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The music theme

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The music theme. From humble beginnings, the ApexHi group had a vision to create ... Profit on sale of residential properties held for trading ... – PowerPoint PPT presentation

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Title: The music theme


1
The music theme
  • From humble beginnings, the ApexHi group had a
    vision to create a reputation for successful
    performances.
  • Since inception, they have added members to the
    group who have been instrumental in creating a
    harmonious yet powerful backdrop to their
    performance.
  • They have battled against the odds to break
    records year on year, and continue to rock n
    roll!

2
ANNUAL RESULTS 2008
3
Todays line up
  • Rewind Position at 30 June 2007
  • Play Results for year to 30 June 2008
  • Pause Position at 30 June 2008
  • Fast forward 2009 scenario

4
Rewind
  • Position at 30 June 2007

5
Balance sheet at 30 June 2007
6
Position at 30 June 2007
7
Property portfolio at 30 June 2007
8
Lease expiry profile at 30 June 2007
9
The market at 30 June 2007
The performance of the SA listed property sector
in June was driven by the weakness in the bond
markets with the R157 bond yield weakening to
8,5. (Catalyst Fund Managers)
10
Our strategy at 30 June 2007
  • Drive core income
  • Renewals, escalations and letting vacant space
  • Control costs
  • Property costs expected to rise at 7
  • Manage the cost of debt
  • Non-core income
  • Clearwater guarantee fee
  • Other possibilities
  • Acquisitions and disposals (target of R500m net)
  • Development fees from residential

11
What we promised last year
12
Play
  • Results for year to 30 June 2008

13
Abridged income statement to 30 June 2008
Excluding effects of straight-lining of leases
14
Distributions (cents)
15
Leases concluded
The area over which leases were concluded is more
than the total lettable area of the retail
portions of Sandton City, Canal Walk, Menlyn Park
and Gateway Shopping Centres combined!
16
Letting activity
17
Rentals
18
Non-core income
  • Profit on sale of residential properties held for
    trading
  • 109 of 133 sectional title Berea Lofts were sold,
    of which 101 were transferred in May 2008
  • Profit of R14,2-million (5,4 cents)
  • Guarantee fee Clearwater Capital
  • Guarantee fee payable by Clearwater based on the
    market price of the C unit in June 2010
    assumed to be R7,50
  • Profit of R10,4-million (3,9 cents)

19
Property expenses
20
Acquisitions
21
Disposals
22
Refurbishments
23
Liquidity
24
Total returns vs PLS and Alsi
25
PLS sector prices and interest rate increases
26
2007 forecast vs 2008 actual performance (cents)
27
Pause
  • Position at 30 June 2008

28
Structure and model
29
Balance sheet
30
Valuation of properties
  • All 304 properties were valued at 30 June 2008
  • Properties under R10-million at last valuation
    date were valued by the directors (5,5 of the
    total value)
  • All other properties were valued by independent
    valuers
  • Value gave rise to fair value upward adjustment
    of R360,9-million increasing the value
    of the portfolio to R9,2-billion.
  • The R9,2-billion valuation represents a forward
    yield of 11,6 (2007 11,3)

31
Balance sheet cont
32
Summary of borrowings at 30 June 2008
Average length of all fixes is approximately 8
years
33
Position at 30 June 2008
34
Property portfolio at 30 June 2008
35
Sectoral spread by lettable area
36
Sectoral spread by rentals
37
Location
38
Geographical spread
39
Vacancy profile
40
Vacancies as a result of refurbishments
41
Tenant profile by area
42
Tenant profile by rentals
43
Lease expiry profile at 30 June 2008
So, once again, the area over which leases need
to be concluded in the next financial year is
more than the total lettable area of the retail
portions of Sandton City, Canal Walk, Menlyn Park
and Gateway Shopping Centres combined!
44
The market at 30 June 2008
The SA Listed Property Sector has experienced a
significant valuation decline, having pulled back
30 since its high on 7 November 2007.
(Catalyst Fund Managers)
45
The market at 30 June 2008
  • Retail
  • ApexHis retail portfolio mainly serves the
    commuter market
  • Market less affected by interest rates
  • Affected by rising food prices and transport
    costs
  • Research this market continues to spend, but
    more disposable income goes into basics (food)
  • ApexHis centres well positioned to benefit from
    this spend per head
  • ApexHis centres continue to show growth in
    contrast to urban shopping centres, which are
    now reflecting static or reduced consumer spending

46
The market at 30 June 2008
  • Offices
  • Balance in demand and supply favouring landlords
  • Sharp rise in office rentals in almost all
    locations
  • ApexHis largest office tenant is the South
    African Government and parastatals
  • Increase in demand for office space
  • Likelihood of renewal high
  • Increases in building costs and delays in passing
    plans for new office developments should result
    in continued growth in income in this sector.

