Vukile Property Fund Ltd FY 2014 results

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Vukile Property Fund Ltd FY 2014 results

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Vukile Property Fund Ltd FY 2014 results

  1. 1. Audited condensed consolidated results for the year ended 31 March 2014
  2. 2. Financial highlights www.vukile.co.za > Property portfolio exceeds R10 billion mark.  Net asset value per linked unit up 9.42% to 1 498 cents.  Earnings per linked unit down 16.0% to 229.71 cents.  Headline earnings per linked unit up 20.2% to 163.68 cents.  Annual normalised distribution per linked unit up 5.0% to 126.49 cents.  Gross property revenue up 19.1% to R1.389 billion.  10 year compound annualised total return to unitholders 23.6%.  Return on capital for the year 18.0%.  Profit available for distribution up 24.7% to R694 million.
  3. 3. Vukile audited condensed consolidated results for the year ended 31 March 2014 1 Strategic and operational highlights  Portfolio transformation resulting in a better quality, lower risk portfolio: – Acquisition of 50% of East Rand Mall for R1.1 billion. – Acquired R1.04 billion Sovereign Tenant portfolio. – Successful re-launch of the revamped Randburg Square Shopping Centre. – Realised R287.0 million of sales of higher risk non-core properties.  Continued strong operational performance of the property portfolio. – Like-for-like growth in net property revenue of 6.8%. – Vacancies (as a % of gross rental) down to 6.7% (March 2013: 7.1%). – Positive reversions across all sectors. – Weighted average base rentals increased by 12.5% (March 2013: 12.79%).  Successful completion of one of the most significant empowerment transactions in the listed property sector.  Special distribution of 13.83 cents per linked unit.  Loan to value ratio, net of cash, remains conservative at 30.8% with 88% hedged.  Strategic investments acquired in Synergy Income Fund Limited (34%) and Fairvest Property Holdings Limited (32.2%).  Successful debt and equity raised of R507.6 million and R640.0 million respectively.
  4. 4. Vukile audited condensed consolidated results for the year ended 31 March 2014 2 Commentary 1. Basis of preparation The audited condensed consolidated financial results for the year ended 31 March 2014 included in this announcement have been prepared in accordance with the measurement and recognition criteria of International Financial Reporting Standards (IFRS) and have been prepared in accordance with the presentation and disclosure requirements of IAS 34, Interim Financial Reporting, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Companies Act and the JSE Limited Listings Requirements. Except for the new standards adopted as set out below, all accounting policies applied by the group in the preparation of these financial statements are consistent with those applied by the group in its consolidated financial statements as at and for the year ended 31 March 2013. The group has adopted the following new standards: Amendment of IFRS 7 – Disclosures – Offsetting Financial Assets and Financial Liabilities. IFRS 10 – Consolidated Financial Statements. IFRS 11 – Joint Arrangements. IFRS 12 – Disclosure of Interest in Other Entities. IFRS 13 – Fair Value Measurement. Amendments to IAS 1 – Presentation of Items of Other Comprehensive Income. Revised IAS 27 and 28 – Investments in Associates and Joint Ventures. Amendments to IAS 32 – Financial Instrument Presentation. There was no material impact on the condensed financial statements identified based on management’s assessment of these standards, apart from additional disclosure required in terms of IFRS 13. Grant Thornton, the group’s independent auditor, has audited the consolidated annual financial statements of Vukile Property Fund Limited for the year ended 31 March 2014 from which the condensed consolidated financial results for the year ended 31 March 2014 have been derived (but which is not itself audited) and have expressed an unqualified audit opinion on the consolidated annual financial statements. The auditor’s report does not necessarily cover all information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s work, they should obtain a copy of that report together with the accompanying financial information from the registered office of the company. The preparation of the financial results for the year ended 31 March 2014 was supervised by Michael Potts, CA(SA), financial director. The directors take full responsibility for the preparation of the condensed consolidated financial results for the year ended 31 March 2014 and for ensuring that the financial and other information has been correctly extracted from the Integrated Annual Report and the audited annual financial statements for the year ended 31 March 2014. 2. Financial results The group’s net profit available for distribution increased by R137.5 million (24.7%) to R693.9 million for the year ended 31 March 2014 (March 2013: R556.4 million). Simplified income statement 2014 2013 Calculation of distributable earnings March Group R’000 March Group R’000 Net profit from property operations excluding straight-line income adjustment 847 301 696 488 Net income from asset management business(I) 79 544 63 593 Income from listed property investments 14 862 — Investment and other income 49 417 25 615 Administrative expenses (34 968) (29 192) Finance costs (256 605) (194 285) Taxation (including deferred tax on timing differences) (5 678) (5 772) Available for distribution 693 873 556 447 (I) Internal asset management and other fees of R25.8 million (2013: R17.6 million) that are eliminated on consolidation are included as property expenditure above and hence reduces net profit from property operations and increases fee income generated in the asset management business segment.
  5. 5. Vukile audited condensed consolidated results for the year ended 31 March 2014 3 Property portfolio results During the past financial year, the property portfolio performed well in a difficult economic environment. The retail sector continued to outperform the other sectors while the industrial sector started showing signs of improvement. The commercial sector still battled with high vacancies in selected properties due to an oversupply of space in those nodes. Vacancies on the total portfolio reduced slightly from 7.1% to 6.7% (% of gross rentals) while the expiry profile improved substantially compared to previous reporting periods, thereby reducing the risk in the portfolio significantly. Positive reversions were achieved on renewals across all sectors, but more so in the retail sector with reversions of 7.8% being achieved. New transactions were concluded higher than budget in the retail sector but below budget in the industrial and commercial sectors in an effort to reduce vacancies. Gross rental receivables (tenant arrears) The size of the property portfolio increased by 33.6% from the previous year. Tenant arrears increased by 22% from the prior year to R32.5 million at 31 March 2014, which indicates that tenant arrears have been well controlled. Impairment allowance The allowance for the impairment of receivables has decreased from R13.7 million at 31 March 2013 to R11.3 million at 31  March 2014, which is considered adequate at this stage. The impairment allowance represents 0.81% of property revenue (March 2013: 1.17%). A summary of the movement in the impairment allowance of trade receivables is set out below. R’000 Impairment allowance 1 April 2013 13 653 Allowance for receivable impairment for the year 2 550 Receivables written off as uncollectable (4 859) Impairment allowance 31 March 2014 11 344 Bad debt write-off per the income statement 7 867 Asset management business The asset management business segment generated a net profit of R79.5 million for the year against R63.6 million in the prior year. This segment’s profit is reported gross of a consolidation adjustment of R25.8 million (March 2013: R17.6 million). Refer to note 1 of the simplified income statement in the table on the previous page. Asset management and other fees received of R48 million were in line with the previous year. The lower asset management fees from Sanlam were compensated by the higher asset management fees allocated to the Vukile portfolio following the R1.7 billion property acquisitions by Vukile. Asset management fees are made up as follows: 2014 2013 R’m R’m Asset management fees received from Sanlam 22.9 31.8 Asset management fees received in respect of the Vukile portfolio(I) 25.8 17.6 48.7 49.4 (I) These fees are eliminated on consolidation. Sales commission and other income received of R69.8 million was R23.6 million higher than the previous year, mainly due to the sale of East Rand Mall for R2.2 billion which generated a sales commission net of expenses of c.R66 million. The asset management agreement between Sanlam and Vukile in respect of Sanlam’s commercial property portfolio, is evergreen and can only be terminated in specific circumstances. In March 2014, Sanlam advised Vukile of its intention to repurchase the asset management agreement and business function due to a change in strategy in relation to its portfolio. The price and terms and conditions for the business are yet to be finalised between the parties and hence the discussions are still at an early stage. Commentary (continued)
  6. 6. Vukile audited condensed consolidated results for the year ended 31 March 2014 4 Commentary (continued) The valuation methodology has been changed to the calculation of an arms-length selling price based on discounted future cash flows net of tax in testing for impairment. Previously the internal valuations excluded any tax impact due to the flow through nature of the net income generated. The asset management business has been valued by the directors at fair value less costs to sell, using a discounted cash flow methodology, at R242.1 million. The intangible asset was tested for impairment by comparing the estimated fair value less costs to sell with the carrying value. The change in assumptions has resulted in a reversal of previous impairment losses of R89.1 million. Finance costs Group finance costs, net of interest income (excluding interest receivable of R14.86 million from listed property investments), have increased by R38.5 million, from R168.7 million to R207.2 million. The increase in finance costs is primarily due to interest arising on additional debt of R550 million and R535 million raised to partly finance the acquisitions of 50.0% of East Rand Mall in April 2013 and the Encha Sovereign portfolio which was transferred on 30 September 2013, respectively. The average cost of finance for the year ended 31 March 2014, based on the average of opening and closing interest-bearing debt, (excluding development debt), equates to 8.2% with 88% of interest-bearing debt hedged. Group corporate administrative expenditure Group corporate administrative expenditure of R35.0 million is R5.8 million higher than the previous year’s expenditure of R29.2 million. Short-term bonus costs under-provided for in the previous year (R3.6 million) and the amortisation of conditional unit plan awards in July 2013 (R1.3 million) were the main contributing factors to this increase. Distribution The normalised distribution for the full year ended 31 March 2014 increased by 5% to 126.49 cents per linked unit (March 2013: normalised 120.44 cents per linked unit), which represents 99.9% of the profit available for distribution. The distribution for the six months ended 31 March 2014 is 71.675 cents per linked unit which represents a 5% increase over the comparable six-month period. Treatment of non-recurring income earned The company advised unitholders previously that, in order to report a more predictable and stable income stream for investors going forward, abnormal sales commission and other non-recurring income earned would be paid as a separately identified special distribution in the financial year in which such non-recurring income is earned. The company has reported on its core property earnings as part of the normalised distribution with any special distributions arising from non-recurring income less non-recurring expenditure being declared separately therefrom. To facilitate ease of comparison, the following schedule reflects the distinction between normalised distributions and non-recurring distributions (sales commission plus other) over the past two financial years. 2014 2013 March Cents per linked unit March Cents per linked unit % increase Normalised distribution 126.49 120.44 5.0 Non-recurring distribution 13.83 11.15 24.0 Total distribution 140.32 131.59 6.6 The bulk of sales commission generated was paid as a R63.0 million special distribution in December 2013 and was clearly distinguished from the normalised distribution generated by the group.
