Tour of Tower Cape Properties

Transcription

1 Tour of Tower Cape Properties

2 Contents Tower Strategy Financial Highlights Operational Highlights Tower at a Glance Management Team Borrowings Valuations Operational Performance Top 10 Properties by Value Tpf International Business Case Towers Croatia Strategy Developments Value Add Opportunities Total Returns Strategy Debt Management Strategy Prospects SUNCLARE 1

3 Tower Strategy Tower aims to generate, on a sustainable basis, competitive investment performance by: i) Adding value through local and international property asset management ii) Reinvesting capital in its own portfolio to grow its sustainable income iii) Acquiring properties in strong nodes with growth opportunities and selling properties which have reached the peak of their value Tower will continue to re-invest in value add opportunities in its existing portfolio and expand its portfolio through management s network of contacts throughout South Africa and abroad. 2 TOUR OF TOWER CAPE PROPERTIERS OLD CAPE QUARTER towerpropertyfund.co.za 3

4 Financial Highlights (at 31 May 2018) Distribution of 40.3 cents per share representing 5% growth from corresponding period Distributable earnings of R266 million Portfolio at 46 properties after the continued sale of non-core assets % Fund Total Return Vukovarska Valuation Portfolio value of R4.9 billion Market capitalisation of R2.3 billion Loan-to-value of 38.6% Net asset value of R9.68 per share Properties sold or in the final process of sale of R247 million 5 Capital Raise Capital Raise TOUR OF TOWER CAPE PROPERTIERS SUB DUBROVNIK towerpropertyfund.co.za 5

5 Operational Highlights Vacancies reduced to 4.6% (SA 5.4%, Croatia 0%) WALE (portfolio) 4.3 years WALE (SA) 2.9 years Tenant retention ratio 90% Rental reversions - Retail 8.2%, Offices 1.88%, Industrial -9.77% Net operating cost ratio of 14% (gross of 28%) Previous high vacancy industrial properties, Meadowbrook (15 000m²) and Isando (10 000m²) now fully let Certain properties well through the J curve including Cape Quarter, De Ville, VMD and Sunclare showing potential upside 6 TOUR OF TOWER CAPE PROPERTIERS MEADOWBROOK towerpropertyfund.co.za 7

6 Tower at a Glance (at 30 September 2018) Property portfolio value: R4.5bn Rentable area (GLA): m² Occupancy rate (GLA): 95.5% Gearing (LTV): Average gross rental: Existing lease escalations: 7.59% Number of properties: 44 Average property value: 35% (36.7% post Yazaki acquisition) R110.78/m² R102m OFFICE 5% 47% 48% GAUTENG RETAIL INDUSTRIAL Sectoral Profile KZN WCAPE CROATIA Value 23% 35% 8% 34% Value Geographic Profile 8 TOUR OF TOWER CAPE PROPERTIERS 9

7 Management Team Marc Edwards Chief Executive Officer Strategy, Acquisitions, Debt and Capital Raising Johan Malherbe Asset Manager Western Cape, KwaZulu Natal, Specialised Finance, Acquisitions and Strategy Joanne Mabin Chief Financial Officer Financial Controls and Management Bruce Rogerson Asset Manager Gauteng, Acquisitions and Disposals 10 TOUR OF TOWER CAPE PROPERTIERS UPPER GRAYSTON towerpropertyfund.co.za 11

8 Borrowings Total debt ZAR debt Euro debt Loan facilities (R 000) Weighted cost of funding (%) Debt expiry profile (years) * 4.7 Percentage hedged (%) Hedging expiry profile (years) * renewal terms under negotiation. The Standard Bank Euro debt (EUR 47 million) was refinanced at 3 month euribor plus 320 bps, 45 bps lower than the previous rate. 12 TOUR OF TOWER CAPE PROPERTIERS VMD towerpropertyfund.co.za 13

9 Valuations Valuations are a combination of Directors valuations and independent valuations. Directors valuations utilise a standard cap rate on forward income method of valuation whilst independent valuations utilise a discounted cash flow method of valuation. 14 TOUR OF TOWER CAPE PROPERTIERS MEDSCHEME towerpropertyfund.co.za 15

10 Operational Performance Space let in the period m 2 New space let m 2 Renewable space let m 2 Total vacant space (SA) m 2 Total vacant space (Croatia) 2 788m % Lease expiry profile by revenue per sector Monthly <May 19 <May 20 <May 21 <May 22 <May 23 <May 24 <May 25 Industrial Office Retail * Excluding Konzum head lease and including vacancies committed to and in the process of signing % Lease expiry profile by GLA per sector Monthly <May 19 <May 20 <May 21 <May 22 <May 23 <May 24 <May 25 Industrial Office Retail 16 TOUR OF TOWER CAPE PROPERTIERS 17

