Spear Reit Ltd. · JSE:SEA
Spear Reit — FY2020 Earnings Presentation
35 slides from Spear Reit's earnings presentation, May 2020
Slide 1: Provisional Summarised Reviewed Consolidated Financial Results Year Ended 29 February 2020
PROVISION AL SUMM ARISED REVIEWED CONSOLIDATED FIN ANCI AL RESULTS YEAR ENDED 29 FEBRUARY 2020
Slide 2: Table of Contents
TA BL E OF C ONT E NTS 1. I NT RO DU CT IO N & E N V IRO NM ENTAL OVERVIE W 2. I M PACT O F COV ID- 1 9 3. HI G HLIGHTS FY 2 0 2 0 FI N A NCI AL PERFO RM ANCE 4. FY 2 0 2 0 5. P O RT FO LIO OVERVIEW 6. S U B SEQ U ENT EV ENTS 7. O U T LO O K & PRO S P ECTS 8. Q U E S T IO NS / Provisional Summarised
Slide 3: Introduction & Environmental Overview
INTRODUCTION & 1 / ENVIRONMENTAL OVERVIEW EMAIL QUESTIONS TO [email protected] / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 1
Slide 4: Mission Statement and Strategy
1 / INTROD UCTION & E NVIRO NM E NTAL OVE RVIE W / M IS S I O N S TAT EM ENT AND S T RATE GY STRATE GY S HO RT TE RM Adapt to Covid-19 operating environment Capital preservation and liquidity management Aggressive letting of vacant space and quick turnaround times High level of tenant retention thro
Slide 5: Impact of Covid-19
IMPACT OF 2 / COVID-19 / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 3
Slide 6: Impact of Covid-19: SA Inc
2 / IM PACT O F C OV ID- 1 9 SA INC 11 March 2020 – Covid-19 declared a global pandemic by WHO 26 March 2020 – SA government institutes a hard lockdown 27 March 2020 – Moody’s downgrades SA to sub-investment grade Lockdown measures have severe impact on SA Inc across commerce and financial markets O
Slide 7: Impact of Covid-19: Collections and FY2021 Operating Scenarios
2 / IM PACT O F C OV ID- 1 9 C O L L E CT I O N FY 2 0 2 1 Y T D FY2021 OPE RATING SCE N ARIOS 98% M AR C H 2 0 2 0 LO W ROA D 92% AP R I L 2 0 2 0 60% of FY2021 billing collected Spear breakeven point 64% M AY 2 0 2 0 (measured as at 13 May 2020) Zero hospitality income included M I D D L E ROAD 61
Slide 8: Impact of Covid-19: Spear
2 / IM PACT O F C OV ID- 1 9 SPE AR Stress tests on balance sheet and income statement conducted • Refer to Spear scenario plan 2021 Sufficient liquidity headroom to absorb rental decline to cover operating expenditure and interest – no going-concern risk • ± R200 million in cash availability Funder
Slide 9: Highlights FY2020
HIGHLIGHTS 3 / FY2020 / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 7
Slide 10: Highlights FY2020: Portfolio Snapshot
3 / HIG HL IG HTS FY2 0 2 0 / P O RT FO L I O S N APS HOT 32 AS S E TS NUMBER OF PROPERTIES R4.18BN 9.78% R129.7M R9 513/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY GROWTH PROPERTY VALUE VALUATION 7.63% LE T T ING AVERAGE IN-FORCE 436 436M2 97.12% 29 MONTHS R91.60/M2/PM ESCALATIONS GLA OCCUP
Slide 11: Highlights FY2020: Financial Performance
3 / HIG HL IG HTS FY2 0 2 0 / FIN AN C I AL PERFO RM ANCE 91.66 DIS T RIB U T IO N CENTS FY2020 47.02 CENTS 6.06% 20.19% 38.35% DISTRIBUTION FINAL FY2020 NET COST TO TOTAL GROSS DISTRIBUTION DISTRIBUTION INCOME COST TO INCOME PER SHARE GROWTH TANGIB LE NE T ASSE T VALUE ( TN AV ) R12.17 0.41% R11.70
Slide 12: TNAV Bridge
3 / HIG HL IG HTS FY2 0 2 0 / TN AV B R I D G E R0.05 R0.99 R12.12 R12.17 R11.70 14 R0.08 R0.03 12 Fair value (R0.88) Profit for adjustment Acquisition of (R0.22) IFRS 2 (R0.47) the year subsidiary reserve 10 (excluding fair value adjustments) Distributions 8 Share issue Rands paid FY2019 final 12 J
