WISDOM OF CROWDSORMOB MENTALITY

SA Listed Property Update | 7 June 2017

1

DANGEROUS COCKTAIL

2

Mob mentality meets ultra pessimism…

Panic No analysis Bias analysis Narrow analysis

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GRT NEP ITU USDZAR

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GRT

NOT DISPUTING THE VIEW

3

But keep the process intact

Modest growth, similar guidance

Strategy uncertainty

Tail risk

Tenant specific risk

Structural overhang

SAPY overhaul

NOT DISPUTING THE VIEW

4

Keep the process intact – overly pessimistic

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GRT

8.25% forward yield

Generalists more concerned around banks and retailers

Generalists see GRT first point of entry into defensive asset class

Underlying foreign assets help earnings

Oversold in 2015?

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GRT NEP ITU USDZAR

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

NEP USDZAR

5

JUST RUNNING AWAY FROM THE RAND

Keep the process intact – overly optimistic

-

0,50

1,00

1,50

2,00

2,50

3,00

-

50

100

150

200

250

P/NAV NEP - Price NEP - NAV

-

0,20

0,40

0,60

0,80

1,00

1,20

1,40

1,60

1,80

2,00

-

5

10

15

20

25

30

35

40

45

P/NAV ROC - Price ROC - NAV

Ran 56% in 2015

NAV up 36%

Ran 44% in 2015

NAV up 32%

WE STILL LIKE THE REGION

6

But now we have choice

Source: Company reports

Montenegro

Macedonia

MACRO DRIVERS ARE POSITIVE

7

Property fundamentals have followed

Source: Company reports

South Africa share of CEE Commercial RE Volumes

1,5% 2,0%

5,3%4,3% 4,6%

19,6%

0,0%

5,0%

10,0%

15,0%

20,0%

2011 2012 2013 2014 2015 2016

EU’s 10 fastest growing economies EU unemployment rate

1,7%

2,8%

2,9%

3,1%

3,2%

3,2%

3,5%

3,8%

3,9%

4,4%

4,5%

1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% 5,0%

Eorozone

Spain

Lithuania

Latvia

Sweden

Slovakia

Poland

Luxembourg

Malta

Romania

Ireland

Macro and property Metrics

-0,7%

1,0% 1,0%

3,8%3,5%

4,2%4,2% 4,4%

2,5%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

Yield - Cost of Debt GDP Growth Real Retail spendgrowth

SA Poland Romania

8

CEE FOR YOURSELF

The good the bad and the ugly

NEP ROC EPP MAS HYP TWR

Sustainable platform

In country expertise and

experience

Viable strategy

Location / asset mix

Development capability

Funding carry

Foreign funding mismatch

Gearing

Valuation

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GRT NEP ITU USDZAR

9

OR TAKE A DEVELOPED MARKET PLAY?

Schadenfreude

60,0%

70,0%

80,0%

90,0%

100,0%

110,0%

120,0%

GBPZAR ITU

UK REITS AND BREXIT IMPACT

10

No compensation for probability of ‘Hard Brexit’

0.8x P/NAV could be

buy territory

Source: Barclays, Kempen & Co, Land Securities

UK REITs trading at slight discount to 10y Ave Discount of -10% P/NAV

London Office rents are yet to fall Supply running above the LT average

11

UK REITS AND BREXIT IMPACT

Still prefer retail… but not without its risks

Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17

High Street Shops

London (City) 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.25%

London (West End) 2.25% 2.25% 2.25% 2.25% 2.25% 2.50% 2.50% 2.50%

UK Shopping

Centres4.50% 4.50% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%

Source: Cushman & Wakefield, HSBC research, Morgan Stanley research

But global headline risk to retail is rife

UK also has specific headwinds:

