SA Corporate June 2017 Interim Results Presentation August 2017 - - PowerPoint PPT Presentation

SA Corporate June 2017 Interim Results Presentation

August 2017

Agenda

• Highlights

Rory Mackey

• Financial Performance

Antoinette Basson

• South African Portfolio Review

Rory Mackey

• Unlocking Value in the Retail Portfolio

Rory Mackey

• Re-Inventing C&I

Rory Mackey

• Zambian Portfolio Performance

Rory Mackey

• Building the Afhco Business

Rory Mackey

• Storage Genie

Rory Mackey

• Strategy & Prospects

Rory Mackey

• Acknowledgments

Rory Mackey

• Questions

Team

2

HIGHLIGHTS RORY MACKEY

3

High Level Review

• Distribution Themes
• Anticipated weaker H1 vs 2017 FY together with challenging economic conditions
• H1 2017 distribution growth of 4.4% higher than June 2016
• NPI growth of 13.8%; LFL increasing by 4.1%; acquisitions contributed 8.3%
• Industrial portfolio - strong retentions (82.1%); low vacancies (1.6%); LFL NPI growth of

4.0%

• Retail portfolio NPI growth of 19.7%; LFL increasing by 6.0%; strong retentions of 92.0%;

positive reversions of 6.6% and escalations of 7.6%

• Decisive interventions in the Afhco portfolio to address challenges in the Joburg inner-city

residential portfolio to position for future sustainable growth; Afhco LFL NPI growth of 4.2%

• Commercial LFL NPI declined by 0.5%; reduction in exposure decreased vacancies to 6.7%
• Investment Strategy
• Executed acquisitions and pipeline increased to R3.2bn
• Executed & contracted disposals of R746m; R312m in addition to those reported at end

February 17

• Developments in progress outstanding expenditure of R813m in completing retail, industrial

and residential redevelopments

• Capital Structure
• Equity issuance of R600m
• Debt well hedged at 81.0% with expiring swaps renegotiated to improve tenors

4

FINANCIAL PERFORMANCE ANTOINETTE BASSON

5

Distribution History

• 5.00

10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 2012 2013 2014 2015 2016 2017 15.17 16.28 17.68 19.66 21.44 22.38 14.98 16.47 18.02 19.91 21.58 Interim Final 30.15 32.75 35.70 39.57 43.02

6

Distribution Growth

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2012 2013 2014 2015 2016 2017 5.7% 7.3% 8.6% 11.2% 9.1% 4.4% 3.5% 9.9% 9.4% 10.5% 8.4% Interim Final

7

Distribution at a Glance

Jun 2017 Jun 2016 % Rm Rm Variance Net Property Income - Like for Like 439.07 421.59 4.1 Net Property Income - Developments 164.24 124.19 32.2 Net Property Income - Acquisitions 58.45 9.14 539.5 Net Property Income - Buildings sold/held for sale 12.19 37.13 (67.2) Net Property Income 673.95 592.05 13.8 Investment in Joint Venture 30.73 31.77 (3.3) Distribution related income 10.67

• 100.0

Net finance costs (153.25) (109.72) 39.7 Dividends from fixed property companies 0.37

• 100.0

Distribution related expenses (21.45) (23.61) (9.1) Distributable earnings 541.02 490.49 10.3 Distribution per share (cents) 22.38 21.44 4.4

PY lease cancellation set-off against transactional income

8

Investment Properties Growth Analysis

Portfolio growth underpinned by acquisitions, development expenditure and upward revaluation 15,022 15,625 113 371 237 (450) 332 14,400 14,600 14,800 15,000 15,200 15,400 15,600 15,800 16,000 16,200 16,400 Investment Properties December 2016 Acquisitions and improvements through business combination Acquisitions Improvements / development costs Disposals Fair value adjustment Investment Properties June 2017 9

Growth in Assets and Market Capitalisation

100 200 300 400 500 600 0.0 5.0 10.0 15.0 20.0 25.0 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017

