18 February 2019 Asset Class Yield (in %) Total Return (% chg) 15 Feb 1 Week YTD SA Listed Property 8.6% -2.8% 4.4% SA Bonds 9.6% -0.6% 1.1% SA Cash 9.6% 0.0% 0.6% UK Listed Property 4.6% 0.0% 10.6% US Listed Property 3.7% 0.3% 11.7% W. Europe (ex. UK) Listed Property 5.9% -3.6% 7.8% Australia Listed Property 4.3% 0.5% 10.2% JSE SA Listed Property Index - Weekly Gainers & Losers South African Listed Property South African property markets ended lower as it closed at 499.38 for the week ended February 15, 2019, down 3.7%. Total return for SA Listed Property fell 2.8% over 1 week and rose 4.4% YTD. Sirius Real Estate Ltd rose 2.4%, followed by Stenprop Ltd gain of 2.1% and EPP NV, which rose 1.6%. On the other hand, Hyprop Investments Ltd fell 10.1% due to ratings downgrade by Moody s. This was followed by Fortress REIT Ltd and Arrowhead Properties Ltd which fell 8.6% and 8.5%, respectively. Resilient REIT Ltd (RES) interim results expect distribution of between 530cps and 550cps for FY19 (down from 565cps in FY18), this represents a respectable forward dividend yield of between 8.8% and 9.1% (in line with the JSAPY). The outcome from the Financial Sector Conduct Authority s (FSCA) investigation of allegations of wrongdoing by RES, remains outstanding. RES LTV was 26% (well contained). The operational performance in SA was reasonable (60% of investment portfolio in Jun 18) with retail sales growth of 4.7% and 1.8% vacancy rate, the Edcon exposure was reduced to 6.4% and NEPI s share is recovering from its low in Nov 18 Source: Afrifocus Securities JSE SAPY, EM REIT, World REIT and SA All Bond TR Index Sirius Real Estate Ltd Stenprop Ltd EPP NV Resilient REIT Ltd Redefine Properties Ltd -5.2% -5.7% 2.4% 2.1% 1.6% 210 190 170 150 130 110 Arrowhead Properties Ltd Fortress REIT Ltd -8.5% -8.6% 90 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Hyprop Investments Ltd -10.1% -12.0% 12.0% JSE SAPY Total Return Index FTSE World REIT Total Return Index FTSE EM REIT Total Return Index SA All Bond Total Return Index 52 Week Highs 52 Week Lows Name 52WK High Name 52WK Low Source: Bloomberg, Afrifocus Securities Source: Bloomberg, Afrifocus Securities Analyst Malcolm Riley +27(0)11 290 7816 MalcolmR@afrifocus.co.za ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 7 1
Ranking Table NAME INDEX WEIGHT PRICE DIRTY CLEAN TARGET DPS NTM FORECAST DPS CAGR TOTAL RETURN ESTIMATE YIELD CAPITAL TOTAL AFFSEC CALL INDEX JSE SAPY 499 499 561 6.0% 9.2% 12.2% 21.4% REB Rebosis Property Fund 0.4% 2.4 2.2 6.3 0.7 1.7% 29.9% 179.7% 209.6% DLT Delta Property Fund 0.0% 3.9 3.9 5.9 0.9 0.0% 22.3% 50.6% 73.0% ITU Intu Properties 0.0% 21.5 21.5 33.7 2.1-4.1% 9.7% 56.6% 66.3% FFB Fortress Reit B 3.8% 14.0 13.4 18.5 1.9 12.0% 14.4% 38.1% 52.5% AWA Arrowhead Props. 0.0% 4.2 4.0 5.3 0.6-5.9% 15.7% 32.5% 48.2% SAC Sa Corporate Rl.Est.Fund 2.7% 3.6 3.5 4.5 0.5 5.6% 12.8% 27.1% 39.9% APF Accprop 0.8% 3.8 3.8 4.6 0.5 2.7% 13.9% 21.5% 35.4% HYP Hyprop Investments 6.8% 81.5 78.8 97.3 8.4 9.0% 10.6% 23.5% 34.2% RPL Redefine (Jse) International 0.0% 26.7 25.5 30.7 2.5 3.8% 9.8% 20.3% 30.1% EPP Epp N V 1.8% 19.5 19.6 22.6 2.0 5.8% 10.2% 15.5% 25.6% ATT Attacq Ord 3.2% 15.8 15.5 18.6 0.9 12.3% 5.6% 19.4% 25.0% RES Resilient Pr.Inc.Fd. 5.2% 60.5 58.7 67.6 5.7 6.5% 9.7% 15.2% 24.9% NRP Nepi Rockcastle 12.3% 122.9 122.9 144.3 9.2 