transcend residential property fund · 2018-11-22 · this presentation and the documents provided...

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TRANSCEND

RESIDENTIAL

PROPERTY FUND

The market leader in quality

affordable housing

in South Africa

Investor presentation – November 2018

TRANSCEND RESIDENTIAL PROPERTY FUND 1

DISCLAIMER

This document has been compiled by Tenurey BSM Proprietary Limited (“Tenurey”) from information provided by the management of Transcend

Residential Property Fund Limited (“Transcend”) and from publicly available sources. Information contained herein involves elements of subjective

judgment and analysis which may or may not be correct and has not been independently verified.

While the information contained herein is believed to be accurate, Tenurey has not conducted any investigation with respect to such information. No

representation or warranty, express or implied is or will be given by Transcend or Tenurey or their respective directors, partners, employees or

advisors or any other person as to the accuracy, completeness or fairness of this document and, so far as permitted by law and except in the case

of fraud by the party concerned, no responsibility or liability whatsoever is accepted for the accuracy or sufficiency thereof or for any errors,

omissions or misstatements negligent or otherwise relating thereto.

Transcend shall only be bound by those particular representations and warranties set forth in definitive written transaction documents, when and if

such transaction documents are executed and subject to such restrictions and limitations as may be contained therein.

This document includes certain statements, estimates, targets, forecasts and projections provided by Transcend with respect to Transcend’s

anticipated future performance. Such statements, estimates, targets, forecasts and projections reflect significant assumptions and subjective

judgments and analysis by Transcend’s management concerning anticipated results which may or may not prove to be correct and there can be no

assurance that any estimates, targets, forecasts or projections are attainable or will be realised. Tenurey does not assume responsibility for

verifying any of such statements, targets, estimates, forecasts and projections. Nothing contained in this document is, or shall be relied upon as, a

promise or representation, whether as to the past or the future. Accordingly, neither Transcend nor Tenurey nor any of their respective directors,

partners, employees or advisors nor any other person, shall be liable for any direct, indirect or consequential loss or damage suffered by any

person as a result of relying on any statement in or omission from this document and any such liability is expressly disclaimed. In particular, but

without limitation, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any

estimates, targets, forecasts or projections contained in this document (or otherwise provided by or on behalf of Transcend with respect to the

subject matter of this document). In all cases, addressees should conduct their own investigation and analysis of Transcend and the information

contained in this document.

This presentation and the documents provided with this presentation are confidential and may not be disclosed to any third party without the prior

written consent of Tenurey and Transcend.


Rob Wesselo

Chief Executive Officer –

Transcend

Managing Director – IHS

Solly Mboweni

Chief Operations Officer

PRESENTERS

Myles Kritzinger

Chief Financial Officer

Executive summary 4

2. Transcend 7

2.1 Current group structure 8

2.2 Current portfolio overview 9

2.3 Current board of directors 10

2.4 Proposed board and management 11

2.5 Role of IHS 12

2.6 Investment case – why Transcend 14

3. Proposed Transactions 15

3.1 IHS Res 1 Transactions 16

3.2 Other Transactions 18

3.3 Funding and capital structure 19

4. Financials 20

4.1 Pro forma effects – DPS 21

4.2 Pro forma balance sheet 22

5. Conclusion 23

Annexures 26

I Transcend existing portfolio 27

II IHS Res 1 Properties, Protea Glen & Silverleaf 44

III Portfolio post Proposed Transactions 55

IV Transcend vs MSCI Residential Benchmark 57

V IHS and MMA (Hunt) 59


PRESENTATION OUTLINE

1. EXECUTIVE SUMMARY

4


Listing

• Listed on the Altx in December 2016 at R6.75 (21%

discount to NAV)

• Intention to migrate to the Main Board (speciality

REIT sector) post implementation of the Proposed

Transactions

Profile

• A residential REIT, focused on affordable housing

that is lifestyle enhancing and well located in high

growth urban areas

• Exposure to Gauteng, Mpumalanga* and the

Western Cape

Portfolio overview^

• 14 properties comprising 2,532 units*

• 128,915m² GLA

• Portfolio value of R1.25bn

• Occupancy: 96%^

• Avg gross rental per unit: R5,576

• 90% of portfolio comprising 2 bed, 1 bath units

Investment case

• Transcend = 2nd largest residential focused listed

property fund, with high quality assets, safe and

secure lifestyle complexes and a focus on

greening

• Properties are +/- 5 years old

• Defensive asset class

• Residential fund expertise through International

Housing Solutions’ (“IHS”) – a market leader in

residential real estate investment

Pipeline• Access to a future R6.4bn asset pipeline consisting

of 9,900 units through IHS

Transcend at a glance (status quo) Current market metrics

Share price since listing (R)

5,00

6,00

7,00

8,00

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Geographic spread of properties

*Includes Acacia Place (sale agreement signed in Sep 2018 to dispose of Acacia Place for R127.5mil)

Rmil

Closing share price (R) 5,60

Shares outstanding (mil) 73.6

Market capitalisation 412,2

Net interest bearing debt 509.3

Enterprise value 921,5

Investment property 1 252

Gearing (LTV) 42%

Net asset value (NAV) as at 30 June 2018 764.8

NAV per share (R) 10,39

Interim DPS (Cents) 30.10

Discount to NAV -46%

Forward yield 12,2%

^As at 1 Nov 2018. Occupancy includes Acacia Place with a 10% vacancy

Volume traded since listing: 226,082 shares

Value traded since listing: R1,393,907 1,981 shares

traded at R5.60


5


Proposed Transactions and Capital Raise

Acquisitions

• Res 1 Properties: 1,983 units spread across 7 properties from IHS Res 1 Fund for R1.21bn (9.76% yield and

13.4% discount to independent valuation);

• Protea Glen: 176 units from a wholly owned subsidiary of South Africa Workforce Housing Fund (“SAWHF”) for

R60mil (10.3% yield and 2.1% discount to independent valuation);

• Silver Leaf: 76 units for R44.5mil (9.6% yield); and

• Vanguard: 60 units for R33.3mil (9.8% yield) (transferred in Aug 2018)

• Total purchase consideration: ±R1.35bn at an average acquisition yield of 9.78%

Funded by• Purchase consideration (including transaction costs) funded by: debt of ±60% (R825mil) and equity of ±40%

(R551mil)

Equity raise• R6.29 per share (ex-div), c. R6.44 cum dividend (as at 1 Dec 2018)

• Forward yield of 10.5% (post Proposed Transactions)

• Discount to NAV of 31% (post Proposed Transactions)

Pre-commitments and

underwrite

• Emira Property Fund: up to R337mil of equity (max 34.9% shareholding and a min 25.1% shareholding) and a SH

loan facility of R105mil

• MMA Capital Management (“MMA”): Underwrite of R105mil

Shareholding post

Proposed Transactions

• SAWHF: 38.4% (intention is for SAWHF to dilute over time, as Transcend pipeline is executed)

• Emira: 25.1% (minimum)

• Public: 36.5%^ (assuming no underwrite take-up)

Timing

• Investors meetings (12 – 21 Nov)

