Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...

 
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
Domestic Medium Term Note
Conference Call
14 September 2017

www.vukile.co.za
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
AGENDA

         01   Profile & Strategic Direction

         02   Update on Group Debt

         03   Proposed Amendments to DMTN Programme

         04   Q&A

         05   Appendix
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
Profile
Who we are

    High quality, low risk, RETAIL REIT

    Strong OPERATIONAL focus

    Core competence in ACTIVE ASSET MANAGEMENT

    Prudent FINANCIAL MANAGEMENT and strong CAPITAL MARKETS EXPERTISE

    ENTREPRENEURIAL APPROACH to deal making

    Strong focus on GOVERNANCE and LEADERSHIP

    History of strong compounded growth and SHAREHOLDER RETURNS

    Growing INTERNATIONAL EXPOSURE focused on UK and Spain

    Listings on the JSE AND NSX

Domestic Medium Term Note Conference Call 14 September 2017              3
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
Strategic direction – New horizons
A platform for growth - building on an exceptional core retail portfolio

             Continued                                                                         Conservative balance
           South African                                  International expansion               sheet management
        retail asset strategy

  Focus on defensive retail                          Developed markets – Spain &          Disciplined and conservative
   sector in-line with our high-                       United Kingdom                        financial management with
   quality low risk portfolio                                                                stable LTV target around 35%
                                                      Predominately focused on
  Continue to invest in our                           retail but will evaluate other       Prudent interest rate policy to
   portfolio through expansions                        sectors                               hedge at least 75% of debt
   and upgrades
  Continue to invest in our                          Looking to invest into a holistic    Foreign exchange hedging
   systems and team to add value                       property strategy and create          policy to minimise adverse
   through our data-driven asset                       capacity on the ground with           foreign exchange fluctuations
   management approach                                 local market knowledge                by hedging forward on average
                                                                                             75% of foreign dividends by
  Looking       for      accretive                   Atlantic Leaf platform for            way of forward currency
   acquisitions,     developments                      growth in United Kingdom              swaps over a 3 year period
   and corporate opportunities
                                                      Castellana platform for growth
                                                       in Spain
Domestic Medium Term Note Conference Call 14 September 2017                                                                    4
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
Strong operational focus on asset management
Consistently repositioning and proactively enhancing our portfolio

Total Portfolio Market Value per m²
20,000                                    Property Sold       Stable Portfolio       Acquisitions since 2005         Average

15,000

10,000

 5,000

     -
            Mar-05     Mar-06       Mar-07       Mar-08   Mar-09      Mar-10     Mar-11     Mar-12      Mar-13     Mar-14      Mar-15      Mar-16   Mar-17

                                                                                                                                 9%

   Retail                                                 Retail                                          Retail
                     48%         2005           52%                        47%       2011                                                2017
                                                                                                  53%                                               91%
   Other                                                  Other                                           Other

                                R3.1 Bn                                  GAV        R5.4 Bn                                             R13.1 Bn

                             R2 949/m²                              Value/m²       R5 817/m²                                        R13 994/m²

                            R35m / prop                       Ave value/prop      R72m / prop                                      R196m / prop

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                  5
Domestic Medium Term Note Conference Call - 14 September 2017 www.vukile.co.za - Vukile ...
Analysis of group debt (as at 31 July 2017)
Well hedged with low risk expiry profile

                                                                                Policy                                         Actual

                                                              No more than 25% of total interest bearing
Maturities                                                                                                          Achieved and constantly managed
                                                              debt to mature within any one financial year

Hedging strategy                                               75% of interest bearing debt to be hedged                        92.6% *

                                                                                                                           28% DMTN debt
Target bank versus debt capital market funding ratio                 Diversified sources of funding                   45% South African Bank debt
                                                                                                                        27% Foreign Bank debt

                                                          Hold various facilities with multiple banks and
Multi-banked approach                                                                                           Currently 11 funders + DMTN programme
                                                                               lenders

                                                              Internal Management: Maximum LTV level of        Group LTV 36.2% (Current DMTN Definition)
LTV policy
                                                                                40%                            Southern Africa LTV 33.2%, Spain LTV 47.7%

DMTN Secured Portfolio                                                                        DMTN Secured Note LTV 30.95%

                                                             Properties in the Vukile Group Property
                                                                                                              Group LTV 32.2% (Proposed DMTN Definition)
Proposed LTV Ratio                                        Portfolio, on a consolidated basis + the market
                                                                                                               Southern Africa LTV 28.8%, Spain LTV 47.7%
                                                              value of equity accounted investments
* Excluding development loans and Corporate Paper

