Interim Results 31 March 2018
Interim Results 2018 Green Green shoots starting to show shoots Portfolio surprised on the upside Letting vacant space but with greater incentives Benefits in 2019 Remains tough environment 2
Interim Results 2018 Arrowheads’ missio n Opportunistic Diversified Sustainable value for our shareholders Trusted South African focused 3
Interim Results 2018 Diverse commercial (office, retail and industrial) portfolio: value R5.6 billion 60% interest in Indluplace: R1.9 billion Arrowhead 56% interest in Gemgrow: R1.6 billion as at 31 March 2018 19% interest in Rebosis: R1.1 billion 11% interest in Dipula: R509 million Gearing R3.5 billion, company LTV of 31.3% 4
Interim Results 2018 Operational success Initially vacancies forecast to increase for 2018 Started year at 12.1% Vacancy at period-end 10.6% Vacancy expected to be below 9% by financial year-end Well positioned for defensive sustainable growth 5
Interim Results 2018 1 Sturdee 11 343m 2 of 13 350m 2 let 3-5 year leases Strong demand at market related rentals around R135m 2 Breakdown of tenants Eurasian Resources Group 3 298m 2 SPARK Schools Head Office 1 794m 2 Sizwe Medical Fund 1 692m 2 Cool Ideas 1 250m 2 Ombudsman for Short-Term Insurance 1 184m 2 Sanlam 1 001m 2 Arrowhead Group 811m 2 Motherland Coffee 313m 2 We encourage shareholders to come visit and view success 6
Interim Results 2018 7
Interim Results 2018 Operational success Kwela Logistics Kwela Logistics (15 450m 2 ) Blackheath Cape Town Declined several offers to sell Re-let 14 484m 2 at higher rate (3 tenants) 8
Interim Results 2018 Operational success Hill Street Hill Street (13 347m 2 ) Sold to Live/Easy (student development) R60 million (VAT inclusive) Transferred 24 April 2018 9
Interim Results 2018 Operational success 3 000m 2 let at Owl Street Working on large leads Major lease renewal with RCS in Cape Town 6% step up and 6% annual escalation Lease expiry was June 2018 and now is June 2021 SARS, the other major renewal Advanced discussions Expect a 4 year lease renewal 10
Interim Results 2018 To t a l dividend 31 March 2018 R’000 2018 2017 Revenue (excluding straight line rental income) 1 112 580 959 324 Listed securities income 109 980 95 893 Property expenses (408 359) (360 780) Administration and corporate costs (28 319) (23 809) Finance charges (273 936) (193 283) Finance income 47 336 39 940 Pre-effective date dividend # - 19 162 Non-controlling interest profits elimination (net of antecedent income) (146 348) (126 089) Distributable income 412 934 410 358 Accrued dividend on listed securities 107 749 120 926 Listed securities income recognised in previous reporting period (109 980) (95 893) Total dividends 410 703 435 391 Dividend to the Arrowhead Charitable Trust and corporate fees* 13 793 13 404 Total dividend after effects of Arrowhead Charitable Trust 424 496 448 795 # Pre-effective date dividend is in respect of the dividend declared by Gemgrow as regards the income earned by Gemgrow on the Cumulative Properties Limited (“ Cumulative ”) portfolio prior to the accounting effective date. * Dividend to the Arrowhead Charitable Trust and corporate fees is added back as it is eliminated on consolidation. Corporate fees are in respect of administration costs recouped from Indluplace and Gemgrow. Property expenses as a percentage of revenue – gross 38% 38% Property expenses as a percentage of revenue – net 16.1% 16.0% Dividend for the quarter ended 31 December** - 222 218 Dividend for the 6 months/quarter ended 31 March ^ 424 496 226 577 Total dividend (cents) 424 496 448 795 Dividend per share for the quarter ended 31 December** - 21.41 Dividend per share for the 6 months/quarter ended 31 March ^ 40.43 21.83 Total dividend (cents) 40.43 43.24 Net asset value per share (cents) - including non-controlling interest 1123.68 1132.84 Net asset value per share (cents) - excluding non-controlling interest 823.83 858.93 ** As announced on SENS on 22 January 2018, dividends are declared bi-annually, compared to quarterly as in the prior financial year. ^ The dividend was declared on 23 May 2018 11
