Financial Mail Page 1 -10/07/15 01:41:01 PM hhh

ANNUAL REPORT WWW.FINANCIALMAIL.CO.ZA THE PROPERTY HANDBOOK

THE PROPERTY HANDBOOK 2015 2015

An invaluable tool for real estate investors Financial Mail Page 2 -10/07/15 11:14:28 AM hhh 13305

MAKING PROPERTY FUNDING FROM START TO FINISH HAPPEN

Building partnerships to realise opportunities for our clients. At Nedbank Property Finance we understand property. In fact, our agile solutions have made us the market leader with a proven track record across the board. Contact us for your commercial, industrial or retail property funding needs.

Cape Town 021 416 7000 Eastern and southern Cape 041 393 5800 Pretoria 012 436 7000 Durban 031 364 1111 Gauteng and Bloemfontein 011 294 4444 Port Elizabeth 041 398 8000

BT Ngebs Mall, Billion Group, Mthatha.

Nedbank Limited Reg No 1951/000009/06. nedbank.co.za Authorised financial services and registered credit provider (NCRCP16).

13305 Nedbank BT NGEBS 225x170.indd 1 2015/06/19 12:57 PM Financial Mail Page 3 -10/07/15 12:57:26 PM hhh

C o n te n t s

Foreword ...... 6 Abland Property lending...... 8 Offices and industrial outlook ...... 12 Retail sector perspective ...... 14 Hotel industry prospects...... 16 Buy-to-let ...... 18 Residential outlook ...... 20 Abreal The African growth story...... 22 Offshore housing opportunities ...... 26 Global Reits...... 28 Listed property outlook...... 30 Profiles of listed funds: Accelerate Property Fund ...... 32 Oilgro Arrowhead Properties...... 34 Attacq ...... 36 Capital Property Fund ...... 38 Capital & Counties Properties...... 40 Delta Property Fund...... 42 Dipula Income Fund...... 44 Emira Property Fund ...... 46 Equites Property Fund...... 48 Fortress Income Fund...... 50 Growthpoint Properties...... 52 Hospitality Property Fund...... 54 Hyprop Investments ...... 56 Intu Properties...... 58 PROPERTY FUND Investec Australia Property Fund ...... 60

THE PROPERTY HANDBOOK 3 Financial Mail Page 4 -10/07/15 12:57:47 PM hhh

Investec Property Fund...... 62 MAS Real Estate...... 64 New Europe Property Investments ...... 66 Octodec Investments...... 68 Rebosis Property Fund ...... 70 Redefine International...... 72 Redefine Properties ...... 74 Resilient Property Income Fund...... 76 Rockcastle Global Real Estate Company ...... 78 SA Corporate Real Estate Fund...... 80 Safari Investments...... 82 Texton Property Fund...... 84 The Pivotal Fund...... 86 Tower Property Fund...... 88 INTEGRATED Vukile Property Fund...... 90 REAL-TIME Table: Property transfer costs ...... 92 Useful terms ...... 94 IN THE CLOUD

Financial Mail Editor: Tim Cohen. Property Handbook editor: Joan Muller. Projects editor: Luleka Mangquku. Projects co-ordinator: Matshepo Gumede. SOFTWARE Photographers: Russell Roberts, Jeremy Glyn, Hetty Zantman. Proofreader: Dave Landau. DESIGNED FOR Layout & cover design: Colleen Wilson. Sales: Lyn Hill. PROPERTY MANAGERS P ro d u c t i o n : Jamie Kinnear.

www.mdapropsys.com 0861 00 2231 4 THE PROPERTY HANDBOOK Financial Mail Page 5 -10/07/15 11:17:24 AM hhh 1193592_E

Australia Property Fund

Some returns should be obvious

With 17 quality properties and AUD 361 million of asset value, the Investec Australia Property Fund has grown by 178% since listing in October 2013. And the annual results show better things to come. With strong distribution growth, underpinned by the strength of the real estate fundamentals, the returns are attractive. If you’re looking for quality and growth for your portfolio, look no further.

For more information visit investec.com/australiapropertyfund

Australia Property Fund

Investec Property Limited ABN 93 071 514 246 AFS licence 290909 is the issuer of units in the Fund. Investments in the Fund are not deposits with, or other liabilities of, Investec Australia Limited or any Investec Group entity and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Past performance is not necessarily a guide to future performance. Returns and benefits are dependent on the performance of underlying assets and other variable market factors and are not a guarantee. Exchange rate fluctuations may have an adverse effect on the value of certain investments. This document is for information only and readers should obtain their own investment, legal and tax advice. Neither Investec Australia Limited nor any member of the Investec Group guarantee any particular rate of return or the performance of the Fund, nor do they guarantee the repayment of capital from the Fund. The Fund is regulated in Australia and is approved by the FSB in South Africa as a foreign collective investment scheme (CIS). The Fund is listed on the JSE Limited.

1193592 Investec IPAF Australia 225x170.indd 1 2015/07/10 10:27 AM Financial Mail Page 6 -10/07/15 12:58:02 PM hhh

FOR EWOR D More money-making options

ow in its 15th edition, Lodestone; and more recently, the Financial Mail’s Th e Arrowhead spin-off IndluPlace Property Handbook Properties, the JSE’s eagerly Ncontinues to provide plenty of awaited first pure housing fund. food for thought on the That brings the tally of new challenges and opportunities property listings over the past presented by the various sectors four years to a substantial 28. In of the real estate market. fact, real estate companies As always, the aim of the account for 40% of all listings handbook is to provide expert since the beginning of 2011, opinion, analysis and forecasts according to the JSE’s investor on local and global property relations division. trends to enable our readers to New listings have b o o s te d make better informed invest- the size and stature of listed ment decisions. property as an asset class. Also, This year we have they have lured investors wh o introduced a new chapter on may not have considered listed hotels in which Pam Golding weakness, listed property property as an alternative to Tourism & Hospitality investors have had a particu- general equities, cash and bonds Consulting MD Kamil Abdul- larly profitable year, with the SA because of the sector’s previous Karrim provides a compelling listed property index a c h i ev i n g lack of liquidity. case for why the asset class a substantial 32% total return Avior Research property should be included in real for the 12 months ending May. analyst Naeem Tilly says in his estate portfolios (Chapter 4). Th e re’s still no end to the overview of SA’s listed property We also look at the growing flurry of merger, acquisition and sector in Chapter 10 there are trend to buy a holiday home new listings activity. No less more new listings to come. offshore in order to get citizen- than R15bn in new equity has If you have become over - ship or a second passport already been raised in the first whelmed by the rapid increase (Chapter 8). New investment half of 2015 by listed property in the number of real estate destinations, notably Portugal, firms via book builds, rights counters, don’t miss the reviews have opened to SA investors issues and IPOs, according to of leading analysts and fund looking for an insurance policy figures from Stanlib. That is on managers who provide insight against political, currency and top of the record R40bn capital on 30 individual property economic risk at home. raised by the sector in 2014. stocks in the second half of the In Chapter 6, Lightstone’s In fact, since April last year, handbook. Paul-Roux de Kock provides a there have been no fewer than As always, we value feed- comprehensive overview of the 10 new property listings, three back from our readers, so please residential market and why of which made their debut on let us know if you have any house prices may be heading the JSE this year. These are suggestions on how to improve for a period of slower growth. UK-focused mall owner New next year’s offering. Joan Muller Despite recent share price Frontier Properties; SA-based The Property Handbook e d i to r

THE PROPERTY HANDBOOK 6 FINANCIAL MAIL July 20 1 5 Financial Mail Page 7 -10/07/15 11:18:05 AM hhh

Redefine_Advert_225x170FINAL.indd 1 11/06/2015 13:50 Financial Mail Page 8 -10/07/15 12:58:17 PM hhh

CHAPTER 1 Property lending: Off to a strong start in 2015

hough the local be affected in the same way. commercial property ❑ The listed property s e c to r finance market has been has had a high level of activity, Tconstrained by poor GDP with most of the big players growth, rising operating costs looking to increase the size of and low business confidence in their portfolios. For example, the first half of 2015, lending G row t h point recently acquired remains remarkably buoyant. Acucap and Sycom, while Also, the level of arrears and Redefine took a 66% stake in bad debt has improved Fountainhead and also acquired noticeably in the past few years. the unlisted Leaf portfolio. Ne d b a n k ’s book, which Finding quality stock at realistic attracts a 34% market share of Ro b i n values is difficult, which has the SA commercial property Lockhar t-Ross resulted in bigger funds finance market, stood at around acquiring and consolidating R115bn at the end of April 2015, Basel 3 will force banks to smaller funds. up from R100bn in mid-2014. increase the amount of capital Because SA listed property Four or five years ago, 3,5% of they need to hold against a loan funds are well managed, well our total commercial property as the term of the loan diversified and well hedged, they finance book was problematic. increases. In addition, new represent the safest prospect That number is now less than liquidity ratios are going to be from both an investor’s and a 1,25% — a low ratio by bank applied in 2018. These will lender’s perspective, despite the standards, where anything require banks to source funding market having entered a rising below 2% is acceptable. Our for their loan book for a interest rate cycle. credit loss ratio (bad debt as a duration that matches the ❑ The office market re m a i n s function of the total book) is period of the loans, which will the most concerning for less than 0,2%. Most compe- be difficult to achieve in the SA bankers, particularly in certain titors have similar trends. market. This is likely to lead to locations where there is existing However, there are some banks having to shorten the or looming oversupply. For headwinds facing the commer- period of their loans to property example, A grade office space in cial property finance market. investors. That, in turn, may Sandton has vacancy levels of The upcoming implementation also result in nonbank lenders above 11%. Banks are cautious of Basel 3, which will impose increasing their presence in the about funding new office stricter capital and liquidity property finance space as they developments unless they are requirements on banks, is set to will not be subject to the same supported by a strong tenant on present some challenges that strict requirements imposed by a long lease, or they are being will make it increasingly Basel 3. undertaken by a listed fund or difficult and costly for banks to However, the different substantial developer with a lend on a longer-term basis. sectors of the market will not all strong balance sheet. Another

THE PROPERTY HANDBOOK 8 FINANCIAL MAIL July 20 1 5 Financial Mail Page 9 -10/07/15 11:18:35 AM hhh 1193591_E

Property Fund Limited

The formula hasn’t changed

Since listing, the Investec Property Fund has grown 5,1x and delivered consistent dividend growth to shareholders. This growth is no coincidence, it’s a result of our continuous pursuit of quality properties in quality locations with quality tenants.

For more information visit investecpropertyfund.com

Property Fund

Investec Property Fund Limited – 2008/011366/06. This company is listed on the JSE Limited. Managed by Investec Property (Pty) Limited.

1193591 Investec IPF 225x170.indd 1 2015/07/10 10:05 AM Financial Mail Page 10 -10/07/15 12:58:30 PM hhh

signif icant Gautrain routes. In KwaZulu amount of new Natal, the last phase of Pearls of building Umhlanga achieved upwards of d eve l o p m e n t s R1bn in presales. A significant taking place in number of new residential the industrial d eve l o p ments are also being sector. Only a planned for Cape Town’s few new Atlantic Sea Board area. industrial nodes Also, an emerging trend is are being when listed property funds d eve l o p e d , acquire and develop rental including housing portfolios as part of Banks are cautious about Cornubia and their existing asset mix. funding new office developments Ha m m a rs d a l e Previously, only a few listed near Durban. funds included any meaningful contributing factor to the ❑ In the retail market there is a residential components. This concern surrounding the office sense of caution among bankers. trend is not surprising as market is the consolidation of Though a number of major occupancy levels of rental offices by the big corporates in shopping centres have recently housing portfolios in key nodes mega head office campuses in come on stream or will soon be are good, while defaults and key nodes. This is increasing the completed, the reality is that arrears are low. level of vacant space in sur- few opportunities for mega In June 2015, Arrowhead rounding or secondary nodes. retail projects remain. In the listed SA’s first dedicated ❑ The industrial market has major cities, there are potential residential real estate invest- had positive growth over the opportunities to build new ment trust on the JSE, Indlu- past few years, with one of the regional malls in areas such as Place Properties. More are main reasons being the drive Kempton Park near OR Tambo bound to follow. There is also a for efficiency and scale in international airport in Gauteng likelihood of a dedic a te d logistics and distribution among and in the Table View/Blouberg student accommodation fund retailers. About four years ago a area in Cape Town. coming to market soon. 50 000 m² warehouse was Selective opportunities still Though the market for considered substantial. Now remain in niche retail centres, residential developments many of these facilities are many of which are comple - should stay strong until at least more than 100 000 m². The mentary to regional malls, 2017/2018, it is important to market has also been fuelled by townships and rural areas. But remember the lessons learnt other balance sheet trans- these are only viable provided a f te r the global financial crisis. actions, such as the recent sale they are underpinned by real We now know what challenges and leaseback deals by major economic growth and solid can arise when mega residential industrialists MacSteel and retail fundamentals. developments are launched and Aveng looking to refinance their ❑ The residential market is the the economy unexpectedly owner-occupied property hot property sector at the turns. To manage potential risk, p o r t fo l i o s . moment. Several substantial it’s critical to consider the There has been substantial new high-rise sectional-title financial substance and track development activity in the residential developments are record of the developer as well Waterfall City node around the coming to the market in areas as the period and phasing of a Mall of Africa, which is under such as Sandton and Rosebank new residential project. construction near Midrand by in Gauteng. These are driven by Robin Lockhart-Ross JSE-listed Attacq. However, proximity to work, ease of Nedbank Property Finance there is generally not a interaction and the expanded managing executive

THE PROPERTY HANDBOOK 10 FINANCIAL MAIL July 20 1 5 Financial Mail Page 11 -10/07/15 11:19:19 AM hhh

ADVERTORIAL

OLD MUTUAL PROPERTY – A LEADER IN SA PROPERTY DEVELOPMENT

OLD MUTUAL has been a leading developer of property over the last 40 years, responsible for landmark shopping centres, industrial parks and major office blocks in South Africa’s key cities. Old Mutual Property continues to be a leader in property development in these three sectors, and in the last three years alone has completed or is in the process of completing R6 billion in both greenfield and brownfield projects across its portfolio totaling in excess of 200 000 square metres. These projects have enhanced the yield and value of the portfolio to the benefit Old Mutual’s policyholders.

RETAIL Old Mutual has been a pioneer in the development of leading Responsible Environmental Management is a key pillar of Old Mutual’s shopping centres across South Africa overseeing, from a greenfield strategic imperatives, and Old Mutual Property continues to be a basis, the construction of some of the country’s leading centres trailblazer when it comes to green building initiatives. The Portside including Menlyn, Gateway and Cavendish Square. We continue to development has been recognised as the only high-rise building in be involved in such developments in Menlyn, The Zone and Vincent South Africa with a Green 5 Green Star rating for both Design and Park amongst others and have been at the forefront of trends in retail Building achievement in this space, while the retrofitting initiatives centres, such as focusing on leisure and entertainment, introduction across the Old Mutual Property portfolio have resulted in over of international tenants and sustainability. Focusing on sustainability, R150 million of savings over the last 5 years from initiatives such as in particular, has saved in excess of R150million in electricity in its LED lighting and air conditioning controls. top three centres alone over the last five years. Old Mutual prides itself on sustainability INDUSTRIAL and innovation with sustainability being Old Mutual is a long-standing leader in industrial investment, owning a key feature in Old Mutual’s investment industrial parks in Cape Town, Johannesburg, Pretoria and KwaZulu approach. The Portside building, a case in point, is one of our most noteworthy Natal. It has expanded this portfolio with new developments in green building which showcases and Cape Town and is progressing with projects in both Gauteng and includes innovation such as: KwaZulu Natal. • High performance building facade OFFICES designed for disassembly, reuse Old Mutual has been behind the development of iconic buildings for key and recycling tenants across the country, including KPMG’s head office in Parktown, • Over 95% high efficient LED Lighting Johannesburg, the Portside skyscraper in Cape Town and the new – Portside is the first building in SA to Old Mutual Head Office in Sandton. All of these buildings are boast LED lights to all parking areas leading examples of design and sustainability. as well as the offices • Water recycling using Rainwater and Portside, for example, has achieved a 5 Star Green Star Office v1 Greywater harvesting AS-BUILT certification by the Green Building Council of South Africa, • Electric vehicle charging points to making it the only high-rise building in South Africa to be 5 Star Green promote the use of electric cars Star rated. We also aim to obtain a 5 Star Green Star rating for the new • Bicycle racks, showers and lockers Old Mutual headquarters office in Sandton. These offices include have inside the building, and cutting-edge sustainability measures for the benefits of tenants and community cycle racks on the street the broader community. to encourage non-motorised transport. DOING THINGS RIGHT GREEN BUILDING TOOLS SPONSORSHIP Leading the way to ensure a transformed and sustainable future is a Old Mutual Property is also a sponsor of the Green Building Council’s significant driver for our business. We believe in doing good while Socio-Economic Category Rating Tool, a global first in the green doing good work. This includes limiting the negative impact our building arena. This tool seeks to recognise the role that property business has on the environment and capitalising on the positive effect development can play in economic upliftment by considering the transformation brings to our industry. We are constantly challenging main impact levers of job creation, equity, economic opportunity, ourselves to improve and retain our leadership status. transfer of knowledge and skills, community benefit, safety and health.

Old Mutual Property (Pty) Ltd is a Licensed Financial Services Provider. Financial Mail Page 12-13 -10/07/15 12:59:06 PM

CHAPTER 2 Investors who hold major road networks in the upgrades for investors — significant assets that fall into northern provinces and especially in areas that have a these categories should be Lanseria — outperforming the shortage of vacant land. thinking about ways of either southern and western nodes. In summary, the overall Offices & industrial: Investors face attracting new tenants or Maxi-units allow businesses to market is certainly one that retaining existing ones to avoid consolidate storage and favours tenants. Negligible GDP new challenges being left with significant centrally locate their and employment growth — vacancies in their portfolios. distribution activities, while made worse by productivity This could, of course, be smaller midi and mini units and efficiency concerns achieved by simply reducing struggle with the weaker (load-shedding) — do not bode t is fair to say that the SA leaner, more multiskilled real estate demand will show rent. But innovative ideas could performance of SMMEs in the well for the foreseeable future office and industrial market workforce. This has boosted the significant change. involve offering tenants other current economic climate. when it comes to the real estate performance mirrors (or use of technology and Taking a closer look at the incentives, such as re n t -f re e In essence, what we are market. The next few quarters Imaybe even slightly lags) the prompted business consoli- office sector, the overall periods and higher tenant seeing in the market is a will quite likely be characte ri - general outlook of the economy. dation across the economy. For vacancy rate in Johannesburg installation allowances, which “re p l a ce m e n t ” of existing stock sed by a declining development And the picture is far from rosy. example, UTI and Cell C — b ot h showed a marginal increase to will not affect portfolio pipeline, slowing demand “Slow growth, load-shedding, with head offices in Waterfall 11,9% in the first quarter of 2015, value. The majority of and tenant movement, as unemployment, lack of political Estate in Midrand — have been up from 11,3% a year before. new developments are well as plateauing or even l e a d e rs h i p” are common able to downsize their office However, for newer premium nonspeculative in nature, Logistics and distribution sliding rental rates in phrases that people use when and industrial accommodation (P) grade buildings, the and many of these h ave businesses account for a older or less efficient describing the SA economy. to develop a more profitable comparable rate was just 4,8%, been commissioned for greater proportion of activity buildings. Investors As the accompanying business model. having declined from 7,6%. tenants who are moving would be wise to fo c u s graphic shows, employment Technology is supporting a Grade P stock has had a out of older B and A on their portfolios to mostly outperformed GDP prior paperless work environment in stronger 2,8% year-on-year rise grade buildings. ensure that they are to 2008, boosted partly by the office; industry is benefiting in rental rates to R185/m² in the Though overall offering their tenants preparations for the 2010 soccer from mechanisation; and the first quarter of 2015, almost vacancies have increased what they want. World Cup, as well as the rise in retail sector is gaining from double the rate of grade A and B and rental rates have Currently, tenants a re consumption growth during self-service options and online buildings. Tenants are showing remained flat in the spoilt for choice and it is those years. But the decline in shopping. Hence, even besides a strong preference for the industrial market, more likely that if you lose employment was worse than the weaker economic outlook, amenities in these buildings, than 200 000 m² of them now, you will that of GDP, and it has failed to there are signs suggesting that some of which integrate green industrial property will struggle to fill your recover in line with GDP. double-digit employment energy, which allow for be developed by 2016, vacancies for some time. There are a number of growth may be something of long-term savings on opera- most of which is It is hoped that it will underlying factors leading to the past. And with that, the tional costs, while avoiding nonspeculative in nature. not take too long for the this jobless growth. The factors that drive commercial electricity supply problems For the industrial sector, to more modern requirements. economy to recover. But to structure of the SA economy associated with Eskom. logistics and distribution And newer stock is expected to assume that this would have a has slowly shifted away from a ANNUAL GROWTH P grade stock is remaining businesses are accounting for a outperform these older similar effect on commercial producer driven economy. Th e resilient in the face of a tougher much greater proportion of buildings. Hence developers real estate demand would be % mining and manufacturing GDP at market prices economic environment, but this activity, partly reflecting the who are invested in new misleading. Modern 25 sectors account for a smaller Employment is happening at the cost of older structural change in the developments are now safer advancements and interior share of GDP than sectors such 20 B and even newer A grade economy, with manufacturing than those more heavily space design point to a as financial and business 15 buildings. The “d e m a n d” we are slowing under the pressure of invested in older stock, even downward trend in space to services, which employ a lower 10 seeing in the office market cheaper imports. with the expected oversupply in personnel ratios in the future.

number of workers with a 5 could be described as tenant Location to major road and both the office and industrial And the ability of investors to much higher skills base. churn rather than real growth. rail networks is a big advantage sectors. Over time, one is likely move with the changing tide 0 Another factor supporting This has potentially dire in the sector, with Gauteng’s to see high vacancies at low will determine if they sink or -5 jobless growth is that business implications for lower-grade eastern nodes close to OR rental rates in older units, sw i m . Craig Hean

2011

2013

2012

2001 2010 2014

2007

2003 2002

2005 2006 2009

2000 is seeking ways to improve 2004 2008 buildings or those in secondary Tambo airport and the northern which could present oppor- Jones Lang LaSalle efficiencies by operating a SOURCE: SAPOA a re a s . nodes — such as those close to tunities for refurbishments and SA country head

THE PROPERTY HANDBOOK 12 13 FINANCIAL MAIL July 20 1 5 Financial Mail Page 14 -10/07/15 12:59:19 PM hhh

CHAPTER 3 Retail: Weigh the risks properly

here are three key issues Retail shopping centres cing technology to remain affecting the investment face more competition relevant to an increasingly decisions of SA retail tech-savvy shopper. They are Tproperty players. These are the using technology to their dual proliferation of shopping benefit — engaging with centres and the continuous shoppers to keep them coming rollout of new retail outlets, back while luring new ones, which could lead to over- and to gain insights into their saturation; the advent of online shopping habits to better cater shopping (e-tailing) and how to their needs. this will affect physical retailers; Malls globally are facing and the expansion of malls and increased competition from retailers across the co n t i n e n t . their online equivalents and this This high concentration of is forcing them to up their game new retail space has led to to prevent online buying from heightened competition and encroaching on their turf. SA pressure on existing shopping malls are not immune. centres. As a result, mall owners ment returns are stimulated. However, we believe there are being forced to continually There is also a great social will always be a place for invest in upgrading their benefit — key in job creation — physical retail. In SA, a visit to existing centres to enhance the leading to reduced commuting the mall is part of our social overall shopping experience. which provides more dispo- fabric. We don’t visit shopping However, super-regional malls sable income for co m mu n i t i e s . centres just to buy but to also that offer critical mass and A recent local survey shows socialise and relax. So we don’t comparative shopping continue that 95% of local shoppers still think online shopping will to perform well despite the prefer to go to an actual bricks significantly reduce demand for economic downturns. and mortar shop. However, the retail space, but it will influence Though there is a high Internet has changed the way the use of space. It will place concentration of malls in some we shop — for example, 73% increased pressure on shopping urban areas, we believe there use the Net to compare prices. centre owners to enhance the are still investment oppor- In the UK, online retail now overall shopping experience by tunities for retail development makes up almost 15% of total providing other value-adds in in underserviced a re a s , retail sales. their malls. So, more attention especially in former townships Though local online will be paid to the entertain - that are heavily populated (we shopping habits are years ment aspect that a mall offers. recently broke ground in behind these levels, at less than SA property developers and Botshabelo in the Free State, our a percent (0,8%) of total retail retailers are making a major first greenfield township sales, local shopping centres mark on the continent, d eve l o p ment). have taken note of the online especially in the retail sector of In this segment everyone shopping phenomenon in many countries such as Uganda, wins — the demands of these overseas markets. Their reaction Ghana and Kenya. Stanlib is areas are satisfied and invest- is to find new ways of embra- also entering Africa through its

THE PROPERTY HANDBOOK 14 FINANCIAL MAIL July 20 1 5 Financial Mail Page 15 -10/07/15 11:19:55 AM hhh CHARLIE BRAVO #445-15 CHARLIE BRAVO

NEED BETTER SPACE?

If you need less space, more space or just better space, contact Redefine Properties today. We have the place you need to work smarter. To view our portfolio, call 0860DEFINE or go to www.redefine.co.za.

OFFICE | INDUSTRIAL | RETAIL We’re not landlords. We’re people.

Job 445-15 FM Prop Handbook 225x170mm.indd 1 2015/07/08 12:49 PM Financial Mail Page 16-17 -10/07/15 01:01:01 PM

Africa Direct Property Develop- CHAPTER 4 is a total rejection of the asset SUPPLY & DEMAND — experience as well as the NATIONAL TOTAL ment Fund. Though still in the class. co n te m porary level of the tech- Supply fundraising stage, the f u n d’s Investment was accelerated Rooms nology and general environ- Demand focus will be on investing in during peak performance 70 000 ment of the hotel are critical quality retail developments. Hotels: Still an asset periods such as 2007-2008, 65 000 decision-making points. The retail sector is expected resulting in excess capacity 60 000 There is an increasing 55 000 to be the main driver of class that is through accelerated develop- 50 000 disparity between the perfor- economic growth in Africa ment. But in the resultant 45 000 mance of preferred or popular because of the concurrent down-cycle investment was 40 000 hotels and poor-quality ones. As growth of the continent’s m i s u n d e rs to o d totally curtailed, creating this 35 000 more new hotels come onto the

emerging middle class. Many of cyclical turbulence that gives 30 000 market, there will be a natural

2011

1997

1993

2013

1996

1995

1999

2012

1994

1998

2010 2001

the retail-specific opportunities the overall perception of an 2014 attrition of older, poor-quality

2007

2003

2002

2009 2006 2005

2000

2004 2008 will link back to SA retailers. unstable asset class. SOURCE: PAM GOLDING HOSPITALITY products. And as the asset class The Liberty Property aving come through its SA has just under 67 000 rooms However, to accurately d eve l o p s , due cognisance and Portfolio, whose retail portfolio worst trading cycle in in the formal hotel sector. Data evaluate the performance of also assumed a capital invest- understanding will need to be includes super-regional malls recent times — f ro m analysed over a period of 21 hotels, we have undertaken a ment of R40m, a yield of 8% gleaned from performance such as Sandton City and Hthe last quarter of 2008 to the years reflects that growth in longer-term comparative and a capitalisation rate of 12% orientated attrition. Eastgate, is one of the biggest third quarter of 2011 — the SA capacity was fairly consistent analysis between a hotel (Rode Report reflects an average The understanding of hotels owners of retail space in SA. hotel industry is now showing over the period 1998-2008, with investment in a prime market capitalisation rate of 13% in as an asset class is nonetheless Retail offers a compelling signs of sustainable growth. And a substantial spurt in 2009/2010. and a prime commercial invest- 2002 in Cape Town). Towards changing as investors and l i s te d investment proposition because though occupancy rates are still Comparing the current inven- ment based at an Ebitda level. achieving a reflective Ebitda, an property funds are starting to of its ability to monetise invest- below the high levels that were tory to 2008 levels shows that For the hotel case study, a operating cost of 15% has been take a longer-term view on ment through long-term quality achieved in 2007, the effect on there has been an overall benchmarked three-star hotel factored and a fixed escalation investment. This applies rentals. And demand for retail supply/demand needs to be increase of 20%, with most of in Cape Town was used. We of 10%/annum has been especially to hotels as part of space across Africa is still out- analysed to fully understand the the increased rooms brought on have taken the 37% historically applied. A vacancy level of 5% mixed-use developments. stripping supply by far. current state of the industry. to the market in 2009/2010. established average Ebitda has been assumed. Cyclical and As is the case in Europe, the As exciting as it is to The accompanying graph Supply has stabilised with margin over an extended period planned refurbishments are Middle East and the US, hotels recognise investment oppor- (see page 17), extracted from our marginal new inventory from 2002-2018 based on the excluded in both computations. in SA have the potential to tunities in Africa, one needs to empirical database, shows that entering the market since 2010. empirically published STR Interestingly, the hotel become a critical balancing be cognisant of the risks. However, the demand data HotelBenchmark Survey Revpar generates 17,7% higher accu- component, bringing variability Investors should implement shows the effects of the global (revenue per available room). mulated Ebitda over the period. to an overall fixed return intensive due diligence to pin- financial crisis in the last Revpar was increased by 10% This asserts the need to evaluate p o r t fo l i o . Kamil Abdul-Karrim point real risks and identify quarter of 2008 and the sub- per year for the projected hotel investments over the Pam Golding Tourism & specific actions to manage and sequent recession in 2009, period of 2015-2018, based on longer period. Hospitality Consulting MD mitigate those appropriately. compounded by the accele - the current performance of the It is clear that the lack of Relationships are key, rated increase in supply in industry and the fairly stable longer-term understanding of INVESTMENT especially to gain a deeper 2009/2010. But by 2012 supply environment. the performance of hotels as an PERFORMANCE COMPARED u n d e rstanding of each region. demand had stabilised to 2007 The actual capital cost for a asset class is a key driver of To ensure the success of a levels and has since grown three-star hotel in 2002 was accelerated inventory increases, Ebitda (Rm) 14 Commercial Ebitda project, partnering locals with a over the past two years. R400 000/room, according to which to a great extent create Hotel Ebitda vested interest in the success of It is this cyclicality of the Pam Golding Tourism & these artificial down-cycles. 12 the project is essential. And no- industry that creates the Hospitality Consulting’s Hotel guests are also becoming 10

where is this more important negative perceptions often research. For the purpose of the more discerning. And while 8

than in ensuring land tenure is associated with hotels as an comparative analysis we have location remains a substantial 6 secure and that there is true asset class. Investment is structured the case study on a driver in the positioning of a 4 t ra n s fo r m a t i o n . Amelia Beattie & considered positive by 100-room hotel, which brings hotel, it is not the only factor 2

