INTERIM RESULTS PRESENTATION - 30 NOVEMBER 2020 - Tower Property Fund
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INTERIM RESULTS PRESENTATION
30 NOVEMBER 2020
AGENDA Tower strategy 2 Financial highlights 3 Operational highlights 4 Tower at a glance 5 Net property operating income 6 Distribution analysis 7 Condensed consolidated statement of financial position 8 Capital structure 10 Capital structure - continued 11 Operational performance 12 Top 10 properties by value 13 Major valuation movements 14 Impact of Covid-19 15 Success – Cape Quarter leasing 16 Old Cape Quarter leasing and sales 17 TPF International 18 Deployment of capital 19 Developments 20 Risks 21 Areas of focus 22 Corporate Social Responsibility 23 Value add opportunities 24 Prospects 25
TOWER STRATEGY
The objective of Tower is to deliver attractive, growing, total returns by:
• Investing in properties in strong nodes with growth potential
• active property asset management of our existing portfolio,
with a particular focus on unlocking available profits
• prudent balance sheet management in order to manage risk
and create capacity to unlock value
• accepting variances in income where these can be shown to
add sustainable value
• selling non-core and ex-growth properties to realise capital for
re-investment, and
• cost containment, with a focus on “greening” initiatives
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 2
FINANCIAL HIGHLIGHTS
Loan to value of 40.1% (39.1% at 30 May 2020)
Portfolio vacancy of 15.2% (7.9% at May 2020), expected Vacancy 12% at year end
Average collections of 94% for period March 2020 – January 2021
Sale of Euro 9.1 million (at book value) of Croatian properties during the period
Sale of R77 million (at book value) of South African properties (Pending Transfer)
Refinancing of Euro 31.5 million debt secured by South African properties with Rand debt
Investment property valuations down by R149 million during the period
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 3
OPERATIONAL HIGHLIGHTS
SA Vacancies 17.9% (9.5% at May 2020), expected to be 12% at year end
WALE (portfolio) 5.5 years GLA
WALE (SA) 2.6 years
WALE (Croatia) 6.2 years
Rental reversions: -8.8% (Retail -14.3%, Offices -8.3%, Industrial -1.3%)
Tenant retention 95%
Net operating cost ratio of 20% (gross of 35%)
Croatia vacancies – *Physical vacancies are approximately 2 410m² 6.3%
* Physical vacancies covered by held lease
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 4
TOWER AT A GLANCE
Revenue by sector (%)
Property portfolio value R4.5 billion Industrial
Rentable area (GLA) 254 336m² 8
Occupancy rate (GLA) 84.8%
(as at 31 May 2021 expected to be 88%)
47 Office
Gearing (LTV) 40.1% Retail 45
Average gross rental R112.00/m²
Existing lease escalations 7.2%
Number of properties 41 Revenue by geography (%)
Average property value R110 million
25 Western Cape
Croatia 35
9 31 Gauteng
KwaZulu-Natal
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 5
NET PROPERTY OPERATING INCOME
South Africa Croatia Total
30 Nov 2020 30 Nov 2019 30 Nov 2020 30 Nov 2019 30 Nov 2020 30 Nov 2019
R’000 R’000 % mvt R’000 R’000 % mvt R’000 R’000 % mvt
Rental income 113 272 141 054 -20% 60 785 60 074 1% 174 057 201 128 -13%
Net property operating expenses (18 074) (12 827) 41% (2 241) (618) 263% (20 315) (13 445) 51%
* Net property income 95 198 128 227 -26% 58 544 59 456 -2% 153 742 187 683 -18%
On a like-for-like basis, net property income was down 20.3% in South Africa and 3.2% in Euros in Croatia
South Africa Croatia
• Rental income • Rental income
› Decrease due to: › Increase due to:
– covid concessions given – the increase in the exchange rate
– the acquisition of Yazaki Block B
– indirect impact of covid
› Partially offset by:
– increased vacancies
– sales of Vukovarska and Velika Gorica
• Net property operating expenses
– expiry of the VMD headlease on 31 July 2020
› Increase predominately due to increased bad debts written off (R3 million) • Net property operating expenses
› Increase due to property management fees incurred at VMD (post
headlease expiring) and Yazaki
'* These figures exclude the straight-line lease accrual.
