Remuneration report
In the context of the accountability and transparency encouraged by King IV, this remuneration report is presented in three sections – background, an overview of the remuneration policy and the remuneration implementation report which articulates the link between strategy, sustainable value creation, performance and remuneration.
Background
This review outlines the key elements of the company's remuneration policy which is designed to encourage executive directors to improve the company's performance, and to ensure that executives are fairly and responsibly rewarded for their individual contributions and performance.
The remuneration committee (the committee) comprised three independent non-executive directors, Stewart Shaw-Taylor (chair), Lindie Engelbrecht (resigned effective 30 November 2018) and Gavin Tipper. Thabo Mokgatlha was appointed to the committee on 30 November 2018. The CEO and human resources executive attend meetings by invitation, but are excluded from any deliberations pertaining to their own remuneration.
The composition of the committee ensures that the remuneration of executives is set by independent non-executive directors who have no personal interest in the outcome, and who will give due regard to the interests of all stakeholders of the company.
The committee considers the performance measures and targets for the short-term incentive (STI) plan to ensure that they are appropriate and support the company's strategy. During the year the committee assessed and reviewed the remuneration policy and in the context of the revised strategy for the group formulated changes to the performance targets for the group's STIs which will be effective for the financial year ending 30 June 2020. In addition, the company intends to introduce Malus and clawback provisions for both STI and LTI awards, effective from 1 July 2019.
STIs paid in December 2018, were awarded in line with the key performance deliverable (KPD) scores achieved as at June 2018. The KPD score achieved at 30 June 2019 will be applied to determine STIs payable in December 2019.
The year under review continued to be challenging for the company. Distributable income was negatively impacted by the weak economic conditions in South Africa as well as the performance of the sub-Saharan African portfolio, resulting in a decrease in the price of the company's shares over the financial year. This had an impact on the remuneration of executive directors and senior executives, particularly in regard to annual cash incentives and the expected value of conditional unit plan shares.
Pieter Prinsloo, the chief executive officer, and Laurence Cohen, the chief financial officer, resigned with effect from 31 January 2019, and 31 July 2018, respectively.
Three executive directors were appointed. Morné Wilken was appointed chief executive officer in December 2018, Brett Till as chief financial officer in October 2018 and Wilhelm Nauta, who had been employed as chief investment officer in 2016, joined the board in July 2018.
The committee is satisfied that the current remuneration policy is appropriate and that it complies with the recommended practices of King IV.
A copy of the full remuneration policy is available on the website at www.hyprop.co.za.
Remuneration policy
Philosophy
As an internally managed REIT, the objective of the remuneration policy is to promote the delivery of Hyprop's strategic objectives, encourage individual performance and reward sustainable value creation. Our philosophy emphasises the role of employees in building long-term sustainable value through fair and balanced remuneration.
Hyprop's success depends on attracting and retaining talented, experienced and motivated individuals who can execute our business strategy to achieve our vision and mission. The company uses both short and long-term incentives in support of its remuneration for executives and management.
Key principles
- Ensure remuneration policies and practices are aligned with the company strategy and values
- Attract and retain talented, experienced and motivated individuals who can execute the business strategy
- Link salary structures and policies to performance objectives that support sustainable value creation over the short, medium and long term
- Align long-term incentives (LTI) with the strategic objectives of the company and the creation of long-term shareholder value, and
- Apply a fair and reasonable remuneration structure across the company by:
- Ensuring that non-executive directors' fees are fair, transparent and responsible
- Ensuring that the executive directors' and executive management's remuneration is fair and responsible in the context of overall company remuneration
- Considering the pay ratios between executives and other staff when determining annual salary increments
- Rewarding employees fairly, reasonably and responsibly for their contribution to the operating and financial performance of the company
- Identifying, investigating and addressing any remuneration disparities related to, inter alia, race and gender
- Ensuring that guaranteed pay is based on equal pay for work of equal value
- Ensuring that guaranteed pay for all employees is based on clear role descriptions, which are mapped and aligned with similar jobs. The Patterson job grading system is applied, with the six grades defining the employee's remuneration scale, and
- Implementing a training plan. Various training courses are provided to create an empowered work environment.
The remuneration and nomination committee
The responsibilities of the committee are set out in a formal charter, which takes into account the recommendations of King IV, and other relevant best practice.
In executing its mandate relating to remuneration for non-executive directors, executive directors, executive management and other staff, the board (as advised by the committee) will:
- Annually review the remuneration structures to ensure that they are performance-based, and linked to realistic performance objectives that support sustainable long-term growth
- Representative of best practice in the industry
- Ensure that stakeholders can make an informed assessment of reward practices and governance processes, and
- Ensure that the remuneration practices are compliant with all applicable laws and regulatory codes.
Malus and clawback provision
Malus and clawback provisions will apply to STI and LTI awards granted to executives and prescribed officers with effect from 1 July 2019. (Payments relating to the 2019 financial year will be excluded).
Voting
Shareholders will be requested to cast a non-binding advisory vote on the remuneration policy and implementation report at the company's annual general meeting on 2 December 2019.