  7. 7. Vukile audited condensed consolidated results for the year ended 31 March 2014 5 Commentary (continued) Summary of group financial performance 2014 2013 March March Headline earnings of linked units (R’m) 765 561 Net asset value per linked unit (cents) 1 498 1 369 Normalised distributions (cents) 126.49 120.44 Special distributions (cents) 13.83 11.15 Total distributions per linked unit (normalised and special) (cents) 140.32 131.59 Loan to value ratio (%)(I) 33.10 33.50 Loan to value ratio net of cash (%)(I) 30.80 22.20(III) Gearing ratio (%)(II) 29.10 31.00 (I) Based on directors’ valuations of the group’s portfolio at 31 March 2014. (II) The gearing ratio is calculated by dividing total interest-bearing borrowings by the total assets. (III) Cash utilised to finance the acquisition of East Rand Mall reduced this percentage in the previous year – refer paragraph below. Cash flow and net asset value The group net cash flow, reflecting the composition of cash generated and utilised during the year under review, is set out below: The bulk of the opening cash balance of R1.267 billion was utilised to acquire 50% of East Rand Mall (R1.1 billion) on 2 April 2013. Borrowings of R456 million, share issuances of R1.3 billion and proceeds from property sales (R522 million) were primarily utilised to acquire investment properties and investments in listed property companies totalling R2.2 billion. 0 – 1 000 000 – 2 000 000 – 3 000 000 – 4 000 000 – 5 000 000 – Group net cash flow Investmentand interestincome Balance1April2013 Cashfrom operatingactivities Borrowingsadvances Proceedsonsale ofinvestment properties/fixedassets Issueoflinkedunits Distributions Acquisition/improvements toinvestmentproperties andfixedassets Acquisitionofinvestments andavailable-for-sale financialassets Loanstodirectors undersharepurchaseplan Financecosts Balance31March2014 1287300 (649065) 1267304 64279 969578 456377 522329 (2735201) (605121) (23000) (256605) 298175
  8. 8. Vukile audited condensed consolidated results for the year ended 31 March 2014 6 Commentary (continued) The net asset value of the group increased over the reporting period by 9.42%, from 1 369 cents per linked unit to 1 498 cents per linked unit at 31 March 2014. The change in net asset value per linked unit, based on 509.6 million linked units in issue at year end, is set out in the NAV bridge graph below. Borrowings The group’s finance strategy is to minimise funding costs and refinance risk. The business objectives that are necessary to implement this strategy can be summarised as follows: Strategy Current position Diversify funders to at least three providers Five funders Diversify funding structures to incorporate, where appropriate: % of total Bank debt 52 Secured bonds 39 Commercial paper 9 100 Spread expiry terms of all interest-bearing debt to less than 25% per annum Achieved Hedge or fix 75% of interest-bearing debt 88% hedged Maximise interest income and limit negative carry Achieved through increase in access facilities repayable without break costs The Global Credit Rating Company (Pty) Ltd (GCR) has recently re-affirmed an AA (RSA) rating on its DMTN programme and an “A” corporate rating for Vukile. During March 2014 the company successfully issued R300 million commercial paper, as follows: Maturity date Term months R’m Interest rates % September 2014 6 75 6.38 March 2015 12 225 6.43 300 300 – 500 – 700 – 900 – 1 100 – 1 300 – 1 500 – 1 700 – 1 900 – NAV bridge (cents per linked unit) Adjustedfor additionallinked unitsinissue Investmentproperties purchased Increasein non-currentassets Decreasein investmentproperties heldforsale Decreasein currentassets Decreasein non-currentliabilities Increasein currentliabilities ClosingNAV (31March2014) OpeningNAVbalance (1April2013) aspreviouslyreported 1369 (211) 500 83 (2) (142) 66 (165) 1498
  9. 9. Vukile audited condensed consolidated results for the year ended 31 March 2014 7 Commentary (continued) The table below sets out the debt that has been hedged/fixed. VUKILE Loans Borrowings R’000 Interest rate hedges/fixed R’000 Hedged % DMTN Corporate bonds 1 320 000 1 320 000 100 DMTN Commercial paper 300 000 — — ABSA term facility RMB (R1.5 billion Sanlam acquisition) SCM (R1.5 billion Sanlam acquisition) Standard Bank (Encha acquisition)(I) RMB (Encha acquisition) 290 000 245 000 245 000 184 550 222 271 140 000 245 000 245 000 320 000 150 000 48 100 100 173 67 Nedbank Limited – fixed rate loan 398 777 398 777 100 Total interest-bearing(II) 3 205 598 2 818 777 88 Development loans(III) 195 681 — — Group total 3 401 279 2 818 777 (I) A further drawdown of R135.45 million is available (total R320 million) once certain mortgage bond issues have been resolved. (II) The interest on this debt is reflected in the income statement as finance costs. (III) Interest on development loans is capitalised until the development is completed and does not impact on distributable earnings. It is not the policy of the company to hedge commercial paper (R300 million), development debt (R196 million) and revolving access facilities (R72 million). The company’s borrowing capacity is unlimited in terms of its Memorandum of Incorporation (MOI). The group’s LTV ratio at 31 March 2014 based on external and directors’ valuations was 33.5% and 33.10% respectively compared to the bank’s covenants of 50% and the DMTN covenants of 40% in respect of those properties mortgaged as security under the DMTN programme and 45% in respect of total group debt as a percentage of group investment properties. The group has unutilised bank facilities of R484 million at 31 March 2014. Post period refinancing A R440 million bank facility was replaced with a R500 million bank facility in April 2014 and comprises the following: Term Year R’m Finance costs % Access facility 1 200 7.06 Term facility(I) 3 200 8.97 Term facility(I) 4 100 9.65 (I) These facilities have been hedged through interest rate swaps. The above finance costs are inclusive of bank margins, debt raising costs and interest rate hedge costs, where applicable. Valuation of portfolio The accounting policies of the group require that the directors value the entire portfolio every six months at fair market value. Approximately one half of the portfolio is valued every six months, on a rotational basis, by registered independent third party valuers. The directors have valued the group’s property portfolio at R10.3 billion as at 31 March 2014. This is R2 582 million or 33.6% higher than the valuation as at 31 March 2013 mainly due to the acquisition of East Rand Mall (50%), the Encha portfolio, Letlhabile Mall, Hammarsdale Junction, Ga-Kgapane Modjadji Plaza (30%) and undeveloped land in Midrand. The calculated recurring forward yield for the portfolio is 9.6%. The external valuations by Broll Valuation and Advisory Services (Pty) Ltd, part of the CBRE Affilliate Network, and Jones Lang LaSalle (Pty) Ltd at 31 March 2014 of 47.9% of the total portfolio are in line with the directors’ valuations of the same properties.
  10. 10. Vukile audited condensed consolidated results for the year ended 31 March 2014 8 Commentary (continued) 3. Group property portfolio overview The group property portfolio at 31 March 2014 consisted of 79 properties with a total market value of R10.3 billion and gross lettable area of 1 144 841m², with an average value of R130 million per property. The geographical and sectoral distribution of the group’s portfolio is indicated in the graphs below. The portfolio is well-represented in most of the South African provinces and Namibia. 90% of the gross income is derived from Gauteng, KwaZulu-Natal, Western Cape and Namibia. Geographical profile % of gross income Gauteng (58%) KwaZulu-Natal (18%) Western Cape (7%) Namibia (7%) Free State (4%) Northwest (1%) Limpopo (2%) Mpumalanga (2%) Eastern Cape (1%) Sectoral profile % of gross income Retail (55%) Offices (25%) Industrial (10%) Sovereign (7%)* Hospital (2%) Motor related (1%) *Top four regions account for 90% of exposure. *The Sovereign portfolio has only been in the portfolio for eight  months. Tenant profile % of GLA Large national and listed tenants and major franchises (45%) Government (12%) National and listed tenants, franchised and medium to large professional firms (8%) Other (35%) Vukile’s tenant concentration risk is considered to be low as the top 10 tenants account for 33.6% of total GLA. Local, provincial and national government is the single largest tenant, occupying 12.0% of total GLA with Shoprite the second largest at 5.3% of total GLA.
  11. 11. Vukile audited condensed consolidated results for the year ended 31 March 2014 9 Commentary (continued) Top 10 properties by value Property Location Sector Rentable area m² Directors’ valuation at 31 March 2014 R’000 % of total Valuation R/m² East Rand Mall (50%)* Boksburg Retail 31 258 1 029.1 10.0 32 922 Durban Phoenix Plaza Durban Retail 24 363 587.2 5.7 24 101 Pretoria Navarre Building Pretoria Sovereign 47 518 471.2 4.6 9 915 Pretoria De Bruyn Park Pretoria Sovereign 41 418 367.3 3.6 8 869 Randburg Square Randburg Retail 51 326 332.2 3.2 6 472 Cape Town Bellville Louis Leipoldt Bellville Hospital 22 311 328.3 3.2 14 714 Pinetown Pine Crest (50%)* Pinetown Retail 20 056 310.3 3.0 15 473 Soweto Dobsonville Shopping Centre Soweto Retail 23 177 301.9 2.9 13 026 Oshakati Shopping Centre Oshakati Retail 24 632 253.5 2.5 10 290 Johannesburg Isle of Houghton Houghton Offices 28 074 244.2 2.4 8 700 Total Top 10 314 133 4 225.2 41.1 13 450 *Represents an undivided 50% share in this property. Property portfolio performance New leases and renewals of 285 098m² with a contract value of R1 060 million were concluded during the year. 91% of leases to be renewed during the year ended 31 March 2014 were renewed or are in the process of being renewed which is up from 87% in 2013. Details of large contracts Tenant Property Sector Contract value R’m Lease duration Years Pick n Pay Daveyton Shopping Centre Retail 62.1 12 DPW: SAPS Pretoria Arcadia Suncardia Offices 31.6 5 Marley Pipe Pretoria Rosslyn Warehouse Industrial 30.4 10 Eskom Sandton Sunninghill Sunhill Park Offices 33.0 3 Shoprite Checkers Ondangwa Shoprite Centre Retail 26.2 10 Medi-Clinic Cape Town Bellville Tijger Park Offices 27.5 6 Viva Gym SA Roodepoort Hillfox Power Centre Retail 22.7 10 Gym Company Randburg Square Retail 22.4 11 Game Stores Oshakati Shopping Centre Retail 23.1 7 Shoprite Checkers Durban Phoenix Plaza Retail 21.4 5
  12. 12. Vukile audited condensed consolidated results for the year ended 31 March 2014 10 Commentary (continued) The group lease expiry profile graph reflects that 27% of the leases are due for renewal in 2015. The cumulative lease expiry profile improved substantially compared to March 2013. This is the result of sales and acquisitions as well as the renewal of a number of lease agreements on the balance of the portfolio. 24% of leases are due to expire in 2019 and beyond. Vacancies At 31 March 2014, the portfolio’s vacancy (measured as a percentage of gross rental) was 6.7% compared to 7.1% at 31 March 2013. On 31 March 2014 the portfolio’s vacancy (measured as a percentage of gross lettable area) was 6.5% compared to 6.8% at 31 March 2013. Vukile has signed a sales agreement for the sale of Pretoria Midtown building while Johannesburg Bedfordview 1 Kramer Road will be auctioned during June 2014. Once the above sales have been concluded the office vacancies, excluding offices held for sale, will reduce from 17.5% to 12.6% (as a % of GLA) whilst the total portfolio vacancies will drop from 6.5% to 5.3%. At Pretoria De Bruyn Park ± 2 000m² of the vacant area is storage currently occupied by the Department of Public Works (DPW). Vukile is in the process of obtaining an addendum to the lease agreements for this area which will improve the vacancies reflected at this property. 1 320m² of the remaining vacancy can only be occupied by DPW as it is only accessible via their premises. Vukile is engaged in various initiatives in an effort to reduce the vacancies on the portfolio including broker focus groups, the publishing of vacancy information directly to brokers and also on the Vukile vacancy website, leasing incentives on selected properties, incentives to property management companies and leasing brokers. 0 – 20 – 40 – 60 – 80 – 100 – Beyond March 2019 March 2019March 2018March 2017March 2016March 2015Vacant Ⅵ GLA Ⅵ Cumulative as at March 2014 Ⅵ Cumulative as at March 2013 Group lease expiry (% of GLA) 11 13 6 19 17 27 6.5 6.8 100 8976 70 50 34 9391 85 76 61 0 – 3 – 6 – 9 – 12 – 15 – 18 – Ⅵ 31 March 2013 Ⅵ 31 March 2014 (excluding Pretoria Midtown and Bedfordview Kramer Road) Ⅵ Pretoria Midtown and Bedfordview Kramer Road Vacancy profile (% of gross rental) TotalMotor relatedHospitalSovereignIndustrialOfficesRetail 3.9 3.3 12.5 14.9 2.512.4 7.2 4.8 — 4.8 — — — 8.9 7.1 6.7 0.85.9
