for the six months ended 31 august 2016 · ›asdasdas sovereign underpinned jse listed reit 76.3%...
TRANSCRIPT
INTERIM RESULTS PRESENTATIONfor the six months ended 31 August 2016
SANDILE NOMVETEINTRODUCTION & HIGHLIGHTS
NPA Cape Town
3
INTRODUCTION TO DELTA
• Dsds
› asdasdasSovereign underpinned JSE listed
REIT
76.3%of revenue from
sovereign tenants
Dominant in
Pretoria &
Durban CBDs
Industry leading level 2
B-BBEEempowered property fund
Average property value of
R98.8m
Assets under management of
R11.8bnby 100% black-owned asset
manager
Market capitalisation# of
R5.3bnup from R3.5bn at 29 Feb 2016
# closing share price of R7.42 and 710,632,183 shares in issue as at 25 October 2016
4
HIGHLIGHTS SINCE LISTING
Rands (bn)
Investment Portfolio Growth
0
1
2
3
4
5
6
7
8
9
10
11
12
13
Nov-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16
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
5
CORPORATE HIGHLIGHTS OF PAST 6 MONTHS
Distribution growth of
7.1%Fifth consecutive period of growth
in half-year distribution
Vacancies largely unchanged at
9.2%(SAPOA average 10.5%)
Like-for-like net property income
growth of
5.2%in a challenging environment
Property portfolio now exceeds
1 million m2
in Gross Lettable Area
Gearing reduced to
41.0%(Feb 2016: 47.2%)
Reaffirmed GCR
Credit Ratingfor both Corporate (BBB+) and DCM
Secured Bond (A+)
6
31 August 2016 31 August 2015 29 February 2016Shares in issue 710,632,183 542,316,733 533,097,436
Market capitalisation R4.63 billion R4.45 billion R3.47 billion
NAV per share R9.86 R9.65 R10.61
No. of properties 115 85 100
Valuation of property portfolio R11.36 billion R9.08 billion R10.10 billion
Average value per property R98.78 million R106.82 million R101.00 million
Gross lettable area 1,003,028 m² 723,929 m² 813,505 m²
Tenant Sectorial profile (GLA) Office - Sovereign: 71.1% Office - Sovereign: 65.4% Office - Sovereign: 67.5%
Office - Other: 19.0% Office - Other: 23.5% Office - Other: 21.4%
Industrial: 6.8% Industrial: 4.1% Industrial: 3.9%
Retail: 3.1% Retail: 7.0% Retail: 7.2%
Vacancy rate 9.2% 8.4% 9.0%
Weighted average rent (per m2) R102.69 R101.49 R102.89
Weighted Average Lease Expiry # (years) 2.0 2.7 2.3
Weighted average in force escalation 7.1% 7.9% 7.8%
Loan to value 41.0% 46.0% 47.2%
Fixed % 84.1% 79.0%* 83.5%
Weighted Average Cost of Debt 9.0% 8.1% 8.8%
SNAPSHOT
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
* Restated with revolver facilities excluded# By revenue
SHANEEL MAHARAJFINANCIAL REVIEW
Delta Towers, Durban
8
FINANCIAL HIGHLIGHTS OF PAST 6 MONTHS
• Dsds
› asdasdasGearing reduced to
41.0%(Feb 2016: 47.2%)
Net cost to income ratio
10.2%(Feb 2016: 12.2%)
Interest cover ratio maintained
2.38(Feb 2016: 2.38, Aug 2015: 2.16)
Fixed debt of
84.1%(Feb 2016: 83.5%)
Successfully refinanced or settled
R832mof debt
Property operating margin
maintained at
72.7%in tough economic environment
9
FINANCIAL REVIEW
31 Aug 2016 31 Aug 2015 29 Feb 2016
Revenue (R’000) 757,292 587,160 1,247,582
Net property income (R’000) 550,585 429,142 925,531
Finance costs (R’000) (228,638) (194,701) (412,713)
Cost to income ratio (net / gross) 10.2% / 27.2% 11.4% / 27.3% 12.2% / 26.4%
Investment property (R’000) 11,357,790 9,082,064 10,095,181
Listed securities - Mara Delta (R’000) 459,435 386,192 472,546
Borrowings (R’000) 5,004,118 4,570,263 5,094,310
Gearing level 41.0% 46.0% 47.2%
Interest cover ratio 2.38 2.16 2.38
Weighted average interest rate 9.0% 8.1% 8.8%
Average debt expiry period (years) 2.1 2.6 2.3
Average debt fix expiry period (years) 2.1 1.9 2.1
Fixed % 84.1% 79.0% * 83.5%
Net asset value per share R9.86 R9.65 R10.61
* Figures restated to exclude revolver facilities
10
DISTRIBUTABLE INCOME STATEMENT
R’000 H1 Aug 16 H1 Aug 15 FY2016Change %
(H1’16 vs H1’15)
Net property income (excl. straight line accrual) 550,526 420,484 898,581 30.9%
Administration expenses (41,330) (36,366) (82,744) 13.7%
Realised foreign exchange loss 112 0 (39) -
Net finance costs (215,055) (180,657) (379,979) 19.0%
Dividend received - Mara Delta 18,851 14,057 36,779 34.1%
Sundry income 15 6,080 7,266 (99.8%)
Antecedent interest - 9,010 9,010 (100.0%)
Retained distributable earnings - - (912) -
Distributable income for the period 313,119 232,608 487,962 34.6%
Number of shares in issue 710,632,182 542,316,733 533,097,436 31.0%
Number of shares entitled to distribution 681,722,806 542,316,733 533,097,436 25.7%
Distribution per share (cents) 45.93 42.89 90.79 7.1%
11
GROWTH IN DISTRIBUTIONS
Cents / share
Historic distribution per share
23.69
32.51
40.18
72.69
40.01 44.05
84.06
42.89
47.90
90.79
45.93
-
20.00
40.00
60.00
80.00
100.00
