to raise R8.5m for the project which will cover full costs of the school. Government then contributes R18 per child per day

CORPORATE SOCIAL RESPONSIBILITY

15

• The Centre is located on the fringe of the CBD close to

densely populated residential areas

• Shoprite trades extremely well and the centre attracts

the medium to lower LSM groups

• Close to taxi ranks and public transport
• Nationals occupy 77% of the Centre

SHOPRITE BRITS

16

• Nationals occupy 92% of the Centre
• KFC drive-thru and Cashbuild recently completed
• Scope for upward reversions as rentals are low
• Ample bulk for future expansion

SHOPRITE ENNERDALE

17

• Relatively new centre located on the main arterial route

at the entrance to Modimolle

• Attractive tenant mix with 78% occupied by national tenants
• Cashbuild, OK Furnishers, Pep, Spur and Wimpy are some
• f the nationals
• The centre attracts a broad spectrum of consumers

SHOPRITE MODIMOLLE (NYLSTROOM)

18

• Desirable location close to public transport
• 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

SUNCLARE

19

• Utilising current bulk on the Piazza
• Opportunity to build 50-80 residential apartments
• Developed out of subsidiary company with assessed loss
• Material profits will support and enhance earnings in the

medium term

• Completion 2nd quarter 2017

CAPE QUARTER RESIDENTIAL INITIATIVE

20

Major fund managers

Rank Fund manager % holding 1 STANLIB Asset Management 20,10 2 Allan Gray Asset Management 18,03 3 Coronation Fund Managers 16,24 4 Grindrod Asset Management 8,00 5 Prescient Investment Management 5,48 6 Personal Trust International 3,23 7 3 PM Investments 2,37 8 Sanlam Investment Management 2,05 9 Plexus Wealth 1,31 10 Ampersand Asset Management 0,93 77,74

SHAREHOLDERS

21

• Macro economic factors to further impact trading environment
• Cape Quarter residential development to support

and enhance growth for medium term

• R1bn pipeline under negotiation
• R175m developments in pipeline
• Green programme to continue
• Expect portfolio to grow to R3.5bn by year end
• Committed to achieving forecast distribution of 86.6c per share for

the May 2015 year end

PROSPECTS

22

Thank you, any questions?