  13. 13. Vukile audited condensed consolidated results for the year ended 31 March 2014 11 Commentary (continued) The properties with the highest vacancies are reflected below. 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 Cape Town Bellville Suntyger (16%) Johannesburg Rosettenville Village Main Industrial Park (13%) Sandton Hyde Park 50 Sixth Road (26%) Cape Town Parow Industrial park (0%) Midrand IBG (12%) Johannesburg Isle of Houghton (4%) Cape Town Bellville Barons (20%) Bloemfontein Plaza (3%) Sandton Sunninghill Place (2%) Soweto Dobsonville Shopping Centre (6%) Germiston Meadowdale R24 (5%) Pretoria Hatfield Festival Street Offices (1%) Centurion 259 West Street (34%) Midrand Allandale Industrial Park (1%) Centurion Samrand N1 (23%) Randburg Square (5%) Randburg Trevallyn Industrial Park (4%) Sandton Rivonia Tuscany (25%) Midrand Ulwazi Building (21%) Pretoria Lynnwood Sunwood Park (10%) Pretoria Lynnwood Excel Park (30%) Sandton Bryanston St Andrews Complex (36%) Roodepoort Hillfox Power Centre (7%) Johannesburg Parktown Oakhurst (41%) Cape Town Bellville Tijger Park (22%) Pretoria De Bruyn Park (11%) Johannesburg Bedfordview 1 Kramer Road (98%) Pretoria Midtown Building (100%) Pretoria Arcadia Suncardia (11%) Ⅵ Vacant area 31 March 2013 Ⅵ Vacant area 31 March 2014 Individual properties vacancy profile (% of GLA) Vacancy 1 000 m2
  14. 14. Vukile audited condensed consolidated results for the year ended 31 March 2014 12 Commentary (continued) Base rentals (excluding recoveries) The weighted average monthly base rental rates per sector, between 31 March 2013 and 31 March 2014, are set out in the graph below. The high increase in base rentals is due to the acquisitions as well as the sale of lower value properties during the year. Average contractual rental escalation of 8% is in line with the previous year (8.1%). The average escalation on expiry rentals on the total portfolio of 4.5% is positive against the backdrop of a difficult trading environment. The low escalation on offices is to be expected during the current over-supply of office space. Industrial escalations of 2.1% have dropped due to leasing incentives offered at industrial parks in an effort to retain tenants to prevent the vacancy from increasing further. 0 – 20 – 40 – 60 – 80 – 100 – 120 – 140 – Ⅵ March 2013 Ⅵ March 2014 Weighted average base rentals (R/m2 ) Excluding recoveries TotalMotor relatedHospitalSovereignIndustrialOfficesRetail 86.76 102.56 83.07 86.80 38.89 40.16 — 83.44 82.87 89.09 84.68 104.50 74.09 83.39 12.5%23.4%7.5%3.3%4.5%18.2% Rental escalation (%) Contracted rental escalation profile Average annual escalation 0 – 2 – 4 – 6 – 8 – 10 – Offices Retail Industrial Sovereign Hospital Motor related Total 8.0 7.8 8.6 8.9 7.5 7.0 8.0 Leasing activity (%) Lease renewals Escalation on expiry rentals 0 – 1 – 2 – 3 – 4 – 5 – 6 – 7 – 8 – 9 – Office Retail Industrial Average 1.7 7.8 2.1 4.5
  15. 15. Vukile audited condensed consolidated results for the year ended 31 March 2014 13 Commentary (continued) The low percentage reflected for industrial (88.8%) is due to leasing incentives offered to tenants to reduce the vacancies. Expense categories and ratios Recurring property expenses have increased year-on-year mostly due to excessive increases in electricity and water tariffs and rates and taxes. The various cost components are reflected in the graph below: 84% of costs from top four categories Government services (46%) Rates and taxes (19%) Cleaning and security (11%) Property management fee (8%) Maintenance contracts (6%) Asset management fee (6%) Insurance premiums (2%) Bad debt (1%) Sundry expenses (1%) The group continuously evaluates methods of containing costs in the portfolio and the stable portfolio’s recurring costs to property revenue ratios (excluding electricity and rates and taxes) have decreased from 17.7% in March 2010 to 16.8% in March 2014 and hence have been well contained. Leasing activity (%) New leases concluded Rental concluded/budget 0 – 20 – 40 – 60 – 80 – 100 – 120 – Office Retail Industrial Average 92.5 102.2 88.8 96.1
  16. 16. Vukile audited condensed consolidated results for the year ended 31 March 2014 14 Commentary (continued) *The stable portfolio includes only those properties that have been in the portfolio for the full 12-month period. ~ Durban Workshop is excluded from this graph. Rent collection and arrears An important part of protecting the group against the likelihood of tenants defaulting on their lease agreements, is our credit vetting process prior to the acceptance of a tenant. We have developed a comprehensive screening process for each applicant, which assesses the tenant according to type (national, government, SMMEs and other), nature of business, main shareholders and other relevant characteristics, and in the case of renewals, payment history. As such, it is important to closely monitor our arrears book and any changes to tenant payment processes. We measure the effectiveness of our collections process based on the percentage collected by the fifth business day of each month. On average, our collection percentages (including legal cases) on the fifth business day of the month for the last two years are as follows: 2014 2013 Sector % % Retail 76.3 76.5 Offices 88.3 79.8 Industrial 76.1 66.9 Hospital 100.0 100.0 Motor related 83.8 90.5 Portfolio growth, redevelopments and sales Acquisitions 50% interest in East Rand Mall As part of an on-going strategy to grow the portfolio, increase its retail exposure and improve the quality of its portfolio, the company acquired a 50% undivided share of East Rand Mall on 2 April 2013 for R1.1 billion. East Rand Mall, regarded as one of the top regional malls in South Africa, has a gross lettable area of 62 516m² and is situated in Boksburg, Gauteng.  It has an 85% comprehensive national tenant component which includes Edgars, Mr Price, Woolworths and Foschini.  The strong performing mall, supported by good trading densities among national tenants, has become the focal point of this eastern Gauteng retail node with a catchment radius of approximately 10 kilometres.  The inclusion of the 50% undivided share of East Rand Mall has enhanced the quality of and strengthened the revenue of the portfolio. Encha Properties As part of the company’s transformation strategy, the company concluded an agreement with Encha Properties Proprietary Limited (Encha) in one of the most significant Black Economic Empowerment (BEE) initiatives in the listed property sector to date. 0 – 5 – 10 – 15 – 20 – 25 – 30 – 35 – 40 – Ⅵ All recurring expenses Ⅵ All recurring expenses excluding rates and taxes and electricity Ratio of gross recurring cost to property revenue (%) Stable portfolio March 2014March 2013March 2012March 2011March 2010March 2009March 2008March 2007 31.6 18.5 30.3 17.8 30.8 17.2 33.0 17.7 33.1 16.9 35.3 17.0 36.5 17.6 34.8 16.8
  17. 17. Vukile audited condensed consolidated results for the year ended 31 March 2014 15 Commentary (continued) Vukile acquired four predominantly national government-tenanted properties from Encha for c.R1.04 billion at a yield of 9.5%.  A put and call option over the Pretoria Momentum Building has not yet been exercised as one of the conditions precedent relating to the finalisation of a five-year lease has not yet been met.  The properties purchased comprise Navarre Wachthuis, the Koedoe Arcade, De Bruyn Park in Pretoria and the Bloemfontein Fedsure Building.  A sovereign tenant sub-portfolio has been established within Vukile to house the new properties, which are being managed by Encha on an external management company basis. The portfolio carries a longer dated lease expiry profile with contractual escalations of 8.9%. Fairvest Four properties at a consideration of R231.6 million were sold to Fairvest Property Holdings Limited (Fairvest) in exchange for 165 426 429 Fairvest shares at a consideration of R1.40 per share resulting in Vukile holding a 31.5% interest in Fairvest.  A further 2.1 million shares in Fairvest were acquired in the market by Vukile. The stake in Fairvest is strategically aligned to Vukile’s focus on lower LSM retail. It allows the company to stay housed in lower LSM retail assets by getting exposure to smaller centres and doing so in a managed and time efficient manner. The transaction was done on a yield enhancing basis. Synergy Vukile acquired a strategic equity stake in Synergy Income Fund Limited (Synergy) by concluding an agreement in December 2013 to acquire 52 300 000 Synergy B-linked units, representing a 34% interest in Synergy, from Liberty Group Limited. The purchase consideration was discharged by an issue of approximately 20.6 million Vukile linked units to Liberty, and was done on a yield enhancing basis. The Synergy portfolio is comprised of 15 assets valued at c.R2.2 billion and shows a strong fit with the Vukile portfolio. Discussions are in progress with Synergy to explore further opportunities with the fund. Hammarsdale Junction Shopping Centre The Hammarsdale Junction Shopping Centre measuring 19 400m² and anchored by Pick n Pay, Spar and Mr Price, opened in June 2013.  The centre is located within the Mpumalanga Township of KwaZulu-Natal.  The national tenant component of the centre at opening date was 74%.  The average monthly foot count since opening has been 480 000.  Permanent job opportunities for approximately 450 people were created. The centre was acquired for R197 million at an initial yield of c.9.5%. Mini factory/warehousing complex Linbro Park Stratford Property Ventures commenced with the development of a 15  000m² mini factory/warehousing complex at Linbro Park during October 2013.  Transfer of the land was registered during February 2014.  Linbro Park is one of Johannesburg’s prime industrial areas. The development is incorporated into Linbro Business Park, firmly established as a desirable business address, which enjoys excellent accessibility to the N3 and Sandton CBD via Marlboro Road while offering the added benefit of being located approximately three kilometres from the Gautrain Marlboro Station.  The development comprises 22 units with a wide variety of unit sizes ranging from 350m² to 1 870m².  The anticipated capital expenditure is R124 million at an initial yield of 10% which is underpinned by a one year income guarantee. The completion date is August 2014. 30% interest Modjadji Plaza (15 200m²) and Maake Plaza (9 800m²) Transfer of Modjadji Plaza was registered during February 2014 while Maake Plaza’s transfer is imminent. The purchase price for the shares in these centres amounts to R61.5 million at a blended anticipated initial yield of 12%. The centres are located in the rural areas surrounding Tzaneen in the Limpopo Province. Both centres are anchored by Shoprite and the national tenant composition is 88%. Letlhabile Mall, North West Province The Letlhabile Mall was acquired in March 2014 for R194.2 million at a yield of 9.2%.  The centre with a GLA of 17 600m², is situated in Letlhabile about 30 kilometres north of Brits in the North West Province. Shoprite is the food anchor. Other national tenants include Pep Stores, Ackermans, Mr Price, Jet Stores, Dunns, Capitec and Nedbank. The national tenant component comprises approximately 88% of the total GLA.  The mall opened on 28 March 2014. A decision has been taken not to pursue the acquisition of Edendale Mall as reported previously. In terms of the JSE Listing Requirements we are required to report on a circular distributed to unitholders in January 2012, relating to the acquisition of 20 properties from the Sanlam Group. The circular net property revenue for the year to 31 March 2014 was forecast at R142.6 million. This excludes the straight-line rental
