Spring Real Estate Investment Trust · HKEX:1426

Spring Real Estate Investment Trust — H1 2016 Earnings Presentation

23 slides from Spring Real Estate Investment Trust's earnings presentation, Aug 24, 2016

  1. Slide 1: Interim Results 2016 Presentation

    Interim Results 2016 Presentation 24 August 2016

  2. 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

  3. Slide 3: Agenda

    Agenda 1 KEY MESSAGES 2 1H 2016 RESULTS 3 INVESTMENT HIGHLIGHTS 4 MARKET OUTLOOK 5 OUTLOOK & STRATEGY 2

  4. Slide 4: Overview of 1H 2016

    OVERVIEW OF 1H 2016 Delivering stable operation  Occupancy stable average at 96%, maintained high rental  24.3% lease executed (GFA terms) with high retention rate.  Superior asset quality and location of China Central Place office towers contributed to stable leasing performance.  Total Distrib

  5. Slide 5: Historical Distributions Since IPO

    HISTORICAL DISTRIBUTIONS SINCE IPO  Stable distribution since IPO in Dec 2013.  Average DPU yield of 7.9% since 2014. Interim DPU Final DPU Annualized Distribution Yield (%, RHS) 40 10 8.8 Ann. Distribution Yield (%) 9 7.8 7.2 8 30 DPU (HK cents) 7 6 20 12.5 12.6 5 4 3 10 2 13.9 14.0 13.0 1 0 0 20

  6. Slide 6: Historical Leasing Performance Since IPO

    HISTORICAL LEASING PERFORMANCE SINCE IPO  Quarterly leasing performance shows a track record of stable operation.  Passing rent and occupancy maintained at high levels. 360 330 100% 300 Monthly Passing Rent (RMB/sqm) 270 80% 240 Occupancy (%) 210 60% 180 150 40% 120 90 60 20% 30 0 0% 1Q 2Q 3Q 4Q 1

  7. Slide 7: Agenda

    Agenda 1 KEY MESSAGES 2 1H 2016 RESULTS 3 INVESTMENT HIGHLIGHTS 4 MARKET OUTLOOK 5 OUTLOOK & STRATEGY 6

  8. Slide 8: 1H 2016 Results Summary

    1H 2016 RESULTS SUMMARY Financial Performance 1H 2016 1H 2015 Change Total Revenue (US$ million) 39.38 40.84 -3.6% Net Property Income (US$ million) 30.48 31.41 -3.0% Net Property Income Margin 77.4% 76.9% +0.5 ppts Total Distributable Income (US$ million) 20.42 20.97 -2.6% Distribution per Unit (HK

  9. Slide 9: 1H 2016 Results Highlights

    1H 2016 RESULTS HIGHLIGHTS - Gross avg monthly passing rent at RMB360/sqm, +1.1% yoy(1) 1. Leasing Performance - Avg monthly occupancy stayed high: 96% - Leases entered into (as % of end-June occupied GFA): 24.3% - Revenue: US$39.38 mn, -3.6% yoy - Net property income (NPI): US$30.48 mn, -3.0% yoy 2

  10. Slide 10: Leasing Performance

    LEASING PERFORMANCE Solid performance despite slower China growth Average Passing Rents Average Occupancy Rates (RMB per sqm per month) (%) 352 355 356 360 96% 96% 96% 96% 95% 95% 96% 90% 288 334 337 338 339 226 201 274 188 215 179 191 2010 2011 2012 2013 2014 2015 1H 1H 2010 2011 2012 2013 2014 201

  11. Slide 11: Financial Performance

    FINANCIAL PERFORMANCE Revenue Net Property Income (US$ million) (US$ million) -3.6% 50 76.9% 77.4% 80.0% 40.84 39.38 40 -3.0% 31.41 70.0% 30.48 30 60.0% 20 50.0% 10 0 40.0% 1H 2015 1H 2016 1H 2015 1H 2016 NPI NPI margin  Overall, revenue reflected stable passing rents and occupancy rates.  Stable

