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INDLUPLACE PROPERTIES LIMITED - Pre-close investor update and roadshow

Release Date: 27/09/2019 12:15
Code(s): ILU     PDF:  
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Pre-close investor update and roadshow

(Incorporated in the Republic of South Africa)
(Registration number 2013/226082/06)
JSE share code: ILU ISIN: ZAE000201125
(Approved as a REIT by the JSE)
(“Indluplace” or “the company”)


Shareholders are advised that Indluplace hosted pre-close meetings with investors on Wednesday,
25 September 2019 to provide an update on operations for the year ending 30 September 2019. The pre-
close investor update covered the topics set out below.

Introduction and market update

In its interim results, the company highlighted the difficult environment in which it was operating and
advised that conditions foreseen at the beginning of the financial year in October 2018 had turned out to be
considerably worse than anticipated.

However, shareholders were also advised that whilst it was expected that conditions would remain tough
through the second half of the year, an improved performance was expected based on certain building
specific strategies that had been implemented, the strengthened head office team, and the continued letting at
Highveld View, all combined with the historical seasonality experienced in the residential sector.

Indluplace is pleased to confirm that performance in the second half of the year has improved as anticipated.


The Highveld View complex in Witbank, comprising 450 units will be approximately 65% let at the end of
September 2019 (from 37% at end March 2019).

Letting of No. 1 Eloff Street, with 320 units, has improved from 74% let as at the end of March 2019 to
what will be approximately 97,5% let as at 30 September 2019.

Currently the total Indluplace portfolio, including Highveld View, is approximately 92,5% let.

Economic conditions remain challenging for tenants, offering limited scope for rental escalations.

Acquisitions and Disposals

The acquisition of a further 70 newly built, fully let phases of Golden Oakes in Boksburg was completed in
August 2019, bringing the total number of units acquired in the financial year to 210 units; all funded by
debt resources.

Indluplace continues to implement its stated strategy of disposing of small, non-core properties and the
company has to date entered into agreements to sell 15 properties comprising 142 units.

As previously communicated, given the company’s risk profile, Indluplace has taken a strategic decision to
exit student accommodation and properties with head leases and it continues to actively pursue disposals of
these assets.

Arrears management

Despite the increasing financial pressure on tenants, bad debt provisions and write offs have been in line
with expectations and are expected to be in line with previous years. Legal costs are expected to increase
with more legal intervention required to ensure rental collection.

Gearing and funding

Indluplace’s loan to value at year-end will be approximately 35%, slightly higher than as at 31 March 2019,
but in line with expectations. Indluplace intends reducing its gearing as it executes on its disposal

Given the company’s disposal programme, it has elected to extend for a further 12 months only the
R200 million SBSA loan scheduled to mature in September 2019.

About 60% of the company’s total debt is hedged. If debt maturing in the next 12 months is excluded,
approximately 70% of total debt is fixed. This is below the company’s target of 80% but should be viewed
in light of the anticipated disposals.

Strengthening the team

As previously announced Grant Harris joined the company as Chief Operating Officer in July 2019. Since
then, the company has increased the number of asset managers from one to two, and more recently
appointed a dedicated utilities manager to assist with resolving council account queries and improve
recoveries. Furthermore, a financial analyst and in-house letting agent have been appointed.

These appointments are all in line with increasing capacity within the head office team and are intended to
supplement rather replace Indluplace’s outsourced property managers. These appointments are already
having a positive impact on operations and it is expected that further evidence of this will be seen into the
next financial year.

Dividend guidance

The company confirms its dividend guidance for the full year, given at the time of the announcement of its
interim results.

27 September 2019

Java Capital

Date: 27/09/2019 12:15:00
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