At the annual general meeting held on 30 November 2018, the resolutions on the company's remuneration policy and the remuneration implementation report received a 72% non-binding vote in support of each policy.
Consultations were subsequently held with the two major dissenting shareholders to understand their concerns regarding the remuneration policy, implementation and disclosure thereof. The committee has considered the feedback and has made appropriate amendments to short-term KPDs, and enhanced the disclosure of executive performance measurement.
Remuneration structure
Hyprop's remuneration structure is set out in the table below:
| Element | Policy | Structure | Participation |
| Base salary | Provide a market-related level of base pay with due regard for the responsibilities of the position.Benchmarked against industry norms and adjusted based on an employee's experience, qualifications, and the level of responsibility. | Review annually with increases effective from 1 January. | Junior, middle and senior management, executives and executive directors. |
| Short-term incentive | Short-term incentives, paid in cash, based on performance. | Performance measured against KPDs at property and company level for the year. Cash bonus paid in December. |
Junior, middle and senior management, executives and executive directors. |
| Long-term incentive scheme | Long-term incentives granted to attract, motivate and retain executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills. | Conditional unit plan. Two components: 70% performance-based, 30% retention-based. | Executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills. |
The remuneration policy achieves a reasonable balance between guaranteed pay, short-term incentives and long-term incentives, and is aligned with the group's objectives.
Base salary
The fixed (guaranteed) component of remuneration includes a base salary, pension contribution and benefits. Base salaries are normally set at median remuneration levels when compared to the industry and the national salary market.
Salary benchmarking
Remuneration benchmarking is performed annually. Basic salaries are benchmarked against median industry and national salary norms and adjusted based on an employee's experience, qualifications, responsibilities, and performance.
Independent remuneration consultancies (PwC and 21 Century Proprietary Limited) are used to provide the committee with market data to assist in remuneration decisions, where appropriate. Where surveys indicate that a job grouping is significantly out of line with the comparative benchmark, a remuneration adjustment may be considered.
Remuneration may exceed benchmarked levels where required to attract and retain specialised skills or for employment equity purposes.
Salary increases and reviews
The committee reviews salaries on an annual basis taking cognisance of the approach set out above. The following factors are considered during this process:
- Performance of the company
- Projected inflation
- Affordability, and
- Performance of the individual.
A pro-rated increase is paid to employees who have not been in the employment of the company for the full financial year to which the annual increase relates.
Employee benefits
We offer a range of employee benefits that exceed legislated minimum standards and include:
- Membership of a defined contribution pension fund with death, disability and funeral benefits
- Four months partially paid maternity leave (paid at 50% of cost to company)
- Ten days partially paid paternity leave (paid at 50% of cost to company)
- Annual leave rising to 20 days after five years' and 25 days after 10 years' consecutive service with the group, and
- Six days' paid study leave for approved qualifications.
Short-term incentive (STI)
STIs are linked to performance objectives that support business goals. Two components are considered when determining an employee's STI, namely performance against KPD targets, evaluated biannually, and individual performance reviews, conducted annually. The employee's level of responsibility and job grade determines the weightings allocated to each area of assessment.
STI allocation
A significant portion of senior management's reward is variable, based on achieving group performance targets, as well as individual contributions to the growth and development of their business, division and the company.
| Executive directors | Senior management | Other employees |
|
STIs are aligned with KPD scores and are subject to the committee's discretion and approval. KPD weighting – 100%. |
STIs are aligned with KPD scores, performance reviews and subject to the committee's discretion and approval. KPD weighting – 90%. Performance review weighting – 10%. |
STIs are aligned with KPD scores, performance reviews and are subject to the committee's discretion and approval. KPD weighting – dependent on job grade. Performance review weighting – dependent on job grade. |
|
Allocated at the discretion of the remuneration committee. |
Allocated at the discretion of the remuneration committee. |
Maximum bonus potential is determined by job grade. |
|
Exceptional performance by senior management may be rewarded at the committee's discretion. |
Exceptional performance is rewarded with higher incentives, after considering recommendations from general managers, regional executives and executive directors. |
STIs and salary increases are approved by the committee before payment is made in December.
Long-term incentives (LTI)
LTI reward decisions are aligned to the company's strategic objectives and the creation of long-term shareholder value.
Conditional unit plan (CUP)
The CUP was approved by shareholders in 2013 and the scheme applies until 2023. The purpose of the CUP is to align employee performance with stakeholder interests and to retain skilled and talented employees. Annual allocations of performance and retention shares are made in a 70:30 ratio. Vesting of the performance shares is subject to performance conditions stipulated in the rules of the CUP and approved by the committee at the time of allocation.