  18. 18. Vukile audited condensed consolidated results for the year ended 31 March 2014 16 Commentary (continued) accrual contained in the forecast. Actual net rental income achieved for the year ended 31 March 2014 amounted to R141.5 million, despite the sale of Bassonia Office Park in the previous year and the sale of Bloemfontein Trador Cash Carry on 13 August 2013, which reduced net property revenue generated by this portfolio for the year ended 31 March 2014. As such the actual net rental income achieved exceeded the forecasts contained in the abovementioned circular. Post year end “A” grade quality offices were acquired for R54 million in April 2014 situated on 9th Street, Melrose Estate, within walking distance of the Rosebank Gautrain station. Upgrades/Redevelopments As part of the on-going strategy to improve the quality of the existing portfolio, the following projects as set out below have been completed, or are in progress. East Rand Mall: Extension and upgrade The extension of East Rand Mall by about 7 300m² and the upgrade of the centre at a total cost of R307 million, of which R255 million and R52 million comprises income generating and defensive capex respectively was approved by the company’s Property Investment Committee in April 2014. A projected net rental yield of 8.1% is projected for the income generating capex. Vukile and Redefine Properties Limited, who each own an undivided share of 50% in the centre, will contribute R153.5 million each. Food Lovers Market will be the food anchor for c.4 500m². Randburg Square The R207 million redevelopment of the Randburg Square was completed in the past financial year. The overall project encompassed improving sightlines through the reconfiguration of central areas, the broadening of the internal walkways, the introduction of new wider and higher shop fronts, the installation of new bulkheads and completely revamping the aesthetic appeal of the centre. In addition to the original two phases, a third phase was added which incorporated improving all services to the retail suites to comply with current legislation, all within the original budget. Management has noted that in addition to the overall increase in foot count, improved tenant mix and strong turnover growth as communicated to the market during the re-launch in October last year, the spend per head patterns have also since shown a significant increase on a comparative basis. This is a firm indication that the quality of the shopper has also improved since the completion of the redevelopment. This will bode well for the future growth of the asset. On the letting front we continue to receive very healthy positive reversions from expiring tenants.  Preliminary feedback and trading data from national tenants has also shown a steady increase with Mr Price, Foschini, Truworths and Ackermans amongst the top performing tenants in the centre in terms of trading densities since the re-launch. This project continues to be an example of a well-considered capital allocation decision to brownfield developments which gears our properties for growth in an ever competitive environment. Such investments ensure strong and sustainable future growth in the standing investment portfolio. Durban Workshop* Certain of the upgrades to the Durban Workshop at a budgeted cost of R47.7 million were initially delayed due to protracted negotiations with the KZN Heritage Resources Agency regarding the approval of the plans. The plans have now been approved. Due to the delays with the approval of the plans, the projected completion date has been extended to November 2015. The following aspects of the upgrade have been completed/are in process:  The cinema area has already been converted into retail space at a cost of R7.3 million and let to Ackermans, Pep and Dunns who have commenced trading, resulting in a yield of 11.1% on this conversion.  The upgrade of the various ablution facilities has started.  The reconfiguration and upgrade of the food court has also started. This centre is well located with a footfall of more than a million per month. The upgrade will coincide with the Durban City centre project of ± R500 million for the general upgrade of the surrounding area and the construction of a library which will be completed in 2018. This new world class facility will be adjacent to the Durban Workshop and is expected to have a significant impact on the City centre and the Workshop.
  19. 19. Vukile audited condensed consolidated results for the year ended 31 March 2014 17 Commentary (continued) Cape Town Bellville Tijger Park The upgrade to the exterior and interior of buildings 1, 2 and 3, the construction of a new parking garage and the landscaping upgrade was completed in November 2013 at a total cost of R49.8 million. Cape Town Bellville Barons The upgrade to the Barons VW premises at a cost of R17.5 million has been completed. The new 10 year lease concluded with Barloworld Auto commenced on 1 December 2013. Cape Town Bellville Louis Leipoldt The upgrade for Medi-Clinic was completed in May 2013. Vukile’s share of the costs of the upgrade amounted to R33.5 million. Roodepoort Hillfox Power Centre* The third phase of the upgrade at a cost of R20 million commenced in April 2014 for completion by November 2014. The work will include:  Upgrading the existing signage towers to improve the centre’s visibility, especially from Hendrik Potgieter Road.  New cladding to the façade to hide the dated roofline and to provide better signage opportunities for tenants.  Replacing existing shop fronts with new anodised aluminium shop fronts.  Replacing mall paving and tiling in selected areas.  Upgrading the existing ablution facilities.  Repainting the exterior of the centre (excluding the roofs). *Post the above upgrades and expansions, we expect to achieve higher rentals on renewals and reduced vacancies. Daveyton Shopping Centre Work on the expansion of the Pick n Pay commenced in March 2013. The R6.9 million, yield enhancing project, has expanded the store by an additional 700m². The project was completed at the end of October 2013. As part of the expansion, Pick n Pay has entered into a new 10 year lease expanding its offering to 3 700m². This expansion is well justified by the strong historic performance of the store and should bode well for sustained, solid future trade. Ondangwa Shoprite Centre The extension of the Shoprite premises in the Ondangwa Centre at a cost of R9.5 million has been completed and the new 10 year Shoprite lease commenced on 1 December 2013. Property sales during the year net of selling costs Property Sales price R’000 Yield % Durban Embassy 235 611 9.9 Durban Qualbert Centre* 68 778 9.6 Malamulele Plaza* 64 766 9.6 Kimberley Kim Park* 53 012 9.6 Giyani Spar Centre* 48 466 9.6 Midrand Allandale Land (Halfway House Ext 65) 24 320 — Bloemfontein Bree Street Warehouse 13 900 6.7 Randburg Triangle 13 458 10.5 Total 522 311 *Sold to Fairvest The proceeds from property sales will be utilised to acquire properties that conform to Vukile’s investment requirements and/or to fund expansions and revamps, thereby further enhancing the quality of the portfolio. Property sales after year end Property Sales price R’000 Yield % Cape Town Kenilworth Motor Showrooms 34 750 12.2 Lichtenburg Shopping Centre 48 600 9.9
  20. 20. Vukile audited condensed consolidated results for the year ended 31 March 2014 18 Commentary (continued) 4. Operating segments Condensed operating segment report for the year ended 31 March 2014 GROUP Retail R’000 Offices R’000 Group income for the year ended 31 March 2014 Property revenue 773 328 349 151 Straight-line rental income accrual 29 299 12 580 802 627 361 731 Property expenses (295 104) (143 827) Profit from property and other operations 507 523 217 904 Group statement of financial position at 31 March 2014 Assets Investment properties 5 327 347 2 108 030 Add: Lease commissions Goodwill 53 169 Intangible asset Investment properties held for sale 195 558 117 009 5 576 074 2 225 039 Add: Excluded items Development expenditure Investments Furniture, fittings and computer equipment Available-for-sale financial asset Derivative financial instrument Loans to directors Deferred taxation assets Trade and other receivables Cash and cash equivalents Total assets Liabilities Linked debentures and premium 2 432 989 980 191 Interest-bearing borrowings 1 822 211 734 125 4 255 200 1 714 316 Add: Excluded items Equity Deferred taxation liabilities Trade and other payables Current taxation liabilities Linked unitholders for distribution Total equity and liabilities
  21. 21. Vukile audited condensed consolidated results for the year ended 31 March 2014 19 Commentary (continued) Industrial R’000 Sovereign office R’00 Hospital R’000 Motor related R’000 Total R’000 Asset manage- ment business R’000 Total Group R’000 135 872 94 879 26 393 10 002 1 389 625 92 654 1 482 279 5 512 4 137 1 446 519 53 493 — 53 493 141 384 99 016 27 839 10 521 1 443 118 92 654 1 535 772 (45 908) (27 356) (2 784) (1 538) (516 517) (38 917) (555 434) 95 476 71 660 25 055 8 983 926 601 53 737 980 338 1 060 488 1 010 906 328 287 128 279 9 963 337 9 963 337 26 657 26 657 9 989 994 9 989 994 3 889 57 058 57 058 242 059 242 059 — 312 567 312 567 1 064 377 1 010 906 328 287 128 279 1 359 619 242 059 10 610 678 29 732 592 300 4 660 20 313 18 757 23 000 3 424 86 165 298 175 11 678 204 467 175 445 332 144 619 56 510 4 526 816 4 526 816 349 896 333 535 108 314 42 324 3 390 405 3 390 405 817 071 778 867 252 933 98 834 7 917 221 7 917 221 3 108 689 7 870 274 926 4 262 365 236 11 678 204
  22. 22. Vukile audited condensed consolidated results for the year ended 31 March 2014 20 Commentary (continued) Condensed operating segment report for the year ended 31 March 2013 GROUP Retail R’000 Office R’000 Group income for the year ended 31 March 2013 Property revenue 615 405 415 611 Straight-line rental income accrual 2 547 1 720 617 952 417 331 Property expenses (255 098) (151 476) Profit from property and other operations 362 854 265 855 Group statement of financial position at 31 March 2013 Assets Investment properties 3 829 929 2 532 533 Add: Lease commissions Goodwill 59 713 Intangible asset Investment properties held for sale 40 509 262 536 3 930 151 2 795 069 Add: Excluded items Deffered capital expenditure Furniture, fittings, computer equipment and other Available-for-sale financial asset Financial asset at amortised cost (loans and receivables) Trade and other receivables Cash and cash equivalents Total assets Liabilities Linked debentures and premium 1 647 602 1 189 830 Interest-bearing borrowings 1 576 968 1 007 768 3 224 570 2 197 598 Add: Excluded items Equity and reserves Derivative financial instruments Deferred taxation liabilities Trade and other payables Current taxation liabilities Linked unitholders for distribution Total equity and liabilities
  23. 23. Vukile audited condensed consolidated results for the year ended 31 March 2014 21 Commentary (continued) Industrial R’000 Total R’000 Asset manage- ment business R’000 Total Group R’000 135 924 1 166 940 77 974 1 244 914 562 4 829 — 4 829 136 486 1 171 769 77 974 1 249 743 (46 237) (452 811) (32 022) (484 833) 90 249 718 958 45 952 764 910 1 008 272 7 370 734 7 370 734 18 922 18 922 7 389 656 7 389 656 3 889 63 602 63 602 152 965 152 965 20 157 323 202 323 202 1 032 318 7 776 460 152 965 7 929 425 138 385 5 129 19 417 1 152 84 360 1 267 304 9 445 172 437 790 3 275 222 3 275 222 342 722 2 927 458 2 927 458 780 512 6 202 680 6 202 680 2 626 187 59 330 6 293 228 117 1 343 321 222 9 445 172
  24. 24. Vukile audited condensed consolidated results for the year ended 31 March 2014 22 Commentary (continued)Commentary (continued) 5. Capital commitments The group has authorised and contracted refurbishment and expansions totalling R180.5 million. The group is authorised, but has not yet contracted, to upgrade shopping centres, replace air-conditioning units, refurbish lifts, tenant installations and other minor capital expenditure at an estimated cost of R88 million. The above refurbishment programme, capital expenditure and developments will be funded out of surplus cash, bank facilities and proceeds from property sales. 6. Prospects Vukile is in a strong and healthy position for the future. Our gearing is conservative with high levels of interest rate hedging, which puts us in a defensive position ahead of an expected rising interest rate cycle. Our portfolio is solid with its improved quality and lower risk profile. Our team benefits from excellent skill, knowledge and experience. We’ve battened down the hatches for what could be a more challenging time for the sector. But, we remain vigilant for opportunities to grow the fund with value-adding transactions, whether they be in direct property investments or other listed funds strategically aligned to Vukile. Notwithstanding the dual headwinds of a stubbornly sluggish economy and rising interest rates, distribution growth for the listed property sector is forecast at between 7% and 8% for the next year. We are confident that Vukile will deliver growth in distributions at least in line with the top end of this projected sector growth. This view is premised on interest rates rising by no more than 200 basis points over the course of our financial year and there being no material deterioration in the macro-economic environment relative to current levels. Forecast rental income is based on contractual lease terms and anticipated market related renewals. The forecast information contained in this paragraph has not been reviewed or audited by Vukile’s auditors. 7. Acknowledgements My thanks go to the Vukile management team and staff for the fantastic results, their hard work and commitment this year. The growing depth of knowledge and experience in the team continues to strengthen Vukile. A special thanks must go to the chairman and the board for their unwavering support and significant input provided over the past year. We would also like to express our gratitude to Vukile’s business partners. Their dedication and exceptional efforts are invaluable in driving our performance. 8. Board changes The company announced the appointment of Dr Renosi Mokate to the board as an independent non-executive director with effect from 11 December 2013. Dr Mokate has over 27 years of experience in the field of development economics and planning and has served in various academic and executive roles. She is a former executive director of the WorldBank Group as well as a former deputy governor of the South African Reserve Bank and currently serves as a board member of Bidvest Bank Limited and chairperson of the Government Employees Pension Fund. Dr Mokate holds a BA-degree from Lincoln University, Pennsylvania, USA and MA and PhD degrees from the University of Delaware, Newark, USA.
