Title: 2005 INTERIM RESULTS for the six months ended 30 September 2005
12005 INTERIM RESULTS for the six months ended 30
September 2005
2Highlights
- Distribution up 8.3 on strong property
performance - Overall portfolio vacancy rate reduced to 3.8 of
gross rentals - R80m expansion and upgrading project launched
- Securitisation will impact positively on
full-year and future results
3Salient features of results
- Net profit before tax, debenture interest and
fair value adjustment of R115m (2004 R75m) -
includes R33.9m from MICC - Net asset value per linked unit up to 654c from
494c at September 04 (32.6) - Distribution up to 32.5c from 30c (8.3)
4Group income statement
Unaudited six months ended 30 Sept 2005 R000
Property revenue 275 196
Straight-line rental income accrual 13 797
Gross property revenue 288 993
Property expenses (95 599)
Net profit from property operations 193 394
Administrative expenses (5 595)
Investment and other income 1 313
Operating profit before finance costs 189 112
Finance costs (73 981)
Net profit before debenture interest 115 131
5Group income statement contd
Unaudited six months ended 30 Sept 2005 R000
Debenture interest (94 518)
Net profit before fair value changes 20 613
Fair value adjustment 161 765
Net profit before taxation 182 378
Taxation (28 149)
Net profit 154 229
Attributable to Linked unitholders of the company 143 375
Minority shareholders 10 854
6Reconciliation
Unaudited six months ended 30 Sept 2005 R000
Attributable profit after taxation 143 375
Adjusted for
Change in fair value of investment properties (175 562)
Straight-line rental accrual net of deferred taxation 11 766
Deferred taxation on change in fair value adjustment of investment properties 22 298
Debenture interest net of minority interest 86 982
Minority interest in revaluation surplus net of deferred taxation 10 063
Headline earnings of linked units 98 922
Adjusted for straight-line rental accrual net of deferred taxation (11 766)
Earnings available for distribution 87 156
Distribution for six months ended 30 Sept 05 87 162
7Group balance sheet
Unaudited at 30 Sept 2005 R000
ASSETS
Non-current assets 3 338 154
Current assets 45 931
Total assets 3 384 085
EQUITY AND LIABILITIES
Equity and reserves 422 865
Non-current liabilities 2 813 538
Current liabilities 147 682
Total equity and liabilities 3 384 085
Sept 05 Sept 04
NAV 654 cents 494 cents
Premium to NAV 5.5
Loan to value ratio 39.7 41
8The property portfolio
- Vukile 52 properties with GLA of 676 961m²
- MICC 40 properties with GLA of 395 322m²
(MICC to sell Sandton Sanlam Park for R60.25m
cash, subject to conditions precedent) - Vukile portfolio valued at R2.27 billion (up
6.4) - MICC valued at R1.051 billion (up 4.9)
9The Vukile portfolio
National tenant groups - of GLA and gross
rentals
10The Vukile portfolio
Lease expiry profile - of gross rentals
11The Vukile portfolio
Vacancy profile - of gross rentals
Figures in brackets as at 31 March 2005
(Commercial space in Randburg re-classified)
12The Vukile portfolio
Large vacancies ( of gross rentals)
Sept 04 Mar 05 Sept 05
Bloemfontein Plaza 21.2 19.4 10.7
Randburg Square 23.6 22.7 23.7
If Randburg excluded, overall vacancy drops to
1.8
13The Vukile portfolio
Sectoral spread - of gross rentals
Figures in brackets prior to commercial space in
Randburg re-classified
14The Vukile portfolio
Geographical spread - of GLA
15The Vukile portfolio
New leases and renewals
- Total contract value R124 million
- Total rentable area 71 060 m²
- Includes
- CCMA in Durban Embassy (R16.1m)
- Bateman in Bedfordview GIS (R9.7m)
- Y Hotels in Bloemfontein Plaza (R9.1m)
16The MICC portfolio
National tenant groups - of GLA and gross
rentals
17The MICC portfolio
Lease expiry profile - of gross rentals
18The MICC portfolio
Vacancy profile - of gross rentals