Conditions for the performance component of the CUP:
| Vesting percentage(1) | |
| Threshold | 50% of awarded performance shares vest at threshold. No performance shares vest for performance below threshold. |
| On target | 100% of awarded performance shares vest for performance on target. |
| Stretch | 150% of awarded performance shares vest for performance at stretch levels. |
(1) Linear vesting will apply for performance between "threshold" and "on target" or between "on target" and "stretch" performance. For example, where performance is exactly halfway between threshold and on target, the portion of performance shares that will vest will reflect a similar ratio, i.e. 75%
| Performance condition | Detail | Weighting | Threshold | On target | Stretch |
| Growth in distribution per share relative to peer group(1) | Measured as simple growth in distribution per share over the performance period. | 40% | 95% | 102,5% | 110% |
| Share price performance relative to peer group(1) | Measured as growth in share price over the performance period (difference between share price at the end and start of the performance period). | 40% | 95% | 105% | 120% |
| Strategic component | Determined by the remuneration and nomination committee. | 20% | Determined by the remuneration and nomination committee |
||
(1) Peer group comprises the five largest South African REIT companies, by market capitalisation, listed on the JSE
Under the CUP, shares are offered to executives, senior managers and employees with specific core, critical or strategic skills. Allocations are approved by the committee.
Performance shares vest three years after initial allocation, provided that the relevant performance conditions have been met.
Retention shares vest five years after initial allocation, subject to continuous employment over the vesting period.
Participants only receive dividends after the shares have vested.
Directors' remuneration
Executive directors
Executive directors are permanent employees and their employment agreements include a notice period, but no restraints of trade. They are offered competitive remuneration packages (including base salaries, short-term incentives and long-term incentives), which are reviewed by the committee annually.
Minimum employment terms and conditions for executive directors are governed by South African legislation. If an executive director's services are terminated, the committee oversees any settlement, assisted by labour law advisers where appropriate.
Non-executive directors
Non-executive directors are remunerated competitively. There are no contractual arrangements applicable to loss of office.
The committee benchmarks fees against a peer group of JSE-listed companies every two years with CPI adjustments in the in-between years. Recommendations are made to the board, which proposes fees for approval by shareholders at the AGM.
Remuneration for non-executive directors comprises a base fee only. Non-executive directors do not receive STIs, nor do they participate in any LTI schemes, except if they have previously held executive office and are entitled to unvested benefits from that period.
The chairperson of the board and the chairpersons of the subcommittees are paid higher fees than the members of the board and subcommittees. Different fee levels are paid for the different subcommittees to reflect the complexity, risk and amount of preparation required.
Implementation of the remuneration policy during the 2019 financial year
Key principles and strategy
We recognise and value our people as our most important asset.
The company is committed to being an employer of choice with a culture, policies and procedures that set high expectations, while providing a stimulating and inclusive environment, sustaining its reputation for being a leading South African based REIT and delivering on key business priorities.
Our salary structure is performance driven with key short-term targets set annually. PwC assisted the company in reviewing the short-term targets in the current year.
Retaining and attracting talent
While low employee turnover ensures continuity, and aligns group performance with our long-term strategic objectives, we aim for an appropriate balance between internal and external appointments.
Our HR strategy is designed to contribute to the required changes in recruitment, selection and hiring, training and development, succession planning, remuneration and benefits, performance management, employee relations and company culture, that will be needed to ensure the company achieves its strategic goals.
| Staff retention statistics | 30 June 2019 | 30 June 2018 |
|---|---|---|
| Annual employee turnover rate | 11% | 7% |
| Non-executive directors retained | 88% | 100% |
| Executive directors retained | 0%* | 100% |
| Strategic management retained | 100% | 100% |
| Executives and senior manager retained | 96% | 83% |
| Other staff retained | 90% | 93% |
| Total staff retained | 89% | 93% |
| Non-executive directors average tenure (years) | 6 | 6 |
| Executive directors average tenure (years) | 1 | 11 |
| Strategic management average tenure (years) | 11 | 9 |
| Executives and senior manager average tenure (years) | 10 | 9 |
| Other staff average tenure (years) | 9 | 9 |
| Average tenure of employees (years) | 8 | 9 |
* Impacted by the resignations and appointments of the CEO and CFO
Employee turnover at senior management level continued to be low and our average tenure of employees remains within our targeted range.
Base salaries
Base salary is defined in terms of a total cost of employment (CTC) package approach; the guaranteed package includes base salary, travel allowance, retirement savings, death, disability and healthcare contributions.
2019 salary increases
The committee considered the projected inflation rate, performance of the company and the affordability of the increased salary cost to determine the base salary increase for the year. As an added measure, the increase of 6% was compared to the salary increases granted by peer companies. The increases applied were in line with the industry. To address the earnings gap, the committee, as done in the previous three years, approved a minimum 6,5% salary increase for lower earning employees.
Annual base salary increases were effective from 1 January.
Base salary increases applied |
30 June 2019 | 30 June 2018 |
|---|---|---|
| Executive directors | 6% | 6,4% |
| Strategic management | 6% | 6,4% |
| Executive management | 6% | 6,4% |
| Other staff | 6% – 6,5% | 6,4% – 7,5% |
| CPI* | 5,0% | 4,8% |
| Minimum CTC – lowest level of employee (R/pa) | 111 715 | 105 044 |
* CPI reflects the indicator measured by Statistics South Africa in the preceding October of each year.