4.1% 7.5% 17.4% 24.9% VKE Vukile Property Reit 4.9% 20.2 20.1 22.9 2.0 7.0% 9.8% 14.2% 24.0% BUY HMN Hammerson (Jse) 0.0% 68.9 69.0 77.5 4.8-1.6% 6.9% 12.3% 19.2% RDF Redefine Properties 16.1% 9.8 9.6 10.4 1.0 5.6% 10.6% 8.5% 19.1% L2D Liberty Two Degrees 0.7% 7.2 7.2 7.9 0.6-1.1% 8.1% 10.4% 18.5% SRE Sirius Real Estate (Jse) 1.3% 11.7 11.6 13.1 0.5 4.0% 4.7% 12.4% 17.1% GRT Growthpoint Prop 21.9% 24.8 24.0 25.5 2.3 6.2% 9.4% 6.3% 15.7% OCT Octodec Investments 0.0% 20.5 20.0 21.0 2.1 1.9% 10.3% 4.9% 15.2% EMI Emira Property Fund 2.3% 15.2 14.6 15.3 1.6 6.5% 10.8% 4.2% 15.0% IPF Investec Property 2.2% 15.3 15.2 16.0 1.5 4.3% 9.7% 5.2% 14.9% CCO Capital & Cnts. (Jse) Props. 0.0% 44.9 44.9 50.5 0.3 0.8% 0.6% 12.5% 13.1% EQU Equites 2.3% 20.3 20.3 20.4 1.5 9.0% 7.3% 0.3% 7.6% FFA Fortress Reit A 6.7% 18.7 18.2 17.7 1.5 5.1% 8.5% -2.7% 5.8% www.afrifocus.co.za 2
Dividend Revision Table Upgrades 3m Rev 1mRev Downgrades 3m Rev 1mRev Fortress Reit B 2.1% 0.3% Rebosis Property Fund -37.6% -24.1% Nepi Rockcastle 1.6% 0.4% Arrowhead Props. -20.3% -21.0% Vukile Property Reit 1.6% 0.0% Intu Properties -15.7% -1.9% Attacq Ord 1.4% -0.6% Liberty Two Degrees -6.3% -4.3% Fortress Reit A 1.2% 0.3% Investec Property -2.9% -0.9% Redefine Properties 1.1% 0.3% Accprop -2.0% -1.4% Growthpoint Prop 1.0% 0.1% Epp N V 1.0% 0.3% Redefine (Jse) International Reit 0.8% 0.3% Texton Property Reit 0.7% 0.2% JSE SAPY DY, FTSE EM REIT DY, FTSE World REIT DY and SA 10yr Bond Yield 12 10 9.6 8 8.7 6 4 4.0 2 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 JSE SAPY Index DY (%) FTSE EM REIT Index DY (%) FTSE World REIT Index DY (%) SA 10yr Bond Yield (%) * JSE SAPY Index DY value at 8.6 and FTSE EM REIT Index DY value stands at 8.7 as of 15 th Feb 2019 Sector Premium/Discount to NAV 120% 80% 40% 0% -40% Mar-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Prem/Disc to NAV Zero Prem/Disc Average www.afrifocus.co.za 3
PRICE TO BOOK VALUE FORWARD DIVIDEND YIELD REIT Forward DY vs Forecast Distribution Growth and Implied Equity Risk Premium (ERP) 15% 13% APF SAC FFB ERP = 3% ERP = 5% ERP = 7% ERP = 9% 11% OCT RDF RES VKE EMI HYP 9% IPF FFA GRT INDEX EQU 7% 5% SRE ATT 3% 0% 2% 4% 6% 8% 10% 12% 14% 16% FORECAST DISTRIBUTION GROWTH, % p.a. OFF Scale Stocks AWA (Arrowhead Properties Ltd), REB (Rebosis Property Fund), DLT(Delta Property Fund) and L2D(Liberty Two Degrees) Price to Book vs ROE NTM 1.6 1.4 SRE EQU 1.2 1.0 0.8 OCT HYP IPF GRT VKE INDEX SAC EMI RES FFA RDF 0.6 0.4 APF AWA DLT 0.2 0.0 6% 7% 7% 8% 8% 9% 9% 10% 10% ROE NTM OFF Scale Stocks L2D(Liberty Two Degrees), ATT(Attacq Ord), FFB(Fortress Reit B) and REB(Rebosis Property Fund) www.afrifocus.co.za 4
Key Corporate Events Date Company Name Events 15 February 2019 Resilient REIT Ltd 1H Interim Results 19 February 2019 Liberty Two Degrees Annual Financial Results 27 February 2019 NEPI Rockcastle PLC Annual Financial Results 28 February 2019 Growthpoint Properties Ltd 1H Interim Results 04 March 2019 MAS Real Estate Inc 1H Interim Results 05 March 2019 Attacq Ltd 1H Interim Results and Dividend Declaration 06 March 2019 Fortress Income Fund Ltd 1H Interim Results 06 March 2019 Fortress REIT Ltd 1H Interim Results 06 March 2019 SA Corporate Real Estate Ltd Annual Financial Results 07 March 2019 EPP NV Annual Financial Results 09 May 2019 Equites Property Fund Ltd Annual Financial Results Source: Sharenet, Company Website, Afrifocus Securities www.afrifocus.co.za 5
