INTERIM FINANCIAL RESULTS Six months ended 31 December 2009
AGENDA Introduction & Highlights Financial Review Operational Overview Acquisitions, Developments and Disposals Growthpoint Properties Australia Prospects Annexures 2
INTRODUCTION AND HIGHLIGHTS
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet GROWTHPOINT IN SUMMARY The largest listed property company on the JSE with property assets valued at more than R34,6 billion Market capitalisation in excess of R21 billion Diversified property portfolio comprising 435 properties in SA and 24 in Australia: Retail Office Industrial Australia R10,4 billion R12,5 billion R6,8 billion R4,9 billion AU$ 744 million The only fully integrated internally managed property company on the JSE employing 443 staff 4
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet HIGHLIGHTS FOR THE SIX MONTHS TO DECEMBER 2009 Distribution per linked unit 59.1 cents 7.6% 5.0% Acquisition of 76.2% of Growthpoint Properties Australia AU$ 194,5 million R1,3 billion New equity raised via vendor placement R1,3 billion 5
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet HIGHLIGHTS FOR THE SIX MONTHS TO DECEMBER 2009 New equity raised via Distribution Reinvestment Plan (supported by 66% of unitholders) R540 million 7.6% Favourable Moody s rating Global - Baa2/P2 National - A1.za/P1.za Launch of DMTN Commercial Paper programme R5 billion 6
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet HIGHLIGHTS FOR THE SIX MONTHS TO DECEMBER 2009 First issue of Short Term Commercial Paper R500 million 7.6% Repayment of Series 3 CMBS Notes R1,566 billion Funded a skills development and training centre in Diepsloot R4,0 million Inclusion in JSE Socially Responsible Investment Index ( SRI ) 7
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet GROWTH IN DISTRIBUTIONS Period Distribution (cents) % of total distribution Increase 6 Months Dec 06 45,0 48.3% 15.1% 6 Months June 07 48,1 51.7% 14.0% Year to June 07 93,1 100.0% 14.5% 6 Months Dec 07 51,1 48.0% 13.6% 6 Months June 08 55,4 52.0% 15.2% Year to June 08 106,5 100.0% 14.4% 6 Months Dec 08 56,3 49.1% 10.2% 6 Months June 09 58,3 50.9% 5.2% Year to June 09 114,6 100.0% 7.6% 6 Months Dec 09 59,1 5.0% 8
GROWTH PRIMARY IN ASSETS TITLE 18 PT AND TREBUCHET MARKET Secondary CAPITALISATION Title 16 pt Trebuchet R bn Unit price NTAV Cents 1600 1200 800 400 0 2003 2004 2005 2006 2007 2008 2009 9
FINANCIAL REVIEW
SIMPLIFIED INCOME STATEMENTS (Extracts) Dec 2009 R million Dec 2008 R million Increase/ (decrease) June 2009 R million Gross property revenue 1 939 1 558 24.5% 3 211 Property expenses (455) (390) 16.7% (759) Net property income 1 484 1 168 27.1% 2 452 Other operating expenses (52) (30) 73.3% (75) Net property income after operating expenses 1 432 1 138 25.8% 2 377 Investment income - - - 1 Operating profit 1 432 1 138 25.8% 2 378 Interest paid (589) (451) 30.6% (921) Finance income 81 35 131.4% 162 Taxation (excl CGT and deferred tax) - (1) (100.0%) (5) Adjustment for non-controlling interest (9) - 100.0% - Profit before debenture interest 915 721 26.9% 1 614 Distribution for the period 915 721 26.9% 1 614 11
NET PROPERTY INCOME ANALYSIS Dec 2009 R million Dec 2008 R million Increase/ (decrease) Net property income 1 484 1 168 27.1% Adjustments: Acquisition of GOZ (159) - Acquisitions and developments (165) (96) Disposals (11) (17) Adjusted like for like net property income 1 149 1 055 8.9% Retail 417 382 9.2% Office 439 402 9.2% Industrial 293 271 8.1% Total 1 149 1 055 8.9% 12