Alex Phakathi, Stanlib Direct investors and funders during the capital investment to R40m. that determines guest prefer-

2011

2017

2013

2012

2016 2015

2010

2014

2018

2007

2003

2002

2009 2006 2005 2004 Property Investments head and There is a need to evaluate hotel u p - cy c l e s . But when the For the prime commercial ence. The quality of the product, 2008 fund manager, respectively investments over the longer period sector hits a down-cycle there (offices) investment we have the wow factor of the SOURCE: PAM GOLDING HOSPITALITY

THE PROPERTY HANDBOOK 16 17 FINANCIAL MAIL July 20 1 5 Financial Mail Page 18-19 -10/07/15 01:01:21 PM

CHAPTER 5 rentals in our current data set. rental growth. income. Currently, the average Yield represents the rental or Our data is confined to tenant is committed to about income return a property tenants who use an estate 36% of reported income. As generates relative to its current agency as opposed to renting shocking as it sounds, this ratio Buy-to-let: Tenant selection more value, and refers to a given directly from a landlord. As the is actually in decline from a point in time. This means that largest processor of residential high of 45% in December 2014. critical than ever over time, your yield is likely to letting transactions in SA, Pay- When these items are improve as the capital cost of Prop has access to the actual combined with calculated the property remains fixed but transactional records relating to income tax as per the SA the rental increases. On that more than 70 000 active leases. Revenue Service tax tables, one A’s current national Festive season spending appears to have a basis, the current gross yield is This means that we are likely can better understand an average rental stands at significant “hangover ” effect in February just over 7% and has been in excluding much of the informal average consumer’s cash flow. R6 354 and has been on a that region for the past year. and lower-value rental markets Granted, some households may Ssteady upward curve since The net yield represents the — and therefore our average have a second income but the breaching the R6 000 mark a actual money received by the income figures are likely to be picture still highlights the year ago. owner after all costs (agent higher than those of the average financial strain that the average However, when looking at the commission, repairs, rates & South African. tenant is under, leaving just year-on-year rate at which taxes, and so on) have been Using an advanced under R9 000 after formal average rentals increase (for deducted. Based on the actual algorithm, we are able to finance commitments are paid. instance, April 2015 versus April monies paid to owners, the combine various aspects of an It is becoming clear that 2014), interesting underlying current net yield for an average i n d iv i d u a l’s profile into a tenants are under increasing trends emerge. The first and property is just under 5%. As financial and behavioural risk financial pressure. For most obvious relates to the 2010 rentals have been growing at a rating. When we isolate the buy-to-let investors this means soccer World Cup fever that In essence, the cyclical fall in the below-R7 500 price fairly steady pace over the past percentage of all tenants who that assessing the nonpayment gripped SA at the time and swings appear to be a case of category. However, the fastest year, the only conclusion one fall into the high and very risk that a tenant poses is one of caused a spike (and quick the market trying to find a growing price bands are those can make is that the cost of high-risk categories over time, the most important decisions to subsequent decrease) in rental balance between what tenants that are above this level — with owning and maintaining a the data shows us that festive make. Considering that each growth rates in June 2010. More can pay and what landlords are rentals above R15 000 growing at property is increasing at a faster season spending appears to month of nonpayment drops importantly, since then the demanding. As the adage goes, 36%; the R10 000-R15 000 price rate than the rate at which have a significant “h a n gove r ” the landlord’s already meagre market has fluctuated between tenants will pay as much as band increasing at 30%; and the landlords are increasing rental effect in February. returns by roughly half a six to 12-month cycles of they can afford and landlords R7 500-R10 000 band growing at va l u e s . Another interesting ratio to percentage point, the financial increasing and decreasing will ask for as much as they can 22% over the past quarter. This drop in net yields over better understand a tenant’s argument for better tenant growth. In each cycle, rental get. But this balance is both A lot has been written in the the last quarter could explain risk profile is the value of debt selection is now more relevant growth rates reached an 8%-10% elusive and dynamic. On a media recently about high-end why landlords have again repayment a tenant is than ever. Louw Liebenberg ceiling, dropping back to 4%-5% sobering note, the long-term rentals, with astounding indivi- started to increase the rate of committed to versus declared PayProp CEO before turning upwards again. trendline is not as attractive as dual rental amounts being used one might have hoped. The to illustrate the extent to which LONG-TERM RENTAL NATIONAL YIELDS INCOME & EXPENDITURE OF overall tendency is one of rental luxury rentals are prevalent in GROWTH TREND THE AVERAGE SA TENANT % The 2010 soccer increases decreasing steadily SA . Net yield R % 7,5 Word Cup caused a over time. There is a definite upward Gross yield 35 000 16 % change 7,0 rental growth spike 30 000 In the latest quarter it seems trend in the percentage of 14 Trend line 7,1 7,1 7,0 7,0 6,5 as if we have hit an upward rentals that fall into the R15 000 12 25 000 10 540 6,0 turning point at last — l a n d l o rd s and above category over time, 10 20 000 8 5,5 32 244 6 263 have been trying to push but it is important to put this 5,2 15 000 6 5,0 6 517 through higher increases for the result into context. Even as the 5,1 10 000 4 4,5 4,9 4,9 5 000 past six months, but tenant percentage of rentals in this 2 4,0 8 924 0 payment risk appears to have category has more than doubled 0 Q2 Q3 Q4 Q1 2014 2015 Income Debt Rent Tax Remaining had a dampening effect on that. over the past four years, they 2010 2011 2012 2013 2014 15 repayments Currently, 77,5% of all rentals still make up only 4,1% of all SOURCE: PAYPROP SOURCE: PAYPROP SOURCE: PAYPROP

THE PROPERTY HANDBOOK 18 19 FINANCIAL MAIL July 20 1 5 Financial Mail Page 20 -10/07/15 01:01:32 PM hhh

CHAPTER 6 Residential: Power crisis a factor

ouse price inflation price inflation in the next tier of ability to increase their earnings should end the year at the more affordable market to support a higher mortgage. around 5,8% due to the picking up, indicating some Moving up the tiers, the Hweakening GDP growth trend positive spillover from the ability to increase earnings over the past four years. buoyant lowest tier segment. becomes more dependent on The total value of SA’s As the number of available the success of the macro- residential property market is properties decreases when economy. So, it is crucial that currently at R4,3 trillion, which moving up the tiers, you only government creates an environ- exceeds SA’s total annual GDP need a proportion of home ment in which businesses are and makes it a critical part of owners in the lower tiers to given every opportunity to the economy. SA’s housing “u p g ra d e” in order to increase s u cce e d . This means govern- market comprises about 6,1m the demand to support price ment should focus on fixing the individual residential properties, inflation in these higher tiers. electricity supply crisis, up- of which nearly 20% are valued This ability to upgrade is set by grading failing infrastructure, at more than R3m. the additional income available curbing the destructive effects On the flip side, 55% of all to buyers, which will be directly of industrial action and establi - residential properties are worth influenced by the interest rate shing a political environment less than R500 000, indicating on their mortgage, as well as the that invites foreign direct that we are dealing with a i nve s t ment to enable small seriously dispersed There are variables that make it and medium businesses to property market. This large possible for house owners to upgrade s u cce e d . affordable market has a If government manages significantly lower mort- to address these issues, we gage bond penetration rate could see house price than the rest of the m a rke t . inflation of 7,3% for 2015. If This has driven banks to we, as a country, fail to develop innovative ways to address these, it is likely capture market share in a that national house growth segment that they are will drop to a meagre 3,5% traditionally unfamiliar with. HOUSE PRICE GROWTH in 2015 — lower than the Over the past couple of years TREND projected CPI figures — we ’ve seen the low-value Low value (

growth, with an increased 10 currently buoyant low-value demand for formal housing market, resulting in further from buyers who were 0 house price deflation in 2016. previously renting or staying in -10 Paul-Roux de Kock 15 informal shelters. Over the past 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Lightstone residential year we’ve also seen house SOURCE: LIGHTSTONE research head

THE PROPERTY HANDBOOK 20 FINANCIAL MAIL July 20 1 5 Financial Mail Page 21 -10/07/15 11:20:33 AM hhh Financial Mail Page 22 -10/07/15 01:01:46 PM hhh

CHAPTER 7 African growth story: Real estate markets still undersupplied

hough considerable have recently been made. tion and economic growth opportunities still exist Foreign investment in the coupled with foreign companies in Africa, investors often natural resource sectors of these establishing operations in these Tmake the mistake of thinking of economies is acting as a catalyst territories. This is providing the continent as a single, homo- for economic development, opportunities for investors geneous jurisdiction. However, boosting demand for quality wanting exposure to property it’s critical to identify the office, retail and residential d eve l o p ments on the continent. countries and sectors that offer property space. Though commodity prices, the best opportunities and Countries that are realising oil in particular, have dropped, match them with their own opportunities for real estate resulting in economic growth expertise. Also, investors need investment include Nigeria, forecasts being revised down- to find the right local partners Ghana, Kenya, Angola, Mozam- wards in many jurisdictions, to help them navigate the risks bique, Zambia and Namibia. there is still demand for quality and complexities of doing Rapid urbanisation is boosting real estate assets due to the business on the continent. consumer spending in these enormous undersupply. The demand for quality countries, and this is driving Ni ge r i a’s population of about property assets on the continent demand for quality real estate 170m people makes it one of is evident in countries where assets. This urbanisation is in A f r i c a’s premier destinations for natural resource discoveries response to sustained popula - property developments. Though retail and office property AFRICA PRIME RENT RANKING dominate much of the interest Rental Offices Retail Industrial Residential in Nigeria’s property sector, ranking* (US$/m2 (US$/m2 (US$/m2 (US$/month, interest in the industrial /month) /month) /month) 4 bed exec house) property landscape should 1. Luanda, Angola 150,00 120,00 21,00 25 000 2. Lagos, Nigeria 85,00 80,00 8,00 8 000 begin to increase. This will be 3. Abuja, Nigeria 60,00 72,00 12,00 8 500 despite Nigeria’s well docu- 4. Malabo, Equatorial Guinea 40,00 40,00 18,00 8 000 mented power and transport 5. Libreville, Gabon 40,00 50,00 8,00 8 000 infrastructure constraints and 6. Kinshasa, DR Congo 30,00 30,00 8,00 8 000 7. Cairo, Egypt 35,00 100,00 3,50 3 500 the effect of a lower oil price. 8. Algiers, Algeria 37,50 37,50 12,00 5 000 Ni ge r i a’s commercial hub of 9. Maputo, Mozambique 37,50 40,00 10,00 6 000 Lagos, which has a population 10. Accra, Ghana 37,50 42,50 10,00 5 000 of about 21m, has just 54 000 m² 11. N’Djamena, Chad 40,00 40,00 6,00 7 000 of high-end retail space in the 12. Johannesburg, SA 22,00 60,00 7,00 4 500 13. Cape Town, SA 18,00 60,00 5,00 5 000 form of the Palms and Ikeja 14. Port Louis, Mauritius 34,00 40,00 7,00 3 000 shopping malls, while Abuja has 15. Abidjan, Côte d’Ivoire 28,00 32,00 8,00 3 000 33 388 m² for its almost 3m 16. Nairobi, Kenya 21,00 48,00 4,20 4 720 people, according to Standard 17. Addis Ababa, Ethiopia 20,00 25,00 6,00 6 000 Bank estimates. Nigeria’s West * Ranking based on a weighted aggregate of rents across the four sectors SOURCE: KNIGHT FRANK RESEARCH African counterpart, Ghana, is

THE PROPERTY HANDBOOK 22 FINANCIAL MAIL July 20 1 5 Financial Mail Page 23 -10/07/15 11:21:08 AM hhh

across Quality shopping Africa centres

Property investment excellence www.hyprop.co.za Financial Mail Page 24 -10/07/15 01:01:59 PM hhh

beset with similar constraints, in 2014, the perceived risk of development over time. That with the capital city of Accra foreign currency lending will provide natural demand for having just 47 300 m² of quality remains relatively high. This office, residential and retail retail space for a population of highlights the fact that investors space in outlying areas as well about 4m people, with probably need to be aware that rapid as the capital city of Maputo, another 12 000 m² of smaller changes in policy can materially where many foreign entities are centres being operational. affect the risk environment and setting up head offices. Ghana, however, faces some their return on investments. Standard Bank’s presence in challenges largely related to the The Portuguese speaking 20 African countries, including regulatory environment. The countries of Mozambique and SA, means it is positioned to Bank of Ghana introduced Angola are prime examples of understand the dynamics of measures in 2014 to curb the where local knowledge and doing business across the extension of foreign currency expertise are paramount in continent and is able to offer a loans and also the charging of unlocking the potential that broad range of banking rent in foreign currency in an exists in these economies. solutions to clients across the attempt to bolster the nation’s The natural gas finds north co n t i n e n t . Gary Garrett currency, the cedi. Despite of Mozambique will unlock Standard Bank Real Estate reversing these regulations later infrastructure and property finance head Foreign investment flow on the rise

Africa is no longer viewed as a include One Airport Square in rest of the continent. A recent region of long-term economic Accra, a landmark office entrant is the Momentum distress, but it is increasingly building that is nearing Africa Real Estate Fund, which seen as a continent of co m p l e t i o n . was launched by Momentum opportunity. As such, a more Along with these inter- Global Investment diverse range of international national investors, we have Management in conjunction property investors are also noted that SA investors with Eris Property Group in pursuing opportunities in have become increasingly January 2015. The fund has a Africa. China’s importance as a active in other African focus on Ghana, Kenya, source of investment into markets. Over the past two Nigeria, Mozambique, Rwanda Africa is well publicised, but years, a number of SA-based and Zambia. Investors such as there is also a growing interest funds have raised significant these will develop a wave of from the rest of Asia and the volumes of capital to invest in modern investable assets that Middle East. real estate projects across the will do much to improve the Investment by Western sub-Saharan region. A size and maturity of African property funds into Africa is prominent example is RMB real estate markets over the limited, though the UK-based Westport, affiliated to Rand next few years. The need for emerging market specialist Merchant Bank, which is high-quality commercial and Actis has been a trailblazer in involved in office and retail residential real estate will only Africa since establishing its projects in Angola, Ghana and increase as the economies of first sub-Saharan property Ni ge r i a . sub-Saharan Africa grow in fund in 2006. Actis closed its Along with RMB Westport, importance on the global stage. second African real estate fund Sanlam, Atterbury, Stanlib and Tony Galetti, Galetti Knight in 2012, and its current projects Resilient are also targeting the Frank joint CEO and cofounder

THE PROPERTY HANDBOOK 24 FINANCIAL MAIL July 20 1 5 Financial Mail Page 25 -10/07/15 11:21:40 AM hhh

cliffedekkerhofmeyr.com Cliffe Dekker Hofmeyr is a member of DLA Piper Group, an alliance of legal practices.

TLG6470

6470 FM PROPERTY HANDBOOK TURNIGN HEADS AD.indd 1 6/29/15 11:37 AM Financial Mail Page 26 -10/07/15 01:02:27 PM hhh

CHAPTER 8 Offshore housing opportunities

outh Africans looking to real estate option, the govern- government, it had more than invest in offshore ment requires that applicants 400 applications for its property are increasingly make an investment in Individual Investor Programme Sconsidering a model of invest- designated, officially approved by January 2015. ment that would also gain them real estate developments with a Malta allows people to a second passport: a residence value of at least US$400 000 become citizens within 12 or citizenship-by-investment plus the payment of govern- months if they make a p ro g ra m m e . ment fees, other fees and taxes. €650 000 contribution to a Countries running these Investors holding a Kittitian development fund and lease a programmes gain by enticing passport gain visa-free travel to property or buy a property for high net-worth individuals into 132 countries and have citizen- at least €350 0 0 0, among other making hard currency invest- ship in a country that has no tax requirements. New residents ments into local real estate to on income or capital gains. may be able to benefit from an help boost their struggling Another twin-island nation advantageous tax regime. Those economies. Apart from the in the Caribbean, Antigua & qualifying are subject to a tax financial investment oppor- Barbuda, allows full legal rate of only 15% on earnings tunities, the key benefit of citizenship to be granted based derived from outside Malta. obtaining citizenship or on an investment in govern- Elsewhere in Europe, 1 93 6 residency in European countries ment approved real estate. The “golden visas” were issued such as Malta or Portugal, for application procedure takes through Portugal’s residency instance, is visa-free travel in about three months from start programme in its first 12 the European Union (EU) and to finish. Passport holders from months of operation. Foreign Schengen area countries. Antigua & Barbuda gain visa- investors from outside the EU The Caribbean’s St Kitts and free travel to more than 125 are able to acquire a residence Nevis has been running a countries, including Canada, the permit through a qualifying c i t i z e n s h i p - by -i nve s t m e n t US and most European investment, which includes the programme for more than 30 countries. An investment of at acquisition of real estate. years. But it was only after 2006 least $400 000 in real estate is The mobility of wealthy that the programme took off. To required. Residents benefit from investors is starting to have a qualify for citizenship under the no capital gains tax or estate positive effect on property taxes and are not prices in some of the markets taxed on their world- that offer residency or citizen- wide income, but ship schemes. The Fi n a n c i a l only on income Ti m e s recently reported that sourced within property prices in Portugal were Antigua & Barbuda. up 5,9% for the second quarter In 2014, Henley & of 2014 and that the proportion Partners helped of foreign investment in real Antigua & Barbuda develop a plan fo r estate surged from 45% in 2012 offers enticing Malta, the smallest to 70% in 2013. Andrew Taylor options for buyers member of the EU. Henley & Partners group According to its v i ce - c h a i r m a n

THE PROPERTY HANDBOOK 26 FINANCIAL MAIL July 20 1 5 Financial Mail Page 27 -10/07/15 11:22:15 AM hhh

05 JULY 2015 RSA

05 JULY 2015

d E RSA PROPERTYThe & LIFESTYL Durban dream A cosmopolitan lifestyle in one city N Turn to page 08 for more

Experience the live-wire energy of Jozi Turn to page 10 for more

What’s ON SHOW What’s ON SHOW this weekend? this weekend? – Get the full list at – Get the full list at yourneighbourhood.co.za yourneighbourhood.co.za

+ +

The largest property The largest property marketplace in SMART METERS marketplace in 19 South Africa South Africa

17 SEMIGRATING TO DURBS DURBAN 14 HOME LOAN MARKET UPDATE 04 SPOTLIGHT: HOME LOAN MARKET UPDATE

05 Property now in the

Neighbourhood PROPERTY & LIFESTYLE Financial Mail Page 28 -10/07/15 01:02:40 PM hhh

CHAPTER 9 Global Reits a good rand hedge bet

nvestors who feared a in the US and the UK. Vacancies further debt downgrade for have compressed to single digits SA no doubt breathed a sigh in most markets and office

Iof relief when global rating Roberts Russell rentals have started to grow by agency Fitch announced it double digits in key global cities. would maintain its current Against this backdrop, rating for the country. dividend growth from the Conversations about where global Reit market is likely to be to find the right rand hedge around 5%-7% over the next have resurfaced as SA investors Kundayi Munzara year, way ahead of global search the globe for oppor- inflation which is expected to tunities. Given the high offshore just touch 1%. Reits also still allocations by most of the large have low payout ratios (below asset managers and increased 60% on average) and therefore of f shore investment by local have room to continue showing businesses, SA investors are still dividend growth into the bearish on SA’s short-term index notched up an impressive medium term, even if earnings prospects and a further 21,8% last year alone, which growth should decelerate. potential weakening of the rand. was mainly due to a US bond Global Reits offer an initial Over the past 10 years to the rally that caught most industry forward dividend yield of 4%, end of 2014, global real estate forecasters off guard. which is around 1,7% higher than investment trusts (Reits), which Past returns have benef ited the 2,3% average yield available invest in various property sub- those who enjoyed the addi- from bonds. The long-term sectors across the world, have tional effect of the weaker rand average yield spread between delivered compound US dollar (relative to the dollar) since the bonds and property has been 130 returns of about 8%/year. Reits beginning of 2012. Recent fore- basis points, indicating that Reit have outperformed all other casts project 2,7% global GDP prices may be providing a buffer asset classes over the past growth for 2015, driven mainly against a potential initial 40-50 decade. by the US, the UK and some basis points increase in bond In addition, at a beta of 0,8 Eastern European states (such as rates. The short-term risk to relative to equities, which Romania). Global growth could share prices is the timing and indicates a low sensitivity to be dragged down by developed quantum of interest rate hikes by movements in general equity Europe, Japan and Brics (Brazil, the US Federal Reserve, which share prices, more and more Russia, India, China and SA). will lead to global bond rate former sceptics are becoming After years of deleveraging, normalisation. So investors can convinced that Reits are a the global consumer also expect high single-digit US dollar useful diversifier in a balanced appears in better shape, with returns from global Reits over portfolio. Over the past three retail sales likely to outpace the medium to long term, which years, global Reits, as tracked by inflation at 3%-4%. As the is attractive — irrespective of the Epra/Nareit developed landlord to the global economy, h ow the rand will p e r fo r m . rental index, have delivered property sector fundamentals Kundayi Munzara annualised returns of 12,7%. The have been improving, especially Sesfikile Capital director

THE PROPERTY HANDBOOK 28 FINANCIAL MAIL July 20 1 5 Financial Mail Page 29 -14/07/15 09:53:38 AM hhh

Imagine what you could do with over 4.5 million eyes on your business Effective Measure, South Africa, March 2015

Advertise on the Times Media Online Network to ensure wide reach, targeted audience and measurable results.

VISIT WWW.TIMESMEDIALIVE.CO.ZA OR GET IN TOUCH BELOW

Naeem Imam CAPE Sebastian Krogh JHB OfÁce: +27 11 280 5132 OfÁce: +27 21 488 1796 Email: [email protected] TOWN Email: [email protected]

www.timeslive.co.za | www.sowetanlive.co.za | www.bdlive.co.za | www.Ánancialmail.co.za www.sundayworld.co.za | www.rdm.co.za | www.sportlive.co.za | www.businessdaytv.co.za www.handicaps.co.za | www.sahomeowner.co.za | www.bookslive.co.za | www.heraldlive.co.za www.dispatchlive.co.za | www.thehomechannel.co.za | www.ignitionlive.co.za OUR www.careerjunction.co.za | www.autojunction.co.za | www.propertyjunction.co.za www.timesmedialive.co.za NETWORK Financial Mail Page 30-31 -10/07/15 02:35:38 PM

CHAPTER 10 schemes is encouraging. increase in electricity prices, the office sector, while adding In contrast, the office sector which do not bode well for high-quality retail to the is plagued by an oversupply of inflation. Furthermore, an earnings stream. Growthpoint’s Listed property: Search for income s p a ce , weak demand and a expected increase in interest increasing focus on develop- structural decline in s p a ce rates later this year may also ments will be accretive to net needs. Though industrial space worsen sentiment towards asset value (NAV) — we are expected to continue boasts the lowest vacancy level listed property. particularly excited by (2,6%) among the three There are, however, reasons opportunities at Samrand co m m e rcial property sectors, to be optimistic. Distribution (Midrand) as well as in Bellville landlords are struggling to push growth remains firm and is and the V&A Waterfront in Cape ❑ he listed property sector Dividend growth generally TOTAL RETURN BY rentals higher. This is due to expected to average 8,5% in Town. Interest rate risk is was the star performer beat analysts’ e s t i m a te s , ASSET CLASS te n a n t s’ rising costs of 2015. Foreign interest in SA controlled, with 80% of the debt in SA in 2014. The JSE’s underpinned by generally % o cc u p a t i o n , e-tolls and limited listed property is strong, given h e d ge d . Tproperty index (Sapy) achieved a falling vacancies, improving net 45 Year to date market rental growth as rentals attractive yields. Improving Vu k i l e’s retail exposure is 41,4 40 1 year total return of 26,6%, exceeding property income growth and an 35 for new developments are liquidity could also underpin underappreciated, with key our expectations at the upward revision to guidance. 30 restrained by the stagnation in prices. But it is time for assets, such as East Rand Mall beginning of the year. For the On a weighted average basis, 25 construction costs. investors to become more (50%), performing reasonably 20 f ifth time in the past 10 years, the historic rolled dividend per 15 13,7 Listed property returns will selective in their stock choices well. Though the full acquisition 12,5 12,4 the Sapy’s return surpassed share (DPS) growth was 9,8%. 10 also depend on the perfor- as the performance of indivi- of retail focused Synergy was 5,8 6,1 equities, bonds and cash. ❑ There was increased demand 5 3,0 mance of government bonds. dual counters is likely to unsuccessful, control over the 0 1,5 The sector’s remarkable from investors on the lookout SAPY ALSI ALBI TR STEFI However, the underlying driver become increasingly divergent. management company reduces performance has continued into for any income during a time of SOURCE: BLOOMBERG, COMPANY DATA, of bond yield changes matters. Avior Research’s top picks ( May any potential risk to earnings. 2015, with a first quarter total uncertainty, and new ones who AVIOR CAPITAL MARKETS For example, if the long bond 2015) are Growthpoint Proper- The sale of the asset manage- return of 14%, ahead of other previously ignored the sector on yields increase because the ties, Vukile Property Fund and ment business also improves asset classes. The best per- the grounds of it being illiquid. self-storage business. Also, the economy is stronger, investors Investec Property Fund. visibility into future earnings. forming counters were Fortress ❑ Expectations for short-term listing of another Africa-focused can reasonably expect higher Growthpoint is SA’s largest The company is expected to B (+100%), Rockcastle (+82%), interest rates to rise subsided property fund is on the cards. rents and occupancy, easier and most liquid Reit. Though deliver about 8% growth in Resilient (+61%) and Arrowhead following lower and more stable The key question is whether access to capital and narrower recent dividend growth of 7,5% distributions next year. It is B (+50%). Hospitality was the inflation. the sector is likely to continue debt margins. Alternatively, if is below average, risk to attractively priced at a yield of year’s worst performing stock. SA also performed admirably to outperform other asset higher government bonds are earnings is low given extensive 8,5%. Interest rate risk is New listings such as Safari and against global real estate invest- classes over the next 12 months. primarily the result of diversification. And though the minimal, with 90% of its debt Equites disappointed. ment trust (Reit) markets, out- Economic and employment increasing US treasuries, a broader office market is under h e d ge d . A few factors underpinned performing the UK, developed growth as well as supply and credit downgrade, rising p re s s u re , the risk is mitigated The Investec Property Fund the outstanding performance: Europe and Asia. The US was demand metrics in underlying government debt or above- with long leases and premium management team’s eye for the best performing Reit market, sectors (retail, office and expected inflation, then Reits grade buildings. The acquisition solid acquisitions is its attractive with a 43,2% total return in rand industrial) of the broader are likely to suffer significant of Acucap reduces exposure to fe a t u re . Management is not terms (30,4% in US dollars). property market are the key destruction in capital values. afraid to accept short-term An estimated R50bn of factors that will determine the Global bond yields have DISTRIBUTION GROWTH dilution in lieu of long-term

Russell Roberts Russell equity was raised by the sector performance of the asset class. already risen sharply in April PER ANNUM strength of assets. The portfolio in 2014 to fund mergers, acqui- Despite a slowdown in and May due to increasing global % has an elongated lease expiry 14 DPU growth sitions and new listing activity, trading density growth and inflation, rising oil prices and a Average profile (weighted average of 4,3 12 more than any other year. The deteriorating retailer afford- mild recovery in EU economic years) and minimal reversion 10 largest listing was Pivotal ability levels, we believe the growth. For the period February and vacancy risk. The balance 8 (R 5bn). The market can expect a retail sector remains poised to 1 to May 14, the SA 10-year bond sheet is defensively positioned, Naeem Tilly 6 few more new listings this year, deliver the best returns in 2015. yield had gained 110 bps to 4 with 86% of its debt hedged. including Indluplace, the first Demand from national and 8,05%, with listed property prices 2 Dividend growth of around 8% separately listed residential international retailers remains declining by 1%. 0 can be expected over the next property fund by Arrowhead firm, while a sharp slowdown Another threat is the 02 03 04 05 06 07 0809 10 11 12 13 14 two to three y e a rs . Naeem Tilly Properties, and Stor-Age, a in new shopping centre rebound in oil prices and an SOURCE: BLOOMBERG, COMPANY DATA, Avior Research property analyst AVIOR CAPITAL MARKETS

THE PROPERTY HANDBOOK 30 31 FINANCIAL MAIL July 20 1 5 Financial Mail Page 32-33 -10/07/15 02:35:53 PM

