investor presentation - vukile.co.za · investor presentation july 2018. ... this presentation and...

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Investor PresentationJuly 2018

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This presentation and any materials distributed in connection with this presentation may include certain forward-looking statements, beliefs or opinions, including statementswith respect to the Company’s business, financial condition and results of operations. These statements, which contain the words “anticipate”, “believe”, “intend”, “estimate”,“expect”, “forecast” and words of similar meaning, reflect the directors’ beliefs and expectations and involve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved.There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these statements and forecasts. Pastperformance of the Company cannot be relied on as a guide to future performance. Forward-looking statements speak only as at the date of this presentation and theCompany expressly disclaims any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation. No statement in thispresentation is intended to be a profit forecast. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

This document speaks as of the date hereof. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness,accuracy or fairness. This information is still in draft form and has not been legally verified. The financial information included herein is in draft form and unaudited. TheCompany, its advisers and each of their respective members, directors, officers and employees are under no obligation to update or keep current the information contained inthis presentation, to correct any inaccuracies which may become apparent, or to publicly announce the result of any revision to the statements made herein except wherethey would be required to do so under applicable law, and any opinions expressed in them are subject to change without notice. No representation or warranty, express orimplied, is given by the Company, or any of its subsidiary undertakings or affiliates or directors, officers or any other person as to the fairness, accuracy or completeness of theinformation or opinions contained in this presentation and no liability whatsoever for any loss howsoever arising from any use of this presentation or its contents otherwisearising in connection therewith is accepted by any such person in relation to such information.

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DISCLAIMER

DEAL HIGHLIGHTSAn opportunity to buy a high quality unique portfolio of dominant shopping centres from Unibail-Rodamco-Westfield

The proposed off-market acquisition provides meaningful scale to Vukile’s strategy to invest in the Spanish economy through retail property assets with strong fundamentals at an attractive yield

− The property portfolio will enhance the diversification of Vukile’s assets across Spain

− Acquisition yield of 5.9% is attractive and accretive

− Cash on cash yield of 8.1% in first 12 months

Portfolio consists of 4 strong and dominant assets, 2 of which are Unibail 4-star centres which speaks to the strong fundamentals supporting the properties

Acquisition will lead to a temporary increase in Vukile’s LTV to c.42.5% with active plans to bring gearing down to target level of 35% within the short-term

Earnings enhancing and strategically aligned

STRATEGIC DIRECTIONFocus on capital allocation and strategic consistency

Continued focus on defensive retail sector in line with our high-quality low risk portfolio

Further investment in our existing portfolio through expansions and upgrades

Strong operational focus to keep delivering solid results

Increased focus on consumer analytics and alternative income streams

Appetite to invest further inSouth Africa but limited local acquisition prospects at theright price

Southern Africa

Focus will be on Spain to drive home the advantage we have created in Castellana through scale, on-the-ground presence and operational capabilities

Despite performing in line with expectations, limited potential to invest further new equity into Atlantic Leaf under current conditions, but rather working with management to unlock value

Decided not to look at any other new markets in the short to medium term but rather to focus on Spain

International

Disciplined and conservative financial management with stable LTV target around 35%

Prudent interest rate policy to hedge at least 75% of debt

Foreign exchange hedging policy to minimise adverse foreign exchange fluctuations by hedging forward on average 75% of foreign dividends by way of forward exchange contracts over a 3 year period

Look to recycle non-core assets into core strategy:

- Timing and price dependent

- Includes stake in Gemgrow

Balance sheet management

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TRANSACTION OVERVIEWOpportunity to gain further exposure to Spain through acquiring a unique portfolio of dominant assets at an accretive yield

Portfolio acquisition value c.€460 million (externally valued at c.€480 million)

Portfolio acquisition cost c.€490 million (inclusive of transaction costs)

Cash on cash yield 8.1%

Local bank funding c.€257 million (no recourse to Vukile)

Equity contributors ▪ Vukile: c.€152 million▪ Co-Investor: €80 million

Vukile underwrite €30 million of Vukile’s required equity contribution is underwritten

Co-Investor Lee Morze related entity

Rationale for co-investment arrangements

▪ The size of the portfolio requires that Vukile co-invests with a 3rd party in order fund the transaction

▪ Co-Investment with Morze serves to deepen alignment with Vukile

Nature of co-investment Mechanisms in place, for Vukile to acquire the equity held by the Co-Investor 36 months post acquisition at a pre-determined price that Vukile projects to be accretive

