Tower 2017 Annual Results - Analyst presentation

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Annual Results Presentation

1

TOWER ANNUAL RESULTS PRESENTATION - 2017

31 May 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Presentation Outline Tower Strategy 1 Financial Highlights 2 Operational Highlights 3 Tower at a Glance 4 Management Team 5 Financial Results 6 Financial Results 7 Borrowings 8 Operational Performance 9 Top 10 Properties By Value 10 Greening 11 Agrokor Update 12 Agrokor Update 13 Corporate Social Responsibility 14 Success Stories - Croatian 15 Success Stories - Cape Quarter 16 Success Stories - VMD 17 Developments - Napier Street 18 Developments - Piazza 19 Top 10 Shareholders 20 Additional Capital 21 Prospects 22 Link Hills | R220 million 2

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Tower Strategy Tower aims to generate competitive investment performance by adding value through local and international property asset management, acquiring properties in strong nodes with growth opportunities, selling properties which have reached the peak of their value and the cost-effective greening of its property portfolio resulting in lower operational expenditure and increased tenant retention.

Tower aims to expand its portfolio through management’s network of contacts throughout South Africa and abroad.

VMD Kvart | R411 million 1

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Financial Highlights • Base re-set in January 2017 • Re-set guidance of 80 cents – 82 cents per share for FY May 2017 • Distribution of 38.7 cents per share • Decision not to pay out Agrokor arrears until finalised • 16% reduction on corresponding period due to re-setting of the base and Agrokor arrears • Headline earnings up 95% to R320 million • Distributable earnings up 18% to R262 million • Portfolio expanded to 49 properties • Portfolio value of R5 billion • Market capitalisation of R2.5 billion • Loan-to-value of 39% • Net asset value of R9.61 per share • Nine properties currently for sale at >R515 million Cape Quarter Square | R681 million 2

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Operational Highlights • Internalisation of the asset management company • Vacancies increased to 5.9% (SA 6.8%, Croatia 7%) • WALE (portfolio) – 4.4 years • WALE (SA) – 2.8 years • Tenant retention ratio 90% • Net operating cost ratio of 14% (gross of 29%) • Acquisition of Agrokor portfolio of €66.4 million

De Ville Retail Center | R245 million 3

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Tower at a glance R5bn

Rentable area (GLA):

311 000m²

Occupancy rate (GLA) (July 2017):

94%

Gearing (LTV):

39%

(expected to reduce to 31% should sales materialize)

Average gross rental

R108.08m2

Existing lease escalations

7.80%

Number of properties

49

Average property value

R100m

Geographic Profile

9%

Revenue

Property portfolio value:

Revenue

Sectoral Profile

42% 49%

RETAIL OFFICE INDUSTRIAL

10% 39%

28% 23%

GAUTENG CROATIA WCAPE KZN

Tower Asset Growth 6 5

%

4 3 2 1

Q1 2017

Q4

Q3

Q2

Q1 2016

Q4

Q3

Q2

TOWER ANNUAL RESULTS PRESENTATION - 2017

Q1 2015

4

Q4

Q3

Q2

Q1 2014

Q4

Q3

Listing

Cost

Evaluation

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you�.

Stephen Covey

Management Team

Marc Edwards

Johan Malherbe

Strategy, Acquisitions, Debt and Capital Raising

Western Cape, Structured Finance, Acquisitions and Strategy

Joanne Mabin

Bruce Rogerson

Financial Controls and Management

Gauteng and KwaZulu-Natal, Acquisitions and Disposals

Chief Executive

Chief Financial Officer

Asset Manager

Asset Manager

Meridijan | R232 million 5

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Financial Results Condensed consolidated statement of profit and loss and other comprehensive income

Revenue Net property operating expenses Net property rental and related income Administration expenses Other income Impairment of goodwill Foreign exchange gain/(loss) Net operating profit Fair value adjustments Profit from operations Net finance costs Indirect capital raising expenses Profit before taxation Taxation Profit for the period Other comprehensive income ( items that may subsequently be reclassified to profit and loss Exchange difference on foreign operations Total comprehensive income for the period Basic and diluted earnings per share ( weighted average shares in issue (cents)

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TOWER ANNUAL RESULTS PRESENTATION - 2017

