SA Corporate December 2015 Year End Results Presentation
March 2016
Agenda
• Highlights Rory Mackey
• Financial Performance Antoinette Basson
• Portfolio Review Rory Mackey
• Unlocking Value in the Retail Portfolio Rory Mackey
• Building the AFHCO Business Rory Mackey
• Zambian Acquisition Rory Mackey
• Strategy & Prospects Rory Mackey
• Acknowledgments Rory Mackey
• Questions Team
2
HIGHLIGHTSRORY MACKEY
High Level Review• Distribution Themes
• Full year distribution growth of 10.8%
• H2 distribution growth of 10.5% vs H2 2014
• Solid Tenant Retentions at 89.9% for traditional portfolio
• Investment Strategy
• AFHCO performance exceeding acquisition yield expectation
• Acquisition of 2 JHB inner city property portfolios, 2 additional JHB inner city properties and 50% interest in JV owning 3 Zambian properties for R1,335m
• Contracted acquisitions of R401m
• Disposal of 7 properties for R175m
• Contracted and unconditional disposal of 4 properties for R187m
• Developments in progress of R1,108m
• Efficient Operations
• Reduction in overall year-on-year vacancies
• Capital Structure
• 26.8m shares issued in H1 2015 by means of vendor placements
• 263.1m share issued in H2 2015 by means of rights issue
• Weighted average cost of debt supportive of core income growth
• Adequately hedged with expiring swaps renegotiated with improved tenors
• Alignment of Investor & Management Interests
• Completion of conversion to Corporate REIT
4
The last 3 years
5
2012 year end 2015 year end
R8.1bn Property assets R12.4bn
R7.5bn Market Cap R10.5bn
30.15 Distribution per share (cents) 39.57
365 Share price (cents) 460
342 NAV per share (cents) 436
139 Properties 178
2013
Four-pillar strategy formulatedInvestment strategy refined to focus on accretive growth investments and disposal of poor quality propertiesExternalisation of property management to Broll to enhance operational efficiencyOptimisation of capital structure through buy-backs, debt refinancing & hedge restructuring
2014
Executed transaction with Old Mutual to internalise asset managementIntroduced performance based management incentive structure aligned with shareholdersFinalised strategy to unlock value in retail portfolio through repositioning, re-tenanting & redevelopmentsDiversification into inner city residential and retail property through acquisition of Afhco
2015Conversion to corporate REITInitiated sub Saharan investment strategy with 50% investment in Zambian portfolioAfhco growth trajectory reinforced through formulation of development pipeline & system enhancements
FINANCIAL PERFORMANCEANTOINETTE BASSON
Dis
tributio
n H
isto
ry
7
14.24
14.35
15.17
16.28
17.68
19.66
14.18
14.48
14.98
16.47
18.02
19.91
28.42
28.83
30.15
32.75
35.70
39.57
-
5
10
15
20
25
30
35
40
45
50
2010
2011
2012
2013
2014
2015
Inte
rimFin
al
Tota
l
Distribution Growth
8
0.8
%
5.7
%
7.3
%
8.6
%
11.2
%
2.1
%
3.5
%
9.9
%
9.4
% 10.5
%
1.4
%
4.6
%
8.6
%
9.0
%
10.8
%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2011 2012 2013 2014 2015
Interim Final Total
Distribution at a glance
9
Dec 2015Rm
Dec 2014Rm
%Variance
Net Property Income - Traditional Standing Portfolio 899.633 846.130 6.3
Net Property Income - AFHCO Portfolio 125.240 36.600 242.2
Net Property Income - Other Acquisitions 30.782 19.154 60.7
Net Property Income - Buildings sold 4.418 16.659 (73.5)
Net Property Income 1,060.073 918.542 15.4
Investment in joint venture 9.207 - 100.0
Taxation on distributable earnings 0.489 - 100.0
Net finance costs (231.146) (162.795) 41.9
Group Expenses (37.562) (45.793) (18.0)
Antecedent distribution 52.392 - 100.0
Distributable earnings 853.453 709.954 20.2
Distribution per share (cents) 39.57 35.70 10.8
First six months 19.66 17.68 11.2
Second six months 19.91 18.02 10.5
Distribution contributors and detractors
10
35.70
1.89
4.350.56
-0.62
0.46 0.02
-3.23
0.44
39.57
30
32
34
36
38
40
42
44
Distribution31 Dec 2014
Increase inNPI -
StandingPortfolio
Increase inNPI - AFHCO
portfolio
Increase inNPI - OtherAcquisitions
Decrease inNPI - SoldBuildings
Increase inJoint Venture
income
Increase inTaxation ondistributable
earnings
Increase innet interest
paid
Decrease inGroup
Expenses
Distribution31 Dec 2015
Group Financial Position
11
Rmillion
8,7
22
- -
205
515
1,6
26
537
10,5
03
163 -
118
556
3,1
06 631
11,8
38
554
850 232
663
3,4
86 6
70
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Investment
Properties
Properties Held for
sale
Investment in
Joint Ventures
Other Non-current
assets
Other Current
Assets
Non-current
liabilities
Current Liabilities
December 2013
December 2014
December 2015
Growth in Assets and Market Capitalisation
12
0
100
200
300
400
500
600
0
2
4
6
8
10
12
14
16
2012 2013 2014 2015
Total Assets (Rbn) Market Cap (Rbn) NAV per share (cents) Share Price(cents)
R’bncents
Group debt structure – at 31 Dec (excl. fixes)
13
Maturity and interest rate profile of interest-bearing debt WAR of 7.41%, weighted average maturity - of 2.7 years, and WAM of 1.59%.
