Spear Reit Ltd. · JSE:SEA
Spear Reit — FY2022 Earnings Presentation
46 slides from Spear Reit's earnings presentation, May 26, 2022
Slide 1: Provisional Reviewed Condensed Consolidated Financial Results
PROPERTY ~— PEOPLE ~ PLANET Provisional Reviewed Condensed Consolidated Financial Results FOR THE YEAR ENDED 28 FEBRUARY 2022 PRESENTATION: 26 MAY 2022 SPEAR REIT LIMITED
Slide 2: Table of Contents
TABLE OF CONTENTS INTRODUCTION AND 1. ENVIRONMENTAL UPDATE 2. SPEAR FY2022 CORPORATE PERFORMANCE 3. FY2022 SALIENT DETAILS 4. FINANCIAL PERFORMANCE FY2022 5. PORTFOLIO OVERVIEW 6. SECTORAL PERFORMANCE FY2022 DEVELOPMENT PROJECTS AND 7. ACQUISITIONS 8. OUTLOOK 9. GUIDANCE 10. QUESTIONS MWEB Head Offi
Slide 3: Introduction and Environmental Update
01 INTRODUCTION AND ENVIRONMENTAL UPDATE EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA Mega Park, Bellville PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 33
Slide 4: Mission Statement and Strategic Achievements
1. INTRODUCTION AND ENVIRONMENTAL UPDATE 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. STRATEGIC ACHIEVEMENTS — 16.26% GROWTH IN DPS Spear has successfully Income sta
Slide 5: Spear FY2022 Corporate Performance
02 SPEAR FY2022 CORPORATE PERFORMANCE Sable Square Shopping Centre, Milnerton PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 55
Slide 6: Spear Total Return FY2022
2. SPEAR FY2022 CORPORATE PERFORMANCE SPEAR TOTAL RETURN FY2022 244.8m 58.5m Gross number Volume traded of shares during period issued 200 180 83% Share performance based to 100 24% R391m 160 Ratio of volume Rand value traded to shares traded during issued period 140 39% 26% 120 22% OUTPERFORMANCE V
Slide 7: FY2022 Salient Details
03 FY2022 SALIENT DETAILS Liberty Life Building, Century City PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 77
Slide 8: Portfolio Snapshot Assets
3. FY2022 SALIENT DETAILS PORTFOLIO SNAPSHOT 31 ASSETS NUMBER OF PROPERTIES R4.48BN (0.41%) R143M R9 669/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY DECLINE PROPERTY VALUE VALUATION (FY2021) LETTING 6.31% AVG IN-FORCE ESCALATIONS 457 950M2 93.76% 27 MONTHS R98.24/M2/PM GLA OCCUPANCY WALE AVE
Slide 9: Portfolio Snapshot: Distribution
3. FY2022 SALIENT DETAILS PORTFOLIO SNAPSHOT DISTRIBUTION 78.00 35.19 DIPS CENTS 68.25 88% 44.30% 6.86% CENTS FY2022 CENTS FY2022 AVERAGE SA REIT COST-TO- SA REIT ADMIN FINAL DPS DECLARED DPS FY2022 PAYOUT RATIO INCOME RATIO COST-TO-INCOME FOR 6 MONTHS ENDED 28 FEBRUARY 2022 TANGIBLE NET ASSET VALUE
Slide 10: FY2022 YTD Total Collections
3. FY2022 SALIENT DETAILS FY2022 YTD TOTAL COLLECTIONS (AS AT 21 APRIL 2022) R560 396 R554 810 R543 273 98% 96% BUDGET (R’000) BILLED (R’000) COLLECTED (R’000) COLLECTED TO BILLED YTD PER SECTOR 97.92% 96.94% 98% 97% COLLECTED COLLECTED TO TO BILLED BUDGET Year-to-date collections have been in line
Slide 11: Financial Performance FY2022
04 FINANCIAL PERFORMANCE FY2022 Northgate Park, Brooklyn PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 11 11
Slide 12: Consolidated Statement of Comprehensive Income
GROUP 4. FINANCIAL PERFORMANCE FY2022 REVIEWED AUDITED YEAR ENDED YEAR ENDED FEBRUARY 2022 FEBRUARY 2021 R’000 R’000 CONSOLIDATED STATEMENT OF Contractual rental income 413 574 377 846 COMPREHENSIVE INCOME Tenant recoveries 140 754 120 284 Straight-line rental income accrual 20 026 32 238 for the ye
Slide 13: Revenue per Month
