Investors’ Presentation 16 October 2008 Erinvale
AECI UPDATE AECI UPDATE • Trading environment • Melt-down of global financial markets causing risk re-evaluation M lt d f l b l fi i l k t i i k l ti and credit squeeze • Global recession looming • Unprecedented volatility in input prices • Effect on AECI • Still believe that the strong commodity cycle will continue • AECI is dependent on volumes of commodities not prices p p • Consumers in SA under pressure and volumes declining • AEL • Trading well in second half-year • Trading well in second half year • Projects on track, although cost escalation being felt • Chemserve • Strong trading performance continues Strong trading performance continues • Project costs under pressure but business case remains strong
AECI UPDATE AECI UPDATE • SANS • Withdrawal of offer to purchase nylon business Withd l f ff t h l b i • PET due diligence process complete, awaiting final offers • Decision on nylon will be announced by year-end • Pension Fund surplus and post-employment liability • Stock markets decline has had adverse effect on investment performance • Balance sheet Balance sheet • Debt capacity and terms have been renegotiated and restructured • BBBEE • Employee and community share scheme Employee and community share scheme • 10% of share capital – 6,5% EST & 3,5% CST • Authorisation from shareholders planned for late ’08 • Implementation in 1H’09
CONTENTS CONTENTS • External market environment • Vision & strategy • Land development structure • Strategy St ateg • Valuation • What next? • Modderfontein • Modderfontein • Somerset West • Leasing structure Leasing structure • Portfolio statistics • Remediation • Historical performance
EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT 9 8 8 ces, Rm 7 6 urrent pric 5 4 Cu 3 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Plans passed Buildings completed Source : Bureau for Economic Research
EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT CAUSE FOR CONCERN CAUSE FOR CONCERN • Electricity crisis • Increase in building costs • Increase in building costs • Increase in interest rates • Unavailability of zoned land
BER CONTRACTORS CONFI DENCE I NDEX BER CONTRACTORS CONFI DENCE I NDEX 100 90 80 70 70 60 50 40 0 30 20 10 0 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 Source : Bureau for Economic Research
COMMERCI AL PROPERTY CONFI DENCE COMMERCI AL PROPERTY CONFI DENCE 70 60 50 40 30 20 10 10 0 -10 -20 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 I ndustrial Office Retail Source : eProp 11/09/2008
EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT I MPACT ON LAND PRI CES I MPACT ON LAND PRI CES Increase in land prices has slowed but will improve from these levels R700 – R1000/m 2 (prime R1500/m 2 ) • Industrial land R2000 – R3000/bulk m 2 • Offices O ces 000 3000/bu R500 – R800/m 2 (30 units/ha) • Residential
MANDATE AND STRATEGY MANDATE AND STRATEGY To optimise the value of AECI’s property assets and maximise To optimise the value of AECI s property assets and maximise benefit to shareholders through: • Selling off land surplus to operational requirement Selling off land surplus to operational requirement • Maintaining and growing the existing property portfolio
LAND DEVELOPMENT LAND DEVELOPMENT Gautrain Wholesale Retail Helderberg Coastal Sewer Road I nfrastructure
HEARTLAND PROPERTI ES HEARTLAND PROPERTI ES Chief Executive Officer Anthony Diepenbroek Development Development Development Development Commercial Commercial Sales Sales Financial Financial Director Director Director Director Director Somerset West Modderfontein Deon van Zyl Leticia Potts Jaco Strydom Michael Walsh Neil Hayes
OBJECTI VES OBJECTI VES To optimise the value of land surplus to AECI’s operational requirements and release to the market requirements and release to the market Optimise? • Strategic macro planning • Installation of bulk services infrastructure • Incremental land release • Matching market demand M hi k d d
RELEASE TO MARKET RELEASE TO MARKET Current contributions: • Sell off parcels of land to developers • Sell stands to individual end users • Enhance value by means of development controls • Identify and create high value precincts Additional value add possibilities: Additi l l dd ibiliti • Enter into joint ventures with developers • Lease land & retain ownership • Participate in ownership of top structures • Participate in ownership of top structures
RATE OF SALE HA/ ANNUM 2004 RATE OF SALE HA/ ANNUM 2004 – – 2008 2008 350 300 250 200 Richards Bay Umbogintwini Somerset West 150 Milnerton Modderfontein 100 50 - 2004 2005 2006 2007 1h'08
VALUATI ON PRI NCI PLES VALUATI ON PRI NCI PLES • An art and a science • Based on a perception of the market at the time • Reputable methodology and valuation company Reputable methodology and valuation company • Context of the urban framework • Basis of development potential (bulk rights) QUESTION & MODIFY ASSUMPTIONS NOT VALUE QUESTION & MODIFY ASSUMPTIONS NOT VALUE
BASI S OF VALUATI ON BASI S OF VALUATI ON • I n hands of a developer • Discount rate 25% real Discount rate 25% real • DCF 14 years • Annuity income • Land sales prices R800 – R900/m 2 • Industrial land R2000/bulk m 2 • Offices R350/m 2 • Residential • Services estimates MODDERFONTEI N R2,0 BI LLI ON SOMERSET WEST SOMERSET WEST R0 5 BI LLI ON R0,5 BI LLI ON
REGI ONAL REGI ONAL CONTEXT CONTEXT MODDERFONTEI N MODDERFONTEI N
REGI ONAL REGI ONAL Table View Table View CONTEXT CONTEXT Kraaifontein Kraaifontein SOMERSET WEST SOMERSET WEST Cape Town Cape Town CBD CBD St ll St ll Stellenbosch Stellenbosch b b h h URBAN EDGE MAJOR ROADS SCENIC ROUTES Paardevlei SITE APPROXIMATELY 40 mins. DRIVE FROM Somerset- Somerset -West West CBD Cape Town Muizenberg Muizenberg Strand Strand Gordon’s Gordon’s Bay Bay False bay False bay Cape Point Cape Point
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