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                 6
Analysis of group debt (as at 31 July 2017) (cont.)
Well hedged with low risk expiry profile

                                                                             Policy                                        Actual

                                                              Minimise while maintaining hedging and                     Group 5.52%
Total cost of finance
                                                                            LTV policy                                   (ZAR 9.08%)

                                                              Endeavour to allocate fixed rate debt to
Fixed rate (swap) maturity profile                                                                                         3.0 years
                                                               mature between 3 years and 5 years

                                                              Fully backed by the committed revolving
Commercial Paper undertaking                                                                                               Achieved
                                                                           credit facilities

                                                                                                         Long term rating A (Rating outlook Positive)
                                                               Maintain “A” rating for Company and
Rating                                                                                                            and Short term rating A1
                                                                “AA” in respect of secured notes
                                                                                                                Secured long term rating AA+

                                                                    To include investments in:
                                                                      Atlantic Leaf (R763 mil);
Market value of equity accounted investments                          Gemgrow A (R46 mil);                                R2.1 Billion
                                                                      Gemgrow B (R815 mil); and
                                                                      Fairvest (R478 mil)

                                                                                                                          R477.3 million
                                                                     Moruleng Mall (80%) and
Value of unsecured assets                                                                                (R1.7 Billion of potential secured assets to be
                                                                    Tzaneen Maake Plaza (70%)
                                                                                                                   release from Bank Security)

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                7
Foreign exchange hedging policies
Continuing to maintain a conservative balance sheet

                                                                                                         Policy

Prudent approach                                                Minimise adverse foreign exchange fluctuations on Vukile’s earnings, assets and liabilities

Reduce currency risk                                                  Acquisition of foreign assets to be funded with foreign loans in same currency

                                                               On average 75% of foreign dividends to be hedged by way of forward currency swaps over a
Currency hedging strategy
                                                                                                     3 year period

Interest rate hedging on foreign debt                         75% of interest on foreign loans raised by Vukile to finance offshore acquisitions to be hedged

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                     8
Group debt profile (as at 31 July 2017)
Diversified sources of funding

Group Debt by Currency                                                                                       Sources of Group Debt

           9.08%                 2.22%                 3.10%                  5.52%

                                                                                                                                                                                             2 772
                                                                                6 180
   7,000                                                                                    10. 00%

                                                                                            9.0 0%
                                                                                                                                                                                        3% SCM
   6,000
                                                                                                                                                                                       4% Nedbank
                                                                                            8.0 0%
                                                                                                                                                                                           15%
                                                                                                                                                                                           RMB

                                                                                                                                                            1 749
   5,000
                                                                                            7.0 0%

                                                                                                                            1 659
                                                                                                                                                                                           19%
                                                                                            6.0 0%
                                                                                                                                                                                         Investec
   4,000

                                                                                                                       13% Banco
              2 911

                                    2 769

                                                                                            5.0 0%

                                                                                                                        Popular                          34%
                                                                                                                      14% Bankia                       Unsecured
   3,000                                                                                                                                                                                   29%
                                                                                            4.0 0%

                                                                                                                          19%                                                              ABSA
                                                                                                                          BBVA
                                                                                            3.0 0%

   2,000

                                                                                            2.0 0%
                                                                                                                         55%                               66%
                                                                                                                        Banco                            Secured                          31%
                                                          500

   1,000

                                                                                            1.0 0%
                                                                                                                     Santander &                                                     Standard Bank
                                                                                                                      Caixabank
      0                                                                                     0.0 0%

             ZAR               EUR #            GBP                           Total                               Foreign Funders #                      DMTN                       Local Funders *
                          Debt    Total cost of Debt (%)
                                                                                                              * Debt from local funders includes loans of GBP28.7m and EUR71.2m
# Debt in EUR includes consolidated debt from Castellana of EUR 106.4mil , which in non-recourse to Vukile    # Debt from foreign funders is consolidated debt from Castellana, which in non-recourse to Vukile
Domestic Medium Term Note Conference Call 14 September 2017                                                                                                                                                       9
Analysis of loan repayment and swap expiry profile (as at 31 July 2017)
Well hedged with low risk expiry profile

Loan and Swap Expiry Profile

       92.6% of
   interest bearing
     debt hedged

                                                                                                                  36.1%
                                                                                                          27.7%
                                                                                                  28.0%
      Fixed rate
                                                     23.4%

   (swap) maturity
                                                                                          17.9%
                                                                       16.8%

   profile 3.0 years
                                                             12.0%