  25. 25. Vukile audited condensed consolidated results for the year ended 31 March 2014 23 Commentary (continued) 9. Payment of debenture interest and cash dividend (the cash distribution) with an election to reinvest the distribution in return for Vukile linked units Notice is hereby given of a distribution amounting to 71.675 cents per linked unit, for the six-month period to 31 March 2014. Linked unitholders will be entitled to elect (in respect of all or part of their linked unitholding) to reinvest the cash distribution of 71.675 cents per linked unit, in return for linked units (the linked unit reinvestment alternative), failing which they will receive the cash distribution in respect of (all or part of) their linked unitholdings. A circular providing further information in respect of the cash distribution and the linked unit reinvestment alternative will be posted or otherwise distributed to linked unitholders on 29 May 2014. Linked unitholders who have dematerialised their linked units are required to notify their duly appointed Central Securities Depository Participant (CSDP) or broker of their election in the manner and time stipulated in the custody agreement governing the relationship between the linked unitholder and their CSDP or broker. Vukile was granted REIT status by the JSE Limited with effect from 1 April 2013 in line with the REIT structure as provided for in the Income Tax Act, No. 58 of 1962, as amended (the Income Tax Act) and section 13 of the JSE Listings Requirements. The REIT structure is a tax regime that allows a REIT to deduct qualifying distributions paid to investors, in determining its taxable income. The cash distribution of 71.67500 cents per linked unit meets the requirements of a “qualifying distribution” for the purposes of section 25BB of the Income Tax Act (a qualifying distribution) with the result that: qualifying distributions received by resident Vukile linked unitholders must be included in the gross income of such linked unitholders (as a non-exempt dividend in terms of section 10(1)(k)(i)(aa) of the Income Tax Act), with the effect that the qualifying distribution is taxable as income in the hands of the Vukile linked unitholder. These qualifying distributions are however exempt from dividends withholding tax, provided that the South African resident linked unitholders provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated linked units, or the company, in respect of certificated linked units: – a declaration that the distribution is exempt from dividends tax; and – a written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances affecting the exemption change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by the Commissioner for the South African Revenue Service. Linked unitholders are advised to contact their CSDP, broker or the company, as the case may be, to arrange for the abovementioned documents to be submitted prior to payment of the distribution, if such documents have not already been submitted. qualifying distributions received by non-resident Vukile linked unitholders will not be taxable as income and instead will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions per section 10(1)(k) of the Income Tax Act. It should be noted that until 31 December 2013 qualifying distributions received by non-residents were not subject to dividends withholding tax. From 1 January 2014, any qualifying distribution are subject to dividends withholding tax at 15%, unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation (DTA) between South Africa and the country of residence of the linked unitholder. Assuming dividends withholding tax will be withheld at a rate of 15%, the net distribution amount due to non-resident linked unitholders is 60.92375 cents per linked unit. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied upon if the non- resident linked unitholder has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated linked units, or the company, in respect of certificated linked units: – a declaration that the distribution is subject to a reduced rate as a result of the application of a DTA; and – a written undertaking to inform their CSDP, broker or the company, as the case may be, should the circumstances affecting the reduced rate change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by the commissioner for the South African Revenue Service. Non-resident linked unitholders are advised to contact their CSDP, broker or the company, as the case may be, to arrange for the abovementioned documents to be submitted prior to payment of the distribution if such documents have not already been submitted, if applicable.
  26. 26. Vukile audited condensed consolidated results for the year ended 31 March 2014 24 Commentary (continued) Linked unitholders who are South African residents are advised that in electing to participate in the linked unit reinvestment alternative, pre-taxation funds are utilised for the reinvestment purposes and that taxation will be due on the total cash distribution amount of 71.67500 cents per linked unit. Linked unitholders are further advised that: the issued share capital of Vukile is 509 573 007 linked units of one cent each at year end; there are no secondary tax on company credits available to be utilised; and Vukile’s tax reference number is 9331/617/14/3. This cash distribution or linked unit reinvestment alternative may have tax implications for resident as well as non-resident linked unitholders. Linked unitholders are therefore encouraged to consult their tax and/or professional advisors should they be in any doubt as to the appropriate action to take. The salient dates relating to the cash distribution and linked unit alternative are as follows: 2014 Circular and form of election posted to linked unitholders Thursday, 29 May Finalisation information including the linked unit ratio and price per linked unit published on SENS Thursday, 5 June Last day to trade in order to participate in the election to receive the linked unit reinvestment alternative or to receive a cash distribution (LDT) Thursday, 12 June Linked units trade ex-distribution Friday, 13 June Listing of maximum possible number of linked units under the linked unit reinvestment alternative Wednesday, 18 June Last day to elect to receive the linked unit alternative or to receive a cash distribution (no late forms of election will be accepted) at 12:00 (SA time) Friday, 20 June Record date for the election to receive the linked unit reinvestment alternative or to receive a cash distribution (record date) Friday, 20 June Results of cash distribution and linked unit reinvestment alternative published on SENS Monday, 23 June Cash distribution cheques posted to certificated linked unitholders on or about Monday, 23 June Accounts credited by CSDP or broker to dematerialised linked unitholders with the cash distribution payment Monday, 23 June Linked unit certificates posted to certificated unitholders on or about Wednesday, 25 June Accounts updated with new linked units (if applicable) by CSDP or broker to dematerialised linked unitholders Wednesday, 25 June Adjustment to linked units listed on or about Thursday, 26 June Notes: 1. Linked unitholders electing the linked unit reinvestment alternative are alerted to the fact that the new linked units will be listed on LDT + 3 and that these new linked units can only be traded on LDT + 3, due to the fact that settlement of the linked units will be three days after record date, which differs from the conventional one day after record date settlement process. 2. Linked units may not be dematerialised or rematerialised between Friday, 13  June  2014 and Friday, 20 June 2014, both days inclusive. 3. The above dates and times are subject to change. Any changes will be released on SENS. On behalf of the board AD Botha LG Rapp Melrose Estate 23 May 2014
  27. 27. Vukile audited condensed consolidated results for the year ended 31 March 2014 25 Condensed consolidated statement of financial position at 31 March 2014 Condensed consolidated statement of financial position at 31 March 2014 2014 2013 GROUP R’000 R’000 ASSETS Non-current assets 10 739 238 7 770 306 Investment properties 9 787 413 7 241 245 Investment properties 9 989 994 7 389 656 Straight-line rental income adjustment (202 581) (148 411) Other non-current assets 951 825 529 061 Investments — 152 965 Straight-line rental income asset 202 581 148 411 Investments 592 300 — Deferred capital expenditure 29 732 138 385 Furniture fittings, computer equipment and other 4 660 5 129 Available-for-sale financial asset 20 313 19 417 Loans and receivables — 1 152 Goodwill 57 058 63 602 Derivative financial instrument 18 757 — Deferred taxation assets 3 424 — Long-term loans granted 23 000 — Current assets 626 399 1 351 664 Intangible asset 242 059 — Trade and other receivables 86 165 84 360 Cash and cash equivalents 298 175 1 267 304 Investment properties held for sale 312 567 323 202 Total assets 11 678 204 9 445 172 Equity and reserves 3 108 689 2 626 187 Non-current liabilities 6 668 564 5 755 367 Linked debentures and premium 4 526 816 3 275 222 Other interest-bearing borrowings 2 133 878 2 414 522 Derivative financial instruments — 59 330 Deferred taxation liabilities 7 870 6 293 Current liabilities 1 900 951 1 063 618 Trade and other payables 274 926 228 117 Short-term borrowings 1 256 527 512 936 Current taxation liabilities 4 262 1 343 Linked unitholders for distribution 365 236 321 222 Total equity and liabilities 11 678 204 9 445 172 Net asset value per linked unit (cents) 1 498 1 369 Net tangible asset value per linked unit (cents) 1 440 1 319
  28. 28. Vukile audited condensed consolidated results for the year ended 31 March 2014 26 Condensed consolidated statement of comprehensive income for the year ended 31 March 2014 2014 2013 GROUP R’000 R’000 Property revenue 1 389 625 1 166 940 Straight-line rental income accrual 53 493 4 829 Gross property revenue 1 443 118 1 171 769 Property expenses (516 517) (452 811) Net profit from property operations 926 601 718 958 Net income from asset management business 53 737 45 952 Corporate administrative expenses (34 964) (29 192) Investment and other income 64 279 25 615 Operating profit before finance costs 1 009 653 761 333 Finance costs (256 605) (194 285) Profit before debenture interest 753 048 567 048 Debenture interest (691 667) (554 368) Profit before capital items 61 381 12 680 Profit on sale of investment properties 41 201 903 Amortisation of debenture premium 9 959 6 804 Goodwill written-off on sale of subsidiary/properties by a subsidiary (6 544) (821) Reversal of impairment/(impairment) of intangible asset 89 094 (114 131) Impairment of goodwill — (1 121) Loss on sale of furniture, fittings and equipment (4) — Fair value gain on investments 17 228 — Profit on sale of subsidiary — 1 160 Profit/(loss) before fair value adjustments 212 315 (94 526) Fair value adjustments 174 784 255 329 Gross change in fair value of investment properties 228 277 260 158 Straight-line rental income adjustment (53 493) (4 829) Profit before taxation 387 099 160 803 Taxation (5 678) 412 834 Profit for the year 381 421 573 637 Other comprehensive income/(loss) for the year 66 162 (52 053) Total comprehensive income for the year 447 583 521 584 Earnings per linked unit (cents) 229.71 273.53 Diluted earnings per linked unit (cents) 229.71 273.53 Headline and diluted headline earnings per linked unit (cents) 163.69 136.16 Number of linked units in issue 509 573 007 431 040 218 Weighted average number of linked units in issue 472 371 428 412 394 876
  29. 29. Vukile audited condensed consolidated results for the year ended 31 March 2014 27 Reconciliation of earnings to headline earnings and to profit available for distribution for the year ended 31 March 2014 2014 2013 Group R’000 Cents per linked unit Group R’000 Cents per linked unit Earnings per share 381 421 81.65 573 637 139.10 Adjusted for: Debenture interest 691 667 148.06 554 368 134.43 Earnings per linked unit 1 073 088 229.71 1 128 005 273.53 Change in fair value of investment properties (174 784) (37.42) (255 329) (61.91) Total tax effects of adjustments — — (418 606) (101.51) Write-off in goodwill on sale of subsidiary/properties sold by a subsidiary 6 544 1.40 821 0.20 Impairment of goodwill — — 1 121 0.27 Loss on sale of subsidiary — — (1 160) (0.28) Profit on sale of investment properties (41 201) (8.82) (903) (0.22) Loss on disposal of furniture, fittings and equipment 4 — 188 0.05 Reversal/(impairment) of intangible asset (89 094) (19.07) 114 131 27.68 Amortisation of debenture premium (9 959) (2.12) (6 804) (1.65) Headline earnings of linked units 764 598 163.68 561 464 136.16 Loss on disposal of furniture, fittings and equipment (4) — (188) (0.05) Revaluation surplus on investments (17 228) (3.69) — — Straight-line rental accrual (53 493) (11.45) (4 829) (1.17) Profit available for distribution 693 873 148.54 556 447 134.94