Total Assets (Rbn) Market Cap (Rbn) NAV per share (cents) Share Price (cents)

R’bn cents 10

Net Asset Value

499.28 22.38 11.45 0.19 (0.08) (0.74) (21.58) 510.90 300 325 350 375 400 425 450 475 500 525 550

Opening NAV 1 January 2017 Distributable earnings for the period Revaluation of Investment Properties, Shares and Interest Rate Swaps Net exposure to Zambian JV Net repurchase of treasury shares Other Non- distributable income statement items Distributions paid to shareholders Closing NAV 30 June 2017 11

Capital Structure

Sources of Capital

Debt finance sources are diversified between banks and institutional borrowings.

3.3% 3.2% 9.4% 1.1% 3.1%

Absa Nedbank Standard Bank State Bank of India Investec

Equity 70.6% Bank Term Debts 4.8% Institutional and DFI Debts 3.6% Bank Revolvers 0.9% Syndicated Loans 20.1% Equity Bank Term Debts Institutional and DFI Debts Bank Revolvers Syndicated Loans 12

Group Debt Structure – at 30 June 2017 (excl. fixes)

Maturity and interest rate profile of interest-bearing debt WAR of 8.5%, weighted average tenor of 2.2 years, and WAM of 1.7%.

Loan type: 6.88% Amortising 9.17% Term Loan (Syndication) 2.97% Term Loan (US$) 9.10% Term Loan (Syndication) 9.12% Term Loan (Syndication) 8.79% Revolving credit 8.78% Term Loan 8.72% Revolving credit 8.99% Term Loan 8.99% Term Loan 9.04% Term Loan 8.82% Term Loan (Syndication)

1,152 200 270 30

• 500

159 848 950 353 550 121

• 300
• 41
• 200

400 600 800 1,000 1,200 Dec 2017 Aug 2018 Sep 2018 Sep 2018 Nov 2018 Jan 2019 Mar 2019 Dec 2019 Jun 2020 Nov 2020 Dec 2021 Apr 2024

Amount Drawn Available

* - AFD Fixed Rate Debt # - Maturing Q4 2017 # *

13

Group Debt Structure – at 30 June 2017 (incl. fixes)

Maturity and interest rate profile of interest-bearing debt – WAR inclusive of fixes of 8.5%. Current LTV 31.1%

Loan type: 6.88% Amortising 9.15% Term Loan (Syndication) 3.59% Term Loan (US$) 9.08% Term Loan (Syndication) 9.10% Term Loan (Syndication) 8.77% Revolving credit 8.76% Term Loan 8.70% Revolving credit 8.97% Term Loan 8.97% Term Loan 9.02% Term Loan 8.80% Term Loan (Syndication) 1,152 200 270 30

• 500

159 848 950 353 550 121

• 300
• 41
• 200

400 600 800 1,000 1,200 Dec 2017 Aug 2018 Sep 2018 Sep 2018 Nov 2018 Jan 2019 Mar 2019 Dec 2019 Jun 2020 Nov 2020 Dec 2021 Apr 2024

Amount Drawn Available

14

Group Swap Profile – 30 June 2017

Tenor and interest rate swaps profile – weighted average tenor – 3.3 years and rate

• f 6.8% (weighted swap margin -0.025%). 81.0% of variable rate debt hedged by
• swaps. 81.5% of effective debt fixed (incl fixed rate debt)

* Includes $27m swap at 1.79% (based on US LIBOR)

8.45% 7.45% 7.60% 4.72% * 6.35% 7.27% 5.89%

240 705 240 753 650 1,234 240

• 500

1,000 1,500 2017 2018 2019 2020 2021 2022 2023 Swap amount

15

Group Net Cash Flow

191 643 (178) (3) (721) (16) (225) (11) 452 (522) (2) (9) 559 158 (1,000) (500)