• Site visit (22 Nov)

• Final CPs (expected to be received by 30 Nov)

• Equity commitments (by 30 Nov)

• Effective date – targeting 1 Dec and issue of new shares – 1st week of Dec

^Includes SA Corporate Real Estate Limited (4.3%), who has communicated that they will dispose of their stake as part of the new equity raise or post the Proposed Transactions


6


Rationale of Proposed Transactions

✓ Ability to secure portfolio at deep discount to fair value, despite scarcity value of large residential portfolios

✓ Lifestyle enhancing properties in well located, high growth urban areas

✓ Stable income stream at an attractive yield

✓ Highly sought after properties of superior quality to comparable portfolios in the market

✓ Favourable arrangement with IHS provides ability to access significant future pipeline

✓ Benefits of institutional knowledge of assets, which also ensures efficient handover

✓ Adds critical scale providing portfolio efficiency benefits

✓ Facilitates increased free float, liquidity and Main Board migration

Portfolio value

of

R2.63bn

Market Cap

R970m

Snapshot of Transcend post the Proposed Transactions

4,442 units

22 properties 254,201m2 GLA

LTV of 46.0%

81% Gauteng,

19% Western

Cape*

5.99% vacancy

31% discount

to NAV

R6,406 avg gross monthly rental / unit^

9,900 units

(R6.4bn)

pipeline

10.5% forward yield

*Based on value

^ For forecast period of FY2019

2. TRANSCEND


2.1 CURRENT GROUP STRUCTURE

8


67 on 7th

EdenvaleVanguard(2)

Alpine

Mews

Ekhaya

Fleurhof

Ekhaya

Jabulani

Jackalberry

Close

Kensington

Place

Molware

EstateParklands

Village

Seven

Stone Arch

Estate

Terenure

Estate

Theresa

Park

Estate

Trade-

winds

100% ownership of 14

properties1

IHS Property

Management

(“IHSPM”)3

SA Corporate

SA Workforce

Housing

Fund SA 1

9.0%

Property Management

Agreement

SAWHF PVE

(“SAWHF”)

100%

80.2%

IHS Asset

Management

(“Manco”)

Asset Management

Agreement

Notes

1. Acacia Place: As announced on 18 September 2018, Transcend has concluded a sale agreement to dispose of Acacia Place (325 units) for R127.5mil

2. Vanguard: A fully-let rental enterprise comprising 60 sectional title units was acquired for R33.3 million on 23 August 2018

3. Wholly owned by MMA Capital Management. The intention is for IHSPM to become a wholly owned subsidiary of IHS in 2019

Emira

9.9%

Acacia

Place(1)

Other

0.9%

• Fee: annual asset management fee of 0.50% of

company EV (+ VAT)

• Term: 10 years from Dec 2016 and option for

Transcend to renew for further 5 years (every 5 years)

• Option: Transcend has option to purchase equity or

business of Manco at fair value (to be negotiated)

once market cap reaches R4bn

• Avg collection fee of 6.5% (+ VAT)

• 3 month’s notice to cancel

2.2 CURRENT PORTFOLIO OVERVIEW


No. Property name Location

Total number

of units in

complex

Total number

of units

owned by

Transcend

Total GLA

(m²)

Independent

Valuation

R’000

Weighted

average

rental per

unit per

month

(R/units)

Current

Vacancy (%

of units)

1 67 on 7th Edenvale, Gauteng 204 157 8,478 97,500 5,942 0.60%

2 Acacia Place(2) Witbank, Mpumalanga 325 325 17,891 127,500 6,853 10.00%

3 Alpine Mews Eersterivier, Western Cape 90 90 4,005 36,200 4,659 1.00%

4 Ekhaya Fleurhof Fleurhof, Gauteng 162 162 6,642 69,500 4,336 1.23%

5 Ekhaya Jabulani Jabulani, Gauteng 244 244 10,004 90,600 4,112 2.46%

6 Jackalberry Close Jansen Park, Gauteng 252 208 10,713 112,300 5,589 6.35%

7 Kensington Place Ferndale, Gauteng 56 56 2,376 35,100 6,233 1.79%

8 Molware Kosmosdal, Gauteng 252 252 11,937 138,500 5,542 3.57%

9 Parklands Parklands, Western Cape 187 187 10,044 98,100 6,092 4.28%

10Village Seven,

Stone Arch VillageCastleview, Gauteng 114 114 6,039 55,100 5,414 4.39%

11 Terenure Estate Terenure, Gauteng 350 350 22,028 214,200 6,380 4.00%

12Theresa Park

EstatesTheresa Park, Gauteng 242 242 12,388 98,000 4,346 5.79%

13 Tradewinds Ferndale, Gauteng 85 85 3,730 46,000 6,119 0.00%

14 Vanguard Heideveld, Western Cape 60 60 2,640 33,300 6,057 1.49%

Total 2,623 2,532 128,915 1,251,900 5,5763 4.34%4

Notes:

1. Refer to Annexure I on slide 27 for further detail on all the above properties

2. As referred to on slide 8, Transcend has signed an agreement to sell Acacia Place for R127.5mil 3. As at 1 Nov 2018

4. Vacancy excl Acacia Place is 3.45%

• Transcend’s current property portfolio comprises 2,532 units (across 14 properties) with a valuation of R1.25bn

• Transcend concluded a sale agreement in September to dispose of Acacia Place (325 units) for R127.5mil. Acacia Place had exposure of 39%

to bulk leases (which expired) for the interim period ending 30 June 2018, resulting in a 42% vacancy (based on units)

• The rest of the portfolio has no exposure to bulk leases and is defensive in nature

2.3 CURRENT BOARD OF DIRECTORS


Name Background

Rob Wesselo (54)

Chief Executive Officer

LLB from WITS

Rob is responsible for the South African operations of International Housing Solutions, a post he has held since 2010. In this role, he is

responsible for sourcing investments, structuring, and negotiating deals with developers and managing the operations of IHS in South

Africa. Before joining Transcend, Rob was the Head of Commercial Property Finance (Property Investments) at ABSA. He has held

other property-focused positions such as Commercial Director at Pangbourne Properties and Head of Listed Property Funding at RMB.

Solly Mboweni (49)

Chief Operations Officer

BCom and PGDip in

Property Studies (WITS)

Prior to joining Transcend, Solly was at ABSA for 4 years in a number of senior positions. He has also managed the asset

management and property development departments at Liberty Properties. Solly recently served as the Vice President of SAIBPP

(South African Institute of Black Property Practitioners). Solly is also Head of Housing Operations at IHS, with direct responsibility for

the activities of New Business and the Asset Management of the Rental Portfolio Since 2014.

Myles Kritzinger (34)

Chief Financial Officer

BCom(Acc)(Hons)

CA(SA), Diploma in

Insolvency Law (SARIPA)

Myles was appointed as CFO for Transcend on 9 March 2018. He has experience in the affordable housing market and new fund

development as former Dealmaker at IHS. Former Manager at Deloitte & Touche, former Financial Analyst at Absa Capital and Absa

Retail banks and former Consultant at Nimble Risk Services.