Loan type:
6.88% Amortising Loan
2.13% Term Loan (Foreign)
8.40% Term Loan (Syndication)
8.08% Revolving credit
7.77% Revolving credit
7.99% Term Loan
7.99% Term Loan
8.02% Term Loan
8.10% Term Loan (Syndication)
7.87% Term Loan
7.67% Bridging Loan350.0
500.0
1,152.0
200.0
270.0
30.0
-
-
848.0
420.5
73.1
-
-
300.0
200.0
-
-
0 200 400 600 800 1,000 1,200
October 2016
January 2017
December 2017
August 2018
September 2018
September 2018
December 2018
December 2018
December 2019
November 2020
April 2024
Amount Drawn Available
R71.6m AFD debt at 6.88% amortising debt with a final
maturity of 2024 to be assumed w.e.f. acquisition
of Platinum Place
Group swap profile – at 31 December
14
Tenor and interest rate swaps profile – weighted average tenor – 3.25 years and rate of 6.1% (weighted swap margin 0.5%). 87.0% of variable rate debt hedged by swaps. 87.2% of effective debt fixed (incl fixed rate debt)
7.05%
3.16% *
6.78%
7.27%
6.51%
6.41%
5.39% ^240
240
540
705
390
571
594
- 200 400 600 800
2015
2016
2017
2018
2019
2020
2022
Swap amount
* Includes $27m swap at 1.79% (based on US LIBOR)^ Swap expires at year end. Replaced after year-end at 8.22% for same quantum, expiring in 2020
In addition to R240m replaced, the following additional swaps were entered into after year-end:- R150m at 7.99%, expiring in 2019 (in anticipation of acquisition)- R240m at 8.39%, expiring in 2021 (to replace swaps expiring in 2016)
Group debt structure – at 31 Dec (incl. fixes)
15
Maturity and interest rate profile of interest-bearing debt – WAR inclusive of fixes of 7.84%. Current LTV 28.9%
R71.6m AFD debt at 6.88% amortising debt with a final
maturity of 2024 to be assumed w.e.f. acquisition
of Platinum Place
Loan type:
6.88% Amortising Loan
3.59% Term Loan (Foreign)
8.71% Term Loan (Syndication)
8.38% Revolving credit
8.08% Revolving credit
8.30% Term Loan
8.30% Term Loan
8.33% Term Loan
8.41% Term Loan (Syndication)
8.18% Term Loan
7.98% Bridging Loan350.0
500.0
1,152.0
200.0
270.0
30.0
-
-
848.0
420.5
73.1
-
-
300.0
200.0
-
-
0 200 400 600 800 1,000 1,200
November 2016
January 2017
December 2017
August 2018
September 2018
September 2018
December 2018
November 2018
December 2019
November 2020
April 2024
Amount Drawn Available
Gro
up n
et c
ash flo
w
16
301,2
15
923,5
30
(265,1
07)
(568) (5
8,5
21) (3
,888)
(994,2
67)
(693,6
38)
(13,0
73)
(40,6
14)
206,7
31 2
2 (9
,987)
(757,9
59)
1,2
93,2
95
13,0
20
(2,0
00)
(14,4
60)
(4,2
71)
430,8
81
310,3
41
(1,5
00,0
00)
(1,0
00,0
00)
(500,0
00)
-
500,0
00
1,0
00,0
00
1,5
00,0
00
Balance 31 December 2014
Cash generated from operations
Net finance costs
Taxation (paid) / received
Acquisition of subsidiary
Acquisition of Property, plant andequipment
Acquisitions and Improvements toInvestment Property
Investment in Joint Ventures
Loan to Developer
Letting commissions and tenantinstallations
Disposal of investment properties
Disposal of property, plant andequipment
Increase in financial assets
Distributions paid
Issue of new shares
Loan from developer
Buy-back of shares
Settlement of Swaps
Interest bearing borrowngs -foreign
Interest bearing borrowngs - local
Balance 31 December 2015
R '0
00
Net Asset Value
17
Cents per share
381
40
30 23
-20
436
350
360
370
380
390
400
410
420
430
440
450
460
470
Opening NAV 1January 2015
Distributableearnings for the
period
Revaluation ofInvestment
Properties, JVand InterestRate Swaps
Foreignexchange
adjustments
Other Non-distributable
incomestatement items
Distributionsattributable to
shareholders
Closing NAV 31Dec 2015
Trading Volumes and liquidity