• 500

1,000 Balance 31 December 2016 Cash generated from operations Net finance costs Net Acquisition of Property, Plant and Equipment Acquisitions and Improvements to Investment Property Investment in Joint Venture Prepayments/Advances to developers and movements in other financial assets Letting commissions and tenant installations Disposal of investment properties Distributions paid Repurchase/Vesting of treasury shares Interest bearing borrowings - foreign Interest bearing borrowings - local Balance 30 June 2017

Rm 16

Trading Volumes and Liquidity

• 20,000,000

40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 490 500 510 520 530 540 550 560 570 580 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Volume Traded Closing Price ( c )

SAC: closing price v monthly volume traded

FFB EMI GRT RES VKE FFA HYP SAC IPF RDF 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

• 20,000

40,000 60,000 80,000 100,000

Value traded as % of market capital

17

SOUTH AFRICAN PORTFOLIO REVIEW

RORY MACKEY

18

Overview – Sectoral Analysis (excl. Rest of Africa JV)

51% 25% 4% 20% 55% 27% 5% 13% Industrial Retail Commercial AFHCO June 2017 June 2016

Sectoral Profile (% of GLA) Sectoral Profile (% of Market Value)

34% 43% 8% 15% Industrial Retail Commercial AFHCO June 2016

SA Corporate excluding Zambian JV

• 188 Properties
• Total GLA 1,455,239m2
• Total Portfolio R15.6bn

(Dec-16: R15.0bn) Zambian JV

• 3 Properties
• GLA 57,649m2
• Portfolio Value R856.8m

(Dec-16: R860.8m) Traditional standing Portfolio:

• Weighted Average

discount rate 15.0%

• Weighted average

capitalisation rate 9.0%

30% 44% 7% 19% June 2017

• 10,000

20,000 Industrial Retail Commercial AFHCO Average 5,989 15,294 14,890 11,554 9,690 6,231 18,047 15,798 10,559 10,511 6,379 18,699 16,803 9,260 10,260

Market Value per m²

June 2016 December 2016 June 2017

19

Property Portfolio

Acquisitions, Disposals and Developments

2,147 507 2,711 459 287 9.5% 10.4% 10.7% 9.1% 8.1% 8.8% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%

• 500

1,000 1,500 2,000 2,500 3,000 Committed Developments Acquisitions Contracted Acquisitions Disposals Contracted and unconditional disposals Group WACC Cost / Carrying Value (Rm) Selling Price (Rm) Yield forecast 1st 12 months Exit yield on sales price 20

Executed Acquisitions

# Land/Bulk acquired for development ^ Yield in USD Property Sector Forward Yield % Purchase price (R000) Transfer date Steelport Residential, Steelport Residential 10.3 79,781 Jan-17 Friendship Town, Midrand Residential 11.0 72,047 Feb-17 Long Street Precinct Bulk, Jeppestown Residential # 29,658 Feb-17 - Apr-17 Reef Acres, Springs Residential 10.0 43,456 Feb-17 Andrea Close & Dennehof and Bloekomhof, Vereeniging Residential 11.0 40,580 Mar-17 51 Pritchard Street, Johannesburg CBD Retail 10.3 178,026 Mar-17 Erf 286, Erand (storage land) Land # 12,247 Apr-17 Indirect investment in Phase 3A, Zambia Retail 9.0^ 23,152 Apr-17 Cnr of Rockey and Davies Streets, Doornfontein Retail # 5,500 May-17 Erf 8383, Milnerton (retail and storage development land) Land # 22,515 Jun-17 Total 10.4 506,962 21