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 FY2017(target)
15.6%
9.6%7.2%
23.1%
8.7%7.1%
7 - 7.5%
8.0%
H2
45.93
H1
12
DISTRIBUTABLE EARNINGS BRIDGE
232,608
34,417
95,6254,794 (9,010)
(34,286)
(4,964)
(6,065)313,119
H1 Aug 2015 Existingportfolio
Acquisitions Dividendsreceived
(Mara Delta)
Antecedentdividend
Net financecosts
Admin costs Other income H1 Aug 2016
200,000
220,000
240,000
260,000
280,000
300,000
320,000
340,000
360,000
380,000
R’000
13
LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS
Description Amount (R) %
Net Property Income (NPI) Aug 2015 420,484,000
Increased NPI from base portfolio held at 31 Aug 2015 34,417,000 8.2%
NPI attributable to acquisitions post 31 Aug 2015 95,625,000 22.7%
NPI Aug 2016 550,526,000 30.9%
Increased NPI from base portfolio held at 31 Aug 2015 34,417,000
Time weighting of acquisitions concluded in H1 Aug 2015 (12,564,000)
Like-for-like increase in NPI 21,853,000 5.2%
14
STATEMENT OF FINANCIAL POSITION
R’000 31 Aug 2016 31 Aug 2015 29 Feb 2016Change %
(Aug’16 vs Feb’16)
Assets
Non-Current assets 10,567,801 9,227,782 9,085,759 16.3%
Investment property 10,155,844 8,816,434 8,684,700 16.9%
Fair value of property portfolio 9,969,666 8,633,026 8,500,183 17.3%
Straight line rental income accrual 186,178 183,408 184,517 0.9%
Investment in associate 403,954 406,825 383,327 (5.4%)
Other non-current assets 8,003 4,523 17,732 (54.9%)
Current assets 506,280 456,639 519,113 (2.5%)
Non-current assets held for sale 1,201,946 265,630 1,410,481 (14.8%)
Total assets 12,276,027 9,950,051 11,015,353 (11.4%)
Equity and liabilities
Total Equity 7,007,810 5,231,003 5,656,629 23.9%
Total Liabilities 5,268,217 4,719,048 5,358,724 (1.7%)
Non-current liabilities 4,039,368 3,783,115 3,610,815 11.9%
Current liabilities 1,228,849 935,933 1,747,909 (29.7%)
Total equity and liabilities 12,276,027 9,950,051 11,015,353 11.4%
NAV per share R9.86 R9.65 R10.61 (7.1%)
15
NAV BRIDGE
10.61
1.80
0.40 0.040.03 (2.65)
(0.36)
(0.01) 9.86
29 Feb 2016 Assets acquiredthrough
acquisitions netof debt raised
Remainingimpact fromoperations
Revaluation offinancial
instruments &forex gains
Contribution ofassociate
Issue of sharesfor acquisitions
Dividend paid Disposals 31 Aug 2016
9.50
10.00
10.50
11.00
11.50
12.00
12.50
13.00
Rands
16
DEBT SUMMARY
As at 31 August 2016
Facility Type R’ m Weighted Ave. Rate Weighted Ave. Term
Floating bank facilities 2,913 9.0% 2.1
Fixed bank facilities 796 8.9% 1.7
Revolving bank facilities 640 9.4% 3.9
Total bank facilities 4,349 9.1% 2.3
DMTN programme - floating 587 9.0% 0.5
Vendor loans 15 9.5% 0.3
Total borrowings, net of accrued interest 4,951 9.1% 2.1
Accrued interest 53
TOTAL 5,004
Total fixed bank facilities 796 8.9% 1.7
Interest rate swap contracts 2,582 7.9% 2.2
Cross currency swaps 225 Libor + 2.9% 0.8
Total fixed 3,603 2.1
Fixed % and total weighted average cost of debt: 84.1% 9.0%
Interest Cover Ratio: 2.38
Loan to Value Ratio: 41.0%
17
GRAPHICAL DEBT ANALYSIS
84.3%
11.9%
3.5% 0.3%
Sources of Debt
ZAR Banking Facilities (R4,174m) DMTN Programme (R587m)
USD Banking Facilities (R175m) Vendor Loans (R15m)
Total: R4,951m
71.7%
22.1%
6.2%
Fixed Debt Breakdown
Swap Contracts (R2,582m) Fixed Banking Facilities (R796m)
Cross Currency Swaps (R225m)
Total: R3,603m
58.9%
16.1%
12.9%
9.3% 2.5%
0.3%
Debt Classification
Floating Bank Facilities (R2,913m) Fixed Bank Facilities (R796m)
Revolving Bank Facilities (R640m) Secured Bonds (R462m)
Unsecured Com. Paper (R125m) Vendor Loans (R15m)
Total: R4,951m
59.2%
17.6%
11.9%
5.7%3.5%
1.8%
0.3%
Financier Split
Nedbank (R2,930m) Standard Bank (R872m)
Debt Capital Markets (R587m) Investec (R283m)
Bank of China (R175m) Sanlam Capital Markets (R89m)
Vendor Loans (R15m)
Total: R4,951m
18
DEBT EXPIRY PROFILE
-
200
400
600
800
1,000
1,200
28-Feb-17 28-Feb-18 28-Feb-19 29-Feb-20 28-Feb-21 28-Feb-22
DMTN Programme Fixed Bank Facilities Floating Bank Facilities
Revolving Bank Facilities Vendor Loans Swap Contracts
R mil
19
DEBT COMMENTARY
• Cost of debt significantly increased across the industry in last 12 months
• Liquidity in Debt Capital Markets has reduced for smaller funds such as
Delta, and sentiment towards government has exacerbated this constraint
• Nonetheless, Delta has
› Successfully refinanced or settled R832m in vanilla and DCM debt
› Managed to further reduce LTV to 41.0% (Feb’16: 47.2%)
› Increased fixed debt to 84.1% (Feb’16: 83.5%) by concluding R360m in
swaps at weighted average base rate of 8.05%
› Maintained similar average debt expiry and average fix expiry metrics
of 2.1 (Feb’16: 2.3) and 2.1 (Feb’16: 2.1)
› Significant progress achieved in refinancing of DLTB02 Secured Bond of
R462m.