Audited 12 months ended 31 May 2017 R'000

Audited 12 months ended 31 May 2016 R'000

447 341 (34 259) 413 082 (16 394) 533 (3 006) 63 874 458 089 111 544 569 633 (124 559 ) (557 ) 444 517 444 517

376 451 (30 733) 345 718 (23 946) 10 377 (30 519 ) 301 630 (18 137) 283 493 (115 040) (894) 167 559 167 559

(54 119) 390 398 129.8

42 968 210 527 67.1

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Financial Results (continued) Condensed consolidated statement of financial position

Audited 12 months ended 31 May 2017 R’000

Audited 12 months ended 31 May 2016 R’000

4 690 991

3 945 530

707 260

251 673

Total assets

5 398 251

4 197 203

Equity and liabilities Equity Stated capital Retained income Foreign currency translation reserve Shareholders’ interest Non-controlling interest Total equity

3 035 344 237 031 (9 155) 3 263 220 24 627 3 287 847

2 236 244 89 390 41 949 2 367 583 20 228 2 387 811

Liabilities Non-current liabilities Secured financial liabilities

1 755 835

1 054 748

354 569

754 644

5 398 251

4 197 203

Assets Non-current assets Current assets

Current liabilities Total equity and liabilities

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TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Borrowings Maximum targeted loan-to-value 40% Current LTV

39%

Total borrowings

R2bn*

Fixed debt

72%**

Weighted average rate

5.76%***

* 35% ZAR debt, 65% Euro debt **ZAR debt 72%, Euro debt 72% ***ZAR debt 9.14%, Euro debt 3.91%

Sunclare | R248 million 8

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Operational Performance Space let in the period

56 240m2

New space let

27 570m2

Renewable space let

28 670m

Total vacant space (SA)

18 360m

2

Lease expiry profile by Revenue per sector 40 35 30

%

25 20 15

2

10 5 0

Total vacant space (Croatia)

7%*

Vacant

Monthly

<May-18

<May-19

Industrial

<May-20

<May-21

Office

<May-22

<May-23

<May-24

Retail

* Excluding Konzum head lease (expected to be let by year end).

Lease expiry profile by GLA per sector 25 20

%

15 10 5 0

Vacant

Monthly

<May-18

Industrial

9

TOWER ANNUAL RESULTS PRESENTATION - 2017

<May-19

<May-20

Office

<May-21

<May-22

<May-23

<May-24

Retail

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Top 10 Properties By Value Property Sector

Value (R)

Location

Cape Quarter Square

Mixed use

682m

Cape Town*

Sub City

Retail

501m

Dubrovnik, Croatia**

VMD KVART

Office

414m

Zagreb, Croatia**

Sunclare Office 248m Claremont De Ville

Retail/Office 245m Durbanville

Meridijan Retail 232m

Zagreb, Croatia**

Link Hills

Retail

220m

Waterfall, KZN

Super Konzum

Retail

195m

Zagreb, Croatia**

Upper Grayston

Office

178m Sandton

Cape Quarter Piazza

Retail/Office 187m

Cape Town

* Cape Quarter precinct, post sale of residential units, anticipated value in excess of R1.2 billion (Including development profit) ** at R14.89 to the Euro

10

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Greening • Total of 1.3 million kWhs per annum being generated from solar • 1.9 million kWhs of lighting saved per annum • Circa 2.9 million kgs of carbon off-set per year • R4 million per annum saved as a result of green initiatives • Cape Quarter awarded a 4 Star Green Star “existing building” rating through the Green Building Council of South Africa • Cost of all greening (solar and lighting) work undertaken since the start of the fund in 2016 is R15.36 million • Total saving of 3.2 million kWhs which equates to R4 million p.a. (26% yield) and is equivalent to 608 cars being taken off the road • Projects undertaken in the past financial year include: 308 Kent Road - PV solar, 32 Napier and Piazza - Green Star Rating Cape Quarter Square | R682 million 11

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Agrokor Update Konzum • Four retail centres acquired for €66 million • Twelve-year triple net head lease from Konzum, guaranteed by Agrokor • Agrokor is the leading food producer and retailer in Southeastern Europe • Employs 65 000 people - accounts for 16% of Croatian GDP • Konzum is owned by Agrokor and anchors each centre

Sub City - Debrovnik | R501million 12

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Agrokor Update (continued) Konzum/Agrokor • Konzum has 740 outlets in the Balkans • Agrokor experienced an unforeseen business rescue in April 2017 • New law (“Lex Agrokor”) established to save the business due to its national importance • Tower owed circa R10 million in rental arrears.