Contracted Acquisitions

1 Represents 60% ownership

* Listed property investment # Land/Bulk acquired for development

Contracted and unconditional Property Sector Forward Yield % Purchase price (R000) Expected transfer Storage Genie leasehold properties Storage 18.3 65,580 Jul-17 African City Mall Phase 1, Johannesburg CBD Retail 10.3 41,136 Jul-17 Reef Acres - Real right of extension, Springs Residential # 1,280 Jul-17 Safari Investments RSA Ltd - 20 000 000 shares * 152,000 Jul-17 Northgate Heights Phase 1A & 1B, Northgate Residential 10.0 57,476 Jul-17 - Nov-17 M&T Development - Burgundy, Centurion Residential 10.0 75,778 Aug-17 M&T Development - Minuet Phases 1 & 2, Midrand Residential 10.0 48,709 Aug-17 Golf Park, Phillip Nel Park, Pretoria Residential 10.3 98,000 Aug-17 Panama House Phase 1, Johannesburg CBD Residential 10.5 70,211 Aug-17 Panama House Phase 2, Johannesburg CBD Residential 10.5 30,919 Nov-17 African City Mall Phase 2, Johannesburg CBD Retail 11.0 40,564 Oct-17 Calgro Developments Phases 1 - 5 Residential 10.8 811,720 Sept-17 - Oct-18 M&T Development - Etude Phases 1 - 6, Midrand Residential 10.0 252,347 Oct-17 - May-18 Long Street Precinct Bulk (Parcels 5 - 7), Jeppestown Residential # 12,235 Dec-17 Northgate Heights Phases 2 & 3, Northgate Residential 11.0 58,582 Feb-18 - May-18 Total 10.8 1,816,538 Contracted and conditional Property Sector Forward Yield % Purchase price (R000) Expected transfer Storage Genie Freehold properties Storage 11.1 266,701 Dec-17 - Dec-18 Total 11.1 266,701 Acquisitions contracted after 30 Jun 2017: Property Sector Forward Yield % Purchase price (R000) Expected transfer The Oaks, Ermelo Retail 10.6 105,000 Nov-17 Calderwood, Boksburg Residential 10.0 165,000 Mar-18 M&T Development - Founders Hill 1 Residential 10.0 289,759 May-18 - Dec-19 Joburg Rising, Johannesburg CBD Residential 10.0 68,413 Jan-19 Total 10.1 628,172

22

Disposals

1 Sale of 50% undivided share; Exit yield calculated on sales price plus

defensive capex Executed Property Sector Exit Yield % Gross price (R000) Transfer date 35 Circuit Road, Westmead Industrial 7.6 15,000 Jan-17 Pine Crest Shopping Centre, Pinetown 1 Retail 8.2 406,959 Mar-17 36 Wankel Street, Jet Park Industrial 7.1 37,000 May-17 Total 8.1 458,959 Contracted and Unconditional Property Sector Exit Yield % Gross price (R000) Expected transfer Lebombo Road, Garsfontein (Portion) Commercial 6.2 12,000 Sep-17 African Diamond, Johannesburg CBD Residential 6.8 25,000 Oct-17 Textile House, Johannesburg CBD Residential 9.5 55,000 Nov-17 The Mall, Vanderbijl Park Afhco Retail 10.0 13,580 Dec-18 Total 7.8 105,580 Contracted and Conditional Property Sector Exit Yield % Gross price (R000) Expected transfer Hotel at Cullinan Jewel Shopping Centre, Pretoria Retail 9.0 2,700 Sep-17 96 15th Road, Randjespark Industrial 7.9 92,000 Oct-17 Nukerk, Johannesburg CBD Residential 10.0 87,000 Dec-17 Total 8.9 181,700

23

Lease renewals - % Rental Reversions

0.4% 6.6%

• 10.5%

2.7%

• 0.6%
• 12.0%
• 10.0%
• 8.0%
• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% Industrial Retail Commercial Total (excl. AFHCO) AFHCO Retail / Commercial 6 months to June 2017

• 1. Negative reversion due to a tenant occupying 698m2 giving up

space and negotiating a lower rental. If this tenant is removed from the calculation, the rental reversion will be 10%.

1

24

Contracted Rental Escalation Profile

* Including loyalty program inflationary increases are anticipated.