OTIS TSHABALALAPORTFOLIO REVIEW
SARS Randburg
21
PORTFOLIO BREAKDOWN
Office -Sovereign *
Office -Other
Industrial Retail Total
Number of properties 86 23 3 3 115
Gross lettable area (m2) 725,984 213,787 39,541 23,716 1,003,028
Vacancy (%) 7.3% 12.6% 28.8% 3.4% 9.2%
Value R8.55bn R2.22bn R0.18bn R0.26bn R11.36bn
Average rental (R/m2) 110.05 87.30 48.86 78.16 102.69
Weighted ave. escalation (%) 7.1% 7.4% 8.0% 7.4% 7.1%
Weighted ave. lease expiry (by revenue) - by building type
1.8 years 1.8 years 3.1 years 9.0 years 2.0 years
Weighted ave. lease expiry (by revenue) - tenant specific #
1.9 years 1.9 years 2.6 years 3.2 years 2.0 years
Cost to income ratio (net) 8.8% 19.9% 17.5% 18.4% 10.2%
Cost to income ratio (gross) 25.1% 39.9% 36.4% 40.3% 27.3%
* Multi-tenant buildings are classified according to majority tenant type. Office - Other buildings therefore contain a minority element of Sovereign tenants# This classification looks specifically at the tenant type within each building
22
SECTORAL SPLIT
GLA - by building
Office - Sovereign (72.4%)
Office - Other (21.3%)
Industrial (2.4%)
Retail (3.9%)
GLA - by tenant *
Office - Sovereign (71.1%)
Office - Other (19.0%)
Retail (6.8%)
Industrial (3.1%)
Rental - by building
Office - Sovereign (79.2%)
Office - Other (17.4%)
Retail (1.9%)
Industrial (1.5%)
Rental - by tenant
Office - Sovereign (76.3%)
Office - Other (15.3%)
Retail (6.9%)
Industrial (1.5%)
*Excludes vacancies. Analysis focuses on what category the specific tenant falls into, rather than the category of the building
23
DETAILED TENANT BREAKDOWN
71.1%
19.0%
6.8%
3.1%
40.4%
14.7%
11.8%
4.2%
Tenant Profile by GLA
Office - Sovereign Office - Other
Retail Industrial
76.2%
15.4%
6.9%
1.5%
39.94%
20.11%
11.73%
4.53%
Tenant Profile by Rental
National Government Provincial Government
Local Government State-Owned Enterprise
Excludes vacancies. Total occupied GLA = 911,086 m2
24
UPDATE ON SOVEREIGN TENANTS
• 2nd dispensation (3 year terms, 5.5% escalations) ends in March 2017
• DPW in conjunction with National Treasury have gone on roadshows during October 2016 to communicate the new leasing framework going forward
• Highlights of framework at this stage:› Occupy appropriate space at market related rentals
› Longer term leases for empowered tenants on a sliding scale
› Coordinated engagement from DPW, Treasury and user departments with financial institutions, SAPOA, SABIPP and business
› Standardisation of lease agreements and office specifications
› Roll out of automated payment system to make payments more efficient
› Concession from DPW to continue servicing rental payments on month-to-month and expired leases
• The Property Management Trading Entity continues to recruit suitably qualified property professionals to improve delivery
25
UPDATE ON SOVEREIGN TENANTS
• What this means for Delta:
• Ongoing improved and effective communication
• Providing long term leases for empowered landlords on a sliding scale
› Indicatively, a 100% empowered company (incl. Mancos) = 9 year 11
month lease, 50% empowered = 5 year lease
› Delta would thus qualify for long term leases
› This would enable ongoing CAPEX investments and improvements
• Delta well placed to provide the appropriate accommodation to government
› At market related rentals
› In the nodes that government strategically wish to occupy
26
LEASING
Total leases concluded 1 March 2016 - 31 August 2016
No of Leases
Total Area (m2)
W.A. Expiry Rate (R / m2) *
W.A. Achieved Rate (R / m2) *
ReversionW.A. Esc. achieved
Renewed leases (expiring FY Feb2017) 69 48,866 118.59 108.15 (8.8%) 7.3%
Renewed leases (expiring FY Feb2018) 8 10,949 85.85 81.04 (5.6%) 6.0%
Total renewals concluded 77 59,815 112.60 103.74 (7.9%) 7.0%
*All rentals quoted are gross rentals
Renewals by Sector
Sector No of Leases Total AreaW.A. Term(months)
W.A. Expiry Rate / m2 *
W.A.Achieved
Rate / m2 * Reversion
W.A. Esc. achieved
National government - Nelspruit 10 16,711 36.00 114.34 89.58 (21.7%) 6.0%
National government - all other 4 8,913 36.00 104.32 92.61 (11.2%) 6.0%
National government - subtotal 14 25,624 36.00 99.10 78.18 (21.1%) 6.0%
Provincial government 1 4,975 36.00 121.08 110.00 (9.1%) 7.5%
Local government 1 3,035 36.00 96.45 85.00 (11.9%) 7.5%
State-owned enterprise 3 14,584 48.95 90.43 92.93 + 2.8% 8.0%
Office - other 30 7,585 25.40 112.02 96.49 (13.9%) 7.8%
Retail 28 4,012 44.35 207.09 238.57 + 15.2% 7.7%
Total 77 59,815 38.50 112.60 103.74 (7.9%) 7.1%
27
