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P RO P E R T Y F U N D
INTERIM RESULTS PRESENTATIONfor the six months ended 31 August 2017
P RO P E R T Y F U N D
AGENDAIntroduction & Highlights
Financial Review
Portfolio Review
Conclusion
Questions & Answers
Annexures
01
02
03
04
05
06
P RO P E R T Y F U N D
INTRODUCTION & HIGHLIGHTSSandile Nomvete
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
INTRODUCTION TO DELTA4
75.9%
Sovereign underpinnedJSE listed REIT
R5.3bn
Marketcapitalisation of
Pretoria & Durban CBDs
Dominant in
R104.9m
Average property value of
R11.7bn
Assets under management of
of revenue from sovereign tenants short term as at 31 August 2017
by 100% black-owned asset manager
GCR credit ratingreaffirmed
A2(za)
BBB+(za)long term
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
HIGHLIGHTS SINCE LISTING5
Investment Portfolio Growth - Rands (bn)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
Nov-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Dec-16 Mar-17 Apr-17 Aug-17 Sep-17 Oct-17
Mar-17: Submitted bulk lease renewal proposal for 243,000m2 to DPW (PMTE)
Aug-17: DPW Treasury negotiation team has evaluated bulk proposals and are now negotiating with the landlords
Oct-17: Settled R125million DMTN unsecured facility
Oct-17: Refinanced US$12 million Bank of China facility
Nov-12: Delta lists on the JSE main board with a portfolio value of R2.1 billion
Jul-13: Launches R2 billion
Domestic Medium Term Note Programme
Feb-14: Surpasses pre-listing target of a R7 billion asset portfolio. REIT Status approved
Jun-14: Launches and lists Delta International (rebranded to Mara Delta), the first specialist pan-African focused property fund to be listed on JSE
Aug-16: Balance sheet strengthened, gearing reduced to 41%. Portfolio GLA surpasses 1 million m2
* Graph includes market value of listed investments
April-17: Proposed BEE transaction
Dec-16: Refinanced R462 million DCM
Oct-17: BEE Transaction receives PMC approval
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CORPORATE HIGHLIGHTS UP TO INTERIM RESULTS PRESENTATION 20176
46.40 cents per share
Increased half-year distribution by 1.0% to
R329.7million
Increased half-year distributable earningsby 5.3% to
18.1 days
Debtors well managed at
Vacancy at
71 661m2
Renewed
48 590m²
Concluded
of new leases
11.3%of existing leasesSAPOA: 11.8%
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
SNAPSHOT7
31 August 2017 28 February 2017 31 August 2016Shares in issue 710,632,182 710,632,182 710,632,182
Market capitalisation R5.3 billion R5.9 billion R4.6 billion
NAV per share R9.74 R9.9 R9.9
No. of properties 108 112 115
Valuation of property portfolio R11.3 billion R11.4 billion R11.4 billion
Average value per property R104.9 million R101.6 million R98.8 million
Gross lettable area 973,431 m² 981,777 m² 1,003,028 m²
Tenant Sectorial profile (GLA) Office - Sovereign: 71.7% Office - Sovereign: 70.7% Office - Sovereign: 71.1%
Office - Other: 17.8% Office - Other: 19.4% Office - Other: 19.0%
Industrial: 3.8% Industrial: 3.1% Industrial: 3.1%
Retail: 6.7% Retail: 6.8% Retail: 6.8%
Vacancy rate 11.3% 10.7% 9.2%
Weighted average rent (per m2) R108.1 R105.2 R102.7
Weighted Average Lease Expiry # (years) 1.8 1.7 2.0
Weighted average in force escalation* 7.3% 6.9% 7.1%
Loan to value 42.3% 41.5% 41.0%
Fixed % 82.3% 81.5% 84.1%
Weighted Average Cost of Debt 9.2% 9.2% 9.0%
Listing date: 02 November 2012 JSE classification: Real Estate Holdings & Development
Asset manager: Delta Property Asset Management (Pty) Ltd JSE code: DLT
Asset management fee: 0.35% of enterprise value
# By revenue
* Rate pre bulk renewals
P RO P E R T Y F U N D
FINANCIAL REVIEWShaneel Maharaj
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
FINANCIAL HIGHLIGHTS UP TO INTERIM RESULTS PRESENTATION 20179
42.3%
Loan to value of
R715m
Successfully refinancedand settled
82.3%
Fixed debt of
Debtors well managed at
73.8%
Property operating margin at
2.4
Interest cover ratio
(Feb 2017: 41.5%) of debt facilities (Feb 2017: 85.1%)
(Feb 2017: 2.5)
18.1 daysin tough
economic environment
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
FINANCIAL REVIEW
31 August 2017 31 August 2016 28 February 2017
Revenue (R’000) 782,341 757,292 1,617,344