18
SAC: closing price v monthly volume traded Value traded as % of market capital
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
420
430
440
450
460
470
480
490
500
510
520
530
Jan-1
5
Feb-1
5
Mar-
15
Apr-
15
May-1
5
Jun-1
5
Jul-
15
Aug-1
5
Sep-1
5
Oct-
15
Nov-1
5
Dec-1
5
Volume Traded Closing Price ( c )
SAC
EMI
GRT
RES
FFA
HYP
VKE
IPF
RDF
0%
20%
40%
60%
80%
100%
120%
- 20,000 40,000 60,000 80,000 100,000
PORTFOLIO REVIEWRORY MACKEY
Overview – Sectoral Analysis (excl. Zambian JV)
20
178 Properties
Total GLA 1,387,140
Total Portfolio R12.4bn(Dec-14: R10.7bn)
Traditional standing Portfolio:
Weighted Average discount rate 14.3%
Weighted average capitalisation rate 8.9%
Industrial 56%
(Dec-14:57%)
Retail 26%
(Dec-14: 27%)
Commercial6%
(Dec-14: 6%)
AFHCO12%
(Dec-14: 10%)
By GLA
Industrial 36%
(Dec-14: 40%)
Retail 41%
(Dec-14: 41%)
Commercial9%
(Dec-14: 10%)
AFHCO14%
(Dec-14: 9%)
By Market Value
5,362
10,244
12,446
7,4255,419
11,580 12,984
6,765 7,6845,734
14,278 13,288
10,4388,924
-
5,000
10,000
15,000
Industrial Retail Commercial AFHCO Average
Market Value per m²
December 2013 December 2014 December 2015
Overview – Geographical Analysis (excl. Zambian JV)
21
Gauteng57%
(Dec-14:
56%)
KwaZulu Natal32%
(Dec-14: 32%)
Western Cape6%
(Dec-14: 6%)
South Africa: Other5%
(Dec-14: 6%)
By GLA
Gauteng57%
(Dec-14:
53%)
KwaZulu Natal35%
(Dec-14: 38%)
Western Cape6%
(Dec-14: 6%)
South Africa: Other3%
(Dec-14: 3%)
By Market Value
Overview – Sectoral Analysis (AFHCO)
22
44 Properties
GLA 170,060
Market Value R1.8bn
Weighted average capitalisation rate 10.2% (excluding properties under development and development bulk)
Retail / Commercial
37%
(Dec-14: 29%)
Residential63%
(Dec-14:
71%)
By GLA
Overview – Tenant Grading by GLA – Traditional portfolio
23
“A”: large national tenants, large listed tenants, government and major franchisees “B”: national tenants, listed tenants, franchisees, large regional tenants, medium to large professional firms“C”: other
A63%
B29%
C8%
Total Portfolio
65%
58% 59%
63%
31%
26% 28% 29%
4%
16%13%
8%
0%
10%
20%
30%
40%
50%
60%
70%
Industrial Retail Commercial Total
per sector
A B C
Overview – Tenant Grading by GLA – AFHCO
24
“A”: large national tenants, large listed tenants, government and major franchisees “B”: national tenants, listed tenants, franchisees, large regional tenants, medium to large professional firms“C”: other
A18%
B29%
C53%
Retail / Commercial
Portfolio
Acquisitions
25
Property SectorForward Yield %
Purchase price (R000)
Date of transfer
Morulat Property Investments 4 portfolio, New Doornfontein
AFHCO 10.6 243,635 Jan-15
Atkinson House, Johannesburg CBD ^ AFHCO 10.3 92,333 Mar-15
Sambro House, Marshalltown AFHCO 10.2 44,000 Mar-15
Inner City Retail Portfolio, Johannesburg CBD
AFHCO 10.8 260,954 Oct-15
Indirect investment in property portfolio in Lusaka and Ndola *
Rest of Africa
8.7 693,639 Nov-15 to
Dec-15
Total 9.6 1,334,561
^ part of original AFHCO Deal* 50% of net equity in investment in joint venture - yield determined in US Dollars
Contracted Acquisitions
26
Property SectorForward Yield %
Purchase price
(R000)
Expectedtransfer
Morning Glen Shopping Centre, Sandton Retail 9.7 293,000 Mar-16
Jeppe Street Post Office, Johannesburg CBD AFHCO ^ 88,200 Jun-16
Inner City Retail Portfolio, Johannesburg CBD (remainder) AFHCO 10.8 20,130 Apr-16
Total 9.8 401,330
^ Property acquired to redevelop to 14,000m2 of retail and 44,000m2 of residential (approximately 850 apartments) and the redevelopment viability is in the process of being finalised.