Interim Results 2018 Arrowhead Unaudited for the six Unaudited for the six as at 31 March 2018 months ended months ended R’000 31 March 2018 31 March 2017 Assets Non-current assets 17 698 905 15 560 960 Investment property 15 036 213 12 400 987 Fair value of property portfolio for accounting purposes 14 912 089 12 322 921 Straight line rental income accrual 124 124 78 066 Property, plant and equipment 1 486 925 Loans to participants of group share purchase and option schemes 736 874 652 576 Goodwill 337 449 337 449 Financial assets 1 584 800 2 164 138 Deferred taxation 2 011 2 011 Derivative instruments 72 2 874 Current assets 377 713 302 154 Trade and other receivables 253 539 165 835 Cash and cash equivalents 124 174 136 319 Total assets 18 076 618 15 863 114 Equity and liabilities Shareholders interest 8 394 444 8 648 659 Stated capital 6 572 398 6 676 586 Reserves 1 822 046 1 972 073 Non-controlling interest 3 055 312 2 758 108 Other non-current liabilities 5 602 954 3 428 213 Secured financial liabilities 5 532 120 3 409 159 Derivative instruments 70 834 19 054 Current liabilities 1 023 908 1 028 134 Trade and other payables 323 235 253 101 Secured financial liabilities 700 673 775 033 Total equity and liabilities 18 076 618 15 863 114 12
Interim Results 2018 Arrowhead loans of R3 482 million and group of R6 242 million Debt Arrowhead LTV of 31.3%, group of 36.75% Loans fixed, Arrowhead 73% and group 80% as at 31 March 2018 Arrowhead effective interest rate of 9.35% and group effective interest rate of 9.40% for Interim period ended March 2018 2019 R500 2020 R1 528 2021 - 2022 R548 2023 R907 Total R3 483 13
Interim Results 2018 40 assets Indluplace Properties Gemgrow Properties 14
Interim Results 2018 Top 5 properties Access Park Western Cape R776 000 000 20 456m 2 Retail 15
Interim Results 2018 Top 5 properties Cleary Park Eastern Cape R521 000 000 36 294m 2 Retail 16
Interim Results 2018 Increase catchment due to new bus transport system Excited Cleary Park residents 17
Interim Results 2018 Top 5 properties Westgate Mall Western Cape R332 000 000 28 951m 2 Retail 18
Interim Results 2018 Top 5 properties Midtown Mall North West R260 000 000 17 456m 2 Retail 19
Interim Results 2018 Top 5 properties 158 Offjces Gauteng R253 661 000 19 510m 2 Office 20
Interim Results 2018 Our exposure GLA (m 2 ) - 3.14% Revenue (R) - 2.64% Post Cleary Park (exited post period-end) Edcon GLA (m 2 ) - 2.70% Revenue (R) - 2.16% as at 31 March 2018 Our Edcon exposure is broken down as follows: Edgars 53% Jet 47% 21
Interim Results 2018 Letting King Williams Town Replaced Jet Mart & Edgars Active with a local supermarket & national shoe retailer success Westgate Mall where Replaced Jet & Edgars with a national Gym & created a new wing which is now fully let to national tenants Edcon Cleary Park Replaced Edgars with a national supermarket has Thohoyandou Centre (Prior to disposal to Gemgrow) Replaced Jet with a national supermarket vacated In all instances above we have matched the exiting rental or achieved a higher rental rate. 22
Interim Results 2018 6% 4000 3500 7% 3000 16% 4% 2500 3% Tra d ing 2000 1500 1% 1000 densities 500 0 Access Park Montclair Cleary Park Westgate Midtown Mall KWT September 2017 vs March 2018 3% 9.00% 8.00% 3% Rent 7.00% 14% 2% 6.00% 5.00% 1% 3% to sa l es 4.00% 3.00% ratio 2.00% 1.00% 0.00% Access Park Montclair Cleary Park Westgate Midtown Mall KWT 23
Interim Results 2018 50 commercial (retail, office & industrial) properties 57% retail, 35% office and 8% industrial (sectoral by value) As at Overall vacancy 10.63% (retail 5%, office 21%, industrial 3%) 31 March Average gross rent per sector (R134/m 2 retail, R107/m 2 office, R45/m 2 industrial) 2018 Escalation per sector (7.83% retail, 8.18% office, 8.14% industrial) Average lease profile 3.87 years Escalations achieved per sector (retail 4%, office 7%, no Industrial lease expiry within the period under review), overall 5% positive 24
Interim Results 2018 Indluplace dominant listed residential fund in South Africa Defensive investment opportunity offers good returns in a difficult environment if managed properly Indluplace On track with 4% forecast for year-end 30 September 2018 Tough 6 months but proving defensive and diversified Vacancies responsive to small changes Portfolio growth to R4.3 billion with 9 662 units 25
Interim Results 2018 High yield high growth fund Manage risk by diversification Performing well in tough environment Growth of 7-9% on track for year-end 30 September 2018 Acquisitions 26
Interim Results 2018 10 assets to sell Dipula Income Fund Rebosis Property Fund 27
Interim Results 2018 Rebosis dividend growth of 4% to February 2018 Currency to Arrowhead, currently holding Positive engagement with management 28
Interim Results 2018 Dipula B dividend growth to February 2018 Dipula B dividend forecast for year-ended August 2018 Dipula Positive engagement with management Dipula stake has performed well Looking to recycle shareholding responsibly 29
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