Net property income (R’000) 576,376 550,585 1,153,341
Finance costs (R’000) (235,967) (228,638) (470,580)
Cost to income ratio (net / gross) 11.0% / 26.2% 10.2% / 27.2% 12.4% / 28.8%
Investment property (R’000) 11,330,429 11,357,790 11,381,421
Listed securities as quoted on the JSE - GRIT (R’000) 379,482 459,435 429,588
Borrowings (R’000) 5,035,744 5,004,118 5,099,227
Loan to value (LTV) 42.3% 41.0% 41.5%
Interest cover ratio (31 Aug 2016) 2.4 2.4 2.5
Weighted average interest rate 9.2% 9.0% 9.2%
Average debt expiry period (years) 1.6 2.1 1.9
Average debt fix expiry period (years) 1.8 2.1 2.2
Fixed % * 82.3% 84.1% 85.1%
Net asset value per share R9.74 R9.86 R9.91
* Figures restated to exclude revolver facilities
10
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DISTRIBUTABLE INCOME STATEMENT
31 August 2017 31 August 2016 28 February 2017
Net property income 576,376 550,585 1,153,341
Straight-line rental income accrual 699 (59) (4,863)
Administration expenses (45,949) (41,330) (68,169)
Realised foreign exchange (loss)/gain (259) 112 -
Net finance costs (after interest income) (223,127) (215,055) (443,412)
Dividend income from associate - GRIT 18,587 18,851 37,990
Sundry income 19 15 6,215
Retained distributable earnings 3,378 - (3,378)
Distributable income for the period 329,724 313,119 677,724
Number of shares in issue 710,632,182 710,632,182 710,632,182
Number of shares entitled to distribution 710,632,182 681,722,806 710,632,182
Distribution per share (cents) 46.40 45.93 97.24
11
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
GROWTH IN DISTRIBUTIONS
23.7
32.5
40.2
72.7
40.0 44.1
84.1
42.9 47.9
90.8
45.9 51.3
97.24
46.4
97.24
FY2013 H1 Aug-13 H2 Feb-14 FY2014 H1 Aug-14 H2 Feb-15 FY2015 H1 Aug-15 H2 Feb-16 FY2016 H1 Aug-16 H2 Feb-17 FY2017 H1 Aug-17 FY2018(target)
7.1%
1.0%
0%H1 – Interim
H2 – Final
Total – Full year
12
Historic distribution per share (cents/share)
15.6%
9.6% 7.2%23.1%
8.7% 7.1%7.1%
8.0%
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DISTRIBUTABLE EARNINGS BRIDGE
313 119
41 758 3 378 (367) (264) (4 619)(8 072) (15 209)
329 724
H1 Aug 2016 Existing portfolio(ex Straight-line)
Retaineddistribution
Forex/Sundryincome
Dividend income(GRIT)
Admin costs Net finance costs Disposals H1 Aug 2017
200 000
220 000
240 000
260 000
280 000
300 000
320 000
340 000
360 000
380 000
400 000
13
R’000
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS
Description Amount (R) %
Net Property Income (NPI) Aug 2016 550 585 000
Increased NPI from base portfolio held at 31 Aug 2016 41 000 256 7.4%
NPI attributable to disposals post 31 Aug 2016 (15 209 256) -2.8%
NPI Aug 2017 576 376 000 4.7%
Increased NPI from base portfolio held at 31 Aug 2016 41 000 256 7.4%
Time weighting of acquisitions concluded in H1 Aug 2016 (3 435 960) -0.6%
Like-for-like increase in NPI 37 564 296 6.8%
14
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
STATEMENT OF FINANCIAL POSITION
R’000 31 August 2017 31 August 2016 28 February 2017 Change % (Aug ‘17 v Feb 17)
ASSETS
Non-Current assets held for sale 10 525 979 10 567 801 10 448 271 0,7%
Investment property 10 124 585 10 155 844 10 053 921 0,7%
Fair value of property portfolio 9 934 190 9 969 666 9 861 449 0,7%
Straight line rental income accrual 190 395 186 178 192 472 (1,1%)
Investment in associate (equity accounted) - GRIT 398 304 403 954 391 013 1.9%
Other non-current assets 3 090 8 003 3 337 (7,4%)
Current assets 413 446 506 280 583 563 (29,2%)
Non-current assets held-for-sale 1 205 844 1 201 946 1 327 500 (9,2%)
Total assets 12 145 269 12 276 027 12 359 334 (1,7%)
EQUITY AND LIABILITIES
Equity (31 Aug 2017) 6 920 648 7 007 810 7 041 616 (1,7%)
Liabilities 5 224 621 5 268 217 5 317 718 (1,8%)
Non-current liabilities 3 079 037 4 039 368 4 142 269 (25.7%)
Current liabilities (31 Aug 2017) 2 145 584 1 228 849 1 175 449 82.5%
Total equity and liabilities 12 145 269 12 276 027 12 359 334 (1,7%)
15
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
NAV BRIDGE
9.91
0.43 0.03(0.51)
(0.07)(0.04)
9.74
28 Feb 2017 Contribution fromoperations
Contribution ofassociate
Dividend paid Disposals Fair value of financialinstruments and forex
31 Aug 2017
9.50
9.60
9.70
9.80
9.90
10.00
10.10
10.20
10.30
10.40
10.50
16
Rands