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 6
DISTRIBUTION ANALYSIS
30 Nov 2020 30 Nov 2019 %
R’000 R’000 Variance
Administration expenses
Net property income 153 742 187 683 -18%
• Decrease due to no bonuses being paid in
Administration expenses (13 983) (14 600) -4% the period under review
Realised foreign exchange gain/ (loss) 582 (445) Net finance costs
Profit from operations 140 340 172 638 -19% • Increase due to the increased interest
Net finance costs (57 235) (47 157) 21% expense resulting from the conversion of
Taxation (7 638) (2 831) Euro 31.5 million debt with Rand debt and
Equity-settled share-based payment reserve 23 285 the increase in the exchange rate
Distributable earnings 75 491 122 934 -39% Taxation
Non-controlling interest (10 222) (11 130) • R4.3 million tax arose as a result of the
65 270 111 804 -42% expected dividend payout ratio of 75% for
Distributable earnings attributable to parent
the year
Development income lost - 6 259 -100%
• Balance relates to tax payable in Croatia
Distribution paid - 118 063 -45% and Mauritius
Non-controlling interest
Distribution per share (cents) - 35.0 -100.0% • Oryx 26% holding in TPF International and
VMD Group's 20% of Tower Europe
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 7
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
30 Nov 2020 31 May 2020
R’000 R’000
Investment property
ASSETS
• Decrease as a result of sales, the reduction
Non-current assets in valuations and the decease in the
Fair value of investment property exchange rate
SA 2 764 293 2 956 500 • Partially offset by the capex spent, the Old
Croatia 1 517 798 1 601 714 Cape Quarter development and the
4 282 091 4 558 214 reallocation of properties from held for sale
Inventory
Current assets • Napier Street residential units and the Old
Cape Quarter residential units under
Inventories 86 717 54 411
construction
Trade and other receivables 147 269 149 977
Investment property held for sale
Cash and cash equivalents 159 795 336 678
• Shoprite Ennerdale (R77m) and a sectional
Straight-line lease accrual 8 653 12 414 title unit at Upper Grayston (R3m)
Investment property held for sale 79 958 176 646
482 392 730 126
TOTAL ASSETS 4 763 483 5 288 340
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 8
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
30 Nov 2020 31 May 2020
R’000 R’000
Non-controlling interest
EQUITY
• VMD Group's 20% share of Tower Europe
Equity attributable to the parent 2 415 005 2 571 106 and Oryx's 26% share of TPF International
Non-controlling interest 298 136 339 000 Tax payable
TOTAL EQUITY 2 713 141 2 910 106 • Includes R10.5 million tax payable in
Croatia on the sale of Vukovarska and
LIABILITIES Velika Gorica and R7.5 million tax payable
Bank debt 1 889 747 2 214 605 in SA from not distributing 75% of the
31 May 2020 distributable income
SA 1 411 194 1 653 124
SA REIT NAV per share
Croatia 478 553 561 481
Derivatives 56 919 52 514 • Down as a result of the negative fair value
adjustments to investment property and
Loan payable to shareholder 31 461 33 342 interest rate derivatives
Trade and other payables 54 894 69 085
Rental guarantee - 1 184
Tax payable 18 321 7 504
TOTAL LIABILITIES 2 051 342 2 378 234
TOTAL EQUITY AND LIABILITIES 4 764 483 5 288 340
SA REIT NAV per share (cents) -5% 733 768
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 9CAPITAL STRUCTURE
30 Nov 2020 Rand Euro 31 May 2020 Rand Euro