SA Listed Property Corporate News Company Name News Accelerate Property Fund Ltd The Company announced that its Directors Andrew Costa and John Paterson had engaged in an off-market exercise of awards and issue of shares in compliance with Rules 3.63 3.74 of the JSE Listing Requirements. The total value of the transaction was about R1.0 mn and R1.4 mn, respectively. Emira Property Fund Ltd The Company announced its unaudited interim financial results for 1H19. Revenue totaled R878.6 mn vis-à-vis R855.4 mn in the corresponding period of the previous year. Profit attributable to shareholders stood at R500.1 mn compared to R529.2 mn. The Company s EPS was 86.25c vis-à-vis 103.11c. Furthermore, the Company declared a dividend of 72.86c per share. Equites Property Fund Ltd The Company announced that it had successfully raised R710.0 mn through the book build process by issuing the maximum number of shares available under its existing authorities. Fortress Income Fund Ltd The Company referred to the SENS announcement published on November 30, 2018, related to remuneration policy, in which shareholders were requested to provide feedback to the remuneration committee. Further on this issue, the Company had planned a teleconference to be held in the first quarter of 2019. However, due to the limited feedback received and some shareholders indicating a preference to engage directly with the remuneration committee, the committee has decided to dispense with the teleconference and allow shareholders a further opportunity to provide feedback in writing by February 22, 2019, by e-mailing the Company Secretary at tamlyn@fortressfund.co.za. Hyprop Investments Ltd The Company announced that Moody s had lowered the rating for medium-term notes from Baa3 to Ba1; also; long-term national scale ratings were lowered to Aa3.za from Aa1.za. The main reason cited for the decrease in ratings is that Moody's estimates that the debt-to-asset ratio, adjusted for the full consolidation of Hystead Limited ("Hystead"), increased to 41% as of June 30, 2018, from 33.4% in 2017, due to debt-funded acquisitions in Eastern Europe. EPP NV The Company announced that associates of its Directors had engaged in multiple off-market transactions for sale and purchase of securities in compliance with Rule 3.63 of the JSE Listing Requirements. The value of the transactions was EUR15.2 mn (sale of shares), EUR8.3 mn and EUR4.6 mn (purchase of shares). Rebosis Property Fund Ltd The Company announced that it had entered into a sale and purchase agreement to dispose two of its properties SALU Building and Bank of Lisbon with their rental enterprises for a considered amount of R897 mn. Redefine Properties Ltd The Company announced the results of the annual general meeting held on February 14, 2019. It declared that all the resolutions tabled thereat were passed by the requisite majority of Redefine shareholders. Stenprop Ltd The Company announced that it had arranged a new GBP26.8 mn senior loan facility with Lloyds Bank Commercial Banking. The facility is secured against the 1.16 mn sq. ft. MLI portfolio, which the Company acquired in December 2018 from Hansteen Holdings PLC for GBP67.9 mn, excluding acquisition costs. It will be used to repay the majority of the debt drawn down from the Company's revolving credit facility with Investec Bank, which was used alongside existing cash resources to acquire the portfolio. Source: Sharenet, SENS, Afrifocus Securities www.afrifocus.co.za 6