ACCELERATE PROPERTY FUND good. The weighted average average. Retail vacancies had, as it provides the company with annual escalation across the however, increased from 9% to an additional avenue to access portfolio was 8,35%. This is a 9,7% as some areas were kept funds at potentially lower costs. positive attribute as it shows that vacant for refurbishment. Though the company has his midsized real estate to alleviate traffic congestion. rentals are largely at market and Accelerate has a loan-to- attractive metrics, the stock has investment trust (Reit) Though development has there is room for positive rental value of 39%, which is higher been relatively illiquid as has, as at end-September been delayed, we are positive reversions. The lease expiry than the sector average but Acce l e ra te’s shares are tightly T2014, a portfolio that consists of on Fourways Mall given the profile is well structured in that largely in line with the average held by management and about 51 well established properties long-term demographic profile not more than 20% by gross gearing for a fund of its size. Of 60% of the shares are free float. across SA. It has a strong bias and residential expansion rental is expected to expire the fund’s total debt, 89% is But management’s large stake towards retail properties, which potential for Fourways and within any particular year before fixed for three years at an provides comfort for investors comprise 66,7% of the portfolio s u r ro u n d s . March 2019. attractive blended annual rate of in that it ensures that manage- by gross lettable area (GLA). The Accelerate announced the Vacancies at the time of the 7,2%. The current debt structure ment’s objectives are aligned residual portfolio has office potential acquisition of two port- results had improved to 8,8% positions the fund well for an with the fund’s performance (22,2%), industrial (7,2%) and folios for R1,46bn during the from 10% by GLA. Industrial upward interest rate cycle. and hence shareh o l d e rs’ specialised auto dealership (3,9%) year. The first, for R615m at an and specialised auto dealership In March 2015, Global Credit interests. Liquidity, however, p ro p e r t i e s . accretive weighted average yield properties remained fully let Ratings assigned Accelerate should improve if Accelerate is The defining characteristic of 10,3%, had seven properties. and office vacancies improved with an investment grade (AA-) included in the SA listed of Accelerate’s portfolio is the Some of the properties include notably from 18,1% to 10,3%, senior secured rating, with a property index. Chloe Ma critical mass it has within the the Pick n Pay and Shoprite which is lower than the national stable outlook. This is positive Stanlib property analyst Fourways node, north of Jo’b u rg . distribution centres and the About 60% of the value of its Ellerines head office in Charles LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FOUR GEOGRAPHICAL (JSE) portfolio consists of its Four- Crescent. The latter is a strategic Vacant 140 SHAREHOLDERS SPREAD Monthly 135 ways retail properties, with the acquisition as Accelerate will SA listed Shareholder's % Share % per province property index 130 held CEO Michael flagship asset being Fourways own about 90% of the Charles 2015 125 name The Michael Family 37,03 2016 120 G e o rg i o u Mall Shopping Centre. The mall Crescent node subsequent to the 115 Trust & Fourways is among SA’s highest trading p u rchase. The aim is to rede - 2017 110 Precinct 105 shopping centres, with trading velop the critical mass Accelerate 2018 Coronation Fund 17,74 100 Managers 2019 & Accelerate 95 densities of R3 5 0 0/ m ²- has in the Charles Crescent node Beyond Property Fund Government 7,97 R4 5 0 0/ m ² per month. into a mixed-use node similar to 0105152520 30 89 Employees Pension (% of lettable area) 13 2014 2015 Fund Gauteng — 80,2% Major plans to refurbish and the Melrose Arch precinct. Stanlib SOURCE: ACCELERATE PROPERTY FUND SOURCE: INET BFA 6,18 Western Cape — 14,9% double the size of Fourways Mall The second portfolio has six KZN — 2,7% to 150 000 m² were expected to properties, which were acquired Limpopo — 2,2% commence mid-2015, after for R850m at an 8,1% yield. The delays due to funding and final- assets are tenanted to auditors ACCELERATE PROPERTY FUND (As at September 30 2014) Who manages the fund? Accelerate Property Fund ising the design. The develop- KPMG across various centres in Number of properties in the fund 51 SECTORAL SPREAD ment has commenced with the SA on 15-year leases, escalating Property valuation R 6 ,1 3 b n Market capitalisation R 3,94 b n by value and rental income relocation of the taxi rank. About at 8% over the first 12 years. The Annual trading volume as % of units in issue 1 8% 60% of the new space has been a cquisition will bring the fund’s Net asset value per unit R 5,96 Price per unit at date R 5, 89 p re committed to existing tenants asset value to more than R7bn Premium/discount to net asset value 7c (d i sco u nt) Historic/forward yield (%) 8,2% (forward) that require additional space. The and provide a defensive under- Gearing (%) 39,1 % residual 40% should be let pin to the portfolio by extending Name of the company Accelerate Property Fund relatively easily given the interest the lease expiry profile. Name of fund Accelerate Property Fund from i n te r national retailers to Accelerate reported its 2015 JSE code APF Retail — 66,7% Head of fund and title Michael Georgiou (CEO) Office — 22,2% trade from dominant, super- interim results towards the end Contact person Pieter Grobler Industrial — 7,2% Tel no (010) 001-7910 regional shopping centres. As of 2014, and they were in line Fax no Specialised — 3,9% part of the larger development, with management’s guidance. Physical address Cedar Square Centre Management Offices, Cnr of Willow & Cedar Ave, Fourways, Jo’b u rg E-mail address p i ete r @ a cce l e ra te pf.co. za SOURCE: ACCELERATE PROPERTY FUND the surro u n ding road infra- The property metrics of the Website address w w w. a cce l e ra te pf.co. za structure will also be upgraded portfolio remained relatively

THE PROPERTY HANDBOOK 32 33 FINANCIAL MAIL July 20 1 5 Financial Mail Page 34-35 -10/07/15 01:04:46 PM

ARROWHEAD PROPERTIES other property funds, operated rates in the first half of the satisfactory debt funding head- in a tough environment in 2014 financial year, resulting in room for future acquisitions. — and despite the widely held vacancies increasing from 6,2% The company has a split A view that its assets are heavily to 8,9%. and B share structure, but the rrowhead Properties The residential portfolio has slanted towards the mature side Ellerines vacated 12 000 m² plan is to convert the B shares has been one of the 36 properties valued at R788m, — the funds’ p e r fo r m a n ce of space during the period. Of to A shares. The conversion is fastest growing real making up 10,8% of Arrow- metrics are more favourable this space, 6 500 m² we re still some months away, but the estateA investment trusts (Reits) h e a d’s portfolio and completing than those of many of its peers. successfully let while the outcome will be that the fund by assets since listing on the JSE the balance of its investment In fact, like-for-like growth balance is under offer. will no longer pay out in 2011. From an asset base of 81 p ro p e r t i e s . in rentals and distributions per With loan-to-value (LTV) distributions to A and B unit investment properties valued at In February, Arrowhead unit have been among the being one of the key indicators holders separately, but rather R1,5bn at the time of listing, the successfully raised R600m from highest in the sector. The fund investors look at for comfort, on a combined basis. fund now manages 155 investors, the proceeds of which achieved 6% growth in net Arrowhead remains A r rowh e a d’s management properties valued at R7,3bn (at were used to acquire an addi- property income and 19% conservatively geared with an has provided guidance that the last reporting period). tional portfolio of 60 residential growth in distributions per unit LTV of 31%. Though this is fund will achieve combined As a result, Arrowhead is properties, increasing the fund’s for the interim period ending marginally up from last year’s distribution growth of 11,82% for now the 12th largest Reit by residential footprint further. March 31 2015. 23%, it is lower than the fund’s the full year ending September weighting in the SA listed The residential portfolio was The negative effect of Ab i l’s self-imposed target of 35% and 2015. Pelo Manyeneng property index (Sapy), with a listed recently on the JSE as a demise contributed to a in line with peers. This level of Momentum Asset Management market cap of about R8,6bn at separate entity called marginal uptick in vacancy gearing still gives the fund property analyst end-May 2015. Indluplace Properties, making it The fund has been strate- the exchange’s first standalone LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) gically positioned as an owner rental housing portfolio. It Vacant 160 SHAREHOLDERS SPREAD Arrowhead B and manager of high yielding raised R400m through a private Monthly 150 Shareholder's % Share % per province held properties. The preference is for placement prior to listing and 2015 140 name CEO Gerald SA listed A-linked units property index Le i ss n e r ownership of retail, office and has assets valued at R1,6bn. 2016 130 PIC 12,66 industrial assets that are some- Arrowhead aims to retain a 2017 120 Coronation Fund 11,14 Managers 2018 110 what mature in their investment sizeable equity investment in Investec Asset Mngt 6,92 2018 & 100 Beyond Foord Asset Mngt 5,80 cycle over assets that are in their Indluplace with the view to Arrowhead A 0510152025 90 Sanlam Investment 5,63 early stages of development. benefit from the growth rate of Mngt Gauteng — 56% Of the fund’s R7,3bn invest- the newly formed fund. The (% of lettable area) 2013 2014 2015 KZN — 11% SOURCE: ARROWHEAD SOURCE: INET BFA Western Cape — 11% ment portfolio, R2,96bn is in quantum of Arrowhead’s North West — 5% offices, R2,69bn in retail and i nve s t ment in Indluplace is Eastern Cape — 5% R817m in the industrial sector. estimated to be about 70%. Mpumalanga — 4% Limpopo — 3% In addition to this mix of One of the key debates in the ARROWHEAD PROPERTIES (As at March 31 2015) Northern Cape — 3% Who manages the fund? Internally managed Free State — 2% assets, Arrowhead spent a market is whether there is Number of properties in the fund 155 (commercial); 96 (residential) considerable amount of time in sufficient residential stock Property valuation R 7, 2 bn Market capitalisation R8,5bn SECTORAL SPREAD the past year looking at possibly available to make Indluplace Annual trading volume as % of units in issue AWA = 29%; AWB = 27% (as at Sept 30 2014) by value and rental income venturing into the inner-city Properties an attractive Net asset value per unit 14,54 (combined A & B) Price per unit at date R20,16 (combined A & B) residential and student accom- proposition to investors. Though Premium/discount to net asset value 38,7% (premium, combined A & B) Historic/forward yield (%) 8,2% (forward, combined A & B) modation market. there may be some sceptics, we Gearing (%) 31 , 5% The culmination of this are not among them. Name of the company Arrowhead Properties strategy was the acquisition of a We believe that given the Name of fund Arrowhead Properties portfolio of residential assets acquisitions made in the past JSE code AWA & AWB Head of fund and title Gerald Leissner (CEO), Mark Kaplan (COO), Imraan Suleman (CFO) Office — 41% from the likes of Jika Properties year alone, there are still Contact person Mark Kaplan Retail — 38% and Standard Bank. Some of opportunities for an early mover Tel no +27 (10) 1000-076 Industrial — 11% Fax no +27 (86) 6144-329 Residential — 10% these properties are located in to bulk up the portfolio further Physical address 2nd Floor, 18 Melrose Boulevard Melrose Arch, Johannesburg, 2196 E-mail address info@arrowheadproper ties.co.za SOURCE: ARROWHEAD areas such as Johannesburg’s with high-yielding stock. Website address www.arrowheadproper ties.co.za Berea, Yeoville and Honeydew. Though Arrowhead, like most

THE PROPERTY HANDBOOK 34 35 FINANCIAL MAIL July 20 1 5 Financial Mail Page 36-37 -10/07/15 01:05:25 PM

AT TAC Q UK. On December 18 2014 MAS 2013. The counter closed at existing development pipeline transferred its listing from the R24,68 on May 22 2015, which and the implementation of its AltX to the JSE’s main board. It represents a 45,01% premium to diversification strategy into is also listed on the Euro-MTF NAV (excluding deferred tax). other African and international ttacq is a property including landmark commercial in Luxembourg. That compared to the SA listed m a rke t s . holding, development and retail property assets and At t a cq ’s gearing as at property index (Sapy), which The company has managed and investment group. developments such as the December 31 2014 was 33,9%. was trading at a 42,75% to achieve double digit NAV TheA company listed on the JSE Garden Route Mall in George; The company has 70,8% of total premium to NAV at that time. growth in the past. And despite in the real estate holdings & Mooirivier Mall in Potchef- committed facilities hedged at a Attacq achieved a total the recent selling of company development sector in October stroom; Lynnwood Bridge in premium cost of 1,6%. The return of 23,6% in 2014, shares by management and 2013 and is focused on Pretoria; and the recently weighted average cost of debt is compared to the SA listed related parties to the value of providing capital growth rather completed 73 042 m² New tow n 9,7%, which is about 100 basis property sector’s 26,64%. Year about R43m (year to date ended than income distributions to Junction in Johannesburg. points above that of the to date (January-April 2015), the May 2015), it is expected to i nve s to rs . At the heart of its property sector. counter had managed to out- maintain its stated strategy to Its assets comprise two focus development pipeline is The company announced a perform marginally, delivering a provide sustainable, long-term areas: investment properties Waterfall City near Midrand net asset value per share total return of 13,37% relative to capital growth to its investors and new developments. Its north of Johannesburg, which is (NAVPS) of R15,52 at December the sector’s 13,21%. through investments and portfolio strategy is to hold 65% one of SA’s largest mixed-use 31 2014, representing 20,8% It s focus will remain on the d eve l o p m e n t s . Mvula Serota in completed buildings and 35% precincts. Waterfall City is growth from the comparative ongoing rollout of Waterfall, the Catalyst Fund Managers in developments to optimise anchored by the 131 037 m² Ma l l figure of R12,85 on December 31 successful completion of its investment analyst long-term sustainable capital of Africa, a super-regional mall growth and enhance total that is scheduled to open in LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) returns to shareholders. April 2016. Mall of Africa, of Vacant 160 SHAREHOLDERS SPREAD Developments comprise land, which Attacq owns an 80% Monthly 150 Shareholder's % Share % per province name held CEO Morne greenfields as well as brown- effective holding, has an 2015 140 Sanlam Life 12,37 2016 Wi l ke n field projects. The latter refers estimated capital cost and 130 Insurance Attacq to refurbishments and completion value of R3,2bn and 2017 120 Coronation Fund 10,78 2018 110 Managers extensions to existing buildings. R4,5bn respectively. Royal Bafokeng 2019 & SA listed 100 10,54 Its property portfolio is Attacq also recently secured Beyond property index Holdings 90 valued at R14,05bn and com- the development of new office 01020304050607080 Govt Employees 5,75 Gauteng — 75,8% (% of lettable area) 13 2014 2015 Pension Fund Western Cape — 16,7% prises 25 completed income premises for PwC, scheduled Mergon Foundation 3,71 SOURCE: ATTACQ SOURCE: INET BFA North West — 7,5% producing buildings and six for completion at the beginning properties under development. of 2018. The company’s portfolio has Its African portfolio includes a diverse geographical spread Bagatelle Mall of Mauritius and ATTACQ (As at December 31 2014) SECTORAL SPREAD Who manages the fund? Atta cq across SA and includes a a 31,25% stake in Att Africa — in Number of properties in the fund 28 (operational); 6 (under development) by value growing representation of p a r t n e rship with Hyprop Property valuation R14bn Market capitalisation R 1 6 ,4 bn international investments in I nve s t ments and Atterbury Annual trading volume as % of units in issue 31 ,7% sub-Saharan Africa as well as Property Holdings — wh i c h Net asset value per unit R15,52; R17,02 (excl deferred tax) Price per unit at date R 22 exposure to the property invests in retail centres and Premium/discount to net asset value 41,8% (premium); 29,3% (excl deferred tax) markets of Germany, Switzer- developments across Gearing (%) 33,9 % land and the UK via a strategic sub-Saharan Africa. Name of the company Atta cq Retail — 47,2% Name of fund Atta cq Office — 33,3% stake in fellow JSE-listed MAS Attacq has a 45,4% stake in JSE code AT T Industrial — 4,4% Real Estate. MAS — a real estate investment Head of fund and title Morne Wilken (CEO) Contact person Melt Hamman (financial director) Vacant land — 15,1% Attacq managed to grow its company, with a portfolio of Tel no (087) 845-1136 Fax no (086) 242-9247 assets by 39,1% over the 12- commercial properties in Physical address 2nd Floor, Building 2, Maxwell Office Park, Magwa Crescent West, Waterfall C i ty SOURCE: ATTACQ month period ended December Western Europe. MAS’s current E-mail address re ce pt i o n @ a tta cq .co. za 2014. The company has an asset investment focus is on Website address w w w. a tta cq .co. za value in excess of R20bn, Germany, Switzerland and the

THE PROPERTY HANDBOOK 36 37 FINANCIAL MAIL July 20 1 5 Financial Mail Page 38-39 -10/07/15 01:06:15 PM

CAPITAL PROPERTY FUND been cautious on the type of utilising cross currency swaps. over the 12 months to end- acquisitions it wants to execute As at December 31 2014 April 2015 and offers a fo rwa rd and is not prepared to gear up Capital had a net asset value yield of 6,2%. Investors in for acquisitions offering (NAV) of R11,56/share — an Capital are likely to enjoy apital Property Fund is have on average been able to suboptimal yields. Th e increase of 10% year-on- above-average sector returns. the largest specialist sign better escalation rates — as weighted average cost of year — with the share trading at Fo r t ress Income Fund has logistics fund in the high as 9%-10% in some funding is at 8,4%, with the a 19% premium to NAV. Given submitted an offer to the board CSA-listed property sector. instances — than their retail and average hedge term at 5,5 years. the strong outlook for industrial of Capital to acquire 100% of the Logistics and industrial assets office counterparts. Va c a n c i e s Similar to most listed property rentals and demand for logistics business. This deal will be make up 80% of the portfolio are contained, with the logistics companies, Capital has hedged space, we expect to see good attractive if it goes through as a on a gross lettable area (GLA) portfolio sitting at 3,3% while 83% of its net borrowing. Given revaluations from the under- more diversified firm will basis. With a market cap of the industrial exposure has a that access to capital market lying properties. Capitalisation attract a better yield rating than about R25bn, its direct property vacancy rate of 4,8%. Demand funding has become more rates in the logistics and a specialist fund. But given the assets are located mainly in for logistics space continues to difficult after the demise of Abil, industrial sectors may also fall size of the combined business Gauteng and KwaZulu Natal. be strong from large anchor Capital has increased debt slightly, adding to the strong one would expect distribution The fund’s strategy is to invest food and clothing retailers. funding from commercial p e r fo r m a n ce . growth to slow as large acqui- in and develop A grade logistics Tenant retention is strong banks, with an additional We expect distribution sition yielding opportunities portfolios across SA and invest across the portfolio, leading to R700m being raised. growth of 9% in the 2016 become scarce. Nesi Chetty 30% of the gross asset value in lower costs of occupation across Capital hedged 33% of its financial year. The share Momentum Asset Management offshore equities. Over time, the group. foreign currency exposure by increased by more than 30% head of property Capital will look to unlock value Ca p i t a l’s core portfolio has by disposing of its office assets. experienced net income growth LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FOUR GEOGRAPHICAL (JSE) Capital currently owns a of 6% for the latest reporting Vacant 137,5 SHAREHOLDERS SPREAD Monthly % per province portfolio of retail, office and period (12 months to December 130,0 Shareholder's % Share 2015 125,0 name held MD Barry industrial assets, with a value of 2014). A number of large leases SA listed 2016 120,0 Resilient 11,1 Stu h l e r property index R17bn as at the beginning of have expired and have been 2017 115,0 Government 7,9 110,0 Employees Pension 2015. By asset size, 62% of this renegotiated during the 2014 2018 105,0 Fund 2019 Capital 100,0 portfolio is attributable to financial year. About 23% of Property Stanlib 2020 & 6,7 Fund 95,0 logistics and industrial buildings Ca p i t a l’s leases by GLA will Beyond 90,0 Investec 5,5 0 5 10 15 20 25 87,5 and 25% to offices. come up for expiry in 2016. Gauteng — 76,8% (% of lettable area) At the beginning of 2015, Management expects to 2013 2014 2015 Western Cape — 7,7% Capital had a listed property begin developing Clairwood SOURCE: CAPITAL PROPERTY FUND SOURCE: INET BFA KZN — 12,1% Eastern Cape — 2,3% portfolio of R17,8bn, including Logistics Park in Durban during Mpumalanga — 0,6% investments in Resilient 2015. This 358 000 m² GL A Free State — 0,5% Property Income Fund, project will cost an estimated CAPITAL PROPERTY FUND (As at June 1 2015) Who manages the fund? Internally managed SECTORAL SPREAD Romanian-focused New Europe R2bn and yield an estimated Number of properties in the fund 25 2 by value Property Investments (Nepi), 9%. The other substantial Property valuation R 1 7, 8 bn Market capitalisation R2, 3bn Fortress Income Fund B and development is the 124 151 m² Annual trading volume as % of units in issue 28 , 8% Ro c kcastle Global Real Estate Montague Business Park at a Net asset value per unit R11,56 Price per unit at date R 1 4,1 0 Company. These underly i n g cost of R500m, yielding 8,5%. Premium/discount to net asset value 14,9% (premium) Historic/forward yield (%) 6,3% (historic) investments are strategic and Capital has a total development Gearing (%) 24, 8% the fund will look to dispose of pipeline of close to R4,5bn. Retail — 12% Name of the company Capital Property Fund Office — 25% its stakes when it finds compel- Though the performance of Name of fund Capital Property Fund ling reinvestment alternatives at the office portfolio should still JSE code CPF Logistics — 60% Head of fund and title Barry Stuhler (MD) Industrial — 2% compelling valuations. be challenging, Capital is Tel no (011) 612-6870 Other — 1% Fax no (011) 612-6869 The logistics industrial managing the high vacancies in Physical address 4th Floor, Rivonia Village, Rivonia Boulevard, 2191 SOURCE: CAPITAL PROPERTY FUND property sector is experiencing that p o r t fo l i o . E-mail address info@capitalproper ty.co.za low vacancies and strong rental Gearing is still very low at Website address www.capitalproper ty.co.za growth. Industrial landlords around 25%. Management has

THE PROPERTY HANDBOOK 38 39 FINANCIAL MAIL July 20 1 5 Financial Mail Page 40-41 -10/07/15 02:36:18 PM

CAPITAL & COUNTIES PROPERTIES As Earls Court is one of the may be prepared to acquire venture with Network Rail to major regeneration projects in stakes in the development, look at the redevelopment of London, it is being subjected to which could result in a quicker some major stations in London. political and media scrutiny on development profit realisation This is another opportunity in eing a central London far at The Beecham moving the a regular basis. As such, political based solely on the price at which management can assist focused property firm benchmark per square foot for i n te r ference could become a which the land is being acquired. with the establishment of a makes Capital & selling prices in the area. A sticking point, though the likeli- This has already been illustrated potential master plan for re- BC o u n t i e s’ (CapCo) exposure and more ambitious project, Kings hood of the red eve l o p m e n t by the joint venture agreement d eve l o p m e n t . property mix an ideal entry Court, has started whereby a being derailed is small. Capco concluded on the Covent Garden should point for those wanting invest - new mixed-use development CapCo continues to trade in Seagrave Road site to develop continue to perform well, ment access to that market. between Long Acre and King excess of its current NAV per more than 800 houses referred providing local investors with This, combined with the rand Street will be created by 2017. share, in line with other Central to as Lillie Square. Construction exposure to both capital growth, weakness and continued strong The potential value unlock London peers. Also, the share of the first phase has started. underpinned by development net asset value (NAV) growth, with the redevelopment of the price once again reflects more This proves that management potential, and growing income has resulted in its share price Earls Court site is an exciting accurately some of the potential has the capability to unlock land certainty, recycled back into the increasing more than six times and potentially valuable project. development profits that CapCo value through planning company to invest in further since its 2010 demerger from CapCo, together with adjoining should participate in through the approvals and the potential capital growth opportunities. the old Liberty International. land owners Transport for development cycle at Earls implementation of those plans. Anton de Goede Ma n a ge ment has worked London (TfL) and the boroughs Court. Potential partners in the CapCo has announced the Coronation Fund Managers hard to enhance the company’s of Hammersmith & Fulham and redevelopment of Earls Court acquisition of a stake in a joint property analyst portfolio. At Covent Garden big Kensington & Chelsea, have strides have been made to re- received formal outline LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) position the area as a premier planning consent for the re- Vacant 240 SHAREHOLDERS SPREAD Capital & Counties Central London retail desti- development of the 77-acre site 2014 220 % Share Properties Shareholder's % per region held CE Ian nation. And Central London into a residential-led mixed- 2015 200 name BlackRock 14 2016 180 Hawkswor th retail continues to attract strong used development covering Coronation 11 160 demand from both UK and more than 1m m². 2017 Gordon Family 11 SA listed 140 foreign retailers for their first Though the redevelopment 2018 property index Interest 2019 & 120 Norges Bank 7 foray into the country. has a 20-year outlay, the initial Beyond 100 Public Investment 4 01020304050 90 Corp Covent Garden increased its receipt of planning approval (% of lettable area) 2013 2014 2015 value by 25% on a like-for-like was an important first step due Note: Covent Garden Portfolio only UK — 100% basis in 2014 compared with the to the change in potential use SOURCE: CAPITAL & COUNTIES PROPERTIES SOURCE: INET BFA previous year, while continuing from exhibition to residential. SECTORAL SPREAD to increase the rent potential The latter is more valuable. by value and rental income target — £100m by 2017 from Planning momentum remains CAPITAL & COUNTIES PROPERTIES PLC (As at June 1 2015) (Covent Garden) Who manages the fund? N /A the current £75m. Ma n a ge m e n t strong with detailed planning Number of properties in the fund 11,7m ft² (as at Dec 31 2014) is also gradually gaining expo- permission achieved in 2014 for Property valuation £3bn (as at December 31 2014) Market capitalisation £3,5bn (as at May 29 2015) sure to more strategic streets the first phase of the develop- Annual trading volume as % of units in issue s u r ro u n ding Covent Garden. ment to be called Earls Court Net asset value per unit 311p (as at Dec 31 2014) Price per unit at date 419,8p (as at May 29 2015) Covent Garden Living, an arm Village, as well as the change of Premium/discount to net asset value 35% (premium) Historic/forward yield (%) to unlock value from potential use permission from commer- Gearing (%) 12% (loan-to-value, as at Dec 31 2014) residential investment in the cial to residential for the Retail — 52% Name of the company Capital & Counties Properties Plc (Capco) area, is gaining more traction in Empress State office tower on Name of fund NA F&B — 19% its office-to-apartment conver- the site. Land and property JSE code CAPC. J Leisure — 1% Head of fund and title Ian Hawksworth (CE) Offices — 12% sion developments. Two new assembly in the area continues Contact person Michelle McGrath (director of investor relations) Tel no +44 (0)20 3214-9150 Residential — 6% residential projects, The Bee- on a similar basis as for Covent Fax no +44 (0)20 3214-9151 Change of use — 10% cham and The Southa m p to n , Garden, with £51m worth of Physical address 15 Grosvenor Street, London, W1K 4QZ E-mail address Fe e d ba c k @ ca p i ta l a n d co u nt i es.co m SOURCE: CAPITAL & COUNTIES PROPERTIES have been launched during the small acquisitions in 2014 in the Website address w w w.ca p i ta l a n d co u nt i es.co m past 12 months, with sales thus vicinity of Earls Court.