4. FINANCIAL PERFORMANCE FY2022 REVENUE PER MONTH R’000 000 4 49 48 1 3 47 46 2 45 44 43 42 41 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 1. Third wave hits SA and rental deferral provided that was rebilled before end of FY2022 2. Accrued final income billed
Slide 14: Reconciliation Between Earnings and Distributable Earnings
4. FINANCIAL PERFORMANCE FY2022 YEAR ENDED RECONCILIATION BETWEEN EARNINGS AND SA REIT FUNDS FROM OPERATIONS (SA REIT FFO) FEBRUARY 2022 DISTRIBUTABLE EARNINGS PER SHARE R’000 Comprehensive income (SOCI) attributable 164 924 for the year ended 28 February 2022 Adjusted for: Accounting/specific adjus
Slide 15: Consolidated Statement of Financial Position
4. FINANCIAL PERFORMANCE FY2022 CONSOLIDATED STATEMENT OF YEAR ENDED Group YEAR ENDED FINANCIAL POSITION FEBRUARY 2022 FEBRUARY 2021 ASSETS R’000 R’000 Non-current assets 4 413 384 4 508 736 As at 28 February 2022 Current assets 117 089 75 151 TOTAL ASSETS 4 530 473 4 583 887 SPEAR REIT LIMITED GROU
Slide 16: TNAV Bridge
4. FINANCIAL PERFORMANCE FY2022 TNAV BRIDGE R0.71 R11.50 R11.30 14 R10.95 R0.04 12 Profit for the year (excl (R0.01) 10 IFRS 2 (R0.54) (R0.35) fair value (R0.34) (R0.06) Expense for adjustment) future CSP Rands 8 Distributions Fair value paid adjustment Private FY2022 Final 6 placement Issue of cash
Slide 17: Funders and Funding Maturity
4. FINANCIAL PERFORMANCE FY2022 FUNDING MATURITY 39.05% 7.32% FUNDERS AVERAGE COST OF LOAN-TO-VALUE Group Debt Profile FUNDING 6BPS 17% FY2025 TOTAL NET Variable DEBT EXPIRY DEBT debt R1.78bn Fixed debt 33% 58% 28-month weighted 67% R1.78bn Cost FY2024 average maturity 25% Cost 8.34% 5.92% FY2026 We
Slide 18: Balance Sheet and Funding Update
4. FINANCIAL PERFORMANCE FY2022 BALANCE SHEET AND FUNDING UPDATE R254M PRIVATE PLACEMENT FEB 2022 Group covenants COVENANTS FEB 2022 R230M LIQUIDITY AVAILABILITY LTV 55% 39.05% R280M DEBT REFINANCED 1.75 2.19 ICR TIMES TIMES R270M DEBT SETTLED LTV and ICR will change to 50% and 2 times, respectively
Slide 19: SA REIT LTV Movement
4. FINANCIAL PERFORMANCE FY2022 BALANCE SHEET AND FUNDING UPDATE SA REIT LTV (movement in bps) FY2022 final DPS Acquisition of payment: Cash 50 27 Junction 0.34% 39.05% 1.85% 45 0.80% 35.89% 40 Industrial 35 investment (0.28%) (3.70%) (0.95%) (1.22%) Percentage 30 25 Disposal of 15 on Disposal of 6
Slide 20: Portfolio Overview
05 PORTFOLIO OVERVIEW Northgate Park, Brooklyn PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 20 20
Slide 21: Top Properties by Value
5. PORTFOLIO OVERVIEW R2.12BN 177 755M2 38.82% TOP 5 PROPERTIES BY VALUE TOTAL VALUE TOTAL GLA PORTFOLIO GLA MEGA PARK 2 LONG STREET SABLE SQUARE LIBERTY LIFE BUILDING NORTHGATE PARK BELLVILLE CAPE TOWN SHOPPING CENTRE CENTURY CITY BROOKLYN MILNERTON VALUE* (R’000) VALUE* (R’000) VALUE* (R’000) VALU
Slide 22: Sectoral Split by Value, Revenue and GLA
5. PORTFOLIO OVERVIEW SECTORAL SPLIT BY VALUE, REVENUE AND GLA Value of properties Property revenue Gross lettable area Number of properties Portfolio occupancy 1% 29% 34% 56% 10 97% 97% 6% R4.48bn 5% 4% R555m 457 950m 2 1 31 93.76% 46% 11% 14 49% 15% 15% 6 87% 95% 29% Retail Commercial Industrial H
Slide 23: Sectoral Split: Commercial
5. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Commercial Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 1% 1% 2% 86% 36% 34% 34% 88% 86% 21% 19% 20% R2.2bn R257 853 132 951m2 87.03% 93% 5% 3% 7% 7% 100% 10% 16% 18% 8% 17% 15% 100% 13% 13% 48% Century City CBD Tyger Valley Brooklyn Par