Salary benchmarking
The company's policy is to pay employees a base salary that is close to the 50th percentile of comparable companies. In addition, the variable compensation elements are set to enable the overall compensation to move towards the upper quartile for outstanding performance.
Benchmark reviews were conducted externally and include market analyses by industry specialists. Bespoke benchmarks include an industry peer group and comparable companies in various industries selected according to where we compete for talent.
The peer group used for the analysis included property management companies and South African REITs.
Adjustments were considered and approved for jobs that were significantly out of line with the survey report.
Base salaries adjusted |
30 June 2019 | 30 June 2018 |
|---|---|---|
| Executive directors | 1 | – |
| Strategic management | 1 | – |
| Executives and senior management | 3 | 5 |
| Other employees | 34 | 30 |
| Total | 39 | 35 |
The company uses the Patterson system to grade positions in the company. All position grades were reviewed during the year. Similar positions are aligned within a salary band taking into consideration an employee's experience, qualifications, the nature of work and the level of responsibility. This practice accords with the company's commitment to fair remuneration and equal pay for work of equal value.
Base salaries paid |
30 June 2019 R000 |
% increase/ (decrease) |
30 June 2018 R000 |
% increase/ (decrease) |
|---|---|---|---|---|
| Executive directors | 10 056* | 37,4% | 7 319 | 6,1% |
| Strategic management | 6 788 | 6,0% | 6 403 | – |
| Executives and senior management | 28 563** | (8,1%) | 31 065 | (18,3%) |
| Other employees | 66 864 | 4,7% | 63 869 | 6,6% |
| Total | 112 271 | 3,3% | 108 656 | 3,6% |
| * | Wilhelm Nauta appointed as an executive director in July 2018 |
| ** | Wilhelm Nauta appointed as executive director in July 2018, and included in executive directors for the 2019 financial year (included in executives and senior management in the 2018 financial year). One regional executive position eliminated after the retirement of Lynda Burger in July 2018 |
Employee benefits
Our employee surveys confirmed that our employee benefits contribute to the loyalty and commitment of our employees. Details of employee surveys are given on Sustainability.
Pension fund (defined contribution)
In total, 208 employees are members of the company's pension fund and R12,6 million (2018: R12 million) was contributed to the pension fund during the year. Membership of the fund provides death, disability and funeral insurance.
| Benefit | |
| Life insurance | Four times annual pensionable salary. Education protector to third year tertiary education. |
| Disability insurance | 75% of monthly pensionable salary. |
| Funeral insurance | R25 000. |
Maternity leave
A total of R88 000 was paid to two employees who received four months' partially paid maternity leave during the year.
Short-term incentive (STI)
STIs are determined based on the employee's individual performance and business units' scores against the KPDs.
Key performance deliverables
Performance against KPDs is measured to ensure we achieve our strategic priorities and deliver value for stakeholders.
The KPDs comprise financial, operational, environmental, social and corporate governance measures. KPDs for the 2019 financial year were approved by the committee in May 2018. Actual performance is measured against targets and communicated to management in December 2018 and June 2019, respectively.
2019 KPD targets
KPD scores against targets relating to the 2019 financial year, which will be applied to STIs allocated and paid in December 2019, are as follows:
| Key performance indicator | Target | Performance achieved | Weighting | Score against target (range 70% – 130%) |
Weighted score |
| Financial targets | 58% | 70% | 40,6% | ||
| Distributable income growth | 5% to 7% (per division) | 1,5% negative growth year on year | 33% | 70% | 23,1% |
| Budget income and expense management | On budget | 8% below budget | 25% | 70% | 17,5% |
| Operational targets | 26% | 91% | 23,8% | ||
| Trading performance | 4% trading density increase year on year. | 0,61% trading density increase year on year. | 3% | 85% | 2,6% |
| Footcount consistent with previous year. | 1,36% decline in footcount year on year. | ||||
| Leasing | Vacancy movement – 0% increase year on year. | Reduced vacancies year on year by 27% (9 742 sqm – 2019, 13 968 sqm – 2018). | 17% | 92% | 15,6% |
| Rentals achieved – on budget. Rental escalation on new and renewed leases – 7%. | Rentals achieved lower than budget due to rent reversions. Rental escalations achieved 7,2%. | ||||
| 2% of lease documentation in the process of being finalised. | 11% of lease documentation in the process of being finalised. | ||||
| Tenant arrears and deposits | 2% arrears outstanding as a % of total rent roll raised. | 0,98% arrears outstanding as a % of total rent roll raised. | 6% | 93% | 5,6% |
| 1,5% deposits outstanding as a % of deposits raised. | 15,2% deposits outstanding as a % of deposits raised. | ||||
| Environmental, social and corporate governance | 16% | 123% | 19,6% | ||
| Operations risk and environmental impact | Building compliance files 90% complete. | Building compliance files 94% complete. | 6% | 110% | 6,6% |
| 80% waste recycling rate | 81% of waste recycled during the year. | ||||
| 3% kWh saving year on year. | 5,57% kWh saving achieved year on year. | ||||
| Transformation | 75% of all new and internal appointments to be black as defined in the EE Act. | 88% of all new and internal appointments were black as defined in the EE Act. | 5% | 130% | 6,5% |
| 75% of all procurement from suppliers rated between BEE level 1 – 4. | 80% of all procurement from suppliers rated between BEE level 1 – 4. | 5% | 130% | 6,5% | |
| Total | 100% | 84% | |||
2020 KPD targets
The committee reviewed the targets for the executive directors, senior management and management teams during the year. The June 2020 targets are aligned with the company strategy.