THE PROPERTY HANDBOOK 40 41 FINANCIAL MAIL July 20 1 5 Financial Mail Page 42-43 -10/07/15 01:07:09 PM

DELTA PROPERTY FUND bique, and a shopping centre in ratio of fixed versus floating Notwithstanding this, Delta Mo ro cco’s Casablanca. interest rates was 32:68. delivered strong distribution Delta Property Fund holds a The levels of gearing that the growth, achieving 15% growth 35% shareholding in Delta Inter- fund employed — coupled with in income payouts for the year elta Property Fund is a renewing whichever leases national. Over time, manage- interest rates skewed heavily ended February 2015. real estate investment were due for renewal during ment would like this stake to be towards the floating side — we re Barring any financial trust (Reit) operating that year (including those on diluted down to around 25%. a cause for much concern and, engineering, the likelihood of mainlyD in the government and month-to-month leases) for a From a debt perspective, at times, a primary reason some seeing double digit growth in parastatal office property maximum period of three years Delta had about R3,8bn of investors were critical of Delta. distributions will reduce as the markets. Its key proposition to escalating at a rate of 5,5%/year. utilised debt facilities at year- With a higher proportion of window for concluding yield- investors — when it listed its This was received with end — 70% of this was fixed for interest rate exposure now enhancing acquisitions portfolio of property assets resistance from property funds an average period of 2,3 years at fixed, management has to spend diminishes. As a result, Delta valued at R2,1bn in November (both listed and private), but a an average interest rate of 7,9%. some time rearranging the has given guidance of 8% 2012 — was to provide access to number of them ultimately bore At 46,72% post year-end, balance sheet and getting the distribution growth for 2016, a consolidated government- the brunt of this directive. But (down from 49,9% at year-end), f u n d’s LTV ratio back to more which compares reasonably tenanted office portfolio. De l t a’s shareholders were not the fund’s loan-to-value (LTV) “re a s o n a b l e” levels. In fact, well with what is expected from Fast-track to February 2015, significantly affected by this, ratio is on the aggressive side in management has already given the sector as a whole. the portfolio size had surged to given the fund’s relatively long relation to other listed property an undertaking to have gearing Pelo Manyeneng 82 properties valued at R8,21bn, lease expiry profile — one of the funds. Around mid-2014, it had levels reduced to acceptable Momentum Asset Management spanning offices, retail and key metrics CEO Sandile an LTV ratio of 47,5% and its levels by this time next year. property analyst industrial assets. And now the Nomvete and CFO Bronwyn fund — externally managed by Corbett focus greatly on. LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) MPI Property Asset Management As a result, Delta managed to Vacant 135 SHAREHOLDERS SPREAD SA listed — has a market cap of R5bn. renew 81 leases and get 33 new Monthly property index 130 Shareholder's % Share % per province by GLA 125 name held 2016 CEO Sandile Delta splits its office lettings, covering a total gross 120 Coronation Fund 18,47 N o mvete exposure into “gove r n m e n t ” lettable area of 101 830 m² in the 2017 Delta 115 Managers Property 110 and “ot h e r ”, making it simple 2015 financial year. From this, 2018 Fund Stanlib Asset 14,92 105 Management 2019 for investors to understand the the fund achieved an average 100 Public Investment 14,63 2020 & underlying tenant exposure. escalation of 6,75%. At year-end, Beyond 95 Corp Sanlam Investment 0 5 10 1520 25 89 8,20 The government portfolio is the fund had an average Management Gauteng — 39,3% (% of lettable area) 20132014 2015 valued at R5,1bn and comprises occupancy rate of 92,9%, 240 Grindrod Asset 6,78 Western Cape — 4,8% properties with leases signed basis points deterioration SOURCE: DELTA PROPERTY FUND SOURCE: INET BFA Management KZN — 35% Eastern Cape — 3,4% with the department of public relative to the 95,3% occupancy Limpopo — 6,4% works (DPW), while the “ot h e r ” rates achieved in August 2014. Mpumalanga — 3,7% office portfolio is valued at Over the past year, Delta’s DELTA PROPERTY FUND (As at June 11 2015) Free State — 1% Who manages the fund? MPI Property Asset Management North West — 0,8% R2,73bn. The latter includes management team had been Number of properties in the fund 82 (as at Feb 28 2015) leases signed with the likes of looking at taking advantage of Property valuation R 8 ,4 b n SECTORAL SPREAD Market capitalisation R 4,0 8 b n the SA Revenue Services. The opportunities available in the Annual trading volume as % of units in issue by value and rental income balance of the portfolio is made African (excluding SA) real Net asset value per unit R 1 0,02 Price per unit at date R 8 ,9 0 up of retail assets (R207m) and estate market. As a result, Delta Premium/discount to net asset value R1,12 (discount) Historic/forward yield (%) 8% industrial assets (R 218m). International listed as a separate Gearing (%) 49,9 % The DPW made 2014 a entity on the AltX in July 2014 Name of the company Delta Property Fund challenging and topical year fo r to focus solely on real estate Name of fund Delta Property Fund property funds with exposure markets in the rest of Africa. JSE code D LT Retail — 5,9% Head of fund and title Sandile Nomvete (CEO) to government tenants. As part Currently, the focus is only on Contact person Kirsten Lewis Office government — 59,3% of sorting out its internal Mozambique and Morocco. The Tel no (087) 803-3582 Office other — 32,5% Fax no (086) 504-1237 Industrial — 2,3% processes, the department fund has a market cap of R1,3bn Physical address Silver Stream Office Park, 10 Muswell Road South, Bryanston E-mail address i nfo @ d e l ta f u n d .co. za SOURCE: DELTA PROPERTY FUND sought to enforce a national and owns a portfolio of office Website address w w w.d e l ta f u n d .co. za treasury directive aimed at properties in Maputo, Mozam-

THE PROPERTY HANDBOOK 42 43 FINANCIAL MAIL July 20 1 5 Financial Mail Page 44-45 -10/07/15 01:07:32 PM

DIPULA INCOME FUND through an enhanced retention ment’s ability to secure further but would probably need to rate — a promising sign as industrial leases will soon be access equity financing. renewals are being concluded at tested given the significant lease Dipula performed strongly in better rentals than for new expiries that are on the horizon 2014, with a total return of ipula is one of the few renewals in the latest reporting te n a n t s . For the February 2015 over the next 12 months. 23,16% for A units and 32,37% substantially black- period, but vacancies were reporting period, renewals were As at February 28 2014, debt- for B units — a strong recovery owned SA real estate affected by the demise of at R92,86/m² compared to to-asset levels were at a high from 2013. In 2015, unit holders investmentD trusts (Reits) Ellerines and Abil. This should R 54,94/m² for new lettings. 35,5%. Management is comfor- will be worried about the through a consortium that, be reversed in the short term, The fund is growing its table with debt levels of around combined distribution growth of together with management and particularly as Dipula’s shop- exposure to industrial, with the 40%-45%, which makes access only 6,8% in the interim period, associates, holds about 25% of ping centres target the lower sector accounting for 21% of to further bank funding easier. co n s i d e r ing the attractive yields total issued linked units. The LSM groups in rural areas, D i p u l a’s GLA. Vacancies are low, With 72% of the debt fixed, at which properties are being fund is black managed, making townships and CBDs across SA, with a R50m development Dipula remains vulnerable to an acquired relative to the higher it one of the most empowered a sector where retailers are still under way in Ormonde, south impending interest rate cycle. proportion of floating debt funds in the listed property focused on growth. Nonetheless, of Johannesburg, expected to be And with 19,7% of the fund’s Dipula currently holds. Manage- sector. Investors in Dipula can the positioning of the retail completed this November. The bank facilities expiring in 12 ment’s forecast distribution invest in Dipula A or B units. portfolio bears risk in that d eve l o p ment is already 60% months, debt funding options growth remains soft between Since listing in 2011, Dipula low-income shoppers are faced prelet, which bodes well for will need to be considered. Th e 6,5%-7,5%, which is rather has traded at a higher yield with decreasing disposable D i p u l a’s ability to recycle non- fund has a potential R1bn pipe- disappointing. Thabo Ramushu relative to the sector, owing to income, driven by high levels of performing stock. Manage- line over the next six months, Meago Asset Managers director various reasons. These include ind e b te d ness and an impending the perceived lower-quality rising interest rate environment. LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) portfolio with which it listed Arrears are still under control, Vacant SHAREHOLDERS SPREAD Dipula 135 Property 130 % per province by GLA and the relative illiquidity of the though helped by the higher 2015 Shareholder's % Share Fund B 120 held SA listed name CEO Izak stock. The quality of the port- level of national tenants (71% on 2016 property 110 A-linked units index Coronation Fund 29,7 Pete rse n folio is improving, though, average) in Dipula’s centres. 2017 through aggressive acquisition The fund is awaiting the 100 Managers 2018 90 Govt Employees 17,7 Dipula of better-quality higher-yielding transfer of the 15 735 m² Umzim - 2019 & Pension Fund Property 80 assets and, to a lesser degree, khulu Mall in KwaZulu Natal, Beyond Fund A Old Mutual 10,3 0 5 10 15 20 25 70 B-linked units Gauteng — 71,9% due to refurbishments. acquired for R 193m,with a BEE Management 27,4 (% of lettable area) 2013 2014 2015 KZN — 5,2% The fund has 176 assets, with strong national tenant presence. Consortium (Dipula) Eastern Cape — 5,2% SOURCE: DIPULA INCOME FUND SOURCE: INET BFA an average value of R27m/asset. Also, the company continues to Arrowhead Prop 23,2 Limpopo — 4,6% This makes the fund extremely consider options to increase its Western Cape — 3,8% North West — 3,8% asset management intensive. shareholding in Eyethu Orange Free State — 3,5% Though its top 20 assets make Farm Mall on the East Rand, DIPULA INCOME FUND (As at February 28 2015) Mpumalanga — 1,6% Who manages the fund? Dipula Asset Management Trust Northern Cape — 0,4% up 48% of the portfolio, the fund which has trading performance Number of properties in the fund 1 76 needs to consider more that is above expectations. Property valuation R 4,7 b n SECTORAL SPREAD Market capitalisation R 4, 2 b n by value aggressive disposal of smaller Its exposure to offices is at Annual trading volume as % of units in issue 17,4% (A-linked units); 20,5% (B-linked units) lower-quality assets to reduce 20%. The largest office assets Net asset value per unit R 832 ,73 Price per unit at date R11,20 (A-linked units) ;R10,50 (B-linked units) the management burden of such include offices leased to the Premium/discount to net asset value 30,3% (premium, combined) Historic/forward yield (%) 8,6%: A-linked units; 7,9%: B-linked units (forward) a large portfolio and also possibly department of public works. Gearing (%) 35, 5% improve on associated costs. Office vacancies decreased to About 59% of Dipula’s 11%, but tenant retention re m a i n s Name of the company Dipula Income Fund Name of fund Dipula Income Fund Retail — 64,0% portfolio is exposed to retail challenging. The focus is now on JSE code A-linked units: DIA, B-linked units: DIB Head of fund and title Izak Petersen (CEO) Office — 25,0% property and the fund has been a more customer-centric Contact person Brigitte de Bruyn (financial director) Industrial — 11,0% Tel no (011) 325-2112 most active in retail asset acqui- approach, with intensive Fax no (011) 325-7597 SOURCE: DIPULA INCOME FUND sitions since listing. The retail re l a t i o n ship management to Physical address Block B Dunkeld Park, 6 North Road, Dunkeld West, 2196 E-mail address [email protected], [email protected] portfolio reported positive limit the loss of existing tenants. Website address w w w.d i p u l a .co. za rental reversions of 2,3% on The benefits are being realised

THE PROPERTY HANDBOOK 44 45 FINANCIAL MAIL July 20 1 5 Financial Mail Page 60-61 -10/07/15 01:10:46 PM

INVESTEC AUSTRALIA PROPERTY FUND market sectors over the year, The 2015 results reflect the assumes further deployment of which is reflected in the recent positive outcome of the gearing capacity during FY2016 acquisitions. This has reduced s u cce s s ful execution of the into similar yielding assets. the net property income yield f u n d’s strategy. Management The low interest rate environ- nvestec Australia Property weighted average lease expiry, across the portfolio, which has says the fund is well positioned ment in Australia makes the Fund (IAPF) is the first with a relatively low 1,3% been mitigated by downward to deliver long-term sustainable listed property sector an attrac- inward-listed Australian real vacancy. The fund’s target pressure on borrowing costs, income and capital growth tive asset class from a dividend Iestate investment trust (Reit) on gearing ratio of up to 40% gives proactively managed by through the acquisition and yield perspective, especially for the JSE and the JSE’s only pure it up to AU$67m in debt management. The weighted efficient management of quality unfranked investors (an arrange- Australian-focused property capacity to continue average property yield of the properties and conservative yet ment that eliminates the double play. It is the Investec group’s aggressively pursuing attractive portfolio is now 8,23%, down proactive balance sheet and taxation of dividends). However, first listed foray into offshore a cq u i sition opportunities. IAPF from 8,59% at listing. This yield interest rate management. property prices have risen real estate markets. also locked in historically low compression has also had a The board expects distri- markedly, which means The fund aims to maximise funding rates of 4,15%, hedging positive effect on property bution growth of between 10% valuations are looking ex p e n s ive . sustainable returns to unit 100% of its debt book. valuations. The fund’s lease and 12% (pre-withholding tax) So the risk of costly acquisitions holders by investing in quality IAPF continues to review its expiry profile at year-end in FY2016. The lower end of the is rising. But given the weak office, industrial and retail fixed borrowing costs and has remains strong with a weighted guidance assumes no change in ra n d , the stock may be attractive properties in Australia. It offers taken advantage of falling average lease expiry of 6,4 years the current property portfolio to SA investors looking for rand investors exposure to the interest rates in Australia by by income. About 64% of leases and a gearing level of 30%. The hedge qualities. Howard Penny Australian real estate market locking in lower forward rates expire after five years. upper end of the guidance RMB Morgan Stanley and a rand-hedge opportunity during the year. Management through the Australian dollar. has renegotiated its debt facility, LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) The management team’s increasing the tenor by three Vacant 130 SHAREHOLDERS SPREAD objective is to grow and years to five years and simul- Monthly 125 Shareholder's % Share % per region Investec Australia name held 2017 120 CEO Graeme diversify the fund’s asset base. It taneously reducing the margin Property Fund Investec Property 18,56 Ka tz also wants to optimise capital by 42,5 basis points to 1,275%. 2018 115 Fund 2019 110 Investec Bank 16,33 and income returns over time The fund now has a long dated 105 Stadium On Main 2020 3,63 for unit holders by investing in debt and swap maturity profile 100 2021 & Investments SA listed 95 high-quality commercial real of 4,84 years and 5,52 years Beyond property index Sanlam 2,98 02040507010 30 60 80 90 Stanlib 2,75 estate assets that have certain respectively and a current New South Wales — 24% (% of lettable area) 13 2014 2015 qualities. These include being hedged position of 100%. SOURCE: INVESTEC AUSTRALIA Queensland — 27% positioned in well located The number of properties PROPERTY FUND SOURCE: INET BFA Australian Capital Territory — 18% commercial precincts in has grown to 17 and is worth South Australia — 3% Australia and New Zealand; $361m — up from nine Victoria — 28% medium to long-term lease properties worth $154m in 2014. INVESTEC AUSTRALIA PROPERTY FUND (As at May 28 2015) Who manages the fund? Investec Property Management SECTORAL SPREAD profiles; limited or no short Weighted average escalations Number of properties in the fund 17 term capex requirements; are lower in Australia than in Property valuation AU $361 m by value and rental income Market capitalisation R 3,0 8 b n contractual rental growth; and SA, with IAPF’s weighted Annual trading volume as % of units in issue 20 % strong tenant covenants. average escalations at 3,4%. Net asset value per unit $ 1 ,0 1 Price per unit at date R12,50 For the year ended March 31 Recent acquisitions comprise Premium/discount to net asset value 33,6% (premium) Historic/forward yield (%) 6,9% (forward) 2015, the group delivered 7,6% a mix of office and industrial Gearing (%) 27% annualised growth in distribu- properties which are well tion per unit. The portfolio grew located and have strong tenant Name of the company Investec Property Name of fund Investec Australia Property Fund Office — 68% by 122%, bringing total asset covenants. They also reflect JSE code IAP:SJ Head of fund and title Graeme Katz (CEO) Industrial — 32% growth since listing on October m a n a ge m e n t ’s ability to unlock Contact person Zach McHerron (fund manager) Tel no +61 2 9293-2464 SOURCE: INVESTEC AUSTRALIA 24 2013 to a relatively strong off-market transactions through Fax no +61 2 9293-6301 PROPERTY FUND 178%. IAPF is geared at 28% and the Investec network in a very Physical address Level 23, Chifley Tower, 2 Chifley Square, Sydney NSW 2000 E-mail address za c h . m c h e r ro n @ i nveste c .co m . a u the underlying portfolio has a competitive market. Yields have Website address www.investecaustraliaproper tyfund.co.za relatively strong 6,4 years continued to tighten across all

THE PROPERTY HANDBOOK 60 61 FINANCIAL MAIL July 20 1 5 Financial Mail Page 46-47 -10/07/15 01:07:56 PM

EMIRA PROPERTY FUND and extension to Wonderp a rk duration to expiry of 2,1 years. At costs, leasing and other general Shopping Centre, Pretoria. It was present, around 84% of Emira’s expenses. Its recent property expanded from 63 000 m² to total debt is fixed. The weighted expense to revenue ratio was 90 000 m² at a cost of R551m to average interest rate for the 35%, a decrease from 39% the mira Property Fund, a experiencing similar growth of accommodate larger premises group is 8,6%. It has about R1,4bn previous year. real estate investment 9,5%, driven by rental income. for anchor tenants. Now E m i ra of debt maturing in 2015. Strong rental growth and a trust (Reit), has a portfolio Average expiring rentals in the boasts a super-regional centre Ma n a ge ment will continue to be reduction in vacancies across Ethat is strategically spread office sector are R107/m² wh i l e with a book value of R1,5bn in opportunistic with share re- the portfolio bode well for across the office, retail and for retail it is close to R125/m². its portfolio. purchases when the earnings future NAV revaluations. We industrial sectors. The value New leases are being signed The fund has also managed yield becomes attractive relative expect strong dividend growth split per sector is 39% retail, closer to R102/m² for offices to increase the value per square to cash and interest rates. and future acquisitions to bulk 46% offices and 15% industrial. and R133/m² for retail as metre per property across both Emira holds a 4,9% i n te re s t up the asset base. Emira trades The fund is more weighted demand is still relatively strong. its retail and office portfolios. in Growthpoint Australia at a at a forward yield of 7,3% versus towards office at 35% on a gross Total vacancies have been The average value per square rand value of R707m, as at last the sector average of 6%. A lettable area (GLA) basis. In the declining steadily, from 7,8% in metre for offices is now R13 5 5 0, year-end. We expect distribu- higher-quality portfolio means past few years the fund has December 2012 to 4,9% in with the average value of office tion growth out of Australia to Emira is likely to start attracting streamlined its portfolio by December 2014. The office properties sitting at R91m. slow down, given the compe- a much better rating than it has disposing of nonperforming sector is still problematic for Total debt at the 2014 titive market and weaker rand. done historically. Nesi Chetty higher vacancy office assets and most property companies. Bu t December year-end was R4,6bn, Emira has done well to Momentum Asset Management strengthening the quality of the the fund’s office vacancy of with a weighted average manage bad debts, staffing head of property portfolio through acquisitions, 7,9% remains well below Sapoa upgrades and redevelopments. levels of around 11%. The rental LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) As at May 2015, Emira had market for offices seems to be Vacant 135,0 SHAREHOLDERS SPREAD Expiries 130,0 148 properties, with a total asset stabilising. But rental reversions SA listed Shareholder's % Share % per province Outgoing CEO value of R13,5bn and a market on gross office rentals are still 2015 property index 125,5 name held 120,0 Redefine Properties 13,6 2016 Ja m es cap of R8,3bn. It has high -4%. Large leases such as Pick n 115,0 PIC/GEPF/Micawber 12,3 110,0 Te m p l eto n 2017 Tiso Property 8,3 exposure to the Gauteng node Pay Wonderpark and Times 105,0 SBSA Absa 2,1 2018 100,0 (67% of GLA), with Menlyn in Media at Universal Print House SBSA Prudential 2019 95,0 1,9 Pretoria and Centurion being its have already been renewed or & beyond Emira Property Inflation Plus Fund 90,0 core focus areas. The fund has are being negotiated. 0 5 10 15 2025 30 35 87,5 returned about 30% to investors Tenant retention across the (% of lettable area) 2013 2014 2015 Gauteng — 59% SOURCE: EMIRA PROPERTY FUND SOURCE: INET BFA Western Cape — 14% over the 12-month period to group by GLA has improved KZN — 24% December 2014, and year to considerably from 70% in Free State — 3% date has already delivered previous years to 77%. The returns in excess of 6%. aggressive leasing strategy is EMIRA PROPERTY FUND (As at December 31 2014 ) Who manages the fund? Strategic Real Estate Managers Emira has undergone a huge starting to pay off for the group. Number of properties in the fund 1 48 SECTORAL SPREAD turnaround in performance Recent large acquisitions Property valuation R12,5bn by value and rental income Market capitalisation R8,8bn over the past year. Distribution include the Integri-T portfolio Annual trading volume as % of units in issue 5 0,7% growth averaged 9% while the acquired for R830m at a forward Net asset value per unit R16,50 Price per unit at date R17, 3 fund has also posted solid net yield of 9,4%. This acquisition Premium/discount to net asset value 105% (premium) Historic/forward yield (%) 7,5% (historic) asset value (NAV) growth of comprised two retail properties, Gearing (%) 35, 4% 14%. The current NAV per share three office buildings and three Name of the company Strategic Real Estate Managers is R16,50, implying that at the industrial properties. Smaller Name of fund Emira Property Fund early May trading price of properties such as Ben Fleur JSE code EMI Retail — 39% Head of fund and title James Templeton (CEO) Office — 46% R17,40 the share is trading at a Shopping Centre were acquired Contact person James Templeton Industrial — 15% Tel no +27 (11) 028-3100 slight premium to NAV. at a purchase price of R66m and Fax no +27 (86) 226-6702 Like-for-like growth in net a forward yield of 9,4%. Physical address 1st Floor, Optimum House, Epsom Downs Office Park, 13 Sloane St, Bryanston, 219 1 E-mail address j te m p l eto n @ e m i ra .co. za SOURCE: EMIRA PROPERTY FUND income across the retail port- The most significant project Website address w w w.e m i ra .co. za folio is 9,1%, while offices are in the past year was the upg ra d e

THE PROPERTY HANDBOOK 46 47 FINANCIAL MAIL July 20 1 5 Financial Mail Page 48-49 -10/07/15 01:08:25 PM

EQUITES PROPERTY FUND that industrial property out- shops or warehouses in multiple which it acquired as part of the performed other sectors of the locations in favour of larger Intaprop merger. About 16 ha of property market in 2014. Rentals centralised ones. It’s no longer that is strategically located are also still outp e r fo r m i n g an “everyone wins” market but within Meadowview Business n June 18 2014 Eq u i te s transfers and good lease renewal inflation. In addition, industrial a “zero-sum game”, similar to Park (Gauteng), where manage- Property Fund listed rates meant the fund declared a vacancies remain low at around the precursor to the office ment plans to unlock develop- on the JSE as the only higher than expected total 4%, especially for assets related property sector slowd ow n , ments of up to R800m over O“ p u r e - p l a y ” i n d u s t r i a l r e a l distribution of 5,1%. Over the to distribution/warehousing. which started about four years three years. Also, the fund has estate investment trust (Reit). same period it acquired R119m However, based on anecdotal ago. So, we are likely to see old entered into an agreement to The founding partners — Gian - worth of property assets at evidence and recent sector industrial stock lose tenants in develop a 22 276 m² A- g ra d e carlo Lanfranchi of Swish earnings enhancing yields. results, the outlook for indus- favour of modern, larger ware- warehouse in Midrand (Gauteng) Property Group; Kevin Dreyer, Management expects distribu- trial property appears slightly houses offering adequate for The Foschini Group for who runs the development arm tion growth of 7%-8% for the worse: negative reversions (new turning circles for large trucks about R150m in a venture with of the Cape Town Airport City year ending February 2016. rental levels lower than expiring and higher internal stacking the Lord family. Foschini has an consortium; and Andrea After listing with a relatively rents) have re-emerged and space. Those that hold or can option to extend the facility by Taverna-Turisan, an entre - low loan-to-value (LTV) ratio of there are gradual vacancy rises develop new space will be 15 000 m². Equites is also close preneur and developer — 7,8% and floating debt (100% across the board. among the winners in this cycle. to concluding various trans - initially merged 17 properties exposed to interest rate fluc- Management teams point to Equites may benefit from this actions worth about R320m. totalling 124 253 m² at a tuations), the group has since consolidation of operators trend given its fairly modern Kundayi Munzara combined value of R1,2bn. drawn down R127m of its working out of smaller work- portfolio and a 21 ha land bank, Sesfikile Capital director CEO Taverna-Turisan wa s R600m bank facility, wh i c h previously a commercial increased the LTV to 9,8%. It LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) property broker with McCreedy also appointed Bram Goossens Vacant 132 SHAREHOLDERS SPREAD SA listed Monthly property % Share % per province Friedlander and cofounder of as chief financial officer and he 125 Shareholder's CEO Andrea Rialto Foods. He later sold his fixed 79% of all borrowings for 2016 index name held 120 Gamlan Investments 7,94 2017 Tave r n a -Tu r i sa n shares in Rialto and formed five years at an all-in rate of 115 Chiluan Holdings 7,12 2018 Chiluan Holdings, which 8,9%. The target is to have up to 110 Swish Property 6,52 2019 105 Eleven developed six A-grade distribu - 80% of all debt hedged against 2020 & Investment 8,78 Beyond 100 tion facilities that now form part interest rate fluctuations. Equites Property Fund Solutions ISL Foord of the Equites portfolio. In May Equites concluded a 0 5 10 15 2025 30 35 95 Allan Gray 6,85 (% of lettable area) The fund went public to merger with Intaprop. This 2014 2015 Western Cape — 100% a cce l e rate its growth plan and involves the acquisition of SOURCE: EQUITES PROPERTY FUND SOURCE: INET BFA diversify its sources of capital. I n t a p ro p’s R1,9bn industrial But growth is unlikely to be at property portfolio in return for the expense of quality. At listing a strategic holding in Equites. EQUITES PROPERTY FUND (As at May 25 2015) Who manages the fund? Equites Property Fund it raised R650m through an Management has been clear Number of properties in the fund 20 SECTORAL SPREAD ove rsubscribed private place- from the outset that its vision is Property valuation R 1 ,4 b n Market capitalisation R1,5bn by value and rental income ment. Management retained to become SA’s most successful Annual trading volume as % of units in issue 6% 40% to have a “co n t ro l l i n g ” specialist industrial property Net asset value per unit R11, 37 Price per unit at date R13 stake over the medium term, fund. Specialist listed property Premium/discount to net asset value 1 4% Historic/forward yield (%) 8,2% allaying fears of manager- firms have commanded superior Gearing (%) 8 ,9 % s h a re holder misalignment. ratings to diversified ones. And Name of the company Equites Property Fund In the prelisting statement, major Reit countries such as the Name of fund Equites Property Fund m a n a ge m e n t ’s guidance was for US, Japan and Europe (including JSE code EQU ISIN: ZAE000188843 Head of fund and title Andrea Taverna–Turisan (CEO) Office — 27% a total distribution of R66,5m for the UK) have moved further Contact person Riaan Gous Industrial — 73% Tel no (021) 460-0404 the nine months to end- towards greater specialisation. Fax no (021) 418-1754 February 2015, implying a At sector level, Equites could Physical address 14th Floor, Portside Tower, 4 Bree Street, Cape Town E-mail address i nfo @ e q u i tes.co. za SOURCE: EQUITES PROPERTY FUND forward yield of 8,3% at the be well placed as Investment Website address w w w.e q u i tes.co. za listings price of R10. Early asset Property Databank data shows

THE PROPERTY HANDBOOK 48 49 FINANCIAL MAIL July 20 1 5 Financial Mail Page 50-51 -10/07/15 01:08:48 PM

FORTRESS INCOME FUND listed property investments in May 2015. This has been driven announced its intention to high-growth markets. by a strategic focus on retail acquire sister fund Capital. If The balance of the listed properties, while disposing of this move is successful, it could equity portfolio comprises industrial and office properties. result in Fortress becoming the his internally managed diversified across SA, with a investments in sister companies There has also been a focus to fourth-largest listed Reit in SA, real estate investment 64% exposure to large national Resilient Property Income Fund decrease the average cost of with a pipeline of developments trust (Reit) was esta- tenants, which include large and Capital Property Fund. borrowing through active that we believe will continue to Tblished as a hybrid fund to offer listed companies and major Interest rate risk remains low management of hedging, using support its strong performance. investors a niche exposure to f ra n c h i s e e s . in the fund, with a 21% gearing capital markets for funding and The fund is headed by Mark the commuter-orientated retail Lease expiries are well spread level that is 124% hedged, with a negotiating lower margins on Stevens, and his team is smart, market. Fortress Income Fund over the next five years, with no weighted average hedge term of secured funding facilities. entrepreneurial and highly was also set up to offer exciting more than 20% of leases expiring 4,5 years and an all-in funding The large exposure to capable. This is what separates offshore property ventures in each year (based on cost of 8,4%. national retail tenants and the Fortress from being a mere through holdings in Rockcastle contractual rental revenue). Fortress is one of the most proximity of the assets to major collection of properties to that Global Real Estate Company, Vacancies in the portfolio have interesting listed property transport hubs in rural and of a superior business whose Romanian-focused New Europe remained acceptable around the counters in SA. Its performance nonmetropolitan nodes also stock-in-trade just so happens Property Investments (Nepi) 4% level, with decent rental since listing in 2009 has been makes Fortress’s retail assets to be property. and more recently Hammerson reversions of 6,8% experienced astounding, with its market cap among the most defensive in Fayyaz Mottiar Plc, based in the UK. on expired leases. growing from R1,8bn at listing the sector. Absa Asset Management The capital structure c a te rs The Fortress team is focused to more than R19,5bn at end- In May 2015 the fund fund manager for investors with different risk strongly on asset management, profiles, through an A and B with existing retail centres being LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FOUR GEOGRAPHICAL (JSE) share structure. The A and B upgraded, extended or re- Vacant SHAREHOLDERS SPREAD Fortress income Fund B 450 shares trade independently on developed frequently. The fund 2015 400 Shareholder's % Share % per province name held MD Mark the JSE. Investors in the A has also seized an opportunity 2016 350 FFA-linked units Steve n s shares have a preferential claim to improve the quality of the 2017 300 Coronation Fund 50,9 SA listed Managers 2018 property 250 to the income distribution of portfolio by acquiring a 25% Stanlib index 200 5,5 the fund, but are capped on the stake in The Galleria and Arbour 2019 Fortress Income 2020 & Fund A 150 growth on the income distri- Crossing shopping centres. Beyond FFB-linked units Capital Property 0 5 10 15 20 25 90 25,2 Gauteng — 28,2% bution by the lower of 5% or The fund had the foresight to Fund Western Cape — 5,9% (% of lettable area) 2013 2014 2015 CPI. The A shares also have acquire Weskus Mall in Vreden- Resilient Property 23,3 KZN — 18,2% preference to capital partici- burg, Western Cape, at an SOURCE: FORTRESS INCOME FUND SOURCE: INET BFA Income Fund Eastern Cape — 8,4% Limpopo — 14,8% pation in the event of the fund attractive yield of 7,8%. The area Mpumalanga — 15,9% winding up, while the residual is going through signif icant Free State — 2,5% income distribution and capital development due to Transnet’s FORTRESS INCOME FUND (As at June 30 2014) North West — 6,1% Who manages the fund? Internally managed participation would then accrue R9,7bn infrastructure expansion Number of properties in the fund 97 SECTORAL SPREAD to the B shares. p ro g ra m m e . Property valuation R 6 , 57 b n by value and rental income Market capitalisation R 1 0,9 bn The direct property portfolio Fortress has substantial Annual trading volume as % of units in issue 33,16% (FFA); 4,81% (FFB) consists of 97 investment diversification across geo- Net asset value per unit R14,58 (FFA); R8,08 (FFB) Price per unit at date R15,90 (FFA); R10 (FFB) properties, with a gross lettable graphies and currencies. Its Premium/discount to net asset value 9,05% (premium, FFA); 23,76% (premium, FFB) Historic/forward yield (%) 7,40%: FFA; 4,33%: FFB (historic) area of 768 444 m², and is investment in Rockcastle makes Gearing (%) 22 ,9 % valued at R6,6bn. About 90% of up 24% of the fund’s assets Name of the company Fortress Income Fund Retail — 86,2% the total direct portfolio followed by Nepi at 17%. The Name of fund Fortress Income Fund comprises retail assets based on fund has also opportunistically JSE code “F FA” ISIN ZAE000192787; “F F B” ISIN ZAE000192795 Office — 0,5% Head of fund and title Mark Stevens (MD) Industrial — 10,6% value, with about 8% in acquired a stake in the highly Contact person Bernita Schaper (company secretary) Residential — 2,7% Tel no (011) 612-6849 industrial assets and the rated UK-listed Reit Hammer- Fax no (011) 612-7599 SOURCE: FORTRESS INCOME FUND remainder being offices and son. Ma n a ge m e n t ’s intention is Physical address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 E-mail address N /A residential assets. to maintain and increase the Website address www.for tressfund.co.za The portfolio is well f u n d’s exposure to hard currency

