Integrated
Report

2019

Currently viewing: BUSINESS OVERVIEW/ Our value-creation process | Next: Key relationships

Our value-creation process

Our value-creation process reflects the IIRC model shown below, where the flow of inputs (capitals or resources) is transformed by our business activities into outputs (what we use and produce) and outcomes (benefits or impacts for our stakeholders), all within an external environment that influences our decisions. This is a complex interplay, and our overarching objective is to generate positive outcomes for stakeholders, or at least mitigate negative impacts.

 

Resource trade-offs in implementing our strategy
  Financial
  As a REIT, we pay dividends twice a year. The positive impact on our shareholders (social and relationship resources) may be countered by the negative impact on our financial resources.
  Manufactured
  Our goal is to create an integrated smart city that works. Large investments in manufactured resources to build infrastructure in Waterfall impact our short-term financial resources. We believe creating a sustainable city will benefit us in the long run, increasing our financial resources.
  Natural
  Through water-saving strategies and our investment (financial resources) in renewable energy, we reduce the impact on our natural and financial resources, and honour our obligations as a responsible corporate citizen. By reducing the impact on our natural resources, we ensure 'business as usual' in times of service delivery interruptions, in turn reducing the impact on our financial and social and relationship resources (reputational).
  Human
  Training and developing employees is a retention strategy and a way to build our intellectual capital. Financial and human resources (lost time at work) are initially affected but increased in the long run by the value employees generate for the company.
  Social & relationships
  We invest time (human resources) and money (financial resources) in our communities and stakeholder groups as the quality of these relationships supports or hampers our ability to operate.
  Intellectual
  We invest in intellectual resources and leading technology systems to improve the quality of information. The short-term negative impact on human and financial resources is offset by enhancing our competitive advantage, which translates into a long-term benefit for these resources.
           

Resources

INPUTS

             

 

   

 

   

   

 
                               
 

Financial

Our challenge: Increased competition for capital

 

Manufactured

Our four key drivers

  • South Africa portfolio
  • Developments at Waterfall
  • Investment in MAS
  • Rest of Africa retail investments (Manufactured resources)

Our challenge: Oversupply of space in certain nodes in our South African portfolio

   

Natural

Our challenge: Cost and availability of water and electricity

 

Human

Our challenge: Scarcity of experienced and skilled property professionals

   

Social & relationships

Quality relationships with

  • Community
  • Employees
  • Government, municipality and regulators
  • Land holder
 

Our challenge: The maintaining of quality relationships

   

Intellectual

Intellectual

Our challenge: Shortage of skills and resources to support innovation

 
                               
           

Value-adding activities

WHAT WE DO

         
               
  Invest     Develop     Grow  
                               

Source

Through internal and external resources, we source investment and development opportunities

Assess

We evaluate identified opportunities and invest in assets with potential to deliver sustainable income and capital growth. We seek to optimise our capital allocation

Secure

We secure the opportunity, once we have assessed and approved our investment decision

Fund

By prudently managing our funding, we have the financial flexibility to execute value-enhancing investments, develop new assets or redevelop existing assets

   

Develop

We develop buildings to meet tenant and consumer needs and, by doing so, we generate a pipeline of agile investment properties

   

Enhance

Through proactive property and asset management, we strive for sustainable income and capital growth. Total return includes both income and capital growth with the focus on dividend growth

Evaluate

We optimise our total return through proactive asset management, using our sector insight and expertise to regularly review our entire asset portfolio and value the potential return of our assets to generate maximum shareholder value

Recycle capital

We optimise our capital allocation by recycling capital from mature assets into assets with higher growth prospects

                               

Support

All our activities are underpinned by shared corporate services such as finance, human resources, legal and marketing

 
                               
            Outputs              

Investing, developing and managing quality real estate investments

Completed seven new buildings

                               
           

Resource

OUTCOMES

             
+ Dividend of 81.5 cents per share
Gearing increased to 37.7%
+ Reduced cost of debt to a weighted average of 8.8%
+ 78.7% of total committed debt facilities hedged
+ Improved interest cover ratio of 1.85 times
+ MAS exceeding its dividend guidance
Shareholder loan impairments of R467.5 million on our Rest of Africa retail investments
Reduced value in Waterfall development rights
 
Total assets decreased to R27.1 billion
Recycled capital totalling R450.0 million from selling assets
+ Reduced vacancies to 6.2%
+ Rental escalations of 7.1%
+ Weighted average lease expiry profile of 6.5 years
+ Average trading density growth of 6.8%
Bulk rolled out of 27 701m2 effective PGLA
   
+ 12.5% decrease in Scope 2 carbon footprint emissions
+ 36.7% waste recycled
+ Renewable energy-generating capacity of 6 852kWh
+ 13 certified green buildings
 
± Voluntary employee turnover at 9.1%
+ R4.1 million invested in training over four years
   
Commitment to transformation demonstrated through our B-BBEE level 3 score (revised property codes, REIT sector)
+ Corporate social investment (CSI) spend of R6.4 million
+ 402 employee hours invested in CSI
+ 681 direct beneficiaries reached through CSI projects
+ 415 jobs created through CSI
   
+ Included in the FTSE4Good Index series for the third year
+ Effective controls and processes
+ Team of respected industry professionals
+ Recognition and enhanced reputation
+ Various industry awards
 
         

Strategic matters

             

 

   

 

   

   

 
         

How and why our outcomes created value

             
We are balancing dividend payouts to shareholders with reinvestment into Developments at Waterfall   By actively managing the quality of our South African portfolio, we are achieving above-market performance in KPIs for the real estate industry     By investing to reduce the impact on our natural resources, we ensure 'business as usual' in times of service delivery interruptions and maintain our standing as a responsible citizen   In the face of an industry-wide shortage of skills, we are focused on training for our own needs, those of the industry and the broader society     We invest time and money in our community as the quality of these relationships supports or hampers our ability to operate (Key relationships)     Investing in innovative solutions and measuring our performance against global benchmarks enhances our competitive advantage  
         

Risks and opportunities

             

Meeting shareholder expectations

Availability of capital

Liquidity

 

Protection of property rights

Impact of disruptive technology

Emerging markets

Cost and availability of water supply

Delivery of Developments at Waterfall

Cost and availability of electricity

Land invasion

Stakeholder activism

   

Cost and availability of water supply

Cost and availability of electricity

 

Transformation targets

   

Transformation

Stakeholder activism

   

All risks