Disposals
27
Property SectorExit Yield
%
Sales price
(R000)
Date of transfer
110 Zastron Road, Bloemfontein Office 6.8 6,900 Jan-15
Stellenbosch Square, Stellenbosch * Retail 7.8 40,000 Feb-15
36 Wierda Road West, Wierda Valley Office 7.5 39,000 Feb-15
3 Remblok Street, Strydom Park Industrial 8.3 10,700 Mar-15
The Boulevard, Melville Retail 7.4 31,200 Apr-15
Middelburg Pick n Pay, Middelburg Retail 8.3 24,000 Sep-15
293 Hebbard Road, Robertville Industrial 5.5 23,500 Dec-15
Total 7.4 175,300
* 50% Undivided share
Contracted and Unconditional Disposals
28
Property SectorExit Yield
%
Sales price
(R000)
Expected transfer
date
Checkers Somerset West ^ Retail 7.1 75,000 Feb-16
8 Paul Smit Street, Anderbolt ^ Industrial 8.8 50,000 Feb-16
83 Heidelburg Ave, City Deep Industrial 7.4 36,000 Mar-16
4 School Road, Pinetown Office 5.3 25,500 Mar-16
Total 7.4 186,500
^ transferred
Lease renewals - % Rental Reversions
29
2.3%
6.5%
-7.3%
3.1%
11.2%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Industrial Retail Commercial Total (excl. AFHCO) AFHCO Retail /Commercial
12 months to December 2015
30
Driven by implementation of • redevelopments and repositioning properties to dominate their catchment areas • implementation of innovative strategies to provide differentiation in over traded nodes
Main Contributors:
Retail Vacancy Reversions 9.4%
PropertyVacancy reversion
Contributor
Hayfields Mall 145% Introduced value apparel and liquor to tenant mix
East Point 117% Branded fashion outlet strategy
Stellenbosch Square 86% Property redevelopment
Montana Crossing 26% Branded fashion outlet strategy
Celtis Ridge Shopping Centre 21% Introduced entertainment to tenant mix
Willow Way Shopping Centre 20% Enhanced fast food offering
Town Square 19% Improved convenience offering
Umlazi Mega City 11% Initial redevelopment tenanting
Contracted rental escalation profile
31
8.1%7.7%
8.2% 8.0%
8.8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Industrial Retail Office Total (excl AFHCO) AFHCO Retail /Commercial
Group lease expiry – Traditional Portfolio
32
Vacancies Monthly 2016 2017 2018 2019 2020+
% of GLA 2% 5% 18% 24% 19% 7% 25%
Cumulative 2% 7% 25% 49% 68% 75% 100%
2%
5%
18%
24%
19%
7%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0%
5%
10%
15%
20%
25%
30%
% o
f G
LA
Group lease expiry – AFHCO Retail / Commercial
33
Vacancies Monthly 2016 2017 2018 2019 2020+
% of GLA 5% 8% 24% 15% 12% 7% 29%
Cumulative 5% 13% 37% 52% 64% 71% 100%
5%
8%
24%
15%
12%
7%
29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0%
5%
10%
15%
20%
25%
30%
35%
% o
f G
LA
Industrial Lease Expiry Strategy 2016
34
• 134 760m² (17.2%) expiring in 2016
• 20% already renewed at positive reversion of 1.30 %
• 53% of all leases expire in Gauteng of which management expects 87% to renew
• 35% of all leases expire in KwaZulu-Natal of which management expects 58% to renew, 13%
have already been re-let and 22% are receiving asset management intervention
• 12% of all leases expire in Western Cape of which management expects 79% to renew
• Continued focused strategy of early renewal engagement implemented in all regions
• Overall, management expect 76% to renew with negative reversions of circa 1.5%
Office Lease Expiry Strategy 2016
35
• 20 547m² (25.5%) expiring in 2016
• Strategy of early renewal engagement implemented in all regions
• 40% of leases expiring in 2016 already renewed at negative 3.8% reversions
• Overall, management expect 85% to renew with negative reversions of circa 4%
Vacancy profile - % of GLA (Traditional Portfolio)
36
0.2
%
8.9
%
11
.8%
4.0
%
1.4
%
5.9
%
12
.7%
3.7
%
0.3
%
4.5
%
11
.1%
2.3
%
0%
4%
8%
12%
16%
Industrial Retail Commercial Total
December 2013 December 2014 December 2015
Vacancy profile - % of gross rental (Traditional Portfolio)
37
0.2
%
4.6
%
7.0
%
3.2
%
1.2
%
3.4
%