8.0% 7.6% 8.0% 7.8% 9.0% 7.5% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% Industrial Retail Commercial Total (excl AFHCO) AFHCO Retail / Commercial AFHCO Residential

* 25

Group Lease Expiry – Traditional Portfolio

Vacancies Monthly 2017 2018 2019 2020 2021+ % of GLA 2.6% 5.5% 9.0% 21.6% 16.0% 11.4% 33.9% Cumulative 2.6% 8.1% 17.1% 38.7% 54.7% 66.1% 100.0% 2.6% 5.5% 9.0% 21.6% 16.0% 11.4% 33.9% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

% of GLA

26

Group Lease Expiry – Afhco Retail / Commercial

Vacancies Monthly 2017 2018 2019 2020 2021+ % of GLA 1.4% 13.9% 7.0% 15.8% 10.1% 22.4% 29.4% Cumulative 1.4% 15.3% 22.3% 38.1% 48.2% 70.6% 100.0% 1.4% 13.9% 7.0% 15.8% 10.1% 22.4% 29.4% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

% of GLA

27

Industrial Lease Expiry Strategy 2017

• 159,113m² expiring in 2017
• H1 renewals at 0.4% reversion
• Of 2017 expiries 80% already renewed at a reversion of -2.5%
• Overall, management expect to conclude 86% renewal for 2017 with negative reversions of circa -2.5%
• 12% have vacated, all of which have been re-let
• Generally short term renewals of 2 to 3 years with 8% escalations intact
• Industrial portfolio has a high retention rate historically
• Dec 2014 – 72%
• Dec 2015 – 93%
• Dec 2016 – 76%
• Industrial portfolio has a low vacancy rate historically
• Dec 2014 – 1.4%
• Dec 2015 – 0.3%
• Dec 2016 – 1.1%

28

Traditional Vacancy Profile

(% of GLA)

2.6% 4.5% 8.6% 3.6% 1.1% 4.5% 8.8% 2.7% 1.6% 3.9% 6.7% 2.6% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Industrial Retail Commercial Total June 2016 December 2016 June 2017

29

Traditional Vacancy Profile

(% of gross rental)

1.6% 2.8% 5.9% 2.7% 0.9% 3.3% 5.4% 2.5% 1.1% 3.2% 5.5% 2.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Industrial Retail Commercial Total June 2016 December 2016 June 2017

30

Afhco Vacancy Profile

(Residential % of Units / Retail & Commercial % of GLA)

3.3% 5.2% 4.6% 3.4% 10.4% 8.7% 1.4% 8.9% 5.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Retail / Commercial Residential Total June 2016 December 2016 June 2017

31

Jo’burg Inner-City Challenges

Source of article – Citizen.co.za south africa 14.8.2017 07:27 am

Areas of Worsening Crime Unemployment in Potential Tenant Base Increased Competition

32

Afhco 2017 New Leases and Notices

Percentage Residential Units Vacancies as at 25 August 2017 excluding sold buildings = 6.4%

100 200 300 400 500 600 0.2 0.4 0.6 0.8 1 1.2 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 July 2017 Aug-17

Notices New leases

33

Arrears

Tenant receivables as a % of rolling 12 months income

2.2% 3.0% 2.4% 2.8% 3.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Jun-15 Dec-15 Jun-16 Dec-16 Jun-17

34

UNLOCKING VALUE IN THE RETAIL PORTFOLIO RORY MACKEY

35

Community and Neighbourhood Centres Continue to Outperform Regional and Super Regional Centres

Source: SAPOA: April 2017

36

The Oaks Centre

GLA = 8,548 m2 Acquisition Cost = R105 Million Acquisition Yield = 10.6% Guarantee = 24 month NPI guarantee National Tenants = 92% of GLA Anchors = Checkers & Woolworths 2016 Trading Density = R3,165 / m2 National Trading Density Growth = 6.1%