SEGMENTAL INFORMATION Retail R million Office R million Industrial R million 100% Australia R million Total R million Gross property revenue 623 725 423 168 1 939 Property expenses (172) (170) (104) (9) (455) Net property income 451 555 319 159 1 484 Percentage of total 30.4% 37.4% 21.5% 10.7% 100% Property expense ratio 27.6% 23.4% 24.6% 5.4% 23.5% Property book value 10 407 12 499 6 820 4 895 34 621 Percentage of total 30.1% 36.1% 19.7% 14.1% 100% 13
BALANCE SHEETS (Extracts) Total Dec 2009 R million RSA Dec 2009 R million Australia Dec 2009 R million June 2009 R million Direct Property portfolio * 34 621 29 726 4 895 29 211 Intangible assets (net of deferred tax) 1 339 1 339-1 374 Derivative financial assets 154 152 2 166 Long-term loans (BEE) 430 430-396 Cash 533 509 24 497 Interest bearing liabilities ** 12 277 9 961 2 316 10 322 Non-controlling interest 506 - - Linked unitholders interest (NAV) 22 711 - - 20 077 Units in issue ( 000) 1 547 522 159 620 1 409 018 * Includes R493m of properties reclassified as held for sale (June 2009 R574m) ** Including fair value adjustment of R470m (June 2009 R424m) 14
KEY STATISTICS AND RATIOS INCOME STATEMENT Dec 2009 Dec 2008 June 2009 Income statement: Property expense ratio (%) 23.5% 25.0% 23.6% Operating expense ratio (%) 2.7% 1.9% 2.3% Total expense ratio (%) 26.2% 26.9% 25.9% Interest cover ratio (times) 2.8 2.7 3.1 Bad debts (R million) 9,7 6,2 17,0 Bad debts as % of gross property revenue 0.5% 0.4% 0.5% 15
KEY STATISTICS AND RATIOS BALANCE SHEET Balance sheet: Dec 2009 Dec 2008 June 2009 Total arrears (R million) 57,9 39,0 36,4 Provision for bad debts (R million) 20,7 14,2 16,7 Net asset value per linked unit (cents) 1 468 1 418 1 425 Net tangible asset value per linked unit (cents) 1 381 1 308 1 327 Loan to value ratio (%) * 32.6% 36.3% 32.2% Loan to value ratio (%) excluding GOZ 30.2% 36.3% 32.2% * Based on nominal value of interest bearing borrowings and net of cash balances 16
PROPERTY PORTFOLIO Dec 2009 R million Balance at 30 June 2009 29 211 Acquisitions Australia 4 148 Goulburn, NSW and Stormill 481 Disposals (379) Foreign exchange translation 81 Transfer to investment property held for sale (493) Developments and capital expenditure 392 Sub-total 33 441 Fair value adjustment 687 Properties held for sale (refer Annexure 9) 493 Balance at 31 December 2009 34 621 17
BORROWINGS AND CASH Growthpoint has access to significant additional bank funding Current margins are likely to be 175 bps to 225 bps for facilities between 3 and 5 years Growthpoint s initial issue of CP in November 2009: Amount Term Margin Debt facilities (refer Annexure 6) R m Available debt facilities 11 128 Utilised * (9 491) Un-utilised 1 637 * R1,3 billion of facilities to be refinanced before November 2010 R360 million 3 months 55 bps R140 million 6 months 80 bps Interest rate risk policy: At least 75% of interest rates hedged Currently 118.3% hedged (refer Annexure 6) Strategy in place to reduce this to below 100% by 1 March 2010 Cash balances at 31 December 2009 of R533 million Montclare Place, Cape Town 18
OPERATIONAL OVERVIEW
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet GROWTHPOINT S PROPERTY PORTFOLIO Retail Office Industrial RSA Total 100% Australia Number of properties 53 136 246 435 24 GLA (m²) 958 144 1 203 851 2 358 175 4 520 170 731 798 Vacancy (m²) 26 531 110 682 132 881 270 094 18 114 Vacancy (%) 2.8% 9.2% 5.6% 6.0% 2.5% Valuation (R m) 10 407 12 499 6 820 29 726 4 895 Value per m² (excl bulk) 10 845 10 297 2 763 6 483 6 690 Average gross rental (per m² / month) R102 R97 R29 R59 R48 Forward yield 8.7% 9.1% 10.2% 9.2% 8.6% Average in force escalations 7.8% 7.9% 8.1% 2.7% Weighted average lease period (years) - By gross rental 3.4 5.2 3.2 4.1 10.6 - Excluding Investec 3.6 20