LEASING - OUTLOOK
Anticipated sovereign renewals - leases on month-to-month or expiring by 28 February 2017
Sector No of Leases Total AreaW.A. Proposed
Rate / m2 *W.A. Expiry Rate / m2 *
Reversion
leases on month-to-month or expiring by 28 February 2017
National government 22 116,114 103.88 98.78 + 5.2%
Provincial government 16 67,910 109.56 121.40 (9.8%)
Local government 1 21,339 115.00 121.56 (5.4%)
State-owned enterprise 7 28,601 98.56 122.60 (19.6%)
Total 46 233,965 104.71 109.03 (4.0%)
Leases expiring in March 2017
National government 14 70,080 97.14 88.67 + 9.6%
Provincial government 1 297 100.00 104.02 (3.9%)
Total 15 70,377 93.27 85.20 + 9.5%
Grand Total 61 304,341 102.07 100.52 + 1.4%*
All rentals quoted are gross rentals
28
LEASE EXPIRY PROFILE AT 31 AUGUST 2016
Total portfolio - by GLA
Vacant (9.2%) Month-to-month (16.7%)
28 Feb 17 (11.5%) 28 Feb 18 (23.6%)
28 Feb 19 (12.0%) 29 Feb 20 (8.1%)
28 Feb 21 (11.4%) Beyond 28 Feb 2021 (7.5%)
Total portfolio - by rental
Month-to-month (18.1%) 28 Feb 17 (12.6%)
28 Feb 18 (23.1%) 28 Feb 19 (15.9%)
29 Feb 20 (9.7%) 28 Feb 21 (12.3%)
Beyond 28 Feb 2021 (8.4%)
29
GEOGRAPHICAL AND GRADE SPLIT
GLA - by buildingGauteng (43.3%)
Kwazulu-Natal (29.2%)
Free State (8.5%)
Limpopo (4.5%)
Western Cape (4.2%)
Northern Cape (4.0%)
Mpumalanga (3.3%)
Eastern Cape (2.4%)
North West (0.6%)
Rental - by buildingGauteng (43.8%)
Kwazulu-Natal (23.9%)
Limpopo (9.0%)
Free State (7.2%)
Western Cape (4.9%)
Northern Cape (4.4%)
Mpumalanga (3.5%)
Eastern Cape (2.8%)
North West (0.5%)
Office grade – by rental
A (26.3%)
B (73.7%)
Office grade - by GLA
A (20.6%)
B (79.4%)
30
GOVERNMENT PRECINCT - PRETORIA
31
NODAL ANALYSIS - PRETORIA
1 – 9: Delta owned properties 10: ABSA Towers 11: Momentum building 12: Treasury
13: Telkom Towers 14: CGI Building (DPW Head Office) 15: AVN Building (DPW occupied) 16: State Theatre
17: Sammy Marks Shopping Centre 18: Intended new municipal HQ
32
NODAL ANALYSIS - DURBAN
1 – 14: Delta owned properties 15: Durban International Convention Centre 16: Durban City Hall 17: Workshop Mall (Old Railway Workshop)
18: Durban Marina 19: SAHARA Park Kingsmead 20: South Beach 21: Redefine Towers
22: Commercial City Building 23: Durban Bay House
33
NODAL ANALYSIS - BLOEMFONTEIN
1 – 13: Delta owned properties 14: Hoffman Square 15: Sand du Plessis Theatre 16: Waterfront Mall
17: Loch Logan 18: Appeal Court 19: “Fourth” Raadsaal 20: Bloemfontein City Hall
21: CR Swart Building 22: Lebohang Building 23: Bram Fisher Building 24: Liberty Life Building
34
ACQUISITIONS
• Strategy is to continue to (opportunistically) focus on
› Significant assets (> R100m)
› Underpinned by (or have potential for) long term sovereign leases
› Located in nodes attractive to sovereign tenants
• Past 6 months:
› Transferred 17 assets
› Aggregate purchase price of R1.34 bn
› Weighted average yield of 13.1%
› GLA of 199,355 m2
35
ACQUISITIONS - REDEFINE PORTFOLIO UPDATE
• Rationale:
› Yield accretive at 13.3%
› Enhanced presence in nodes of Jhb, Pta, Dbn where Delta has existing exposure and representation
› Provided opportunity to decrease LTV through 100% share issuance
› Delta best placed to extract value from a sovereign portfolio
• Leasing:
› 4 year renewal at 17 Harrison Street: 11,627m2, R101.23 / m2, 8% esc
› 113,390m2 In advanced negotiations
• CAPEX:
› Refurbishments largely lease dependant
› Commitment of R14.2m made for 17 Harrison Street
36
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 6 months:
› Transferred Tembisa Megamart
– R206m, 9% yield, transfer date 25 Aug 2016
› 10 assets subject to signed sale agreements
– R578.1m, certain assets lodging imminently, others have various conditions
precedent still to be met, disposal yields between 10 - 10.5%
• Delta will continue to dispose of non-core assets with a rational approach to
capital allocation in line with investment strategy
OTIS TSHABALALACAPEX
CMH Durban
38
REDEVELOPMENT STRATEGY
• Delta to deploy CAPEX into portfolio
› Enhancing earnings and value uplift
› Securing long term stable returns
› Provide competitive offering and excellent accommodation to tenants
• Identify assets where greatest value can be added, through value enhancing developments,renewal of long term leases and activation of under-utilised area or available bulk
• Three tier approach to CAPEX
› Defensive
› Tenant installation
› Project specific
• Original FY2017 budget of R294m (including projects on next slide)
› H1 spend = R107m