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DEBT SUMMARY
As at 31 August 2017
Facility Type R’ m Weighted Ave. Rate
Floating bank facilities 3 507 9.2%
Fixed bank facilities 796 8.9%
Revolving bank facilities 640 9.3%
Total bank facilities 4 943 9.2%
DMTN programme - floating 125 9.4%
Total borrowings, net of accrued interest 5 068 9.2%
Accrued interest 4 N/A
TOTAL borrowings including interest 5 072
Total fixed bank facilities 796 8.9%
Interest rate swap contracts 2 720 7.4%
Cross currency swaps 125 Libor + 3.3%
Total fixed 3 641
Fixed % excluding revolving bank facilities: 82.3% 9.2%
17
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Source of Debt
94.4%
2.5% 3.1%
ZAR Banking Facilities (R4,787m)
DMTN Programme (R,125m)
USD Banking Facilities (R,156m)
Debt Classification
69.2%
15.7%
12.6%2.5%
Floating Bank Facilities (R3,507m)
Fixed Bank Facilities (R,796m)
Revolving Bank Facilities (R,640m)
Unsecured Com. Paper (R,125m)
18
GRAPHICAL DEBT ANALYSIS
Financier Split
63.4%17.5%
2.5%
13.5%3.1%
Nedbank (R3,214m)
Standard Bank (R888m)
Debt Capital Markets (R125m)
Investec (R685m)
Bank of China (R156m)
Fixed Debt Breakdown
74.7%
21.9%
3.4%
Swap Contracts (R2,720m)
Fixed Banking Facilities (R796m)
Cross Currency Swaps (R125m)
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DEBT EXPIRY PROFILE
0
100
200
300
400
500
600
700
800
900
1 000
1 100
1 200
1 300
1 400
1 500
28-Feb-18 28-Feb-19 28-Feb-20 28-Feb-21 28-Feb-22
Debt Expiry Profile
DMTN Programme Fixed Bank Facilities Floating Bank Facilities Revolving / Liquidity Bank Facilities Vendor Loans Swap Contracts
19
R mil
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DEBT EXPIRY PROFILE
As at 31 August 2017
Financier Type Expiry R’ m
FY2018 Expiry
Bank of China 3 year term facility Refinanced Oct 17 156
Standard Bank 3 year term facility 25 Sep 2017 86
Standard Bank 3 year term facility 30 Nov 2017 12
Nedbank 5 year term facility 2 Nov 2017 324
Nedbank 1 year term facility 17 Dec 2017 40
TOTAL 618
FY2019 Expiry
Standard Bank 5 year term facility 31 May 2018 128
Standard Bank 3 year term facility 27 Jul 2018 41
Nedbank 5 year term facility 2 May 2018 270
Nedbank 2 year term facility 12 May 2018 200
Nedbank 2 year term facility 1 Jun 2018 380
Nedbank 5 year term facility 18 Jul 2018 80
Nedbank 5 year term facility 2 Aug 2018 100
TOTAL 1,198
20
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DEBT COMMENTARY
➢ During the current year Delta has successfully refinanced and settled R715m as follows:
• refinanced R434 million in vanilla debt up to Aug 17
• refinanced R156 million in vanilla debt post Aug 17
• settled R125 million unsecured note in DMTN program post Aug 17 with vanilla funding
➢ Delta’s loan to value ratio has increased to 42.3% (2017: 41.5%), impacted by the disposal of non-current assets held for sale (R121.6million), devaluation of its investment in GRIT (R50.1million) and realisation of the loan with Baystone on disposal of the investment (R58million)
➢ Weighted average all in cost of debt increased to 9.2% (2016: 9.0%) due to higher rates on facility renewals and longer term interest rate swaps concluded
➢ Fixed debt decreased to 82.3% (2016: 84.1%) due to the expiry of a R160million swap fixed at 7.3%
➢ Average debt expiry and average fix expiry metrics were 1.6 (2016: 1.9) and 1.8 (2016: 2.1) respectively
21
P RO P E R T Y F U N D
PORTFOLIO REVIEWOtis Tshabalala
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
OPERATIONS HIGHLIGHTS UP TO INTERIM RESULTS PRESENTATION 201723
71.7%
A distinct focus on sovereign tenants
71 661m²
Vacancies of
243 000m²
being sovereign tenants (by GLA)
Bulk lease renewal proposal to DPW
(PMTE)
62 leases nationally
11.3%
(SAPOA average 11.8%)
Total lease renewals in a challenging
environment
48 590m²
Total new leases concluded (GLA)
including 24 727 m2 concluded
post 31 August 2017
Rental income attributed to sovereign
tenants
75.9%
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Buildings represented by Province Representative Tenants
24
A STRATEGY DESIGNED TO MAXIMISE ON SECURE AND STABLE INCOME
North West
Limpopo
MpumalangaGauteng
KwaZulu Natal
Free State
Eastern Cape
Northern Cape
Western Cape
Nr of Buildings GLA (m2)
Gauteng 39 425 771
KwaZulu-Natal 17 278 316