GLA AND VACANCY RECONCILIATION (RSA) Total GLA (m²) Vacant area (m²) Vacancy Balance at 30 June 2009 4 572 632 244 998 5.4% GLA Adjustments (4 906) (25) Disposals (77 321) (159) Acquisitions 19 331 6 671 Developments and extensions 10 434 5 715 Leases expired in the period 323 490 Renewals of expired leases * (244 821) New letting of vacant space (167 759) Leases terminated 101 984 Balance at 31 December 2009 4 520 170 270 094 6.0% * Retention % of 76% compared to 59% for the year to June 2009 21
SECTORAL ANALYSIS - (RSA) South African Property portfolio by value and gross lettable area ( GLA ) Value GLA 22
GEOGRAPHICAL ANALYSIS (RSA) South African Property portfolio by value and gross lettable area ( GLA ) Value GLA Great JHB Western Cape Pretoria KwaZulu-Natal Eastern Cape North West Other 23
RETAIL Total portfolio vacancies: Dec 2009 Dec 2008 26 531 28 464 Total portfolio vacancy 2.8% 3.0% Top 18 centre vacancy 1.1% 1.5% Balance of portfolio 6.4% 6.0% Arrears: R mil R mil Total 21,1 19,7 Bad debt provision 5,2 8,1 Brooklyn Mall, Pretoria National retail sales remain under pressure Cross subsidising by national retailers of poor performing new stores Retailers margins and cost structures under pressure Most leases renewed with positive reversions but increase in temporary rent relief to deserving smaller tenants Marginal improvement in vacancies and arrears have stablised 15.4% of leases come up for renewal in 2010 Development dynamics: New developments unlikely to find any support from retailers but extensions to existing retail space still in demand at performing centres Acquisitions: Scarcity of good quality low-risk investments 18 major shopping centres make up more than 80% of value of our retail portfolio Regional centres continue to trade well whilst smaller centres remain vulnerable 24
OFFICE Vacancies: Dec 2009 Dec 2008 Vacancy 6.1% 3.8% Development vacancies 3.1% 1.4% Total 9.2% 5.3% Arrears: R mil R mil Total 13,8 10,4 Bad debt provision 5,8 3,8 Demand for office space remains very weak 16% of leases by GLA expire in 2010 Ongoing high vacancies putting pressure on vacancy periods, rentals and tenant installation allowances Other key points of interest Approximately 66% of new developments let with 36,765m² remaining un-let In excess of 16,988m² let since 1 January 2010 of which 7,126m² related to new developments Top 12 office buildings make up 43% of the value of the office portfolio (refer Annexure 4) Development dynamics Demand for new developments remains weak Most new developments still not feasible, due to rentals under pressure and high building costs The Place (SAPOA Merit Award) 25
INDUSTRIAL Vacancies: Dec 2009 Dec 2008 Vacancy 4.6% 2.0% Development vacancies 1.0% 0.7% Total 5.6% 2.7% Arrears: R mil R mil Total 23,0 8,9 Bad debt provision 9,7 2,3 Tough trading conditions as a result of sharp decline in manufacturing output Oversupply of industrial space with vacancies continuing to rise Uptake of new developments slow Rental growth static, negatively impacted by increased utility costs Motor industry and ancillary services particularly weak Development and leasing dynamics New developments not feasable Client commitment time much longer due to market uncertainty Utility management is key Short term view Bottom of the cycle towards mid 2010 Increased activity and take up of space towards the end of 2010 and into 2011 Central Park, Cape Town 26