KPD targets relating to the 2020 financial year, which will be applied to STIs allocated in December 2020, are as follows:
| Key performance indicator | Weighting | Target |
| Financial targets | 55% | |
| Distributable income growth | 20% | 668 cents distributable income per share |
| Total return on investment | 20% | Total return on investment relative to peer group – 102,5% |
| Loan to value ratio (based on a fully consolidated loan to value ratio calculation) | 15% | Reduce loan to value ratio by 4,5% |
| Operational targets | 25% | |
| Trading performance | 25% | South Africa – 1,5% trading density growth over previous year. Eastern Europe – 2,5% trading density growth over previous year |
| South Africa – 1,5% tenant turnover growth over previous year. Eastern Europe – 3% tenant turnover growth over previous year | ||
| Footcount consistent with previous year | ||
| Environmental targets | 20% | |
| Operations risk and environmental impact | 13,5% | Global Real Estate Sustainability Benchmark (GRESB) score of 65 |
| 6,5% | Two solar photovoltaic projects implemented within budget during the year | |
| Total | 100% | |
| Modifier | ||
| Transformation | 0% to -10% | BBBEE verification rating improved by one level |
| Innovation | 0% to 5% | Implement an innovation project that contributes to the strategic objectives |
Individual performance reviews
Individual performance reviews were conducted during October 2018. The rating process was done through the company's employee self-service system (ESS) after meetings between the employees and line managers. Discussions are structured to cover work goals achieved, training needs and job performance, and to set personal job goals for the next 12 months.
The performance of any employee that requires improvement is addressed during the year through consultation, and if required, training.
| Results of individual performance reviews | Performance review score % | June 2019 | June 2018 |
|---|---|---|---|
| Performance requires improvement | 66% to 93% | 4% | 7% |
| Performance consistently meets expectations | 100% to 110% | 53% | 51% |
| Performance exceeds expectations | 111% to 127% | 35% | 38% |
| Exceptional performance delivery | 128% to 143% | 8% | 4% |
| 100% | 100% |
Performance management score and STI allocations
The committee considered the outcome of the performance reviews conducted in October 2018 and the June 2018 KPD score (110,9%) before STIs were approved. STIs paid for the year aligned with the remuneration policy.
| STIs paid - R000 | 30 June 2019 | % increase/ (decrease) |
30 June 2018 |
|---|---|---|---|
| Executive directors | 5 894* | 12% | 5 257 |
| Strategic management | 2 614 | 9% | 2 398 |
| Executives and senior management | 8 132 | (23%) | 10 559** |
| Other employees | 10 556 | 13% | 9 351 |
| Total | 27 196 | (1%) | 27 565 |
| * | 2019 includes the STI for Wilhelm Nauta, appointed as an executive director in July 2018 |
| ** | 2018 includes the STI paid to Wilhelm Nauta |
Please see executive directors' STI calculations and payments.
Long-term incentives (LTI)
Refer to financial statement note K2 - Share-based payments.
Award issue
Awards in terms of the CUP were approved by the committee and made to 25 participants in July 2018 and to two participants in January 2019.
Shares vested
The 1 July 2015 CUP award vested in October 2018.
Performance conditions applied
The performance shares awarded are subject to performance conditions relating to distribution and share price growth measured against the five largest South African REITs. The comparative companies were Growthpoint, Redefine, Fortress, Vukile and Investec Property Fund.
Hyprop's distribution grew by 39%, over the three-year period from award date and was measured against the 31% weighted average distribution growth of the comparative peer group. The distribution growth performance condition met the stretch target.
Hyprop's share price decreased by 15%, over the three-year period from award date and was measured against the negative 7% weighted average share price growth of the comparative peer group. The share price growth performance condition was not met.
The committee did not factor in a strategic component and approved the 75% performance condition met in October 2018.