• Brexit knock to Consumer Confidence

• Rising inflation while wages are flat

• Business tax rates in London

Implied capital depreciation

Retail cap rates have been stable Price to NAV for the retailers

THE JSE IS REFLECTING SENTIMENT

12

ALPI Index – 30 largest Property Companies listed on JSE

Source: Company reports

SAPY geographical exposure

49%

20%

18%

5%5%

2%1%

SA UK Eastern Europe Australia Europe US Africa

64%

19%

5%

4%

4%2% 1%

SA Eastern Europe Australia UK US Europe Africa

“ALPI” geographical exposure

0,00%

5,00%

10,00%

15,00%

RE

S

FF

B

HY

P

L2D

EQ

U

GR

T

FF

A

SA

C

DIB

IPF

RD

F

SS

S

RE

A

VK

E

AP

F

OC

T

ILU

FV

T

AW

A

DIA

EM

I

SA

R

GP

A

GP

B

HP

B

RE

B

DL

T

TW

R

TE

X

AT

T

CC

O

GR

P

HM

N

NE

P

MS

P

RO

C

SR

E

ITU

CR

P

ST

P

RP

L

EP

P

IAP

AL

P

MD

P

GT

C

9.2%6.0%

Yield

13

SPEAKING LOUDER DOESN’T MAKE YOU RIGHT

Stop worrying about how many

heads and start asking who they

belong to…

THANK YOUSesfikile Capital (Pty) Ltd

Reg number: 2008/022541/07

1st Floor, 30 Melrose Boulevard

Melrose Arch 2076

+27 (11) 684 2679

info@sesfikilecapital.co.za

www.sesfikilecapital.com

follow us on twitter: Sesfikile_Cap and keep abreast with the Global listed property market

Disclaimer:

The information contained in this presentation is confidential and may be subject to legal privilege. Access to this information by anyone

other than the intended recipient is unauthorised. This presentation is in its entirety specifically intended for use by institutional clients,

and is not intended for use and should accordingly not be relied upon by private individuals whether clients or otherwise. If you are not the

intended recipient, you may not use, copy, disseminate, distribute and/or disclose the report or any part of its contents or take any action

in reliance on it. If you have received this presentation in error, please notify us immediately by e-mail or telephone on (+27-11) 684 2679

and thereafter immediately destroy and/or delete the presentation. Sesfikile Capital (“Sesfikile”) makes no representations and gives no

warranties of whatever nature in respect of the presentation and its contents including but not limited to the accuracy or completeness of

any information, facts and/or opinions contained therein. The presentation is provided by Sesfikile solely for the recipient's information,

and all rights in and to the presentation including copyright and other intellectual property rights therein are proprietary to Sesfikile.

Accordingly, the presentation may not be reproduced, distributed in any form and/or disseminated without the prior written consent of

Sesfikile.

Sesfikile Capital is an authorised Financial Services Provider. FSP number: 39946

15

One of the most experienced in the sector

SESFIKILE CAPITAL INVESTMENT TEAM

Evan Jankelowitz

Evan holds a BCom (Financial Management; Cum Laude) from the University of Johannesburg and Chartered Financial Analyst (“CFA”)

designation. He joined Stanlib in 2003 where he started out in the Wealth division representing teams such as Structured and Alternative

Investments as well as Product Development. He soon moved on to Asset management as an analyst primarily focused on listed property;

and then took on the role as co-Head of the Listed Property Franchise. During his tenure at Stanlib, the team grew the franchise to being the

largest listed property manager in South Africa and achieved several number 1 performance rankings across 3 and 5 year investment periods.

Evan co-managed the Stanlib Global Property Fund which invested in North America, Europe, Asia Pacific and Australia.

Kundayi Munzara

Kundayi holds a BSc. (Honours) in Property Studies from the University of Cape Town, has a Chartered Financial Analyst (“CFA”) designation

and completed UK Financial Services Authority (“FSA”) exams for approved person status. He also completed a Leadership & Insight

Programme at the Gordon Institute of Business Science (GIBS). Kundayi’s career began at Old Mutual Properties as a property valuer, and in

2005 continued at Investec Private Bank’s property risk team valuing properties for lending purposes. He then moved to Investec Property

Investments as a buy-side analyst and was subsequently appointed head of research for the investment team of analysts in South Africa, UK

and Australia. In 2009 Kundayi moved to Investec Bank London to assist in the development and asset management and trading of Investec’s

global listed property offering which included investment in UK, European and Australian Real Estate Investment Trusts (REIT) on behalf of

high net worth private clients.

Mohamed Kalla

Mohamed holds a BCom (Investment Management; Cum Laude) from the University of Pretoria and Chartered Financial Analyst (“CFA”)

designation and has extensive experience in the investment industry. He started his career at RMB Asset Management as part of their

Institute of Investment Excellence programme where he gained exposure to various aspects of fund management. He subsequently moved to

Barnard Jacobs Mellet Securities (“BJM”), where he spent the last 5 years as a Research Analyst and was one of the top-rated sell-side

analysts in the Real Estate sector. During his time at BJM, Mohamed was also instrumental in the design and management of BJM’s internal

research database systems.

Anil Ramjee

Anil holds a Masters in Economic Science from the University of Witwatersrand. He started his career at Cadiz FSG Securities as a

quantitative economist and strategy research assistant. Thereafter he moved to Standard Bank in the operational risk team which was

responsible for designing and maintaining the risk maps for the bank. After gaining some banking experience Anil moved to Vunani Securities

in the role of sell-side Equity Analyst focussing at the listed property sector. Anil is currently completing his Masters in Property Studies at the

University of Cape Town. Anil is an Investment Analyst dedicated to offshore REITs.