Free State 17 85 506
Mpumalanga 11 30 251
Limpopo 7 44 885
Northern Cape 7 37 316
Western Cape 5 41 889
Eastern Cape 2 23 717
North West 2 5 780
TOTAL 108 973 431
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
GOVERNMENT PRECINCT | PRETORIA25
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
NODAL ANALYSIS | PRETORIA26
1 – 9
Delta owned
properties
14
CGI Building
(DPW Head Office)
10
ABSA Towers
15
AVN Building
(DPW occupied)
11
Momentum building
16
State Theatre
12
Treasury
17
Sammy Marks
Shopping Centre
13
Telkom Towers
18
Intended new
municipal HQ
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
NODAL ANALYSIS | DURBAN
1 – 14Delta owned
properties
19SAHARA Park
Kingsmead
15Durban International
Convention Centre
20South Beach
16Durban City Hall
21Redefine Towers
17Workshop Mall
(Old Railway Workshop)
22Commercial City
Building
18Durban Marina
23Durban Bay House
27
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
NODAL ANALYSIS | BLOEMFONTEIN
1 – 13Delta owned
properties
19“Fourth” Raadsaal
14Hoffman Square
20Bloemfontein City Hall
15Sand du Plessis Theatre
21:CR Swart Building
16Waterfront Mall
22Lebohang Building
17Loch Logan
23Bram Fisher Building
18Appeal Court
24Liberty Life Building
28
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
PORTFOLIO BREAKDOWN
Office -Sovereign *
Office - Other Industrial Retail Total
Number of properties 82 19 4 3 108
Gross lettable area (m2) 681,429 228,003 40,258 23,741 973,431
Vacancy (%) 10.2% 14.0% 19.0% 3.7% 11.3%
Value R8.4bn R2.5bn R0.2bn R0.3bn R11.3bn
Average rental (R/m2) # 114.4˄ 92.6 51.6 114.0 108.1
Weighted ave. escalation (%) # 7.2% 7.8% 8.0% 7.9% 7.3%
Weighted ave. lease expiry (by revenue) - by building type
1.6 years 2.1 years 1.7 years 5.8 years 1.8 years
Weighted ave. lease expiry (by revenue) - tenant specific #
1.5 years 2.2 years 1.7 years 3.5 years 1.8 years
Cost to income ratio (net) 8.1% 27.9% 7.2% 25.4% 11.0%
Cost to income ratio (gross) 22.8% 43.8% 24.9% 37.5% 26.2%
˄ Rental as at interim; renewals not yet in effect
29
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
GLA - by building
70.0%
23.4%
4.1% 2.5%
Office - Sovereign (70.0%)
Office - Other (23.4%)
Industrial (4.1%)
Retail (2.5%)
GLA - by tenant*
71.7%
17.8%
6.7% 3.8%
Office - Sovereign (71.7%)
Office - Other (17.8%)
Retail (6.7%)
Industrial (3.8%)
30
SECTORAL SPLIT
Rental - by building
75.4%
20.8%
2.0%1.8%
Office - Sovereign (75.4%)
Office - Other (20.8%)
Retail (2.0%)
Industrial (1.8%)
Rental - by tenant
75.9%
15.2%
7.1% 1.8%
Office - Sovereign (75.9%)
Office - Other(15.2%)
Retail (7.1%)
Industrial (1.8%)
*Excludes vacancies. Analysis focuses on what category the specific tenant falls into, rather than the category of the building
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Tenant Profile by GLA
71.7%
17.8%
6.7%
3.8%
37.9%
15.5%
12.5%
5.8%
Office - Sovereign
Office - Other
Retail
Industrial
Tenant Profile by Rental
75.9%
15.2%
7.1%
1.8%
37.0%
20.8%
11.8%
6.3%
National Government
ProvincialGovernment
Local Government
State-OwnedEnterprise
31
DETAILED TENANT BREAKDOWN
Excludes vacancies. Total occupied GLA = 863,382 m2
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
UPDATE ON SOVEREIGN TENANTS
➢ The current year has been challenging economically, coupled with the delays in signing the new leasing policy and the staff changes at Department of Public Works
➢ There have been some major changes in the Property Management Trading Entity/DPW senior structures • Head of PMTE (Mr. Paul Serote) departed end of August 2017 returning to the private sector
• DG (Mr. Mziwonke Dlabantu) departed end of September 2017 to head up NHBRC
• DDG (Mr. Mandla Sithole) 2nd in command to Paul Serote, departed end of September 2017,redeployed back to Finance
➢ This shake up has resulted in the slowing down of the bulk lease renewal proposals process➢ We take comfort in that they have been replaced by veterans from the old guard at DPW who were at the
helm in the old days when the radical BBBEE policy that favored empowered companies was in place➢ Mr. Sam Vukela who was the DG from 2007 to 2010 has been re-instated as the acting DG
➢ Ms. Lydia Bici, a DPW veteran on Policy and Regulation, who was instrumental in crafting the old BBBEE policy has returned as the acting head of the PMTE