Robert Emslie (59)

Chairman, independent

non-exec director

Undergraduate &

Graduate degree from RAU

Robert is an independent non-executive director of Finbond Group Limited, the independent chairman at Silverbridge Holdings Limited

and an independent director of New Europe Property Investments Plc. He is also on the boards of a number of unlisted companies.

Faith Khanyile (50)

Independent non-exec director

BA (Economics) Wheaton, USA

MBA (Finance) Bentley, USA

Faith is the CEO of WDB Investment Holdings (WDBIH) and has been associated with WDBIH for over 18 years. She spent 12 years

with Standard Bank, Corporate & Investment Bank from 2001 to 2013 in various senior management and executive roles.

Michael Aitken (58)

Independent non-exec

director

BA and LLB

Michael has been a non-executive director of Strategic Real Estate Managers (Pty) Ltd and Emira Property Fund Limited since April

16, 2007. He also served as a non-executive director of Hyprop Investments Limited from August 2000 to June 2013, acting as

chairman from August 2007 to June 2013.

Michael Falcone (55)

Non-executive director

BA (Economics) (Dartmouth)

and MBA from Harvard

Mike is the chief executive officer and president of MMA Capital Management, a position he has held since January 1, 2005. Prior to

his involvement with MMA Capital Management, Mike served as senior vice president and partner at the Shelter Group.

Cathal Conaty (53)

Non-executive director

BA (University College) (Dublin)

MBA (IESE) (Barcelona, Spain)

In various positions in the past 15 years, he has set up and managed private investment funds, served as a Regional Vice President of

property management, and represented investors’ interests in a variety of market-rate and subsidised properties.

2.4 PROPOSED BOARD AND MANAGEMENT


Proposed management and board composition (post Proposed Transactions)

• A process is underway through Transcend’s nominations committee to change the Board and appoint key personnel to the Manco (anticipated to

take place in early FY19 post implementation of the Proposed Transactions)

• It is Transcend’s intention to implement a share incentive scheme for the executive directors and management team in FY2019

Executive directors and key management (to be employed by Manco)

• Solly Mboweni and Myles Kritzinger currently serve as executive directors of Transcend

• Vanessa Perfect is currently the Head of Rental Asset Management at IHS

• It is intended that Solly, Myles and Vanessa will be dedicated exclusively to Transcend following the management restructure to be determined by

the nominations committee

Non-executive directors

• It is anticipated that certain of the non executive board directorships will be reconstituted to take into account the prevailing JSE Main Board

requirements as well as to enhance capacity and the requisite skill set of Transcend

IHS

SAWHF

IHS FUND II

(SA)

IHS FUND II (SSA)

RES I*

NEW BUSINESS

IHS PM

Focus: Affordable housing

Equity: Private Equity Fund

Deals: Develop & Rental

Size: R1.8bn (raised)

Units: 28,000 (committed)

End Life: Apr 2019 (ext.)

Focus: Affordable Green housing


Location: SSA (Nam & Bots)



Units: 942 (committed)

End Life: Jul 2024

Focus: Green housing


Location: SA




End Life: Jul 2024

Focus: Mid Mkt Rental

Equity: Private Equity JV

Location: SA

Deals: Rental

Size: R796m (committed)


End Life: N/A

Focus: Property Management

Focus: SA & SSA

Deals: Rental

Size: 9,138 units under mgmt.

Employees: 175

Name: Development Fund

Location: SA

Deals: Develop units for REIT’s

Size: $150m (target)

Units: 17,500 (projected units)

Name: Kenya Rental Fund

Location: Kenya

Deals: Green Rental

Size: $250m (target)

Units: 7,500 (projected units)


2.5 ROLE OF IHS

Notes: *The units in Res 1 are in the process of being acquired by Transcend

• Established in 2007, a real estate fund manager focused on development and management of affordable housing communities

• Recognise the need to both create viable housing investments and provide broader community infrastructure with easy access to schools,

shops and work opportunities

• Owned by MMA – a subsidiary of Hunt Company (private US family company – 7th largest US Multifamily Owner)

• 212 employees (37 in IHS and 175 in IHS PM)

• Based on the current size of Transcend, the external Manco is a more cost effective approach than performing this function internally. Ability for

Transcend to leverage off IHS’ resources, network and pipeline of opportunities


2.5 ROLE OF IHS

Notes: *The units in Res 1 are in the process of being acquired by Transcend

29 800 units / stands

completed since 2007

9 138 units in rental

portfolio

Highlights of IHS include:

7 100 units under

construction

R5.8bn of investor

equity commitments

managed under IHS

76 investments in

residential real estate

projects


sold since 2007

3 300 units approved

and fully funded


commenced since

2007

• Transcend will leverage off of IHS’ strong network and deal

making capability for future external acquisitions – access to:

- an existing pipeline of 9,900 units (R6.4bn) through the IHS

managed funds

- An existing pipeline from 3rd party developers of ±760 units

R653mil

Local pipeline Potential US Multifamily strategy

• Transcend has the ability to leverage off IHS’ network and

relationship with MMA, which in turn has access to the Hunt

Company

- 105,018 Multifamily housing units developed

- Hunt is the 7th largest Multifamily owner in the US

2.6 INVESTMENT CASE – WHY TRANSCEND

14

TRANSCEND RESIDENTIAL PROPERTY FUND

Track record• Management team has extensive track record in residential property investment and management

• IHS has become a market leader and has been a driver of the institutional residential rental market in SA

Unique defensive

market segment

• Transcend focuses on medium density, secure estates with lifestyle amenities

• The affordable market, is one of the few in which demand exceeds supply with strong fundamentals, given the

ever increasing trend in South Africa towards urbanisation

• The affordable market has the lowest vacancy rate of the residential rental market

• Counter cyclical nature of residential property

Pipeline and growth

strategy

• In addition to the Transcend portfolio, IHS currently manages approximately 9,138 quality affordable rental properties

and Transcend is well placed to acquire these units from the respective funds (upon exit)

• Transcend will leverage off IHS’ strong network and deal making capability for future acquisitions

• IHS is experienced in sourcing and stabilising properties, which will be used to the benefit of Transcend

• Transcend is gaining increased exposure to off-market transactions given its rapidly increasing profile within the SA

market

• Transcend can also leverage off IHS’ shareholder – MMA (Hunt) (which specialises in investing in affordable housing

and clean energy) and gain access to Hunt’s US portfolio

Competitive edge

• Focus on greening

• High quality assets

• Lifestyle complexes

• Safe and Secure

• Internal amenities

• +/- 5 years old

• Low maintenance

• Close to work and

transport

• Community friendly

14

3. PROPOSED TRANSACTIONS


3.1 IHS RES 1 TRANSACTIONS


Key transaction details

Units acquired• 1,983 units spread across seven properties comprising Midrand Village, De Velde, Birchwood Village, Southgate

Ridge, Urban Ridge (West), Urban Ridge (East) and Urban Ridge (South)

