Spring Real Estate Investment Trust · HKEX:1426
Spring Real Estate Investment Trust — FY2020 Earnings Presentation
23 slides from Spring Real Estate Investment Trust's earnings presentation, Mar 23, 2021
Slide 1: Final Results 2020 Presentation
Final Results 2020 Presentation 23 March 2021
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 OVERVIEW OF FY 2020 2 FY 2020 RESULTS SUMMARY 3 CCP PROPERTY OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 2 5 OUTLOOK & STRATEGIC PRIORITIES 2
Slide 4: Overview of FY 2020
OVERVIEW OF FY 2020 Performance Review ◼ Revenue and net property income’s performance was encouraging given the tough macro environment, with marginal declines of 2.5% and 2.3% YoY respectively. Our Beijing operation was inevitably affected by the COVID-19 pandemic, continued tension between China
Slide 5: Agenda
AGENDA 1 1 OVERVIEW OF FY 2020 2 FY 2020 RESULTS SUMMARY 3 CCP PROPERTY OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 2 5 OUTLOOK & STRATEGIC PRIORITIES 4
Slide 6: FY 2020 Results Summary
FY 2020 RESULTS SUMMARY ▪ Revenue and NPI both declined YoY as the revenue from our CCP Property was inevitably affected by global events during the year. ▪ Total distributable income improved, mainly due to lower cash interest expense, thanks to a low interest rate environment and also the strength
Slide 7: Financial Performance
FINANCIAL PERFORMANCE ▪ Spring REIT: Overall stable operation despite weakness in the macro environment. Revenue and NPI declined by 2.5% and 2.3% YoY respectively while NPI margin remained stable. ▪ CCP Property: As the main driver of our profit, CCP Property’s revenue and NPI declined by 2.4% and
Slide 8: Debt Profile
DEBT PROFILE ▪ In February 2020, the convertible bonds were fully converted, reducing our total borrowings and gearing ratio. ▪ In 1H 2020, Spring REIT entered into several interest rate swaps, locking 74.4% of floating rate of our US$-denominated loan with an average swap rate of 0.52%. ▪ Cash inte
Slide 9: Agenda
AGENDA 1 1 OVERVIEW OF FY 2020 2 FY 2020 RESULTS SUMMARY 3 CCP PROPERTY OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 2 5 OUTLOOK & STRATEGIC PRIORITIES 8
Slide 10: Leasing Market Condition
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% 100% 750,000 91% 94% 88% 100% 85% 84% 81% 1,200,000 74% 72% 80%
Slide 11: Future Grade-A Office Supply
FUTURE GRADE-A OFFICE SUPPLY Of the 821,400 sqm GFA of new supply in 2021 and 2022: ▪ 26% of the GFA will be located in the CBD area ▪ Of which, 79% of the GFA is held of self-use or pre-committed Grade-A office supply by year (sqm, GFA) 1,000,000 900,000 800,000 210,000 700,000 New Supply in CBD 60
Slide 12: Comparison of Grade-A Office Markets Across China
COMPARISON OF GRADE-A OFFICE MARKETS ACROSS CHINA ▪ Beijing and Guangzhou have highest office occupancy of above 85%. ▪ Low new supply in the next 4 years, only 1.3% p.a. of existing stock (vs avg. 10.4% p.a. of other selected cities) Office GFA 2H 2020 Stock New Supply 2021 - 2024 2H20 Occupancy ra
Slide 13: CCP Property Operations Summary
CCP PROPERTY OPERATIONS SUMMARY ▪ Rental income at CCP Property declined by 1.9% YoY. ▪ Property operating expenses declined by 2.9% which was roughly in line with the decrease in revenue. ▪ Cost structure remained stable, with NPI margin at 72.6% (FY 2019: 72.5%) FY 2020 FY 2019 Change (in RMB mill
Slide 14: Leasing Performance
LEASING PERFORMANCE ▪ Slight decline in both passing rents and occupancy rates amid pressure from both demand and supply sides. Average Passing Rents Average Occupancy Rates (RMB per sqm per month) (%) 96% 95% 94% 94% 96% 93% 92% 94% 93% 90% 362 362 361 362 363 360 357 343 337 334 2014 2015 2016 201
Slide 15: Tenant Base
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 December 2020) Epson 6.2% Zhong De Securities 4.4% Deutsche Bank 4.4% 23.8% Xinyuan 4.4% Condé Nast 4.4% Note: as of 31 December 2020 Other industry-lea
Slide 16: Expiring Lease Profile
EXPIRING LEASE PROFILE ▪ Average lease expiry of existing leases (in GFA terms) as of 31 December 2020 was 610 days. ▪ Lease expiries in 2020 – about 18% and 12% in the first and second half of 2021, with an average expiring rental rate of RMB355 per sqm and RMB374 per sqm respectively 371 362 355 3
Slide 17: Cost Structure of CCP Property
COST STRUCTURE OF CCP PROPERTY Most property expenses are revenue-linked or fixed FY 2020 ◼ Property taxes Other taxes – Includes real estate tax and land use tax Others – Starting from 2H 2016, real estate tax calculated 4% based on 12% of revenue for leased area, and 1.2% of Property management fe
Slide 18: ESG Initiatives
ESG INITIATIVES ◼ In 2020, the CCP Property was awarded LEED Platinum Certification under the LEED for Existing Buildings: Operations and Maintenance category, recognising our efforts to responsibly manage significant impacts of our buildings on the environment and natural resources. ◼ To better ass
Slide 19: Agenda
AGENDA 1 1 OVERVIEW OF FY 2020 2 FY 2020 RESULTS SUMMARY 3 CCP PROPERTY OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 2 5 OUTLOOK & STRATEGIC PRIORITIES 18
Slide 20: Location of the properties
Location of the properties 19
Slide 21: UK Portfolio Operation Summary
UK PORTFOLIO OPERATION SUMMARY Long-term, quality cash flow backed by guarantee, with upward-only revisions Portfolio Highlights 1. The portfolio: 84 separate commercial properties in the UK, with a total gross internal area of approx. 505,381 sq.ft. 2. Purchase price: £73,500,000, funded by debt (a
Slide 22: Agenda
AGENDA 1 1 OVERVIEW OF FY 2020 2 FY 2020 RESULTS SUMMARY 3 CCP PROPERTY OPERATION REVIEW 4 UK PORTFOLIO OPERATION REVIEW 2 5 OUTLOOK & STRATEGIC PRIORITIES 21
Slide 23: Outlook & Strategic Priorities
OUTLOOK & STRATEGIC PRIORITIES ▪ For our CCP Property, most of the major leases due to expire in the first half of 2021 have been secured for renewal. It will take time for the Beijing market to absorb the new office supply, which in the near team is expected to weigh on the rental levels and occupa
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