Spear Reit Ltd. · JSE:SEA
Spear Reit — Investor Presentation (June 2018)
55 slides from Spear Reit's investor presentation, June 2018
Slide 1: Capital Raise June 2018
Capital Raise June 2018
Slide 2: Table of Contents
Table of Contents 1. Spear REIT at a Glance Appendix: 2. FY2018 Highlights Top 10 Assets 10. Questions & Answers 3. Financial Performance 9. Outlook 4. Group Structure & Directors 8. Capital Raise: 5. Portfolio Overview Timing & Process 7. Distribution Forecast FY2019 6. New Acquisitions Capital Rai
Slide 3: 1. Spear REIT at a Glance: Mission Statement
MISSION STATEMENT “To be the leading Western Cape-focused REIT and to consistently grow our distribution per share ahead of inflation and within the top quartile of our peer group” 1. Spear REIT at a Glance Capital Raise June 2018 3
Slide 4: Spear REIT at a Glance
Spear REIT at a Glance • JSE listing 11 November 2016 Active Asset • Western Cape-focused real estate investor Management • Successful tenant retention programme = High occupancy • Value creation through active asset management Portfolio Value R3.1 billion Average Escalation 8.38% Rentable Area (GLA
Slide 5: 2. FY2018 Highlights
2. FY2018 Highlights Capital Raise June 2018 5
Slide 6: Highlights – 2018 Financial Year
Highlights – 2018 Financial Year • Exceeded full year distribution forecast by 1.95% • TNAV per share growth of 15.4% • 117% asset growth in core portfolio • 68% growth in market capitalisation Distribution Per Share 78.50 cents 1.95% over revised forecast Tangible Net Asset Value Per Share 15.4% to
Slide 7: 3. Financial Performance
3. Financial Performance Capital Raise June 2018 7
Slide 8: Summary Income Statement
Summary Income Statement Group Group Audited Audited Year 4 months ended ended Consolidated 28 February 28 February Statement of 2018 2017 R’000 R’000 Comprehensive Total revenue 316 595 61 262 Income Property operating and management expenses (87 422) (16 294) Net property-related income 229 173 44
Slide 9: Summary Balance Sheet
Summary Balance Sheet Consolidated Statement of Group Group Financial Position Audited Audited Feb 2018 Feb 2017 R’000 R’000 ASSETS Reporting periods are not comparable Non-current assets 2 975 850 1 452 376 Current assets 251 488 41 136 TOTAL ASSETS 3 227 338 1 493 512 EQUITY AND LIABILITIES Spear
Slide 10: Funding and Debt Maturity
Funding R152 million Management successfully Funding refinanced R691 million of borrowings and agreed new 13% terms at year end with an Maturity expiry in February 2021 at a rate of prime less 1.30% R100 million 8% LTV – 38.48% R1 205 bn Total Borrowings – R1.205 billion R953 million Average Cost of
Slide 11: 4. Group Structure & Directors
4. Group Structure & Directors Capital Raise June 2018 11
Slide 12: Group Structure
Group Structure 3 Directly held Assets Spear REIT Limited 22 Directly held Assets Subsidiary Companies DoubleTree by Hilton Hotel, Cape Town at Upper Eastside incl. retail and commercial Spear HoldCo Sable Square Pembury Retirement Complex 15 on Orange Hotel by Marriott As at 28 February 2018 and no
Slide 13: Executive Management – Role Changes
Executive Management – Role Changes Quintin Rossi (37) Mike Flax (53) INCOMING CHIEF EXECUTIVE EXECUTIVE DEPUTY OFFICER CHAIRMAN Co-founder of Spear Co-founder of Spear Committees: Executive, Committees: Executive, Investment, Audit & Risk, Investment, Audit & Risk Social & Ethics Capital Raise June
Slide 14: Board of Directors
Board of Directors Executive Quintin Rossi Mike Flax Christiaan CEO Executive Deputy Barnard Chairman CFO non- Executive Abu Varachhia Jalal Allie Brain Goldberg Niclas Kjellström- Sean McCarthy Chairman Lead Independent Independent Non- Matseke Non-executive Non-executive executive Independent Non-
Slide 15: 5. Portfolio Overview