THE PROPERTY HANDBOOK 50 51 FINANCIAL MAIL July 20 1 5 Financial Mail Page 52-53 -10/07/15 01:09:09 PM

GROWTHPOINT PROPERTIES ratio of 29,2%, of which 80,1% of also increased, though still for shareholders. The large size debt is hedged for a weighted negligible at 1,4%. Vacancies at of the portfolio ensures more average term of four years. the V&A Waterfront remain low diversification and lower asset- The SA portfolio has been at 1% and the asset continues to specific risk. But the relatively rowthpoint is the point’s overall asset mix, with resilient, with the fund perform well, with rental low rate of capital recycling in largest real estate retail increasing in the SA port- maintaining an average growth growth on renewals at 7,1% and recent years means Growth- investment trust (Reit) folio from 34% to 39%, while in distributions of 7% over the a 90,2% renewal success rate. point has a large “tail of assets” onG the JSE, with a market cap of offices remained unchanged at past five years. That being said, By employing strong weighing down on perfor- R70bn. It has property assets 46%. Though the transaction the most recent results to property people at the helm of mance. The tail hurts earnings valued at R78,2bn, comprising improves the overall retail mix, December 31 2015 have started each sector or portfolio, the and dilutes the positive effects 431 properties in SA and 51 in there are concerns about the to show some signs of weak- senior executive management of asset management activities Australia, through 6 4 , 5 % - ow n e d quality of the office portfolio ness and are reflective of the team has had the ability to and outperforming subport - Growthpoint Australia (Goz). It and the increased concentration current economic climate. focus on the bigger picture and fo l i o s . This has not gone un- also has a 50% interest in the risk to certain nodes. Overall, SA vacancies have execute the overall strategy. noticed and the share price has V&A Waterfront in Cape Town, Growthpoint maintains an increased over the past year This has led Growthpoint to underperformed the SA listed making it the largest and most active acquisition and develop- from 4,6% to 6,4%, with retail cement its position as the property index over the past diversified property owner in ment pipeline and has more vacancies up from 3,3% to 4,4%, biggest property player in SA. year. Management is certainly SA. It is also the only local than R3,2bn in current and office vacancies 7,5% to 8,4% The challenge will be experienced enough to address property fund included in the future projects on the go. The and industrial vacancies 3,6% to whether the fund will be able to the c h a l l e n ge s . Mohamed Kalla FTSE JSE Top 40 index and has large acquisition and develop- 5,8%. Vacancies in Goz have deliver above-average returns Sesfikile Capital director a relatively high foreign investor ment activity is in stark contrast ownership, currently at 20%. to disposals, with only R465m in LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) The fund has successfully assets held for sale. Though we Vacant 135 SHAREHOLDERS SPREAD Monthly SA listed 130 grown its asset base over the believe management has shown property Shareholder's % Share 125 % value per province 2015 index name held CEO Norbert past decade. Management has a great success in acquiring and 120 2016 PIC 11,2 Sa sse history of being successful developing assets in recent 115 2017 110 Southern Palace 7,8 “co n s o l i d a to rs” of assets, acqui- years, we are critical of the slow 2018 105 Properties ring strategic portfolios such as pace of disposals and “capital 2019 100 Stanlib 5,1 2020 & 95 Investec 3,6 Growthpoint 90 Primegro (R2,5bn, 2003), Met- re cy c l i n g ” in the portfolio. Beyond Properties BEE Consortia 3,4 0 5 10 1520 25 85 board (R2,4bn, 2006), Para- In addition to acquisition Gauteng — 43% (% of lettable area) 2013 2014 2015 mount (R3,4bn, 2007), Orchard and development activity, * As at June 30 2014 Western Cape — 11% Industrial Trust in Australia G row t h p o i n t ’s sound balance SOURCE: GROWTHPOINT PROPERTIES SOURCE: INET BFA * As at Dec 31 2014 KZN — 6% Eastern Cape — 2% (R1,3bn, 2009) and 50% of the sheet management has further Other — 3% V&A Waterfront (R5bn, 2011). enhanced shareholder returns Australia — 27% More recently, two large over the years. The fund has GROWTHPOINT PROPERTIES (As at December 31 2014) V&A — 8% Who manages the fund? Growthpoint Management Services office portfolios were acquired: been first to market in a Number of properties in the fund 4 31 SECTORAL SPREAD Abseq (R1,3bn) and Tiber number of capital raising Property valuation R 78 b n by value Market capitalisation R64,1 bn (R6,5bn) at initial forward yields initiatives such as the first Annual trading volume as % of units in issue of 8,7% and 7,7% respectively. commercial mortgaged-backed Net asset value per unit R 23,1 5 Price per unit at date R 27,49 This increased G row t h p o i n t ’s securities issue (R800m in Premium/discount to net asset value P re m i u m Historic/forward yield (%) 6,8% (historic) overall office exposure to 46%, 2005), the first distribution Gearing (%) 30, 8% causing some concern for the reinvestment programme in Name of the company Growthpoint Properties market as the office sector has 2009, the first capital raising in Name of fund Growthpoint Properties Retail — 25% recently been under pressure. the short-term commercial JSE code G RT Office — 27% Head of fund and title Norbert Sasse (CEO) Industrial — 13% Largely in response to these paper market (R500m in 2009) Contact person Lauren Turner Tel no +27 (11) 944-6249 GOZ — 25% concerns, effective from April 1 and the long-term unsecured Fax no +27 (86) 649-6666 V&A — 9 2015, Growthpoint successfully bond market (R500m in 2011). Physical address The Place, 1 Sandton Drive, Sandton, Gauteng, 2196 * As at June 30 2014 E-mail address l tu r n e r @ g row t h p o i nt.co. za SOURCE: GROWTHPOINT PROPERTIES took control of Acucap and The balance sheet remains well Website address w w w.g row t h p o i nt.co. za Sy co m . This improves Growth- positioned with a loan-to-value

THE PROPERTY HANDBOOK 52 53 FINANCIAL MAIL July 20 1 5 Financial Mail Page 54-55 -10/07/15 01:09:30 PM

HOSPITALITY PROPERTY FUND Its core portfolio o cc u p a n cy forecast at 1,71c. abroad. This has buoyed the growth rose 0,4% to 67,5% and In its recent trading update performance of the fund’s Cape ADR increased 5,1% to R1 3 5 9, management says revenues were Town properties. resulting in RevPar growth of affected by a drop in overseas Hospitality should have more ospitality Property view to decrease the number of 5,5% to R917 for the nine visitors due to perceptions that success in selling off its noncore Fund is the JSE’s only hotels from 22 to 14, while months to March 2015. SA may have also been hit by the assets in its 2016 financial year. It real estate investment retaining higher value proper- Distributable earnings fell 7,4% ebola outbreak as well as SA’s has already identified potential Htrust that invests exclusively in ties in metropolitan areas. The in the second half of 2014. recently implemented stringent buyers for a number of assets, hotel and leisure resorts. The properties earmarked for sale Hospitality is expecting visa requirements. Restricted with due diligence processes combined market cap of its are worth about R220m. The distribution growth for the six public-sector spending, following under way. But it may battle to dual-listed units has fluctuated fund has sold its interest in the months to June to be at least cost saving measures imposed sell them at the profits it desires, between R2,3bn and R3,2bn Courtyard portfolio for about 16,7% or 15,35c/unit lower than by the department of finance, given an economy that is over the past two years due to R80m. the forecast, representing an has also weakened revenue from experiencing tepid growth. There volatile supply and demand One key challenge facing the expected combined distribution government conferences. may be acquisition opportunities metrics in the sector. The asset fund is that its income stream of 76,81c. Distributions for the A Nevertheless, travel by locals elsewhere in sub-Saharan Africa. base is worth close to R5,1bn has varied across a large range units are likely at 75,10c, within SA has increased, given The fund has recently and comprises 22 individual of properties and has been representing the usual 5%/year the weakness of the rand undergone some changes to its hotel and resort properties. fairly cyclical. Hospitality is also growth, but the B-linked unit against the euro and dollar and executive management team. The fund offers investors a exposed to strikes, which can distribution is expected to be at how expensive it has become Alistair Anderson split A and B unit structure. The create labour cost issues. least 90% or 15,35c lower than for South Africans to travel Business Day property writer A linked units have a preferential However, management has claim to earnings, and they grow worked with staff to help build LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) their distribution annually at a better relationships with unions. Vacant SHAREHOLDERS SPREAD Hospitality Property 190 Fund B 180 Shareholder's % Share fixed rate, which is the lower of Centralised procurement plat- Monthly SA listed % per province property 160 name held 2013 Acting CEO CPI or 5%. The B units receive forms have also been index 140 A & B-linked units 2014 Coronation 26,9 Ridwaan Asmal the residual of earnings. formalised at most of the 120 Investec 2015 12,5 The 2010 soccer World Cup g ro u p’s hotels to negotiate bulk 100 Kagiso Asset 6,3 provided a thrust of activity to supply arrangements with 2016 80 Management 2017 & Hospitality 60 Sanlam the group, boosting the perfor- major suppliers to minimise the Beyond Property 5,1 Fund A 40 RE:CM 4,7 mance of the B units. But the cost of consumables. 020406080100 Gauteng — 27,28% subsequent lull in demand for The performance of the (% of lettable area) 2013 2014 2015 Western Cape — 22,72% SOURCE: HOSPITALITY PROPERTY FUND SOURCE: INET BFA KZN — 31,82% hotel rooms has placed f u n d’s core portfolio has not Eastern Cape — 9,09% significant downward pressure lagged the hotel sector overall, Other (Mpumalanga) — 9,09% on the B units’ income and but some of its noncore capital growth performance. properties have placed a drag HOSPITALITY PROPERTY FUND (As at March 31 2015 SECTORAL SPREAD Who manages the fund? HPF Management by rental income Its properties are categorised on earnings due to a fall in Number of properties in the fund 22 into three lease type segments: conference business. Property valuation R5bn Market capitalisation R2,6bn fixed lease properties; fixed and In a recent trading statement, Annual trading volume as % of units in issue 30,5% (HPA); 82,8% (HPB) variable lease properties; and management said trading Net asset value per unit R 1 1 , 24 Price per unit at date R15,24 (HPA); R2,70 (HPB) variable lease properties. Its conditions in the SA hotel Premium/discount to net asset value 35,6% (premium, HPA); 76% (discount, HPB) Historic/forward yield (%) 9,7%: HPA, 3,9%: HPB (historic); 10,2%: HPA, 4,1%: HPB (forward) larger properties include the industry have been tough since Gearing (%) 37,9 % Holiday Inn Sandton, the mid-2014. According to the STR Gauteng — 49% Crowne Plaza Rosebank, the Global SA Hotel Review for the Name of the company Hospitality Property Fund Western Cape — 33% Name of fund Hospitality Property Fund KZN — 13% Radisson Blu Waterfront in period July 2014-March 2015, JSE code HPA and HPB Head of fund and title Ridwaan Asmal (acting CEO) Eastern Cape — 3% Cape Town, the Radisson Blu the hotel industry recorded Contact person Ridwaan Asmal Mpumalanga — 2% Tel no (011) 994-6320 Gautrain in Sandton and the occupancy growth of only 0,7% Fax no (011) 994-6321 SOURCE: HOSPITALITY PROPERTY FUND Westin Cape Town. to 64,2% while the average daily Physical address The Zone, Loft Offices, 2nd Floor, Cnr Oxford Rd & Tyrwhitt Ave, Rosebank, 2196 E-mail address i nfo @ h pf.co. za Management plans to sell rate climbed 5,9% to R1 0 5 9. Website address w w w. h pf.co. za some noncore properties, with a RevPar grew 6,7% to R680.

THE PROPERTY HANDBOOK 54 55 FINANCIAL MAIL July 20 1 5 Financial Mail Page 56-57 -10/07/15 01:10:03 PM

HYPROP INVESTMENTS distribution per share was properties to be valued on a six- results presentation, the average 13,7%, higher than the previous monthly basis by independent value per square metre is comparable period; it had a net external valuers. R32 641 for the shopping centre asset value (NAV) per share As at the end of December portfolio and R13 340 for the he JSE-listed Hyprop November 2014. Construction is increase of 7,2%; and a total last year, the top eight office properties. Investments is a real under way at Achimota Mall in return of 25,9%. Management’s properties by market value The average growth in estate investment trust Accra, and Kumasi City Mall in guidance for the 12 months were: Canal Walk, Western trading density for the shopping T(Reit) that specialises in Ku m a s i . ending June 30 2015 is between Cape (80% share — R6,208bn); centre portfolio is 5,5%, the investing and managing The move into the rest of 12% and 15% for the full year. Clearwater Mall, Gauteng gross rent-to-turnover is 6,7% high-quality shopping centres Africa for a number of This is exceptional for a (R3,641bn); Somerset Mall, and the average annualised in major metropolitan areas. companies is prompted by the company with low financial Western Cape (R2,263bn); resultant property yield is 7,2%. Their malls are mostly regional fact that Africa has a significant leverage and limited offshore Wo o d lands Boulevard, Gauteng On February 16 2015, Hyprop centres that are dominant in shortage of high-quality retail exposure (due to a weak rand). (R2,239bn); The Glen, Gauteng was rated as a BEE level 6 their respective catchment property — less than 2m m² In the last decade, Hyprop’s (75% share — R2,127bn); Rose- contributor in terms of the a re a s . catering for more than 1bn total return on investment has bank Mall, Gauteng (R2,181bn); Property Sector Charter Generic The larger centres have a people compared with SA’s been 32%, with a distribution Hyde Park, Gauteng (R1,855bn); Enterprise Scorecard and is a diverse offering for consumers 21m m² for a population of 52m yield in rand terms of more and CapeGate, Western Cape constituent of the JSE SRI index. and during recessions typically — amid economic growth rates than 11% per year. NAV growth (R1,779bn, including the Zayd Sulaiman increase their market share. exceeding 5%. Some cities are per year has been 20%. Lifestyle Centre held for sale). Catalyst Fund Managers This is evident by the current growing faster and there is The valuation policy is for Per Hyprop’s latest interim investment analyst vacant space of only 1,8% burgeoning growth in the (including offices) in Hyprop’s middle-class population. LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) portfolio by rentable area. As at December 31 2014, Vacant 165 SHAREHOLDERS SPREAD Hyprop % Share Valued at R27,1bn (as at Hyprop had net borrowings of Monthly Investments Shareholder's % per province by GLA 150 name held CEO Pieter December 31 2014), Hyprop about R6,9bn. This equates to 2015 140 Government 13,98 Prinsloo ranks fifth in its sector by 25,4% of total property assets. 130 Employees Pension 2016 Fund market cap and third by Sapy- The weighted average cost of SA listed 120 property Stanlib 6,16 2017 index 110 listed property index weighting. borrowings was 7,3%. About Investec 5,30 2018 & 100 It is internally managed, distri - 88% of Hyprop’s debt is fixed Beyond Old Mutual 5,01 90 Investment Solutions 4,68 buting 100% of its distributable for an average term of 5,1 years. 0 5 10 15 2025 30 35 40 Gauteng — 42% income to shareholders. US dollar debt amounts to (% of lettable area) 2013 2014 2015 Western Cape — 48% As at December 31 2014, R1,886bn, which reduces the SOURCE: HYPROP INVESTMENTS SOURCE: INET BFA Hy p ro p’s direct property port- average cost of debt. folio consisted of 12 shopping The US dollar debt was used centres valued at R24,62bn and to fund the African investments. HYPROP INVESTMENTS (As at December 31 2014) Who manages the fund? Internally managed SECTORAL SPREAD a standalone office portfolio The leases in respect of these Number of properties in the fund 16 (held for sale) of R489m. properties are denominated Property valuation R 27 b n by value and rental income Market capitalisation R 23,7 b n It also has a R2bn investment mainly in US dollars. At Annual trading volume as % of units in issue 39 % in sub-Saharan Africa. This is December 31 2014, the net asset Net asset value per unit R 81 ,49 Price per unit at date R 97, 5 0 held through Hyprop Invest- value per share of the company Premium/discount to net asset value 19,6% (premium) Historic/forward yield (%) 5,2% (historic) ments Mauritius, a wholly was R81,49. Gearing (%) 25, 4% owned subsidiary of Hyprop. CEO Pieter Prinsloo leads the Name of the company Hyprop Investments Retail — 92% The 44 000 m² Manda Hill executive management team Name of fund Hyprop Investments Office — 8% shopping centre in Lusaka, and is assisted by Laurence JSE code HYP Head of fund and title Pieter Prinsloo (CEO) Zambia, is the largest centre in Cohen as financial director. Contact person Viki Watson (investor relations) Tel no (011) 447-0090 the sub-Saharan Africa portfolio They have an envious perfor- Fax no (011) 447-0092 SOURCE: HYPROP INVESTMENTS (excluding SA). mance track record. Physical address 2nd Floor, Cradock Heights, 21 Cradock Avenue, 2196 E-mail address I nvesto r Re l a t i o n s @ hy p ro p.co. za The 27 500 m² West Hills For the six months to Website address w w w. hy p ro p.co. za Mall in Accra, Ghana, opened in December 31 2014, Hyprop’s

THE PROPERTY HANDBOOK 56 57 FINANCIAL MAIL July 20 1 5 Financial Mail Page 58-59 -10/07/15 01:10:25 PM

INTU PROPERTIES retail space. It has secured into 2022. successfully started to recycle planning consent for various Occupancies are static at capital from its portfolio by projects across the entire 95%, while 210 new lettings selling an 80% stake in one of portfolio, many of the projects have been concluded on its less prominent shopping ntu Properties is a specialist the most dominant, making up are linked to catering and average at market rental values centres in Uxbridge, thereby shopping centre real estate a quarter of the portfolio value. leisure, which is becoming an and 5% above the rent strengthening its balance sheet, company listed both in SA Intu has recently added important differentiator for previously received. The which has been a concern for Iand the UK. It is a constituent of Spain to its geographical shopping centres. Smaller active medium-term earnings upside some investors given the capital the FTSE 100 index on the LSE exposure. The company already management refurbishment lies within the conversion of requirements of the manage- as well the FTSE/JSE Top 40 owns two of the top 10 activities are also under way, short-term rentals and filling of ment pipeline. Intu has also index on the JSE. The bulk of its shopping centres in Spain, with while nearly £1bn worth of vacancies left by retailers going experienced success with the asset base consists of shopping the most recent addition being major extensions to six of its into administration. Th e more prominent branding of centres across England, Wales, the Puerto Venecia shopping centres are being considered. portfolio value continues to its shopping centre portfolio, Scotland and Northern Ireland, centre and retail park in Planning approvals and retailer benefit from demand for leveraging off its nationwide located within major urban Zaragoza. Management views co m m i t ment take longer to institutional investment assets, coverage, with an increase in nodes. Intu was previously this centre as a good example of secure in the UK than in SA. So, with transactional evidence retailers entering into leasing named Capital Shopping what retail destinations can be these major extensions will only becoming more prevalent with contracts at multiple centres at Centres after it demerged f ro m in Spain. And with no dominant start in a staggered manner a positive effect on net asset a time. Anton de Goede the combined business of landlord in the country at from 2015 onwards into 2020, value per share. Coronation Fund Managers Liberty International in 2010. present, Intu sees this as an with completions from 2017 With this demand, Intu has property analyst With the UK being one of the opportunity to become Spain’s most prolific Internet retailing leading owner, developer and LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) markets globally, the prevalence manager of prime, regional Vacant 135 SHAREHOLDERS SPREAD Monthly 130 of omni-channel retailing has shopping centres. The top 10 Intu Properties Shareholder's % Share % per continent 125 held CE David become prominent. Omni- key catchment areas in Spain 2015 name 120 Peel Group 23,3 2016 F i sc h e l channel retailing refers to account for 80% of retail spend 115 Coronation Asset 14,4 customers experiencing a and management has develop- 2017 110 Management 105 Gordon Family 8,3 similar shopping experience ment plans for sites in Vigo, 2018 100 Interests 2019 & SA listed 95 across all shopping platforms Valencia, Palma and Malaga. Beyond property index Public Investment 7, 3 from the physical store to With 90% of the shopping 0102030405060 90 Corp (% of lettable area) 2013 2014 2015 BlackRock 6,1 shopping on a mobile device. centre portfolio at present still Europe — 100% In a similar way, the name UK-based, being a concentrated SOURCE: INTU PROPERTIES SOURCE: INET BFA change to Intu has been the shopping centre owner makes catalyst for the creation of a Intu highly exposed to the retail nationwide consumer facing environment and health of the INTU PROPERTIES (As at June 1 2015) Who manages the fund? Internally managed shopping centre brand to UK consumer. After a challen- Number of properties in the fund 21 properties (19: UK; 2: Spain) SECTORAL SPREAD ensure a similar customer ging consumer environment Property valuation £9 b n Market capitalisation £4, 5 b n by value and rental income experience across the portfolio. over the past few years, the UK Annual trading volume as % of units in issue Part of this is the implemen- economy is gradually exhibiting Net asset value per unit 379 p Price per unit at date 33 4 p tation of a multi/omni-channel signs of positive growth Premium/discount to net asset value Discount of 12% Historic/forward yield (%) 4,1% (dividend yield) retail strategy to capture some momentum. Employment is Gearing (%) 44% (as at Dec 31 2014) of the migrating Internet retail growing; house price growth is Name of the company Intu Properties Plc spend. strong; and retail sales growth Name of fund N /A Intu owns nine of the UK’s has returned. This should bode JSE code ITU Head of fund and title David Fischel (CE) Retail — 100% top 20 shopping centres as well for Intu as retailers look to Contact person Susan Marsden (company secretary) Tel no +44 (0)20 7887-4220 ranked by the PMA. Six of the capture some of this renewed Fax no N /A centres make up two thirds of energy in the economy. Physical address 40 Broadway, London, SW1H 0BT E-mail address fe e d ba c k @ i ntu .co.u k SOURCE: INTU PROPERTIES the portfolio value, with The Intu is ready to capture Website address w w w. i ntu g ro u p.co.u k Trafford Centre in Manchester potentially renewed demand for

THE PROPERTY HANDBOOK 58 59 FINANCIAL MAIL July 20 1 5 Financial Mail Page 60-61 -10/07/15 01:10:46 PM

INVESTEC AUSTRALIA PROPERTY FUND market sectors over the year, The 2015 results reflect the assumes further deployment of which is reflected in the recent positive outcome of the gearing capacity during FY2016 acquisitions. This has reduced s u cce s s ful execution of the into similar yielding assets. the net property income yield f u n d’s strategy. Management The low interest rate environ- nvestec Australia Property weighted average lease expiry, across the portfolio, which has says the fund is well positioned ment in Australia makes the Fund (IAPF) is the first with a relatively low 1,3% been mitigated by downward to deliver long-term sustainable listed property sector an attrac- inward-listed Australian real vacancy. The fund’s target pressure on borrowing costs, income and capital growth tive asset class from a dividend Iestate investment trust (Reit) on gearing ratio of up to 40% gives proactively managed by through the acquisition and yield perspective, especially for the JSE and the JSE’s only pure it up to AU$67m in debt management. The weighted efficient management of quality unfranked investors (an arrange- Australian-focused property capacity to continue average property yield of the properties and conservative yet ment that eliminates the double play. It is the Investec group’s aggressively pursuing attractive portfolio is now 8,23%, down proactive balance sheet and taxation of dividends). However, first listed foray into offshore a cq u i sition opportunities. IAPF from 8,59% at listing. This yield interest rate management. property prices have risen real estate markets. also locked in historically low compression has also had a The board expects distri- markedly, which means The fund aims to maximise funding rates of 4,15%, hedging positive effect on property bution growth of between 10% valuations are looking ex p e n s ive . sustainable returns to unit 100% of its debt book. valuations. The fund’s lease and 12% (pre-withholding tax) So the risk of costly acquisitions holders by investing in quality IAPF continues to review its expiry profile at year-end in FY2016. The lower end of the is rising. But given the weak office, industrial and retail fixed borrowing costs and has remains strong with a weighted guidance assumes no change in ra n d , the stock may be attractive properties in Australia. It offers taken advantage of falling average lease expiry of 6,4 years the current property portfolio to SA investors looking for rand investors exposure to the interest rates in Australia by by income. About 64% of leases and a gearing level of 30%. The hedge qualities. Howard Penny Australian real estate market locking in lower forward rates expire after five years. upper end of the guidance RMB Morgan Stanley and a rand-hedge opportunity during the year. Management through the Australian dollar. has renegotiated its debt facility, LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) The management team’s increasing the tenor by three Vacant 130 SHAREHOLDERS SPREAD objective is to grow and years to five years and simul- Monthly 125 Shareholder's % Share % per region Investec Australia name held 2017 120 CEO Graeme diversify the fund’s asset base. It taneously reducing the margin Property Fund Investec Property 18,56 Ka tz also wants to optimise capital by 42,5 basis points to 1,275%. 2018 115 Fund 2019 110 Investec Bank 16,33 and income returns over time The fund now has a long dated 105 Stadium On Main 2020 3,63 for unit holders by investing in debt and swap maturity profile 100 2021 & Investments SA listed 95 high-quality commercial real of 4,84 years and 5,52 years Beyond property index Sanlam 2,98 02040507010 30 60 80 90 Stanlib 2,75 estate assets that have certain respectively and a current New South Wales — 24% (% of lettable area) 13 2014 2015 qualities. These include being hedged position of 100%. SOURCE: INVESTEC AUSTRALIA Queensland — 27% positioned in well located The number of properties PROPERTY FUND SOURCE: INET BFA Australian Capital Territory — 18% commercial precincts in has grown to 17 and is worth South Australia — 3% Australia and New Zealand; $361m — up from nine Victoria — 28% medium to long-term lease properties worth $154m in 2014. INVESTEC AUSTRALIA PROPERTY FUND (As at May 28 2015) Who manages the fund? Investec Property Management SECTORAL SPREAD profiles; limited or no short Weighted average escalations Number of properties in the fund 17 term capex requirements; are lower in Australia than in Property valuation AU $361 m by value and rental income Market capitalisation R 3,0 8 b n contractual rental growth; and SA, with IAPF’s weighted Annual trading volume as % of units in issue 20 % strong tenant covenants. average escalations at 3,4%. Net asset value per unit $ 1 ,0 1 Price per unit at date R12,50 For the year ended March 31 Recent acquisitions comprise Premium/discount to net asset value 33,6% (premium) Historic/forward yield (%) 6,9% (forward) 2015, the group delivered 7,6% a mix of office and industrial Gearing (%) 27% annualised growth in distribu- properties which are well tion per unit. The portfolio grew located and have strong tenant Name of the company Investec Property Name of fund Investec Australia Property Fund Office — 68% by 122%, bringing total asset covenants. They also reflect JSE code IAP:SJ Head of fund and title Graeme Katz (CEO) Industrial — 32% growth since listing on October m a n a ge m e n t ’s ability to unlock Contact person Zach McHerron (fund manager) Tel no +61 2 9293-2464 SOURCE: INVESTEC AUSTRALIA 24 2013 to a relatively strong off-market transactions through Fax no +61 2 9293-6301 PROPERTY FUND 178%. IAPF is geared at 28% and the Investec network in a very Physical address Level 23, Chifley Tower, 2 Chifley Square, Sydney NSW 2000 E-mail address za c h . m c h e r ro n @ i nveste c .co m . a u the underlying portfolio has a competitive market. Yields have Website address www.investecaustraliaproper tyfund.co.za relatively strong 6,4 years continued to tighten across all

THE PROPERTY HANDBOOK 60 61 FINANCIAL MAIL July 20 1 5 Financial Mail Page 62-63 -10/07/15 01:11:05 PM

