RESULTS PRESENTATION · RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 6 Debt Funding...

www.deltafund.co.za

P RO P E R T Y F U N D

RESULTS PRESENTATIONfor the six months ended 31 August 2019

01

02

03

04

05

06

AGENDA

Introduction and Business Update


Financial Review

Operational Review

Conclusion

Questions & Answers

Annexures

www.deltafund.co.za


INTRODUCTION ANDBUSINESS UPDATE

Sandile Nomvete

RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 20194

INTRODUCTION TO DELTA

80.7%

Sovereignunderpinned

JSE listed REIT

of revenue from sovereign tenants

Level 2B-BBEE

Highlyempowered fund

Rating on new sector codes

R11.3bn

Assets under management of

By 100% black-owned asset manager

Pretoria & Durban CBDS

Dominant in

R109.7m

Average propertyvalue of

(Feb 2019 : R109.1m)

R9.29

Net asset value

(Feb 2019 : R9.30)


Exceptionally difficult trading conditions continued during the reporting period, characterised by weak economic growthand subdued investment within the economy. Policy uncertainty and protracted lease negotiations with DPW contributedto Delta’s challenges during this period, however, we have made headway with lease renewals, signing on new tenants,extending expiring debt facilities and successfully disposing of some assets held for sale

Considering the current tough trading environment, and cognisant of increased working capital and contractual capexcommitments on the back of new leases concluded, the board and management deemed it prudent to declare an interimdistribution of 12.19 cents per share

Leasing Progress

Initial total bulk lease renewals of 227 550 m2 submitted to DPW

• 95 523 m2 renewed during the reporting period

• The remaining balance of 131 086 m2 includes four leases of 96 502m2. Two of these leases aggregating65 000m2 are in final stages of negotiation with approximately a third remaining under negotiation

Vacancies increased primarily due to loss of tenants at Capital Towers, UNISA and Bloemfontein

BUSINESS UPDATE


Debt Funding

Delta’s long-standing banking partners approved extensions totalling ca.R2.8 billion in expiring facilities during the period, with further extensions concluded post interim reporting

Interest rates slightly more competitive than exit rates and are expected to normalise on conclusion of bulk renewals

Disposals

Management remains cognisant of the tough economic environment and will only announce unconditional transactions

Several unsolicited offers have been received and are under consideration

BEE opportunities to acquire and secure long-term leases are prevalent in the market but access to funding seen as barrier

BUSINESS UPDATE cont.


Proposed Rebosis merger

In line with Delta’s strategy to introduce an element of bulk and diversification into its portfolio, we are continuing toprogress a proposed merger with Rebosis

To date the parties have made good progress with both Delta and Rebosis committed to the process

Key milestones that have been achieved:

• Preliminary due diligence has been completed

• Initial optimal capital structure has been determined

• Methodology on swap ratio determined

• Includes the funding gap to achieve an acceptable LTV level for the merged entity

• Preliminary meetings conducted with major shareholders/funders to obtain support for proposed merger termsand for the potential capital raise. In this regard the major shareholders/funders are following internal evaluationand approval processes before providing firm feedback

A more formal announcement on the specifics relating to the above will be made in due course

BUSINESS UPDATE cont.

www.deltafund.co.za


FINANCIAL REVIEWShaneel Maharaj


INTERIM PERFORMANCE 2020

1.9

Interestcover ratio

(Feb 2019 : 2.1)

44.3%

Loan tovalue of

(Feb 2019 : 45.1%)

R2.8 billion

Extendedfacilities totaling

(Feb 2019 : R2.1 billion)

44.1%

Fixeddebt of

(Feb 2019 : 59.8%)

67.2%

Property operating margin at

(Feb 2019 : 67.8%)

28.0 days

Debtorsmanaged at

(Feb 2019 : 31.0 days)


31 August 2019 31 August 2018 28 February 2019

Revenue (R’000) 759 031 779 643 1 547 365

Net property income (R’000) 507 261 525 560 1 037 786

Finance costs (R’000) 296 522 248 604 537 281

Cost to income ratio - gross method 32.8% 32.0% 32.2%

Cost to income ratio - net method 17.8% 17.9% 18.3%

Investment property (R’000) 11 305 258 11 535 867 11 350 331

Investment in listed securities (R’000) 417 669 453 468 461 822

Borrowings (R’000) 5 210 232 5 121 953 5 258 471

Loan to value (LTV) 44.3% 43.0% 45.1%

Weighted average interest rate 10.0% 9.3% 10.2%

Average debt expiry period (years) 0.6 1.1 0.8

Average debt fix expiry period (years) 3.3 1.1 2.1

Fixed : floating debt (excluding revolvers) 44.1% 81.9% 59.8%

Net asset value per share R9.29 R9.93 R9.30

FINANCIAL REVIEW


31 August 2019 31 August 2018 28 February 2019

Net property income (excl. straight line accrual) 514 775 540 423 1 072 090

Administration expenses (35 943) (46 672) (79 727)