Performance conditions for shares awarded 1 July 2015
| Performance condition |
Threshold | Stretch | Growth over three- year period |
Weighted peer group growth over three-year period |
Hyprop's growth relative to peer group |
Weighting | % of the award vested |
Weighted total vested |
| Growth in distribution per unit relative to the peer group | Hyprop's growth in distribution per unit relative to peer group: 95% | Hyprop's growth in distribution per unit relative to peer group: 110% | 39% | 31% | 125,9% | 50% | 150% | 75% |
| Unit price performance to the peer group | Hyprop's unit price performance relative to peer group: 95% | Hyprop's unit price performance relative to peer group: 120% | (15%) | (7%) | (114%) | 50% | – | |
| % shares awarded to vest | 75% |
Number of shares awarded, vested and forfeited
| Performance shares | Retention shares | |||||||||
| Award date | Number of participants |
Number of shares awarded |
Performance conditions met |
Number of shares vested |
Number of shares forfeited** |
Number of shares to vest |
Number of shares awarded |
Number of shares vested |
Number of shares forfeited |
Number of shares to vest |
| 01/01/2014 | 27 | 107 561 | 100,0% | 100 413 | 7 148 | – | 46 098 | 36 769 | 9 329 | – |
| 01/07/2014 | 26 | 110 422 | 89,4% | 93 363 | 17 059 | – | 47 324 | 1 428 | 19 134 | 26 762 |
| 01/07/2015 | 26 | 78 282 | 75,0% | 47 809 | 30 473 | – | 33 549 | 729 | 13 464 | 19 356 |
| 01/07/2016 | 26 | 80 979 | 1 764 | 43 253 | 35 962 | 33 499 | 102 | 12 838 | 20 559 | |
| 01/01/2017 | 1* | 5 982 | 5 982 | 2 564 | – | 2 564 | ||||
| 01/07/2017 | 25 | 84 840 | 790 | 30 230 | 53 820 | 35 114 | 12 043 | 23 071 | ||
| 01/07/2018 | 25 | 96 302 | 20 800 | 75 502 | 41 281 | 8 915 | 32 366 | |||
| 01/01/2019 | 2* | 39 281 | 39 281 | 16 835 | – | 16 835 | ||||
| 603 649 | 244 139 | 148 963 | 210 597 | 256 264 | 39 028 | 75 723 | 141 513 | |||
| * | Special allocation |
| ** | Resignations and performance conditions not met |
Value of vested LTI
| LTIs vested - R000 | 30 June 2019 | % increase/ (decrease) |
30 June 2018 |
|---|---|---|---|
| Executive directors | 1 751 | (45%)*** | 3 184 |
| Strategic management | 1 471 | (13%) | 1 694 |
| Executives and senior management | 4 202 | (22%) | 5 405 |
| Other employees | – | – | |
| Total | 7 424 | (28%) | 10 283 |
*** The vested value of the LTI was impacted due to performance conditions not met and shares forfeited due to resignations.
Directors' remuneration
Approved increases
In determining the salary increases for executive directors, the committee considered inflation, market conditions, industry benchmarks and changes in roles and responsibilities.
Approved increases in executive directors' base salaries applied in January
| 2019 R |
2018 R |
||
|---|---|---|---|
| MC Wilken | 4 716 000 | – | |
| PG Prinsloo | – | 4 449 000 | |
| BC Till | 2 884 000 | – | |
| LR Cohen | – | 2 800 000 | |
| AW Nauta | 2 800 000 | 2 634 000 | |
| Total | 10 400 000 | 5,2% | 9 883 000 |
Chief executive officer
| 2019 | 2018 | |||
|---|---|---|---|---|
| Total remuneration paid (R) | MC Wilken appointed 27 December 2018 |
PG Prinsloo resigned 31 January 2019 |
Total | PG Prinsloo |
| Base salary | 2 741 348 | 3 057 429 | 5 798 777 | 4 464 125 |
| STI | – | 3 708 000 | 3 708 000 | 3 498 000 |
| LTI vested value | – | 1 750 941 | 1 750 941 | 2 069 137 |
| Total | 2 741 348 | 8 516 370 | 11 257 718 | 10 031 262 |
STI
PG Prinsloo
Short-term performance incentives relating to the 2018 financial year, paid in December 2018
| Key performance indicator | Target | Performance achieved | Weighting | Total weighted score |
| Financial targets | 60% | 68,9% | ||
| Distributable income per share growth | 8% | 8,8% | 33% | 37,8% |
| Budget income and expense management | On budget | Exceeded budget by 0,6% | 27% | 31,1% |
| Operational targets | 26% | 24,6% | ||
| Trading performance | 4% trading density growth | 0,5% trading density increase year on year. | 3% | 2,3% |
| Footcount consistent with previous year | 1,6% decline in footcount year on year. | |||
| Leasing | Vacancies – 0% increase year on year | Reduced vacancies year on year by 25,7% (13 968 sqm – 2018, 17 559 sqm – 2017) | 16,5% | 16,2% |
| Rentals achieve on budget, 7,5% escalations | Rental escalations achieved 7,7% | |||
| 2% of lease documentation in the process of being finalised | 12% of lease documentation in the process of being finalised | |||
| Tenant arrears and deposits | 2% arrears outstanding as a % of total rent roll raised. | 0,6% arrears outstanding as a % of total rent roll raised. | 6,5% | 6,1% |
| 1,5% deposits outstanding as a % of deposits raised. | 8,7% deposits outstanding as a % of deposits raised. | |||
| Operational risk and environmental impact | 14% | 17,4% | ||
| Building compliance files | 96% complete | 100% complete | 4% | 5,2% |
| Waste recycling | 75% of waste recycled during the year | 83% of waste recycled during the year | 2% | 2,5% |
| Energy saving | 3% kWh saving year on year | 5,5% kWh saving achieved year on year | ||
| Transformation | 70% of all new and internal appointments to be black employees as defined in the EE Act. | 77,6% of all new and internal appointments were black employees as defined in the EE Act | 5% | 5,8% |
| 72% of all procurement from suppliers rated between BEE level 1 – 4 | 87% of all procurement from suppliers rated between BEE level 1 – 4 | 3% | 3,9% | |
| Total | 100% | 110,9% | ||
| Total STI allocated (Rand) | 3 708 000 | |||
| STI as a % of base salary | 83% | |||
The STI paid to the chief executive officer was determined by the KPD score.