Seller• International Housing Solutions Residential Partners 1 (RF) Proprietary Limited (“IHS Res 1”) - currently managed

by IHS. IHS Res 1 is 95% owned by PSP (Public Sector Pension Investment Board – one of Canada’s largest

pension investment managers). PSP has a 45% stake in SAWHF

Purchase consideration• R1.21 billion at a weighted average yield of 9.76%, subject to subject to an escalation of 6% per annum (pro-rated

accordingly) from 1 December 2018 (price determination date) until the date of transfer of each of the respective

units

Settlement • To be settled 100% in cash

Funding• Gearing of 60% (c. R742 million), with the intention to settle the balance of the purchase consideration by raising

c. R495 million of new equity by way of a Vendor Placement

Underwriting and

commitments

• Emira has provided an irrevocable commitment to subscribe for a minimum 25.1% of Transcend shares and a

maximum of 34.9% of the Transcend shares in issue post implementation of the Proposed Transactions

− MMA Capital has provided an underwrite of R105mil

− Emira has also provided an underwrite of R105mil in the form of a shareholder loan to the extent that there is a

shortfall in the equity raise

Conditions precedent

• Shareholder approvals (by 30 Nov 2018)

− Related party transaction (IHS Res 1 is a related party) (50% +1) of independent Transcend shareholders

− Issue greater than 30% of shares in issue (75% +1) of all Transcend shareholders

• JSE approval – Category 1 related party transaction and Reverse Takeover

• Debt (by 21 Nov 2018)

• Competition Commission (approved on 14 Nov 2018)

• Raising the equity amount (by 14 Dec 2018)

Effective date and

closing date

• Effective date: First day of the month following the last CP being fulfilled - expected to be 1 December 2018

• Closing date:

− 1 Dec 2018 (if CPs are met by 23 Nov 2018); or

− 14 Dec (if CPs are met between 24 Nov and 30 Nov); or

− 31 Jan (if CPs are met between 1 Dec and 14 Dec 2018)

3.1 IHS RES 1 TRANSACTIONS (continued)


PropertyNo of

unitsLocation Purchase price

Independent

valuation

Valuation

exceeding

purchase

consideration

1 Dec ’18 – 30

Nov ‘19

forecast NOI

Cap Rate

Midrand Village 225 Clayville, Gauteng R139,295,212 R153,300,000 R14,004,788 R12,525,642 8.99%

De Velde 310 De Velde, Western

CapeR289,144,251 R337,700,000 R48,555,749 R23,681,581 8.19%

Birchwood Village 360 Chartwell, Gauteng R266,463,076 R288,300,000 R21,836,924 R25,866,036 9.71%

Southgate Ridge 412 Naturena, Gauteng R170,420,202 R216,600,000 R46,179,798 R19,751,200 11.59%

Urban Ridge (West) 260 Midrand, Gauteng R127,516,812 R153,100,000 R25,583,188 R13,674,100 10.72%

Urban Ridge (East) 184 Midrand, Gauteng R98,783,206 R109,600,000 R10,816,794 R10,394,953 10.52%

Urban Ridge (South) 232 Midrand, Gauteng R118,277,360 R138,800,000 R20,522,640 R12,219,568 10.33%

Total 1,983 R1,209,900,119 R1,397,400,000 R187,499,881 R118,113,079 9.76%

• Transcend is acquiring the IHS Res 1 units at a 13% discount to their independent market valuation

• The IHS Res 1 units offer stable and secure income streams and are located in well-situated, high growth urban areas

• Three of the properties – Midrand Village, De Velde and Birchwood Village are well suited to a sectional title sales program and could generate

greater value for Transcend if Transcend disposes of the individual units at market value over a period of time vs. keeping the units as rental stock

• Transcend will re-invest such proceeds and acquire additional rental units by leveraging off IHS’ network and pipeline of managed funds and

making 3rd party acquisitions

3.2 OTHER TRANSACTIONS

TRANSCEND RESIDENTIAL PROPERTY FUND

Silverleaf

• On 3 April 2018 it was announced that Transcend is in the process of acquiring the Silverleaf Portfolio

− Agreement entered into between De Facto Investments 264 Proprietary Limited and Transcend on 28 March

2018 – Transcend will acquire 76 sectional title units

− For an aggregate purchase consideration of R44.5 million

• Due to delays in the finalisation of town-planning amendments, It is expected that Silverleaf should transfer to

Transcend by 1 December 2018

Vanguard

• On 12 June 2018 Transcend announced that it has entered into an agreement with SAWHF SA Rental 4 Trust

• Transcend acquired 60 sectional title units in the scheme known as Vanguard Residential Village 3 for an aggregate

purchase consideration of R33.3 million

− The Vanguard transaction has been successfully concluded, with Vanguard transferring to Transcend on 23 August

2018

Protea Glen

• On 8 October 2018 Transcend announced it has concluded a legal agreement with Sunnyshore Trade and Invest 105

Proprietary Limited (“Sunnyshore”) (owned by SAWHF) to acquire 176 residential sectional title units in two

sectional schemes known as Protea Glen for R60 million

• The Protea Glen Transaction is subject to fulfilment of inter alia the following suspensive conditions, as set out in the

Protea Glen Sale Agreements:

− Transcend complying with the applicable JSE Listings Requirements

− Approval from the shareholders of Sunnyshore

− Approval from Transcend shareholders (included with IHS Res 1 Transaction)

− Transcend conducting a technical due diligence

− Transcend raising the required funding to settle the purchase consideration

• The effective date (transfer) of the Protea Glen Transaction is estimated to be on or about 1 December 2018

Acacia Place

• On 18 September 2018 Transcend announced that it has entered into a sale agreement with Instratin Properties

Proprietary Limited (“Instratin”) to:

− dispose of all 325 units comprising Acacia Place located in Duvha, eMalahleni (Witbank), Mpumalanga, to Instratin

− for a cash price of R392,308 per unit amounting to a total cash price of R127.5 million

− the proceeds of which will be used to reduce interest-bearing liabilities until required for new acquisitions

18

3.3 FUNDING AND CAPITAL STRUCTURE


Analysis of total funding requirement Salient terms of private placement

Salient terms of debt funding

Proposed Transactions (at cost) R1.348bn

Total funding requirement R1.38bn

Equity requirement: maximum (40%) R551m

Transaction costs (incl. VAT) R28m

Less: Emira (Assume Emira take up 25.1%) (R243m)

Private Placement R308m

Utilisation of SBSA and Nedbank facilities R825m

LTV ratio post the Proposed Transactions 46%

▪ Quantum

▪ Excluding Emira’s total subscription of 25.1%, approximately

R308mil is available for issue to the public

▪ Pricing

▪ Indicative clean pricing range of R6.29 per share, (cum price of

R6.44, assuming an issue date of 1 December 2018)

▪ Forward yield of 10.5%

▪ Timing

▪ To be completed after the last of the conditions precedent being

fulfilled, which is expected to be met by 30 November 2018

Standard Bank & Nedbank Facility amount Terms Interest rate Profile

Facility (1) & (A) R295m 3 years 3-month JIBAR +190 bps Interest quarterly

Facility (2) & (B) R295m 5 years 3-month JIBAR +225 bps Interest quarterly

Facility (3) (RCF) R150m 3 years Prime less 1% Interest monthly

Facility (4) R107m 3 years 3-month JIBAR +215 bps Interest quarterly

Facility (5) R10m 3 years Prime less 1% Interest quarterly

R857m

4. FINANCIALS


4.1 PRO FORMA EFFECTS – DISTRIBUTION PER SHARE


Transcend financial effects based on the implementation of the Proposed Transactions, being funded with 40% equity and 60% debt