47
The market at 30 June 2008
  • Industrial
  • Balance in demand and supply favouring landlords
  • Even more pronounced than in office sector
  • Dramatic increase in industrial rentals
  • ApexHi has benefitted from its limited investment
    in this area of the market

48
Fast forward
  • 2009 Scenario

49
Strategy
  • Grow income
  • Manage risk
  • Improve rating
  • Residential
  • Charitable Trust

50
Grow income
  • Primary objective to increase income distribution
    per unit on an annual basis
  • Growth in rentals into 2009 estimated to be 11
  • Escalations in leases of between 8 and 12
  • Increases in rentals of 15 as a result of
    renewals
  • Long term growth in income per unit of 11 per
    annum
  • Identify opportunities for one off gains from
    guarantee fees and development profits
  • Identify opportunities for acquisitions and
    disposals

51
Manage risk
  • Costs expected to escalate by 12
  • Target to keep cost increases at two percentage
    points below increases in rents, but in 2009 we
    expect higher costs due to
  • Increased assessment rates
  • Increased electricity tariffs
  • Interest rates are fixed. Gearing is low at 15
    of the property value
  • Insurance
  • Self-insured limit increase from R100 000 to R250
    000
  • Insurance cover now based on replacement values

52
Improve rating
  • Dispose of underperforming properties
  • Identify next tranche of disposals
  • Improve the quality of the existing portfolio
  • Complete refurbishment programme
  • Location and geographical spread
  • Maintain spread, but in concentrated nodes
  • A-grade tenants
  • Where the likelihood of renewal is high
  • Size and liquidity
  • 2nd largest property company by market
    capitalisation
  • One of the most liquid counters in the sector
  • Management
  • Strong team of 9 people seconded from Madison

53
Residential
  • Softstone portfolio
  • Lease units to achieve maximum return
  • Dispose of properties /units when the
    opportunities arise
  • Any cash surplus when the entire portfolio is
    finally disposed of will be shared with Aengus

54
Charitable Trust
  • ApexHi has announced its intention to establish a
    Charitable Trust as part of its commitment to the
    sustainable and long-term economic and social
    development of underprivileged communities in
    areas in which the company is invested
  • Subject to unit holder approval on 15 August 2008

55
The two scenarios - assumptions
  • Low note
  • Net income on core investment portfolio
  • 11 rental growth
  • 12 increase in property expenses
  • Non-core income
  • Rental income offset by trading losses no
    earnings
  • 4,29 cents from Clearwater guarantee fee
  • (based on C unit price in 2010 of R7,50)
  • Head office and corporate costs
  • Asset management fee of R38 per combined unit

56
The two scenarios - assumptions
  • High note
  • Net income on core investment portfolio
  • 11,1 rental growth
  • 12 increase in property expenses
  • Non-core income
  • 8,97 cents from residential
  • 5,88 cents from Clearwater guarantee fee
  • (based on C unit price in 2010 of R8,00)
  • Head office and corporate costs
  • Asset management fee of R33 per combined unit

57
The two scenarios
58
The two scenarios distributions per unit
The distribution structure will change when the
93,75 cents per quarter threshold is reached.
Based on the above high note scenario, the
threshold will be reached in the third quarter of
the 2009 financial year.
59
Distribution structure
Cents per quarter
60
Thanks
  • Directors
  • Madison and the great team assigned to ApexHi
  • Broll and our other outsourcees
  • Our auditors Grant Thornton
  • Our sponsors Java Capital
  • Investment Analysts Society
  • Rico Schacherl, our cartoon illustrator
  • And a special thanks to Sandra Mason of
    theCOMMSdepartment

61
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