PRE-CLOSE BUSINESS UPDATE FOR THE PERIOD ENDING 29 FEBRUARY 2020 - - PowerPoint PPT Presentation

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Feb 05, 2023 281 likes •436 views

PRE-CLOSE BUSINESS UPDATE FOR THE PERIOD ENDING 29 FEBRUARY 2020 AGENDA 01 02 03 S T R A T E G Y TRADING BUSINESS E N V I R O N M E N T U P D A T E S U S T A I N A B L E S T A B L E C O N S I S T E N T R E S O U R C E F U L D I V E R

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PRE-CLOSE BUSINESS UPDATE

FOR THE PERIOD ENDING 29 FEBRUARY 2020

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AGENDA

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S T R A T E G Y

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U P D A T E

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E N V I R O N M E N T TRADING BUSINESS

C O N S I S T E N T D I S C I P L I N E D S T A B L E D I V E R S I F I E D S U S T A I N A B L E R E S O U R C E F U L

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C O N S I S T E N T

S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E

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SA focused ▪ Geographically diversified ▪ Economically active locations ▪ Sectorally diversified Diversified ▪ Predominantly retail (convenience, rural & township) ▪ Increase industrial exposure ▪ Selective office ▪ Affordable residential rental Portfolio

ptimisation

▪ Non-core disposals ▪ Capital recycling ▪ Acquisitions, developments, redevelopments and conversions Tenant centric ▪ Credit quality ▪ Manage concentration risk ▪ Enhance tenant experience Human capital ▪ Value our people ▪ Talent attraction and retention ▪ Teamwork above all ▪ Resourcefulness Sustainability ▪ Compliance ▪ Efficiency ▪ CSI & BEE ▪ Social, economic & environmental

STRATEGY

SHAREHOLDER VALUE CREATION

Managing brilliantly Remaining disciplined Buying well

OUR VALUE PROPOSITION

▪ A diversified REIT that is growing, improving and de-risking its portfolio through employing a range of value-add strategies including leasing, conversions, extensions, redevelopments, partnerships and development. ▪ We are focused on our chosen property market segments and continuously reposition our portfolio in-line with changing market dynamics.

OUR TOOLS

Research and analysis Good capital allocation Balance sheet manage- ment Focus A competent core team

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STRATEGIC CAPITAL ALLOCATION TO DE-RISK PORTFOLIO

▪ Allocation of capital into areas of core competency ▪ Build capacity for operational excellence ▪ Tactically going underweight offices ▪ Increasing retail and industrial exposure ▪ Chosen retail segment defensive and resilient through different cycles ▪ Industrial assets that are relevant to market needs ▪ Entering affordable residential rental market ▪ Residential portfolio to be capped at 20% ▪ Shift towards well-located residential in response to demand driven by a changing SA culture, low savings, falling disposable income, upfront acquisition cost and urbanisation ▪ Strategic value-add revamps and expansions mainly funded through recycled capital ▪ Portfolio significantly de-risked in terms of:

Tenant quality
Quality of assets
Quality management
Portfolio & asset size

AT LISTING CURRENT FUTURE

54% 29% 17% 66% 20% 14% 60% 10% 20% 10%

Retail Office Industrial Residential Reduce cost of capital

By income By income By income

Build strong human capital capacity Continuous portfolio improvement

STRATEGIC GROWTH DRIVERS

SA economic rebound Sensible corporate action and strategic tie-ups

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S T A B L E

S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E

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TRADING ENVIRONMENT

▪ Slow economic growth ▪ Increased security costs due to a continuous increase in crime ▪ Load shedding resulting in:

increase in operating costs (back-up power, unbudgeted expenditure due to power surge related damages)
pressure on tenant turnovers

▪ Tenant profit margins under pressure ▪ Business failures ▪ Dysfunctional municipalities

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D I V E R S I F I E D

S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E

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BUSINESS UPDATE (31 January 2020)

▪ Gearing 41.3% ▪ Refinanced facilities R663 million for 3 years ▪ R109 million to be refinanced by year-end ▪ 79% Interest rate exposure hedged ▪ Dividend policy remains the same ▪ Interim dividends expected to be in-line with guidance Balance sheet & trading update Sales, capex and acquisitions Operations Leasing ▪ 4 properties sold for R49 million ▪ 2 properties sold for R25.6 million awaiting transfer ▪ A total of R24 million capex spent (defensive & accretive) ▪ Cosmo City resi expected to transfer by end of Q1 2020 ▪ Stable team and solid operating platform ▪ Additional debtors' administrators ▪ Focus on efficient operations ▪ Reducing vacancies ▪ Solar performing ahead of expectation ▪ Risk (tenant business failures) ▪ New leases concluded 21 242m² ▪ Vacating tenants 16 855m² ▪ Replaced 7 732m² ▪ Total renewals 50 148m² ▪ Current vacancy 5%

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RETAIL (1 September 2019 - 31 January 2020)

▪ 19 556m² let ▪ Average lease period 3 years ▪ Gross rental R91/m² ▪ Escalation 7.8% New Leases Renewals Trends Vacancy ▪ 19 314m² renewed ▪ Average lease period 2.7 years ▪ Gross rental R144/m² ▪ Escalation 8% ▪ Reversion rate 2% ▪ Belle Ombre refurb commenced ▪ Standalone banking branches a challenge ▪ Decay of CBD’s of Vanderbijlpark, Vereeniging, Krugersdorp and Klerksdorp ▪ Exclusivity clauses reducing turnaround options ▪ Disappearance of high-end furniture retailers on the back

f reduced spending

▪ Isolated instances where Edcon has not been replaced ▪ Current 6.4% ▪ 2019 year-end 8.4%

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OFFICE (1 September 2019 - 31 January 2020)

▪ 1 182m² let ▪ Average lease period 2.4 years ▪ Gross rental R154/m² ▪ Escalation 9% New Leases Renewals Trends Vacancy ▪ 10 953m² renewed ▪ Average lease period 2.6 years ▪ Gross rental R150/m² ▪ Escalation 7% ▪ SAPS leases renewed ▪ Reversion rate -9.8% (mainly related to DPW) ▪ Provincial Government impossible to deal with ▪ Market remains extremely competitive ▪ Current 8.4% ▪ 2019 year-end 7.8%

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INDUSTRIAL (1 September 2019 - 31 January 2020)

▪ 504m² let ▪ Average lease period 2.5 years ▪ Gross rental R39/m² ▪ Escalation 9% New Leases Renewals Trends Vacancy ▪ 19 881m² renewed ▪ Average lease period 2.2 years ▪ Gross rental R51/m² ▪ Escalation 7% ▪ Reversion rate -6% ▪ Portfolio vacancies at all time lows ▪ Rentals trending sideways ▪ Current 1.7% ▪ 2019 year-end 2.3%

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THANK YOU