Pre Proposed Transactions 31-Dec-19

Forecast distribution (pre Proposed Transactions)1 ZAR 49 396 760

# shares in issue # 73 605 662

DPS Cents 67,11

Growth ±5,0%

Pro forma adjustments ZAR

Net income from Proposed Transactions2 128 706 605

Increase in Manco fee3 -6 288 342

Increase in interest cost4 -73 219 573

Net return on re-investment of proceeds5 2 698 871

Net increase in distributable income 51 897 561

Distributable income post Proposed Transactions 101 294 321

New shares issued # 80 096 999

Total shares in issue post Proposed Transactions 153 702 661

DPS post Proposed Transactions Cents 65.90

Dilution in DPS (from current forecast) -1,8%

Forward yield (at issue price of R6.29) 10,5%

Notes:

1. Already takes into account the Vanguard and Acacia Place transactions as well as the issue of 7.3mil shares to Emira

2. Assumes effective date of 1 Dec 2018 and included 12 months net income at acquisition yields

3. Manco fee at 0.5% + VAT

4. Interest at a weighted average cost of 9.1%

5. Assumes re-investment of proceeds from sale of sectional title units relating to Midrand Village, De Velde and Birchwood Village

4.2 PRO FORMA BALANCE SHEET


Balance sheet FY 31 December 2017 Interim 30 June 2018 Post Proposed Transactions

Assets

Investment property 1,218,640,000 1,219,201,000 2,630,519,090

Other 51,243,000 47,254,000 174,754,000

Total assets 1,269,883,000 1,266,455,000 2,805,273,090

Liabilities

Interest bearing 555,324,000 555,377,000 1,379,984,548

Other liabilities 25,730,000 23,134,000 23,134,000

Total liabilities 581,054,000 578,511,000 1,403,118,548

NAV 688,829,000 687,944,000 1,402,154,542

Number of shares in issue 66,305,662 66,305,662 153,704,448

NAV per share 10.39 10.38 9.12

Gearing ratio (net cash) 45.6% 42.2% 46.0%

• Post implementation of the Proposed Transactions, Transcend’s total property value will be R2.63bn

• Total interest bearing debt of R1.38bn will exist with an all-in weighted average debt cost of 9.1%. It is the intention to fix a minimum of 50% of

the debt post implementation of the Proposed Transactions

• The LTV will be c. 46% and it is Transcend’s intention to reduce this to a market average of 30-40% post rolling out its pipeline

5. CONCLUSION


Opportunity to

double portfolio

size and migrate to

Main Board of JSE

• Implementation of the Proposed Transactions will result in significantly enhanced scale; and

• Significant increase in market capitalisation

− providing a solid platform to scale further and increase its shareholder base and liquidity

Scalable portfolio

with access to IHS

managed funds

• IHS Asset Management performs the asset management function of Transcend

• IHS currently manages R5.8bn in assets across 3 Funds & 1 JV and has made investments in 76 real estate projects

− Currently operates a rental portfolio of approximately 9 138 units

− Properties located in 5 provinces in SA

− High quality property portfolio with critical mass at attractive yields in a challenging South African economy

Transcend

investment case

and outlook

• Provides investors with exposure to a geographically diverse, well-managed and well-maintained portfolio of properties

that are well-located and good quality, which are expected to appreciate in value over time

• Residential housing a unique defensive investment - potential to act as an inflation hedge over the long term,

returning real growth in distributions

• Growth profile of underlying portfolio earnings attractive

• Conservative outlook on balance sheet gearing to remain in place post the Proposed Transactions

Irrevocable

commitments and

timing

• Transcend is seeking irrevocable funding commitments from investors for up to R308mil

• Timing of calling on such commitments is expected by 10 December 2018


5.1 CONCLUSION AND TIMING

Deliverable Timing

Investors meetings 12 – 21 November 2018

Site visit 22 November 2018

Final CP Expected to be received by 30 November 2018

Equity commitments By 30 November 2018

Effective date Targeting 1 December 2018

Closing date and issue of new shares 1st week of Dec 2018

Panico Theocharides 082 412 0542 [email protected]

Shaun Stewart 082 479 7147 [email protected]

Jacques Russouw 083 269 0310 [email protected]

Rob Wesselo 083 290 3868 [email protected]

Solly Mboweni 072 821 7261 [email protected]

Vanessa Perfect 079 496 9409 [email protected]

Myles Kritzinger 072 440 0072 [email protected]


5.2 CONTACT DETAILS

ANNEXURES


1. TRANSCEND EXISTING PORTFOLIO


Cape Town

TRANSCEND PORTFOLIO – CURRENT

Johannesburg

11

12

13


2

5

3

10

4

7

1

8

9

6

67th on 7th (Edenvale, Gauteng)

TRANSCEND PORTFOLIO – GAUTENG

1

• 67 on 7th is located along Van Riebeeck Avenue, in

Edenvale, Ekurhuleni, Gauteng

• The site is well-located close to a central business

district along Van Riebeeck Avenue, and easily

accessible from major routes, specifically the N12 and

N3 highways

• All units are 2-bedroom, 1 bathroom and 55m2

Property valuation R97.5mil*

Age of property 2.8 years

Total # of units in complex 204

# of units owned by Transcend 157

Size 8,478m2

Historic occupancy rate 95.54%*

Current occupancy rate 99.40%#

Average lease term 16.3 months*

Average gross rental per unit R5,942#

Cap rate 8.25%*

* As per the 2017 Annual Integrated Report

Key facts Photographs

TRANSCEND RESIDENTIAL PROPERTY FUND 29* As per the 2017 Annual Integrated Report

# As at 1 November 2018

Ekhaya Fleurhof (Fleurhof, Gauteng)


2

• The property is located on Main Reed Road in Fleurhof,

Johannesburg, which has good access to the Joburg

CBD, transit routes, and forms part of the Fleurhof

development which is owned by Calgro M3

• Ekhaya Fleurhof consists of 162 units in 4-storey walk-

up blocks. All units are 2-bedroom, 1 bathroom at an

average size of 43m2





Size 6,642m2





Cap rate 9.50%*





Ekhaya Jabulani (Soweto, Gauteng)


3

• The property is located in the CBD of Soweto, directly

behind the Jabulani Mall, near to the Soweto theatre

• Ekhaya Jabulani consists of 243 residential units (of 4

storey walk-up), which are all 2-bedroom, 1 bathroom,

of average size of 43m2

• The units were completed for occupation in February

2014





Size 10,004m2





Cap rate 9.50%*





Jackalberry Close (Boksburg, Gauteng)