‘000 Total ’000 ’000 ‘000 Total ’000 ’000
Loan facilities (R’000) 1 949 956 1 372 857 577 099 2 214 605 740 779 1 473 826
Weighted cost of funding (%) 6.50% 7.94% 3.10% 4.90% 8.55% 3.07%
Debt expiry profile (years) 2.3 1.6 3.9 2.5 2.1 2.7
Percentage hedged (%) 75% 84% 62% 87% 67% 98%
Hedging expiry profile (years) 2.9 2.7 3.7 2.2 3.2 1.8
Highlights
• Refinanced Euro 31.5 million debt with Rand debt at an all-in interest rate of 7.02%
• The full proceeds from the sale of Vukovarksa used to reduce debt, including Euro 6.5 million of Tower's SA Euro debt on 1 June 2020
• Euro 3.6 million of the proceeds from the sale of Velika Gorica used to reduce SA Euro debt further
• A further Euro 1.4 million of proceeds from the sale of Velika Gorica will be received at the end of March 2021 as a liquidation dividend and
used to reduce South African debt
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 10CAPITAL STRUCTURE | CONTINUED
30 Nov 2020 SA Croatia 31 May 2020 SA Croatia
‘000 Total ‘000 ‘000 ‘000 Total ‘000 ‘000
Loan facilities (R’000) 1 949 956 1 470 086 479 870 2 214 605 1 653 124 561 481
LTV* 40.1% 47.5% 25.7% 39.1% 45.6% 28.2%
Debt Allocation 30 Nov 2020 (%) Debt Allocation 31 May 2020 (%)
Croatian Croatian SA
Euro debt Euro debt Rand debt
25 25 34
SA Euro
debt 5 SA
Rand debt
70
SA Euro
debt 41
*The LTV is calculated as other financial liabilities less cash, divided by investment property, assets held for sale and inventory.
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 11OPERATIONAL PERFORMANCE
Lease expiry profile by revenue per sector (%)
m²
60%
Space let in the period 35 054
50%
New space let 6 097 40%
30%
Renewable space let 28 957 20%
10%
Total vacant space (SA) 38 694 (17.9%)* 0%
Monthly < Nov-21 < Nov-22 < Nov-23 < Nov-24 < Nov-25 < Nov-26 > Nov-27
Total vacant space (Croatia) 2 410 (6.3%)*
Retail Office Industrial
Lease expiry profile by GLA per sector (%)
50%
40%
30%
20%
10%
0%
Vacant Monthly Nov-26
Retail Office Industrial
* Excluding Konzum head lease and including vacancies committed to and in the process of signing | Vacancies Include: Upper Grayston, The Braides, Jan Smuts, 135 Musgrave, Link Hills Shopping Centre, 31 Beacon, Wellington Road and Cape Quarter
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 12TOP 10 PROPERTIES BY VALUE
Value
Property Sector Rm Location
Sub- Dubrovnik Retail 545 Dubrovnik, Croatia*
VMD Kvart Office 518 Zagreb, Croatia*
Cape Quarter Square Mixed use 515 Cape Town
Sunclare Mixed use 308 Claremont, Cape Town
Meridijan 16 Retail 295 Zagreb, Croatia*
Cape Quarter Piazza Mixed use 292 Green Point, Cape Town
De Ville Centre Mixed use 215 Durbanville, Cape Town
Link Hills Shopping Centre Retail 196 Waterfall, KwaZulu-Natal
Yazaki Industrial Industrial 160 Zagreb, Croatia*
Evagold Centre Retail 120 Evaton, Johannesburg South
* At R18.32 to the Euro
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 13MAJOR VALUATION MOVEMENTS
• SA valuations decreased by 2.8% (May to November)
• Croatian valuations decreased by 5.6% (Rand) and 0% (Euro)
VMD Kvart
Properties with significant decrease in value
• Cape Quarter Square -18.0%
› Vacancies and negative rent reversions
• 15 Wellington Road -37.5%
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 14IMPACT OF COVID-19
• Collections have steadily improved
• Total collections at 94% (April 2020 – January 2021)
St. Andrews
• Focus on assisting highly impacted tenants (restaurants,
hairdressers etc.)