37

Retail Portfolio Redevelopments

* Represents SA Corporate ownership portion of development costs @ Includes capitalised interest

Property Estimated Cost (Rm) @ Yield %

East Point 499.0 9.0 Umlazi Mega City (Phase 1 & 2) 220.0* 9.5 Completed Subtotal 719.0 9.2 Hayfields Mall 37.3 9.1 Umlazi Mega City (Phase 3) 58.0* 9.5 Midway Mews 32.7 8.8 (ex Def capex – 11.8) Cambridge Crossing 59.9 9.1 (ex Def capex – 11.5) Kempton Park 70.9 10.0 North Park Mall 141.7 10.0 Current Redevelopments Subtotal 400.5 9.6

Total Redevelopments

1,119.5 9.3 38

Performance of Retail Redevelopments

* Driven by an improved trading performance of 10.9% for value branded

• utlets.

39

Green Initiatives - Rooftop Solar Photovoltaic Installations

40

New and Installed Solar Photovoltaic Projects Total kW= 5 570

41

RE-INVENTING C&I RORY MACKEY

42

C&I Redevelopments

57 Sarel Baard Crescent, Centurion (Imperial Health Sciences DC)

43

C&I Redevelopments – Office to Resi Conversion

252 Montrose Avenue, Randburg Cnr Old Pretoria & Alexandra Roads, Midrand Cnr Old Pretoria & Alexandra Roads, Midrand

44

ZAMBIAN PORTFOLIO PERFORMANCE RORY MACKEY

45

Zambian Portfolio Performance

Physical address Cnr Thabo Mbeki and Great East Road, Lusaka Category Retail % of total portfolio GLA 53.1% GLA (m2) 30 622 Tenancy Multi-tenanted Major tenants Builders Warehouse, Pick 'n Pay, Edgars, Food Lovers, Jet, Amic Toy & Baby Shop, Jinlintong, Multichoice, Carnival- ZMK and Pep Stores National tenants by GLA (%) 59.1% Vacancy by GLA (%) 0.6% Weighted average gross rental / m² (USD) 23.8 Weighted average escalation (%) 2.5% Cnr Thabo Mbeki and Great East Road, Lusaka Office 21.7% 12 488 Multi-tenanted Eco Bank, First National Bank Zambia, AON Zambia Ltd, United Bank for Africa, Huawei Technologies Co. Z Ltd 76.3% 4.7% 22.1 2.9% Cnr Kabwe and Mushili Road, Ndola Retail 25.2% 14 539 Multi-tenanted Pick n pay, Cash Build, Pep Stores, Zamjoy (Ex Furnmart), Kobil Filling Station, Carnival Furniture 42.7% 15.9% 11.9 2.9%

East Park Mall Acacia Office Park Jacaranda Mall * The vacancy at Jacaranda Mall has since reduced to 11.8% as at 25 August 2017 *

46

East Park Mall Development Master Plan

• 14 ha extension to East Park Mall site secured as part of PPP with University of

Zambia (25 + 25 yr lease)

• SA Corporate has the option to acquire developments at 9% USD yield

adjusted for any movement in the 5 yr USD Swap Rate

• Should SA Corporate not exercise option to acquire developments, it has a

subsequent right of first refusal should development partner wish to sell to a 3rd party 47

BUILDING THE AFHCO BUSINESS RORY MACKEY

48

AFHCO's Presence in the Johannesburg Inner-City

49

Committed Developments

Additional development bulk – represents R1bn development pipeline in the next 4 years with a targeted yield of 11% primarily at Jeppe Street Post Office & Long Street Precinct

Property Sector Yield forecast 1st 12 months (%) Cost (R000) Forecast Completion date End Park, Mantoll Court, Tollman Mixed use 11.0 77,720 Jul-18 Station View Mixed use 11.0 32,059 Jun-18 Sidelsky Residential 10.6 215,346 Mar-19 Jeppe Street Post Office Phase 1 Residential 11.0 100,555 Jul-19 Total 10.8 425,680 50

M&T Development Joint Initiative

• Transaction Structure
• Afhco and M&T Development (“M&T”) have established a joint initiative company (“JVCo”) to invest in rental

residential property.