7.8
%
3.1
%
0.3
%
2.8
%
8.0
%
2.4
%
0%
3%
6%
9%
12%
Industrial Retail Commercial Total
December 2013 December 2014 December 2015
Office vacancy analysis
38
Office subsector GLA (m2)% of total
GLA Vacant GLA% Vacancy of
GLA type% Vacancy of total
Office GLA
Stand Alone Office 80,578 79,28% 6,699 8,31% 6.59%
Retail Office 21,065 20,72% 4,601 21,84% 4,53%
Total 101,643 100.00% 11,300 11.12% 11.12%
• 1,768m² let to Natal Film Commission at Musgrave Centre office tower, effective 1 February 2016• Stand alone offices earmarked for residential conversion - 252 Montrose – Randburg (2,459m²), 199
North Ridge Road – KZN (4,639m²)• Retail office earmarked for residential conversion at Davenport Shopping Centre, KZN (1,680m²)
Vacancy profile - % of GLA (AFHCO)
39
1.8
%
7.9
%
6.1
%
4.8
% 5.6
%
5.3
%
0%
3%
6%
9%
12%
Retail / Commercial Residential Total
December 2014 December 2015
Vacancy profile - % of gross rental (AFHCO)
40
2.3
%
8.9
%
6.3
%
3.7
%
6.6
%
5.5
%
0%
3%
6%
9%
12%
Retail / Commercial Residential Total
December 2014 December 2015
Expense ratio analysis
41
40.0% 40.8% 41.1%
38.2%36.8%
35.8% 36.3% 36.5%35.0% 34.5%
15.4% 14.7% 14.2% 14.3% 13.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015
Operating expenses Property expenses Property expenses excluding municipal expenses
Property expense categories
42
Advertising1.9% Bad Debt 1.4%
Cleaning & Security10.7%
Municipal
Expenses, 60.2%
Insurance 1.3%
Legal Expenses 0.9%
Letting Expenses3.0%
Maintenance 6.3%
Sundry Expenses9.4%
Property Management Fee 4.9%
Property Arrears and Provisions
43
TENANT DEBTORS AND PROVISIONS (R'000) Dec-15 Dec-14 Dec-13
Total Trade Receivables
Trade receivable before bad debt impairment (Incl. VAT) 55,211 36,392 44,558
Provision for bad debts -29,909 -21,080 -27,921
Trade Receivable after bad debt impairment
(excluding debtors with credit balances) 25,302 15,312 16,637
Provision for bad debt
Opening balance 21,080 27,921 27,229
Amounts written off during the period -7,335 -17,218 -13,557
Additional provision recognised 16,164 10,377 14,249
Closing balance 29,909 21,080 27,921
Provision VAT inclusive 34,096 24,031 31,830
Ratios
Provision as a % of total trade receivable 54.2% 57.9% 62.7%
Provision as a percentage of rental income 1.8% 1.5% 2.3%
Trade receivables as a percentage of rental income 3.0% 2.3% 3.2%
UNLOCKING VALUE IN THE RETAIL PORTFOLIO RORY MACKEY
45
SPRINGFIELD VALUE CENTRE
• Reebok• Triumph• Timberland• Sneakers International• New Balance Outlet Store• Levi's• Adidas• Ibo : International Brands Outlet• Factorie• Nike • Guess• Cotton On• Puma
Average rental/m2 of R185
Average trading density /m2 of R5 079
EAST POINT
• Le Coq Sportif• Trappers• Columbia• Superga• Lee Cooper• Reebok• Adidas• Levi's• Brand Freeway • Fashion Fusion• Nike
Average rental/m2 of R240
Average trading density /m2 of R4 305
Value branded outlet strategy outperformance
Retail Redevelopments
46
PropertyEstimated Cost (Rm) Yield %
East Point 433.1 9.6
Umlazi Mega City 263.7* 9.3
Comaro Crossing 53.7 8.0
Stellenbosch Square 25.1* 11.1
Bluff Towers ^ 65.3 9.7
Total 840.9 9.5
* Represents SA Corp ownership portion of development costs^ Complete
Retail Redevelopments
47
East Point (formerly East Rand Galleria)
Capex Additional GLA StartPreviously
reported yieldYield enhancement measures
R433.1m
-4,700 m² May 2014 9.0%
Value engineeringImproved tenant mix
GLA on completionEstimated
CompletionImproved yield
44,574 m² July 2016 9.6%
Umlazi Mega City
Capex Additional GLA StartPreviously
reported yieldYield enhancement measures
R263.7m(being 75% of undividedshare in cost)
19,000 m² November 2014 9.3%
Further yield enhancement being formulatedGLA on completionEstimated
CompletionCurrent yield
54,200 m² June 2017 9.3%
Retail Redevelopments (continued)
48
Stellenbosch Square
Capex Additional GLA StartPreviously