› Budget for remainder of FY2017 = c.a. R187m, majority of which is lease dependant
39
Property 88 FieldCommission
HouseEmbassy Building
Beacon Hill Pine ParkadeIsivuno House
Shell House
Approved budget
89,400,000 28,250,000 21,843,000 40,000,000 40,800,000* 77,000,000* 43,800,000*
Spent in FY2016 39,728,783 11,118,424 7,982,801 - - - -
Spent in H1 2017 34,897,889 6,238,873 11,211,758 832,000 - - -
Budget for H2 2017
14,773,328 3,812,446 2,648,441 4,200,000 4,402,000 4,235,000 4,500,000
Remaining budget
- 7,080,257 - 34,968,000 36,398,000 72,765,000 39,300,000
Description
Internal refurbishment of tenanted floors for DPW
Internal refurbishment
Façade Upgrade
Internal refurbishment of tenant space
Refurbishment of parking and retail offeringincluding improved tenant mix
* Subject to leasing
Internal refurbishment of tenant space for Tshwane council
* Subject to leasing
Internal refurbishment of tenant space for Ethekwini council
* Subject to leasing
CAPEX - EXISTING PORTFOLIO
SANDILE NOMVETECONCLUSION
Hensa Towers, Polokwane
41
MARA DELTA
• Shareholding 23.9% at 31 August 2016
› valued at R459m1 at Aug 2016
› R18.8m included in H1 2016 distribution from Jan - Jun 2016 dividend
• Delta in process of migrating its Mara Delta holding to SEM
› Shares trading on JSE @ R19.25, and on SEM @ $1.74 as at 31 Aug 2016
› Value would be = R573.5m2 compared to R459m
• Delta strategy
› Maintain current levels, without following rights in the short term
› Delta is cognisant of its own liquidity, the investment will be assessed on an
ongoing basis
1 JSE share price of R19.25. 23,866,776 shares held 2 At rate of 1 USD : ZAR 13.81
42
CONCLUSION
Executive & senior management changes Completed
• CFO: Shaneel Maharaj appointed Dec 2015• COO: Otis Tshabalala promoted from Head of Investments June 2016• Head of Capital Projects: Andries Schoeman appointed Dec 2015• Operations: Sandra Mqina now Head of Operations• Enriched non-executive expertise at Board level
Strengthening of balance sheet Significant progress made
• Gearing reduced to 41.0%, on track to reduce LTV < 40% • Credit rating maintained• Work continues to refinance / term out / settle debt• Significant progress in refinancing R462m secured note• Progress made with disposal of non-core assets and capital being recycled and
allocated more effectively
43
CONCLUSION
Sovereign leasing Progress made, ongoing task
• Difficult environment, HOWEVER most leasing ever concluded in a 6 month period• Significant work done to educate market on sovereign tenants’ leasing policies,
renewals expected to pick-up after policy announcement in April 2017• Delta remains competitive, with well founded relationships (DPW Task Team) and
able to offer an attractive product at market rentals
Strategy Progress made, ongoing task
• Continued to focus internally and bed down recently acquired portfolios• Focused asset management and CAPEX spend on buildings to maintain and enhance
valuations of properties• Acquisitions have been in line with Sovereign focus, will continue to grow
opportunistically in line with strategy
Outlook
• Delta’s defensive portfolio is well positioned to withstand tough economic conditions• On track to meet full year distribution forecast
THANK YOUQ&A
142 - 144 4th Street Parkmore
Embassy Building, Durban
ANNEXURES
46
ANNEXURES
› Board of directors
› Shareholder profile
› Acquisitions
› Disposals
› Top 10 properties by value
› GLA and vacancy reconciliation
› Income and expense components
› Property operating expenses breakdown
› Profitability metrics
› Detailed lease expiry tables and graphs
47
EXECUTIVE MANAGEMENT
Executive Directors
Sandile NomveteChief Executive OfficerExec Dep. & Prop Dev. Prog. (Wits & UCT Business Schools)
Sandile co-founded Motseng InvestmentHoldings which eventually became theempowerment partner to Marriot PropertyGroup. A series of mergers and acquisitionswithin the sector provided the opportunity forMotseng to become the largest 100% black-owned property management company inSouth Africa.Sandile serves as a director on a number ofother listed entities, including KAP Limited. Hehas nearly a decade and a half of experience inexecutive and non-executive positions.Sandile is a graduate of the PropertyDevelopment Programme from the Universityof Cape town Graduate School of Business, andholds an Executive Development Programmeand Finance for non-financial managersDiploma from the University of WitwatersrandGraduate School of Business.