Net finance costs (285 255) (235 906) (511 249)

Foreign exchange gain - 51 -

Dividend income – investment in GRIT 23 538 21 747 39 187

Other income 607 1 103 6 356

Antecedent interest - 476 569

Distributable income for the period 217 722 281 222 527 226

Number of shares in issue (’000) 714 230 713 793 714 230

Distributable earnings per share (cents) 30.48 39.40 73.84

Distributable earnings per share declared (cents) 12.19 39.40 55.39

DISTRIBUTABLE INCOME STATEMENT


HISTORIC DISTRIBUTION PER SHARE (CENTS)

23.7

32.5

40.2

72.7

40.044.1

84.1

42.947.9

90.8

45.951.3

97.2

46.450.8

97.2

39.4

16.0

55.4

12.2

FY2013 H1 Aug-13 H2 Feb-14 FY2014 H1 Aug-14 H2 Feb-15 FY2015 H1 Aug-15 H2 Feb-16 FY2016 H1 Aug-16 H2 Feb-17 FY2017 H1 Aug-17 H2 Feb-18 FY2018 H1 Aug-18 H2 Feb-19 FY2019 H1 Aug-19

H1 – Interim

H2 – Final

Total – Full year

ANALYSIS OF DISTRIBUTIONS DECLARED

15.6%9.6% 7.2%23.1% 8.7% 7.1%8.0% 1.0% (1.0)% (15.1)% (68.5)% (43.0)%7.1% 7.1% 0% (69.0)%


R’000

DISTRIBUTABLE EARNINGS BRIDGE

281 223

217 722

1 792 5 040 6 042 10 729

(51) (476) (497)(12 250)

(24 479)

(49 349)

H1 Aug 2018 Dividendincome (Grit)

Net propertyincome

Provisionsraised

Adminexpenses

Foreignexchange loss

Antecedentdividend

Other income Disposals Vacancies Net financecosts

H1 Aug 2019


Standing portfolio growth estimate (R’000) FY19 FY18%

Change

Rental income 766 544 794 506 (3.5)%

Less: Property operating expenses (251 770) (254 083) (0.9%

Net rental income 514 774 540 423 (4.7)%

Less:

Net income from disposals in FY18 (833) (7 928)

Net income from disposals in FY19 (2 245) (3 516)

Like-for-like NPI calculation 511 696 528 979 (3.3)%

LIKE-FOR-LIKE NET PROPERTY INCOME ANALYSIS


R’000 31 August 2019 31 August 2018 28 February 2019%Change

(Feb 19 – Aug 19)

ASSETS

Non-Current assets 10 332 482 11 016 677 10 377 347 (0.43%)

Investment property 9 913 379 10 561 140 9 913 811 (0,01%)

Fair value of property portfolio 9 762 271 10 383 457 9 755 209 (0.07%)

Straight line rental income accrual 151 108 177 683 158 602 (0.43%)

Investment in other assets 417 669 453 468 461 822 (9.56%)

Other non-current assets 1 434 2 069 1 714 (16.32%)

Current assets 478 518 525 072 447 729 6.88%

Non-current assets held-for-sale 1 391 878 974 727 1 436 520 (3.11%)

Total assets 12 202 878 12 516 476 12 261 596 (0.48%)

EQUITY AND LIABILITIES

Total equity 6 635 452 7 084 784 6 641 445 (0.09%)

Liabilities 5 567 426 5 431 692 5 625 627 (0.94%)

Non-current liabilities 1 616 060 2 985 737 1 470 696 9.88%

Current liabilities 3 951 366 2 445 955 4 149 455 (4.77%)

Total equity and liabilities 12 202 878 12 516 476 12 261 596 (0.48%)

STATEMENT OF FINANCIAL POSITION


Rands

9.30 9.29

0.210.03

(0.03)

(0.06)

(0.16)

31-Aug-18 Contribution fromoperations

Fair value offinancial

instruments &forex gains

Net debt facilitiesraised

Fair value of listedinstruments

Dividend paid 31-Aug-19

NAV BRIDGE


As at 31 August 2019

Facility Type R’ mWeighted Ave.