ACQUISITIONS, DEVELOPMENTS AND DISPOSALS
ACQUISITIONS, PRIMARY TITLE DEVELOPMENTS 18 PT TREBUCHET AND Secondary DISPOSALS Title 16 pt Trebuchet Acquisition and development activity remains low The anticipated distressed selling of quality property has not materialised and is unlikely to in South Africa More properties being offered for sale with possible rise in capitalisation rates, albeit modest No new developments unless substantially pre-committed Development focus to remain on adding good quality properties in strong commercial nodes Sold 4 buildings for R379,0m with a profit of R179,5m over historical cost price Newlands on Main, Cape Town 28
ACQUISITIONS AND DISPOSALS (RSA) Acquisitions Purchase price R million Sector Initial yield Stormill Industrial Park 50,0 Industrial 11.3% Total 50,0 11.3% Disposals Selling price R million Sector Profit on cost Profit on book value Holiday Inn Marine Parade 136,0 Office 71,3 7,2 Tulbach Park 125,0 Office 74,1 29,6 Imperial 60,0 Industrial 22,2 8,5 Goodwood Mall 58,0 Retail 11,9 1,9 Total 379,0 179,5 47,2 29
GROWTHPOINT PROPERTIES AUSTRALIA GOZ
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet GROWTHPOINT PROPERTIES AUSTRALIA Quality, well located, industrial property portfolio 24 industrial properties Office GLA $744 million R12,4 billion 731,798 m² 8.6% yield A$1,9 billion Lease expiry 10,6 year WALE Solely domestic property focus with 100% of distributions comprised of rental income (i.e. no development, funds Office management or other non property income paid out as distributions) Forecast distribution to 30 June 2010 of 14,0 Australian cents 6 months to December 2009: 5,5 cents 6 months to June 2010: 8,5 cents Annualised distribution of 17,0 cents based on normalised second half distributions of 8,5 cents representing a forward yield of over 10% in Australian dollars on the current share price Major tenants Woolworths, Coles and Star Track Express account for 76% of income No lease expiries until 2012 Secure debt facilities to June 2012 31
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet DISTRIBUTABLE INCOME SUMMARY Item Dec 2009 $ million Dec 2008 $ million Increase/ (decrease) Net property income 28,3 27,5 0,8 Net interest (17,8) (16,8) (1,0) Management fee Office (0,2) (1,0) 0,8 Fund expenses (1,5) (0,5) (1,0) Profit from operations after tax 8,8 9,2 (0,4) Distributions paid / payable 8,8 8,6 0,2 32
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet BALANCE SHEET (Extracts) Dec 2009 $ million June 2009 $ million Increase/ (decrease) Item Current assets Cash and cash equivalents 4 7 (3) Other assets 3 3 - Total current assets 7 10 (3) Non-current assets Investment property Office 744 662 82 Less Straight line rental adjustment (26) (19) (7) Other assets 25 19 6 Total non-current assets 743 662 81 Total assets 750 672 78 Current liabilities Trade and other payables 66 24 42 Derivative financial instruments - 15 (15) Provision for distribution 9 3 6 Total current liabilities 75 42 33 Non-current liabilities Derivative financial liabilities 7 7 - Interest bearing debt 345 506 (161) Total non-current liabilities 352 513 (161) Total liabilities 427 555 (128) Net assets 323 117 206 33
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet SECTORAL ANALYSIS (AUSTRALIA) Australian Property portfolio by value and gross lettable area ( GLA ) Property sector Geographic diversity Office * Includes Goulburn acquisition VIC QLD WA SA NSW 34