Shaneel MaharajChief Financial OfficerBCom (Acc) (Hons) (Univ. of Natal), CA(SA), HDipTax
Shaneel is a Chartered Accountant with overfifteen years work experience. He graduatedfrom the University of Natal and completed hisarticles at Deloitte and Touche. He started hiscareer in 2002 with Imperial Fleet Services headoffice and progressed to Financial Manager ofits Government Business Unit. Shaneel thenjoined Cargo Carriers Limited in 2006 as GroupFinancial Manager and played an integral role inthe restructure and growth within thebusiness. He was appointed to the board ofCargo Carriers as Financial Director in2009. Shaneel joined Delta Property Fund inDecember 2015, bringing with him a wealth ofexperience and excellent track record ofstakeholder engagement, relationship building,effectively managing the treasury function andimplementing new systems.
Otis TshabalalaChief Operating Officer Prop Dev. Prog, CCPP
Appointed: 7 June 2016
Mr Otis Tshabalala has been appointed as COOand an executive director of Delta with effectfrom 7 June 2016. Otis is a graduate of theProperty Development Programme from theUniversity of Cape Town and a CCPP from theUniversity of Pretoria and also has severalcertificates in real estate. Apart from headingup the task team that manages Deltas accountwith the Department of Public Works, Otis hasover 24 years’ experience in the commercialproperty sector, with more than 12 years spentin the property finance space.
He is a key member of the team that grew Deltafrom listing with 20 properties to its currentportfolio of 116 assets and has also beeninstrumental in assisting with Delta’s fundingand capital raising.
48
Bronwyn CorbettNon-Executive Director
Non-Executive status as of 07 June 2016
Nombuso AfolayanIndependent
Non-Executive DirectorCommittees: IC
Marelise de Lange Independent
Non-Executive DirectorCommittees: IC, ARC
Ian MacleodIndependent
Non-Executive Director
Committees: IC, ARC
BOARD OF DIRECTORS - CONTINUED
JB MagwazaIndependent
Non-Executive Chairman
Committees: NRC*, SETC
Nooraya KhanLead Independent
Non-Executive Director
Committees: IC, ARC*, NRC
Non-Executive directors
Board Committees
IC = Investment Committee, ARC = Audit, Risk and Compliance Committee, NRC = Nomination and Remuneration Committee, SETC = Social, Ethics & Transformation Committee* Denotes chairperson
Andrew KonigNon-Executive Director
Appointed 01 April 2016
Dumo MotuaIndependent
Non-Executive Director
Committees: NRC, SETC*
49
SHAREHOLDER PROFILE
As at Aug 2016 Units held Holding
Redefine Properties 162 043 079 22.80%
Coronation Fund Managers 76 283 121 10.73%
Stanlib Asset Management 60 639 223 8.53%
Grindrod Asset Management 57 593 038 8.10%
Public Investment Corporation 52 541 118 7.39%
Sanlam Investment Management 49 779 210 7.00%
Kagiso Asset Management 35 614 217 5.01%
Investec Asset Management 28 094 644 3.95%
Directors Holdings 26 361 707 3.71%
Absa Asset Management 7 568 555 1.07%
Prudential Investment Managers 7 032 544 0.99%
Eskom Pension & Provident Inv. Management 5 955 740 0.84%
Subtotal 569 506 196 80.14%
Other 141 125 986 19.86%
Total 710 632 182 100.00%
50
ACQUISITIONS - DETAIL
Property name Location Sector GLA m2 TenancyRent/
m2Vacancy
Purchase Price
2 Devonshire Place Durban Office - Sovereign 8,123 Single 76.39 0.61% 39,000,000
17 Harrison Street & Kay St Parking Johannesburg Office - Sovereign 12,379m2 & 61 bays Single 96.82 0.96% 87,600,000
Commissioner House Bellville Cape Town Office - Sovereign 4,019 Single 110.26 0.00% 40,000,000
Domus Pretoria Office - Other 5,443 Multi 79.17 16.39% 41,600,000
Hatfield Forum East Pretoria Office - Other 6,390 Multi 58.14 15.81% 44,000,000
Hollard House & Parkade Johannesburg Office - Sovereign 10,415 Single 72.14 8.90% 72,600,000
Isivuno House Pretoria Office - Sovereign 23,694 Single 102.75 0.00% 227,000,000
Nosa Pretoria Office - Sovereign 3,770 Single 91.49 0.00% 24,000,000