                                                                               10.8%

                                                                                                                                 9.7%

                                                                                                                                                                            6.3%
                                          3.4%
                                   2.9%

                                                                                                                                        2.4%
                                                                                                                          2.0%

                                                                                                                                                          0.7%
                                                                                                                                                   0.0%

                                                                                                                                                                     0.0%

                                                                                                                                                                                       0.0%
                                     2018             2019              2020               2021            2022            2023          2024              2027              2029             Total
        Loan Profile R'm              177             1,445             1,039              1,105           1,709           122           150                44               389              6,180
        Swap Profile R'm              182               652               586              1,517           1,956             523               -                 -                 -          5,417

Note: Loan Profile includes R77m Commercial Paper issued to Vukile subsidiary in Nambia

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                                                           10
Proposed Amendments to Vukile DMTN Programme
   To align with Industry – while maintaining same low risk profile without unnecessary restrictions

                                                     CURRENT                                                     PROPOSED AMENDMENT

Group LTV threshold                                      45%                                                                   50%

                          Loan to Valuation Ratio means at any time, in respect of the          Loan to Valuation Ratio means at any time, in respect of the
Group LTV Definition      Notes, the ratio as expressed as follows:                             Notes, the ratio as expressed as follows:
                          Loan to Valuation Ratio = L divided by V                              Loan to Valuation Ratio = L divided by V
                          Where:                                                                Where:
                          L = means any secured or unsecured indebtedness of the Vukile         L = means any secured or unsecured indebtedness of the Vukile
                          Group (whether principal, premium, interest or other amounts)         Group (whether principal, premium, interest or other amounts)
                          for or in respect of (i) monies borrowed, or (ii) liabilities under   for or in respect of (i) monies borrowed, or (ii) liabilities under
                          any acceptance or acceptance credit, or (iii) any bonds, notes,       any acceptance or acceptance credit, or (iii) any bonds, notes,
                          debentures, loan stock or other debt securities, or (iv) any          debentures, loan stock or other debt securities, or (iv) any
                          guarantees or indemnities given, whether present or future,           guarantees or indemnities given, whether present or future,
                          actual or contingent; and                                             actual or contingent; and
                          V = the amount of the most recent Open Market Valuation of            V = the sum of (i) the amount of the most recent Open
                          all the Properties in the Vukile Group Property Portfolio;            Market Valuation of all the Properties in the Vukile Group
                                                                                                Property Portfolio, on a consolidated basis and (ii) the market
                                                                                                value of equity accounted investments

Secured Portfolio LTV
                                                         40%                                                                   45%
threshold

   Domestic Medium Term Note Conference Call 14 September 2017                                                                                                        11
Q&A

www.vukile.co.za
                   12
Contact Details

                                                                                                  Contact
Name                               Designation                 Email
                                                                                                  Numbers
Vukile Property Fund
                                                                                                  (011) 288 1002
Laurence Rapp                     Chief Executive Officer      Laurence.Rapp@vukile.co.za
                                                                                                  (083) 266 3011
Mike Potts                                                                                        (011) 288 1003
                                  Chief Financial Officer      Mike.Potts@vukile.co.za
                                                                                                  (083) 357 1111
                                  Senior Manager: Treasury &                                      (011) 288 1001
Maurice Shapiro                                                Maurice.Shapiro@vukile.co.za
                                  Investments                                                     (083) 577 6184

Rand Merchant Bank
                                                                                                  (011) 282 4162
Delia Patterson                   Distribution                 Delia.Patterson@rmb.co.za
                                                                                                  (083) 676 9595
                                                                                                  (011) 282 8559
Leigh Cunningham-Scott Origination                             Leigh.Cunningham-Scott@rmb.co.za
                                                                                                  (084) 569 6611

Domestic Medium Term Note Conference Call 14 September 2017                                                        13
Executive Team
Strong blend of property and financial skills
                                          Laurence has been the driving force behind Vukile’s transformation and growth since his appointment in 2011. Prior to joining Vukile,
            Laurence Rapp                 Laurence was a director of Standard Bank and head of the insurance and asset management division and his experience spans the areas of
            CEO                           investment banking, private equity, retail banking and insurance and asset management. He currently serves as the chairman of SA REIT, an
                                          industry body driving listed property interests, as well as non-executive director of Atlantic Leaf Properties Limited.

                                          Michael is a founding director of Vukile and, prior to joining Vukile, was an independent adviser to the Bridge Capital Group on property
            Michael Potts                 transactions, property portfolio assembly, financial structuring and capital raising. Prior to that, he was managing and financial director of
            Financial Director            the South African group that forms part of the UK-based Hanover Acceptances Group and a non-executive director of Hanover Acceptances
                                          Limited and Outspan International.

