Interim Results Presentation 30 November 2016
Presentation Outline 1. Tower Strategy 2. Financial Highlights 3. Operational Highlights 4. Tower at a Glance 5. Management Team 6. Financial Results 7. Borrowings 8. Operational Performance 9. Top 10 Properties By Value 10. Greening 11. Corporate Social Responsibility 12. Success Stories 13. Croatian Retail Acquisition 14. Top 10 Shareholders 15. Prospects
Tower Strategy Tower aims to generate competitive investment performance by adding value through property asset management and the cost-effective greening of its property portfolio resulting in lower operational expenditure and increased tenant retention. Tower aims to expand its portfolio through management s network of contacts throughout South Africa and abroad. 1
Financial Highlights Interim distribution of 38.4 cents per share 15% reduction on corresponding period Growth in core earnings to 38.4 cents (8% on corresponding period) Headline earnings of R223 million Distributable earnings of R130 million Rolled 12-month forward core earnings of 84-86 cents Portfolio expanded to 49 properties Portfolio value of R5 billion Market capitalisation of R2.6 billion Loan-to-value of 40% Net asset value of R9.41 per share 7 properties currently for sale at >R450 million 2
Operational Highlights Internalisation of the asset management company Vacancies at 4.0% South African vacancies at 4.6% WALE (portfolio) 4.5 years WALE (SA) 3.5 years R1bn worth of quality Croatian retail property acquired 28% of value offshore Operational Ratios IPD Property expense ratio (Gross) 28% 35% Property expense ratio (Net) 13% Operating expense/m 2 Retail R67 R76 Operating expense/m 2 Office R44 R44 Operating expense/m 2 Industrial R22 R15 Operating expense/m 2 All R41 R45 3
Tower at a Glance Property portfolio value: R5bn Rentable area (GLA): 312 690m 2 Occupancy rate (GLA) (30 Nov 2016): 96% Gearing (LTV): 40% 49% (Nov 2016) Revenue Office Retail 9% Industrial 42% 28% 10% (Nov 2016) Revenue W Cape KZN Croatia Gauteng 23% Average Gross Rental R113.95m 2 Existing lease escalations 7.87% Sectoral Profile by Revenue 39% Geographic Profile by Revenue Number of properties 49 Average Property Value R100m 5.0 4.0 3.0 Valuations 30 Nov 2016 Cost 2.0 1.0 Tower Asset Growth Listing Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 4
Management Team Marc Edwards Chief Executive Officer Strategy, Acquisitions, Debt and Capital Raising Johan Malherbe Asset Manager Western Cape, Structured Finance, Acquisitions and Strategy Joanne Mabin Chief Financial Officer Financial Controls and Management Bruce Rogerson Asset Manager Gauteng and KwaZulu-Natal, Acquisitions and Disposals 5
Financial Results Condensed consolidated statement of profit and loss and other comprehensive income Unaudited 6 months ended Audited 12 months ended 30 November 2016 31 May 2016 R 000 R 000 Revenue 222 716 376 451 Net property operating expenses (16 631) (30 733) Net property income 206 085 345 718 Administration expenses (9 110) (23 946) Other income 809 10 377 Impairment of goodwill (102 168) - Foreign exchange gain/(loss) 99 759 (30 519) Net operating profit 195 375 301 630 Fair value adjustments 175 513 (18 137) Profit from operations 370 888 283 493 Net finance costs (64 620) (115 040) Indirect capital raising expenses (557) (894) Profit before taxation 305 711 167 559 Taxation - - Profit for the period 305 711 167 559 Other comprehensive income - items that may subsequently be reclassified to profit and loss Exchange difference on foreign operations (115 629) 42 968 Total comprehensive income for the period 190 082 210 527 Basic and diluted earnings per share - weighted 91.3 67.1 average shares in issue (cents) 6
Financial Results (Continued) Condensed consolidated statement of financial position Unaudited 6 months ended Audited 12 months ended 30 November 2016 31 May 2016 R 000 R 000 Assets Non-current assets 5 138 740 3 945 530 Current assets 251 565 251 673 Total assets 5 390 305 4 197 203 Equity and liabilities Equity Stated capital 3 035 344 2 236 244 Retained income 235 464 89 390 Foreign currency translation reserve (70 467) 41 949 Shareholders interest 3 200 341 2 367 583 Non-controlling interest 17 584 20 228 Total equity 3 217 925 2 387 811 Liabilities Non-current liabilities Secured financial liabilities 1 699 053 1 054 748 Current liabilities 473 327 754 644 Total equity and liabilities 5 390 305 4 197 203 7
Borrowings Maximum targeted loan-to-value 40% Current LTV 40% Total borrowings R2.1bn Fixed debt 70%* Weighted average rate 5.81%** *ZAR debt 68%, Euro debt 72% **ZAR debt 9.16%, Euro debt 3.91% 6% 19% 2016 30 Nov 39% exposed to South Africa 40% 40% Standard Bank of South Africa (Rand) 1% Nedbank (Rand) 39% Standard Bank of South Africa (Euro) 19% Privredna Banka Zagreb (Euro) 6% Zagrebacka Banka (Euro) 1% 39% Tower is in the process of refinancing its Croatian debt to reduce the interest expense and capital repayments 8