  12. Slide 12: Debt Profile

    DEBT PROFILE Interest Coverage Ratio Cash Interest Expenses (US$ million) 5.00x 8.5 8.13 -1.2% 8.03 3.87x -1.8% 3.80x 8 4.00x 7.5 3.00x 7 2.00x 6.5 6 1.00x 5.5 0.00x 5 1H 2015 1H 2016 1H 2015 1H 2016  USD Term Loan  Cash interest expenses: US$8.03 mn, - Notional Amount: US$480 mn -1.2% yoy, primar

  13. Slide 13: Agenda

    Agenda 1 KEY MESSAGES 2 1H 2016 RESULTS 3 INVESTMENT HIGHLIGHTS 4 MARKET OUTLOOK 5 OUTLOOK & STRATEGY 12

  14. Slide 14: Property Overview

    PROPERTY OVERVIEW Premium Grade Office Buildings in Beijing CBD Premium Assets The Property • Two Premium Grade office buildings (total GFA 120,245 sqm) in China Central Place (“CCP”) (华贸中心) and approximately 600 car parking spaces (the “Property”). • China Central Place is a prime mixed-use complex

  15. Slide 15: Tenant Base

    TENANT BASE Diverse and high quality tenant mix Tenants by Industry Top 5 Tenants % of total Tenants As % of leased office GFA leased GFA (30 June 2016) Deutsche Bank 6.5% Business center EPSON 6.0% and others Education/ Technology media/sports/ Condé Nast 4.9% 25.6% Real estate/ Energy/ retail/ res

  16. Slide 16: Expiring Lease Profile

    EXPIRING LEASE PROFILE  Typical office lease has a term of 3 years.  In 1H2016, 24.3% of leases (GFA terms) became effective with high retention rate  Good progress on negotiations with upcoming expiries. Expiring leases as a % of leased office GFA 31.7% 26.6% 20.7% 21.0% 2H2016 2017 2018 2019 an

  17. Slide 17: Cost Structure

    COST STRUCTURE More than 95% of property expenses are revenue-linked or fixed 1H2016  Withholding tax Property Others management fee – 10% of revenues received from rental operations 4.6% 8.9%  Business tax and other taxes(1) Property – Business tax, urban construction and taxes maintenance tax, a

  18. Slide 18: Agenda

    Agenda 1 KEY MESSAGES 2 1H 2016 RESULTS 3 INVESTMENT HIGHLIGHTS 4 MARKET OUTLOOK 5 OUTLOOK & STRATEGY 17

  19. Slide 19: Comparison of Grade-A Office Markets Across China

    COMPARISON OF GRADE-A OFFICE MARKETS ACROSS CHINA Beijing enjoys the best supply-demand dynamics  AHighest Grade Office GFAoffice occupancy of 95% (‘000 sqm) Occupancy  Low new supply in the next 4 years, only 6.4% p.a. of existing stock (vs avg. 25.1% p.a. of selected cities) GFA (‘000 sqm) 1H16

  20. Slide 20: Current Market Condition

    CURRENT MARKET CONDITION Tight supply & high occupancy in Beijing Grade-A offices Beijing Overall Beijing CBD Beijing Overall – Supply, Absorption, Occupancy Beijing CBD – Supply Absorption, Occupancy (sqm, GFA) (sqm, GFA) 95% 95% 97% 97% 95% 95% 96% 91% 100% 94% 94% 100% 88% 91% 1,500,000 950,000 8

  21. Slide 21: Future Grade-A Office Supply

    FUTURE GRADE-A OFFICE SUPPLY Beijing CBD to see more supply in 2019 Grade-A office supply by year 800,000 New Supply in CBD 700,000 600,000 Financial Street 500,000 426,000 214,000 Lufthansa 400,000 140,423 East Chang'an Road 300,000 200,000 Others* 100,000 Historic supply in all of – Beijing 2010 2

  22. Slide 22: Agenda

    Agenda 1 KEY MESSAGES 2 1H 2016 RESULTS 3 INVESTMENT HIGHLIGHTS 4 MARKET OUTLOOK 5 OUTLOOK & STRATEGY 21

  23. Slide 23: Outlook & Strategic Priorities

    OUTLOOK & STRATEGIC PRIORITIES Outlook mixed in 2016 Strategic Priorities  In China, slowing economic growth may  Focus on core strategy on leasing affect business confidence. management to maintain good rental rates and high occupancy.  But a fast-growing service sector – which expanded 7.5% in

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