19The MICC portfolio
Large vacancies ( of gross rentals)
- Fredman Drive sold commercial vacancy reduces
to 11.8 (4.6 total) - With Fredman Drive out Hillview, Randburg
contributes 35 of commercial vacancy (0.8
total) - i.e. if Fredman and Hillview out, overall vacancy
drops to 3.8
20The MICC portfolio
Sectoral spread - of gross rentals
21The MICC portfolio
Geographical spread - of GLA
22Combined portfolio
- Number of properties 92
- GLA 1 072 283m²
- Market value R 3.32 billion
- Vacancy ( of gross rentals) 4.7
- Sectoral spread
- Retail 54
- Commercial 34
- Industrial 12
-
23Strategic objectives (annual report)
- Enhancement of existing properties
- Debt funding structure
- Improvement of liquidity of linked units
24Capex project
- Board has approved R80m to upgrade and expand
Phoenix Plaza and Dobsonville - Phoenix Plaza GLA to be increased by 3 500m² and
Dobsonville by 5 000m² - Initial yield of 11 expected
- Work to start in January and finish August 2006
25CMBS Overview
- Commercial Mortgage Backed Securitisation (CMBS)
used worldwide since late 1980s as alternative to
bank loans for commercial property owners - Part of growing move towards disintermediation
(i.e. reduced reliance on traditional bank
finance)
26CMBS Overview contd
27CMBS Overview contd
- CMBS 120bn currently outstanding in Europe
- South Africas first CMBS was launched in
November 2004. Vukile launched second on 31
October, Growthpoint third on 23 November
28CMBS Structure
- CMBS is a substitute for bank debt through the
use of a special purpose vehicle (SPV) - The SPV makes a loan to the borrower and funds
this loan by issuing highly rated securitisation
notes to capital markets investors - The properties are generally (not always) held in
an insolvency-remote subsidiary SPV of the
transaction sponsor
29CMBS Structure
30CMBS funding costs and benefits
- Notes issued by SPV are rated by rating agency
(e.g. Moodys or Fitch) - Due to high credit rating of the notes, capital
market investors prepared to purchase with low
margin - This low margin translates to lower cost of funds
for SPV, which benefit is passed back to borrower
as lower margin on loan - In addition to lower funding costs, CMBS offers
number of benefits to property owners, including - Diversified funding base
- Decreased pressure on traditional credit lines
- Validation of asset and property management
functions by the rating agency
31Vukiles securitisation programme
- R2 billion CMBS programme arranged by ABSA
launched on - 31 October 2005
- First issuance of 5 and 7 year floating rate
notes totalling - R770 million
- Floating rate notes converted into fixed-rate
exposure through interest rate swaps - Overall debt cost, after all expenses and costs,
will reduce from 11.16 to 10 NACM - If in place for year ended 31 March 2005,
earnings would have been 5 higher than
reported - Future benefits if structure is utilised (set-up
costs not repeated)
32Liquidity
- Trading volumes continue to improve
- 6 months to end March 2005 - R137 million
- 6 months to end September 2005 R174 million
- ( 27)
- Average monthly trade
- 6 months to end March 2005 R22.8 million
- 6 months to end September 2005 R29.0 million
33BEE initiatives
- Discussions underway which may lead to
substantial portion of Sanlam shareholding (58)
sold to BEE consortium -
34Acquisition of MICC
- Vukile currently owns 75.003 of MICCs issued
linked units - Making good progress towards acquiring balance
and delisting MICC - Cautionary announcement made on 22 November 2005
35Prospects
- Continued strong performance expected from
property portfolio - Prospects for further reduction in vacancies
- Benefits of securitisation will start flowing
through in 2nd half and following years - Full-year distribution growth could be similar to
interims
36Questions
?
END