reported yieldYield enhancement measures
R25.1m(being 50% of undividedshare in cost)
700 m² November 2014 9.9%
Value engineeringImproved tenant mix
GLA on completionEstimated
CompletionImproved yield
10,540 m² March 2016 11.1%
Comaro Crossing
Capex Additional GLA StartPreviously
reported yieldYield enhancement measures
R53.7m
- 2,870 m² March 2015 8.0% Value engineering set off against increased capex on enhanced vertical circulation and compliance capex
GLA on completionEstimated
CompletionCurrent yield
14,000 m² August 2016 8.0%
Planned Retail Redevelopments
49
Midway Mews
Additional GLA
Scope
1,858 m²• Phase 1 - New Chicken Licken drive-thru
secured • Extension of the GLA to include deck providing
an upmarket restaurant offering• Aesthetic upgrade to property• Improvement to convenience tenant mix• Creation of a medical offering on the 1st floor
GLA on completion
10,254 m²
Targeting yields of 10% or higher
Cambridge Crossing
Additional GLA
Scope
1,361 m²• New KFC / Nando’s drive-thru tenant• Extension of GLA to include deck on which
drive-thru will be positioned• Aesthetic upgrade to property• Extension and aesthetic upgrade to
Woolworths
GLA on completion
4,921 m²
Cullinan Jewel
Additional GLA
Scope
0 m² • Expansion and refurbishment of Spar• Introduction of Ackermans• Expansion of Pep • Aesthetic upgrade to the property
GLA on completion
6,113 m²
Kempton Park
Additional GLA
Scope
1,000 m² • Development of automotive cluster with reconfigurations of existing space for better rental opportunities
• Major tenants F1, Supaquick and Earn-a-Car secured
GLA on completion
15,757 m²
BUILDING THE AFHCO BUSINESSRORY MACKEY
AFHCO’s Presence in the JHB Inner City
51
AFHCO Development Projects
52
Building Name Retail m²Residential
m²Total m²
No. ofresidential
units to be
developed
Contract Completion
% Completio
n
CompletedConnaught & Gemdawn 1,555 9,161 10,716 179 31/07/15 100%
Jeppe Street Mall 850 4,438 5,288 126 30/09/15 100%
Bulk Acquired in
Initial Transaction
Stuttafords House 1,381 9,312 10,693 188 27/05/16 75%
Moray House 2,168 3,884 6,052 84 31/03/16 65%
African Diamond 139 3,760 3,899 61 01/03/16 95%
Anchor Towers - 962 962 14 31/08/16 0%
Letsema 1,300 4,053 5,353 161 20/01/17 10%
End Park, Mantoll Court, Tollman
1,059 5,816 6,875 152 30/11/16 5%
Normandie 654 3,990 4,644 113 31/10/16 15%
Jeppe Street Post Office 14,000 44,000 58,000 550 30/07/18 0%
PartneredDevelopments
Davies Street East 964 7,200 8,164 190 30/04/17 0%
Panama House 680 7,400 8,080 217 28/02/17 0%
Platinum Place - 9,136 9,136 571 31/07/16 65%
TOTALS 24,750 113,112 137,862 2,606
Jeppe Street Post Office
53
• Auction bid (incl. commission) = R88.2million
• Redevelopment and refurbishment of the retail space on ground & first floor (14,000m²)
• Development of remaining floors to approximately 850 residential units (44,000m²)
• Project Start/Completion: 01/06/2016 – 30/07/2018
AFHCO Development Pipeline
54
Pipeline Bulk Cost Construction Cost Total CostEstimated Project
YieldEstimated
Completion
Completed 45 109 927 64 074 164 109 184 091 11% August 2015
Bulk Acquired in Initial Transaction
106 921 674 159 805 995 266 727 669 11%2016: 80%2017: 20%
Jeppe Street Post Office 88 800 000 350 000 000 438 800 000 TBC2016:20%2017: 40%2018: 40%
Partnered Developments 37 953 082 160 371 493 198 324 575 11%2016:80%2017:20%
ZAMBIAN ACQUISITION – 50% OF CASILLI PORTFOLIORORY MACKEY
Transaction
� SA Corporate concluded the transaction, effective 1 November 2015, involving the purchase of 50% of the shares andclaims from the shareholders (the “Sellers”) of the Casilli group of companies (“Casilli Group”) (holding thethree properties known as:
− East Park Mall;
− Acacia Office Park; and
− Jacaranda Mall;
located in Zambia (the “Properties ” or “Property Portfolio ”) (the “Proposed Transaction ”).