  30. 30. Vukile audited condensed consolidated results for the year ended 31 March 2014 28 Condensed consolidated statement of cash flow for the year ended 31 March 2014 2014 2013 Group Group R’000 R’000 Cash flow from operating activities 969 578 738 201 Cash flow from investing activities (2 753 714) (1 446 725) Cash flow from financing activities 815 007 1 759 881 Net (decrease)/increase in cash and cash equivalents (969 129) 1 051 357 Cash and cash equivalents at the beginning of the year 1 267 304 215 947 Cash and cash equivalents at the end of the year 298 175 1 267 304
  31. 31. Vukile audited condensed consolidated results for the year ended 31 March 2014 29 Condensed consolidated statement of changes in equity for the year ended 31 March 2014 GROUP Share capital and share premium R’000 Non- distributable reserves R’000 Retained earnings R’000 Total R’000 Balance at 31 March 2012 32 263 2 013 225 28 982 2 074 470 Issue of shares 23 853 — — 23 853 Dividend distribution — — (1 131) (1 131) 56 116 2 013 225 27 851 2 097 192 Profit for the year — — 573 637 573 637 Change in fair value of investment properties — 260 158 (260 158) — Deferred taxation rate change — 426 790 (426 790) — Share-based remuneration — 7 411 — 7 411 Transfer from non-distributable reserve — (122 194) 122 194 — Other comprehensive loss Revaluation of available-for-sale financial asset — (18 367) — (18 367) Revaluation of cash flow hedges — (33 686) — (33 686) Balance at 31 March 2013 56 116 2 533 337 36 734 2 626 187 Issue of shares 25 747 — — 25 747 Dividend distribution — — (1 412) (1 412) 81 863 2 533 337 35 322 2 650 522 Profit for the year — — 381 421 381 421 Change in fair value of investment properties — 228 277 (228 277) — Share-based remuneration — 10 584 — 10 584 Transfer to non-distributable reserve — 140 978 (140 978) — Other comprehensive loss Revaluation of available-for-sale financial asset — (11 925) — (11 925) Revaluation of cash flow hedges — 78 087 — 78 087 Balance at 31 March 2014 81 863 2 979 338 47 488 3 108 689
  32. 32. Vukile audited condensed consolidated results for the year ended 31 March 2014 30 Notes to the condensed financial statements for the year ended 31 March 2014 1. Measurements of fair value 1.1 Financial Instruments The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows: 2014 2013 GROUP Level 1 R’000 Level 2 R’000 Total R’000 Level 1 R’000 Level 2 R’000 Total R’000 Assets Investments 592 300 — 592 300 — — — Available-for-sale financial assets 20 313 — 20 313 19 417 — 19 417 Derivative financial instruments — 18 757 18 757 — — — Total 612 613 18 757 631 370 19 417 — 19 417 Liabilities Derivative financial instruments — — — — (59 330) (59 330) Total — — — — (59 330) (59 330) Net fair value 612 613 18 757 631 370 19 417 (59 330) (39 913) Measurement of fair value The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting period. Investments This comprises shares held in listed property companies at fair value which is determined by reference to quoted closing prices at the reporting date. Available-for-sale financial assets This comprises equity-settled share-based long-term incentive reimbursement rights stated at fair value. Fair value has been determined by reference to Vukile’s quoted closing price at the reporting date after deduction of executive and management rights. Derivative financial instruments The fair values of these swap contracts are determined by ABSA Capital, Rand Merchant Bank, Standard Bank and Investec Bank Limited using a valuation technique that maximises the use of observable market inputs. Derivatives entered into by the group are included in Level 2 and consist of interest rate swap contracts. 1.2 Non-financial assets The following table reflects the levels within the hierarchy of non-financial assets measured at fair value at 31 March 2014: 2014 2013 Level 3 Level 3 R’000 R’000 Assets Investment properties 9 899 994 7 389 656 Investment properties held for sale 312 567 323 202
  33. 33. Vukile audited condensed consolidated results for the year ended 31 March 2014 31 Notes to the condensed financial statements (continued) for the year ended 31 March 2014 Fair value measurement of non-financial assets (investment properties) The fair value of commercial buildings are estimated using an income approach which capitalises the estimated rental income stream, net of projected operating costs, using a discount rate derived from market yields. The estimated rental stream takes into account current occupancy levels, estimates of future vacancy levels, the terms of in-place leases and expectations of rentals from future leases over the remaining economic life of the buildings. The most significant inputs, all of which are unobservable, are the estimated rental value, assumptions regarding vacancy levels, the discount rate and the reversionary capitalisation rate. The estimated fair value increases if the estimated rental increases, vacancy levels decline or if discount rates (market yields) and reversionary capitalisation rates decline. The overall valuations are sensitive to all four assumptions. Management considers the range of reasonable possible alternative assumptions is greatest for reversionary capitalisation rate rental values and vacancy levels and that there is also an inter-relationship between these inputs. The inputs used in the valuations at 31 March 2014 were:  The range of the reversionary capitalisation rates applied to the portfolio are between 7.47% and 13.81% with the weighted average being 10.04% (March 2013: 10.2%).  The discount rates applied range between 13.3% and 17.81% with the weighted average being 14.52% (March 2013: 14.4%).  Changes in discount rates attributable to changes in market conditions can have a significant impact on property valuations. A 25 basis points increase in the discount rate will decrease the value of the investment property by R271 million (2.6%). A 25 basis points decrease in the capitalisation rate will increase the value of investment property by R264 million (2.6%). In determining future cash flows for valuation purposes, vacancies are forecast for each property based on estimated demand.
  34. 34. Vukile audited condensed consolidated results for the year ended 31 March 2014 32 Notes
  35. 35. Results presentation for the year ended 31 March 2014
  36. 36. Vukile audited condensed consolidated results for the year ended 31 March 2014 34 Our ten year timeline Where we began.... In the decade since Vukile first listed on the JSE we have achieved an unbroken record of distribution growth for our investors. This consistent performance has been delivered through varying property cycles with stable growth supported by effective strategies, a forward-thinking and proactive approach to deal-making and accomplished management skills. Successful implementation of R2 billion Commercial Mortgage Backed Securitisation Programme 2006Price per unit 987 cents Acquisition of remaining stake of MICC and its subsequent delisting 2007Price per unit 1 077 cents 2008Price per unit 1 006 cents Listed on the Namibian Stock Exchange 2010Price per unit 1 195 cents Internalisation of asset management function in September 2009 Acquisition of the Sanlam property asset management business in January 2010 Ranked best performing property company listed on the JSE by Catalyst Fund Managers 2005Price per unit 530 cents Acquisition of 75% of MICC Listed on the JSE on 27 June 2004 Portfolio value: R3.1 billion Market capitalisation R1.3 billion 2004Price per unit 500 cents 2009Price per unit 919 cents Value of portfolio exceeds R4.5 billion
  37. 37. Vukile audited condensed consolidated results for the year ended 31 March 2014 35 Ten years of creating unitholder value 2011Price per unit 1 423 cents Acquisition of R541 million portfolio from Sanlam Ranked 2nd best performing property company listed on the JSE by Catalyst Fund Managers The journey of growth Acquisition of R1.5 billion portfolio – increasing asset base by 25% Successful implementation of a R5 billion Domestic Medium Term Note Programme with a “AA” rating Ranked top industrial fund by IPD over a three year period for total return 2013Price per unit 1 898 cents 2012Price per unit 1 527 cents Successful broadening of unitholder base through the introduction of the PIC as a significant unitholder Re-rating of free float index weighting from 50% to 100% Ranked 22nd of Top 100 listed companies in 2011 by Business Times Survey Ranked top overall property fund by IPD over three year period for total return Ten years unbroken track record of growth in distributions 2014Price per share 1120 cents Total annualised return of 23.6% over 10 years Portfolio growth from R3.1 billion to R10.3 billion Market capitalisation growth from R1.3 billion to R8.5 billion 2014Price per unit 1 673 cents Portfolio value exceeding R10 billion mark Acquisition of 50% of East Rand Mall for R1.1 billion Successful implementation of R1.04 billion Encha empowerment transaction First property company to acquire REIT status
  38. 38. Vukile audited condensed consolidated results for the year ended 31 March 2014 36 Introduction 
 10 year review •  Tenth set of results since listing in June 2004 •  Decade of unbroken growth in distributions •  Compound annualised total return of 23.6% since listing •  Property asset growth from R3.1bn to R10.9bn −  Direct property portfolio of R10.3bn −  Strategic investments in listed REITS of R600m •  Market cap growth from R1.3bn to R8.5bn •  Stable and deeply experienced management team with a strong emphasis on corporate governance •  Heightened focus in the last three years on changing the nature of the portfolio to a better quality, lower risk profile •  Solid foundation now laid from which to launch the next phase of growth and delivery of shareholder value LAURENCE RAPP Introduction and highlights 2
  39. 39. Vukile audited condensed consolidated results for the year ended 31 March 2014 37 MIKE POTTS Financial performance 5 Highlights
 Transformation of the portfolio •  Growth in normalised annual distributions of 5% in line with market guidance o  Distribution of 71.675 cpu (+ 5%) cents per linked unit for the 6 months ended 31 March 2014 •  Portfolio transformation resulting in a better quality, lower risk portfolio: o  Acquisition of 50% of East Rand Mall for R1.1 billion o  Acquired R1.04 billion Sovereign Tenant Portfolio o  Successful re-launch of the revamped Randburg Square Shopping Centre o  Realised R287.0 million of sales of higher risk non-core properties •  Continued strong operational performance of the property portfolio o  Like-for-like growth in net property revenue of 6.8% o  Vacancies (as a % of gross rental) down to 6.7% (March 2013: 7.1%) o  91% of leases due for renewal were renewed o  Positive reversions across all sectors, retail up by 7.8% o  Weighted average base rentals increased by 12.5% (March 2013: 12.7%) •  Successful completion of significant Encha empowerment transaction •  Special distribution of 13.83 cents per linked unit •  Loan to value ratio, net of cash, remains conservative at 30.8% with 88% hedged •  Strategic investments acquired in Synergy (34%) and Fairvest (33.2%) •  Successful debt and equity raised of R507.6 million and R640.0 million respectively 4
  40. 40. Vukile audited condensed consolidated results for the year ended 31 March 2014 38 Growth in distribution 7     March 2013 March 2014 % Growth Normalised distribution per linked unit (cents) 120.44 126.49 5.0 Special/non-recurring distribution per linked unit (cents) 11.15 13.83 24.0 Total distribution per linked unit (cents) 131.59 140.32 6.6 Distribution history
 A decade of unbroken growth in distributions 6 30,0 32,5 35,8 40,3 44,1 47,0 46,2 47,6 52,2 54,8 31,5 36,0 41,0 48,0 53,8 60,9 62,8 63,8 68,2 71,7 61,5 68,5 76,8 88,3 97,9 107,9 109,0 111,4 120,4 126,5 8,7 13,4 11,2 13,8 117,7 124,8 131,6 140,3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Cents per linked unit Interim Final Normalised Total Non-recurring
  41. 41. Vukile audited condensed consolidated results for the year ended 31 March 2014 39 Simplified income statement (cont.)