4

• Jackalberry Close is located in Jansen Park, Boksburg

of the East Rand, and consists of a total of 252

residential units, of which Transcend owns 208 units. All

units are 2-bedroom, 1 bathroom units, of 51.5m2 in 3

storey walk-ups

• The developer was Bluegate Properties, the same

developer of Molware Estate. Construction began in

May 2013 with occupation completed in mid April 2014





Size 10,713m2





Cap rate 8.50%*





• The property is located near the CBD of the Randburg

suburb in Johannesburg, West of Sandton. A number of

large employers are based in the area, including Multi

Choice and Sasol. The area has a strong demand for

quality rental stock

• Kensington Place consists of 56 residential units (4

storey walk-ups). All units are 2-bedroom, 1 bathroom

units of 50m2

Kensington Place (Randburg, Gauteng)


5





Size 2,376m2





Cap rate 9.00%*





• The property is located between the central business

district of Midrand and Centurion, off Samrand Road

which allows for easy access to and from the N1

motorway

• Molware Estate consists of 252 residential units (3

storey walk-ups), all 2-bedroom, 1 bathroom, with an

average size of 46m² and a crèche located adjacent to

the site

Molware (Midrand, Gauteng)


6





Size 11,937m2





Cap rate 8.50%*





• Stone Arch Village 7 is located in Castleview, within the

greater Stone Arch estate, which was developed by

Cosmopolitan between 2011 to 2012

• The property consists of 114 units, which are all 2-

bedroom, 1 bathroom units, of size of 54m2 in 3 storey

walk-ups

Village Seven Stone Arch Estate (Germiston, Gauteng)


7





Size 6,039m2





Cap rate 8.25%*





• Terenure consists of 350 sectional title units, which is

held 100% by Transcend. The units were developed by

Cosmopolitan, the same developer as for Stone Arch

• There is a good mix of two bedrooms, one bath stack

units and three bedrooms, 2-bathroom simplex units.

There is a crèche, gate house, clubhouse with braai

facilities, jungle gym and pool available

Terenure Estate (Kempton Park, Gauteng)


8





Size 22,028m2





Cap rate 8.75%*





• Theresa Park is located in Pretoria North, Gauteng

• Consists of 242 residential units (2 storey walk-ups)

with an average size of 50m², both 1 bedroom, 1

bathroom and 2-bedroom, 1 bathroom units

Theresa Park Estate (Pretoria, Gauteng)


9





Size 12,388m2





Cap rate 8.50%*





• The property is located near the central business

district of the Randburg suburb in JHB, West of

Sandton. A number of large employers are based in the

area, including Multi Choice and Sasol

• Trade Winds consists of 85 residential units in a five

storey building, with an average unit size of 43m². The

property has a swimming pool, underground parking

and a lift. All units are 1 bedroom, 1-bathroom units

Tradewinds (Randburg, Gauteng)


10





Size 3,730m2





Cap rate 9.00%*





• Alpine Mews is located in Eersterivier in Western Cape.

The site is in a popular area for affordable rental and is

well positioned within walking distance of a train station

and other important amenities

• The property consists of 90 units, all of which are 2-

bedroom, 1 bathroom units in 3 storey walk-ups. The

property attracts tenants with features such as secure

access control, parking for tenants and visitors, as well

as an exclusive use playground

Alpine Mews (Cape Town, Western Cape)

TRANSCEND PORTFOLIO – WESTERN CAPE

11





Size 4,005m2





Cap rate 9.25%*





• Parklands is located in circa. 15km north/north east of

Cape Town and consists of 187 units

• This property remains very popular and has historically

performed well

Parklands (Eersterivier, Western Cape)


12





Size 10,044m2





Cap rate 9.00%*





• Vanguard consists of 60 two bedroomed, one-bathroom

residential units of 44m2 each and located at 29 Jade

Street, off Klipfontein Road, Heideveld, Cape Town

Vanguard (Heideveld, Western Cape)


13

Property valuation R33.3mil#




Size 6,640m2



Average lease term 27 months#


Cap rate 9.00%#





PORTFOLIO OVERVIEW


72

11

16

Gauteng Western Cape Mpumalanga

30 June 2018 Portfolio Highlights

GEOGRAPHIC PROFILE BY REVENUE (%) UNIT PROFILE (%)

56,6

18,6

14,20,1

10,5

Monthly Prior to 31.12.2018

Prior to 30.06.2019 Prior to 31.12.2019

Vacancy

LEASE EXPIRY PROFILE (%) AVERAGE MONTHLY PROPERTY EXPENSES (%)

36

36

28

Utilities Operational Admin

89

6

2

3

2 Bed 1 Bath 1 Bed 1 Bath 2 Bed 2 Bath 3 Bed 2 Bath

30

31

43

42

9,93

10,38

PERFORMANCE OVERVIEW


9,78

10,39

NAV per share (Rand)

31 Dec 2017

31 Dec 2016*

44

42

LTV (%)

31 Dec 2017

31 Dec 2016*

28

32

Net cost-to-income ratio (%)

31 Dec 2017

31 Dec 2016*

12 months to 31 Dec 2017 6 months to 30 June 2018

DIVIDEND per share (cents)

2017 ACTUAL

64.04 2016 ACTUAL

5.61*

OCCUPANCY average

2017 ACTUAL

92.7%2016 ACTUAL

96%*

DISTRIBUTABLE INCOME

(Rm)

2017 ACTUAL

42.52016 ACTUAL

3.7*

EARNINGS per share (cents)

2017 ACTUAL

102.52016 ACTUAL

51.7*

* For the 6 months ended 31 December 2016

NAV per share (Rand)

30 Jun 2018

30 Jun 2017

LTV (%)

30 Jun 2018

30 Jun 2017

Net cost-to-income ratio (%)

30 Jun 2018

30 Jun 2017

DIVIDEND per share (cents)

2018 ACTUAL

30.102017 ACTUAL

29.81

OCCUPANCY average

2018 ACTUAL

88.9% / (94.9%)#

2017 ACTUAL

95.9%

DISTRIBUTABLE INCOME

(Rm)

2018 ACTUAL

20.32017 ACTUAL

19.8

EARNINGS per share (cents)

2018 ACTUAL

32.892017 ACTUAL

27.26

# Occupancy rate if Acacia Place (with vacancy rate of 11%) is excluded

2. IHS RES 1 PROPERTIES, PROTEA GLEN

& SILVERLEAF



Western Cape

IHS RES 1 PORTFOLIO, PROTEA GLEN AND SILVER LEAF

Gauteng

7

2

3

4 56

1

9

8

• Situated on Erf 92 Chartwell Extension 14 & Erf 93

Chartwell Extension 15, located at the corner of Cedar

Road & 3rd Street, Chartwell, Johannesburg

• The complex comprises 360 units (consisting of 108

one-bedroomed units, 224 two-bedroomed units and 28

three-bedroomed units), with an average size of 73m²

and monthly gross rentals ranging from R6,200 –

R11,000 per unit

Birchwood (Johannesburg, Gauteng)