Rate

Floating bank facilities 4 565 9.9%

Revolving bank facilities 648 9.6%

Total borrowings, net of accrued interest 5 213 9.9%

Accrued interest 9

Debt structuring fees amortized (12)

Total borrowings, including interest and fees 5 210

Interest rate swap contracts 2 020 7.8%

Total fixed 2 020

Fixed % (excluding revolvers) 44.1% 10.0%

DEBT SUMMARY


SOURCE OF DEBT TOTAL: R5 213M

96.5%

3.5%

ZAR Bank Facilities (R5 029m)

USD Bank Facilities (R184m)

DEBT CLASSIFICATION TOTAL: R5 213M

87.6%

0.0%

12.4%

Floating Bank Facilities (R4 565m)

Fixed Bank Facilities (Rm)

Revolving Bank Facilities (R649m)

18

GRAPHICAL DEBT ANALYSIS

FINANCIER SPLIT TOTAL: R5 213M

60.4%16.6%

19.5%

3.5%

Nedbank (R3 146m)

Standard Bank (R868m)

Investec (R1 016m)

Bank of China (R184m)

FIXED DEBT BREAKDOWN TOTAL: R2 020M

100%

Interest rate swap Contracts (R2 020m)


DEBT EXPIRY PROFILER

and

(m

illio

n)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

28-Feb-20 28-Feb-21 28-Feb-22 28-Feb-23 28-Feb-24 28-Feb-25 Total

Floating Bank Facilities Revolving/Liquidity Bank Facilities Swap Contracts


Extended R2.8 billion in expiring debt facilities during the period. These facilities were further extended post the interim reporting period to year-end, with the intention for a permanent refinance once the DPW lease renewals are concluded

The weighted average cost of debt decreased to 10.0% ( Feb 2019: 10.2%) with the interest cover ratioat 1.9 (Feb 2019: 2.1)

Loan to value decreased to 44.3% ( Feb 2019: 45.1%), primarily due to improved cash resources and settlement of debt facilities

The average debt facility expiry period and average fixed debt ratio decreased to 0.6 years (2019: 0.8 years) and 44.1% (2019: 59.8%) respectively, impacted by the passage of time and short-term refinance of facilities. We intend to term out the debt expiry profile and fix at least 75% of our debt once facilitiesare refinanced

DEBT COMMENTARY

www.deltafund.co.za


OPERATIONAL REVIEWOtis Tshabalala


INTERIM PERFORMANCE 2020

156 846m²

Total lease

renewals in a

challenging environment

(Feb 2019 : 46 833m2)

44.3%

Bulk lease renewal

proposal to DPW (PMTE)

Renewed 95 523m² (40 leases) by Aug 19

76.6%

Defensive

Sovereign tenants

Gross lettable area (GLA)(Feb 2019: 73.6%)

R123.5 m²

Weighted average

rental of

(Feb 2019: R119.5m²

1.7 years

WALE increased to

(Feb 2019 : 1.2 years)

6 465m²

Total new leases

concluded (GLA)

Retail and office other


GLA - BY BUILDINGGauteng (41.2%)

Kwazulu-Natal (29.8%)

Free State (9.2%)

Limpopo (4.8%)

Western Cape (4.5%)

Northern Cape (4.0%)

Mpumalanga (3.2%)

Eastern Cape (2.5%)

North West (0.6%)

RENTAL - BY BUILDINGGauteng (45.2%)

Kwazulu-Natal (23.4%)

Limpopo (9.9%)

Free State (6.0%)

Western Cape (5.2%)

Northern Cape (3.7%)

Eastern Cape (3.3%)

Mpumalanga (2.6%)

North West (0.5%)

23

GEOGRAPHICAL AND GRADE SPLIT

OFFICE GRADE - BY GLA

A (15.5%)

B (84.2%)

C (0.3%)

OFFICE GRADE – BY RENTAL

A (21.4%)

B (78.5%)

C (0.1%)


Office -Sovereign

Office - Other Industrial Retail Total

Number of properties 81 16 3 3 103

Gross lettable area (m2) 1 576 478 108 916 11 177 56 481 753 052

Income (R’ 000) 75 052 9 877 7 115 1 006 92 996

Vacancies Including assets held for sale (%)2 14.2 34.2 54.4 5.9 19.3

Value ( R billions) 8.7 2.1 0.2 0.3 11.3

Average rental (R/m2) 130.2 90.4 90.0 125.0 123.5

Weighted average escalation (%) 6.7 7.4 8.0 7.5 6.8

Weighted average lease expiry (by GLA) (years) 1.4 1.9 0.0 2.6 1.7

Cost to income ratio (net) (%) 11.9 23.4 6.8 27.5 17.8

Cost to income ratio (gross) (%) 27.9 46.2 18.9 47.4 32.8

1 The GLA was previously reported by building classification and included vacancies, it is now represented by tenant type. Total GLA including vacancies of 179 553m2 is 932 605m2