 Like-for-like growth of 6.8% 9 2014 Rm 2013 Rm Variance Increase in group net rental income (1) 873.1 714.1 159.0 22.3% Made up as follows: •  Like-for-like (stable) portfolio 540.4 505.9 34.5 6.8% •  New property acquisitions contributed 298.6 128.4 170.2 •  Less: Held for sale and non-core properties sold (2) 34.1 79.8 (45.7) (1) Excluding internal asset management fees of R25.8m in 2014 and R17.6m in 2013 (2) The sale of non-core properties effectively reduced net income by R46 million over the comparable period, partially offset by income generated of between 5.5% and 9.5% from the re-investment of the proceeds thereof Simplified income statement
 2014 Rm 2013 Rm % Variance Net profit from property operations excluding straight-line income adjustment 847 301 696 488 21.7 Net income from asset management business(1) 79 544 63 593 25.1 Income from listed property investments 14 862 - - Investment and other income 49 417 25 615 92.9 Administrative expenses ( 34 968) ( 29 192) 19.8 Finance costs ( 256 605) ( 194 285) 32.1 Taxation (including deferred tax on timing differences) ( 5 678) ( 5 772) (1.6) Available for distribution 693 873 556 447 24.7 8 (1) Internal asset management and other fees of R25.8 million (2013: R17.6 million) that are eliminated on consolidation are included as property expenditure above and hence reduces net profit from property operations and increases fee income generated in the asset management business segment.
  42. 42. Vukile audited condensed consolidated results for the year ended 31 March 2014 40 Group balance sheet at 31 March 2014 11 313 9 990 952 626 6 669 1 901 323 7 390 529 1 352 5 755 1 064 0 2 000 4 000 6 000 8 000 10 000 12 000 Investment Properties for sale Investment Properties Other non- current assets Current Assets Non-current liabilities Current Liabilities Mar-14 Mar-13 Rʼmillion Group income and expenditure
 Distributable Income R693.9 million 
 10 Rental Income R1 100 934, 71% Electricity and water services recovered R 216 825, 14% Rates and taxes recovered R 71 866, 5% Asset Management: sales commission other fees R 69 757, 5% Interest Income R 49 417, 3% Investment income R 14 862, 1% Asset Management Fee Income R 22 897, 1% Finance Costs R 256 605, 30% Electricity and water costs R 212 595, 25% Property Expenses R 175 594, 21% Rates and taxes R 89 818, 10% Property Management Fees R 38 510, 4% Asset Management Expenses R 38 917, 5% Corporate Admin R 34 964, 4% Tax R 5 678, 1% Income (R1 546.6 million) Expenses (R852.7 million)
  43. 43. Vukile audited condensed consolidated results for the year ended 31 March 2014 41 Group debt structure 
 Conservatively geared and well hedged 13 2014 2013 Gearing ratio 29.1% 31.0% Loan to value ratio 33.1% 33.5% Loan to value ratio net of cash 30.8% 22.0%* Interest bearing debt hedged 88.0% 92.8% Total average cost of finance for the year 8.2% 8.1% SWAPS •  Extended 39% of swaps maturing in September 2015 to October 2018, at an additional swap cost of 35 bps or R1.4 million per annum •  Extended R100 million swap in April 2014 from March 2015 to March 2019 •  Concluded new R200 million swap in April 2014 expiring in March 2017 •  Average maturity period of swaps extended to 3 years *Skewed in 2013 due to R1.1bn cash raised to fund the acquisition of East Rand Mall on 2 April 2013 Bad debt and arrears analysis
 Declining bad debts •  The size of the portfolio increased by 33.6% from the previous year. Tenant arrears increased by 22% from the prior year to R32.5 million at 31 March 2014 •  Tenant arrears comprised 2.3% of property revenue which is in line with the previous year •  Impairment allowance decreased from R13.7 million (March 2013) to R11.3 million at 
 31 March 2014. The impairment allowance represents 0.81% of property revenue (March 2013: 1.17%) 12 R000 •  Impairment allowance 1 April 2014 13 653 •  Allowance for receivable impairment for the year 2 550 •  Receivables written off as uncollectable (4 859) •  Impairment allowance 31 March 2014 11 344 Bad debt write-off per the statement of comprehensive income 7 867
  44. 44. Vukile audited condensed consolidated results for the year ended 31 March 2014 42 Group debt structure 15 Maturity and interest rate profile of variable interest bearing debt at 31 March 2014 10 75 185,7 225 72,3 7,28 6,38 7,55 6,43 8,23 0 50 100 150 200 250 300 May 2014 September 2014 November 2014 March 2015 September 2016 Variable rate debt [Rʼm] Variable interest rate [%] Group debt structure 14 Maturity and interest rate profile of fixed interest bearing debt at 31 March 2014 150,0 398,7 140,0 163,3 580,0 200,0 163,3 200,0 310,0 163,4 240,0 100,0 24,6 7,71 8,66 7,60 8,03 8,58 6,82 8,60 8,51 8,29 9,07 8,83 7,36 9,13 - 100,0 200,0 300,0 400,0 500,0 600,0 700,0 May 2014 August 2014 March 2015 April 2015 May 2015 March 2016 April 2016 May 2016 September 2016 April 2017 May 2017 March 2018 September 2018 Fixed rate debt [Rʼm] Fixed interest rate [%]
  45. 45. Vukile audited condensed consolidated results for the year ended 31 March 2014 43 NAV bridge
 Year-on-year growth in NAV : 9.4% 17 1369 1498 500 83 66 (211) (2) (142) (165) - 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Opening NAV Balance (1 April 2013) as previously reported Adjusted for additional linked units in issue Investment properties purchased Increase in non-current assets Decrease in investment properties held for sale Decrease in current assets Decrease in non-current liabilities Increase in current liabilities Closing NAV (31 March 2014) NAV bridge (cents per linked unit) Group net cash flow 16 1 267 304 298 175 64 279 969 578 456 377 522 329 1 287 300 ( 649 065) (2 735 201) ( 605 121) ( 23 000) ( 256 605) - 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 3 500 000 4 000 000 4 500 000 5 000 000 Balance1April2013 Investmentandinterestincome Cashfromoperatingactivities Borrowingsadvances Proceedsonsaleofinvestment properties/fixedassets Issueoflinkedunits Distributions Acquisition/improvementstoinvestment propertiesandfixedassets Acquisitionofinvestmentsandavailable- for-salefinancialassets Loanstodirectorsundersharepurchase plan Financecosts Balance31March2014
  46. 46. Vukile audited condensed consolidated results for the year ended 31 March 2014 44 INA LOPION Property portfolio performance and overview 19 Linked unit price and trading volumes
 1 April 2013 to 31 March 2014 18 0 500 1000 1500 2000 2500 3000 3500 4000 4500 0 500 1000 1500 2000 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Volume Share Price Price (cents) Volumes (000)
  47. 47. Vukile audited condensed consolidated results for the year ended 31 March 2014 45 Overview 
 Leasing activity and tenant exposure 21 •  For the year ended 31 March 2014 leases were concluded with a: −  Total contract value R1 060.5 million −  Total rentable area 285 098m² •  Lease renewals 91% of leases due for renewal have been renewed •  Tenant Exposure: (% of GLA) 49% 9% 5% 37% 2013 49% 46% 12% 11% 31% 2014 Large national and listed tenants and major franchises Government National and listed tenants, franchised and medium to large professional firms Other Overview 20 •  Number of properties 79 •  GLA 1 144 841m² •  Valuation −  Total portfolio R10.276 billion 48% of total portfolio valued externally, values in line with internal values −  Average value per property R130 million −  Average discount rate 14.5% −  Average exit capitalisation rate 10.0%
  48. 48. Vukile audited condensed consolidated results for the year ended 31 March 2014 46 Sectoral profile
 66% of portfolio in low risk, stable assets 23 66% Value: R10 276m GLA: 1 144 841m² 66% 22 Historical Portfolio Overview
 March 2011 to March 2014 – a significant transformation March 2011 March 2014 Growth Number of Properties 73 79 7% Average Value per Property R72.3m R130.1m 80% Average Value per m² R5 767/m² R8 952/m² 55% Market Value R5 350m R10 276m 92% –  Stable Portfolio R4 568m R6 211m 36% –  Properties Acquired [Apr 11 to Mar14] - R4 065m –  Properties Sold [Apr 11 to Mar 14] R782m -
  49. 49. Vukile audited condensed consolidated results for the year ended 31 March 2014 47 10 largest properties 25 Property Location Sector Rentable area m² Directorsʼ valuation at 31 Mar 2014 R000 % of total Valuation R/m² East Rand Mall (50%) * Boksburg Retail 31 258 1 029.1 10.0 32 922 Durban Phoenix Plaza Durban Retail 24 363 587.2 5.7 24 101 Pretoria Navarre Building Pretoria Sovereign 47 518 471.2 4.6 9 915 Pretoria De Bruyn Park Pretoria Sovereign 41 418 367.3 3.6 8 869 Randburg Square Randburg Retail 51 326 332.2 3.2 6 472 Cape Town Bellville Louis Leipoldt Bellville Hospital 22 311 328.3 3.2 14 714 Pinetown Pine Crest (50%) * Pinetown Retail 20 056 310.3 3.0 15 473 Soweto Dobsonville Shopping Centre Soweto Retail 23 177 301.9 2.9 13 026 Oshakati Shopping Centre Oshakati Retail 24 632 253.5 2.5 10 290 Jhb Isle of Houghton Houghton Offices 28 074 244.2 2.4 8 700 Total Top 10     314 133 4 225.2 41.1 13 450 *Represents an undivided 50% share in this property. Retail 174 812 2 814.2 27.4 16 098 Sovereign 88 936 838.5 8.2 9 428 Offices 28 074 244.2 2.4 8 700 Hospital 22 311 328.3 3.2 14 714 Total 314 133 4 225.2 41.1 13 450 Portfolio composition - first year yield analysis