Decision not to pay out distribution until resolution • Current rental up to date • Konzum committed to ongoing rentals

Sub City - Debrovnik | R501million 13

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Corporate Social Responsibility • Ubuntu Trust • The Ubuntu Football Academy offers intensive coaching, quality education and holistic mentorship to exceptional young football players over a sustained period of six years (13-18 years) • 65 children currently being placed through school (bursaries) • Ubuntu has established its first school with 35 learners in January 2017

14

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Success Stories Croatia • Portfolio valued at R1.4 billion • GDP growth forecast to be 3% for 2017 • GDP growth driven by record tourism season, strong investment and a pick-up in consumption • Unemployment has reduced from >17% in 2014 to a forecast 11% in 2017 • Agrokor business rescue has not had a marked effect on the economy • Tower has strong relationships with leading businesses and banks in the region

Croatia Portfolio | R1.4 billion 15

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Success Stories (continued) Cape Quarter • 1 400m² of new additional GLA added • Tenant mix improved • Trading densities increased by 6.2% year on year • Footfall increase year on year of 15% • 140 parking bays added from August 2017 • Value at completion of residential addition circa R1.2 billion • Tenant retention 100%

16

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Success Stories (continued) VMD • Increased value due to strengthening cap rates (reduced from 8.5% on acquisition to 7.25% in May 2017) • Most energy-efficient office block in Croatia • Compliments Tower’s green strategy • Four-year head lease • Fully let to blue chip tenants • Rental up-tick from €13.50/m² to €14.50/m²

VMD Kvart | R414 million 17

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Developments Napier Street • Nineteen apartments in addition to two floors of retail and offices • 140 parking bays • Current asking prices circa R68 000/m² (ex VAT) • Anticipated capital profits of R20 million • Will add to footfall of Cape Quarter

Napier Street | R295 million (projected) 18

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Developments (continued) Piazza • At least 54 apartments in addition to existing retail and offices • Municipal approval received in December 2016 for construction late 2017 • Will utilise units to best effect • Capital profit of circa R110 million anticipated • Value on completion: R414 million

Piazza | R414 million (projected) 19

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Top 10 Shareholders Major Fund Managers

% holding

1

Allan Gray Asset Management

28.10

2

Bridge Fund Managers

17.27

3

Prescient Investment Management

14.92

4

Coronation Fund Managers

9.48

5

Personal Trust International

3.22

6

Sanlam Investment Management

2.07

7

Plexus Wealth

1.32

8

3 PM Investments

0.47

9

Momentum Wealth

0.44

10

Momentum Investments

0.40

VMD Kvart | R414 million 20

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Additional Capital Profits • Napier Street R20 million* • Piazza R110 million* • Croatian asset spin off R80 million • Re-financing debt

* Assumes current selling price remains achievable with no capital expenditure increase.

21

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

Prospects • A number of REIT’s reporting flat or negative growth • Tower 2018 distribution growth of 6-8% p.a.

• Once-off capital profits anticipated in 6-30 months • Capital profits to be re-invested - reducing debt (to circa 31%) or repurchasing shares which will add >7c to distributable earnings • Croatian properties to be reversed into separate vehicle, focusing on off-shore acquisitions • Continue to focus on redevelopment opportunities • >R515 million anticipated from sale of non-core properties • Additional savings through greening (solar, water and wastage) *Assumes no major tenant failures and no large vacancies

Rosebank | R695 million (projected) 22

TOWER ANNUAL RESULTS PRESENTATION - 2017

t o w e r p r o p e r t y fun d .c o .z a

“Your most important work is always ahead of you, never behind you”.

Stephen Covey

towerpropertyfund.co.za

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TOWER ANNUAL RESULTS PRESENTATION - 2017

t orw e r t ym fun a I nt e r i m Re s ul t s fo r t h e pe i oedr p3r0o pNove b edr.c2o0.z 15

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