Spring Real Estate Investment Trust · HKEX:1426
Spring Real Estate Investment Trust — Proxy Contest (November 2017)
17 slides from Spring Real Estate Investment Trust's proxy contest presentation, November 2017
Slide 1: Briefing to Unitholders on Extraordinary General Meeting
Briefing to Unitholders on Extraordinary General Meeting November 2017
Slide 2: Disclaimer
DISCLAIMER This presentation should be read in conjunction with Spring REIT’s circular to Unitholders dated 25 October 2017 (the “Circular”). This presentation may contain information which is proprietary, confidential and/or legally privileged and has been prepared by Spring Asset Management Limite
Slide 3: Why is there an EGM?
WHY IS THERE AN EGM? ▶ PAG Unitholders sent an EGM Request Letter to the Board with the following Resolutions: 1. The proposed removal of the Manager 2. The internalisation of the REIT management function 3. The appointment of a PAG representative to the board of any manager of Spring REIT and adopt
Slide 4: Structure of EGM Resolutions
STRUCTURE OF EGM RESOLUTIONS Resolution 1 Removal of the Manager Why only propose Resolution 1 and Resolution 2 (Ordinary Resolution) The Manager is accountable to all unitholders. Hence, the structure of the resolutions was determined with carefully consideration by the Board in consultation with t
Slide 5: Spring REIT has a clear and consistent strategy
SPRING REIT HAS A CLEAR AND CONSISTENT STRATEGY What is a REIT? • Hong Kong REITs are highly regulated under the REIT Code • Invest primarily in real estate to provide returns from rental income • At least 90% of distributable income is to be distributed to Unitholders as dividends • Active trading
Slide 6: What does Spring REIT invest in?
WHAT DOES SPRING REIT INVEST IN? A quality real estate portfolio that delivers China Central Place – Tower 1 & Tower 2 (office floors) ►Premium assets: Premium Grade office properties in Beijing ►Prime location: In the heart of Central Business District. ►Quality tenants: Deutsche Bank, Condé Nast,
Slide 7: Spring REIT's strong operating track record
SPRING REIT’S STRONG OPERATING TRACK RECORD TRACK RECORD OF MAINTAINING POSITIVE RENTAL REVERSION HIGH OCCUPANCY RATE Increased net passing rent Outperforming Beijing CBD per sqm RMB274 to office rent index RMB 354 Above 2.1% 94% 7.6% CAGR average occupancy CAGR since IPO 2013 1H2017 2013 1H2017 ac
Slide 8: Effective capital and risk management strategy
EFFECTIVE CAPITAL AND RISK MANAGEMENT STRATEGY Since 2014, changes in macro environment (particularly RMB depreciation and rising USD interest rate) have presented challenges to Spring REIT. To mitigate the potential negative effects from these factors, the Manager has implemented the following stra
Slide 9: Implemented acquisition strategy for long-term growth and portfolio diversification
IMPLEMENTED ACQUISITION STRATEGY FOR LONG-TERM GROWTH AND PORTFOLIO DIVERSIFICATION ▶ The Manager’s acquisition strategy for Spring REIT is to capitalise on accretive acquisition opportunities as and when they arise. To achieve this, it is important to keep Spring REIT competitive with other propert
Slide 10: Diligently providing distributions to unitholders
DILIGENTLY PROVIDING DISTRIBUTIONS TO UNITHOLDERS • REITs are not designed to deliver short term capital gain (through disposal of assets) but to provide long- term stable distributions. • The Manager is of the view that distribution is the most important parameter in assessing a REITs’ performance,
Slide 11: Management structure and fees conform to well-established market standards
MANAGEMENT STRUCTURE AND FEES CONFORM TO WELL-ESTABLISHED MARKET STANDARDS • In Hong Kong, 9 out of the 10 REITs use the external manager structure • Of the externally managed REITs, 8 out of 9 REITs has a similar management fee structure (which is calculated based on the REIT’s asset value and its
Slide 12: Why did 1H 2017 distributable income decline YoY?
WHY DID 1H 2017 DISTRIBUTABLE INCOME DECLINE YOY? Spring REIT’s decline in distribution in 1H 2017 was primarily caused by external factors outside of the Manager’s control, namely (1) change in real estate tax basis in Beijing, (2) RMB depreciation against USD; (3) and increases in USD LIBOR intere
Slide 13: What was done to mitigate effects from external factors?
WHAT WAS DONE TO MITIGATE EFFECTS FROM EXTERNAL FACTORS? Strategic Initiative Plan Results April 2017: Capital management exercise • Stronger balance sheet Partial repayment of to reduce asset-liability • Annual cash interest savings of mismatch by partial loan USD1.2 mil, with a moderate USD loan w
Slide 14: Benchmarking Spring REIT's performance since IPO
BENCHMARKING SPRING REIT’S PERFORMANCE SINCE IPO • Each REIT is unique given different exposure to different property markets, rental cycles, and external macroeconomic factors, etc. • However, under a comprehensive comparison, Spring REIT’s performance is in-line with its peers. Median of other HK
Slide 15: Consequences if Resolution 1 is approved
CONSEQUENCES IF RESOLUTION 1 IS APPROVED Unitholders are advised to carefully consider the following potentially serious and adverse consequences for Spring REIT if the Manager is removed. ▶ Default under Spring REIT’s financing arrangements The removal of Manager would result in a breach and defa
Slide 16: Consequences if Resolution 2 is approved
CONSEQUENCES IF RESOLUTION 2 IS APPROVED ▶ The REIT Code requires the REIT Trustee and Manager to be independent of each other and internalisation may not be in strict compliance with paragraph 4.8 of the REIT Code, and hence, possibly require the SFC to grant a technical waiver from such requiremen
Slide 17: Board's recommendation
BOARD’S RECOMMENDATION The Board considers both Resolution 1 and Resolution 2 to NOT be in the interests of Spring REIT and the Unitholders as a whole, and would strongly recommend the Unitholders to VOTE AGAINST BOTH Resolution 1 & Resolution 2 16
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