INVESTEC PROPERTY FUND sitions concluded during the 97% of the space let to troubled units smaller than 1 000 m². But year to March 2015 and the retailer Ellerines has been relet at office vacancies were almost un- p o r t fo l i o’s vacancy rate is 2,8%. average positive reversions of changed at 5,2% and retail I PF ’s latest full-year results 16%. The retailer accounted for vacancies were down to 1,2% nvestec Property Fund (IPF) financial year and is majority show that dividends increased 8% of the space that either from 2%. marks the second time that let to law firm Fluxmans with a by 10,1% while growth in nor- expired or was cancelled in the IPF has a quality tenant base, Investec has moved into the further eight years to run on the malised earnings per share was year to end-March. with 84% comprising large Ilisted property sector. Before, lease. It also added the Nicol 19,1%. It is conservatively geared The split of sectors by asset corporates, listed firms or Investec set up Growthpoint Main office complex, which is at 23,6% and the weighted value is 39% office, 42% retail nationals. The largest tenants Properties, which became an home to blue chips such as average lease expiry is 4,4 years, and 19% industrial. The only are Massmart (7%), Investec (7%) independent business after the Tiger Brands, Microsoft, Nestlé, with 37% of the portfolio expi- industrial property in the top 10 and Shoprite Checkers (5%). It i n te r nalisation of the manage- Mutual & Federal, Samsung and ring after five years. The in-force properties is the R347m Alrode also has an investment of ment company in 2006. But by Ad co r p . The largest retail acqui- escalations are attractive — being Multipark south of Jo’burg. But R502m in the IAPF, equivalent 2011 there was market demand sition was the R370m Dihlabeng 8,6% on industrial, 8% on offices there were two industrial acqui- to 5,8% of IPF’s total portfolio. for new property counters, and Ma l l , which dominates the and 7,8% on retail — and the sitions during the year, Diesel IAPF achieved full-year that positioned IPF for recep- southeastern Free State. IPF also average escalation achieved on Road in Isando and 52 Jakara n d a dividend growth of 11% after tion by the market. Investec acquired the 24 000 m² Fl e u rd a l new leases was 8,4%. Riley says in Centurion. There was a withholding tax. Much of the remains the anchor shareholder, Mall in Bloemfo n te i n . new retail leases were being marginal increase in industrial Australian dollar income has with a 34,6% stake in the fund. Howeve r, IPF remains signed at rentals on average vacancies from 2% to 3% due to been hedged. Stephen Cranston IPF CE Nick Riley says the mainly a Gauteng-focused fund 10,3% higher at expiry. About weaker demand for standard Financial Mail senior writer fund is an externally managed as the province accounts for diversified real estate invest- 66% of asset value, 69% of LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) ment trust (Reit). It aims to revenue and 71% of gross Vacant 135 SHAREHOLDERS SPREAD SA listed Monthly 130 deliver sustainable long-term lettable area. The Western Cape property Shareholder's % Share by GLA index 125 CEO Nicholas capital and income returns to its accounts for just 10% of asset 2016 120 name held 2017 115 Investec 34,40 R i l ey shareholders by owning quality value, and almost half of this is 2018 110 Coronation Fund 22,00 105 income producing assets and accounted for by Woolwo r t h s 2019 100 Managers hands-on asset management House, in the Cape Town CBD. 2020 95 Public Investment 4,44 2021 & 90 Corp Investec 85 thereof. The IPF management Investec Durban is IPF’s only Beyond Property Fund S Giuricich Hold 4,26 79 company is a wholly owned significant asset in KwaZulu 0 5 10 15 2025 30 35 40 Investment 3,35 Gauteng — 71% subsidiary of Investec Property, Natal, though Investec Property (% of lettable area) 2013 2014 2015 Solutions Western Cape — 11% SOURCE: INVESTEC PROPERTY SOURCE: INET BFA KZN — 1% a subsidiary of Investec Group. has 100 ha of land at the old Eastern Cape — 2% Investec as a group plays Corobrik site and is considering Free State — 7% across the full property the development of a 66 000 m² Limpopo — 3% Mpumalanga — 3% (As at March 31 2015) spectrum from fund manage- regional shopping centre at INVESTEC PROPERTY FUND Northern Cape — 1% Who manages the fund? Investec Property ment, greenfield and brownfield Cornubia near Phoenix. Number of properties in the fund 80 North West — 1% development, land conversion, Riley says the share price has Property valuation R8,2bn Portfolio valuation (incl. listed investments) R 8 ,7 bn SECTORAL SPREAD property trading, lending and increased by 165% since listing, Annual trading volume as % of units in issue 25 ,7% by value advisory. Many of the fund’s ahead of peers. With a market Net asset value per unit R 1 5,1 5 Price per unit at date R 1 7,0 1 larger holdings, such as the cap of R7bn, IPF is in the Premium/discount to net asset value 12,3% (discount) Historic/forward yield (%) 6,9% (historic)) R422m Balfour Mall came from middle of the pack in terms of Gearing (%) 23, 6% the Investec land bank. Two size and is rated at a forward Name of the company Investec Property Fund office buildings in Rosebank, yield of 7,9%. Since listing, the Name of fund Investec Property Fund The Firs and 30 Jellicoe, were portfolio has grown from 29 JSE code IPF Head of fund and title Nicholas Riley (CEO) Retail — 42% also acquired from Investec. I PF properties worth R1,7bn to 80 Contact person Nicholas Riley Tel no (011) 286-9674 Office — 39% also owns the Investec Pretoria properties and an investment in Physical address 100 Grayston Drive, Sandown,Sandton, 2196 Industrial — 19% and Durban offices. The 30 Investec Australia Property E-mail address proper [email protected] Jellicoe building was the largest Fund (IAPF) worth R8,7bn. Website address http://investecproper tyfund.com SOURCE: INVESTEC PROPERTY office acquisition of the past There were R2,1bn of acqui-

THE PROPERTY HANDBOOK 62 63 FINANCIAL MAIL July 20 1 5 Financial Mail Page 64-65 -10/07/15 01:11:25 PM

MAS REAL ESTATE MAS retains a currency net asset value growth once a for an additional phase. hedging approach as part of its development is completed. The group has acquired a diversification strategy, with The underlying portfolio 19 ha site in Chippenham. This exposure to euros, sterling and showed strong growth of 137% project will be split into two AS Real Estate Inc is portfolio. By the end of 2016, Swiss francs. Growth was from €64,8m at year-end June sites — development and a property invest- the directors aim to have 90% driven principally by the 2014 to €153,7m as at income generating. Manage- ment company that of the portfolio invested in acquisitions completed. But December. Six properties were ment is reworking the existing isM listed on the JSE and in income producing assets and properties have not been acquired during the period, planning consent and wants to Luxembourg. The company the remaining 10% invested in revalued since the end of the with a further two after increase the residential element invests in high-quality real developments and value-add interim reporting period, except year-end. Developments of the development. estate assets in Western Europe. opportunities. for those acquired after this continue to progress well with MAS also has a development Its objectives and investment On December 18 2014 the period which have been valued construction under way on the in Lewes, where a planning strategy are aimed at investors company transferred its listing by an independent valuer at the g ro u p’s New Waverley asset in application has been submitted. seeking offshore property from the AltX to the main board date of acquisition. So, the Edinburgh, where construction Management has performed exposure through European of the JSE. This resulted in its upcoming results will be critical of three prelet hotels — with extensive local consultation on commercial property oppor- recent inclusion in a few key SA to watch for any potentially 400 rooms and eight retail units the project and designs have tunities that yield stable income property benchmarks, including positive upward revaluation. — is under way. MAS expects been finalised. A decision on and capital returns and portfolio the SA listed property index. In MAS developments are completion of the hotels by the the application is expected later diversif ication. Western Europe, its initial focus currently accounted for at cost, second half of 2016 and has this year. Howard Penny Capital growth property is on the UK, Germany and which allows for a “k i c ke r ” to completed the purchase of land RMB Morgan Stanley stock pioneer Attacq is a Sw i t z e rl a n d . significant shareholder in MAS, The directors are targeting PRICE VS SECTOR TOP FIVE SECTORAL SPREAD holding 45,4% at December strong total returns through a (JSE) SHAREHOLDERS MAS 200 by value and rental income 190 2014. MAS is considered to be combination of income and 180 Shareholder's % Share CEO Lukas the key driver of European growth from the investment 170 name held 160 Attacq 45 N a kos expansion for the Attacq group. property portfolio, and through 150 Agulhas Nominees 15 SA listed 140 property index Argosy Capital According to Attacq, MAS development and active asset 130 11 provides upside to its own management. The target is for 120 Sanlam Life 6 110 Insurance reported net asset value from the portfolio to deliver a “co re 100 Mergon Foundation 4 90 Retail — 72% the difference in reported i n co m e” in excess of 6% on the Industrial — 28% equity accounted value of capital invested by shareholders. 2013 2014 2015 SOURCE: MAS REAL ESTATE R2,05bn and market value as at On March 31 2015 the SOURCE: INET BFA December 31 2014 of R2,6bn. adjusted net asset value per The two listed entities also have share was 114,5c (euro). This a historic relationship through represented an increase of 4,3% MAS REAL ESTATE (As at June 19 2015) Who manages the fund? Internally managed the Karoo transaction, which is from the interim period at Number of properties in the fund 25 expected to produce strong December 31 2014 and cumula- Property valuation €220 m Market capitalisation R 4,78 8 b n continued returns for both in tively 10,3% for the nine months Annual trading volume as % of units in issue 8 , 5% the upcoming financial periods. since the end of the previous Net asset value per unit €114,5c (as at March 31 2015) Price per unit at date R 1 6 ,41 MAS aims to maximise financial year (June 30 2014). Premium/discount to net asset value 3% Historic/forward yield (%) 2% shareholder value by adopting a The continued growth in the Gearing (%) 5% high income distribution policy. NAV per share is attributable to Name of the company MAS Real Estate Inc To enhance returns, it will also the strong net operating profit Name of fund N /A invest in properties that stand to as the portfolio benefits from JSE code MSP Head of fund and title Lukas Nakos (CEO) benefit from capital return increased scale, gains in the Contact person Helen Cullen (company secretary) Tel no +44 1624-625-000 improvements through active value of the indirect property Fax no +44 1624-626-037 asset management opportunities. investments and exchange gains Physical address 25 Athol Street, Douglas, Isle of Man, IM1 1LB E-mail address h e l e n @ m a s re i .co m MAS has a diversified from a stronger sterling and Website address w w w. m a s re i .co m Western European property Swiss franc.

THE PROPERTY HANDBOOK 64 65 FINANCIAL MAIL July 20 1 5 Financial Mail Page 66-67 -10/07/15 01:11:47 PM

NEW EUROPE PROPERTY INVESTMENTS present. Assuming Mega Mall qualities, the rating was diluted an estimated 12%-15%/year in rents can approach the €2 7/ m ² due to the fund’s smaller scale, euro over the next three years. It level in five years’ time through balance sheet and partial offers investors a quality income active management, this would development risk. Given Nepi’s stream resulting in below- epi, short for New per capita than SA, Romania has mean another 50% uplift in substantial pipeline and recently average risk. The stock p rov i d e s Europe Property only one-third of the shopping valuation even if the cap rate completed Mega Mall, the issue both an attractive and predic- Investments, owns a centre space or gross lettable remains constant. of scale and balance sheet size table income yield plus relatively Nquality portfolio of large area per capita as SA. Govern- Finally, Nepi’s acquisition is being addressed as a result of high growth from its develop- shopping centres and office ment debt to GDP is among the and development pipeline is strong growth in its asset base. ment and acquisition pipeline as buildings in Romania, Slovakia lowest in Europe and so are the likely to be extended. So, we Management hopes a rating well as organic growth. and Serbia. It has delivered 15% fiscal and current account expect strong NAV growth to upgrade to investment grade Management has gained compound annual growth in deficits. Many global companies continue and probably accele- could happen in the next 12 valuable experience in the cash distributions per share and retailers are present in rate in the next few years. Nepi months. Though capital markets Eastern European real estate since 2008, a strong perfor- Romania, with plans for expan- received its first credit rating pricing changes constantly, market and built up a good mance given that this has been sion. So, it is a “sweet spot”, recently from Moody’s, one Ne p i ’s debt funding rates could track record through the global during the global recession. offering among the highest notch below investment grade reduce by 100-150 basis points in financial crisis. Nepi remains an Nepi provides 100% euro growth prospects in Europe — and Romania’s country rating. future compared to the current attractive investment. exposure through a rand invest- yet property yields are among Though the report was average debt rates of 5% all-in. Leon Allison ment on the JSE. An investment the highest while rentals are positive mostly and highlighted Nepi provides a historic Macquarie Securities Group in it provides rand-hedge still among the lowest. Ne p i ’s investment grade dividend yield of 4%, growing by property analyst qualities without accessing one’s Though Nepi trades at a foreign allowance. It distributes substantial 60% or so premium LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) dividends that attract a 15% to estimated revalued net asset Vacant 280 SHAREHOLDERS SPREAD 260 withholding tax like a normal value (NAV), we believe this is Monthly Shareholder's % Share % per country by rentable 240 New Europe name held area CEO Martin share. However, since 2012 Nepi justified for various reasons. 2015 220 Property Investments Resilient Property 9,28 2016 200 Slabber t has offered shareholders the The fund has a substantial Income Fund 180 2017 option to receive either a cash secured development pipeline 160 Fortress Income 8,82 2018 SA listed 140 Fund distribution or a return of capital that will be significantly property index 2019 & 120 Capital Property 8,70 by way of an issue of new earnings accretive over the next Beyond 100 Fund 90 shares, like a scrip dividend. The few years, given that initial 01020304050607080 GEPF Equity 8,30 (% of lettable area) 2013 2014 2015 Des de Beer 2,10 latter is more tax efficient for yields average 9% versus Romania — 91% long-term shareholders as no funding costs of 4%-5%. SOURCE: NEW EUROPE SOURCE: INET BFA Slovakia — 5% upfront tax is incurred, but Also, Nepi’s recently opened Serbia — 4% rather capital gains tax (CGT) on Mega Mall in Bucharest is a the sale of the shares. prime example of how manage- NEW EUROPE PROPERTY INVESTMENTS (As at March 31 2015) As at December 31 2014, the ment creates value for share- Who manages the fund? Internally managed Number of properties in the fund 34 (excl. properties held for sale) SECTORAL SPREAD portfolio was worth €1,4bn holders. The 72 000 m² mall is Property valuation €1 ,4 bn (at March 31 2015) Market capitalisation €2 ,9 b n by value (including Kosice properties, expected to record an initial Annual trading volume as % of units in issue 22 % €171m, and Mega Mall yield of +10% on cost. Revaluing Net asset value per unit €4, 4 8 Price per unit at date €1 0, 57 development, €107,5m). The it by capitalising the income at a Premium/discount to net asset value 136% (premium) Historic/forward yield (%) 4% (historic) flagship malls in its retail cap rate of around 7% (the same Gearing (%) 1 3% portfolio include Promenada rate at which Nepi acquired Name of the company New Europe Property Investments Plc Mall, City Park, Braila Mall and Promenada Mall in Bucharest) Name of fund New Europe Property Investments Plc Ploiesti Shopping City in would add an estimated JSE code NEP Head of fund and title Martin Slabbert (CEO) Retail — 74% Romania; Aupark Kosice Mall €80m-€100m to the centre’s Contact person Martin Slabbert/Mirela Covasa (CFO) Office — 24% Tel no +40 744-328-882/ +40 721-371-100 Industrial — 2% and Aupark Zilina in Slovakia; valuation. In addition, average Fax no +44 1624-629-282 and Kragujevac Plaza in Serbia. re n t / m ² is €19, compared with Physical address Anglo International House, 2nd Floor, Lord Street, Douglas, Isle of Man, IM1 4LN E-mail address [email protected] or [email protected] SOURCE: NEW EUROPE Despite marginally higher between €26 and €27 for the Website address w w w. n e p i nvest.co m GDP per capita and retail sales two best malls in Bucharest at

THE PROPERTY HANDBOOK 66 67 FINANCIAL MAIL July 20 1 5 Financial Mail Page 68-69 -10/07/15 01:12:14 PM

OCTODEC INVESTMENTS for the total portfolio decreased the Edgars store. A significant managing mixed-use develop- from 16,7% (February 28 2014) to portion of the Edgars space has, ments and delivering good 15,3% (February 28 2015) due however, been relet to re t u r n s , development oppor- mainly to a focused letting Dis-Chem. Management is tunities should unlock further ctodec is a real estate comprised 167 properties valued strategy and upgrades to engaging with other potential value for shareholders. investment trust (Reit) at R4,7bn. Premium and improve properties. Industrial tenants for the remaining s p a ce . Octodec continues to deliver listed on the JSE with Octodec shared a number of vacancies also seem high at 8,6%, The key focus seems to be to solid results despite high Oa portfolio of 320 properties similarities. Both had a focus on though exposure to industrial increase exposure to mixed-use vacancy rates within the office concentrated in Gauteng. The multitenanted development and property is relatively small. residential developments. More portfolio. Distribution growth portfolio is valued at R11bn, refurbishment opportunities in The residential and shopping than 36 885 m² of mothballed achieved for the 2015 interim following a merger with the Johannesburg and Pretoria centre segments have the office and retail acquired as at period is 9,3% and management Premium Properties and IPS CBDs. Premium did not only lowest vacancies at 3,7% and February 28 2015 is earmarked is confident that the 8%-9% Investments in September 2014. bring scale to Octodec’s 3,4% respectively as at February for conversion to mixed-use distribution growth guidance for It started acquiring an exten- portfolio but it also entrenches 28 2015. The retail vacancy is residential. There is also a good the full year is still achievable. sive property portfolio in the Oc to d e c ’s urban renewal commendable and has been d eve l o p ment pipeline of more Key to delivering on the growth Pretoria CBD in the early 1990s. s t ra te g y . boosted by the fact that the than R900m that has been guidance will be a further Today, the CBD properties in IPS Investments was a space previously let to the failed approved for mainly mixed-use reduction in vacancy rates Oc to d e c ’s portfolio offer scale privately held company in Ellerines Group is now fully let. residential schemes. Given through upgrades and proactive that enables it to create value by which Premium and Octodec A notable vacancy at Killarney Oc to d e c ’s successful track m a n a ge m e n t . Koikoi Lawrence means of a unique and a had an equal 50% shareholding. Mall is due to the departure of record of developing and Stanlib property analyst defensive portfolio, with a Its property portfolio comprised residential offering that has a 53 properties valued at R2,5bn. LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FOUR GEOGRAPHICAL (JSE) vacancy rate of only about 3,7%. The enlarged Octodec entity, Vacant 150 SHAREHOLDERS SPREAD 145 The demand for its residential with a market cap of about Monthly Octodec Investments 140 Shareholder's % Share % per province held MD Jeffrey offering is strong and this is R6,4bn following the merger of 2015 135 name 130 Directors and Family 43,99 Wa p n i c k evidenced by bad debts being Premium and Octodec, has 2016 125 120 Stanlib 6,08 2017 below 1% across the residential resulted in Octodec becoming 115 Old Mutual 5,95 2018 110 Government 3,57 portfolio. This low level of bad the dominant player in the 105 2018 & Employees Pension debts is also attributable to the Johannesburg and Pretoria CBD Beyond SA listed 100 property index Fund fact that the property manage- residential space. The enlarged 0 5 10 15 20 25 30 93 ment function is outsourced to entity also has significant (% of lettable area) 2013 2014 2015 Gauteng — 100% a competent and capable exposure to office and retail SOURCE: OCTODEC INVESTMENTS SOURCE: INET BFA property manager in City properties in both inner cities. Property — wholly owned by Residential and CBD retail the Wapnick family, who are (excluding shopping centres) — SECTORAL SPREAD also significant shareholders in which is normally located on OCTODEC INVESTMENTS (As at February 28 2015) Who manages the fund? City Property Administration by value and rental income Octodec, holding about 39%. the ground floor of residential Number of properties in the fund 32 0 Oc to d e c ’s property portfolio buildings — contribute a large Property valuation R11bn Market capitalisation R 6 ,4 b n prior to the merger had a large part of Octodec’s rental income Annual trading volume as % of units in issue exposure to sizeable non-CBD (about 58,3%). The balance is Net asset value per unit R 26 ,45 Price per unit at date R 27, 8 0 retail assets, including Killarney split between offices (22,5%), Premium/discount to net asset value 5% (premium) Historic/forward yield (%) 6 , 83% - 6 , 89 % Mall and Woodmead Value Mart shopping centres (10,5%) and Gearing (%) 4 0, 5% in Johanneburg and Elardus industrial (8,8%). Name of the company Octodec Investments Retail — 39,8% Park Shopping Centre and Office vacancies in the latest Name of fund Octodec Investments Office — 22,5% Gezina Shopping Centre in results seem high at 33%. But if JSE code O CT Industrial — 8,8% Head of fund and title JP Wapnick (MD) P re to r i a . you exclude vacancies on pro- Contact person Anthony Stein Residential — 29,0% Tel no (012) 319-8780 Formerly listed Premium perties that are being developed Physical address CPA House, 101 Du Toit Street, Pretoria, 0002 SOURCE: OCTODEC INVESTMENTS had a market cap of R2,9bn at and upgraded, this decreases to E-mail address i nfo @ o c to d e c .co. za August 31 2014. The portfolio 20,6%. The overall vacancy rate Website address w w w.o c to d e c .co. za

THE PROPERTY HANDBOOK 68 69 FINANCIAL MAIL July 20 1 5 Financial Mail Page 70-71 -10/07/15 01:12:47 PM

REBOSIS PROPERTY FUND from the office assets. The of interest, given that pricing in Port Elizabeth. Meanwhile, BT overall portfolio has one of the will have to be sufficiently Ngebs Mall, a R1,3bn centre, will lowest levels of vacancies in the appealing for shareholders to open this year. sector at just 2,2%. From a approve the transactions. Rebosis should deliver growth his is a retail and oversubscribed and R565m of balance sheet perspective, At the Forest Hill Centre in line with the stated guidance commercial property- capital was raised and ear- Re b o s i s’ gearing level of 38% is about 75%-80% of the gross in FY2015 and similar to the focused real estate marked for future acquisitions. higher than that of the market, leasable area comprises national s e c to r ’s forecast average distri- Tinvestment fund led by Sisa Shortly after, it proposed a but is not at excessive levels. retailers, in line with Rebosis’ bution growth of around 9%. Ngebulana. As at February 28 scheme whereby it would Average debt funding cost is 8% strategy. Consistent with the Prospects are aided by positive 2015 its direct portfolio has 19 acquire the remaining linked and 74% of the debt is fixed. global shift to increased enter- trading density growth at its income-producing assets, of units of listed peer Ascension The development pipeline of tainment offerings at malls (to retail centres and by the contrac- which 14 are office buildings, P ro p e r t i e s . Their shared Billion Group is a key part of aid dwelling times), Forest Hill tual escalations inherent in the four dominant regional objective is to advance their Re b o s i s’ expansion strategy. also includes an ice rink and a extended office lease expiry shopping malls and one an i nve s to rs’ interests through pre- Bi l l i o n’s sizeable retail develop- wave pool. Billion Group will prof ile. industrial warehouse. The serving black management and ments include Forest Hill in start developing the node, adding Rebosis currently offers a portfolio is focused on ow n e rship credentials to Centurion, Bay West City in offices, a value centre and motor forward yield of roughly 2% dominant regional shopping continue enhancing their Port Elizabeth and BT Ngebs in dealerships. Bay West, a R1,75bn above the sector average. malls and mainly single- offering of office accommo - Mthatha. The potential for these retail development opened in Refiloe Seoloane tenanted office buildings let to dation to government and other assets to transfer to Rebosis in May 2015, is set to increase the Investec Asset Management the department of public works, empowerment-sensitive tenants. the future is a significant point retail competitive environment investment analyst with the office buildings located In a similar vein to other in nodes attractive to govern- local listed property companies, LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) ment tenants. The portfolio is Rebosis has recently sought to Vacant 135 SHAREHOLDERS SPREAD Monthly 130 well diversified with 54% diversify its portfolio outside of Shareholder's % Share % per province SA listed 125 CEO Sisa comprising offices, 44% retail SA .In March it gained exposure 2016 property index name held 120 Govt & Employees’ 16,4 2017 Ngebulana and 2% industrial by value. to the recovering UK economy 115 Pension Fund Rebosis seeks to enhance the through the acquisition of a 62% 2018 110 Stanlib 9,2 2019 105 Coronation Fund 9,0 quality of its asset base and stake in New Frontier Proper- Rebosis 100 2020 & Property Managers 95 fund distributions through ties for R1,18bn at a forward Beyond Fund Amatolo Trust 8,4 90 portfolio acquisitions, securing yield of 7%. The investment was 01020304050 Sanlam 5,8 long-term government office funded through cash, debt and (% of lettable area) 2013 2014 2015 Gauteng — 66% SOURCE: REBOSIS PROPERTY FUND SOURCE: INET BFA North West — 2% leases and early-stage investing the issue of linked units. New KZN — 3% in dominant regional shopping Frontier has its primary listing Eastern Cape — 29% centres in underserviced areas. in Mauritius and a secondary Its retail portfolio is let mainly inward listing on the JSE’s AltX. to major national chains. It is focused on retail properties REBOSIS PROPERTY FUND (As at February 28 2015) SECTORAL SPREAD Who manages the fund? Billion Asset Managers The asset and property in the UK. Number of properties in the fund 19 by value and rental income management functions are For the half year to February Property valuation R 6 ,9 9 9 bn Market capitalisation R 5, 6 8 6 b n executed externally through 2015, Rebosis announced solid Annual trading volume as % of units in issue 12% Billion Asset Managers and results, with distribution growth Price per unit at date R 1 3,1 0 Premium/discount to net asset value Billion Property Services of 8,2%, ahead of 6%-8% Historic/forward yield (%) 9,23% (forward) respectively. The fund has the guidance. Encouragingly, Gearing (%) 38 ,0 5% right of first refusal to acquire m a n a ge ment increased the Name of the company Rebosis Property Fund Name of fund Rebosis Property Fund p ro p e r ties from the develop- FY2015 outlook to 8%-10% JSE code REB Retail — 44% ment pipeline of Billion Group. growth. Portfolio performance Head of fund and title Sisa Ngebulana (CEO) Office — 54% Contact person Kameel Keshav (CFO) In January 2015, management was propelled by the retail Tel no (011) 511-5335 Industrial — 2% Fax no (011) 511-5626 announced an accelerated book centres reporting positive Physical address 3rd Floor Palazzo Towers West, Montecasino Boulevard, Fourways SOURCE: REBOSIS PROPERTY FUND build of R400m. Thanks to turnover growth, operating cost E-mail address ka m e e l @ re b os i s.co. za strong demand, it was 2,5 times savings and a solid performance Website address w w w. re b os i s.co. za

THE PROPERTY HANDBOOK 70 71 FINANCIAL MAIL July 20 1 5 Financial Mail Page 72-73 -10/07/15 01:13:06 PM

REDEFINE INTERNATIONAL UK commercial property the past 14 years, according to will be sustained in the coming lending, the market is still at CBRE. In addition, the London quarters. The survey suggested 2004 levels and 46% below office market experienced its that occupier demand should 2007 peaks. Newsom expects strongest take-up in the first continue to pick up, which will edefine International is a at Birchwood shopping centre alternative property asset quarter of 2015 in five years, help drive acceleration in rental FTSE 250 UK real estate in Warrington. Gearing has been classes to attract meaningful with 3,1m ft² of office space growth. Investment inquiries investment trust (Reit) somewhat reduced to 45,1% amounts of debt (such as t ra n s a c te d . are also growing strongly. Rfocused on delivering from 48,1%,including student accommodation, hotels According to CBRE, the high Though investor appetite sustainable and growing income unrestricted cash balances of and health care) in addition to a take-up and low availability is continues to spread beyond the returns through investment in £72,5m available for further rise in development finance. putting significant upward capital, Rics expects London to commercial real estate. The i nve s t m e n t s . The Savills team believes pressure on rentals. All London continue to be the UK’s top company has a market cap of On the hotels side, the group that opportunities in secondary office markets are expected to performing destination over the £800m. It holds a primary has agreed with Travelodge to property markets are dimini- see double digit growth this next 12 months in terms of listing on the London Stock extend the Enfield Travelodge shing, but it remains bullish on year, with the West End property price increases. Exchange and a secondary Hotel in London by 21 rooms. It London retail, London offices expected to lead the pack with That bodes well for JSE- listing on the JSE. Trading well has also recently acquired a and industrial property. rental growth of 15,6%. listed property companies, such on both exchanges, it allows for €156,8m German retail portfolio Office availability in central The latest quarterly survey as Redefine International, fungibility and accurate stock in a joint venture with Redefine London fell 3% in the first from the Royal Institution of which are exposed to the pricing across a geographically P ro p e r t i e s . quarter of 2015 — to 10,8m ft², Chartered Surveyors (Rics), London market. Howard Penny diversified investor base, which Though rising bond yields which is the lowest level over suggests that high growth rates RMB Morgan Stanley includes some of the largest asset are hurting global property managers in SA and abroad. markets, the UK commercial LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) The company targets an property market remains robust Vacant 230 SHAREHOLDERS SPREAD Monthly Redefine International 220 income return to shareholders with a strong underpin from Shareholder's % Share % per region 200 CEO Michael of CPI plus 1%-2%, while capital availability. 2015 name held 2016 Redefine Properties Wa tte rs 180 30,03 retaining loan-to-value levels of William Newsom, director of 2017 160 Allan Gray 13,18 between 40% and 50%. The valuation at international real 2018 SA listed BlackRock 3,79 property 140 Hargreave Hale 2,98 investment portfolio is estate group Savills, recently 2019 index 120 2020 & Societe Generale 2,42 geographically diversified said the UK commercial Beyond 100 across the UK (69%), Europe property lending market is 01020304050607080 90 (31%) and Australia through an “very well populated”, with a (% of lettable area) 2013 2014 2015 UK — 63% SOURCE: REDEFINE INTERNATIONAL SOURCE: INET BFA Europe — 28% investment in Australian-listed number of active lenders Australia — 9% Cromwell (9%). The portfolio is continuing to rise. There were split between retail (55%), 104 new entrants to the market commercial (25%) and hotel in the two years to June 2014, REDEFINE INTERNATIONAL PLC (As at February 28 2015) Who manages the fund? Internally managed SECTORAL SPREAD sectors (20%). It is also with an estimated 46 new Number of properties in the fund 1 82 by value and rental income characterised by a relatively players having entered the Property valuation R 20, 8 b n Market capitalisation R14,97bn (effective May 21 2015) long nine-year average market over the past 12 months. Annual trading volume as % of units in issue 21% weighted lease term, which He said of the new entrants, Net asset value per unit 42 ,4 0 p Price per unit at date R 1 0,1 4 negates some of the risks of about 60% are classified as Premium/discount to net asset value 33% Historic/forward yield (%) 5,9 % potential portfolio vacancies. “other nonbank” entities, most Gearing (%) 4 5% Occ u p a n cy is at an enviable of which are yet to take Name of the company Redefine International Plc 97,6% level across the portfolio. meaningful market share. So far Name of fund Redefine International Plc Retail — 62% Redefine International has a this type of lender has a JSE code RPL Office — 10% Head of fund and title Michael Watters (CEO) number of capex projects under relatively small market share at Contact persons Michael Watters and Stephen Oakenfull Industrial — 4% Tel no +44 207 811-0100 Hotels — 24% way, including a re d eve l o p m e n t around 13%. But this group is Fax no +44 207 811-0101 of Weston Favell shopping expected to take a 30% share Physical address 2nd Floor, 30 Charles II Street, London, SW1Y 4AE E-mail address i nfo @ re d efi n e i nte r n a t i o n a l .co m SOURCE: REDEFINE INTERNATIONAL centre in Northampton and a over the next five years. Though Website address w w w. re d efi n e i nte r n a t i o n a l .co m further £5m extension planned there has been a rapid rise in

THE PROPERTY HANDBOOK 72 73 FINANCIAL MAIL July 20 1 5 Financial Mail Page 74-75 -10/07/15 01:13:30 PM