2 Vacancies are classified by building type which is based on the majority tenant type within each building

PORTFOLIO BREAKDOWN


TENANT PROFILE BY GLA

76.5%

14.5%

7.5%

1.5%

41.6%

14.5%

13.1%

7.3%

Office - Sovereign

Office - Other

Retail

Industrial

Excludes vacancies. Total occupied GLA = 753 052m2

TENANT PROFILE BY RENTAL

80.7%

10.6%

7.6%

1.1%

40.3%

20.8%

12.1%

7.5%

10,6%

7,6%1,1%

National Government

ProvincialGovernment

Local Government

State-OwnedEnterprise

25

DETAILED TENANT BREAKDOWN


It is a tough time for our sector, as we battle to halt rising vacancies as well as rental reversions

Most tenants are adopting ultra conservative approaches by optimizing their real estate needs

We have managed to secure a significant number of leases notwithstanding tenants negotiating on lowerrental and escalations

The cost of relocation including fit out is a significant capital expenditure, therefore, most tenants prefer tonegotiate lower rental terms as opposed to moving

However, the competition for tenants is quite aggressive as some landlords are carrying the cost ofrelocations and offering 12-month rent free periods and flat rentals as well as low rentals in their quest toattract tenants into their buildings

OPERATIONS AT A GLANCE


There is a great need for DPW leasing policy certainty to bring back much needed confidence in our sovereign sector

o A meeting with the DPW Minister, SAPOA and landlords of significance is in the pipeline. Notwithstanding , Delta is continuing engagements with the Minister’s office and Senior Managers in the department regarding the bulk renewals and arrears

DPW debtors

o High level meeting held between DPW, SIU, Delta Senior Management and DPW Auditors (O.M.A.)

o Significant progress is being made in resolving arrear payments that are historic in nature

Government treatment of rates and taxes

o SAPOA & IPD engagement on non-payment of rates & taxes – Part of discussion with DPW Minister & SAPOA

o Impact on rental and ability of Government landlords to create sustainable profit

o Potential payment of increases

DPW UPDATE


Bulk renewal progress

Initial submission - 227 550 m²

Tenants vacated - Stats House Nelspruit (892m²), balance of bulk renewal of 226 609m2

40 Leases signed to date totalling 95 523m² (67.6% - 5 years, 29.7% - 3 years, 2.7% - 1 year)

While our Bulk Renewals look daunting at just under 130 000m2 remaining, there is a concrete plan in place to reduce this significantly by the end of the year

Focusing on the 4 major leases hereunder, which have been escalated to Senior Management and Ministerial level, will see our bulk renewals backlog considerably reduced resulting in us accomplishing over 80% of the Bulk Renewals

LEASING UPDATE - SOVEREIGN TENANTS

DEFAULT LEASES - SENT TO MINISTER

Poyntons DCS 35 981 Dept of Correctional Service 3-5 years

Poyntons Defence 24 268 SANDF 3-5 years

Hallmark 22 885 Dept of Home Affairs 3-5 years

Servamus 13 368 SAPS 3-5 years

96 502


Building Name Area User Department Lease Term

LEASE AGREEMENTS CONCLUDED & SIGNEDDefence Force - Old Pretoria Road 2 504 Defence Force -Yard 5 Years