Slide 24: Sectoral Split: Industrial
5. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Industrial Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 50% R1.27bn 50% 55% R182 576 45% 51% 259 385m2 49% 97% 96.69% 96% Multi-let/Manufacturing Logistics PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDE
Slide 25: Sectoral Split: Retail
5. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Retail Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 20% 19% 40% R0.66bn R85 634 48 951m2 100% 95.34% 96% 60% 80% 81% Convenience retail Destination retail PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR END
Slide 26: Letting Activity for the Period
5. PORTFOLIO OVERVIEW LETTING ACTIVITY FOR THE PERIOD Gross rental at Expiries and Gross rental Average gross Renewals/ renewals/ Average gross Average rental cancellations at expiry expiry rental New lets New lets new rental reversion GLAm² R'000 R/m² GLA R'000 R/m² % Commercial 31 536 4 383 139 27
Slide 27: Tenant and Vacancy Profile
5. PORTFOLIO OVERVIEW TENANT AND VACANCY PROFILE Analysis of the property portfolio in respect of tenant profiles Analysis of the property portfolio as at 28 February 2022 NUMBER OF GLA 457 950M 2 TOTAL VACANCY 28 580M2 = 6.24% TENANTS 429 100M2 OCCUPIED 404 (Due to aggressive letting and successful
Slide 28: Lease Expiry by GLA
5. PORTFOLIO OVERVIEW LEASE EXPIRY BY GLA Lease expiry profile based on GLA as at 28 February 2022 Total Total Total Total Total Total Total 6% 1% 15% 25% 12% 10% 31% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 16% Average 0% Vacant Monthly Expiries Expiries Expiries Expiries Expiries 03/2022 03/2023 0
Slide 29: Valuation Assumptions
5. PORTFOLIO OVERVIEW VALUATION ASSUMPTIONS Industrial Commercial Retail Hospitality Total 2022 Total 2021 Average discount rate (%) 13.56 13.54 13.42 Note 1 & 2 13.50 13.95 Average capitalisation rate (%) 9.00 9.18 8.92 9.03 8.95 Average exit capitalisation rate (%) 9.22 9.50 9.17 9.30 9.25 Average
Slide 30: Sustainability Update: Summary of Solar PV
5. PORTFOLIO OVERVIEW SUSTAINABILITY UPDATE: SUMMARY OF SOLAR PV NUMBER OF AVERAGE SOLAR AVERAGE ANNUAL AVERAGE ANNUAL % OF PORTFOLIO PROPERTIES WITH PENETRATION RATE ROOF RENTAL PER SAVINGS PER SOLAR CURRENT: 45% CURRENT: 22% PROPERTY FINANCED PROPERTY CURRENT: 14 FUTURE: 6% FUTURE: 27% CURRENT: R1
Slide 31: Sectoral Performance FY2022
06 SECTORAL PERFORMANCE FY2022 No.2 Estuaries, Century City PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 31 31
Slide 32: Retail (48 951m2 GLA)
6. SECTORAL PERFORMANCE FY2022 RETAIL (48 951M2 GLA) All retail assets are classified as convenience retail Consistent performance from convenience retail portfolio Retail portfolio occupancy: 95.34% Collections have been 98% versus revenue billed for the period to date Spear provided credits and de
Slide 33: Commercial (132 951m2 GLA)
6. SECTORAL PERFORMANCE FY2022 COMMERCIAL (132 951M2 GLA) All Spear’s commercial assets are located in highly attractive and established office nodes in Cape Town Letting demand notably improved since October 2021 Office portfolio occupancy: 87.03% Collections have been 97% versus revenue billed for
Slide 34: Industrial (259 385m2 GLA)
6. SECTORAL PERFORMANCE FY2022 INDUSTRIAL (259 385M2 GLA) Spear’s industrial portfolio has been resilient during the period, with a number of new lets and relets taking place in a very challenging market Industrial portfolio occupancy: 96.69% (Q3: 97.02%) Collections have been 98% versus revenue bil