5. Portfolio Overview Capital Raise June 2018 15
Slide 16: Portfolio Overview
Portfolio Overview Active Asset Management Western Cape 98% of assets Number of properties 31 Portfolio value R3.1 billion Average property rental rate R91/m2 Average property valuation per m2 R9 665/m2 In force escalations 8.38% Cost to income ratio (Net) 18.51% Capital Raise June 2018 16
Slide 17: Acquisitions & Disposals
Acquisitions & Disposals Acquisitions: The Group acquired the following properties during the year ending 28 February 2018: Transfer Acquisition Value Debt Funding Acquisition Yield date R’000 R’000 % 142 Edward Street, Tygervalley 1-Mar-17 41 200 23 200 9.70 Selective House, Tygervalley 14-Mar-17 1
Slide 18: Top 5 Properties by Value
Top 5 Properties by Value Total Value Total GLA Portfolio R1 810 912 195 616m 2 57.89% Mega Park Industrial 2 Long Street, Sable Square, 15 on Orange, Upper Eastside, Estate, Bellville South Cape Town Milnerton Cape Town Woodstock Value (Rm) 426 000 Value (Rm) 418 400 Value (Rm) 358 300 Value (Rm) 3
Slide 19: Sectoral Split by Revenue & GLA
Sectoral Split by Revenue & GLA Revenue (Rm) GLA (m2) For the year ended 28 February 2018 R294 million 324 245 Residential Residential Hospitality 3% Retail 2% 9% Hospitality 12% 23% Commercial 30% Industrial Industrial 24% Commercial 47% 38% Retail 12% Industrial R70 326 Industrial 152 514m2 Commer
Slide 20: Lease Expiry by GLA
Lease Expiry by GLA Lease Expiry Profile based on GLA as at 28 February 2018 100% 90% 80% 70% 60% 50% 40% 30% Average 20% 26% 10% 0% Vacant Monthly Expires Expires Expires Expires Expires 3/2018 3/2019 3/2020 3/2021 3/2022 to 2/2019 to 2/2020 to 2/2021 to 2/2022 onwards Industrial Commercial Retail H
Slide 21: Top 10 Tenants by GLA
0K/m2 5K/m2 10K/m2 15K/m2 20K/m2 25K/m2 Consol Glass Liquor Runners June 2018 Capital Raise Distell Limited Nampak Limited African Pride Imperial Cargo Multi Room Management MWEB Tanker Services Top 10 Tenants by GLA – FY2018 : 139 000m2 = 42.86% of Fund Pembury Retirement Lodge 21
Slide 22: Tenant & Vacancy Profile
Tenant & Vacancy Profile Analysis of the Property Portfolio as at 28 February 2018 Analysis of property portfolio in respect of tenant profiles Total Vacancy Total Number of tenants 6 334m = 1.95% 2 100% 395 (Due to aggressive letting & successful tenant retention programmes) Offices 6 334m2 Based on
Slide 23: Risk Management: Water Continuity
Risk Management Portfolio water requirements: 2.6 million litres/week Spear water continuity storage capacity: 1.07 million litres Water Continuity Water continuity investment: R7 million Capital deployed to date: R2 million Water use & transport licences In process Current boreholes: 2 Current well
Slide 24: Risk Management: Renewable Energy
Risk Management (continued) Assets earmarked for Phase 1 rollout: 6 Renewable Energy Combined system size: 2,33MWh Renewable energy investment: R24 million Average payback period 4.5 years HOW SOLAR PANELS WORK Benefits of renewable energy: LIGHTBULB Reduction of energy costs by approx. 30% Less rel
Slide 25: Developments: Sable Square Phase 1
Developments & Redevelopment Projects Organic Portfolio Growth Sable Square - Phase 1 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton GLA added: 3 431m2 Sector: Mixed Use Development cost: R50 000 000 Completion yield: 9.8% Status: Completed Capital Raise June 2018 25
Slide 26: Developments: Sable Square Phase 2
Developments & Redevelopment Projects Organic Portfolio Growth Sable Square - Phase 2 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton Planned GLA to be added: 12 000m2 Sector: Retail & Residential Development cost: R200 000 000 Target yield: 10% Status: Target Commencement FY2019 Archite
Slide 27: Developments: 78 on Edward