6

DETAILS OF THE CAPITAL RAISE

Targeted amount R1.55 billion (including R250 million from Encha SPV & R115 million from management)

Indicative timing▪ Book build: Wednesday, 18 July 2018

▪ Settlement date: Thursday, 26 July 2018

Capital raising mechanism Accelerated book build

Use of proceeds▪ To partially fund the acquisition of the portfolio of Spanish properties

▪ The balance required to fund the acquisition will be drawn from existing debt facilities

Marketed to key investors followed by accelerated book build

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ACQUISITION OVERVIEWA low-risk dominant portfolio with stable income profile and value add potential

Dominant Retail portfolio

in Spain

Cash on cash yield

of 8.1%

Average asset value

of €120.3 million

Occupancy costs

ratio of 13%

121 119m² of lettable area

With average GLA of 30 280m2 per asset

WALE of 8.1 years to expiry

and 4.4 years to Break

92% of income

derived from international and national tenants

Vacancy rate of

1.8% across

the portfolio

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ASSET SUMMARYEvenly weighted shopping centre portfolio

EL FARO LOS ARCOS BAHIA SUR VALSUR

Location Badajoz Seville Cadiz Valladolid

Valuation (€’000) 157 400 112 000 118 800 93 100

GLA(i) 43 423m² 17 906m² 24 789m² 35 220m²

Number of stores 110 97 117 94

Opening Year 2013 1992/ 2013, 2016 Refurb 1992/ 2014 Refurb 1998/ 2013 Refurb

Catchment 1.3m in 60’ drive time 1.0m in 30’ drive time 0.8m in 45’ drive time 0.4m in 15’ drive time

Occupancy(ii) 99% 99% 96% 98%

Average monthly rental(ii) €16.6/m2 €32.3/m2 €25.4/m2 €14.2/m2

Occupancy cost ratio(iii) 11.3% 16.8% 13.2% 12.1%

WAULT (years) to break(ii) 5.0 4.3 3.8 4.1

Annual visitors 6.7m 6.7m 6.9m 5.5m

(i) Based on GLA to be acquired as part of the proposed transaction(ii) As at 31 May 2018(iii) Represents the total occupation costs to the tenant (incl. rental, service charges and marketing contribution) as a percentage of the tenant’s sales

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TENANT OVERVIEWDiversified tenant mix underpinned by a high proportion of international and national tenants

Top 10 tenants % of rent

6%

4%

4%

3%

2%

2%

2%

2%

2%

2%

Retail mix % of leased area

Tenant mix % of leased area

International, 60%

National, 32%

Local, 6%

Vacant, 2%

Fashion & Accessories

51%

Restaurant 9%

Health & Beauty

4%

Services 2%

Culture & Presents

5%

Household12%

Food0%

Hypermarket12%

Cinema2%

Leisure0%

Electrical Goods

3%

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PORTFOLIO SUMMARY FORECAST INCOME STATEMENT

8 Months to March 2019(€)

12 Months to March 2020(€)

Revenue 19 504 314 29 867 722

Property operating costs (1 072 405) (2 212 002)

Net operating income 18 432 245 27 655 720

Other expenses (2 045 087) (3 274 090)

Earnings before interest and taxation 16 387 158 24 381 630

Finance costs (3 405 079) (5 107 619)

Profit before taxation 12 982 079 19 274 011

Taxation (345 323) (512 689)

Profit after tax 12 636 756 18 761 322

Profit after tax 12 636 756 18 761 322

Less: Non-controlling interests (5 994 804) (8 900 264)

Profit attributable to Vukile 6 641 951 9 861 059

Note: The above assumes the underwrite is fully utilised

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VUKILE AT A GLANCE POST TRANSACTIONFocused Retail REIT in South Africa with growing Spanish retail exposure

4%United KingdomR1.2bn(iii)

Spain

R12.9bn(ii)

53%(i) includes 80% of the consolidated value of Moruleng Mall (Clidet No. 1011 (Pty) Ltd).(ii) Includes 99% of the consolidated value of Castellana Properties SOCIMI, including the acquisition of Habaneras SC.(iii) Carry value of investment in Atlantic Leaf Properties Limited associate.(iv) Adjusted for European bank debt raised in terms of the proposed acquisition with no recourse to Vukile