➢ Mr Matlala, a seasoned regional manager from the North West, has been tasked with taking on theDDG position
32
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
UPDATE ON SOVEREIGN TENANTS
➢ Given that the old guard are pro-transformation, we remain bullish that the policy will now be finalized and implemented by the end of the year
➢ National Treasury and DPW have set up Negotiation Task Teams that will be negotiating the lease renewals once the relevant circulars shall have been issued by end of November 2017
➢ More encouraging is the fact that notwithstanding the non-finalisation of the new Leasing Framework user departments have been able to conclude leases
• where the User Departments are in need of certainty for space
• and where they can prove to DPW and Treasury that they have the budgets available
• Delta’s diversification within its sovereign tenants i.e. National, Provincial, SOEs and Municipalities is paying dividends as evidenced by the renewal and conclusion of new leases despite the delays in implementing the new leasing policy at national level
33
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
BUSINESS STRATEGY
➢ Delta Property Fund is a REIT that focuses on properties that are leased to The RSA government at all spheres of government be it national, provincial, local government and state owned enterprises
➢ Close to 76% of our income is from sovereign tenants
➢ Sovereign tenants are generally “sticky” tenants and tend to remain in significantly longer than those in the private sector, with most sovereign users historically occupying space for more than 20 years at a time.Do not move easily due to
• the building sizes
• location
➢ The income from sovereign tenants is generally stable and safe income
• reflected in debtors age analysis
34
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
BUSINESS STRATEGY
➢ To continue being the top sovereign fund in the country
➢ Conservative investment strategy aims to provide high quality space for tenants and a secure and stableincome for investors
➢ We are focused on maintaining high tenancy retention and high occupancy levels
➢ As a result of our current investment strategy on sovereign tenants, we have solid retention rate with anoccupancy rate that is consistently over 90% since listing
35
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
BUSINESS STRATEGY
SUSTAINABLE BUSINESS PRACTICES
➢ Our internal DPW Task Team is made of 6 people that interact and work closely with DPW at all levels
➢ Whilst we have budgetary constraints we continue to explore greening where possible
DISCIPLINED ASSET MANAGEMENT TEAM
➢ Since listing we have grown the portfolio from R2 billion to R11.3 billion
➢ We have been very selective in the assets that we acquire and have turned down a significant pipeline that does not meet our criteria
➢ Over the last year we have been inward focused on renewing our leases, filling up vacancies and fixing our buildings
➢ We have also identified the non performing assets and are disposing off these assets
➢ Thus far, we have disposed off assets totalling R254.1 million, of which 4 assets to the value of R139.1 million transferred by interim and 1 asset of R115.0 million post interim. These have been done at a haircut of 6.9%. An additional R371 million has been concluded and should transfer in the next 2 months, at a haircut of 0.5%
➢ Once transfer of the latter is complete, the total haircut on all disposals will be 3.2%
36
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
LEASING UPDATE
➢ A total of 70 leases were renewed measuring 71,661 m2 for the value of R 246 million. Our most notable renewals are :
37
Major leases concluded
37
Building Tenant GLA Term
Smart Xchange Durban Technology 7,940 m² 36 months
Temo Towers Dept. of Agriculture 7,668 m² 36 months
Treasury House Dept. of Finance 7,243 m² 24 months
Std Bank Greyville Standard Bank 6,491 m² 60 months
Sleepy Hollow SARS 4,022 m² 60 months
Liberty Towers Bidvest 3,397 m² 11 months **
TOTAL 36,761 m²
** additional space (2 437m²) committed to Mr Price effective 01 October 2018
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
LEASING UPDATE cont….