Individual performance review
An annual individual performance review was conducted for the chief executive officer by his peers. The review score was considered by the committee but did not carry a weighting in calculating the performance management score used to determine the STI.
The individual performance review score for PG Prinsloo is summarised below:
| Weighting | Score out of 5, where 3 is 100% |
Outcome | |
|---|---|---|---|
| Behaviour | 30% | 3,6 | 120% |
| Business processes | 10% | 3,5 | 117% |
| Business operations (position-specific responsibilities) | 40% | 3,9 | 130% |
| Strategic implementation | 20% | 4,1 | 137% |
| Overall | 3,8 | 127% |
LTI
| Performance shares | Retention shares | ||||||||
| Award date | Number of shares awarded |
Performance conditions met |
Number of shares vested |
Number of shares forfeited |
Vesting value R |
Number of shares awarded |
Number of shares vested |
Number of shares forfeited |
Vesting value (R) |
| MC Wilken | |||||||||
| 01/01/2019 | 26 033 | – | – | – | – | 11 157 | – | – | – |
| Total | 26 033 | – | – | – | – | 11 157 | – | – | – |
| PG Prinsloo | |||||||||
| 01/01/2014 | 20 153 | 100,0% | 20 153 | – | 2 488 089 | 8 637 | 8 637 | – | 708 493 |
| 01/07/2014 | 21 845 | 89,4% | 19 529 | 2 316 | 2 069 924 | 9 362 | – | 9 362 | – |
| 01/07/2015 | 15 794 | 75,0% | 11 846 | 3 948 | 1 042 448 | 6 769 | – | 6 769 | – |
| 01/07/2016 | 16 147 | – | – | 16 147 | – | 6 920 | – | 6 920 | – |
| 01/07/2017 | 17 031 | – | – | 17 031 | – | 7 299 | – | 7 299 | – |
| 01/07/2018 | 20 800 | – | – | 20 800 | – | 8 915 | – | 8 915 | – |
| Total | 111 770 | 51 528 | 60 242 | 5 600 461 | 47 902 | 8 637 | 39 265 | 708 493 | |
Chief financial officer
| 2019 | 2018 | |||
|---|---|---|---|---|
| Total remuneration paid (R) | BC Till appointed 1 October 2018 |
LR Cohen resigned 31 July 2018 |
Total | LR Cohen |
| Base salary | 2 046 818 | 304 168 | 2 350 986 | 2 855 219 |
| STI | – | – | – | 1 759 000 |
| LTI vested value | – | – | – | 1 114 803 |
| Total | 2 046 818 | 304 168 | 2 350 986 | 5 729 022 |
LTI
| Performance shares | Retention shares | |||||||
| Award date | Number of shares awarded |
Performance conditions met |
Number of shares vested |
Number of shares forfeited |
Vesting value R |
Number of shares awarded |
Number of shares vested |
Number of shares forfeited |
| BC Till | ||||||||
| 01/01/2019 | 13 249 | – | – | – | – | 5 678 | – | – |
| Total | 13 249 | – | – | – | – | 5 678 | – | – |
| LR Cohen | ||||||||
| 01/01/2014 | 11 105 | 100,0% | 11 105 | – | 1 371 023 | 4 759 | – | 4 759 |
| 01/07/2014 | 11 769 | 89,4% | 10 521 | 1 248 | 1 115 172 | 5 044 | – | 5 044 |
| 01/07/2015 | 8 509 | – | – | 8 509 | – | 3 647 | – | 3 647 |
| 01/07/2016 | 8 699 | – | – | 8 699 | – | 3 728 | – | 3 728 |
| 01/01/2017 | – | – | – | – | – | – | – | – |
| 01/07/2017 | 9 176 | – | – | 9 176 | – | 3 932 | – | 3 932 |
| 01/07/2018 | – | – | – | – | – | – | – | – |
| Total | 49 258 | – | 21 626 | 27 632 | 2 486 195 | 21 110 | – | 21 110 |
Chief investment officer
| Total remuneration paid (R) | June 2019 AW Nauta |
|---|---|
| Base salary | 2 788 431 |
| STI | 2 186 000 |
| LTI vested value | – |
| Total | 4 974 431 |
STI
AW Nauta
Short-term performance incentives relating to the 2018 financial year, paid in December 2018
| Key performance indicator | Target | Performance achieved | Weighting | Total weighted score |
| Financial targets | 60% | 68,9% | ||
| Distributable income per share growth | 8% | 8,8% | 33% | 37,8% |
| Budget income and expense management | On budget | Exceeded budget by 0,6% | 27% | 31,1% |
| Operational targets | 26% | 24,6% | ||
| Trading performance | 4% trading density growth | 0,5% trading density increase year on year | 3% | 2,3% |
| Footcount consistent with previous year | 1,6% decline in footcount year on year | |||
| Leasing | Vacancies – 0% increase year on year | Reduced vacancies year on year by 25,7% (13 968 sqm – 2018, 17 559 sqm – 2017) | 16,5% | 16,2% |
| Rentals achieved on budget, 7,5% escalations | Rental escalations achieved 7,7% | |||
| 2% of lease documentation in the process of being finalised | 12% of lease documentation in the process of being finalised | |||