Slide 13: Spear Total Return (Since Listing)
3 / HIG HL IG HTS FY2 0 2 0 / S P E AR TOTAL RE T U RN (S INCE LISTING) TOTA L RE TU RN ( TR) 20% SPEAR (TR) -23% SAPY (TR) ANNUALIS E D 7.54% SPEAR (TR) -7.76% SAPY (TR) 140% 130% 120% 120% 110% 100% 90% 80% 70% 77% 60% 11 Nov 16 11 Dec 16 11 Nov 19 11 Jan 17 11 Feb 17 11 Mar 17 11 Apr 17 11 May 17
Slide 14: Financial Performance FY2020
FIN ANCI AL 4 / PERFORM ANCE FY2020 / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 12
Slide 15: Summary Income Statement
4 / FIN ANC I AL PERFO RM ANCE FY 2 0 2 0 / S U M M ARY I N CO M E S TAT EM ENT CONSOLIDATED STATEMENT Group Reviewed Group Audited OF COMPREHENSIVE INCOME Year ended Year ended February 2020 February 2019 FOR THE YEAR ENDED 29 FEBRUARY 2020 R’000 R’000 Property revenue 519 710 426 122 Other income
Slide 16: Distribution Reconciliation
4 / FIN ANC I AL PERFO RM ANCE FY 2 0 2 0 / D IS T RI B U T I O N RECO NCILI AT IO N RECONCILIATION BETWEEN Year ended February 2020 EARNINGS AND DISTRIBUTABLE SA REIT Funds from Operations (SA REIT FFO) per share R’000 EARNINGS Profit or loss per IFRS Statement of Comprehensive Income (SOCI) attrib
Slide 17: Summary Balance Sheet
4 / FIN ANC I AL PERFO RM ANCE FY 2 0 2 0 / S U M M ARY B AL ANCE S HEE T CONSOLIDATED STATEMENT OF Group FINANCIAL POSITION February 2020 February 2019 ASSETS R’000 R’000 AS AT 29 FEBRUARY 2020 Non-current assets 4 253 814 3 808 427 Current assets 48 039 108 291 SPEAR REIT LIMITED AND TOTAL ASSETS
Slide 18: Funding
8.75% 4 / FIN ANC I AL PERFO RM ANCE FY 2 0 2 0 / FU N D I N G 39.63% AVERAGE COST OF FUNDING 26BPS Cost LTV FUN D IN G M AT U R IT Y 8.99% 63.3% Months 24 Fixed debt R1.083BN R1.7BN FY2023 31% R529M Cost 36.7% FY2024 13% 8.41% R225M Months 18 R1.7BN FY2025 6% Variable debt R101M R628M 23-MONTH FY20
Slide 19: Group Gearing and Cost of Debt
4 / FIN ANC I AL PERFO RM ANCE FY 2 0 2 0 / G R O U P G E ARING GE ARING RATIO 40% 39.63% 12 39% 38.82% 10 38.48% 38.43% 8 7.80% 38% 6 Gearing (%) Variance (%) 4 3.12% 37% 2 36.01% 0 36% -1.00% -2 35% -4 -6.42% -6 34% -8 28 Feb 2018 31 Aug 2018 28 Feb 2019 31 Aug 2019 29 Feb 2020 Gearing Variance I
Slide 20: Portfolio Overview
PORTFOLIO 5 / OVERVIEW / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 18
Slide 21: Top Properties by Value
5 / PORTFOL IO OV E RVI E W / TO P 5 P R O P ERT IES BY VALU E R1.97BN 175 591M2 47% TOTAL VALUE TOTAL GLA PORTFOLIO SABLE SQUARE MEGA PARK 2 LONG STREET NORTHGATE PARK 15 ON ORANGE CENTURY CITY BELVILLE CAPE TOWN BROOKLYN CAPE TOWN VALUE (R’000) VALUE (R’000) VALUE (R’000) VALUE (R’000) VALUE (R’00
Slide 22: Sectoral Split by GLA, Revenue & Value
5 / PORTFOL IO OV E RVI E W / S ECTO R AL S P LIT BY G L A, REV ENUE & VALUE / Y EAR EN D ED 2 9 FEB R UA RY 2 0 2 0 3% 1% 3% 6% 6% 10% 11% 8% 29% 28% PROPERTY SPLIT TOTAL REVENUE PROPERTY SPLIT BY GLA 16% BY SECTOR BY VALUE 56% (excluding lease smoothing) 14% (excluding lease asset) 436 436M 2 27%
Slide 23: Letting Activity
5 / PORTFOL IO OV E RVI E W / L E T T I N G ACT IVIT Y Spear began the period with an opening vacancy of 7 992m². Management has successfully renewed and re-let 121 018m² at a positive reversion of 1.95%. T HE TAB LE BELOW REFL ECTS THE LE T TI NG ACTI VIT Y O F T H E I NT ER I M P ER I O D : Gross
Slide 24: Tenant and Vacancy Profile