Defence Force Logistics 2 430 Defence - Logistics 5 Years

Mayors Walk 235 SAPS 5 Years

SAPS Flying Squad 1 125 SAPS Flying Squad 5 Years

2 Devonshire Place 5 117 DOJ&CD 5 Years

2 Devonshire Place 2 171 DOJ&CD 5 Years

Commissioner House 377 National Prosecuting Authority 5 Years

88 Field Street 6 157 National Prosecuting Authority 5 Years

Hollard House & Parkade 8 481 DOJ&CD 5 Years

WB Centre 638 DOJ&CD 5 Years

The Marine Building 1 348 SA Police Services 5 Years

Mayors Walk 297 Defence Force 5 Years

Defence Force Transport 841 Defence Transport 5 Years

Defence Force Headquarters 2 174 Defence Headquarters 5 Years

Military Hospital 3 000 Military Hospital 5 Years

WB Centre 747 SAPS 3 years

Tivoli 1 975 Home Affairs 5 Years

Domitek Building 877 SAPS 5 years

Classic Building 1 301 Arts & Culture Museum 5 years

22 & 24 George Lubbe Str 6 200 SAPS 5 years

Hatfield Forum East 3 644 Dept of Correctional Services 5 years

BULK RENEWAL UPDATE


Du Toitspan 623 SAPS 3 yearsSAPS – Ferreira Street 4 637 SAPS 3 years88 Field Street 4 617 Dept of Water Affairs 5 years Edgars Kroonstad 322 Dept of Correctional Services 5 years Campus Building 3 488 Dept of Water Affairs 5 years Azmo Place 5 225 Dept of Water Affairs 5 years Absa United 3 779 SAPS 3 yearsDu Toitspan 1 090 Dept of Correctional Services 3 yearsLiberty Towers 1 350 Statistics South Africa 3 yearsLiberty Towers 540 Department of Public Works 3 yearsLiberty Towers 1 486 Statistics South Africa 3 yearsThe Marine Building 1 313 Indepe. Police Invstig. Directorate 3 years SA Eagle 2 662 Dept of Land Affairs 1 yearDie Meent 3 171 SAPS 3 years Standard Bank Unisa 500 Dept of Environmental Affairs 3 yearsContinental Building 4 133 Dept of Water Affairs 3 years WB Centre 461 Public Service Commission 3 years Commissioner House, Bellville 3 447 SAPS 3 years Shorburg 1 043 Department of Public Works 3 years

95 523

DEFAULT LEASES - SENT TO MINISTER*Detail as per slide 28 96 502

DEFAULT LEASES Balance of bulk renewal 34 584 3-5 years

226 609

BULK RENEWAL UPDATE cont.


Lease renewals concluded

LEASING UPDATE

For the six months ending 31 August 2019, lease renewals were concluded for a total GLA of 156 846m2, to the value of R671 million

RAF has put out a tender for a 10 year lease for 7 200 m². Currently a tenant at Embassy Building – Durban

Mayors Walk Social Development has renewed 4 975 m² for 5 years post interim

SIU awarded Delta a 5 year tender for 2 200 m² for occupation of space in Liberty Towers Durban – commencement Dec 2019

The most notable renewals are :

Building Tenant GLA

SARS Bellville SARS 16 006 m²

Shell House Ethekwini Municipality 13 828 m²

Hollard House Dept of Justice 6 954 m²

22 & 24 George Lubbe SAPS 6 200 m²

88 Field Dept of Justice 6 157 m²

AZMO Place Dept of Water Affairs 5 224 m²

2 Devonshire Dept of Justice 5 117 m²

SAPS 4294 SAPS 4 637 m²

Total 64 123 m²


Several new leases were concluded measuring 6 400m2 to the value of R 21.5 million over the lease term

Prospective new deals:

SARS in Randburg have initiated discussions with regards to re-occupying 2 700m² of the 2nd floor that they previously vacated. Discussions are at an advanced stage

Delta House - negotiations with a JSE- listed entity for 8 000m² for 5, 7 and 10-year lease, with an option to purchase the building

Tenant Retention

Tenant retention remains a significant focus for Delta

Tenant requirements higher due to higher nodal vacancies and include

o relocation costs, fit out costs, rent free periods

Agents are non-negotiable on commissions and demanding full SAPOA tariff

o some brokers in certain areas are demanding higher tariffs as the battle for tenants intensifies in nodes like Sunninghill and Bloemfontein and other nodes where there is oversupply

Tenants now have representatives assisting them in the leasing process

There is push back on rent renewal rates and escalations

LEASING UPDATE cont. .

32


Vacancies

VACANCIES

Our total portfolio vacancies have increased to 19.3% due to the loss of some key tenants

• UNISA (JHB) in Unisa House – 9 069m2

• Department of Health (PMB) in Capital Towers – 13 485m2

• We are in advanced negotiations with replacement tenants

National office vacancies remain high (SAPOA Q2 2019: 11.3%)

• The two highest being the eThekwini Municipality at 13.5% and the City of Johannesburg at 12.9%

Solutions to fill up these vacancies are a work in progress

• Showrooms to advertise what we can offer on our premises

• Engaging active top brokers in the difficult nodes and incentivizing them with higher commissions

• Tenant Installation, tenant relocation costs and beneficial occupation

Vacancies by region

Region Total GLA Vacancy GLA Vacancy SAPOA

(m2) (m2) (%) (%)

Pretoria 274 065 26 164 10% 9%

Durban 231 936 45 026 19% 14%

Johannesburg 45 533 18 348 40% 13%

Bloemfontein 78 284 21 202 27% Not Available


Currently evaluating the entire portfolio as part of the due diligence on the proposed merger between Delta and Rebosis

o Market related cap rates and discount rates are being applied

o In cases where higher than market rentals are being achieved, these rentals are being reverted to market rates to reduce the risk on future earnings

As and when we conclude leases, we will revalue the respective property

VALUATIONS

Number of Properties Value Feb 2019

103 properties (R’000) R11 305 258

93 properties* (R’000) R10 401 230

*excluding assets held for sale (Bloemfontein portfolio not included)