| Tenant arrears and deposits | 2% arrears outstanding as a % of total rent roll raised. | 0,6% arrears outstanding as a % of total rent roll raised | 6,5% | 6,1% |
| 1,5% deposits outstanding as a % of deposits raised. | 8,7% deposits outstanding as a % of deposits raised | |||
| Operational risk and environmental impact | 14% | 17,4% | ||
| Building compliance files | 96% complete | 100% complete | 4% | 5,2% |
| Waste recycling | 75% of waste recycled during the year | 83% of waste recycled during the year | 2% | 2,5% |
| Energy saving | 3% kWh saving year on year | 5,5% kWh saving achieved year on year | ||
| Transformation | 70% of all new and internal appointments to be black employees as defined in the EE Act. | 77,6% of all new and internal appointments were black employees as defined in the EE Act | 5% | 5,8% |
| 72% of all procurement from suppliers rated between BEE level 1 – 4 | 87% of all procurement from suppliers rated between BEE level 1 – 4 | 3% | 3,9% | |
| Total | 100% | 110,9% | ||
| Total STI allocated (Rand) | 2 186 000 | |||
| STI as a % of base salary | 83% | |||
The STI paid to the chief investment officer was determined by the KPD score.
Individual performance review
An annual individual performance review was conducted for the chief investment officer by his peers. The review score was considered by the committee but did not carry a weighting in calculating the performance management score used to determine the STI.
The individual performance review score for AW Nauta is summarised below:
| Weighting | Score out of 5, where 3 is 100% |
Outcome | |
|---|---|---|---|
| Behaviour | 30% | 3,6 | 118% |
| Business processes | 10% | 3,2 | 107% |
| Business operations (position-specific responsibilities) | 40% | 3,9 | 130% |
| Strategic implementation | 20% | 4,0 | 133% |
| Overall | 3,75 | 125% |
LTI
| Performance shares | Retention shares | ||||||||||
| Award date | Number of shares awarded |
Performance conditions met |
Number of shares vested |
Number of shares forfeited |
Number of shares to vest |
Vesting value R |
Number of shares awarded |
Number of shares vested |
Number of shares forfeited |
Number of shares to vest |
Vesting value R |
| AW Nauta | |||||||||||
| 01/01/2017 | 5 982 | – | – | 5 982 | 2 564 | – | – | 2 564 | – | ||
| 01/07/2017 | 5 737 | – | – | 5 737 | 2 459 | – | – | 2 459 | – | ||
| 01/07/2018 | 7 008 | – | – | 7 008 | 3 004 | – | – | 3 004 | – | ||
| Total | 18 727 | – | – | 18 727 | – | 8 027 | – | – | 8 027 | – | |
Total compensation ratio
The graphs below reflect the earnings potential compared to the actual remuneration paid to the executive directors for the 2019 financial year. The actual LTI and STI amounts for the 2019 financial year will only be quantified once the individual performance evaluations and assessment of KPDs achieved have been completed and approved by the remuneration committee in November 2019.
CEO |
CFO |
CIO |
 |
 |
 |
| * Less than 12 months |
Non-executive directors' fees
Non-executive director fees were externally benchmarked in the previous financial year and the consequent adjustments were approved at the annual general meeting held on 30 November 2018. The previous levels of fees for certain of the non-executive director responsibilities were below the average and median benchmark levels. For the balance of non-executive director responsibilities, the proposed fee adjustments were referenced to CPI.
Non-executive directors' fees are benchmarked externally every second year with CPI adjustments in alternate years.
Non-executive directors' fees
| Director | 30 June 2019 R000 |
30 June 2018 R000 |
|---|---|---|
| Independent non-executive directors | ||
| Gavin Tipper (chairman) | 807 | 688 |
| Lindie Engelbrecht(1) | 230 | 543 |
| Zuleka Jasper | 479 | – |
| Mike Lewin | 421 | 392 |
| Nonyameko Mandindi | 383 | 325 |
| Thabo Mokgatlha | 567 | 462 |
| Stewart Shaw-Taylor | 637 | 551 |
| Non-executive directors | ||
| Kevin Ellerine | 397 | 343 |
| Louis Norval | 397 | 343 |
| Total | 4 318 | 3 647 |
| (1) | Resigned with effect from 30 November 2018 |