Operational Performance Space let in the period 26 500m 2 Lease expiry profile by Revenue per sector New space let 10 550m 2 Renewable space let 16 000m 2 Total vacant space (SA) 12 600m 2 % 40 30 20 10 Total vacant space (Croatia) NIL Monthly <Nov 2017 <Nov 2018 <Nov 2019 <Nov 2020 <Nov 2021 <Nov 2022 >Nov 2023 Industrial Office Retail Vacancies will be subject to weakening market conditions in the short term Lease expiry profile by GLA per sector % 40 35 30 25 20 15 10 5 0 Vacant Monthly <Nov 2017 <Nov 2018 <Nov 2019 <Nov 2020 <Nov 2021 <Nov 2022 <Nov 2023 Industrial Office Retail 9
Top 10 Properties By Value Property Sector Value (R) Location Cape Quarter Square Mixed use 680m Cape Town* Sub-Dubrovnik Retail 428m Dubrovnik, Croatia** VMD KVART Office 387m Zagreb, Croatia** Sunclare Office 245m Claremont De Ville Shopping Centre Retail/Office 241m Durbanville Meridijan 16 Retail 233m Zagreb, Croatia** Link Hills Shopping Centre Retail 229m Waterfall, KZN Vukovarska Retail 196m Zagreb, Croatia** Upper Grayston Office 178m Sandton Cape Quarter Piazza Retail/Office 162m Cape Town * Cape Quarter precinct, post sale of residential units, anticipated value in excess of R1.2bn (Including development profit) ** at R14.89 to the Euro 10
Greening Total of 1300 kwhs per annum being generated from solar 1.9 million kwhs of lighting saved per annum Circa 3 million kgs of carbon off-set per year R4 million per annum saved as a result of green initiatives Cape Quarter awarded a 4 Star Green Star existing building rating through the Green Building Council of South Africa - First lifestyle centre in South Africa to receive this award 11
Corporate Social Responsibility Ubuntu Trust The Ubuntu Football Academy offers intensive coaching, quality education and holistic mentorship to exceptional young football players over a sustained period of six years (13-18 years) 65 children currently being placed through school (bursaries) Ubuntu has established its first school with 35 learners in January 2017 12
Success Stories Croatia Portfolio valued at R1.4bn GDP growth forecast to be 2.6% for 2017 GDP growth driven by record tourism season, strong investment and a pick-up in consumption Unemployment has reduced from >17% in 2014 to a forecast 11% in 2017 Tower has strong relationships with leading businesses and banks in the region 13
Success Stories Konzum / Agrokor Four retail centres acquired for 66m Twelve-year triple net head lease from Agrokor Agrokor is the leading food producer and retailer in Southeastern Europe Employs 65 000 people Konzum is owned by Agrokor and anchors each centre Konzum has 740 outlets in the Balkans Growth in income forecast at 4-5% p/a (EURO) 14
Success Stories VMD Increased value due to strengthening cap rates Most energy efficient office block in Croatia Compliments Tower s green strategy Four-year head lease Fully let to blue chip tenants Rental uptick from 13.50/m² to 14.50/m² 15
Success Stories (Continued) Sunclare Asking rental R160m 2 Tiger s Milk opened September 2016 Low vacancies At least 3000m 2 additional bulk available Value uplift available through neighbour relationships and use of public space Acquired in May 2015 with rentals of R120/m 2 16
Success Stories (Continued) Cape Quarter Revitalised tenant mix with key relocations and new additions Rental turnover increased substantially with more dwell time Fully let Three quarters of the way to reaching full value Waiting list on retail, office and parking space Achieving R2 500 per parking bay Additional 1 800m² GLA added at R160m² to R250m² Local advertising campaign rolled out with profitable in centre and external advertising initiatives 17
ANNEXURE C Developments JARVIS STREET Napier Street Nineteen apartments in addition to two floors of retail and offices 128 parking bays Current asking price in the area R65 000/m² Anticipated profits of R20m Will add to footfall of Cape Quarter NAPIER STREET 305 301 304 303 302 MORELAND TERRACE 18
ANNEXURE C Developments (Continued) JARVIS STREET Piazza At least 54 apartments in addition to existing retail and offices Municipal approval received in December 2016 for construction in June 2017 Will sell off units at circa R65 000/m2 (current rate) Sales profit of circa R120 million anticipated NAPIER STREET 305 301 304 303 302 MORELAND TERRACE 19
Top 10 Shareholders Major Fund Managers % holding 1 Allan Gray Asset Management 17.24 2 Prescient Investment Management 15.46 3 Grindrod Asset Management 14.77 4 Coronation Fund Managers 10.71 5 STANLIB Asset Management 9.23 6 Personal Trust International 2.24 7 3 PM Investments 1.62 8 Plexus Wealth 1.55 9 Anchor Securities Stockbrokers 1.50 10 Sanlam Investment Management 1.15 20
Prospects Sustainable core earnings growth of 8-10% p.a expected* >R240m once-off profits anticipated in 12-30 months Profits to be re-invested - reducing debt or repurchasing shares which will add >7c to distributable earnings Croatian properties to be reversed into separate vehicle, focusing on off-shore acquisitions Continue to focus on redevelopment opportunities >R450 million anticipated from sale of non-core properties CROATIA TPF 2016 *Assumes no major tenant failures and no large vacancies 21
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