SAFARI STRATEGYSafari continues to effectively manage its portfolioto ensure maximum returns to our investorsdespite a challenging South African propertymarket. Safari aims to create value throughgrowing a selective property portfolio. The coreSouth African portfolio currently comprises eightquality, defensive and high-income generatingproperties in peri-urban areas which are mainlyfocused on retail investment properties in thelower income market. Safari extracts the fullpotential of its assets through its strongunderstanding of the market, commitment to thelocal communities and intensive hands-onmanagement to ensure growth in sustainableincome streams. The Platz am Meer mixed-property development in Namibia is still strugglingin the sluggish Namibian economy with theopening of the share title scheme imminent whichwill allow Safari to transfer the apartmentsalready sold.

PORTFOLIO UPDATEThe challenging South African economy has putstrain on all key property indicators across thesector, reflected in increased vacancy factors,negative reversion rates, decrease in tradingdensities together with some disproportionateincreases in operational expenses such as ratesand taxes and electricity tariffs. Although theshort-term conditions in South Africa and morespecifically the retail environment remainschallenging, Safari remains optimistic over itslong-term prospects with good quality defensiveassets dominating the areas in which theyoperate. Safari’s ability to achieve satisfactoryresults is prevalent as demonstrated by the belowfigures for the interim financial period endedSeptember 2019:

New developments and redevelopmentsFollowing the opening of the Nkomo VillageShopping Centre, the ancillary Engen fillingstation is now under construction and set toopen for trade on the 25th of October 2019. Thisaddition is yield enhancing and should attractadditional feet to the centre.

Redevelopment plans for The Victorian isunderway, and Safari ‘s intention is to re-affirmand strengthen the centre as the preferredconvenience centre in Heidelberg. The leasingteam has been working closely with RetailNetwork Services with positive feedback inattracting family restaurants and fast foodbrands. The project is subject to board approvalwhich will be based on a yield accretiveinvestment and, as previously communicated, alldevelopment/re-development projects will beexecuted by non-related parties based on theoutcome of a formal tender process.

VacanciesThe total rentable area of the Safari retailportfolio is 173 344 square meters consisting ofmainly small regional and neighbourhoodcentres. Whilst the vacancy rate for the overallportfolio increased from 2,6% at year end to3.5%, the South African portfolio reports a verylow 1.7% vacancy factor compared to SAPOA’slatest vacancy rate recorded at 4.3% in June 2019(MSCI Retail Trading Density Index).As mentioned above, Platz am Meer remains achallenge but the leasing team is activelysourcing new tenants and engaging on somepositive prospects. The possible revamp of TheVictorian Shopping Centre in Heidelberg had anegative impact on the South African portfoliovacancy rate where existing vacancies will onlybe filled once the redevelopment is completed.

PRE-CLOSE UPDATE for the 6 months ending 30 September 2019

investigating the viability of replacing andreconfiguring Edgars at Denlyn with other tenantcategories to further improve the product offeringof the centre and reduce Safari’s exposure toEdcon even further.

SOLARThe solar installation at Thornhill will be completeby December 2019. The system size is 652 kilowatt peak. Further installations include TheVictorian which is scheduled to be completedduring the first half of 2020. Thabong andAtteridgeville are to follow soon. Safari’s totalgenerating capacity is 2.35 MVA, or 5 millionkWh/annum and the average yield on capitalspend is 14.6%. The yield is expected to improvesince Nkomo has not been operational for the fullperiod and included more winter months thansummer months.

SAFARI DEBT FACILITIESSafari’s LTV is approximately 32.4% and itseffective weighted average cost of debt 9.01%.Currently approximately 62% of Safari’s interest-bearing debt is hedged by way of interest rateswap agreements.

SOUTHERN PALACE RESTRUCTURINGAs per disclosure in the 2019 annual report,Southern Palace defaulted on the R50 millionequity loan from Sanlam during the current periodwhich resulted in a cross-default on the R455million senior loan. Safari subsequently receivedconfirmation that Sanlam called on a portion of theguarantee amount during June 2019 and Safaripaid over an amount of R252 million to Sanlam.Safari, Sanlam and Southern Palace entered intonew agreements at the time to restructure thetransaction. The following agreements and terms,amongst others, have been entered into:• Guarantee signed by Southern Palace Group of

Companies (Holdco of Southern Palace Capital)in favour of Safari for all outstanding amountsowed to Safari by Southern Palace.

Trading DensitiesThe trading density for the overall portfolio isR31 404 per square meters. The South Africanportfolio trades at R32 684 per square meters.(Nkomo Village and Thornhill were taken intoaccount although not trading for a full year).