5 / PORTFOL IO OV E RVI E W / TEN ANT AN D VACANCY PRO FILE ANALYSIS OF THE PROPERTY PORTFOLIO AN ANALYSIS OF THE PROPERTY PORTFOLIO IN RESPECT OF AS AT 29 FEBRUARY 2019 TENANT PROFILES IS PROVIDED BELOW GLA NUMBER OF TOTAL TENANTS 12 570M2 = 2.88% 436 436 VACANCY 454 (Due to aggressive letting and
Slide 25: Lease Expiry by GLA
5 / PORTFOL IO OV E RVI E W / L EAS E E X P I RY BY G L A / LE AS E E X P IRY P R O FI L E B AS ED O N GL A AS AT 2 9 FEB R UARY 2 0 2 0 Total Total Total Total Total Total Total 4% 1% 24% 12% 13% 18% 28% 100% 90% 80% 70% 60% 50% 40% 30% 20% 19% 10% Average 0% Vacant Monthly Expiries Expiries Expiri
Slide 26: Sustainability Update: Renewable Energy
5 / PORTFOL IO OV E RVI E W / S U S TAI N AB I LIT Y U PDAT E RISK MANAGEMENT Five new sites will begin construction within 4–6 weeks of RENEWABLE ENERGY lockdown lifting, adding another 1 300 kWp of solar to the portfolio Six contracts out of 16 properties have solar under and a further 2 million k
Slide 27: Development & Redevelopment Projects: No. 1 Waterhouse Place
5 / PORTFOL IO OV E RVI E W / D EVE LO P M E NT & REDEVELO PM ENT PROJE CTS ORGANIC PORTFOLIO GROWTH NO. 1 WATERHOUSE PLACE PHYSICAL ADDRESS: NO. 1 WATERHOUSE PLACE, CENTURY CITY GLA REDEVELOPED: 11 236M2 SECTOR: COMMERCIAL REDEVELOPMENT COST: R95M TARGET YIELD: 9% STATUS: TARGET COMPLETION JUNE 202
Slide 28: Development & Redevelopment Projects: Marine Place
5 / PORTFOL IO OV E RVI E W / D EVE LO P M E NT & REDEVELO PM ENT PROJE CTS ORGANIC PORTFOLIO GROWTH MARINE PLACE - PAARDEN ISLAND PHYSICAL ADDRESS: MARINE DRIVE, PAARDEN ISLAND GLA TO BE DEVELOPED: 52 000M2 SECTOR: MIXED USE DEVELOPMENT COST: R1.4BN TARGET YIELD: 10% STATUS: TARGET COMMENCEMENT TBA
Slide 29: Subsequent Events
SUBSEQUENT 6 / EVENTS / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 27
Slide 30: Acquisition: Liberty Life, Century City
6 / SUBSEQUENT EV E NTS / AC Q U I S IT I O N LIBERTY LIFE, CENTURY CITY GLA: 18 244M2 SECTOR: COMMERCIAL ACQUISITION PRICE: R370M ACQUISITION YIELD: 9.3% WALE: 4.3 YEARS ACQUISITION DATE: TBC / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 28
Slide 31: Outlook & Prospects
OUTLOOK & 7 / PROSPECTS / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 29
Slide 32: Outlook & Prospects
7 / OUT LO O K & P RO S P ECTS Spear’s portfolio remains of a high quality, Spear remains well capitalised with sufficient defensive in nature and underpinned by liquidity and headroom facilities circa R200m cash strong lease covenants availability post FY2020 final dividend Maintain high occupancy
Slide 33: Outlook & Prospects: Prospects
7 / OUT LO O K & P RO S P ECTS PRO S P ECTS It is difficult to predict the progression and duration of Covid-19 globally, the residual risks when the lockdowns are lifted, and by extension the economic outcomes of the virus on the real estate sector and on Spear. Spear will not be issuing any FY2021
Slide 34: Outlook & Prospects: Prospects
7 / OUT LO O K & P RO S P ECTS PRO S P ECTS A deep recession is likely, which will result in additional pressure on South African citizens and businesses alike Upward trending vacancy rates will become a reality across the real estate sector in the year ahead with softening asking rentals Our variou
Slide 35: Thank You / Questions?
TH AN K YOU 8 / QUESTIONS? EMAIL QUESTIONS TO [email protected] LIVE Q&A WITH CEO AFTER PRESENTATION / Provisional Summarised Reviewed Consolidated Financial Results / Year ended 29 February 2020 33