11 Top 10 Properties by Value Property Sector Value (R) Location Cape Quarter Square Mixed Use 770m Greenpoint, CPT* Sub-Dubrovnik Retail 381m Dubrovnik, Croatia** Sunclare Mixed Use 277m Claremont, CPT VMD Kvart Office 251m Zagreb, Croatia** De Ville Centre Mixed Use 246m Durbanville, CPT Link Hills Retail 206m Waterfall, KZN Meridijan 16 Retail 176m Zagreb, Croatia** Old Cape Quarter Mixed Use 164m Greenpoint, CPT Upper Grayston Office 163m Sandton, JHB Medscheme Office 144m Florida North, JHB * Cape Quarter Precinct, post-sale of residential units, anticipated value in excess of R1.2 billion (excluding development profit). ** at R14.80 to the Euro. 18 TOUR OF TOWER CAPE PROPERTIERS CAPE QUARTER 19

12 TPF International Business Case TPF International Limited Forward yield 7.4% Portfolio size 91 million Loan to value 35% Interest on funding circa 3% Current shareholders Tower Property Fund 74%, Oryx Properties Limited 26% Immediate pipeline circa Euro 100 million 20 TOUR OF TOWER CAPE PROPERTIERS VMD 21

13 Towers Croatia Strategy

14 Towers Croatia Strategy Tower s investment in TPF International ( TPF ) is intended to: Diversify its exposure to only one property market Obtain capital and income growth through purchases and asset management initiatives Grow Tower s earnings European properties have low lease escalations which is problematic when viewed against TWR s SA properties. To combat this, Tower is: Assisting TPF to acquire new, yield accretive properties to boost TPF and TWR income Acquire properties with historically low rentals which are due to correct Acquire properties with asset management upside TPF is attempting to raise cash from like minded investors who are looking for foreign property exposure in a defensive portfolio. TWR may look to sell its own shares in TPF if SA opportunities exist on a stronger growth basis. TPF is looking to off load two hypermarket centres and will reinvest the proceeds in accretive acquisitions. 24 TOUR OF TOWER CAPE PROPERTIERS 25

15 Developments Napier Street 16 apartments in addition to 2 floors of retail 140 parking bays selling at R each (Incl VAT) Current asking prices averaging circa R90 000/m² (Incl VAT) Anticipated capital profits of R20 million Will add to footfall of Cape Quarter 26 TOUR OF TOWER CAPE PROPERTIERS NAPIER STREET 27

16 Developments (continued) Old Cape Quarter 55 apartments in addition to existing retail and offices Will be introducing new retail concept to Cape Town Municipal approval received in December 2016 for construction early 2019 Will utilise units to best effect Anticipated capital profits through sale of residential units is circa R106 million 2 K 1 K 0 K * Source: De Waterkant Growth in Value (R) CLIFTON CAMPS BAY CITY OF CAPE TOWN DE WATERKANT 28 TOUR OF TOWER CAPE PROPERTIERS OLD CAPE QUARTER towerpropertyfund.co.za 29

17 Value Add Opportunities

18 Value Add Opportunities Napier Street R20 million* Old Cape Quarter R106 million* Link Hills refurbishment Re-financing debt Euro X million refinanced with SBSA at a reduced interest cost of 45 bpts TPF International acquisitions and sales * Assumes current selling price remains achievable with no capital expenditure increase. As a fall back, we can revert to short-term lets yielding 11.4%. 32 TOUR OF TOWER CAPE PROPERTIERS OLD CAPE QUARTER 33

19 Total Returns Strategy TWR s previous focus has been on income growth. This has often been short term focussed and has neglected the long term opportunities which exist in the portfolio TWR s strategy will focus on property net income growth with growth in tangible net asset value per share Capital proceeds will be deployed to strenghten the balance sheet before they are used to grow income Income growth will remain a key focus but not at the expense of the longevity of the company A key focus will be on the short term reduction in LTV, especially that of the Euro debt provided by SBSA where SA properties act as security Excess cash will be used to repurchase TWR shares and re-invested in the existing portfolio New acquisitons will be considered however returns need to be higher than those available in the current portfolio 34 TOUR OF TOWER CAPE PROPERTIERS VMD 35

20 Debt Management Strategy Short term focus to reduce LTV to 35% Reduce exposure to SBSA Euro loans and pay down as much of these as possible despite the negative effect this may have on distributions - this is a key risk to the business Hedge out at least 70% of interest rate exposure Obtain interest only loans on the Croatian properties in TPF 36 TOUR OF TOWER CAPE PROPERTIERS DE VILLE 37