Reversion ratesSafari has continued to achieve a positivereversion rate of 2,9%* on its portfolio(*calculated on expired base rental vs renewedbase rental for the period). The low reversionrate is mainly as a result of Platz Am Meerrentals being under pressure. Looking only at theSouth African portfolio, the reversion rate is5.7% calculated on aforementioned basis. Aretention rate of 81% was achieved on all leaseagreements coming up for renewal during thisperiod. Given the tough economic climate, thepositive reversion rate is a result of the qualityand defensiveness of the portfolio as well aseffective asset management and the dedicationof the Safari team to grow the portfolio toensure sustainable future income growth.The weighted average lease expiry (“WALE”) ofthe portfolio is 5,8 years.

EdconSafari agreed to the Edcon rental reductionrequest subject to receiving an option of earlytermination on all Edgars and Jet stores in theportfolio. Edgars Atlyn was given notice to vacateand the space is in the process of beingreconfigured into four value fashion tenantsincluding Power Fashion, Studio88, Jam Clothingand Outlook. The trading date on all four brandsis scheduled for 1 December 2019. Jet at Denlynwas downsized to incorporate Woolworths,which opened for trade on 1 July 2019.Woolworths has indicated that they are pleasedwith the performance of the store to date. Theremaining exposure of Safari’s total portfolio toEdcon is 4.6% of total rentable area and 1.4% oftotal monthly rental income. Management is

• Acknowledgement of debt was signed bySouthern Palace for the current amounts owed toSafari as a result of the guarantees provided toSanlam by Safari.

• Voting Pool Agreement was signed by SouthernPalace, Safari and Sanlam to regulate the votingrights and distribution rights with regards to the53 million deal shares until all outstandingamounts have been settled by Southern Palace.

• Restatement of Claim and Reversionary Pledgeand Cession agreement as security for SouthernPalace’s obligations to Safari for the due andpunctual payment and performance in terms ofthe transaction.

Should Southern Palace not be able to settleSanlam’s facility on maturity in August 2020, Safariexpects to settle the remainder of the Sanlam facilityin terms of the guarantees provided and to exerciseits rights to repayment from Southern Palace interms of the aforementioned agreements. Upon therepayment of the Sanlam loan by Safari, the 53million shares will revert back to Safari.

COMPANY STRUCTURE AND INTERNALISATIONSafari directly owns all buildings in the portfolio andis the direct employer of all employees andexecutive directors after successful internalisation ofthe leasing and property management functions. Allrelated party transactions such as propertymanagement and external development agreementswere cancelled or are in the process of beingunwound. The internalisation allows themanagement team at Safari to closely manage,develop and add value to the property portfolio.The Namibian employees are directly employed bythe Namibian subsidiary. The Safari structure is thussimply the following:

Safari has successfully implemented the MDAProperty System, a property managementsolution system with more than 30 years ofapplication across South Africa. This ensuresimproved reporting, integration and flexibility.

MARKETING AND SOCIAL CONTRIBUTIONSStrong relations with our communities areentrenched in how Safari operates. Throughintentional partnerships, we create opportunitiesfor aspiring township entrepreneurs to developbusinesses. Shape Café runs various trainingprogrammes for township businesses and nowoperates rent-free from our Thabong centre, twolocal-based community radio stations PHELI FMand CAPITAL FM broadcast directly from ourAtlyn and Denlyn centres, and Ingenious Minds isa local marketing agency operating rent-freefrom Nkomo Village. Our partnership withHarambee Youth Employment Accelerator willtackle youth unemployment in our communities.Safari recently hosted a vibrant entrepreneurialnetworking session at Denlyn for a number ofentrepreneurs with a mentoring programme as afollow-up. Other organisations where Safari isvolunteering or giving support include Mpho’sDream Centre for children in Mamelodi, FoodForward SA, the Soccer Legend programme inAtteridgeville, the 80th celebration of HofmeyrHigh School in Atteridgeville, Jacaranda Carecentre, the Lions Club in Swakopmund and therecent upgrade of Tsephang Care Centre in co-operation with Built-it and Reno Race (SABC 1).

CONCLUSIONSafari is committed to creating value forshareholders despite the economic difficulties inthe South African market. We continue to lookfor new opportunities for growth and will remainfocused on retail assets in the lower LSM andperi-urban areas in South Africa.

DISCLAIMERSafari enters into a closed period from 1 October2019 until publication of its interim results. Theinformation contained in this document has notbeen reviewed or reported by the auditors ofSafari. Estimates, assumptions and forward-looking estimates may differ from the interimresults to be published in November 2019.

Please contact Talana Smith (Investor Relations):Tel: +27 (0) 83 292 3845talana@safari-investments.com

100%

(Executive management & employees)

(Namibian employees)