Spring Real Estate Investment Trust · HKEX:1426
Spring Real Estate Investment Trust — FY2023 Earnings Presentation
28 slides from Spring Real Estate Investment Trust's earnings presentation, Mar 21, 2024
Slide 1: Final Results 2023 Presentation
Final Results 2023 Presentation 21 Mar 2024
Slide 2: Disclaimer
DISCLAIMER This presentation may contain information which is proprietary, confidential and/or legally privileged and has been prepared by Spring Asset Management Limited, in its capacity as the manager (the “Manager”) of Spring Real Estate Investment Trust (the “Trust”). This presentation is being
Slide 3: Agenda
AGENDA 1 1 FY2023 RESULTS HIGHLIGHTS 2 CCP PROPERTY OPERATION REVIEW 2 3 HUAMAO PLACE OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 3 5 OUTLOOK & STRATEGIC PRIORITIES 2
Slide 4: FY2023 Results Highlights
FY2023 RESULTS HIGHLIGHTS 3
Slide 5: FY2023 Results Highlights
FY2023 RESULTS HIGHLIGHTS ◼ Despite the challenging macroeconomic environment, Spring REIT registered a 23.3% YoY increase in net property income due to the steady performance of Beijing CCP office portfolio and the full-year contribution from Huamao Place shopping mall in Huizhou ◼ The gain at the
Slide 6: Financial Summary
FINANCIAL SUMMARY Operating Results (in RMB million) FY2023 FY2022 YoY Chg 2H23 1H23 HoH Chg Revenue 732.45 577.85 26.8% 369.03 363.42 1.5% Property operating expenses (189.19) (137.42) 37.7% (99.67) (89.52) 11.3% Net property income 543.26 440.43 23.3% 269.37 273.89 (1.7%) Net property income margi
Slide 7: Proven DPU Track Record
PROVEN DPU TRACK RECORD ◼ Maintained a steady distribution for unitholders amid challenging macroeconomic environment, with an annualized DPU yield of 8.3%1. ◼ Spring REIT’s unit price outperformed its peers and the market in 2023 as well as over the past 3 years2. Its total return was +4% and +8% r
Slide 8: Capital Management
CAPITAL MANAGEMENT Prudent interest rate management with 99.5% of loans either hedged or at stable rate Debt profile (notional amounts) and Hedging ratio Benchmark interest rates Unhedged HKD loan of HKD30mn, 0.5% 2022 2023 Hedged HKD loan, 76.6% RMB loan under LPR, 14.4% 6.0% Fed Fund Upper Bound R
Slide 9: CCP Property Operation Review
CCP PROPERTY OPERATION REVIEW 8
Slide 10: Beijing Leasing Market Condition
BEIJING LEASING MARKET CONDITION Beijing Overall Beijing CBD Beijing Overall – Supply, Absorption, Occupancy Beijing CBD – Supply, Absorption, Occupancy (sqm, GFA) (sqm, GFA) 95% 95% 97% 97% 96% 93% 95% 95% 96% 95% 95% 95% 1,500,000 88% 91% 89% 88% 90% 88% 100% 750,000 91% 94% 88% 91% 100% 85% 87% 9
Slide 11: Beijing Future Grade-A Office Supply
BEIJING FUTURE GRADE-A OFFICE SUPPLY Of the 189,000 sqm GFA of new supply in 2024 and 2025, none will be located in the CBD area Grade-A office supply by year (sqm, GFA) 1,000,000 Others* 900,000 800,000 Historic supply in all of Beijing 700,000 600,000 500,000 400,000 Relatively low new office 300,
Slide 12: Comparison of Grade-A Office Markets Across China
COMPARISON OF GRADE-A OFFICE MARKETS ACROSS CHINA ▪ Beijing has highest office occupancy of 88%. All other cities have occupancy rate under 80%. ▪ Low new supply in Beijing in the next 4 years, only 2.5% p.a. of existing stock (vs avg. 8.0% p.a. of other selected cities) Office GFA 2H23 Total Stock
Slide 13: CCP Property: Operations Summary
CCP PROPERTY: OPERATIONS SUMMARY ▪ 2H23 revenue was increased by 0.5% HoH, with rental income grew by 0.9% HoH due to a moderate improvement in occupancy ▪ Property operating expenses increased by 4.9% HoH, mainly due to higher commission expenses ▪ Cost structure largely remained stable, with NPI m
Slide 14: CCP Property: Leasing Performance
CCP PROPERTY: LEASING PERFORMANCE ▪ Average passing rent was stable HoH, and increased slightly by 0.3% YoY. ▪ The CCP Property registered an average occupancy of 91% in 2H 2023. Average Passing Rents Average Occupancy Rates (RMB per sqm per month) (%) 95% 94% 94% 96% 93% 92% 93% 95% 91% 93% 91% 91%