Research Disclosure NOTICE TO US INVESTORS This report was prepared, approved, published and distributed by Afrifocus Securities (Pty) Ltd located outside of the United States (a non-us Group Company ). This report is distributed in the U.S. by LXM LLP USA, a U.S. registered broker dealer, on behalf of Afrifocus Securities (Pty) Ltd only to major U.S. institutional investors (as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934 (the Exchange Act ) pursuant to the exemption in Rule 15a-6 and any transaction effected by a U.S. customer in the securities described in this report must be effected through LXM LLP USA. Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. ( FINRA ) or other regulatory requirements pertaining to research reports or research analysts. No non-us Group Company is registered as a broker-dealer under the Exchange Act or is a member of the Financial Industry Regulatory Authority, Inc. or any other U.S. self-regulatory organization. Analyst Certification. Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. Please bear in mind that (i) Afrifocus Securities (Pty) Ltd is the employer of the research analyst(s) responsible for the content of this report and (ii) research analysts preparing this report are resident outside the United States and are not associated persons of any US regulated broker-dealer and that therefore the analyst(s) is/are not subject to supervision by a US broker-dealer, and are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with US rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. Important US Regulatory Disclosures on Subject Companies. This material was produced by Analysis Afrifocus Securities (Pty) Ltd solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by LXM LLP USA and elsewhere in the world by Afrifocus Securities (Pty) Ltd or an authorized affiliate of Afrifocus Securities (Pty) Ltd. This document does not constitute an offer of, or an invitation by or on behalf of Afrifocus Securities (Pty) Ltd or its affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which Afrifocus Securities (Pty) Ltd or its Affiliates consider to be reliable. None of Afrifocus Securities (Pty) Ltd accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions. LXM LLP USA assumes responsibility for the research reports content in regards to research distributed in the U.S. LXM LLP USA or its affiliates has not managed or co-managed a public offering of securities for the subject company in the past 12 months, has not received compensation for investment banking services from the subject company in the past 12 months, does not expect to receive and does not intend to seek compensation for investment banking services from the subject company in the next 3 months. LXM LLP USA has never owned any class of equity securities of the subject company. There are not any other actual, material conflicts of interest of LXM LLP USA at the time of the publication of this research report. As of the publication of this report LXM LLP USA, does not make a market in the subject securities. www.afrifocus.co.za 7