� The transaction took the form of the purchase of a 50% interest in three Mauritian entities which own 99.9% of the shares andclaims of three Zambian companies, with the remaining 0.1% interest held on behalf of the Mauritian entities by nominees
Rationale for SA
Corporate to diversify
into Sub-Saharan
Africa
� Long term growth prospects
� Geography in which SA Corporate can have influence, develop competitive IP and achieve critical mass
� SA Corporate is large enough to be able to “open doors” in the region yet small enough that the opportunities in relatively smalleconomies can have significant impact on the Company’s performance
� SA Corporate’s capabilities in all four sectors of the property industry will enable it to more readily exploit opportunities in thedeveloping economies
Principles in seeking
opportunities
� Quality assets with robust cash flows
� Growth opportunity through expansion and / or unlocking value
� Preference for partnership with a local partner with a strong in-country network
56
Zambian Transaction
57
Property Portfolio
Name of property Location GLA (m²)Property value 100%
(USD)Yield (%)
Net property income 100%
(USD)
Income producing portfolio
East Park Mall Lusaka 28 792 72 247 491 8.50% 6 141 036
Acacia Office Park Lusaka 12 700 26 639 753 9.13%1 2 431 832
Jacaranda Mall Ndola 14 020 18 621 408 8.91%1 1 659 545
Total income producing portfolio 55 512 117 508 652 8.68% 10 232 413
Development portfolio
East Park Mall (Phase 3 – Mall extension) Lusaka 9 6143 TBC 9.00% TBC
East Park Mall (Phase 4 – FNB Offices) Lusaka 8 9503 TBC 9.00% TBC
Total development portfolio 18 564 TBC 9.00% TBC
1 Based on property value less saving as a result of a reduced price negotiated with one of the minority shareholders & excluding a possible surplus top-up
3 Estimated GLA
Property Portfolio – phase 1
58
Cnr Thabo Mbeki and Great East Road, Lusaka
Office
24.7%
12 700
Multi-tenanted
First National Bank Zambia, Ecobank Zambia, United Bank for Africa, Huawei Technologies
81%
2.6
4.69%
98%
21.90
3.6%
9.13%
26 639 753
2 098
400 308 152
31 520
East Park Mall Acacia Office Park Jacaranda Mall
Hello is it me you are l yes it is
Cnr Kabwe and Mushili Road, Ndola
Retail
17.3%
14 020
Multi-tenanted
Pick n Pay, Carnival Furniture, FurnMart, Jet, Pep, MTN, Edgars
53%
5.0
6.55%
89%
12.28
3.4%
8.91%
18 621 408
1 328
273 180 652
19 485
Hello is it me you are l yes it is
Physical addressCnr Thabo Mbeki and Great
East Road, Lusaka
Category Retail
% of total property value 67.0%
GLA (m 2) 28 792
Tenancy Multi-tenanted
Major tenantsPick n Pay, Edgars, Food
Lovers, Builders Warehouse, Toys R Us,
National tenants by GLA (%)
64%
Lease expiry by revenue (years)
5.9
Vacancy by GLA (%) 0%
% USD Rentals 100%
Weighted average grossrental / m² (USD)
23.08
Weighted average escalation (%)
2.7%
Yield (%) 8.50%
Value (USD) 72 247 491
Value/m² (USD) 2 509
Value (ZAR) 1 017 248 965
Value/m² (ZAR) 35 331
59
Phase Description GLA (m 2)
Phase 1Existingdevelopment
22 364
Phase 2Builders Warehouse
6 428
Phase 3 Mall extension 9 614
Phase 4 Offices (FNB) 8 950
TotalUltimate development
> 60 000
East Park Mall site plan
60
Amount paid by SA Corporate (USD)
Net propertyIncome (50%) (USD)
Blended overallyield (%)
50% of NAV (less saving as a result of reduced price negotiated with minority shareholder)
42 044 163
50% of shareholder loans settled by SA Corporate 4 650 795
Purchase Consideration (USD:ZAR = 13.99) 46 694 958
50% of third party debt to be refinanced by SA Corporate subsequent to the Proposed Transaction
7 196 883
50% of property value (less saving as a result of r educed price negotiated with minority shareholder)
53 891 841 4 702 896 8.73%
Purchase Consideration
Transaction excluding Builders Warehouse at East Pa rk Mall (executed 1 November 2015)
Acquisition of Builders Warehouse at East Park Mall (executed 28 November 2015)
Amount paid by SA Corporate (USD)
Net propertyIncome (50%) (USD)
Blended overallyield (%)
50% of NAV 2 862 485
Purchase Consideration (USD:ZAR = 14.65) 2 862 485
50% of third party debt to be refinanced by SA Corporate subsequent to the Proposed Transaction
2 000 000
50% of property value 4 862 485 413 311 8.50%
61
Risk mitigation� To mitigate the market volatility in respect of Zambia, a two year yield guarantee and a price adjustment after four
years from the effective date was secured as set out below:
2 year yield
guarantee
� The Sellers shall ensure that the NPI Forecast (for purposes of determining the Purchase Consideration, and whichescalates by approximately 3.5% in the second year) shall be achieved during the 24 months from the Effective Date