IHS RES 1 PORTFOLIO – GAUTENG

1

Property valuation R288mil#




Size 26,232m2



Average lease term 13.52 months#

Average gross rental per unit R7,950$

Cap rate 9.71%^



TRANSCEND RESIDENTIAL PROPERTY FUND 46# As at 1 November 2018

* Occupancy a result of lease up

^ At acquisition$ Forecasted 2019 gross rental

• Situated on Erven 4472 to 4809 Clayville Extension 46,

Porcelain Road, Clayville, Gauteng. Transcend is

acquiring 225 units which vary from two-bedroomed

units with one bathroom, measuring 55m² to three-

bedroomed units with two bathrooms, measuring 80m²

• New lettings currently range from monthly gross rentals

of R6,500 for the two-bedroomed units up to R7,900 for

the three-bedroomed units

Midrand Village (Midrand, Gauteng)


2





Size 14,280m2





Cap rate 8.99%^




* Project was held for sale


• Situated on Erven 3030 and 3031 Naturena Extension

16, 5 Duin Place, Naturena, Gauteng. The complex

comprises 412 units, all of them being two-bedroomed

units with one bathroom, measuring approximately

53m². The units are accommodated in 62 two-storey

blocks, all of which are north facing


of R5,400 for first floor units to R5,600 for ground floor

units

Southgate Ridge (Midrand, Gauteng)


3


Age of property 5 years



Size 21,972m2

Historic occupancy rate 98.04%




Cap rate 11.59%^





• Situated on Erven Erf 1397 Halfway Gardens Extension

79, 77 Fifth Road, Midrand, Gauteng. The complex

comprises 184 units, consisting of 170 two-bedroomed

units with one bathroom and measuring approximately

53m² and 14 three bed-bedroomed units with two

bathrooms measuring approximately 77m². The units

are accommodated in 13 four-storey blocks


of R6,300 for the one-bedroomed units to R6,700 for

the two-bedroomed units

Urban Ridge (East) (Midrand, Gauteng)


4





Size 10,140m2





Cap rate 10.52%^





• Situated on Erf 1386 Halfway Gardens Extension 54, at

the corner of Smuts and 3rd Road, Midrand, Gauteng.

The complex comprises 232 units, all of them being

two-bedroomed units with one bathroom, measuring

approximately 54m². The units are accommodated in 8

four-storey blocks, all of them north facing


of R6,300 for the upper floor units to R6,500 for the

ground floor units

Urban Ridge (South) (Midrand, Gauteng)


5





Size 12,472m2





Cap rate 10.33%^


Key facts


Photographs



• Situated on Erf 1399 Halfway Gardens Extension 35,

81 Fifth Road, Midrand, Gauteng. The complex



57m². The units are accommodated in 4 four-storey

blocks, all of them north facing


of 6,100 for first floor units to R6,300 for ground floor

units

Urban Ridge (West) (Midrand, Gauteng)


6





Size 14,907m2





Cap rate 10.69%^





• Known as Sectional Schemes De-Velde 1, 2, 4 and 5,

located on Portions 128, 131, 132 and 134 of the Farm

794 Stellenbosch RD, De Velde, Western Cape. The

complex comprises 310 units varying from one-

bedroomed units with one bathroom, measuring 38m²

to three-bedroomed units with two bathrooms,

measuring 104m²


of R6,600 for the one-bedroomed units up to R12,000

for the three-bedroomed units

De Velde (Somerset Wes, Western Cape)

IHS RES 1 PORTFOLIO – WESTERN CAPE

7





Size 29,330,m2





Cap rate 8.19%^




* Occupancy a result of lease up

^ At acquisition

$ Forecasted 2019 gross rental

• Situated on Erf 1399 Halfway Gardens Extension 35,

81 Fifth Road, Midrand, Gauteng. The complex



57m². The units are accommodated in 4 four-storey

blocks, all of them north facing


of 6,100 for first floor units to R6,300 for ground floor

units

Protea Glen (Midrand, Gauteng)

IHS RES 1 PORTFOLIO – OTHER

8





Size 8,480m2



Average lease term 29 months#


Cap rate 10.34%^





• The Property consists of 76 two bedroomed residential

units located at 649 Krige Street, Silverton, Pretoria.

• The average rental income per unit is R5,900 per

month

Silverleaf (Pretoria, Gauteng)

IHS RES 1 PORTFOLIO – OTHER

9


Age of property 9 months



Size 5,364m2

Historic occupancy rate N/A


Average lease term N/A#


Cap rate 9.87%^





3. PORTFOLIO POST PROPOSED TRANSACTIONS



PORTFOLIO POST PROPOSED TRANSACTIONS

No. Property name Physical address and provinceTotal number

of units

Total number

of units owned

by Transcend

Total GLA

(m2)

Independent

valuation

R’000

Effective date

of acquisition#

Weighted

average rental

per unit per

month

(R/units)*

Current

Vacancy (% of

units)

Existing Portfolio

1 67 on 7th 67 Seventh Avenue Edenvale, Gauteng 204 157 8,478 97,500 1-Oct-16 6,452 0.60%