During the 2020 financial year, Delta sold Top Trailers site 1, for R45 million

As at 31 August 2019, Delta had approximately R1.39 billion non-current assets held for sale at book value. 1 sale agreements was concluded for R33 million and an offer received for Protea Coin Cape Town for R10 million

DISPOSAL OF ASSETS

PropertyBuilding Classification Location GLA (m2) Sales price (R) Transfer date

Transferred 15 741 45 000 000

Top Trailers site 1 Industrial Wadeville, Johannesburg 15 741 45 000 000 09-May-19

PropertyBuilding Classification Location GLA (m2) Sales price (R)

Expectedtransfer Date

Broadcast House Office - Sovereign Mthatha, Eastern Cape 4 934 33 000 End Nov 2019

Sale agreements concluded 4 934 33 000

1 non-current assets under offer 5 700 10 000

7 other non-current assets held for sale 61 387 864 450

10 Bloemfontein non-current assets held for sale Office - Sovereign Bloemfontein Portfolio 59 427 483 400

TOTAL NON-CURRENT ASSETS HELD FOR SALE 131 448 1 391 870


Disposing of the Free State Provincial Government Portfolio continues to be a priority as vacancies continue to escalate

o Delta continues to work with reputable local brokers and have issued mandates to these brokers

Vacancies in Sunninghill remain a focus area with increased interest from prospective buyers, albeit at significant discounts to book value

The sale of Block G to a PPP partnership has been delayed and further engagement is taking place.

The transfer of Broadcast House is imminent as the buyer has finally secured the lease which was holding up the sale

A new offer for Protea Coin Cape Town is under review with the sale agreement being finalised.

An offer from a JSE listed entity has been received for the purchase/leasing of Delta House with DD underway.

A JSE REIT submitted a letter of intent for the acquisition of Delta’s undivided share in Silverstream Building 3

o They have made a two-pronged offer with scenario 1 being Delta retaining their lease and scenario 2 being Delta cancelling the lease and vacating

o A detailed investigation in the possible transaction is still being assessed by management

Delta has received an offer for one of the Bloemfontein assets which is currently under consideration

An unsolicited offer to purchase the Marine building was received from a blue-chip institution

o The prospective buyer is still conducting their due diligence

Unsolicited offers for SARS Randburg and SARS Bellville were also received from reputable property investors

o Management is reviewing these offers

DISPOSAL OF ASSETS cont.


Capital Expenditure

Our main focus is on compliance and defensive expenditure

o predominantly to maintain the value of the properties and counter competition

Following the signing of the DPW leases TI and Capex will be required to comply with the Schedule C requirements and the improvement of tenant spaces based on the lease agreements

The mentioned Capex programme will be supported with structured procurement principles and will require the following:

o Database of consultants for all regions where DPF are represented

o Database of suppliers with technical and financial strength for all regions

o Tender committee representative of the various business lines within DPF to assure industry compliance and uniform standards for all projects & regions

Some of the projects undertaken which are complete or in progress are:

o Poyntons Fire Project - fire compliance is a key requirement for safety within the portfolio and the project includes installation of fire lobbies, fire doors, fire hydrants and hose reels with the associated pumps and tanks. Anticipated completion Q3 FY20. Estimated spent R35m

o Dept of Justice - 2 Devonshire Place and Hollard House. TI installation and Schedule C compliance. Estimated spend R25 million, completion Q3 FY21

o SIU – Liberty Towers (Complete fit-out on behalf of tenant with limited TI contribution), estimated spend R6.5 million, completion Q1 FY21

CAPEX UPDATE

DPW Bulk Lease Renewal LIFT HVAC STRUCTURAL OHS T /I Allowance TOTAL CAPEX

40 Leases signed 15 054 550 65 260 896 23 557 621 33 960 072 30 865 562 168 698 701

18 Leases outstanding 30 744 431 34 709 695 5 610 913 56 493 897 47 532 975 175 091 912

Total 45 798 981 99 970 591 29 168 534 90 453 969 78 398 537 343 790 613


Buildings consume a third of the world’s energy and are responsible for a fifth of global emissions

Over and above the usual initiatives like energy efficiency through efficient lighting and optimised HVAC upgrades, water-saving interventions etc. , we have identified areas in our existing buildings where can contribute towards this very important cause

We are in the process of introducing projects that will assist us in working towards a sustainable environment. These include :

• Recyclable Waste Management

• Collaborating with other stakeholders such as soft services (cleaning) and technical services providersto use environmentally friendly materials including painting, carpets and ceilings for ourrefurbishment projects

• More initiatives are being looked at in order to enhance our goal towards reduced carbon footprint