➢ A total of 40 new leases were concluded measuring 48 590m2 for value of R 189,5million. Our most notable new leases are :
Tenant retention
➢ Thanks to the hands on approach of the operations team and the property managers we have managed to achieve a high tenant retention rate and to conclude the abovementioned deals
38
38
Building Tenant GLA Term
Embassy & Delta Towers Ethekwini Municipality 14,680 m² 36 months
Delta Heights Compensation Fund 14,229 m² 36 months
Commission House Dept. of Pubic Enterprises 6,157 m² 36 months
Liberty Towers Mr Price 2,667 m² 120 monthsplus 2 437m² from 01-Oct-18
TOTAL 37,733 m²
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
REVERSION39
*All rentals quoted are gross rentals # Excludes 24,727m2 renewed post 31 August 2017
Renewals by Sector
Sector No of Leases Total AreaW.A. Term(months)
W.A. Expiry Rate / m2 *
W.A. Achieved Rate / m2 *
Escalation / (Reversion)
W.A. Esc. achieved
Provincial government 2 14,911 30.17 101.82 116.34 +14% 7.51%
State-owned enterprise 3 5,133 60.00 131.47 109.53 (17%) 7.88%
Office - other 15 22,243 40.68 84.65 82.08 (3%) 7.54%
Retail 25 4,647 46.07 97.68 104.58 +7% 8.12%
TOTAL 45 46,934 39.99 91.40 95.19 +4% 7.63%
Total leases concluded 1 March 2017 – 31 August 2017
No of Leases Total Area (m2)W.A Term (months)
W.A. Expiry Rate (R / m2) *
W.A. Achieved Rate (R / m2) *
Escalation / (Reversion)
W.A. Esc. achieved
Renewed leases # 45 46,934 39.99 91.40 95.19 +4% 7.63%
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
LEASING | OUTLOOK40
Anticipated budgeted sovereign renewals
Sector No of Leases Total AreaW.A. ExpiryRate / m2 *
W.A. ProposedRate / m2 *
Escalation / (Reversion)
Leases on month-to-month or expiring by 28 February 2018
National government 44 197,400 99.72 94.75 (4.98%)
Provincial government 12 46,363 120.59 112.70 (6.54%)
Local government 2 34,977 116.83 112.85 (3.41%)
State-owned enterprise 4 3,703 89.65 93.84 4.68%
TOTAL 62 282,443 105.13 99.92 (4.95%)
*All rentals quoted are gross rentals
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Total portfolio - by GLA
Vacant (11.3%)
Month to Month (25.2%)
28 Feb 18 (8.8%)
28 Feb 19 (13.8%)
29 Feb 20 (11.3%)
28 Feb 21 (18.7%)
28 Feb 22 (5.0%)
Beyond 28 Feb 2022 (5.9%)
Total portfolio - by rental
Month to Month (25.5%)
28 Feb 18 (10.3%)
28 Feb 19 (18.7%)
29 Feb 20 (12.4%)
28 Feb 21 (19.4%)
28 Feb 22 (6.5%)
Beyond 28 Feb 2022 (7.2%)
41
LEASE EXPIRY PROFILE AT 31 AUGUST 2017
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
GLA - by buildingGauteng (43.8%)Kwazulu-Natal (28.6%)Free State (8.8%)Limpopo (4.6%)Western Cape (4.3%)Northern Cape (3.8%)Mpumalanga (3.1%)Eastern Cape (2.4%)North West (0.6%)
Rental - by buildingGauteng (44.5%)Kwazulu-Natal (25.2%)Limpopo (8.9%)Free State (6.4%)Western Cape (5.3%)Northern Cape (3.4%)Mpumalanga (2.9%)Eastern Cape (2.9%)North West (0.5%)
42
GEOGRAPHICAL AND GRADE SPLIT
Office grade - by GLA
A (14.8%)
B (84.0%)
C (1.2%)
Office grade – by rental
A (19.9%)
B (79.4%)
C (0.7%)
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
ACQUISITIONS
➢ Delta did not embark on any new acquisitions during the current year, choosing to rather focus inwardly on acquisitions, filling up vacancies and renewal of leases
Investment strategy
➢ Strategy is to continue to focus on:
• Significant assets (> R100million)
• Underpinned by (or have potential for) long term sovereign leases
• Located in nodes attractive to sovereign tenants
43
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DISPOSAL OF NON-CORE ASSETS
Rationale➢ Recycling of capital from non-core or non-performing assets to reduce gearing, fund CAPEX, create liquidity for future acquisitions
Past yearTransferred buildings
Samora House• R45.0 million, transfer date 07 Mar 2017
1 Ferreira Street• R11.3 million, transfer date 20 Jun 2017
3 Ferreira Street• R26.7 million, transfer date 20 Jun 2017
Damelin House• R55.8 million, transfer date 05 Jul 2017
Presidia House• R115.0 million, transfer date 13 Oct 2017
5 assets subject to signed sale agreements• R371.6 million, with various conditions precedent still to be met
➢ Delta will continue to dispose of non-core assets with a rational approach to capital allocation in line withinvestment strategy
44
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
REDEVELOPMENT STRATEGY
Delta to deploy CAPEX into portfolio
➢ Create value uplift to assets
➢ Securing long term stable returns
➢ Provide improved accommodation offering to tenants
➢ Long term benefit to portfolio
➢ Tenant retention