• JVCo held 60% by Afhco & 40% by M&T.
• Opportunities to be primarily identified on M&T landholdings, developed by M&T to specifications & with

amenities specifically for the rental market & subsequently sold to the JVCo.

• Transaction Rational
• Development of rental residential portfolio required because:
• Limited supply of investment grade stock.
• Income generating residential property on the market often requires refurbishment which subsequently

does not achieve investment hurdle.

• Rapidly changing tenant expectations require latest designs, modern finishes, amenities & security

absent in older properties.

• Residential portfolios need to ensure that exposure is in most desirable nodes. As tenants are more

mobile than homeowners, popularity of areas for rental properties change more quickly.

• REITs have limited development exposure capacity as development funding erodes deployment of capital on

income generating properties.

• Partnerships with developers are therefore required to reposition, refresh and grow the residential portfolio

with accretive acquisitions.

• Development partners need to be (1) capable and experienced, possessing a successful track record, (2) have

IP in respect of product & location, (3) have land holdings to provide an extensive strategic development pipeline, (4) have funding capacity and (5) preferably have the appetite to hold portfolios in partnership to ensure alignment & commitment to adapt product design, specification and amenity provision focused on the rental market.

• M&T Development’s development experience, extensive landholding in Gauteng (now also including Zendai’s

extensive Modderfontein property) and commitment to building an investment portfolio in partnership makes it a perfect partner to Afhco & SA Corporate. 51

M&T Development Joint Initiative Pipeline

• First Development
• Founders Hill, Modderfontein
• 588 units over 6 phases for delivery in 2018 and 2019
• Afhco 60% share = R290m
• Targeting an initial yield of 10%
• Pipeline
• Extensive M&T Development landholdings in prime Gauteng locations
• Identified pipeline of R3.57bn with Afhco’s share being R2.14bn to end 2024

52

Diversifying the Residential Footprint

53

Afhco Operational Interventions

Marketing

• Loyalty programme
• Referral programme
• Special campaigns
• Automation of leads management

Product Enhancements

• Prototype WiFi installations at 3 buildings complemented by tenant surveys
• Recreational areas including dedicated outdoor/indoor gym equipment, discounted access to partner gyms,

children's play areas, indoor soccer fields & braai areas

• Common area & lift upgrades to older buildings to complement apartment refurbishment on re-tenanting
• Shuttle service to Greatermans and Platinum Place properties
• Tenant communication, fault logging and enquiry mobile phone and web-based application

Resourcing The following appointments are being progressed:

• Operations Director
• Development Manager
• Deputy Finance Manager
• Suburban Leasing Manager
• Upskilling existing building managers and appointing additional building managers commensurate with pipeline

54

Marketing Interventions

55

Automated Leads Management

56

Product Enhancement Images

57

STORAGE GENIE RORY MACKEY

58

Storage Genie Transaction

Investment Rationale

• Growing demand for self-storage space in the South African market due to increasing households with smaller

living spaces

• Defensive in nature due to demand in both contracting and expanding economic cycles
• Opportunity to exploit underutilised retail space
• Provides alternative tenancy in existing portfolio, developments and acquisitions
• Diversification and expansion of national footprint
• Partnership with an established brand having short-term rental expertise, bespoke storage management,

administration software and pipeline Transaction Structure The transaction has four parts being:

• The acquisition of the Storage Genie leasehold properties
• The co-development of two SA Corporate undeveloped properties, located in Milnerton, Western Cape,

and Erand, Gauteng

• An acquisition of seven Storage Genie freehold properties
• A further pipeline of freehold and leasehold properties estimated to have a value of R750million