 Top 75% of value made up of high quality, low risk assets 24 CapeTownBellvilleLouisLeipoldt CapeTownKenilworthMotorShowrooms CapeTownPinelandsPinepark LichtenburgShoppingCentre DurbanWestvilleSurreyPark BoksburgEastRandMall(50%) PretoriaArcadiaSuncardia Centurion259WestStreet SandtonBryanstonStAndrewsComplex JhbParktownOakhurst PretoriaLynnwoodExcelPark PretoriaHatfield1166FrancisBaardStreet PretoriaMidtownBuilding JhbBedfordview1KramerRoad Average 9,6% First Year Yield 31 Mar 14 [Recurring net income; Excl Capex] Potential First Year Yield 31 Mar 14 (assumed fully let) 1st Quartile (Top 25%) 4 props; R2.5bn; yield 9.2% 2nd Quartile 
 9 props; R2.4bn; yield 9.1% 3rd Quartile s 18 props; R2.6bn; yield 10.2% 4th Quartile (bottom 25%) 
 42 props; R2.6bn; yield 9.7% Properties to be sold 6 props; R0.2bn; yield 7.3%
  50. 50. Vukile audited condensed consolidated results for the year ended 31 March 2014 48 Geographic profile (GLA m²)
 Top four regions account for 88% of exposure
 27 Gauteng 60% KwaZulu- Natal 15% Western Cape 7% Namibia 6% Free State 4% Northwest 3% Limpopo 2% Mpumalanga 2% Eastern Cape 1% Total Portfolio Gauteng 41% KwaZulu- Natal 22% Namibia 13% Free State 8% Northwest 7% Limpopo 5% Mpumalan ga 4% Retail [43%] Gauteng 83% KwaZulu- Natal 1% Western Cape 13% Eastern Cape 3% Offices [23%] Gauteng 69% KwaZulu- Natal 23% Western Cape 8% Industrial [21%] Gauteng 90% Free State 10% Sovereign [10%] Western Cape 100% Hospital [2%] Gauteng 22% Western Cape 78% Motor Related [1%] Retail Portfolio Profile
 A key strength 26 •  28 Retail properties with a total market value of R5.5 billion •  80% Exposure to national tenants •  15 Largest retail centres made up of 70% of the total retail value: −  81% exposure to national tenants. −  Average trading density R27 200/m² −  Average foot count 850 000 per month, with 4 of the centres averaging a million or more per month
  51. 51. Vukile audited condensed consolidated results for the year ended 31 March 2014 49 Individual properties vacancy profile
 (% of GLA) (vacancy 1 000m²)
 29 0m² 2 000m² 4 000m² 6 000m² 8 000m² 10 000m² Cape Town Bellville Suntyger (16%) Jhb Rosettenville Village Main Industrial Park (13%) Sandton Hyde Park 50 Sixth Road (26%) Cape Town Parow Industrial Park (0%) Midrand IBG (12%) Jhb Isle of Houghton (4%) Cape Town Bellville Barons (20%) Bloemfontein Plaza (3%) Sandton Sunninghill Place (2%) Soweto Dobsonville Shopping Centre (6%) Germiston Meadowdale R24 (5%) Pretoria Hatfield Festival Street Offices (1%) Centurion 259 West Street (34%) Midrand Allandale Industrial Park (1%) Centurion Samrand N1 (23%) Randburg Square (5%) Randburg Trevallyn Industrial Park (4%) Sandton Rivonia Tuscany (25%) Midrand Ulwazi Building (21%) Pretoria Lynnwood Sunwood Park (10%) Pretoria Lynnwood Excel Park (30%) Sandton Bryanston St Andrews Complex (36%) Roodepoort Hillfox Power Centre (7%) Jhb Parktown Oakhurst (41%) Cape Town Bellville Tijger Park (22%) Pretoria De Bruyn Park (11%) Jhb Bedfordview 1 Kramer Road (98%) Pretoria Midtown Building (100%) Pretoria Arcadia Suncardia (11%) Vacant Area Mar-13 Vacant Area Mar-14 Vacancy profile
 Trending in the right direction 28 3,1% 15,0% 5,1% 6,8% 2,7% 12,6% 2,8% 6,2% 10,7% 5,3% 4,9% 1,2% 17,5% 6,5% Retail Offices Industrial Sovereign Hospital Motor Related Total Vacancy [% of GLA] 3,9% 12,5% 7,2% 7,1% 3,3% 12,4% 4,8% 4,8% 8,9% 5,9% 2,5% 0,8% 14,9% 6,7% Retail Offices Industrial Sovereign Hospital Motor Related Total Vacancy [% of Rent] Mar-13 Mar-14 (excluding Pta Midtown and Bedfordview Kramer Rd) Pta Midtown and Bedfordview Kramer Rd
  52. 52. Vukile audited condensed consolidated results for the year ended 31 March 2014 50 Lease renewals and new leases concluded
 Positive reversions across all sectors 31 7,8% 1,7% 2,1% 4,5% Retail Office Industrial Average Lease renewals - % escalation on expiry rentals 102,2% 92,5% 88,8% 96,1% Retail Office Industrial Average New leases concluded - (Ratio of rental concluded against budget) Expiry profile
 24% of the portfolio expiring in 2019 and beyond 30 27% 17% 19% 6% 13% 11% 6,5% 34% 50% 70% 76% 89% 100% 6,8% 61% 76% 85% 91% 93% Vacant Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Beyond March 2019 GLA Cumulative as at Mar-14 Cumulative as at Mar-13
  53. 53. Vukile audited condensed consolidated results for the year ended 31 March 2014 51 Weighted average base rentals R/m² (excluding recoveries)
 Growth of 12.5% 33 86,76 83,07 38,89 82,87 84,68 74,09 102,56 86,80 40,16 83,44 89,09 104,50 83,39 18,2% 4,5% 3,3% 7,5% 23,4% 12,5% Retail Offices Industrial Sovereign Hospital Motor Related Total Mar-13 Mar-14 Contracted rental escalation profile
 Portfolio average of 8% 32 7,8% 8,0% 8,6% 8,9% 7,5% 7,0% 8,0% Retail Offices Industrial Sovereign Hospital Motor Related Total
  54. 54. Vukile audited condensed consolidated results for the year ended 31 March 2014 52 35 Office portfolio - weighted average base rentals R/m² (excluding recoveries) - 20 40 60 80 100 120 140 Pretoria High Court Chambers Pretoria Lynnwood Excel Park Pretoria Hatfield Festival Street Offices Sandton Rivonia 36 Homestead Road Sandton Bryanston Ascot Offices Jhb Isle of Houghton Pretoria Arcadia Suncardia Jhb Parktown 55 Empire Road Sandton Bryanston St Andrews Complex Midrand Ulwazi Building Sandton Sunninghill Sunhill Park Durban Westville Surrey Park Midrand IBG Pretoria Lynnwood Sunwood Park Cape Town Pinelands Pinepark Centurion 259 West Street Sandton Rivonia Tuscany East London Vincent Office Park Cape Town Bellville Tijger Park Jhb Parktown Oakhurst Cape Town Parow De Tijger Office Park Sandton Sunninghill Place Pretoria Hatfield 1166 Francis Baard Street Jhb Houghton 1 West Street Sandton Hyde Park 50 Sixth Road Pretoria Lynnwood Sanlynn Cape Town Bellville Suntyger Weighted average R86.80 34 Retail portfolio - weighted average base rentals R/m² (excluding recoveries) - 50 100 150 200 250 Germiston Meadowdale Mall Roodepoort Hillfox Power Centre Lichtenburg Shopping Centre Mbombela Shoprite Centre Bloemfontein Plaza Kokstad Game Centre Randburg Square Rustenburg Edgars Building Monsterlus Moratiwa Crossing (94.50%) Hammarsdale Junction Lethlabile Mall Giyani Plaza Piet Retief Shopping Centre Oshakati Shopping Centre Ondangwa Shoprite Centre Katutura Shoprite Centre Ga-Kgapane Modjadji Plaza (30%) Pietermaritzburg The Victoria Centre Soweto Dobsonville Shopping Centre Daveyton Shopping Centre Oshikango Spar Centre Sandton Bryanston Grosvenor Shopping Centre Windhoek 269 Independence Avenue Pinetown Pine Crest (50%) Mbombela Truworths Centre Durban Workshop Durban Phoenix Plaza East Rand Mall (50%) Weighted average R102.56
  55. 55. Vukile audited condensed consolidated results for the year ended 31 March 2014 53 37 Other - weighted average base rentals R/m² (excluding recoveries) - 20 40 60 80 100 120 140 Sandton Linbro Galaxy Drive Showroom Cape Town Bellville Barons Cape Town Kenilworth Motor Showrooms Cape Town Bellville Louis Leipoldt Bloemfontein Fedsure House Pretoria De Bruyn Park Pretoria Koedoe Arcade Pretoria Navarre Building Sovereign Hospital Motor Related 36 Industrial portfolio - weighted average base rentals R/m² (excluding recoveries) - 10 20 30 40 50 60 Pretoria Rosslyn Warehouse Cape Town Parow Industrial Park Durban Valley View Industrial Park Jhb Rosettenville Village Main Industrial Park Roodepoort Robertville Industrial Park Randburg Trevallyn Industrial Park Pinetown Westmead Kyalami Industrial Park Midrand Allandale Industrial Park Germiston Meadowdale R24 Randburg Tungsten Industrial Park Pinetown Richmond Industrial Park Midrand Sanitary City Centurion Samrand N1 Kempton Park Spartan Warehouse Weighted average R40.16
  56. 56. Vukile audited condensed consolidated results for the year ended 31 March 2014 54 Recurring expenses
 84% of costs from top four categories 39 Government Services 46% Rates Taxes 19% Cleaning security 11% Property Management Fee 8% Maintenance contracts 6% Asset Management Fee 6% Insurance Premiums 2% Bad Debt 1% Sundry Expenses 1% Ratio of gross recurring cost to property revenue
 Ongoing focus on cost containment
 38 31,6% 30,3% 30,8% 33,0% 33,1% 35,3% 36,5% 34,4% 18,5% 17,8% 17,2% 17,7% 16,9% 17,0% 17,6% 16,7% 2007 2008 2009 2010 2011 2012 2013 2014 All recurring expenses All recurring expenses excluding rates taxes and electricity Excluding Durban Workshop Remaining portfolio excluding properties sold to date
  57. 57. Vukile audited condensed consolidated results for the year ended 31 March 2014 55 Re-development / upgrade
 East Rand Mall
 41 Proposed development program: Design and tender process April to June 2014 Tenant notice period April to June 2014 Provisional plan approval June 2014 Commence on site Aug 2014 Practical completion October 2015 Approved capex: R million Yield Income generating 255.0 8.1% Non income generating 51.7   Total capex 306.7 6.7% Vukileʼs 50 % share 153.3   Re-development / upgrade
 East Rand Mall
 40 •  East Rand Mall jointly owned by Vukile and Redefine •  The gross lettable area is 62 500m² •  Major tenants include Woolworths, Edgars, Ster-Kinekor, Truworths, Mr Price, Foschini, Ackermans, Incredible Connection, Cotton On, CNA, Jet Stores, Cape Union Mart and Galaxy Bingo •  The proposed extension of 7 300m² will include a new 4 500m² Food Lovers Market and supported by strong tenant demand •  The eastern entrance will be re-positioned which will add extra lease area •  The floors, shop fronts and ceilings will be upgraded •  The parking area will be combined with that of the adjoining East Rand Galleria resulting in an increased parking ratio of 4.2 bays per 100m² GLA •  Paid parking on foot will be introduced for all parking areas •  East Rand Galleria, owned by SA Corporate Real Estate, is currently undergoing a major upgrade

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