21 Prospects Higher focus on sustainable income moving forward Re-investment of capital proceeds debt, shares and property Croatian portfolio expected to grow in TPF International Limited Refinance SBSA Euro debt Continue to focus on redevelopment opportunities Continue to sell tail Flat property net income growth TOUR OF TOWER CAPE PROPERTIERS CROATIA 39

22 Tower Property Valuations - May 2018 TOWER PROPERTY VALUATIONS MAY 2018 # TYPE GLA (SQM) VACANCY (GLA) WEIGHTED AVE GROSS RENT/SQM MAY 2018 VALUATIONS RATE/SQM (GLA) RATE/SQM (GBA) FORWARD YIELD VALUATION METHOD OFFICES % % 1 VMD Kvart, Zagreb, Croatia % % Market 2 Sunclare, Claremont, Cape Town % % DCF Sturdee Ave, Rosebank, JHB % % DCF 4 Medscheme, 38 Conrad St, Florida North % % Directors 5 Clifton Place, Berea, Durban % % DCF 6 15 Wellington Road, Parktown % % DCF Jan Smuts Ave, Craighall Park, JHB % % DCF 8 Upper Grayston Block E, Sandton, JHB % % DCF Kent Rd, Randburg, JHB % % DCF 10 Constantia View, Querelina, JHB % % DCF 11 3 River Rd, Bedfordview, JHB % % DCF Beacon Rd, Florida North, JHB % % DCF 13 Upper Grayston Block F, Sandton, JHB % % DCF 14 Whitby Manor, Midrand % % Directors 15 The Braides, Gallo Manor, JHB % % DCF 16 Viscount Road Office Park, Bedfordview, JHB % % Directors 17 Upper Grayston Block B, Sandton, JHB % % DCF 18 Willowvale, Ruimsig, JHB % % DCF 19 St Andrews Office Park, Bedfordview, JHB % % DCF 20 Upper Grayston Block D, Sandton, JHB % % DCF 21 Woodlands Office Park, Woodmead, JHB % % Directors 22 Coachmans Crossing C, Bryanston, JHB % % Directors 23 Hanover Square, Edenvale, JHB % % DCF 24 Waterford Office Park, Woodmead, JHB % % Directors 25 Coachmans Crossing D, Bryanston, JHB 557 0% % Directors Upper Grayston Block A, Sandton, JHB 40 0% % Directors RETAIL AND MIXED USE % % 4 Agrokor Shopping Centres % % Market 5 Cape Quarter Square, Cape Town % % DCF 6 De Ville Centre, Durbanville, Cape Town % % DCF 7 Link Hills Shopping Centre, Waterfall, KZN % % DCF 8 Cape Quarter Piazza, Cape Town % % Development 9 Evagold Centre, Evaton Gauteng % % DCF 10 Shoprite Ennerdale, Gauteng % % DCF 11 Shoprite Modimolle, Limpopo Province % % Directors Musgrave Rd, Berea, Durban % % DCF 13 Clearview Village, Florida North, JHB % % Directors Napier Rd, Cape Town 773 0% % Development INDUSTRIAL % % 1 Meadowbrook DC, 74 Lascelles Rd, Edenvale % % DCF 2 Isando, 8 Industry Rd, Isando % % DCF 3 Route 21, Prospect Close, Irene % % DCF 4 Kuit Street, 320 Kuit Street, Watloo, Pretoria % % DCF 5 Cleveland, 10A Cleveland Rd, Cleveland, JHB % % Vacant 44 TOTALS %

23 Tower Portfolio View per Category TOWER PORTFOLIO VIEW PER CATEGORY VALUATION CATEGORY VALUATION CATEGORISED SUMMARY FIRE SALE PRICE SCENARIOS BRACKET VALUATION % OF TOTAL % OF VALUE PRICE % OF TOTAL Notes VMD CROATIA % 90% % KONZUM CQ % 110% % CROATIA A % 110% % B % 85% % CQS C % 75% % CQP D % 50% % NAPIER TOTALS % 91% % CAPE QUARTER Sunclare DeVille Sturdee Medscheme A Clifton Ennerdale Evagold Link Hills Meadowbrook Route Upper Grayston (4) Wellington Rd B Beacon Coachmans (2) Musgrave St Andrews Viscount Woodlands MAY 2018 ACTUAL MARKET DIFFERENCE C Shares in Issue NAV/SHARE River NAV Kent VALUATION LESS FIRE SALE SCENARIO Jan Smuts NET "SURPLUS" Braides Clearview Cleveland Constantia View VALUATIONS PER CATEGORY C 5% B 19% D 12% A 18% CROATIA 23% CQ 23% Hanover Isando Kuit Street Modimolle Waterford Whitby Cape Quarter Square Weighted Ave Gross Rental/sqm Willowvale D Office TOTAL Retail TOUR OF TOWER CAPE PROPERTIERS