• Offices and convenience retail more resilient
• A number of retail tenant requests for turnover related rental
* Collections as a % of total billing less relief granted
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 15SUCCESS – CAPE QUARTER LEASING
Office Vacancy currently 7 850sqm
Co-Working – 1 850sqm Cape Quarter
• Opening 1 March 2021, 25% pre-let, projected to be 50% by May
Ex Deloitte 6 000sqm
• Finalising negotiations with significant international tenant
occupying full vacant space to commence in April 2021
Retail Vacancy – 600sqm
• 22 offers to lease received, oversubscribed by 150%
• Cape Quarter Living fully let
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 16OLD CAPE QUARTER LEASING AND SALES
• Increased demand for retail space from national and international
tenants
Old Cape
• Seven units have been sold at an average price of R72 000/sqm Quarter
(inclusive) totalling R72 000 000
• Balance of units not sold to be pooled together with the Napier
Street and Cape Quarter Living units and leased on a short to
medium term basis
• 4 Star Green Design rating achieved
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 17TPF INTERNATIONAL
Forward yield: Portfolio size:
7.38%* €82.5 million
Loan value: Interest on funding:
25.7% ±3%
Zero vacancies** Total return since
acquisition 7.5%
Current shareholders:
Tower Property Fund 74% Oryx Properties Ltd: 26%
* Forecast financial information has not been reviewed or reported on by Tower`s auditors | ** Due to head leases (6.3% actual vacancies)
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 18DEPLOYMENT OF CAPITAL
• The total cost incurred on the OCQ development to 30 November
2020 is R362 million (including land)
Cape Quarter
• Expected Capex at Cape Quarter is R16 million for upgrades
required at Co-working and ex Deloitte space
• Remaining cost to complete Old Cape Quarter is approximately
R142 million
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 19DEVELOPMENTS
Old Cape Quarter
• Construction to be completed by September 2021 Old Cape Quarter
• Sale of apartments (7 closed)
• Prices reduced given Covid-19
• Significant interest in commercial space
• Balance of apartments to be leased for short- and long-term periods
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 20RISKS
• Increase in the debtor's book. Additional in-house staff appointed
• Early terminations, negative reversions and reduced space
De Ville
requirements. Internal leasing resources appointed
• Decline in trading densities – Pick n Pay, De Ville and Link Hills as
well as Spar, Cape Quarter, have requested rent reductions
• SA Vacancies have increased from 20 530sqm (9.5%) at year end
May 2020 to 31 300sqm (14.5%) at the end of September to almost
40 000sqm (19%) currently
› This is projected to decrease by approximately 8 500sqm over
the next couple of months to approximately 31 500sqm (14.6%
SA and 12.4% total portfolio)
• De Ville – Virgin Active – Renewal concluded @ R135/m²
• Covid-19 – collections @ 94%
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 21AREAS OF FOCUS
• A dedicated Tower leasing manager has been appointed in Gauteng
• In house resources appointed in Gauteng (Asset and Leasing
Link Hills
Manager) with strong focus on sales
• Repurposing of certain properties (e.g. Link Hills Shopping Centre
underway with interest from strong national tenant)
• Conversion to shared workspace in decentralised offices being
investigated where possible
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 22CORPORATE SOCIAL RESPONSIBILITY
Ubuntu Football Trust
• Covid-19 lockdowns were a difficult time for Ubuntu with little to no football for most of the year and many educational challenges
• Ubuntu's generous donors (including Tower) helped to provide over 100 GBs of data for online learning and 42 food packs for our families in
need
• Seven grade 12`s matriculated from the Ubuntu Football School . Their matric results have been delayed by Covid-19
• Ubuntu now has 14 students in the United States studying on scholarships worth a total of over R28.7 million
• Ubuntu has made the transition to face to face teaching for 2021 from grade 7 to grade 12 and adding Xhosa as a second language
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 23VALUE ADD OPPORTUNITIES
• Old Cape Quarter – in progress
• Link Hills refurbishment – in progress
• Reduction in SBSA Euro loans (Euro 9 million left)
• Increased focus on convenience retail
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 24PROSPECTS
• Interim distribution deferred to end of the financial year
given risks of Covid-19 third wave and the requirement to
protect cash flow
• Old Cape Quarter on track to trade 1 September 2021
• Major strategic discussion underway at board level to
specialise the company – details to be released in due
course
• Additions to the board bringing new expertise and focus
2020 TOWER PROPERTY FUND
INTERIM RESULTS PRESENTATION 25THANK YOU
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