            Hermina (Ina) Lopion
                                          Ina has 24 years’ property experience and six years’ life insurance experience within the Sanlam Group. She is responsible for the asset
            Executive Director: Asset
                                          management of the Vukile property portfolio. Ina is also a director of the South African Council of Shopping Centres (SACSC).
            Management

                                          Sedise is responsible for Vukile’s for jointly driving Vukile’s overall portfolio growth and transformation objectives. He was chief executive of
            Sedise Moseneke               Encha Properties from 2004 up until Vukile’s acquisition of a portfolio of government tenanted properties from Encha in 2013. He is a past
            Executive Director            president of the South African Property Owners Association (SAPOA) and is the non executive chairman of Encha Property Services. He is a
                                          member of the South African Institute of Black Property Practitioners (SAIBPP).

            Johann Neethling
                                          Johann has 15 years' experience in the areas of assurance, general and corporate finance, governance and company secretariat. He joined
            Director: Corporate
                                          Vukile in August 2010, after holding various positions within the property division of Sanlam, where he spent 7 years. He serves as a director
            Services/Group Company
                                          and senior vice-president of Chartered Secretaries Southern Africa.
            Secretary
                                          Rob joined Vukile in May 2015 and held the position of Financial Director of Synergy Income Fund and was instrumental in its repositioning
                                          into Gemgro Properties. Prior to joining Vukile, Rob was previously the Head: Finance and Support for the Real Estate Investment Division
            Rob Hawton
                                          within the Corporate and Investment Bank of the Standard Bank Group, where he spent 8 years. Prior to that, he held various finance
            Executive: Finance
                                          positions within Investec Bank, Barclays Africa, Tourvest Retail Travel and Credit Suisse (London). Rob holds a B.Com and B.Com (Hons)
                                          degrees in accounting and a Master’s degree in Financial Management from the University of Johannesburg and is a Chartered Accountant.
                                          He completed his articles with PricewaterhouseCoopers.
                                          Itumeleng’s real estate experience spans investment appraisal, retail developments and asset management both in the unlisted and listed
            Itumeleng Mothibeli
                                          real estate environments over the past 10 years. He was previously part of the Old Mutual Property Unlisted Fund and later the SA
            Executive: Asset Management
                                          Corporate Real Estate Fund management teams prior to joining Vukile in August 2012. He is a member of South African Institute of Black
                                          Property Practitioners (SAIBPP), sits on the Gauteng Chapter Committee of the SACSC as well as on the SAPOA Awards Committee.

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                                                   14
Non-executive Directors
Strong blend of property and financial skills
                             • Non-executive director of the JSE Limited (Johannesburg Securities Exchange)
            Anton Botha      • Non-executive director African Rainbow Minerals
                             • Non-executive director Sanlam Limited (one of South Africa's largest life insurers)

                             • Former group chief executive of Absa Group Limited (Top 4 South African Retail Bank)
                             • Non-executive director and chairman of the audit committee of Steinhoff International Holdings Limited (Multi-billion Euro South African-based
            Steve Booysen
                               international retail holding company listed in Johannesburg and Frankfurt)
                             • Non-executive director Clover Industries, JD Group Limited and Senwes Limited
                             •   Former executive director of the World Bank
                             •   Former deputy governor of the South African Reserve Bank.
            Renosi Mokate
                             •   Renosi currently serves on the board of Bidvest Bank
                             •   Chairman of the Government Employees Pension Fund (GEPF)

                             • Peter held a senior management position with McDonald’s Corporation for 10 years
            Peter Moyanga    • He is the largest owner-operator franchisee of McDonald's restaurants in South Africa
                             • He is the Vice Chairman of Reach For a Dream NPO

                             • Former partner at KPMG
                             • Former Head of Internal Audit at Transnet (South Africa's largest rail, port and pipeline company)
                             • Serves as a member of the King Committee on Corporate Governance
            Nigel Payne      • Chairman of Mr Price Group Limited, a leading, multi-billion Euro South African fashion retailer
                             • Serves on the boards of Bidvest Group Limited (a listed South African conglomerate that owns over 300 companies), JSE Limited and BSi Steel
                               Group Limited
                             • Chairman of Bidvest Bank
                             •   Executive chairman of Mvua Property Partners, a commercial property investment firm
                             •   Non-executive director of AECOM South Africa
            Hatla Ntene
                             •   Non-executive director of Calgro M3 (One of the leading residential development companies in South Africa)
                             •   Non-executive director of the Don Hotel Group
                             • Former chief executive officer of Vusani Property Investments
                             • Former managing director of OK Bazaars Group (taken over by Shoprite Holdings which is Africa's largest food retailer and employs over 136 000
            Mervyn Serebro
                               people)
                             • He is also Chairman of the Reach For a Dream NPO.

