ANNUAL RESULTS PRESENTATION for the year ended 31 May 2015 1 - PowerPoint PPT Presentation

ANNUAL RESULTS PRESENTATION for the year ended 31 May 2015 1

PRESENTATION OUTLINE 1. Financial Highlights 2. Operational Highlights 3. Tower Strategy 4. Tower At A Glance 5. Tower Asset Managers 6. Management Team 7. Financial Results 8. Borrowings 9. Operational Performance 10. Croatia Calling 11. Rationale and Opportunties 12. Building Information 13. VMD Grupa 14. Top 10 Properties by Value 15. Greening 16. Corporate Social Responsibility 17. Recent Major Acquisitions 18. Success Stories 19. Shareholders 20. Prospects

FINANCIAL HIGHLIGHTS • Total distribution of 86.8 cents per share exceeds • Headline earnings of R125 million • Distributable earnings of R137 million • Portfolio expanded to 48 properties (July 2015) • Portfolio value increased by 88% to R3.8 billion (July 2015) • Market capitalisation increased by 50% to R2.4 billion (July 2015) 1

OPERATIONAL HIGHLIGHTS • Vacancies reduced by 60% (from Nov 2015) to 4% • 15% expense ratio net of recoveries • Greening projects returning greater than anticipated results • Fixed debt at 70% (July 2015) • Large, well located properties to the value of R1.7bn purchased 2

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. 3

TOWER AT A GLANCE Sectoral profjle by revenue (May 2015) Geographic profjle by revenue (May 2015) Property portfolio value: R3.8bn* 9.13% 12.73% Rentable area (GLA): 285 000m 2 * KZN Retail Occupancy rate (GLA): 96%* 32.29% Offjce Gauteng 42.20% 48.67% Existing portfolio escalations: 7.8% Industrial Western Cape 54.98% Average gross rental: R107/m 2 Gearing (LTV): 36% * As at 31 July 2015 TOWER ASSET GROWTH 4500000 000 4000000 000 3500000 000 3000000 000 2500000 000 2000000 000 1500000 000 1000000 000 500000 000 Q3 2013 Q4 2013 Q1 201 4Q 2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 4

TOWER ASSET MANAGERS • Experienced team: TAM comprises Spire and ex Mettle executives • Successful track record of managing and assembling Paramount Property Fund. • Good mix of property and financial skills • Demonstrated ability to add value and improve underperforming properties • Spire contracted to undertake national property management • Management to be internalised in the short term 5

MANAGEMENT TEAM Marc Edwards Bruce Kerswill Chief Executive Officer Executive Director Strategy, acquisitions, debt and Strategy, Marketing and Greening capital raising Joanne Mabin Johan Malherbe Chief Financial Officer Asset Manager Financial controls and management Western Cape Keith Craddock Bruce Rogerson Executive Director Asset Manager Financial, administration, property Gauteng and KwaZulu-Natal management 6

FINANCIAL RESULTS Condensed consolidated statement of profit and loss and comprehensive income Reviewed year Audited ended year ended 31 May 2015 31 May 2014 R’000 R’000 247 721 191 270 Revenue Net property operating expenses (34 928) (19 785) Net property rental income 212 793 171 485 Administration expenses (14 952 ) (10 273) Other income 2 914 480 Net operating profit 200 755 161 692 Fair value adjustments on investment properties 101 740 (11 740) Fair value adjustments on interest rate derivatives 762 (1 442) Profit from operations 303 257 148 510 Net finance costs (76 683) (50 390) Indirect capital raising expenses (206) (11 487) Profit before taxation 226 368 86 633 Taxation - - Total comprehensive income for the period 226 368 86 633 Basic and diluted earnings per share - weighted average shares in issue (cents) 149,9 82,0 Basic and diluted headline earnings per share - 82,6 weighted average shares in issue (cents) 93,1 7

FINANCIAL RESULTS (continued) Condensed consolidated statement of financial position Reviewed Audited year ended year ended 31 May 2015 31 May 2014 (Restated) R’000 R’000 Assets Non-current assets 3 140 990 2 060 847 Current assets 98 795 75 053 Total assets 3 239 785 2 135 900 Equity and liabilities Equity Stated capital 1 518 389 1 251 034 Retained income 146 650 46 713 1 665 039 1 297 747 Liabilities 857 341 769 518 Non-current liabilities 717 405 68 635 Current liabilities 3 239 785 2 135 900 Total equity and liabilities 8