Developments & Redevelopment Projects Organic Portfolio Growth 78 on Edward Physical address: 78 Edward Street, Tygervalley GLA added: 3 500m2 Sector: Mixed Use Development cost: R110 000 000 Target yield: 9% Status: Completion in FY2019 Architect’s Impression Capital Raise June 2018 27
Slide 28: Developments: Marine Place, Paarden Eiland
Developments & Redevelopment Projects Organic Portfolio Growth Marine Place - Paarden Eiland Physical address: Marine Drive, Paarden Eiland GLA to be developed: 52 000m2 Sector: Mixed Use Development cost: R1 700 000 000 Target yield: 10% Status: Target Commencement TBA Architect’s Impression Capita
Slide 29: 6. New Acquisitions
6. New Acquisitions Capital Raise June 2018 29
Slide 30: Island Business Park, Paarden Eiland
Island Business Park, Paarden Eiland, Cape Town Physical address: No. 8 Section Street, Paarden Eiland GLA: 2 322m2 Sector: Mixed Use Acquisition price: R24 000 000 Acquisition yield: 10% Strategic Acquisition: Part of Paarden Eiland Development Strategy Capital Raise June 2018 30
Slide 31: Blackheath Park, Blackheath
Blackheath Park, Blackheath, Cape Town Main tenants: Pioneer Fishing, ZTE / Bollare & Namaqua Wines Physical address: Cnr Range & Station Road, Blackheath GLA: 37 333 m2 Sector: Industrial Acquisition price: R110 500 000 Acquisition yield: 10.43% WALE: 28 months Capital Raise June 2018 31
Slide 32: Old Mutual Private Wealth, Century City
Old Mutual Private Wealth, Century City, Cape Town Main tenant: Old Mutual Private Wealth, Estuaries Physical address: No. 2 Oxbox Crescent, Century City GLA: 4 199m2 Sector: Commercial Acquisition price: R98 000 000 Acquisition yield: 9.22% WALE: 52 months Capital Raise June 2018 32
Slide 33: 7. Distribution Forecast FY2019
7. Distribution Forecast FY2019 Capital Raise June 2018 33
Slide 34: Distribution Forecast FY2019
Distribution Forecast FY2019 9 – 11% distribution growth for 2019 financial year Between 85.6 cents to 86.4 cents Growth supported by organic portfolio improvements Growth supported by accretive acquisitions The growth is premised upon the following assumptions: That a relatively stable macroeconomi
Slide 35: 8. Capital Raise: Timing & Process
8. Capital Raise: Timing & Process Capital Raise June 2018 35
Slide 36: Capital Raise: Timing & Process
Capital Raise: Timing & Process Our objective is to generate sustainable and growing income as a specialised REIT. Amount to be raised R150 million to R300 million Placing price R10.00 - R10.20 Revised FY2019 forward yield 8.6% Opening of private placement 28 May 2018 Closing of private placement 1
Slide 37: Capital Raise: Key Features and Rationale
Capital Raise: Timing & Process • Western Cape-focused real estate investor Key Features of • 117% asset growth in core portfolio the Capital Raise • 68% growth in market capitalisation • 9-11% distribution growth for FY2019 Investment Rationale Benefits of Growth Investment & development pipeline o
Slide 38: Anticipated Shareholding Post Capital Raise
Anticipated Shareholding Post Capital Raise • Strong management & shareholder alignment Active Asset • High percentage of free float Managers • Management lock-in agreements in place Before Capital Raise Post Capital Raise Shares % Held Shares % Held Abu Varachhia 20 984 992 12.70 Abu Varachhia 20 9
Slide 39: Use of Capital Raise Proceeds
Use of Capital Raise Proceeds Capital Deployment Acquisitions R’000 Capital Requirements Total acquisition cost 200 000 Bank debt settled 100 000 300 000 Maximum capital raise 300 000 Less: Antecedent dividend (10 294) Less: Equity raise fees (3 750) Net proceeds to Spear 285 956 Cash reserve fundin
Slide 40: 9. Outlook
9. Outlook Capital Raise June 2018 40
Slide 41: Outlook: Investment Case Summary