59

Storage Genie Transaction – Leasehold Properties

Leasehold Properties

• Acquisition
• f

14 Storage Genie leasehold properties on 1 July 2017. The investment will generate an initial yield

• f

18.3% which translates to an internal rate of return of at least 20%

• ver

the leasehold periods, assuming no renewal of the leasehold leases

• Upward or downward price adjustment upon

the second anniversary of the effective date

Property Location Storage Units Hillfox Gauteng 62 Princess Crossing Gauteng 179 PTA East Gauteng 174 Sandton Gauteng 46 Wanderers Gauteng 74 Pomona Gauteng 350 Zambezi Gauteng 93 Rosebank Gauteng 86 Stoneridge Gauteng 306 Randburg Gauteng 62 Rivonia Gauteng 228 Bryanston Gauteng 142 Fourways Gauteng 214 Blue Valley Gauteng 93 Total 2109

60

Storage Genie – Freehold Properties

Freehold Properties

• The acquisition of three existing freehold self storage properties and four under development for R267million in

the 12 month period from December 2017.

• Purchase prices to be based on capitalising forecast net property income by 12%.
• The forecast net property income will be determined by assuming current market rentals escalated to the date of

transfer of the respective property, forecast operating expenses based on quotations received and an occupancy level of 85%.

• Storage Genie shall enter into a 3-year head lease at an initial net property income yield of 11.1% escalating at

8% (“Yield Guarantee”).

• In the event that, in year 3, the actual net property income is lower than the forecast net property income, there

shall be a price adjustment on the anniversary of the third year from the effective date.

• The Yield Guarantee and price adjustment shall be secured by a purchase price retention of between 7% and 17%

depending on the occupancy on transfer. 61

STRATEGY & PROSPECTS RORY MACKEY

62

Strategy & Prospects

The challenges of lethargic South African economic conditions has required the Company to take the following decisive actions to ensure defensive rental revenue streams to generate sustainable distribution growth:

• Focussed tenanting of the retail portfolio towards food and convenience complemented by a

well considered redevelopment and rejuvenation programme.

• Proactive management of the industrial portfolio concentrating on holding quality assets and

retaining tenants with strong covenants.

• Improving the reliability of growth in income from the Afhco residential portfolio by:
• diversifying its geographic spread through strategic joint initiatives.
• realigning

its Johannesburg inner-city business through

• perational

and asset management interventions.

• Diversification into the self-storage sector known for its defensive characteristics.

2017 full year distribution growth of approximately 6% is anticipated, which is at the lower end of guidance given at the beginning of the year.

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ACKNOWLEDGMENTS

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QUESTIONS

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ADDITIONAL SLIDES

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Overview – Geographical Analysis (excl. Rest of Africa JV)

61% 28% 1% 5% 5%

June 2017

Geographical Profile (% of GLA) Geographical Profile (% of Market Value)

58% 32% 0% 5% 5% Gauteng KwaZulu Natal Limpopo Western Cape South Africa: Other June 2016 61% 31% 1% 5% 2% June 2017 58% 34% 5% 3% Gauteng KwaZulu Natal Limpopo Western Cape South Africa: Other June 2016

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Overview – Sectoral Analysis (Afhco)

59 Properties GLA 288,043m2 Market Value R3.0bn Weighted average capitalisation rate 9.8% Afhco also owns residential bulk of 106,635m2 to be redeveloped

Retail / Commercial 30% (June 2016: 34%) Residential 70% (June 2016: 66%)

By GLA

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Overview – Tenant Grading by GLA – Traditional Portfolio

66% 58% 59% 63% 28% 27% 22% 28% 6% 15% 19% 9%

0% 10% 20% 30% 40% 50% 60% 70% Industrial Retail Commercial TOTAL

Per Sector

A B C A 63% B 28% C 9%

Total Portfolio

"A": large national tenants, large listed tenants, government and major franchisees "B": national tenants, listed tenants, franchisees, large regional tenants, medium to large professional firms "C": other

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