Pine Parkade Durban Retail / Parking 2,985m2 & 1430 bays Multi 141.76 20.36% 71,000,000
Poyntons Pretoria Office - Sovereign 73,187 Single 75.92 7.96% 352,000,000
Shell House Durban Office - Sovereign 14,022 Single 99.15 0.00% 90,236,460
Shorburg Pretoria Office - Other 15,041 Multi 73.2 8.84% 89,800,000
Standard Bank Nelspruit Nelspruit Office - Other 2,374 Multi 123.76 0.00% 24,200,000
Treasury House Pietermaritzburg Office - Other 9,764 Multi 89.93 0.89% 52,797,400
191,606 1,255,833,860
Standard Bank Nelspruit UNISA Nelspruit Office - Sovereign 5,589 Multi 91.21 32.30% 34,782,050
Bldg 3, Silver Stream Business Park Bryanston Office - Other 2,160 Multi 134.02 0% 44,648,511
Total 199,355 1,335,264,421
51
DISPOSAL OF NON-CORE ASSETS
Property Sector Location GLA Sales price (R) Transfer Date
Transferred 14,025 206,000,000 22 Aug 2016
Tembisa Retail Midrand 14,025 206,000,000
Sale agreements concluded 67,883 578,100,000*
Block G Office - Sovereign Pretoria CBD 7,992 225,800,000 End Nov 2016
Presidia Office - Other Pretoria CBD 12,656 115,000,000 End Nov 2016
Damelin Building Office - Other Durban CBD 3,933 55,800,000 End Nov 2016
Top Trailers site 1 Industrial Wadeville, Johannesburg 15,741 50,000,000 End Nov 2016
Broadcast House Office - Sovereign Mthatha, Eastern Cape 4,934 33,000,000 Early Nov 2016
3 Ferreira Street Office - Other Nelspruit 2,28238,000,000
End Nov 2016
1 Ferreira Street Office - Other Nelspruit 961 End Nov 2016
Thema Thumo Office - Sovereign Kimberley 2,396 28,500,000 Early Nov 2016
Top Trailer Site 2 Industrial Wadeville, Johannesburg 12,623 23,000,000 End Nov 2016
Protea Coin Durban Office - Other Durban 4,365 9,000,000 Early Nov 2016
8 other non-core assets 52,845 587,781,000 #
* Aggregate disposal yield of 10.3%# Total book value at Feb 2016
52
TOP 10 PROPERTIES (BY VALUE)
Forum Building Hallmark Building Liberty Towers Delta Towers
Location Pretoria Location Pretoria Location Durban Location Durban
SectorOffice -
SovereignSector
Office -Sovereign
SectorOffice -
OtherSector
Office -Other
GLA 41,003 m2 GLA 26,255 m2 GLA 40,095 m2 GLA 40,958m2
Vacancy Nil Vacancy Nil Vacancy 3.5% Vacancy 31.2%
Valuation R660 mil Valuation R410 mil Valuation R395 mil Valuation R358 mil
53
TOP 10 PROPERTIES - CONTINUED
Poyntons Hensa Towers Embassy Building The Marine
Location Pretoria Location Polokwane Location Durban Location Durban
SectorOffice -
SovereignSector
Office -Sovereign
SectorOffice -
SovereignSector
Office -Other
GLA 73 396m2 GLA 13,675 m2 GLA 32,781 m2 GLA 24,655 m2
Vacancy 8.9% Vacancy Nil Vacancy 27.9% Vacancy 23.1%
Valuation R352 mil Valuation R343 mil Valuation R325 mil Valuation R304 mil
54
TOP 10 PROPERTIES - CONTINUED
Delta Heights Phomoko Towers
Location Pretoria Location Polokwane
SectorOffice -
SovereignSector
Office -Sovereign
GLA 19,122 m2 GLA 13,058 m2
Vacancy 1.8% Vacancy Nil
Valuation R275 mil Valuation R262mil
55
GLA AND VACANCY RECONCILIATION
Properties(No.)
Total GLA (m2)
Vacant GLA (m2)
Vacancy(%)
As at 29 February 2016 100 813,505 73,016 8.98%
Disposals (1) (14,025) (1,065)
Acquisitions 17 199,355 12,653 6.85%
Leases terminated - - 16,238
New letting of vacant space - - (10,860)
Adjustments - CMH Building 1 - 6,412 -
Adjustments - Other (1) (1,726) 1,960
As at 31 August 2016 115 1,003,028 91,942 9.17%
1 The CMH building was incorrectly measured at 29 February 2016. Area of 6,412 m2 was originally accounted for as parking, however, this in fact space occupied by the CMH dealership as part of their showroom. The entire GLA of the building is thus 13,091 m2 compared to 6,679 m2 as at 29 February 2016
56
INCOME AND EXPENSE COMPONENTS
Income
Contractual rental income - R757.2m
Foreign exchange profit- R18.4m
Interest income - R 13.6m
Expense
Property operating expenses - R206.7m
Administrative expenses - R41.3m
Finance costs - R228.6m
Share of loss in associate - R23.7m
57
PROPERTY OPERATING EXPENSES
142,357
25,453
14,454 6,098
5,161
4,235
3,781
3,258
953