Slide 15: CCP Property: Tenant Base
CCP PROPERTY: TENANT BASE Diverse and high-quality tenant mix Tenants by Industry Top 5 Tenants % of total leased Tenants As % of leased office GFA GFA (As of 31 Dec 2023) Epson 6.0% Real estate/ Zhong De Securities 4.3% retail/ Education/ consumer media/sports/ products Global Law 4.3% 21.9% Techno
Slide 16: CCP Property: Expiring Lease Profile
CCP PROPERTY: EXPIRING LEASE PROFILE ▪ Average lease expiry of existing leases (in GFA terms) as of 31 Dec 2023 was 647 days. ▪ Lease expiries in 2024 – about 27% of the leasable GFA, with an average expiring rental rate of RMB359 per sqm. ▪ Of the arrears as of 31 December 2023, the amount outstand
Slide 17: Huamao Place Operation Review
HUAMAO PLACE OPERATION REVIEW 16
Slide 18: Huizhou Market Overview
HUIZHOU MARKET OVERVIEW ▪ Huizhou’s shopping mall industry has experienced robust growth, driven by high economic growth potential, ongoing urbanisation, consumption upgrading, expanding retail facilities, and continued government support. ▪ 36 shopping malls in Huizhou with overall retail GFA of ap
Slide 19: Huizhou Shopping Mall Market
HUIZHOU SHOPPING MALL MARKET Top five shopping malls by gross merchandise value (GMV) in Huizhou, 2023 (million RMB) 2,062 1,900 1,360 Ranked 1st 1,200 in Huizhou 1,000 *Approximation Huizhou HuaMao Place Huizhou Ganghui Huizhou Daya Bay Huizhou Sky City Huizhou Longsun Xintiandi Wanda Plaza Jinshan
Slide 20: Huamao Place in Huizhou: Operations Summary
HUAMAO PLACE IN HUIZHOU: OPERATIONS SUMMARY First full-year contribution from Huamao Place (in RMB million) FY2023 FY2023 Rental Income Mix Commission income Turnover rent 4.9% Revenues 9.1% - Rental income 214.4 - Other income 5.4 Management Total revenue 219.8 fee income 22.0% Property Operating E
Slide 21: Different Initiatives Driving Footfall and GMV
DIFFERENT INITIATIVES DRIVING FOOTFALL AND GMV A variety of online and offline promotion events 2023 Guangdong Night Economy and Summer VIP Lounge for high-spending visitors Consumption Promotion Event at Huamao Place 20
Slide 22: Huamao Place in Huizhou: Leasing Summary
HUAMAO PLACE IN HUIZHOU: LEASING SUMMARY ▪ Introduced a cluster of electric vehicles and exclusive international cosmetics brands, helping to create a sense of exclusivity and luxury for the shopping mall and solidifying its high-end reputation ▪ Successfully signed leases with 154 new merchants in
Slide 23: Ongoing Optimization to Our Tenant Mix
ONGOING OPTIMIZATION TO OUR TENANT MIX Tenancy mix by GFA (as at 31 Dec 2023) Examples of new shops Lifestyle, 1.3% Tech and Others, 2.1% Automobiles, 3.5% Household, 5.0% Food and Beverages, Jewellery and Accessories, 5.3% 31.4% Healthcare and Beauty, 5.6% Sports Goods, 7.3% Entertainment, 11.6% Ap
Slide 24: UK Portfolio Operation Review
UK PORTFOLIO OPERATION REVIEW 23
Slide 25: Location of the properties
Location of the properties 24
Slide 26: UK Portfolio Operation Summary
UK PORTFOLIO OPERATION SUMMARY Long-term, quality cash flow backed by guarantee, with upward-only revisions Annual contract Five-yearly rent review Occupancy rate rental income 4.6% 100% ~GBP4.76 mn • Each of the 84 properties in the UK Portfolio is under a long-term lease with the tenant Kwik-Fit
Slide 27: Outlook & Strategic Priorities
OUTLOOK & STRATEGIC PRIORITIES 26
Slide 28: Outlook & Strategic Priorities
OUTLOOK & STRATEGIC PRIORITIES Weakened sentiment in Beijing office market is expected to persist in the near term ▪ We expect continued pressure on both rent and occupancy, despite no new office supply is expected to be introduced in the Beijing CBD area in the coming year. We will prioritise occup
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