2 Alpine Mews 72 Forest Road Eersterivier, Western Cape 90 90 4,005 36,200 1-Oct-16 5,043 10.00%

3 Ekhaya Fleurhof 40 Salinga Crescent Fleurhof Ext 3, Gauteng 162 162 6,642 69,500 1-Oct-16 4,502 1.00%

4 Ekhaya Jabulani2342 Dikgathlehong Street, Jabulani,

Gauteng244 244 10,004 90,600 1-Oct-16 4,243 1.23%

5 Jackalberry Close 23 Sydney Road, Jansen Park, Gauteng 252 208 10,713 112,300 1-Oct-16 5,702 2.46%

6 Kensington Place 26 Dover Street Ferndale, Gauteng 56 56 2,376 35,100 1-Oct-16 6,732 6.35%

7 MolwareCorner Rietspruit Road and Morithi Street

Kosmosdal, Gauteng252 252 11,937 138,500 1-Oct-16 5,652 1.79%

8 ParklandsAlong Southwark and Dartford Street

Parklands, Western Cape187 187 10,044 98,100 1-Oct-16 6,502 3.57%

9Village Seven, Stone

Arch Village19 Brookhill Road, Gauteng 114 114 6,039 55,100 1-Oct-16 5,526 4.28%

10 Terenure EstateCorner Oranjerivier and Bergrivier Drive,

Terenure Ext 70, Gauteng350 350 22,028 214,200 1-Oct-16 6,636 4.39%

11 Theresa Park Estates60 Burning Bush Street Theresa Park Ext 45,

Gauteng242 242 12,388 98,000 1-Oct-16 4,540 4.00%

12 Tradewinds 255 Kent Avenue Ferndale, Gauteng 85 85 3,730 46,040 1-Oct-16 6,313 5.79%

13 Vanguard29 Jade Street, off Klipfontein Road,

Heideveld, Cape Town60 60 2,640 33,300 22-Aug-18 6,730 0.00%

IHS Res 1 Portfolio

14 Midrand VillageErven 4472 to 4812 Clayville Extension 46,

Porcelain Road, Clayville, Gauteng225 225 14,280 153,300 1-Dec-18 7,313 3.00%

15 De Velde

Portions 128, 131, 132 and 134 of the Farm

794 Stellenbosch RD, De Velde, Western

Cape

310 310 29,330 337,700 1-Dec-18 10,555 6.00%

16 Birchwood VillageNorth of Johannesburg in the suburb of

Chartwell, Gauteng360 360 26,232 288,300 1-Dec-18 7,950 18.00%

17 Southgate RidgeErven 3030 and 3031 Naturena Extension

16, 5 Duin Place, Naturena, Gauteng412 412 21,972 216,600 1-Dec-18 5,874 8.00%

18 Urban Ridge (West)Erf 1399 Halfway Gardens Extension 35, 81

Fifth Road, Midrand, Gauteng260 260 14,907 153,100 1-Dec-18 6,546 8.00%

19 Urban Ridge (East)Erven Erf 1397 Halfway Gardens Extension

79, 77 Fifth Road, Midrand, Gauteng184 184 10,140 109,600 1-Dec-18 7,084 9.00%

20 Urban Ridge (South)

Erf 1386 Halfway Gardens Extension 54, at

the corner of Smuts & 3rd Road, Midrand,

Gauteng

232 232 12,472 138,800 1-Dec-18 6,642 8.00%

Other properties

21 Protea Glen Kganwe Street, Protea Glen, Soweto 176 176 8,480 61,290 1-Dec-18 4,675 8.00%

22 SilverleafErf 2151 Silverton Township, City of

Tshwane76 76 5,364 46,800 1-Dec-18 6,038 3.00%

Total 4,533 4,442 254,201 2,629,930 6,406 5.99%

* Forecasted 2019 weighted average rental per unit per month.# Effective date of property acquired and implemented by Transcend.

4. TRANSCEND VS MSCI RESIDENTIAL

BENCHMARK


TRANSCEND VS MSCI RESIDENTIAL BENCHMARK


Transcend’s return compared to MSCI SA Property

Index# 2017 – return (%)

Costs per m2 – Affordable housing – Transcend vs MSCI Residential Benchmark 2017

Transcend’s income in Rand per m2 compared to

MSCI Residential Benchmark#

Rand / m2 / monthTranscend

Portfolio*

MSCI

Residential

Benchmark*

Relative to

Benchmark

Basic rental 96.39 90.78 5.61

Fixed recoveries 0.00 2.67 (2.67)

Gross rental 96.39 93.45 2.94

Variable recoveries 7.38 14.07 (6.69)

Total income 103.78 107.52 -3.74

Operating costs (21.02) (41.75) 20.73

Net income^ 82.76 65.77 16.99

Source: MSCI Real Estate Portfolio Analysis Service – Transcend vs the MSCI Residential Benchmark

* Income for year to December 2017

0,00%

5,00%

10,00%

15,00%

TranscendPortfolio

Residential Retail Office Industrial

Income return Capital growth Average total return Total return

0

1

2

3

4

5

6

7

Bu

ildin

gm

an

age

me

nt

Cle

an

ing

Se

cu

rity

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rden

s

R&

M: a

irco

n

R&

M: e

leva

tors

/e

ca

lato

rs

Se

rvic

e &

build

ing

ma

inte

na

nce

Rate

s &

ta

xes (

op

scost)

Oth

er

mu

nic

ipa

lcha

rges

Ele

ctr

icity

Te

na

nt in

sta

llatio

ncosts

Lett

ing

fe

es &

com

mis

sio

ns

Ma

na

ge

me

nt

co

sts

Insu

ran

ce

Ba

d d

ebts

Oth

er

op

era

ting

costs

Rand /

sqm

/ m

onth

Transcend Benchmark Ave cost per m2 - Transcend Ave cost per m2 - Benchmark

5. IHS and MMA (Hunt)


Qualifying Criteria

• Affordability Check: Rent must be at most 33% of tenant income (Earning R15,000 = Rent of R5,000)

• No Listing on TPN: Check tenants payment behaviour, not just for listings

• Pay slip: Verified

• 3 Month Bank Statements: Check for spending patterns and affordability

• Deposits: Single month’s deposit for rent & deposits for utilities (if applicable)

• ID Documents: FICA

• Strict rules: Specific approval required for co-signing of leases

Application

form completed

and admin fee

paid by tenants

TPN Credit

Check

If approved:

Tenant to pay

1 month

deposit and 1

month rent


THE ROLE OF IHS – IHS PM CREDIT VETTING

DATE ACTION TAKEN

21st Close – off

22nd – 23rd Weekend

24th – 28th Statements are printed and delivered by hand and e-mail

24th – 31st Credit controllers start calling/sms-ing and e-mailing tenants that have short paid

1st Rent is due

2nd - 7th TPN file upload once receipting is done (SMS please pay or thank you for the payment)

2nd Credit controllers will call/ e-mail daily

3rd Red letters placed on doors

5th 5th Debit order payers

6th - 8th Letters of Demand prepared and delivered to the tenant

Simultaneously second special action to commence (cancelling of tags)

7th TPN File upload, SMS (please pay or thank you for the payment)

Credit controllers request specific action to be taken and follow up daily

7thCredit controllers issue cancellation letters - tenant to vacate within 7days of receipt of the cancellation letter/notice to

vacate


THE ROLE OF IHS – CREDIT CONTROL

• 105,018 Multifamily housing units developed

• 7th largest Multifamily owner in the US

• Largest owner of privatised Military Housing units in the US

• Investors in – and developers of – real estate assets

• Premier developer of master-planned communities

• Invests equity in market rate housing developments across the US

• Owner, manager and developer of mixed-use developments

• Interests in the following subsidiaries:

HUNT REAL ESTATE CAPITAL

In 2016, Hunt Real Estate

Capital originated $2.5 billion in

loans, and to date has originated

more than $21 billion

HUNT CAPITAL PARTNERS

Asset manager, funds manager,

and syndicator for the affordable

housing industry, using low

income housing tax credits

HUNT INVESTMENT

MANAGEMENT

Has more than $3.6 billion in

assets under management in

private real estate equity funds

MMA CAPITAL MANAGEMENT

Hunt subsidiary, MMAC

(NASDAQ: MMAC), utilizes its

extensive real estate and

renewable energy experience to

generate returns

HUNT COMPANIES FINANCE

TRUST

A real estate investment trust

(“REIT”) focused on investing in,

financing and managing a

portfolio of residential mortgage-

backed securities

HUNT FINANCIAL SECURITIES

A financial services firm focused

on serving the needs of

institutional clients


MMA and HUNT

• Listed on NASDAQ

• Invests primarily in debt that finances real assets

• MMAC leverages its extensive real estate and renewable energy

experience to generate returns

• MMAC is externally managed by Hunt Investment Management

• Senior management team averages 23 years of experience in

either the real estate or renewable energy business

Portfolio overview - MMAC’s investments, assets and liabilities

are organized into three portfolios:

• Leveraged Bonds

− Portfolio of primarily tax-exempt mortgage revenue bonds

• Energy Capital

− Invest along side an institutional capital partner in sola ventures

that finance the development and construction of renewable

energy projects

• Other Assets and Liabilities

− Several debt and legacy balance sheet assets, including the

Hunt Note, and additional real estate investments