Use of Capital Raise Proceeds Cape Town – SA’s highest growth area Regionally Diversification across all property sectors Specialised Favourable economic & property fundamentals Portfolio value R3.1 billion High Quality Real GLA of 324 245m2 Estate Portfolio Occupancy rate 98.1% Cost to income ratio
Slide 42: 10. Questions & Answers
10. Questions & Answers Capital Raise June 2018 42
Slide 43: Appendix: Top Assets
Appendix: Top 10 Assets Capital Raise June 2018
Slide 44: Mega Park Industrial Estate, Bellville South
Top 10 Assets Mega Park Industrial Estate, Bellville South Physical address: Cnr Pieter Barlow and Mill Roads, Bellville, Cape Town Value (R‘000): R426 000 Sector: Industrial Zoning: Industrial GLA: 86 091m2 Wale: 24 Tenants: Consol Glass, Tuffy Manufacturing, Imperial Group, Storage Town Capital Ra
Slide 45: 2 Long Street, Cape Town
Top 10 Assets 2 Long Street, Cape Town Physical address: 2 Long Street, Cape Town Value (R‘000): R418 400 Sector: Commercial Zoning: General Business 1 GLA: 24 822m2 Wale: 23 Tenants: SAMSA, Sturrock Grindrod, Fairheads, Harambee Capital Raise June 2018
Slide 46: Sable Square, Milnerton
Top 10 Assets Sable Square, Milnerton Physical address: Cnr Bosmansdam and Ratanga Roads, Milnerton Value (R‘000): R358 300 Sector: Retail Zoning: General Business 1 GLA: 30 934m2 Wale: 41 Tenants: Pick n Pay, Spur, Clicks, China Town, Baby City Capital Raise June 2018
Slide 47: 15 on Orange, Cape Town
Top 10 Assets 15 on Orange, Cape Town Physical address: Cnr Grey Pass and Orange Street, Cape Town Value (R‘000): R305 914 Sector: Hospitality Zoning: Mixed Use GLA: 16 727m2 Wale: 72 Tenants: African Pride Hotel Capital Raise June 2018
Slide 48: Upper Eastside, Woodstock
Top 10 Assets Upper Eastside, Woodstock Physical address: 31 Brickfield Road, Woodstock, Cape Town Value (R‘000): R302 298.16 Sector: Hospitality Zoning: Mixed use GLA: 18 521m2 Wale: 20 Tenants: DoubleTree by Hilton and Conference Centre, Shanduka Black Umbrella, Aegis Media, STA Travel Capital Rai
Slide 49: Mweb Head Office, Bellville
Top 10 Assets Mweb Head Office, Bellville Physical address: 100 Fairway Close, Parow Value (R‘000): R148 263 Sector: Commercial Zoning: General Business 1 GLA: 11 196m2 Wale: 25 Tenants: Mweb Head Office Capital Raise June 2018
Slide 50: Distell DC, Parow
Top 10 Assets Distell DC, Parow Physical address: 1 Beacon Way, cnr Jan van Riebeeck Drive, Parow Value (R‘000): R87 632 Sector: Industrial Zoning: General Business 1 GLA: 16 170m2 Wale: 40 Tenants: Distell Distribution Centre Capital Raise June 2018
Slide 51: Blackheath DC, Blackheath
Top 10 Assets Blackheath DC, Blackheath Physical address: Cnr Range and Anfield Road, Blackheath Value (R‘000): R86 055 Sector: Industrial Zoning: General Business 1 GLA: 22 315m2 Wale: 38 Tenants: Liquor Runners, Elzea Snacks Capital Raise June 2018
Slide 52: Manhattan Plaza, Tygervalley
Top 10 Assets Manhattan Plaza, Tygervalley Physical address: 100 Edward Street, Bellville Value (R‘000): R81 848 Sector: Commercial Zoning: Secondary Business GLA: 4 931m2 Wale: 24 Tenants: Clickatell, Hyundai, NBC Consult, DDP Valuers Capital Raise June 2018
Slide 53: Viking Business Park, Epping
Top 10 Assets Viking Business Park, Epping Physical address: Cnr Viking Way & Showground Avenue, Epping Value (R‘000): R77 354 Sector: Retail Zoning: Commercial C1 GLA: 9 320m2 Wale: 36 Tenants: Pick n Pay, Standard Bank, First National Bank Capital Raise June 2018
Slide 54: Disclaimer
Disclaimer The information contained in this presentation has been prepared by Spear REIT Limited (“Spear”) for information purposes only for the purpose of providing information to invited investors with regard to Spear. This presentation does not constitute, envisage or represent an offer to the p
Slide 55: Thank You
SPEAR THANK YOU @