BORROWINGS • Targeted loan to value - 40% • Current LTV - 36% • Total borrowings - R1.1bn • Fixed debt - 60% (July 2015 - 70%) • Weighted average rate - 7.73% 9

OPERATIONAL PERFORMANCE • Vacancies reduced by 60% to 4% • Active management resulting in expense reduction through contractor management 3500000 and green initiatives 3000000 30000 25000 2500000 2000000 20000 • Green initiatives are reducing operating costs 15000 1500000 and “future proofing” properties at an 1000000 10000 accretive yield 5000 500000 y y 6 7 l 5 6 7 8 9 0 1 t l 8 9 0 1 2 h h 1 1 1 n 1 1 1 1 2 2 2 1 1 2 2 t t a n n y y y y y y y y y y y y y y c o a a a a a a a o a a a a a a a a M M M M M M M M M M M M M M M M V • Mini refurbishment at Cape Quarter with Deloitte expanding • Average property size R100m 10

OPERATIONAL PERFORMANCE (continued) • Over 19 000m 2 of space let • 9 000m 2 of new space let • 10 000m 2 of renewable space let • Active letting strategies should further reduce vacancies in the short term 11

CROATIA CALLING 4.3m Population: Zagreb (Population 1m) Capital City: Tourism and Exports Main Economic driver: Kuna (HRK) Currency: • Included in the Eurozone in July 2013 • Expected to move to the Euro in 2020 12

RATIONALE AND OPPORTUNITIES • Increase Tower’s distributable income • Tower can be a dominant player in the market – a “top feeder” • Property prices are extremely attractive – presents upside rental growth • Country has bottomed out after the recession • Strongest possible partner in VMD – in country expertise • Yield accretive acquisitions • Strong capital growth and rental growth expected • High quality diversification • On the ground expertise 13

BUILDING INFORMATION Location: Ulica grada Vukovara 269d/ VIII, 10000 Zagreb Grade: Premium Size: 18 200m2 Floors: 26 Towers Purchase size: 10 650m2 (15 floors) Parking Bays: 280 Green Status: A Grade 14

VMD GRUPA 1995 Founded: Residential and Development and Construction Commercial 79 Employees: Euro 58m p.a. Turnover: Extremely highly Profile: regarded developers in Croatia Only 5% of sales are through advertising 15

TOP 10 PROPERTIES BY VALUE Property Sector Value Location Cape Quarter Square Mixed use R603m Cape Town VMD Kwart Office R320m Zagreb, Croatia Link Hills Shopping Centre Retail R228m Waterfall, KZN De Ville Shopping Centre Retail/Office R220m Durbanville Sunclare Office R192m Claremont Upper Grayston Office R175m Sandton 6 - 8 Sturdee Avenue Office R153m Rosebank Cape Quarter Piazza Retail/Office R133m Cape Town Medscheme Office R120m Florida North Evagold Shopping Centre Retail R110m Evaton, Gauteng 16

GREENING • Lighting retrofits completed at Cape Quarter and De Ville resulting in an anticipated 69% KWH and carbon emission reduction • Solar PV rolled out to five additional properties • Well advanced in rolling out other initiatives including lighting and water. Yields of 12% - 25% • Cape Quarter being reviewed by the Green Building Council for their Existing Building Performance Tool 17

CORPORATE SOCIAL RESPONSIBILITY • Tower will be funding a bursary in the BSc Property Studies Degree at UCT • Tower funded a book prize at UCT for the property studies course • Tower along with Tower Asset Managers are making a monthly CSR donation to the Ubuntu Trust. • The Ubuntu Football Academy offers intensive coaching, quality education and holistic mentorship to exceptional young players over a sustained period of 6 years (13-18 years). 18

RECENT MAJOR ACQUISITIONS Title Sector Purchase price Location Sunclare Office R192m Claremont, CPT Evagold Centre South Retail R111m Evaton, JHB 15 Wellington Rd Office & Retail R81m Parktown, JHB HBW Portfolio Industrial R375m Gauteng & KZN R760m TOTAL New Acquisitjons Expiry Profjle 45 000 40 000 35 000 25 000 20 000 15 000 10 000 5 000 0 5 6 7 8 9 0 1 2 3 4 1 1 1 1 1 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 19

SUNCLARE • Desirable location close to public transport • Acquisition yield – 9% • Close to retail amenities including Cavendish Square • Strong demand for office space in the area • Claremont vacancies below 1% • Flexible use of space with natural light through atria and balconies 20