REDEFINE PROPERTIES law firm Webber Wentzel. that offer attractive yields and JSE Top 40 index. This would Completion is expected in better fundamentals relative to create a further rerating of its November 2015. the SA property market. More share price relative to the sector Management has been quite than 80% of Redefine’s offshore and could attract more edefine Properties is the had been concerned with the active with acquisitions. It portfolio is invested in listed investors, particularly local and second-largest real quality of Redefine’s portfolio acquired a number of sizeable securities. The balance is offshore index trackers. estate investment trust and tenants. However, this portfolios from MacSteel invested directly in Germany Redefine achieved 7,1% R(Reit) in the SA listed property continues to improve. The office (industrial), Leaf Capital (offices) and Australia through distribution growth for the half- sector, with a market cap of just portfolio is now occupied by and Respublica (residential) at co-ownership with Redefine year ended February 28 2015. more than R40bn (as at June 15 59% A-grade tenants, with the yields ranging from 8%-10%. International and Cromwell. Management is confident that it 2015). Redefine is led by CEO balance being 27% B-grade and Investing in Redefine gives The long awaited acquisition will achieve distribution growth Andrew Konig. 14% C-grade tenants. The retail one exposure to the UK, of Fountainhead appears to be of 7%- 7,5% for the financial As at the half-year ended portfolio has a similar profile to European and Australian on track. Investors who had year ending August 31 2015. February 28 2015, Redefine’s the office portfolio. The indus- property markets. About 15% of previously voted against the As Redefine continues to total assets were worth R62,7bn, trial portfolio comprises 48% A, Redef ine’s portfolio is currently transaction have indicated their evolve and look for oppor- with income producing assets 48% B and 4% C-grade tenants. invested offshore and manage- support of the takeover. This is tunities locally and globally, the valued at R56bn. The assets are Redef ine’s debt profile is also ment is projecting that the likely to be concluded at the market hopes that will translate broken down as follows: direct looking better. The number will increase to 25%. end of August 2015. The poten- to superior income growth. local property portfolio at loan-to-value ratio is 35,1%, Management believes that there tial increase in size of Redefine’s Keillen Ndlovu R35,4bn; local listed property with a 3,5 year average expiry. are better opportunities offshore market cap could take it to the Stanlib head of listed property portfolio (stake in Emira) R1bn; The weighted average cost of Redefine International Plc at debt is 8,3%. The percentage of LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) R3,6bn; and Fountainhead at debt fixed is 86%. This is an Vacant 137 SHAREHOLDERS SPREAD R11,9bn. The directly held improvement from the August Monthly 130 Shareholder's % Share % per province SA listed 125 name held CEO Andrew international properties make 2014 financial year end’s 78%. 2015 property Govt Employees 2016 index 120 10,06 Ko n i g up R1,2bn through 50% holdings Redefine funds its property 115 Pension Fund 2017 in a German portfolio and the book with both traditional bank 110 State Street 6,78 Australian Northpoint portfolio. debt (83%) and debt capital 2018 105 (Custodian) 2019 & 100 Stanlib 4,78 Beyond Redefine The foreign listed portfolio, markets (17%). Most of Old Mutual Group 4,39 Properties 93 through a 15,9% stake in Redef ine’s debt expires in 2018 01020304050 Investment 3,77 Cromwell, is valued at R2,9bn. and beyond. This will help to (% of lettable area) 2013 2014 2015 Solutions Gauteng — 65% SOURCE: REDEFINE PROPERTIES SOURCE: INET BFA Western Cape — 18% Redefine has a well protect it from a pending rise in KZN — 8% diversified local portfolio too. interest rates. Other — 9% The sectoral split post interim Redefine has recently results is 39% offices, 40% retail, embarked on a number of REDEFINE PROPERTIES (As at February 28 2015) Who manages the fund? Internally managed 20% industrial and 1% developments. Management has Number of properties in the fund 29 1 SECTORAL SPREAD specialised properties. concluded about R1,1bn of Property valuation R 36 b n by value and rental income Market capitalisation R 45, 6 b n Redefine owns 291 local projects and has another R2,6bn Annual trading volume as % of shares in issue 44,9 1% properties. Vacancies are at in the pipeline across the office, Net asset value per share R9,9 1 Price per share at date R11,84 6,4%. Weighted average rental retail and industrial sectors. Premium/discount to net asset value 19,49% (premium) Historic/forward yield (%) 6,30% (forward) escalations are in line with the One development that stands Gearing (%) 35,1 % market average at 8,3%. The out is the 34 500 m² 90 Rivonia Name of the company Redefine Properties weighted average lease expiry is Road offices in Sandton, Name of fund Redefine Properties five years, and this is slightly Johannesburg. The project has a JSE code RDF Retail — 3% Head of fund and title Andrew Konig (CEO) longer than the market average cost of R979m, with a projected Contact person Cara White Office — 38% Tel no (011) 283-0202 Industrial — 25% of 3-4 years. It has a good yield of 7,8%. Parking ratio is Fax no (011) 283-0055 tenant retention rate of 89%, very good at five bays/100 m². Physical address Redefine Place, 2 Arnold Road, Rosebank, Johannesburg, 2196 E-mail address i nvesto re n q u i r i es @ re d efi n e.co. za SOURCE: REDEFINE PROPERTIES which is above market levels. Letting is progressing well, with Website address w w w. re d efi n e.co. za Over the years the market 75% of the space already let to

THE PROPERTY HANDBOOK 74 75 FINANCIAL MAIL July 20 1 5 Financial Mail Page 76-77 -10/07/15 01:13:50 PM

RESILIENT PROPERTY INCOME FUND gearing of 28% and a net total future is its foreign holdings. may not even achieve 1% this expense ratio of 12,7%. It The largest holding is Rock- year. Resilient should grow manages its interest payments castle — with interests in faster than the domestic through active interest rate Poland and Zambia — wh i c h economy, but there are few esilient is listed as a real normal Resilient formula of hedges using a sophisticated accounts for 15% of Resilient’s opportunities for new shopping estate investment trust about 85%-90% national chains. mix of caps and swaps. The net worth. This is followed by centre developments,” he says. (Reit) on the JSE. It is Though it has a smallish lettable company has a vacancy of 2,2% Romanian-focused New Europe In contrast, De Beer says in Rinternally managed and is the area of 31 000 m², Resilient has and its centres have enjoyed Property Investments (Nepi), Central and Eastern Europe the third-largest Reit on the JSE. rights to increase it to 85 000 m². like-with-like sales growth of which accounts for 10%. growth in retail sales is between Resilient is highly active as a Resilient has also increased 8,8%. At the December 2014 De Beer says he would prefer 3% and 7% and Nigeria will developer and redeveloper of its stake in Brits Mall in North interims it was disclosed that to buy offshore properties show 5% GDP growth this year, properties. It is focused on West. This 37 000 m² ce n t re 59% of Resilient is made up of directly. But due to ex c h a n ge even without the help of the oil shopping centres and MD Des serves a large catchment area direct properties. controls he has to invest price. “If the oil price recovers, De Beer has concentrated on that includes an extensive The greater Resilient group through funds that are inwardly Nigeria could have 7% growth.” the previously underserved farming and mining includes JSE-listed funds listed on the JSE or else through In the recent reporting areas outside the main community. It has also upped Capital and Fortress (which SA Reserve Bank-approved period, Resilient benefited from metropolitan areas as well as in its stake in the I’langa Mall in have plans to merge). The two holding companies, which are a weaker rand and its own a number of townships. Nelspruit. This mall is due for a account for 15% of its net worth. for African investments. currency hedging activities. Its best known centre is substantial extension, with But perhaps the most “We are not expecting much Stephen Cranston probably the Mall of the North, R410m budgeted for this. exciting part of Resilient’s economic growth from SA and Financial Mail senior writer which dominates Limpopo. It is Resilient has also increased 77 000 m², but an extension of its stake in Resilient Africa, its LEASE EXPIRY PROFILE PRICE VS SECTOR TOP SIX GEOGRAPHICAL (JSE) between 5 000 m² and joint venture with Shoprite, Vacant 200 SHAREHOLDERS SPREAD 190 Monthly Resilient Property % Share % per province 15 000 m² is being considered. which is building malls in 180 Shareholder's 2015 Income Fund CEO Des de Another dominant centre is Nigeria. Says De Beer: “W hitey 170 name held 2016 160 Des de Beer* Be e r 9 Highveld Mall in Witbank. This Basson, CE of Shoprite, talks 2017 150 Stanlib 8,9 140 one has been extended four about a chain of 700 stores 2018 SA listed Fortress Income 5,9 property index 130 times, with Game brought in as around Nigeria. There are 12 so 2019 120 Fund 2020 & 110 Capital Property 5,6 a fourth anchor. In 2014 there far, with another six being Beyond 100 Fund 90 were three acquisitions. The developed. I would be delighted 0510152025 30 35 GEPF Equity 5,1 (% of lettable area) 2013 2014 2015 Investec 5 Gauteng — 14,0% largest was the 52 000 m² if we got to 50 stores in malls * includes the 50% nonbeneficial SOURCE: RESILIENT PROPERTIES SOURCE: INET BFA holdings of Optimprops 3 Eastern Cape — 3,7% Jubilee Mall in Hammanskraal, and some freestanding stores.” KZN — 23,1% Gauteng, which the fund refers Resilient has increased its Limpopo — 30,9% to as “one of a kind”. capital commitment to Resilient Mpumalanga — 15,4% North West — 6,7% Resilient has also acquired Africa to R2bn, with a focus on RESILIENT PROPERTY INCOME FUND (As at June 30 2015) Northern Cape — 6,2% Who manages the fund? Internally managed 50% of Mams Mall, a planned southern Nigeria. The typical Number of properties in the fund 33 (including developments and land) 70 000 m² centre in Mamelodi, mall size in Nigeria is relatively Property valuation R 1 4, 59 b n Market capitalisation R18,8bn Pretoria, in which it will invest modest at 13 000 m², and Th e Annual trading volume as % of units in issue 1 8 , 52 % SECTORAL SPREAD R620m. Mamelodi is one of the Delta Mall in Warri opened in Net asset value per unit R 53,0 6 by value and rental income Price per unit at date R 6 0,0 5 major SA townships still left April and Owerri Mall is due to Premium/discount to net asset value 13,17% (premium) Historic/forward yield (%) 5,46% (historic) without a large mall. open in October. Gearing (%) 28 ,7% At the opposite end of the Resilient has secured sites in Name of the company Resilient Property Income Fund economic spectrum is Irene Asaba, Abeokuta and Port Name of fund Resilient Property Income Fund Village Mall, which De Beer Harcourt and is acquiring four JSE code R ES Head of fund and title Des de Beer (MD) describes as an arty lifestyle further sites. Resilient Africa Contact person Monica Muller (company secretary) Tel no (011) 612-6800 Retail — 100% centre in a rapidly growing might well list later this year Fax no (086) 758-4105 upmarket area of Pretoria. It has both on the JSE and the Physical address 4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 E-mail address i nfo @ res i l i e nt.co. za SOURCE: RESILIENT PROPERTIES a limited range of national Nigerian Stock Exchange. Website address w w w. res i l i e nt.co. za chains, in comparison to the Resilient has conservative

THE PROPERTY HANDBOOK 76 77 FINANCIAL MAIL July 20 1 5 Financial Mail Page 78-79 -10/07/15 01:14:19 PM

ROCKCASTLE GLOBAL REAL ESTATE COMPANY it would be targeting an even open in March 2016. growth in distributions of 5% split between listed property In line with its Eastern for the year ended June 30 2015. investments and direct property European strategy — with a Its value proposition hinges investments over the medium specific focus on Poland — the on management’s ability to his internally managed listed security portfolio of term. So, it is likely that Rock- company acquired its first retail recycle from lower yielding global real estate invest- US$4m to $2,2bn as at March 31 castle will rotate out of lower shopping centre in March 2015 listed property investments into ment company is d u a l ly 2015. Globally listed property yielding listed global Reits into in the country. Solaris centre, an higher yielding direct Eastern Tlisted on the Mauritian Stock stocks make up the bulk of its higher yielding, directly held 18 000 m² shopping mall, is European property investments. Exchange and the JSE. Its asset portfolio, valued at $2,1bn Eastern European and African located in the town of Opole in If this strategy is successfully market cap on May 20 2015 was as at the end of March 2015. property assets. the southern Poland. The implemented, it will significantly US$2bn, making it the Ro c kc a s t l e’s $2,1bn listed The company’s direct African shopping centre was acquired enhance earnings and also eighth-largest company in the property portfolio comprises investments comprise 50% for €52m. Management has change the risk profile of the SA listed property index (Sapy). globally listed Reits that offer interests in two retail malls in indicated that it is looking at company. Given the recent share Rockcastle is a hybrid real exposure to the real estate Zambia (Kafubu Mall and further opportunities to the price performance, it appears estate vehicle, with a broad markets of the US, the UK, Mukuba Mall). The third, total value of €76 0 m . that investors have largely mandate. Its investments Europe, Australia, Canada, Cosmopolitan Mall, is under As at April 30 2015, Rock- already priced in the successful comprise global real estate Singapore and Hong Kong. The construction in Lusaka, Zambia. c a s t l e’s 12-month total return implementation of this strategy. securities — unlisted or over- listed security investments are The company will acquire a was 142% versus the Sapy’s Curwin Rittles the-counter — other instru- exposed to the majority of the 50% stake in this 25 800 m² return of 38% over the same Catalyst Fund Managers ments derived from such real property sectors, with a 60% mall, which is scheduled to period. Management expects investment analyst estate securities; and direct bias towards the retail sector in property assets (which the developed markets. The PRICE VS SECTOR TOP THREE GEOGRAPHICAL (JSE) SPREAD company will both own and co m p a ny ’s top five holdings as 325 SHAREHOLDERS manage), including commercial at December 31 2014 were 300 Shareholder's % Share % per area 275 name held CEO Spiro property development projects, Hammerson (UK: $227,6m); Rockcastle Global 250 Resilient Property Real Estate Company 18,9 N o u ss i s existing properties and real Unibail Rodamco (Europe: 225 Income Fund 200 Pangbourne 17,3 estate companies. $181,4m); Simon Property Group SA listed 175 property index Properties 150 It receives regular distribu- (US: $174m); Avalonbay Fortress Income 2 12,0 tions from its investment Communities (US: $135,6m); and 125 90 portfolio, which it aggregates Ventas (US: $109,1m). From a Zambia — 1% and pays over to investors as geographical perspective, the 2013 2014 2015 International listed dividends semi-annually. majority of the investments are SOURCE: INET BFA property companies — 99%

The company is headed by derived from the US, Europe SOURCE: ROCKCASTLE GLOBAL REAL ESTATE Spiro Noussis, a chartered and Canada. accountant with experience in As at December 31 2014, the ROCKCASTLE GLOBAL REAL ESTATE CO (As at June 1 2015) Who manages the fund? Internally managed private equity and investment dividend declared increased to Number of properties in the fund 3 management. He is also a non- US4,28c (June 2014: 4,18c) and Property valuation U S $96 m Market capitalisation $2 b n executive director of Resilient net asset value (NAV) increased Annual trading volume as % of units in issue 10% Property Income Fund. Rock- to $1,50 (June 2014: $1,39). The Net asset value per unit $1,60 Price per unit at date JSE: R30,09 castle will undoubtedly benefit loan-to-value ratio was 37,5% Premium/discount to net asset value 53,7% premium Historic/forward yield (%) 8% (historic on initial listing price); 3,9% (forward) from the expertise of the (June 2014: 38,3%). The Gearing (%) 4 3% Resilient stable of companies, company hedges its interest rate Name of the company Rockcastle Global Real Estate Company which include New Europe risk through interest rate swaps. Name of fund Property Investments (Nepi), Ma n a ge ment’s target gearing JSE code ROC (SEM code Rock.N0000) Head of fund and title Spiro Noussis (CEO) Fortress Income Fund and ratio is between 30% and 50%; Contact person Leonie Gindan Tel no +27(11) 612-6800; +230 211-1398 Capital Property Fund. and it has indicated that it Fax no +27 (86) 623-7979 Ro c kc a s t l e’s portfolio has expects a decrease in borrowing Physical address Level 3, Alexander House, 35 Cybercity, Ebene, 72201, Mauritius E-mail address l e o n i e g @ ro c kca st l e g l o ba l re. m u grown significantly over the rates as the company ex p a n d s . Website address w w w. ro c kca st l e g l o ba l re. m u past three years from an initial Management has guided that

THE PROPERTY HANDBOOK 78 79 FINANCIAL MAIL July 20 1 5 Financial Mail Page 80-81 -10/07/15 01:16:04 PM

SA CORPORATE REAL ESTATE FUND The concern is headwinds in 9%, while disposals worth momentum of the past two retail, especially in the secondary around R180m were concluded years, given the economic assets, and the fund’s ability to at a yield of 7%. Management is climate and a rising interest rate maintain the momentum in its adding value and quality to the e nv i ro n m e n t in addition to load ast year I sang the praises Though this isn’t the biggest industrial portfolio (where I have portfolio while maintaining shedding, rising une m p l oy m e n t of SA Corporate manage- contributor to earnings, it been proven wrong so far). But acceptable growth in earnings. and social unrest. ment and its ability to provides diversity. And the early letting and greater asset The balance sheet also looks The next 12 months still look turnL the portfolio around from a housing sector presents an attention have put some of these decent. At a loan-to-value of relatively promising and the weak operation under a prohi- opportunity to develop and fears at ease. 29,1%, it is above historic levels likelihood of above inflation bitive Old Mutual management acquire stock at accretive yields, SA Corporate has been but below the market average. If distribution growth is possible contract to a revitalised oper- while maintaining the port- successful in recycling the you take into account that as a result of the restructuring ation. Existing assets were being fo l i o’s quality. Management has portfolio through buying, selling 82,5% of the debt is fixed for that has taken place in the past enhanced and management already earmarked a R340m and refurbishing. Besides the just over three years, that two years. was venturing into new and rental housing development Afhco portfolio, management is reduces risk even further. The This is a company that has exciting territories, such as CBD pipeline at an 11% yield. working on five other material average funding cost, including had a significant turnaround as residential. But my concern at The commercial sector has refurbishments that are both the hedges, sits at 8,4%, which is a result of focused manage- the time was that I may have become far more competitive defensive and accretive, likely to creep higher in the ment, strategic thinking and a got ahead of myself as and SA Corporate seems to have yielding on average above 9%. next year as the swap margins newly found alignment of management still needed to found a relative niche through Acquisitions (excluding Afhco) and nominal rates escalate. i n te re s t s . Evan Jankelowitz prove its ability to sustain a its residential/CBD exposure. exceed R310m at yields above But it will be hard to keep the Sesfikile Capital director market related growth rate in The balance of the portfolio distributions (dividends). is grinding along in a relatively LEASE EXPIRY PROFILE* PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) However, when the 2014 tough macroeconomic environ- Vacant 140 SHAREHOLDERS SPREAD 135 financial results came out, it ment. But industrial has been a Monthly SA Corporate Real Shareholder's % Share % per province by GLA Estate Fund 130 name held MD Rory seemed management was on spectacular performer over the 2015 125 Govt Employees 26,17 120 M a c key the right track. Distributable past several years. Though 2016 Pension Fund 115 Coronation Fund earnings grew by 9% for the reversions on renewals were 2017 110 5,58 year to December, in line with essentially flat and vacancies 2018 105 Managers 2019 & SA listed 100 Stanlib 5,14 the general sector. Considering pushed a percent higher to 1,2%, Beyond property index Sanlam Group 4,16 93 the tough economic climate and this was a strong showing 0 5 10 15 2025 30 Investment 4,03 the relative quality of earnings, considering the high base. Retail (% of lettable area) 2013 2014 2015 Solutions Gauteng — 53% SOURCE: SA CORPORATE SOURCE: INET BFA Western Cape — 6% this was an impressive rate of also did well, with reversions up KZN — 38% growth. The pessimist in me, 3,5% and vacancies down 3% to Other — 3% though, wants to point out the 5,9%. This should weaken in the one-off earnings such as the period ahead as rolling black- SA CORPORATE REAL ESTATE FUND MANAGERS (As at Dec 31 2014) Who manages the fund? SA Corporate Real Estate Fund Managers R7m reversal in bad debt outs are likely to put several Number of properties in the fund 166 SECTORAL SPREAD provision. But the core proper- smaller retailers out of business. Property valuation R 1 0,7 b n by value Market capitalisation R 9,9 bn (as at March 31 2015) ties fared well, with the standing The office portfolio proved Annual trading volume as % of units in issue 29% (2014) portfolio growing net income by once again to be the weakest Net asset value per unit R 3, 81 Price per unit at date R4,90 (as at March 31 2015) 8,6%. Tenant retention was solid sector, as vacancies were higher Premium/discount to net asset value 25,5% (premium, as at Dec 31 2014) Historic/forward yield (%) 7,29% (historic, as at March 31 2015) as 75,9% of expiries were at 12,7% and reversions negat ive . Gearing (%) 29,1 % renewed and vacancies were But that is more a reflection of Name of the company SA Corporate Real Estate Fund Managers steady at just over 3%. the SA economy and limited Name of fund SA Corporate Real Estate Fund The portfolio has evo lve d demand for office space in JSE code SA C Retail — 41% Head of fund and title Rory Mackey (MD) Office — 10% with the acquisition of the ge n e ra l . The fact that industrial Contact person Antoinette Basson Tel no (021) 529-8410 Industrial — 40% Affordable Housing Company and retail each comprise about Fax no (021) 529-8450 AFHCO — 9% (Afhco) portfolio, which now 40% of the portfolio, while office Physical address South Wing, First Floor, Block A, The Forum, North Bank Lane, Century City, 74 41 E-mail address i nfo @ sa co r p.co. za SOURCE: SA CORPORATE comprises just under 10% of SA is a mere 10%, puts SA Corporate Website address w w w. sa co r p o ra tef u n d .co. za C o r p o ra te’s total asset value. in a relatively strong position.

THE PROPERTY HANDBOOK 80 81 FINANCIAL MAIL July 20 1 5 Financial Mail Page 82-83 -10/07/15 01:16:26 PM

SAFARI INVESTMENTS Given Safari’s excellent track now playing in the same space. 10%. In addition, Safari has a record in SA — achieving an Another notable develop- secured loan facility of R600m, annual growth rate of about ment in Safari’s pipeline is the with only 20% utilised. So 20% over the past five years — construction of a first phase of ample funding headroom afari Investments listed small compared to the other it is clear that its township retail about 25 000 m²-30 000 m² of remains for potential develop- on the main board of the Safari centres. However, the focus in high-growth areas is retail space and a taxi rank to ments or acquisitions. Safari JSE in April 2014, with a quality is a great fit to the working. In addition, Safari has serve Bushbuckridge (Limpopo) also has access to the equity Smarket cap of R1,4bn. It used portfolio, given its high level of invested in a fresh development and surrounds with a one-stop capital market following its the funds it raised to settle an occupancy at 95% and the opportunity outside its focus shopping, banking and services listing. outstanding bond. composition of national retailers area through a mixed-use destination at a cost of about Sa f a r i ’s portfolio is relatively The company develops to at 95%. The centre is valued at development on the coastline of R500m. Upon completion, this small, but the quality and own and manage prime retail R135m and currently generates Namibia. This development is development coupled with the exposure of its portfolio are centres that provide quality R14m gross rentals per annum. under construction at a cost of Namibian venture, should take among the best in the sector. It shopping experiences to Sa f a r i ’s property portfolio, R462m and comprises 38 Sa f a r i ’s portfolio to the more could complement many large consumers in the high-growth though small, has a low vacancy luxury apartments and a than R3bn level. listed property portfolios. townships of SA. The portfolio rate and it produces quality 20 000 m² retail centre. Th i s On the funding side, Safari’s However, the current strategy is includes Atlyn Shopping Centre income streams. Revenue cross-border venture may be an gearing remains low, following to extract value for shareholders in Atteridgeville, west of increased 15% at the September indication of limited oppor- the settlement of the bond with through internal portfolio Pretoria. The centre has a gross 2014 half-year term (though this tunities in SA townships, given the listing proceeds. The g row t h . Lawrence Koikoi lettable area (GLA) of 39 680 m² included revenue from the how many listed entities are loan-to-value ratio is currently Stanlib property analyst with another 10 320 m² Victorian Shopping Centre for expansion planned. National the first time). LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) retailers comprise 91% of the All centres have been trading Vacant 132 SHAREHOLDERS SPREAD tenancy and the centre is 99% for more than five years. SA listed Shareholder's % Share Monthly property index 130 % per area name held CEO Francois let. The centre is valued at However, trading densities 120 2016 Stanlib 8,97 M a ra i s R322m, while it currently remain healthy and constantly Safari 115 2017 Investments 110 Nedbank Group 5,09 generates R33m in gross rentals. exceed the national average, 105 Plentytrade 4,20 2018 At 42 200 m² GLA, Denlyn which bodes well for the rental 100 Safarihold 4,13 2019 & Government 3,63 Beyond 95 Shopping Centre in Mamelodi affordability for tenants and the Employees Pension can be described as a small sustainability of rental 0102030405060 89 Fund (% of lettable area) 2014 2015 re g i o n a l . National retailers escalations. This is attributable Gauteng — 89% SOURCE: SAFARI INVESTMENTS SOURCE: INET BFA comprise 91% of tenancy and to excellent asset and facilities Namibia — 11% the centre is fully let. Denlyn is management. The asset anchored by Shoprite and is management function is valued at R512m, with R46m in performed by the fund itself gross rentals being generated. while the management of SAFARI INVESTMENTS (As at June 1 2015) SECTORAL SPREAD Who manages the fund? I n - h o u se The 27 700 m² GLA Thabong facilities is outsourced to Number of properties in the fund 9 by value and rental income Shopping Centre in Sebokeng Cosmos Management. Property valuation R 1 ,7 bn Market capitalisation generates a gross annual rental The expansion plans for the Annual trading volume as % of units in issue N /A of R23m. Valued at R266m, it is Atlyn and Thabong centres Net asset value per unit 87 7 Price per unit at date 900c 100% occupied, with national present development Premium/discount to net asset value 2,62% (premium) retailers comprising 83%. The opportunities which should Gearing (%) 1 7% level of national tenancy is enhance yields, boost Name of the company Safari Investments (RSA) expected to reach 90% dominance in the market and Name of fund Safari Investments (RSA) JSE code SA R Retail — 100% following a planned expansion. protect the clientele. With these Head of fund and title FJJ Marais (CEO) Contact person Dirk Engelbrecht (company secretary) The Victorian Shopping new additions the Safari Tel no (012) 365-1889 Fax no (012) 365-3701 Centre in Heidelberg is Safari’s portfolio value should reach Physical address 420 Friesland Lane, Lynnwood, Pretoria SOURCE: SAFARI INVESTMENTS most recent acquisition. Though R2bn in the next financial year, E-mail address i nfo @ sa fa r i - i nvest m e nts.co m is has a GLA of 15 400 m², it is up from the current R1,5bn. Website address w w w. sa fa r i - i nvest m e nts.co m

THE PROPERTY HANDBOOK 82 83 FINANCIAL MAIL July 20 1 5 Financial Mail Page 84-85 -10/07/15 01:16:49 PM

TEXTON PROPERTY FUND tenant and Standard Bank also This is less than a third of the There are potential benefits if rents a significant amount of national office vacancy rate. A the new management company Tex to n’s space. Government high 90% of leases that expired can deliver value, but there’s leases are not popular with were retained. The loan-to- also risk if it grows assets purely n a major change in sified through acquisitions out most listed funds as timely value ratio was 35%. for the sake of earning fees. direction, Texton Property of offices, its key competence, rental payment can be a Gross lettable area in SA is Texton now has a sizeable Fund has made significant into light industrial and retail. problem, rental increases 322 007 m² and co n t ra c t u a l rand hedge element and offers Iinvestments in the UK market, Of the SA portfolio, 80% of cannot be passed on, lease escalations on the portfolio are further upside when the un- where management has hands- rental now comes from offices. extension negotiations can be at an average 7,5%/year. loved office sector returns to on experience. Until recently, it A year ago this was 94%. Few difficult and you need to have Texton is a smaller fund and favour. As will be the case with owned mostly SA-based office listed funds have more than appropriate BEE credentials. offers investors a forward yield some other niche or smaller properties. Deals announced in 50% exposure to the office The fund doesn’t seem to have comfortably over 9%, which is funds, Texton may not be February 2015 include the s e c to r. these issues with government particularly high relative to its suitable for the novice property £15,5m all-in acquisition of The fund’s competitive te n a n t s . peers. It has above-average investor or those who haven’t Stanford House, an off ice strength has been to purchase For the six months ended distribution growth prospects, spread their risk among other building in Warrington, and offices where it can add value December 31 2014 distribution with a well regarded, hands-on listed property offerings. Booker Warehouse in Burton- by refurbishment. And manage- per unit was up 11,7%. Critical management team. Evan Robins upon-Trent. Both buildings have ment has an enviable track performance metrics remained The portfolio is in good MacroSolutions, Old Mutual triple net leases until 2025. record in this regard. Also, the strong, with the vacancy rate shape, considering the weak Investment Group This was followed by two fund owns prime located bulk, reducing to 3,5% (from 5,3%). state of SA’s office market. portfolio manager further UK deals in May 2015. which it may sell profitably for The first was the acquisition of residential development. Texton LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) a 50% share in the Broad Street has been active in profitably Vacant 135 SHAREHOLDERS SPREAD SA listed 130 Mall in Reading (£32m). Its and cost-effectively greening its Monthly property index Shareholder's % Share % per province 125 name held CEO Angelique partner is retail tycoon Christo off ices. Texton Business Venture 15,4 2015 120 de Rauville Wi e s e’s Tradehold. The second Within the office sector, it is Property Fund Investments 1828 2016 115 (Texton’s BEE was the acquisition of three focused on well located A and 110 2017 partner) 105 p ro p e r ties (£32,4m) — the Tesco B+ grade offices. There are Coronation Fund 8,8 2017 & 100 Beyond office building in Newcastle- opportunities in its chosen 95 Managers Upon-Tyne; Parc Pensarn Units, niche as this is a particularly 0 5 10 1520 25 30 93 Nedbank Group 8,4 Stanlib 8,0 Eastern Cape — 2,5% (% of lettable area) 2013 2014 2015 a decentralised retail centre in unloved area of the market at Old Mutual Group 7,1 Gauteng — 79,9% Carmarthen (Wales); and the moment. Offices, especially SOURCE: TEXTON PROPERTY FUND SOURCE: INET BFA Western Cape — 13,2% KZN — 1,3% Bonmarche and Poundland lower grade ones, remain under North West — 1,7% Units, a city centre retail considerable pressure. Northern Cape — 0,4% complex in Nottingham. So, in a Like most funds, Texton is Free State — 1,0% short period Texton has endeavouring to grow its asset TEXTON PROPERTY FUND (As at May 31 2015) Who manages the fund? Texton Property Investments SECTORAL SPREAD invested just more than R1,5bn base. The fund has aspirations Number of properties in the fund 52 in UK property, which now to grow assets to between R6bn Property valuation by value and rental income Market capitalisation comprises 30,5% of total assets. and R8bn over the next two Annual trading volume as % of units in issue The jury is still out on the years, up from the current asset Net asset value per unit R9,96 (as at Dec 31 2014) Price per unit at date R 1 0, 8 0 wisdom of this strategy. value of about R4,6bn (including Premium/discount to net asset value 8,4% (premium) Historic/forward yield (%) 8,27% (historic, as at Dec 31 2014) The fund has gained hard the UK acquisitions). Its market Gearing (%) 31,3% (as at Dec 31 2014) currency earnings but may cap at end-May 2015 was Name of the company Texton Property Fund sacrifice longer-term earnings R 2,8bn. Name of fund Texton Property Fund Retail — 10,9% growth and focus. Management About 76% of the fund’s JSE code TEX Office — 79,8% Head of fund and title Angelique de Rauville (CEO, as from August 1 2015) Industrial — 9,3% says there is asset management tenants are regarded as blue Contact persons Lyndon Kan; Angelique de Rauville Tel no (011) 731-1980 upside in some of the UK deals. chips (government, listed or Physical address 54 Bompas Road, Dunkeld West, 2196 SOURCE: TEXTON PROPERTY FUND To reduce risk within the SA national corporates). Govern- E-mail address ro m a i n e @ tex to n .co. za portfolio, the fund has diver- ment is the portfolio’s major Website address w w w.tex to n .co. za