Domestic Medium Term Note Conference Call 14 September 2017                                                                                                                     15
High quality retail assets
Top 10 assets

                                                                                          Dobsonville
                                    East Rand Mall      Phoenix Plaza     Pine Crest                      Gugulethu Square
                                                                                        Shopping Centre

            GAV                       R1 277m                 R791m       R786m            R513m             R480m
           Region                        Gauteng        KwaZulu-Natal   KwaZulu-Natal      Gauteng         Western Cape
      Gross Lettable
          Area                          69 424m2          24 351m2        40 087m2         23 236m2          25 322m2

     Monthly Rental                     R250/m2               R242/m2     R152/m2          R133/m2           R143/m2
     National Tenant
        exposure                            89%                80%           92%             87%                90%

         Vukile
        Ownership                           50%                100%         100%            100%               100%

           Approx.
           Footfall                   11.1 million        9.4 million    11.2 million     9.8 million       10.5 million

          Vacancy                          3.8%                1.5%        2.3% *         Fully Let *         Fully Let
    * Excluding development vacancy as at 31 Mar 17

Domestic Medium Term Note Conference Call 14 September 2017                                                                  16
High quality retail assets
Top 10 assets (cont.)

                                                                        Oshakati Shopping
                                      Nonesi Mall      Moruleng Mall                        Setsing Crescent   Randburg Square
                                                                             Centre

            GAV                         R421m                 R394m         R390m              R385m              R380m
           Region                    Eastern Cape        North West         Namibia           Free State          Gauteng
      Gross Lettable
          Area                          28 147m2          31 421m2          24 632m2           21 538m2          40 767m2

     Monthly Rental                     R119/m2               R111/m2       R124/m2            R125/m2            R95/m2
     National Tenant
        exposure                            96%                83%            94%                97%                85%

         Vukile
        Ownership                          100%                80%            100%               100%              100%

           Approx.
           Footfall                    7.0 million        3.6 million      Open Mall          Open Mall          7.1 million

          Vacancy                          1.0%                2.3%           0.3%            Fully Let *           6.9%
    * Excluding development vacancy as at 31 Mar 17

Domestic Medium Term Note Conference Call 14 September 2017                                                                      17
Retail tenant exposure
Low risk with c.80% national tenants

Tenant Profile - by Contractual Rent                                                Top 10 Tenants by Rent

      Other                                                                                                                        2.9% Pep Stores
                                                                                      Steinhoff                             8.0%
      22%                                                                                                                          2.4% Ackermans
 Diversified across
                                                                                       Shoprite                      6.1%
   1105 tenants

                                                                                         Edcon                                     2.5% Jet
                                                                                                                     5.9%
                                                                                                                                   2.0% Edgars
                                                     Top 10                            Foschini                5.1%
                                                    Tenants
                                                                                      Pick n Pay
                                                                                                              4.7%
                                                   46%                                  Stores

                                                    of Retail                              Spar            4.1%
                                                      Rent
                                                                                       Mr Price        3.4%

                                                                                     Truworths         3.2%
                                                                        Nationals
                                                                          78%         Massmart         3.2%

                                                                                      First Rand
                                                                                                    2.3%
                                                                                        Group
Note: Portfolio as at 31 Mar 17 – Excluding Thohoyandou Thavhani Mall

Domestic Medium Term Note Conference Call 14 September 2017                                                                                      18
Retail tenant expiry profile
52% of contractual rent expiring in 2020 and beyond (WALE 3.6 years)

                                                              % of Contractual Rent   Cumulative

                                                                                                                       100

                                                                                                    76
                                                                             66

                                             48

             24
             24                              24                                                                         24
                                                                             18                     10

           Mar-18                          Mar-19                          Mar-20                  Mar-21          Beyond Mar-21

For the 12 months ended 31 March 2017 Retail leases were concluded with:
 Total contract value                      R1 150 million

 Total rentable area                       142 118m²

 Retail Tenant Retention                   84% with almost all tenant vacancies being replaced with new tenants

Domestic Medium Term Note Conference Call 14 September 2017                                                                        19
You can also read
NEXT SLIDES ... Cancel