ACQUISITION PRIMARY TITLE 134 18 LILLKAR PT TREBUCHET ROAD, Secondary GOULBURN, Title 16 pt Trebuchet NSW Address 134 Lillkar Road, Goulburn, NSW, 2580 Property description Regional distribution centre and office Lettable area 42,826 m² Potential expansion 12,458 m² of lettable area Site area Ownership 16.25 hectares Freehold title Office Constructed Completed 2007 Tenant Lease term Rental Annual rent increases Purchase price Coles Group Limited 15 years lease expiring 15 February 2022, with two (2) renewal options each of five (5) years $6,506,485 per annum (at next rental adjustment on 16 February 2010) 2.75% per annum $64m (under the sale contract an early settlement fee of $1.5m was also payable) Initial purchase yield 9.93% 35
PROSPECTS
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet PROSPECTS Economic recovery on the cards but pace of recovery to be slow and gradual Recovery in commercial property sector fundamentals (letting demand and rental growth) to lag the overall economic recovery by 9 to 12 months Vacancies to peak towards the middle of the year with demand starting to pick up towards the end of 2010 and into 2011. Focussed effort to reduce vacancies in the short term Limited new supply across all sectors Very little, if any, distressed selling however more properties and portfolio s being offered for sale with moderate increase in capitalisation rates predicted 37
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet PROSPECTS (Cont d) Improved banking liquidity compared to 2009 but margins still repricing higher on renewal of facilities or signing of new facilities All known sources of debt funding now available to Growthpoint following favourable Moody s rating Growthpoint to continue looking for growth opportunities locally and in Australia whilst investing in our portfolio with a view to improving the overall quality of the portfolio and enhancing future rental growth prospects Growth in distributions for the full year to be similar to that achieved for the half year. (This forecast has not been reviewed or reported on by Growthpoint s auditors) 38
THANK YOU
ANNEXURES
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet ANNEXURE 1 UNITHOLDERS HOLDING >1% AT DEC 09 Name Units held Holding Public Investment Corporation 426 214 544 27.5% BEE Consortiums 122 000 000 7.9% Old Mutual Group 88 931 531 5.8% Stanlib 88 423 371 5.7% Investec 62 013 305 4.0% Investment Solutions 57 617 624 3.7% Liberty Group 38 577 377 2.5% Transnet Retirement Funds 37 812 022 2.4% Coronation Fund Managers 25 796 965 1.7% ABSA Group 24 912 753 1.6% Sanlam Group 24 527 286 1.6% Mine Workers Provident Funds 23 012 712 1.5% Vanguard 19 883 073 1.3% Marriott 18 312 860 1.2% Prudential 17 497 064 1.1% Brait 17 222 556 1.1% Rand Merchant Bank 16 479 575 1.1% Standard Bank Group Retirement Fund 16 300 336 1.0% Total unitholders holding >1% 1 125 534 954 72.7% Other 421 986 970 27.3% Total 1 547 521 924 100% Foreign unitholding 7.2% 41
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet ANNEXURE 2 LINKED UNITS ISSUED DURING THE PERIOD Linked units Opening balance 30 June 2009 1 409 018 815 Vendor placement 96 637 572 Distribution reinvestment 41 865 537 Closing balance 31 December 2009 1 547 521 924 42