957
(R'000s)
Municipal expenses (68.9%)
Service contracts (12.3%)
Property management and letting fees (7.0%)
Repairs and maintenance (3.0%)
Rental paid (2.5%)
Onsite staff costs (2.0%)
Other expenses (1.8%)
Insurance (1.6%)
Consumables (0.5%)
Provision for doubtful debts (0.5%)
58
PROFITABILITY METRICS
9%
20% 18% 17%
10%
25%
40% 40%36%
27%
85%
80%
75% 76%
86%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Office -Sovereign
Office -Other
Retail Industrial Total
Profitability per sector
Cost to Income Ratio (Net)
Cost to Income Ratio (Gross)
Municipal Recovery Ratio
49%
105%
90%
81%
11%
86%
0%
20%
40%
60%
80%
100%
120%
Municipal recoveries
RatesElectricityWater & EffluentRefuseLevies, meter reading and otherTotal
59
LEASE EXPIRY BY GLA AND RENTALTABULAR REPRESENTATION
Expiry Period GLA (m2) % Cumulative % Rental (%) Cumulative %
Vacant 91,942 9.2% 9.2% - -
Month to Month 167,339 16.7% 25.9% 18.1% 18.08%
28-Feb-17 115,447 11.5% 37.4% 12.7% 30.8%
28-Feb-18 236,823 23.6% 61.0% 23.1% 53.9%
28-Feb-19 120,106 12.0% 73.0% 15.9% 69.8%
29-Feb-20 81,742 8.1% 81.1% 9.6% 79.4%
28-Feb-21 114,158 11.4% 92.5% 12.3% 91.7%
Beyond 28 Feb 2021 75,472 7.5% 100.0% 8.3% 100.0%
Total 1,003,028 100% 100%
60
LEASE EXPIRY BY GLASECTORAL TABULAR REPRESENTATION
SectorMonth to
Month28 Feb 17 28 Feb 18 28 Feb 19 29 Feb 20 28 Feb 21
Beyond 28 Feb 2021
TOTAL
National Government 79,729 36,385 145,343 11,521 16,194 55,610 22,885 367,667
Provincial Government 43,439 24,471 297 30,434 5,754 8,865 21,043 134,303
Local Government 21,339 - 13,828 3,035 - - - 38,202
State-owned Enterprise 472 28,130 17,475 11,555 24,876 20,671 4,242 107,420
Total Sovereign 144,979 88,986 176,943 56,544 46,824 85,146 48,170 647,592
Other - Other 19,583 18,990 36,452 54,416 23,976 9,281 10,803 173,500
Retail 2,777 7,471 12,251 9,146 10,943 2,751 16,499 61,837
Industrial - - 11,177 - - 16,980 - 28,157
Vacant - - - - - - - 91,942
167,339 115,447 236,823 120,106 81,742 114,158 75,472 1,003,028
All units are square meters (m2)
61
LEASE EXPIRY PROFILE BY GLAGRAPHICAL REPRESENTATION
167,338
115,448
236,823
120,106
81,742
114,158
75,472
144,978
19,583
2,777
88,987
18,990
7,471
176,943
36,452
12,251 11,177
56,544
54,416
9,146
46,824
23,975
10,942
85,146
9,281
2,751 16,980
48,170
10,803 16,499
Sectoral Breakdown(Outer ring)
Office - sovereign(647,593)
Office - other(173,499)
Retail(61,838)
Industrial(28,157)
Total Portfolio(Inner ring)
Month to month (18.4%)
28-Feb-17 (12.7%)
28-Feb-18 (26.0%)
28-Feb-19 (13.2%)
29-Feb-20 (9.0%)
28-Feb-21 (12.5%)
Beyond 28 Feb 2021 (8.2%)
Excludes vacanciesTotal occupied GLA = 911,086 m2
62
LEASE EXPIRY PROFILE BY TENANT SECTOR
GLA - Office SovereignMonth to Month (22.4%)
28 Feb 17 (13.7%)
28 Feb 18 (27.3%)
28 Feb 19 (8.7%)
29 Feb 20 (7.2%)
28 Feb 21 (13.2%)
Beyond 28 Feb 2021 (7.4%)
Rental - Office SovereignMonth to Month (21.4%)
28 Feb 17 (13.0%)
28 Feb 18 (23.5%)
28 Feb 19 (12.8%)
29 Feb 20 (7.3%)
28 Feb 21 (13.5%)
Beyond 28 Feb 2021 (8.5%)
Rental - Office Other
Month to Month (9.1%)
28 Feb 17 (12.0%)
28 Feb 18 (19.0%)
28 Feb 19 (31.5%)
29 Feb 20 (17.1%)
28 Feb 21 (6.4%)
Beyond 28 Feb 2021 (4.9%)
GLA - Office General
Month to Month (11.3%)
28 Feb 17 (10.9%)
28 Feb 18 (21.0%)
28 Feb 19 (31.4%)
29 Feb 20 (13.8%)
28 Feb 21 (5.4%)
Beyond 28 Feb 2021 (6.2%)
63
LEASE EXPIRY PROFILE BY TENANT SECTOR
Rental - RetailMonth to Month (4.9%)
28 Feb 17 (13.2%)
28 Feb 18 (20.7%)
28 Feb 19 (18.7%)
29 Feb 20 (20.8%)
28 Feb 21 (5.5%)
Beyond 28 Feb 2021 (16.2%)
Rental - Industrial
Month to Month (0.0%)
28 Feb 17 (0.0%)
28 Feb 18 (58.0%)
28 Feb 19 (0.0%)
29 Feb 20 (0.0%)
28 Feb 21 (42.0%)
Beyond 28 Feb 2021 (0.0%)
GLA - Industrial
Month to Month (0.0%)
28 Feb 17 (0.0%)
28 Feb 18 (39.7%)
28 Feb 19 (0.0%)
29 Feb 20 (0.0%)
28 Feb 21 (60.3%)
Beyond 28 Feb 2021 (0.0%)
GLA - RetailMonth to Month (4.5%)
28 Feb 17 (12.1%)
28 Feb 18 (19.8%)
28 Feb 19 (14.8%)
29 Feb 20 (17.7%)
28 Feb 21 (4.4%)
Beyond 28 Feb 2021 (26.7%)