Lease driven to identify assets where greatest value can be added, through value enhancing developments, and activation of under-utilised area or available bulk
Three tier approach to CAPEX
➢ Defensive – compliance
➢ Tenant installation – new and renewed leases
➢ Project specific – value uplift
Original FY2018 budget of R250 million (including projects on next slide)
➢ H1 spent = R67 million
➢ Subject to the renewal of the DPW portfolio, substantial CAPEX will be spend in support of the deployment strategy
45
P RO P E R T Y F U N D
CONCLUSIONSandile Nomvete
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CONCLUSION
Strategy
➢ Continue focusing on pushing forward our advantage of being a Major landlord within the Sovereign underpinned Assets space
➢ Delta will be adaptable and will endeavor to meet the policy requirements from our Sovereign Tenant
Strengthening of balance sheet
➢ In a rapidly changing economic environment the aim is to bring the Gearing to < 40%
➢ Credit rating maintained
➢ Work continues to refinance / term out / settle debt
➢ Progress made with disposal of non-core assets and capital being recycled and allocated more effectively
47
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CONCLUSION cont…
Leasing
➢ Difficult environment, HOWEVER, in the current financial year, a total of 120,000m2
GLA was renewedand concluded
➢ Delta continues to retain good management that have a good history in dealing in the sovereign space
Outlook
➢ The Financial benefits derived from the proposed BEE transaction will have a huge impact on the business
➢ The economic environment is expected to remain pressurised, this may have an impact on the Rentals in the medium term. However it will greatly reduce the likelihood of government spending money on new office developments and may offer opportunities for private sector landlords to build on behalf of the State
➢ We remain on track to achieve the full year guidance
48
P RO P E R T Y F U N D
THANK YOUQuestions & Answers
P RO P E R T Y F U N D
ANNEXURES
P RO P E R T Y F U N D
ANNEXURESExecutive management
Board of directors
Disposal of non-core assets
Top 10 properties by value
GLA and vacancy reconciliation
01
04
02
05
03
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
EXECUTIVE MANAGEMENT52
Executive Directors
Sandile NomveteChief Executive Officer
Exec Dep. & Prop Dev. Prog. (Wits & UCT Business Schools)
Otis TshabalalaChief Operating Officer
Prop Dev. Prog, CCPP
Appointed: 7 June 2016
Shaneel MaharajChief Financial Officer
BCom (Acc) (Hons)(Univ. of Natal), CA(SA), HDipTax
Sandile cofounded Delta Property Fund in 2002, which would go on tolist on the Johannesburg Stock Exchange in 2012. He has since led thecompany to be a predominately sovereign under-pinned fund that isrepresented in all 9 of South Africa’s provinces, growing the value ofits asset base from R2,1 billion at the time of listing to its current valueof R11.4 billion.
Through his leadership, Sandile has managed to position Delta as oneof the most prominent black-owned and black-managed propertyfunds for government and state owned enterprises across SouthAfrica.
Sandile serves as a director on a number of other listed entities,including KAP Limited and GRIT Real Estate Income Group, where he isthe Executive Chairman of the latter. He has more than a decade anda half of experience in executive and non-executive positions.
He is a graduate of the Property Development Programme from theUniversity of Cape Town Graduate School of Business. He also holdsan Executive Development Programme and Finance for non-financialmanagers Diploma from the University of Witwatersrand’s GraduateSchool of Business.
Mr Otis Tshabalala was appointed as COO and an executive director of Delta with effect from 7 June 2016. Otis is a graduate of the Property Development Programme from the University of Cape Town and holds a CCPP from the University of Pretoria and holds several certificates in real estate. Apart from heading up the task team that manages Deltas account with the Department of Public Works, Otis has over 25 years’ experience in the commercial property sector, with more than 12 years spent in the property finance space at Absa Property Finance where he excelled as a Top Dealmaker prior to joining Delta as a Senior Asset Manager. He has a thorough understanding of the business and its strategy.
He is a key member of the team that grew Delta from listing with 20 properties to its current portfolio of 114 assets and has also been instrumental in assisting with Delta’s funding and capital raising.