ANNEXURE PRIMARY 3 TITLE - PROPERTY 18 PT TREBUCHET PORTFOLIO Secondary ANALYSIS Title 16 pt Trebuchet Top 12 retail properties by value Building Fair value R million % Retail portfolio % Total portfolio GLA % Retail portfolio % Total portfolio 1 Brooklyn Mall 1 131 54 847 2 Waterfall Mall 873 49 596 3 Lakeside Mall (87%) 687 56 258 4 La Lucia Mall 597 36 517 5 Kolonnade (50%) 581 34 268 6 Northgate (50%) 554 45 376 7 Woodmead Retail Park 533 53 447 8 Constantia Village 497 20 396 9 River Square Centre 451 38 942 10 Walmer Park Shopping Centre 449 34 030 11 Golden Acre 354 33 739 12 Longbeach Mall 313 30 563 Sub total 7 020 67% 24% 487 979 51% 11% 41 Balance of the sector 3 387 33% 11% 470 165 49% 10% 53 Total for the sector 10 407 100% 35% 958 144 100% 21% 43
ANNEXURE PRIMARY 4 TITLE - PROPERTY 18 PT TREBUCHET PORTFOLIO Secondary ANALYSIS Title 16 pt Trebuchet Top 12 office properties by value Building Fair value R million % Office portfolio % Total portfolio GLA % Office portfolio % Total portfolio 1 Investec, Sandton 1 635 70 945 2 The Place 702 33 589 3 Constantia Office Park 590 70 807 4 Montclare Place 391 29 446 5 Growthpoint Business Park 374 63 388 6 Investec, Cape Town 304 12 836 7 N1 City Hospital 271 14 022 8 Sunnyside Ridge Office Park 265 28 549 9 Central Park 240 34 340 10 Hatfield Gardens 237 25 203 11 Fredman Towers 197 15 005 12 The District 197 18 413 Sub total 5 403 43% 18% 416 543 35% 9% 124 Balance of the sector 7 096 57% 24% 787 308 65% 18% 136 Total for the sector 12 499 100% 42% 1 203 851 100% 27% 44
ANNEXURE PRIMARY 5 TITLE - PROPERTY 18 PT TREBUCHET PORTFOLIO Secondary ANALYSIS Title 16 pt Trebuchet Top 12 industrial properties by value Building Fair value R million % Industrial portfolio % Total portfolio GLA % Industrial portfolio % Total portfolio 1 Growthpoint Industrial Estate 297 34 910 2 Hilltop Industrial Estate 168 69 129 3 Central Park, Cape Town 126 49 135 4 226 Brakpan Road 118 48 043 5 Midas, Meadowdale 106 18 981 6 Rectron, Midrand 107 19 150 7 Kulingile 104 49 000 8 Pine Industrial Park 89 39 620 9 Omni Park 87 40 480 10 Maitland Industrial 77 27 961 11 Meadowdale 77 15 139 12 10 Richard Carte Road 74 19 578 Sub total 1 430 21% 5% 431 126 18% 9% 234 Balance of the sector 5 390 79% 18% 1 927 049 82% 43% 246 Total for the sector 6 820 100% 23% 2 358 175 100% 52% 45
PRIMARY TITLE 18 PT TREBUCHET Secondary Title 16 pt Trebuchet ANNEXURE 6 - BORROWINGS South Africa Refinance date Dec 2009 R million June 2009 R million Investec Buildings loan May 2024 703 Securitisation issue I Nov 2010 805 Securitisation issue II Jul 2011 969 Securitisation Metboard Aug 2011 1 000 Standard Bank Jul 2010 500 Nedbank Sep 2013 1 000 ABSA Mar 2011 1 200 RMB Feb 2018 675 ABSA Paramount Feb 2015 740 RMB Paramount Apr 2018 740 Commercial paper 3 months * Feb 2010 360 Commercial paper 6 months * May 2010 140 Omsfin Feb 2013 659 Total 9 491 9 898 Weighted average fixed rate of interest 10.3% 9.7% % of debt at fixed interest rates 118.3% 108.4% * New facilities obtained in the current period Australia Westpac Jun 2012 1 737 Nab Jun 2012 579 Total 2 316 46
ANNEXURE 7 - INTEREST RATE FIX EXPIRY PROFILE R m Weighted average length of fixes: 8 years 47
ANNEXURE PRIMARY 8 TITLE CONSOLIDATED 18 PT TREBUCHET LEASE Secondary EXPIRY Title 16 PROFILE pt Trebuchet Consolidated lease expiry profile from Jan to Dec each year % 48
ANNEXURE PRIMARY 9 TITLE NON 18 PT CURRENT TREBUCHET ASSETS Secondary HELD Title 16 FOR pt Trebuchet SALE Properties held for sale Sector Fair value Dec 2009 R million 174 Visagie Street Office 47,7 Forum Office 175,0 Metro Park Office 77,6 Sunset Boulevard Office 49,1 OK Empangeni Retail 45,0 Lighthouse Mall Retail 84,4 M & R Bedfordview Office 14,2 Total 493,0 Montclare residential units Residential 21,0 49