43%

Vukile attributable LTV(iv)

37.3%

Group GAVR30.0bn

Southern Africa

R15.9bn(i)

Direct Property Portfolio

R14.5bn(i)

R595m R790m

Group consolidated LTV42.5%

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PRO FORMA SPANISH PORTFOLIO METRICSEnhancing to Spanish portfolio metrics

Gross Asset Value €384.5m

Gross Lettable Area 197 132m²

Vacancy 3.3%

Average Asset Value €27mn

Average Rent/m²/month €10.23

WAULT Exp/Break (by GLA) 17.1yrs/4.4yrs

National Tenant (% rent) 94%

Top 5 Tenants (% rent)

Media Markt (8.6%)

Konecta (7.8%)

Aki (6.3%)

Sprinter (4.9%)

Mercadona (4.7%)

Inditex Group (3.8%)

Pre acquisition

€865.5m

318 471m²

2.7%

€48mn

€13.98

14.9yrs/4.8yrs

92%

Media Markt (4.3%)

Konecta (3.5%)

ZARA (3.1%)

Carrefour (3.1%)

Aki (2.8%)

Inditex Group (9.6%)

Post acquisition

16%

13%

11%

10%8%

7%

34%

Fashion Electronics Sports goods

DIY Household equipment Supermarkets

Other

Pre acquisition tenant mix by rent

Post acquisition tenant mix by rent

26%

6%

7%

6%5%3%

46%

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LTV BRIDGEScope for LTV reduction in the short-term

Key assumptions:(i) ZAR:EUR 15.70(ii) The underwrite is fully utilised (iii) Asset sales are made at carrying value in Vukile’s accounts and applied to debt(iv) Growth in line with market guidance

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BAHIA SUR SHOPPING CENTREStrategic location within the Bahía de Cádiz area

GLA24 789 m²

WAULT to next break (by MGR):

3.8 years

Rent per m² per month€25.36

Vacancy (by GLA):3.8%

NOI growth (5 year CAGR):2.9%

Number of Stores117

35%

15%10%

10%

10%

7%

5%

5%

1% 1%1% Fashion

Restaurants/Catering

Services/Misc

Accessories/Shoes/Bags/Jewellery

Department Store

Sporting Goods

Records/Books/Toys/Gifts

Healthcare/Cosmetics

Video/Comp/Elect - VideoGames

Storage

Home Furnishings (Deco)

2%

31%

22%

10%8%

26%

2018 2019 2020 2021 2022 2023 andbeyond

Key figures Category by rent

Key tenants Break profile by rent

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BAHIA SUR SHOPPING CENTRE (CONT.)

◼ Bahía Sur is a regional shopping centre with a strategic location within the Bahía de Cádiz area, which is within a reasonable distance from many large municipalities

◼ Adjacent to a main highway, the centre enjoys excellent access by car, public transport and foot

◼ Bahía Sur is dominant within its effective catchment area which includes the city of Cádiz, Puerto Real and San Fernando among other relevant towns. The catchment area extends up to 45 minutes’ drive due to the lack of competing schemes to the south of the centre

◼ The centre is part of the broader Bahia Sur sports complex, which includes a football field, gymnasium, tennis courts, and is adjacent to Bahia Sur Hotel and Apartments

◼ The city of Cadiz attracts high income earning tourists, with the majority of the city’s hotels rated 4 or 5 stars

◼ 87% of tenants at the centre are companies with an international and/or national footprint

◼ The centre is complimented by a large owner-occupied department store (El Corte Ingles) and hypermarket (Carrefour) which provide additional footfall and increase total GLA of the scheme to 56 624m2

◼ Annual footfall has increased at a CAGR of 6.6% since 2013

◼ The adjacent hotel has a total 100 rooms, 148 bungalows, 88 apartments and 52 studios – providing good footfall for the shopping centre

◼ While 25% of the GLA (16% of MGR) has a rolling break option, the current occupancy cost ratio attributable to tenants with the rolling break option is 11%

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EL FARO SHOPPING CENTREStrong position as main shopping centre for Badajoz and surrounding areas

GLA43 423 m²


5.0 years




Number of Stores110

37%

14%11%

11%

7%

5%

4%

3%3%

2% 2% 1%

Fashion

Home Improvements /Brico



Services/Misc


Video/Computer/Electrical

Furniture (Muebles)

Sporting Goods




5%

18% 19%

4%

20%

34%

2018 2019 2020 2021 2022 2023 and beyond


Key tenants Break profile by rent

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EL FARO SHOPPING CENTRE (CONT.)