Shaneel completed his BCom (Honours) degree at the University ofNatal and articled at Deloitte & Touche. He started his career withImperial Fleet Services followed by JSE-listed Cargo Carriers Limited,where he was the Group Financial Manager for three years beforeassuming the role as CFO. He spent six years as CFO of Cargo,assuming a significant role in its overall management including itssubsidiary companies within South Africa and sub-Saharan Africa.
Shaneel joined Delta in December 2015 as CFO assuming a strategicrole in Delta’s overall financial, procurement and IT management. Hewas appointed to the board at year end February 2016.
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
BOARD OF DIRECTORS53
Non-Executive directors
Independent Non-Executive Chairman
Committees: NRC* (Nomination)
Lead Independent Non-Executive DirectorAppointed 01 April 2017Appointed LID 30 June 2017
Committees: ARC*
Independent Non-Executive DirectorAppointed 01 June 2017
Committees: IC*
Non-Executive Director
Committees: NRC* (Remuneration), SETC
Independent Non-Executive Director
Committees: NRC, SETC*
Independent Non-Executive Director
Committees: IC, ARC
Non-Executive Director
Committees: NRC
Independent Non-Executive Director
Committees: IC, ARC
JBMagwaza
Mfundiso JJ Njeke
Caswell Rampheri
NoorayaKhan
DumoMotua
Nombuso Afolayan
Bronwyn Corbett
IanMacleod
Board CommitteesIC = Investment Committee, ARC = Audit, Risk and Compliance Committee, NRC = Nomination and Remuneration Committee, SETC = Social, Ethics & Transformation Committee* Denotes chairperson
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
DISPOSAL OF NON-CORE ASSETS
Property Sector Location GLA Sales price (R) Transfer Date
Transferred 27 362 254 100 000
Samora House Office - Sovereign Durban 6 920 45 300 000 07-Mar-17
Damelin Building Office - Other Durban 3 933 55 800 000 05-Jul-17
1 Ferreira Street Office - Other Nelspruit 961 11 300 000 20-Jun-17
3 Ferreira Street Office - Other Nelspruit 2 282 26 700 000 20-Jun-17
Presidia Office - Other Pretoria CBD 12 656 115 000 000 13-Oct-17
Sale agreements concluded 37 318 371 600 000*
Block G Office - Sovereign Pretoria CBD 7 992 225 800 000 End December 2017
14 New Street Office - Other Johannesburg CBD 2 463 16 800 000 End November 2017
Edcon Building Office - Other Johannesburg South 6 188 46 000 000 End December 2017
Top Trailers site 1 Industrial Wadeville, Johannesburg 15 741 50 000 000 End December 2017
Broadcast House Office - Sovereign Mthatha, Eastern Cape 4 934 33 000 000 Early November 2017
8 other non-core assets 61 464 707 900 000#
54
# Total book value at Aug 2017
54
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Forum Building
Location Pretoria
Sector*Office -
Sovereign
GLA 41,003 m2
Valuation R661 mil
Hallmark Building
Location Pretoria
Sector*Office -
Sovereign
GLA 26,255 m2
Valuation R407 mil
TOP 10 PROPERTIES
Poyntons
Location Pretoria
Sector*Office -
Sovereign
GLA 73,396 m2
Valuation R477 mil
Liberty Towers
Location Durban
Sector* Office - Other
GLA 40,080 m2
Valuation R402 mil
Delta Towers
Location Durban
Sector* Office - Other
GLA 41,677m2
Valuation R375 mil
55
* Building sector determined by majority occupation of a tenant type. Some buildings have different types in occupation
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
Embassy Building
Location Durban
Sector* Office - Other
GLA 32,829 m2
Valuation R347 mil
The Marine
Location Durban
Sector* Office - Other
GLA 24,655 m2
Valuation R313 mil
TOP 10 PROPERTIES | CONTINUED
Hensa Towers
Location Polokwane
Sector*Office -
Sovereign
GLA 13,675 m2
Valuation R341 mil
Delta Heights
Location Pretoria
Sector*Office -
Sovereign
GLA 19,122 m2
Valuation R279 mil
Phomoko Towers
Location Polokwane
Sector*Office -
Sovereign
GLA 13,058 m2
Valuation R270 mil
56
* Building sector determined by majority occupation of a tenant type. Some buildings have different tenant types in occupation
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
GLA AND VACANCY RECONCILIATION
Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%)
As at 28 February 2017 112 981,777 105,119 10.7%
Disposals (4) (14,785) (4,086)
Acquisitions - - -
Leases terminated - - 51,555
New letting of vacant space - - (42,433)
Adjustments – Commission House *
- 6,157-
Adjustments - 282 (106)
As at 31 August 2017 108 973,431 110,049 11.3%
57
* Commission House was previously moth-balled due to renovations, building now functional and occupied by DPW
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
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RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2017
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