� To the extent that there is a shortfall in the NPI Forecast, the amount distributed to SA Corporate from dividends ofthe Mauritian Entity shall be increased in such a way that SA Corporate receives the return it would have received hadthe NPI Forecast been achieved in the 24 month period
� The yield guarantee applies to approximately 84% of the NPI Forecast (i.e. excluding the minority seller)
Price
adjustment
� In respect of the 84% of the NPI Forecast, to the extent that the value of the Mauritian Entities after 48 months fromthe Effective Date, calculated by capitalising the actual net property income for months 37 to 48 from the EffectiveDate by 8.50% (“Future Value”), is less than the initial purchase consideration – determined by capitalising the NPIForecast by 8.5% (“Purchase Value”) (“Shortfall”), the Sellers shall either transfer to SA Corporate such number oftheir ordinary shares in the Mauritian Entities to cover the Shortfall or settle the Shortfall by the payment of cash inUSD
� In respect of the 16% of the NPI Forecast, to the extent the Future Value exceeds the Purchase Value (“Surplus”),SA Corporate will settle such Surplus in cash in USD but subject to a maximum payment of $500k of the $1.5mildiscount applicable to the minority seller’s shares
Terms of Sale Agreements
Tax indemnity
� 5 year tax indemnity:
- The Purchase Consideration was determined on the basis that the tax incentives applicable to the three ZambianCompanies will apply for a period 5 years from the Effective Date (i.e. on the basis that during the first five yearsfrom the Effective Date there will be no tax on revenue, income or dividends payable in Zambia by the ZambianCompanies, notwithstanding that in fact the phasing out of such tax incentives may have commenced during suchfive year period)
- To the extent that there is a shortfall in the amounts that would be available for distribution to SA Corporate fromthe dividends of the Mauritian Entities during such period due to any restriction on the tax incentives applicable tothe Zambian Companies at the Effective Date or the suspension or cancellation or non-renewal of any investmentlicense of the Zambian Companies or any change in the tax laws of Zambia ("Tax Change"), the dividends fromthe Mauritian Entities distributable to SA Corporate shall be increased in order to ensure that SA Corporatereceives the return it would have received had the Tax Change not occurred and the amount distributable to theSellers from the dividends of the Mauritian Entities shall be reduced accordingly in the distribution period in whichsuch Tax Change occurs until the expiry of such 5 year period
- The tax indemnity is also only in respect of approximately 84% of the NPI Forecast (i.e. excluding the minorityseller)
62
* The property management of the three Properties will be outsourced to a property management company and a fixed fee of 18% of totalgross income will be paid by the Zambian Companies to the property manager for managing the three Properties
Terms of Sale Agreements (continued)
STRATEGY & PROSPECTSRORY MACKEY
Strategy & Prospects
64
With conversion to a corporate REIT marking successful completion of the 4 pillar strategy, the Company is
positioned for sustainable growth to be supported by:
• Building AFHCO to become a dominant trusted residential rental brand of choice in South Africa
providing quality and affordable accommodation in high demand nodes.
• Capitalising on inner city retail opportunities by growing exposure in high traffic precincts informed by
market research & building relationships with retailers with strong trading performance in these markets.
• Optimising the retail portfolio through redevelopments and improvements to tenant mix to dominate
and/or differentiate.
• Enhancing resilience of the industrial portfolio by focusing on tenant retention & undertaking tenant
driven improvements.
• Generating growth from a phased development pipeline. Investment returns to be ensured by
managing quantum and cost of capital & through risk & reward sharing mechanisms with developers.
• Recycling capital from low growth, poor quality to high growth, high quality assets.
• Monitoring market trends to progress the Group’s sub Saharan investment strategy when property
pricing reflects attractive returns.
• Enhancing returns through effective use of debt and equity to optimise capital structure and manage
interest rate risk and liquidity.
• Positively impacting the environment and ensuring cost containment through green initiatives.
Anticipate distribution growth of approximately 9% for next six months
ACKNOWLEDGMENTS
QUESTIONS