◼ El Faro is a regional shopping centre situated in Badajoz, which is a city in the southwest of Spain close to the Portuguese border

◼ The leading shopping centre not only in Badajoz city, but also in the surrounding areas, including Portugal (with c.20% of annual footfall from Portugal)

◼ Low commercial density in the area, comprised by convenience shopping centres with limited catchment areas and tenant mix

◼ Conveniently located next to a university (with over 34 000 students and staff), hospital, government buildings and an amusement park which attracts visitors from the wider region of Extremadura

◼ It is easily accessible by car and public transport

◼ Considered to be slightly under rented, presenting an opportunity for positive rent reversions

◼ Opened in 2012 and has been well maintained

◼ 92% of tenants at the centre are companies with an international and/or national footprint

◼ Tenants sales at the centre have grown at a CAGR of 6% since 2015

◼ Given the centre’s location, competition is scarce with low commercial density in the area and primary competition coming from convenience centres with a limited tenant mix

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LOS ARCOS SHOPPING CENTREMost urban and consolidated retail centre in city of Seville

GLA17 906 m²


4.3 years




Number of Stores97

42%

13%

13%

9%

8%

8%

2%2% 2% 1% 0%

Fashion

Services/Misc




Toys/Gifts - TRUS

Sporting Goods



Storage

Hypermarket/Supermarket

13% 12%14%

16% 17%

29%

2018 2019 2020 2021 2022 2023 and beyond


Break profile by rentKey tenants

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LOS ARCOS SHOPPING CENTRE (CONT.)

◼ Los Arcos is situated in Seville, the capital city of Andalusia and the fourth largest city in Spain with c.2m inhabitants

◼ Seville is one of Spain’s most popular tourism destinations, with 2.6m visitors and 4.8m overnight stays in 2017 (c.+3.5% vs. 2016)

◼ The centre was one of the first retail schemes opened in Seville and has maintained its dominant position with CAGR footfall growth of 5% (’13-’17)

◼ Located close to the most important highways and infrastructure, enabling easy and fast accessibility to the centre – important given the high traffic density in Seville

◼ Seville’s consumption index has been boosted by the attraction of the city as a tourist destination

◼ Opportunity to further strengthen Los Arcos’ position by enhancing to the centre’s leisure offering

◼ Opened in 1992, with major refurbishments in 2013 and 2016

◼ Los Arcos complex is comprised of a shopping centre and an adjacent office building, with Vukile only acquiring 75.51% of the shopping centre component

◼ The buildings surrounding the centre are primarily middle-class residential buildings with a high population density of 1,650 hab./km2

25

VALLSUR SHOPPING CENTREStrategically placed within a mid-to-high class residential area

GLA35 220 m²


4.1 years




Number of Stores94

28%

27%10%

10%

8%

5%

3%3%

2%2% 1% 1%

0% Fashion

Hypermarket/Supermarket



Services/Misc


Cinema

Sporting Goods




Furniture (Muebles)

6%

16%

26%

8% 9%

34%

2018 2019 2020 2021 2022 2023 andbeyond


Break profile by rentKey tenants

26

VALLSUR SHOPPING CENTRE (CONT.)

◼ Vallsur is situated in Valladolid, the 13th largest city in Spain

◼ Located very close to the main highways and infrastructure, enabling fast and easy accessibility

◼ Built in 1998 and refurbished in 2013 – the centre has been well maintained

◼ The centre has solidified its position as the reference convenience centre in its catchment area

◼ Annual footfall to the centre has increased by double digits annually from 2015, with a 2.5% CAGR in sales from 2015 to 2017

◼ Average income per family in Vallsur’s catchment area amounts to €30,700, 12.3 bps above the average in Spain

◼ 93% of tenants at the centre are companies with an international or national footprint

◼ Current rents are considered below those of comparable sized shopping centres, providing an opportunity for positive increases in rental rates

◼ Carrefour opened a hypermarket in the centre in January 2017, which helped to increase annual footfall by 11% during the last year

◼ Expected additional value enhancement through proactive asset management

investor presentation - vukile.co.za · investor presentation july 2018. ... this presentation and...

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