PRE-CLOSE BUSINESS UPDATE FOR THE PERIOD ENDING 29 FEBRUARY 2020 - PowerPoint PPT Presentation

PRE-CLOSE BUSINESS UPDATE FOR THE PERIOD ENDING 29 FEBRUARY 2020

AGENDA 01 02 03 S T R A T E G Y TRADING BUSINESS E N V I R O N M E N T U P D A T E S U S T A I N A B L E S T A B L E C O N S I S T E N T R E S O U R C E F U L D I V E R S I F I E D 02 D I S C I P L I N E D P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

C O N S I S T E N T P R E - C L O S E B U S I N E S S U P D A T E S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

STRATEGY Remaining Buying Managing SHAREHOLDER VALUE CREATION disciplined well brilliantly ▪ Geographically diversified OUR VALUE PROPOSITION SA ▪ Economically active locations focused ▪ Sectorally diversified ▪ Predominantly retail (convenience, rural & township) ▪ A diversified REIT that is growing, improving and ▪ Increase industrial exposure de-risking its portfolio through employing a range of value-add Diversified ▪ Selective office strategies including leasing, conversions, extensions, redevelopments, partnerships and development. ▪ Affordable residential rental ▪ Non-core disposals ▪ We are focused on our chosen property market segments ▪ Capital recycling Portfolio and continuously reposition our portfolio in-line with changing R ▪ Acquisitions, developments, redevelopments and optimisation market dynamics. conversions ▪ Credit quality Tenant ▪ Manage concentration risk OUR TOOLS centric ▪ Enhance tenant experience ▪ Value our people ▪ Talent attraction and retention Human ▪ Teamwork above all capital Balance ▪ Resourcefulness A Good Research sheet competent capital and Focus ▪ Compliance manage- core team allocation analysis ment ▪ Efficiency Sustainability ▪ CSI & BEE ▪ Social, economic & environmental 04 P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

STRATEGIC CAPITAL ALLOCATION TO DE-RISK PORTFOLIO AT LISTING CURRENT FUTURE 10% Retail 20% 29% Office 20% By income By income By income 66% 54% 60% Industrial 14% 10% 17% Residential ▪ Allocation of capital into areas of core competency STRATEGIC GROWTH DRIVERS ▪ Build capacity for operational excellence ▪ Tactically going underweight offices ▪ Increasing retail and industrial exposure Reduce cost of capital ▪ Chosen retail segment defensive and resilient through different cycles ▪ Industrial assets that are relevant to market needs SA economic rebound ▪ Entering affordable residential rental market ▪ Residential portfolio to be capped at 20% Sensible corporate action and strategic tie-ups ▪ Shift towards well-located residential in response to demand driven by a changing SA culture, low savings, falling disposable income, upfront acquisition cost and urbanisation Build strong human capital capacity ▪ Strategic value-add revamps and expansions mainly funded through recycled capital Continuous portfolio improvement ▪ Portfolio significantly de-risked in terms of: • Tenant quality • Quality of assets • Quality management 05 P R E - C L O S E B U S I N E S S U P D A T E • Portfolio & asset size F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

S T A B L E P R E - C L O S E B U S I N E S S U P D A T E S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

TRADING ENVIRONMENT ▪ Slow economic growth ▪ Increased security costs due to a continuous increase in crime ▪ Load shedding resulting in: • increase in operating costs (back-up power, unbudgeted expenditure due to power surge related damages) • pressure on tenant turnovers ▪ Tenant profit margins under pressure ▪ Business failures ▪ Dysfunctional municipalities P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

D I V E R S I F I E D P R E - C L O S E B U S I N E S S U P D A T E S T R A T E G Y TRADING E N V I R O N M E N T BUSI NESS U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

BUSINESS UPDATE (31 January 2020) Balance sheet & trading update Leasing ▪ Gearing 41.3% ▪ New leases concluded 21 242m² ▪ Refinanced facilities R663 million for 3 years ▪ Vacating tenants 16 855m² ▪ R109 million to be refinanced by year-end ▪ Replaced 7 732m² ▪ 79% Interest rate exposure hedged ▪ Total renewals 50 148m² ▪ Dividend policy remains the same ▪ Current vacancy 5% ▪ Interim dividends expected to be in-line with guidance Sales, capex and acquisitions Operations ▪ 4 properties sold for R49 million ▪ Stable team and solid operating platform ▪ 2 properties sold for R25.6 million awaiting transfer ▪ Additional debtors' administrators ▪ A total of R24 million capex spent (defensive & accretive) ▪ Focus on efficient operations ▪ Cosmo City resi expected to transfer by end of Q1 2020 ▪ Reducing vacancies ▪ Solar performing ahead of expectation ▪ Risk (tenant business failures) 9 P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

RETAIL (1 September 2019 - 31 January 2020) New Leases Vacancy ▪ 19 556m² let ▪ Current 6.4% ▪ Average lease period 3 years ▪ 2019 year-end 8.4% ▪ Gross rental R91/m² ▪ Escalation 7.8% Trends Renewals ▪ Belle Ombre refurb commenced ▪ 19 314m² renewed ▪ Standalone banking branches a challenge ▪ Average lease period 2.7 years ▪ Decay of CBD’s of Vanderbijlpark , Vereeniging, ▪ Gross rental R144/m² Krugersdorp and Klerksdorp ▪ Escalation 8% ▪ Exclusivity clauses reducing turnaround options ▪ Reversion rate 2% ▪ Disappearance of high-end furniture retailers on the back of reduced spending ▪ Isolated instances where Edcon has not been replaced 10 P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

OFFICE (1 September 2019 - 31 January 2020) New Leases Vacancy ▪ 1 182m² let ▪ Current 8.4% ▪ Average lease period 2.4 years ▪ 2019 year-end 7.8% ▪ Gross rental R154/m² ▪ Escalation 9% Renewals Trends ▪ Provincial Government impossible to deal with ▪ 10 953m² renewed ▪ Market remains extremely competitive ▪ Average lease period 2.6 years ▪ Gross rental R150/m² ▪ Escalation 7% ▪ SAPS leases renewed ▪ Reversion rate -9.8% (mainly related to DPW) 11 P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

INDUSTRIAL (1 September 2019 - 31 January 2020) New Leases Vacancy ▪ 504m² let ▪ Current 1.7% ▪ Average lease period 2.5 years ▪ 2019 year-end 2.3% ▪ Gross rental R39/m² ▪ Escalation 9% Renewals Trends ▪ Portfolio vacancies at all time lows ▪ 19 881m² renewed ▪ Rentals trending sideways ▪ Average lease period 2.2 years ▪ Gross rental R51/m² ▪ Escalation 7% ▪ Reversion rate -6% 12 P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0

THANK YOU C O N S I S T E N T P R E - C L O S E B U S I N E S S U P D A T E F O R T H E P E R I O D E N D I N G 2 9 F E B R U A R Y 2 0 2 0