GREEN BUILDING AND SUSTAINABILITY

www.deltafund.co.za


CONCLUSIONSandile Nomvete


The national economic outlook remains challenging with investment levels expected to remain subdued with a lacklustre outlook on future business conditions, especially in light of a possible further credit rating downgrade

Management’s focus will continue to be on

• Concluding the remaining bulk lease renewals

• Formulating, planning and executing capex linked to TI and general building condition

• Refinancing of expiring debt and managing forward looking debt expiry profile

• Driving significant effort into disposals to reduce debt and generate cash for capex and working capital

• Filling vacancies across the portfolio

• Introducing an element of bulk and diversification into the portfolio through the proposed mergerwith Rebosis

CONCLUSION

www.deltafund.co.za


THANK YOUQuestions & Answers

ANNEXURES

01 Government Precinct Pretoria


02 Top 10 properties by value

03 Lease Expiry Profile

04 Sectorial Split

05 GLA and vacancy reconciliation

06 Leasing Outlook

07 Growth / Reversion


GOVERNMENT PRECINCT | PRETORIA


BUILDINGS REPRESENTED BY PROVINCE REPRESENTATIVE TENANTS

REPRESENTATION BY PROVINCE AND MAJOR TENANTS

North West

Limpopo

MpumalangaGauteng

KwaZulu Natal

Free State

Eastern Cape

Northern Cape

Western Cape

No of Buildings GLA (m2)

Gauteng 34 384 559

KwaZulu-Natal 17 278 269

Free State 17 85 980

Mpumalanga 11 30 2521

Limpopo 7 44 885

Northern Cape 7 37 275

Western Cape 5 41 889

Eastern Cape 3 23 717

North West 2 5 780

TOTAL 103 932 605

44


Forum Building

Location Pretoria

Sector*Office -

Sovereign

GLA 35 905 m2

Valuation R673 mil

Hallmark Building

Location Pretoria

Sector*Office -

Sovereign

GLA 26 255 m2

Valuation R410 mil

TOP 10 PROPERTIES

Poyntons

Location Pretoria

Sector*Office -

Sovereign

GLA 73 396 m2

Valuation R576 mil

Location Durban

Sector* Office - Other

GLA 40 080 m2

Valuation R426 mil

Delta Towers

45

* Building sector determined by majority occupation of a tenant type. Some buildings have different types in occupation

Liberty Towers

Location Durban


GLA 41 651m2

Valuation R405 mil


Embassy Building The Marine

Location Durban


GLA 24 676 m2

Valuation R261 mil

TOP 10 PROPERTIES | CONTINUED

Hensa Towers

Location Polokwane

Sector*Office -

Sovereign

GLA 13 675m2

Valuation R303 mil

Isivuno House

Location Pretoria

Sector*Office -

Sovereign

GLA 23 694 m2

Valuation R373 mil

NPA Cape Town

Location Cape Town

Sector*Office -

Sovereign

GLA 10 552 m2

Valuation R249 mil

46

* Building sector determined by majority occupation of a tenant type. Some buildings have different tenant types in occupation

Location Durban

Sector*Office -

sovereign

GLA 32 788 m2

Valuation R336 mil


TOTAL PORTFOLIO - BY GLA

19.3%

28.1%

5.8%

17.1%

8.4%

7.1%

2.4%

11.8%

Vacant (19.3)

Month to Month (28.1%)

29 Feb 20 (5.8%)

28 Feb 21 (17.1%)

29 Feb 22 (8.4%)

28 Feb 23 (7.1%)

29 Feb 24 (2.4%)

Beyond 29 Feb 2024 (11.8%)

TOTAL PORTFOLIO - BY RENTAL

36.1%

9.5%22.7%

10.5%

7.7%

3.1%

10.4%

Month to Month (36.1%)

29 Feb 20 (9.5%)

28 Feb 21 (22.7%)

28 Feb 22 (10.5%)

28 Feb 23 (7.7%)

29 Feb 24 (3.1%)

Beyond 29 Feb 2024 (10.4%)

47

LEASE EXPIRY PROFILE AT 31 AUGUST 2019


73.8%

21.0%

2.6% 2.6%

Office - Sovereign (73.6%)

Office - Other (21.0%)

Retail (2.6%)

Industrial (2.6%)

GLA - BY TENANT*

76.5%

14.5%

7.5% 1.5%



Retail (7.5%)

Industrial (1.53%)

48

SECTORAL SPLIT

RENTAL - BY BUILDING

77,2%

18.6%

2.8% 1.4%



Retail (2.8%)

Industrial (1.4%)

RENTAL - BY TENANT

80.7%

10.6%

7.6%1.1%


Office - Other(10.6%)

Retail (7.6%)

Industrial (1.1%)