THE PROPERTY HANDBOOK 84 85 FINANCIAL MAIL July 20 1 5 Financial Mail Page 86-87 -10/07/15 01:17:10 PM

THE PIVOTAL FUND growth drivers in the short to Pivotal at listing had a clearly property investment vehicle. medium term include the stated intention of having up to This will allow coinvestment to Loftus Park mixed-use develop- 15% of its assets invested off- facilitate access to attractive ment in Pretoria and Kyalami shore. However, its initial foray opportunities in the rest of he Pivotal Fund listed on also chairman of Redefine Corner convenience retail into rand hedge opportunities is Africa. This partnership has the main board of the Properties. The decision by ce n t re . Redevelopments of into the frontier markets of already secured a stake in a JSE in December 2014. Abland to remain as a signi- existing properties such as the Africa. Many are excited about premium grade building to be TIts strategy was to invest in ficant shareholder in the fund 25 000 m² extension to the opportunities on the developed in Nigeria for a property assets that allow for after it listed may give the Wo n d e r boom Junction present co n t i n e n t , as it is one of the few blue-chip tenant on a long lease. sustainable capital appreciation market a level of comfort as far low-risk value accretive remaining high-growth areas in Gearing may appear high at through participation in as alignment of interests goes. opportunities in the near term. the world. That excitement, 47%, but it is still below the d eve l o p ments and acquisitions But it may not be as comfor- Though some of the office though, is often accompanied targeted 55%. Pivotal has been of properties with sustainable table as it would be if Pivotal developments are concerning in by trepidation given the socio- able to bring its cost of debt and growing cash flows. also owned a share of Abland, an environment of already high political uncertainty investing down since listing. And with 87% Given this capital thereby ensuring total align- vacancies and increasing supply into Africa often brings. of the debt fixed, the fund is well appreciation focus, the fund ment of interests. nationally, the association with Pivotal is perhaps s h ow i n g positioned in the changing was listed in the real estate The Pivotal portfolio Abland offers the necessary caution in its approach by economic climate as we enter a holdings & development includes an array of established expertise to take on this risk in coinvesting via Mara Diversified likely rate hiking cycle. subsector. This separates it from properties across subsectors. a careful, managed manner. Property Holdings, a soon to be Jay Padayatchi real estate investment trusts This includes the iconic Alice Like many of its listed peers, Mauritius-SA dual listed Meago Asset Managers director (Reits), which focus on paying Lane office buildings in Sandton out rental income to investors as well as several retail centres LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) in the form of bi-annual such as Centurion Lifestyle Vacant 140 SHAREHOLDERS SPREAD distributions or dividends. Centre; Wonderboom Junction Monthly 135 Shareholder's % Share % per province 130 name held 2013 CEO Jackie van Consequently, Pivotal pays no in Pretoria; Goldfields Mall in SA listed 125 Momentum Life 15,26 property index N i e ke r k dividend and any income Welkom; and a stake in the 2014 120 Assurers generated from its portfolio is recently opened C ra d l e s to n e 2015 115 Path Trust 4,16 Standard Bank 2016 110 3,69 reinvested into its development Mall on the West Rand. 105 Properties 2016 & The Pivotal Fund and/or acquisition pipeline. Though rental levels at listing Beyond 100 Ellerine Bros 3,58 A further key differentiator appeared fair across the retail 01020304050 95 Sasol Pension Fund 3,40 (% of lettable area) 2014 2015 Gauteng — 87,4% and part of its value creation sector, they are slightly steep at Western Cape — 3,9% strategy is its strategic partner- an average R156/m² across the SOURCE: THE PIVOTAL FUND SOURCE: INET BFA Free State — 8,7% ship with Abland, one of the office portfolio. But once the foremost property developers in Alice Lane properties are ex- the country. Pivotal has secured cluded the average office rental THE PIVOTAL FUND (As at February 28 2015) a “right of first refusal” ove r drops considerably to fairly SECTORAL SPREAD Ab l a n d’s development pipeline, reflect the office portfolio quality. Who manages the fund? Internally managed Number of properties in the fund 40 by value and rental income securing a clear pathway for The real value in Pivotal, Property valuation R9, 3bn Market capitalisation R7bn growth in subsequent years. however, lies in the greenfields Annual trading volume as % of units in issue N/A (trading commenced Dec 8 2014) P ivot a l’s shareholders on developments it has access to as Net asset value per unit R18,40 (excl deferred tax) Price per unit at date R 1 8 ,4 0 listing included Abland, which well as the value unlock oppor- Premium/discount to net asset value 25% (premium) retains a 30% shareholding. The tunities within the existing Gearing (%) 47% board of directors contains a property portfolio. Name of the company The Pivotal Fund Name of fund Pivotal Property Fund Retail — 52% blend of youth and experience Within its secured pipeline, JSE code PIV with representation from the Alice Lane 3, which is expected Head of fund and title Jackie van Niekerk (CEO) Office — 43% Contact person Jackie van Niekerk Industrial — 5% major shareholders as well as — to be completed in the first Tel no (011) 510-9999 Fax no (011) 510-9990 perhaps controversially — one quarter of 2017, is likely to be a Physical address Abcon House, Fairway Office Park, 52 Grosvenor Road, Bryanston SOURCE: of the doyens of the property substantial contributor to NAV E-mail address j a c k i e.va n n i e ke r k @ p i vota l f u n d .co. za THE PIVOTAL FUND industry, Marc Wainer, who is growth in that year. Other Website address w w w. p i vota l f u n d .co. za

THE PROPERTY HANDBOOK 86 87 FINANCIAL MAIL July 20 1 5 Financial Mail Page 88-89 -10/07/15 01:17:35 PM

TOWER PROPERTY FUND When I wrote last year’s We expect average growth in value to the bottom line. ove rv i ew, I mentioned that it distributions of around 7%/year An additional risk is a sove- was not ideal that the company on average over the next three reign ratings downgrade for SA. had an external management years. Tower gives you two This would hurt the property ower Property Fund, a The acquisition pipeline is company. I said when Tower chances at beating inflation: sector as a whole as borrowing real estate investment strong, with R1,5bn of property grew to a sufficient size, it through an above-inflation costs would climb fast. In this trust (Reit), forms part of deals in the process of being would be preferable for the initial yield and an income respect, management will Tthe often neglected second tier co n c l u d e d . This will take the management company to be stream that grows faster than continue to look at fixing debt of the SA listed property sector. total size of the portfolio to internalised. Well, on May 4 inflation. for as long as possible. It listed on the JSE in mid-2013 R4 , 6 b n . Retail makes up 40% of 2015 it was announced that Investors in Tower are Tower is positioned to deliver with a property portfolio of the portfolio and industrial 12%, discussions are under way to exposed to the same risks as inflation beating distribution only R1,65bn. The portfolio has with the balance (48%) being internalise the management those from any other smaller growth over the long term. Being since grown to about R3,5bn, office properties. Management’s company now that sufficient cap company. These are being a smaller fund enables it to outperforming growth targets. strategic target is 50% retail, scale exists. The management exposed to a large, single tenant maximise the benefit of property The portfolio is based mainly 20% industrial and 30% in well company should be internalised that can vacate and directly asset management activities as in Gauteng and the Western located office properties. by October 2015, which should affect distribution growth. On the management team doesn’t Cape. Tower differentiates itself Vacancies are at less than 5%, be yield accretive. the other hand, management have to spread its time between by “g re e n i n g ” its properties. This a level management is more At the beginning of June can increase returns through hundreds of assets. Geoff Noble includes improving energy comfortable with. Gearing sits 2015, Tower was trading on a small initiatives (for example Grindrod Asset Management efficiency, which can mitigate at 23% after the recent capital 9,7% 12-month forward yield. greening), which directly add portfolio manager the effect of rising electricity raising. Management has said costs. “G re e n i n g ” p ro p e r t i e s that this should go up to just PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) reduces the cost of occupancy under 35% by October 2015 and 125 SHAREHOLDERS SPREAD 120 for tenants and makes Tower’s should remain at or below 35% Shareholder's % Share SA listed 115 % per province property index name held CEO Marc buildings more competitive. in the medium term. We 110 Coronation Fund 17,37 105 Ed wa rd s Cape Quarter and De Ville generally like companies to Managers 100 Shopping Centre in Cape Town have gearing in the 30%-40% 95 Stanlib 14,58 (its two largest properties) have range as long as a sufficient 90 Allan Gray 8,74 85 Nedbank Group 5,0 both undergone “g re e n i n g ”. Cape amount of debt has been fixed. Tower Property Fund Prescient 2,94 Quarter has solar panels. Solar The proportion of debt that 78 and lighting projects are being is fixed is at 74% (from 71% last 2013 2014 2015 Gauteng — 51,28% SOURCE: INET BFA Western Cape — 43,25% rolled out to other strategic year) for periods of two and KZN — 5,47% properties in the short term. three years. The all-in debt cost These projects are yield accretive varies from 7,55% (floating) to and aid tenant retention. 8,10% and 9,10% fixed for two In the past year, a number of and three years respectively. TOWER PROPERTY FUND (As at May 22 2015) SECTORAL SPREAD acquisitions have been made. Tower is externally managed Who manages the fund? Number of properties in the fund 43 by value and rental income These include Link Hills Shop- by Tower Asset Managers, of Property valuation R 3, 5 b n Market capitalisation R1,6bn ping Centre in Hillcrest, which Marc Edwards is the Annual trading volume as % of units in issue KwaZulu Natal (purchased on C E O. He is supported by a team Net asset value per unit R 9, 26 Price per unit at date R10 an 8,90% yield); Evagold Centre of four executive directors who Premium/discount to net asset value in the East Rand (9,50% yield); come from various property Gearing (%) 38 % an industrial portfolio (9,25% backgrounds. Since our review Name of the company Tower Property Fund Name of fund Tower Property Fund yield); Sunclare Office Building last year the company has JSE code Retail — 39,60% (9% yield); as well as Shoprite appointed a new chief financial Head of fund and title Marc Edwards (CEO) Office — 59,38% Contact person Brits; Shoprite Ennerdale, south officer, Joanne Mabin, who Tel no (021) 659-6100 Industrial — 1,02% Fax no of Jo’burg; and Shoprite replaced Fred Jenkins. Manage- Physical address Tannary Park, 23 Belmont Rd, Rondebosch, 7700 SOURCE: TOWER PROPERTY FUND Modimolle — all three on a ment is approachable and we E-mail address 9,25% yield. rate the team highly. Website address www.towerproper tyfund.co.za

THE PROPERTY HANDBOOK 88 89 FINANCIAL MAIL July 20 1 5 Financial Mail Page 90-91 -10/07/15 01:17:59 PM

VUKILE PROPERTY FUND 8,4%. The current debt structure into 180 apartment units. The an attractive forward yield of positions the company well for development is expected to 8,25%, compared to the sector’s an upward interest rate cycle. commence in September 2015 average yield of 6,3%. The fund The fund has also shown as a mixed-use precinct catering offers value at a time when the ukile Property Fund’s vacancies remain low at 2,5% that it is able to easily raise to the lower-to-middle income sector is notably more expensive, efforts to derisk the and 1,9% respectively. funds from other avenues. In market. The development is particularly given the high- portfolio by increasing Though portfolio metrics are April 2015, it successfully projected to realise a 9% yield quality, low-risk profile of Vmore defensive retail assets and strong, a large component of concluded an oversubscribed and should boost the retail trade Vu k i l e’s portfolio. Its portfolio is disposing of noncore properties leases is expected to expire book-build, raising R 1,1bn, at Vukile’s Randburg Square. now primarily exposed to the over the past few years has paid within the next 12 months. exceeding the original target of Vukile may look to diversify retail sector, which accounts for of f . The fund reported robust Given the portfolio’s high tenant R750m. Subsequently, it raised a offshore into properties within 67% of assets, including its distribution growth of 8,1% for retention ratio of 85%, this further R580m of debt in the developed markets. This will effective holdings in Synergy the full year to March 31 2015, should substantially reduce bond market, and this was also most likely be done in joint and Fairvest. The sale of surpassing both manage m e n t ’s re-tenanting risk. ove rsubscribed. The capital ventures with local property Sa n l a m’s asset management guidance as well as consensus. Income derived from raised will be used to fund its firms familiar with the market business back to Sanlam has also Vu k i l e’s core portfolio grew at Vu k i l e’s investment in listed R1bn acquisition pipeline. environment. Obtaining been concluded. This will enable 6,8% on a like-for-like basis — funds Fairvest Property Management says it will offshore exposure may further Vukile to generate high-quality, above inflation. Positive rental Holdings and Synergy Income diversify into the residential boost Vukile’s future earnings stable distribution growth in the reversions were achieved across Fund also contributed to sector. Vukile plans to convert and distribution growth. 7%-8%/year range. Chloe Ma the portfolio, indicating that income growth. The strong Randburg Square Office Tower Vukile is currently trading at Stanlib property analyst rentals achieved are largely at income growth derived from market and should be sus- Fairvest (10%) was, however, LEASE EXPIRY PROFILE PRICE VS SECTOR TOP FIVE GEOGRAPHICAL (JSE) tainable. The retail portfolio offset by a drag from Synergy’s Vacant 135 SHAREHOLDERS SPREAD Monthly 130 Shareholder's % Share % per area achieved particularly strong more modest 4%. Synergy’s SA listed 125 name held CEO Laurence rental reversions of 10,8%, one of growth prospects are, however, 2016 property index 2017 120 Public Investment 17,16 115 Corp Ra p p the highest in the sector. But expected to improve off the low 2018 110 Stanlib Asset 12,27 management has noticed that base and the consummation of 2019 105 Management 2020 100 some smaller, non-national retail the merger which will benefit 95 Old Mutual 6,97 2020 & Vukile tenants are under pressure as Vu k i l e’s shareholders. Beyond 90 Investment Group Property Fund Gauteng — 54% 0 5 10 15 20 25 30 85 Prudential Portfolio 6,36 both arrears and bad debts Vukile successfully imple- Management KZN — 16% (% of lettable area) 2013 2014 2015 provision increased. This is most mented the offer to acquire Sanlam Investment 5,25 Western Cape — 10% SOURCE: VUKILE PROPERTY FUND SOURCE: INET BFA Management Namibia — 5% likely due to challenging trading control of Synergy, as well as Free State — 5% conditions and frequent power Sy n e rg y ’s asset and property North West — 3% outages. To mitigate this, Vukile management company, Capital Limpopo — 3% Mpumalanga — 3% will continue to acquire retail Land Asset Management in May Eastern Cape — 1% assets that are underpinned by 2015. But Vukile will be required VUKILE PROPERTY FUND (As at March 31 2015) Who manages the fund? Internally managed SECTORAL SPREAD strong national retailer presence to restructure Synergy’s debt Number of properties in the fund 93 by value and rental income — above 80% of gross lettable and rental structure. For the Property valuation R13, 346bn Market capitalisation R 1 1 ,03 b n area (GLA) — and which have interim, the intention is to Annual trading volume as % of units in issue 26 ,4% historically been more resilient retain Syn e rg y ’s listed status as Net asset value per unit R 1 7,1 6 Price per unit at date R 1 9, 25 in challenging trading conditions. Vukile sees value in the current Premium/discount to net asset value 12% (premium) Portfolio vacancies improved A and B unit structure. Gearing (%) 26 , 6% from 6,5% to 4,6% by GLA, Vu k i l e’s balance sheet Name of the company Vukile Property Fund Retail — 64% largely led by improvement in remains strong. As at end-March Name of fund Vukile Property Fund Office — 16% JSE code VKE Industrial — 9% office vacancies, which dropped 2015, the company had gearing Head of fund and title Laurence Rapp (CEO) Contact person Johann Neethling (director corporate services/group company secretary) Sovereign — 7% from 14% to 10,2% and are of 26%, one of the most conser- Tel no (011) 288-1053 Hospital — 3% Fax no (086) 667-6569 Motor related — 1% expected to reduce further to vative in the sector. Of the fund’s Physical address One-on-Ninth, Cnr Glenhove Road and Ninth Street, Melrose Estate 2196 SOURCE: VUKILE PROPERTY FUND 7,8% as leases are finalised after total debt, 88% is fixed for 3,5 E-mail address j o h a n n . n e et h l i n g @ v u k i l e.co. za year-end. Retail and industrial years at a blended annual rate of Website address w w w.v u k i l e.co. za

THE PROPERTY HANDBOOK 90 91 FINANCIAL MAIL July 20 1 5 Financial Mail Page 92-93 -10/07/15 01:18:21 PM

TRANSFER AND CONVEYANCING COSTS Purchase price/ Transfer duty Conveyancing Vat Deeds office Total Purchase price/ Transfer duty Conveyancing Vat Deeds office Total Bond amount fees fees Bond amount fees fees

750 000 0,00 12 230,00 1 712,20 740,00 14 682,20 2 300 000 90 500 22 090,00 3 092,60 1 160,00 116 842,60 760 000 300 12 230,00 1 712,20 740,00 14 982,20 2 400 000 101 500 22 670,00 3 173,80 1 160,00 128 503,80 770 000 600 12 230,00 1 712,20 740,00 15 282,20 2 500 000 112 500 23 250,00 3 255,00 1 160,00 140 165,00 780 000 900 12 230,00 1 712,20 740,00 15 582,20 2 600 000 123 500 23 830,00 3 336,20 1 160,00 151 826,20 790 000 1 200 12 230,00 1 712,20 740,00 15 882,20 2 700 000 134 500 24 410,00 3 417,40 1 160,00 163 487,40 800 000 1 500 12 230,00 1 712,20 740,00 16 182,20 2 800 000 145 500 24 990,00 3 498,60 1 160,00 175 148,60 810 000 1 800 13 390,00 1 874,60 850,00 17 914,60 2 900 000 156 500 25 570,00 3 579,80 1 160,00 186 809,80 820 000 2 100 13 390,00 1 874,60 850,00 18 214,60 3 000 000 167 500 26 150,00 3 661,00 1 160,00 198 471,00 830 000 2 400 13 390,00 1 874,60 850,00 18 514,60 3 100 000 178 500 26 730,00 3 742,20 1 160,00 210 132,20 840 000 2 700 13 390,00 1 874,60 850,00 18 814,60 3 200 000 189 500 27 310,00 3 823,40 1 160,00 221 793,40 850 000 3 000 13 390,00 1 874,60 850,00 19 114,60 3 300 000 200 500 27 890,00 3 904,60 1 160,00 233 454,60 860 000 3 300 13 390,00 1 874,60 850,00 19 414,60 3 400 000 211 500 28 470,00 3 985,80 1 160,00 245 115,80 870 000 3 600 13 390,00 1 874,60 850,00 19 714,60 3 500 000 222 500 29 050,00 4 067,00 1 160,00 256 777,00 880 000 3 900 13 390,00 1 874,60 850,00 20 014,60 3 600 000 233 500 29 630,00 4 148,20 1 160,00 268 438,00 890 000 4 200 13 390,00 1 874,60 850,00 20 314,60 3 700 000 244 500 30 210,00 4 229,40 1 160,00 280 099,40 900 000 4 500 13 390,00 1 874,60 850,00 20 614,60 3 800 000 255 500 30 790,00 4 310,60 1 160,00 291 760,60 910 000 4 800 14 550,00 2 037,00 850,00 22 237,00 3 900 000 266 500 31 370,00 4 391,80 1 160,00 303 421,00 920 000 5 100 14 550,00 2 037,00 850,00 22 537,00 4 000 000 277 500 31 950,00 4 473,00 1 160,00 315 083,00 930 000 5 400 14 550,00 2 037,00 850,00 22 837,00 4 100 000 288 500 32 530,00 4 554,20 1 590,00 327 174,20 940 000 5 700 14 550,00 2 037,00 850,00 23 137,00 4 200 000 299 500 33 110,00 4 635,40 1 590,00 338 835,40 950 000 6 000 14 550,00 2 037,00 850,00 23 437,00 4 300 000 310 500 33 690,00 4 716,60 1 590,00 350 496,60 960 000 6 300 14 550,00 2 037,00 850,00 23 737,00 4 400 000 321 500 34 270,00 4 797,80 1 590,00 362 157,80 970 000 6 600 14 550,00 2 037,00 850,00 24 037,00 4 500 000 332 500 34 850,00 4 879,00 1 590,00 373 819,00 980 000 6 900 14 550,00 2 037,00 850,00 24 337,00 4 600 000 343 500 35 430,00 4 960,00 1 590,00 385 480,20 990 000 7 200 14 550,00 2 037,00 850,00 24 637,00 4 700 000 354 500 36 010,00 5 041,40 1 590,00 397 141,40 1 000 000 7 500 14 550,00 2 037,00 850,00 24 937,00 4 800 000 365 500 36 590,00 5 122,60 1 590,00 408 802,60 1 100 000 10 500 15 130,00 2 118,20 950,00 28 698,20 4 900 000 376 500 37 170,00 5 203,80 1 590,00 420 463,80 1 200 000 13 500 15 710,00 2 199,40 950,00 32 359,40 5 000 000 387 500 37 750,00 5 285,00 1 590,00 432 125,00 1 300 000 18 000 16 290,00 2 280,60 950,00 37 520,60 5 500 000 442 500 39 200,00 5 488,00 1 590,00 488 778,00 1 400 000 24 000 16 870,00 2 361,80 950,00 44 181,80 6 000 000 497 500 40 650,00 5 691,00 1 590,00 545 431,00 1 500 000 30 000 17 450,00 2 443,00 950,00 50 843,00 6 500 000 552 500 42 100,00 5 894,00 1 900,00 602 394,00 1 600 000 36 000 18 030,00 2 524,00 950,00 57 504,20 7 000 000 607 500 43 550,00 6 097,00 1 900,00 659 047,00 1 700 000 42 000 18 610,00 2 605,40 950,00 64 165,40 7 500 000 662 500 45 000,00 6 300,00 1 900,00 715 700,00 1 800 000 49 000 19 190,00 2 686,60 950,00 71 826,60 8 000 000 717 500 46 450,00 6 503,00 1 900,00 772 353,00 1 900 000 57 000 19 770,00 2 767,80 950,00 80 487,80 8 500 000 772 500 47 900,00 6 706,00 2 220,00 829 326,00 2 000 000 65 000 20 350,00 2 849,00 950,00 89 149,00 9 000 000 827 500 49 350,00 6 909,00 2 220,00 885 979,00 2 100 000 73 000 20 930,00 2 930,20 1 160,00 98 020,20 9 500 000 882 500 50 800,00 7 112,00 2 220,00 942 632,00 2 200 000 81 000 21 510,00 3 011,40 1 160,00 106 681,40

THE PROPERTY HANDBOOK 92 93 FINANCIAL MAIL July 20 1 5 Financial Mail Page 94 -10/07/15 01:18:31 PM hhh

Glossary of terms internal rate of return (IRR) amount the owner could required to invest/develop. reasonably expect to get from a ❑ A-GRADE OFFICE SPACE ❑ FLOOR:AREA RATIO (FAR) tenant of a property in the current Sapoa defines A-grade office space economic circumstances. Also called ”b u l k”. The ratio of the as one that’s not older than 15 total area of the floor of a building ❑ NATURAL VACANCY RATE years or which has had major to the total area of the land upon The normal, average or traditional renovation, has high-quality which it stands. percentage of rental properties in finishes, air-conditioning, adequate a node that is not leased or onsite parking and is getting rents ❑ FRACTIONAL OWNERSHIP o ccu p i e d . near the top of the range. A number of buyers, usually 12, buy a share in a property, usually a ❑ NET RENTAL ❑ ANCHOR TENANT leisure home. Similar to time share. Expressed as R/m²/month, the net A “n a m e” store in a shopping rental reflects only the income to centre that will draw shoppers to ❑ FREEHOLD TITLE the investor, and is expressed net the mall and benefit the other mall Unlike sectional title, freehold title of monthly operating costs. stores. Such a tenant usually gets means that the property owner favourable lease terms. holds tenure over the entire ❑ NET LEASE property and not just a portion of it. A lease with a provision for the ❑ ASS E T tenant to pay, in addition to rent, The capital item you invest in, such ❑ GEARING certain costs associated with the as the physical property. Net asset Also referred to as leverage. A operation of the property. value is the value of the property property owner's debt as a less borrowings. percentage of the value of the ❑ P-GRADE OFFICE SPACE property. Also called loan to value. P stands for premium and Sapoa ❑ ASSET MANAGEMENT defines P-grade office space as The management of property ❑ GROSS LETTABLE AREA (GLA) top-quality, generally modern portfolios and listed assets such as Total area that can be rented out space, which is a pacesetter in equities or options by a company to a tenant, and usually includes establishing rentals, and which or individual. common areas such as kitchens includes the latest generation of and bathrooms, but excludes ❑ B-GRADE OFFICE SPACE building services, ample parking, a parking and fire escapes. Older buildings with prestige lobby and a good accommodation and finishes close ❑ GROSS LEASE e nv i ro n m e nt. to modern standards as a result of A lease where the tenant pays a ❑ REVERSE MORTGAGE refurbishments, with single monthly rental, inclusive of Also known as a home income airconditioning and onsite parking. all costs. With this type of contract, the landlords bear the risk of plan, a reverse mortgage is ❑ C-GRADE OFFICE SPACE increased operating expenses. essentially a cash loan available to Buildings with older finishes and retirees against the value of their services that may have on-site ❑ GROSS RENTAL paid-up home. parking and airconditioning. Expressed as R/m²/month, the ❑ gross rental includes the net rental SALE AND LEASEBACK ❑ CAPITAL GAIN to the investor plus the monthly A financing arrangement in a Increase in capital value of a operating costs of running the property that is sold by its property on which tax is payable, proper ty. owner/user, who simultaneously either when sold or deemed by tax leases the property from the buyer rule to be incurred. ❑ INITIAL YIELD for continued use. The net rental income from the ❑ CAPITALISATION (CAP) RATE ❑ first year of a property investment TOTAL RETURN A ratio of the relationship between divided by the value of the The combined capital growth and a year’s cash flow and the present property expressed as a income of an investment over a value of the cash flow. The rate at percentage. This is also an certain period. The Investment which the net income of a building indicator of risk. Property Databank gives a is capitalised into perpetuity to benchmark performance of derive its market value. Cap rates ❑ MANAGEMENT AGREEMENT investment property in SA and are the property equivalent of the A contract between an owner of a g l o ba l l y. forward earnings yield of listed property and a property ❑ VACANCY RATE s h a res. management firm to supervise the affairs of the property for periodic Indicates the level of empty space ❑ DISCOUNT RATE fee payments. in a specific area or building and is A rate of return used to convert usually expressed as a percentage future net income flows into a ❑ MARKET RENTAL of the gross leasable area. The present value and which can be the Also known as economic rent, the inverse is the occupancy rate.

THE PROPERTY HANDBOOK 94 FINANCIAL MAIL July 20 1 5 Financial Mail Page 95 -10/07/15 11:23:08 AM hhh

“How do we light up the African skyline?” “One development at a time.”

To successfully fi nance property developments across the continent, you need a deep-rooted understanding of the African real estate market. Whatever your opportunities or challenges, we have the local insight and on-the-ground expertise to meet them with you. Let us be your partner for growth on this continent we call home.

standardbank.co.za/cib

Corporate and Investment Banking Also trading as Stanbic Bank

Authorised Financial services and registered credit provider (NCRCP15). The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). Moving Forward is a trademark of The Standard Bank of South Africa Limited SBSA 190509 07/15 Financial Mail Page 96 -10/07/15 11:23:43 AM hhh