Slide 35: Hospitality (16 663m2 GLA)
6. SECTORAL PERFORMANCE FY2022 15 on Orange: Earnings contribution HOSPITALITY (16 663M GLA) 2 DoubleTree by Hilton Hotel, Cape Town Disposed of effective 1 February 2022 176-bps LTV reduction 15 on Orange Hotel, Cape Town As announced on SENS on 18 March 2021, management has concluded a fixed-incom
Slide 36: General Business and Portfolio Update
6. SECTORAL PERFORMANCE YTD FY2022 GENERAL BUSINESS AND PORTFOLIO UPDATE Trading conditions have improved across Spear’s portfolio Ongoing implementation of solar PV rollout and water augmentation initiatives Industrial and Retail portfolios remain resilient Office portfolio leasing momentum has con
Slide 37: Development Projects and Acquisitions
07 DEVELOPMENT PROJECTS AND ACQUISITIONS UCD Terminal, Parow PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 37 37
Slide 38: Organic Value Addition
7. DEVELOPMENT PROJECTS AND ACQUISITIONS ORGANIC VALUE ADDITION NAMPAK WAREHOUSE PHYSICAL ADDRESS: 7 HEWETT AVENUE, EPPING LEASE PERIOD: 10 YEARS GLA DEVELOPED: 2 000M2 AND NEW ROOF ON 12 500M2 SECTOR: INDUSTRIAL REDEVELOPMENT COST: R34M TARGET YIELD: 9.33% STATUS: COMPLETED PROVISIONAL REVIEWED CON
Slide 39: Development Growth
7. DEVELOPMENT PROJECTS AND ACQUISITIONS DEVELOPMENT GROWTH MARINE PLACE PHYSICAL ADDRESS: MARINE DRIVE, PAARDEN EILAND GLA TO BE DEVELOPED: 52 000M2 SECTOR: MIXED USE DEVELOPMENT COST: R1.4BN TARGET YIELD: 10% STATUS: TARGET COMMENCEMENT TBA PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RES
Slide 40: Acquisitive Growth
7. DEVELOPMENT PROJECTS AND ACQUISITIONS ACQUISITIVE GROWTH 27 JUNCTION PHYSICAL ADDRESS: 27 JUNCTION ROAD, PAROW LEASE PERIOD: 10 YEARS PEPKOR GLA: 11 500M2 SECTOR: INDUSTRIAL ACQUISITION YIELD: 9.78% STATUS: TRANSFERRED 9 MAY 2022 PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR
Slide 41: Outlook
08 OUTLOOK MWEB Head Office, N1 City PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 41 41
Slide 42: Outlook
8. OUTLOOK OUTLOOK The Western Cape real estate sector has proved to be more resilient than most The letting momentum in the final six months of FY2022, management is other provinces in South Africa confident that further vacancy contraction within the commercial office portfolio will be evident in
Slide 43: Investment Properties Valuation by Segment with Inorganic Pipeline
8. OUTLOOK Investment properties valuation by segment with execution of inorganic pipeline (Rm) 12 000 10 000 8 000 6 000 4 000 2 000 — FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E FY28E Office Industrial Retail Hospitality Urban Logistics Residential Mixed Use Manhattan Plaza, Tyger Valle
Slide 44: Guidance
09 GUIDANCE 1 Waterhouse Place, Century City PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 44 44
Slide 45: Guidance
9. GUIDANCE ASSETS GUIDANCE CONSISTENT Spear will maintain its Western Cape only focus and consciously seek growth opportunities by acquiring high-quality assets OBSESSIVE TENANTS and developing brown and greenfield opportunities aligned with our sectoral focus and growth strategy FOCUS Maintaining
Slide 46: Thank You / Questions
10. QUESTIONS THANK YOU QUESTIONS? Email questions to info@spearprop.co.za Live Q&A with CEO and CFO after presentation Century City, Cape Town PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS / FOR THE YEAR ENDED 28 FEBRUARY 2022 46 46