*Excludes vacancies. Analysis focuses on what category the specific tenant falls into, rather than the category of the building

GLA - BY BUILDING


SectorMonth to

Month29 Feb 20 28 Feb 21 28 Feb 22 28 Feb 23 29 Feb 24

Beyond 29 Feb 2024

TOTAL

National Government 131 025 17 066 43 668 17 967 28 063 16 846 58 377 313 012

Provincial Government 55 669 16 754 12 368 15 750 1 876 - 6 820 109 237

Local Government 24 822 - 16 323 308 13 828 - - 55 281

State-owned Enterprise 16 091 1 063 40 895 14 236 7 824 2 834 16 005 98 984

Total Sovereign 227 607 34 883 113 254 48 261 51 591 19 680 81 202 576 478

Office – Other 17 604 12 320 38 629 18 514 6 970 410 14 470 108 916

Retail 6 073 6 971 7 432 11 958 7 181 2 203 14 662 56 481

Industrial 10 812 - 365 - - - - 11 177

Vacant - - - - - - - 179 553

262 097 54 174 159 680 78 733 65 741 22 293 110 334 932 605

LEASE EXPIRY BY GLA | SECTORAL TABULAR REPRESENTATION


WALE by Tenant Type

SectorTotal GLA

(m2)WALE by GLA

(yrs)Revenue( R’000 )

WALE by Revenue (yrs)

National Government 313 012 1.63 37 437 1.44

Provincial Government 109 237 0.76 19 358 0.66

Local Government 55 281 0.89 6 994 0.67

State - Owned Enterprise 98 948 1.85 11 208 1.76

Office - Other 108 916 1.92 9 877 1.87

Retail 56 481 3.90 7 115 2.61

Industrial 11 177 0.03 1 006 0.04

Vacant 179 553 0.00 0 0

TOTAL 932 605 1.67 92 996 1.38

WALE BY TENANT TYPE


Properties (No.) Total GLA (m2) Vacant GLA (m2) Vacancy (%)

As at 28 February 2019 104 950 422 136 986 14.4%

Disposals (1) (15 741) -

Leases terminated - - 49 032

New letting of vacant space - - (6 465)

Adjustments:

Forum 1 - (5 098)

Chambers of Change 2 3 043

Other (21)

As at 31 August 2019 103 932 605 179 553 19.3%

GLA AND VACANCY RECONCILIATION

1Forum Building remeasured & GLA decreased by 5 098m2

2 Chambers of Change GLA confirmed to plans after handover from Propertuity liquidation


Anticipated budgeted sovereign renewals

Sector No of Leases Total AreaW.A. ExpiryRate / m2 *

W.A. ProposedRate / m2 *

Escalation / (Reversion)

Leases on month-to-month or expiring by 29 February 2020

National government 19 136 166 120.91 96.87 (19.76%)

Provincial government 16 71 433 193.20 124.44 (35.59%)

Local government 3 24 632 167.60 113.74 (32.14%)

State-owned enterprise 11 17 085 114.95 101.15 (12.01%)

TOTAL 49 249 316 145.83 106.73 (26.69%)

LEASING | OUTLOOK

* All rentals quoted are gross rentals


Total leases concluded 1 March 2019 – 31 August 2019

No of Leases Total Area (m2)W.A Term (months)

W.A. Expiry Rate (R / m2) *

W.A. Achieved Rate (R / m2) *

Growth / (Reversion)

W.A. Esc. achieved

Renewed leases # 81 156 846 44.99 100.77 94.46 (6.26%) 6.46%

GROWTH / REVERSION - Annexure

*All rentals quoted are gross rentals

Renewals by Sector

Sector No of Leases Total AreaW.A. Term

(months)W.A. Expiry Rate / m2 *

W.A. Achieved Rate / m2 *

Escalation / (Reversion)

W.A. Esc. Achieved

National Government 40 95 523 51.52 98.50 90.46 (8.16%) 6.11%

Provincial Government 1 779 6.00 129.25 129.25 0.00% 0.00%

Local Government 1 13 828 36.00 92.00 95.00 3.26% 9.00%

State-owned enterprise 4 20 204 53.54 117.74 98.05 (16.72%) 5.33%

Industrial 4 11 177 16.00 83.34 90.01 8.00% 8.00%

Office – other 14 12 168 18.38 98.05 104.65 6.74% 6.98%

Retail 17 3 167 46.52 158.56 151.69 (4.33%) 8.00%

Total 81 156 846 44.99 100.77 94.46 (6.26%) 6.46%


NOTES

RESULTS PRESENTATION · RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 6 Debt Funding...

Documents

Transcript of RESULTS PRESENTATION · RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 AUGUST 2019 6 Debt Funding...