Spear Reit Ltd. · JSE:SEA
Spear Reit — H1 FY2021 Earnings Presentation
42 slides from Spear Reit's earnings presentation, Oct 30, 2020
Slide 1: Unaudited Consolidated Interim Results
UN AUDITED CONSOLIDATED INTERI M RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2020 PRESENTATION / 30 OCTOBER 2020 Liberty Life, Century City Liberty Life, Century City
Slide 2: Table of Contents
TABLE OF CONTENTS I NT RO D U CTIO N AN D 1. E N V I R O N ME NTAL U P DAT E 2. I M PACT O F COV ID - 1 9 3. I NT E R IM S AL IE NT D E TAI LS FY2 0 2 1 I NT E R IM F IN AN CI AL 4. P E RFO R M AN CE FY 2 0 2 1 5. P O RT FO L IO OV E RV IE W 6. S E CTO R AL P E R FO R M AN C E D E V E LO P M E NT AN
Slide 3: Introduction and Environmental Overview
INTRODUCTION AND 1 / ENVIRONMENTAL OVERVIEW EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA 78 on Edward, Bellville / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 3
Slide 4: Mission Statement and Strategy
1 / INTRODUCTION AND ENVIRONMENTAL UPDATE / MISSION STATEMENT AND STRATEGY S TRATEGY S T R AT EG Y AC H I EV ED Successfully adapted to Covid-19 operating environment Capital preservation and liquidity management Maintained income statement consistency and strong rental collections to date Excellent
Slide 5: Impact of Covid-19
2 / IMPACT OF COVID-19 Upper East Side, Woodstock / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 5
Slide 6: Lockdown Operating Percentages – Revenue Based on Rentable Area
2 / IMPACT OF COVID-19 / LOCKDOWN OPERATING PERCENTAGES – REVENUE BASED ON RENTABLE AREA LOC K D O W N O P E R AT I N G P E R C E NTAG E S – R EVEN UE B AS E D O N R E NTAB L E AR E A The percentages below illustrate the monthly revenue contributed to the group under the various lockdown levels: May
Slide 7: FY2021 Operating Scenarios – Current
2 / IMPACT OF COVID-19 / FY2021 OPERATING SCEN ARIOS – CURRENT FY2021 OP ER AT I NG SCE N AR I O S STATUS Q U O Funders remain aligned with Spear strategies Challenging trading conditions persist Spear sufficiently capitalised to meet short- and long-term ±86% of total budget collected set in Decemb
Slide 8: Interim Salient Details FY2021
INTERIM SALIENT DE TAILS 3 / FY2021 Northgate Park, Brooklyn / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 8
Slide 9: Portfolio Snapshot: Assets and Letting
3 / INTERIM SALIENT DE TAILS FY2021 / PORTFOLIO SN APSHOT 32 ASSE TS NUMBER OF PROPERTIES R4.46BN 6.54% R138M R9 753/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY GROWTH PROPERTY VALUE VALUATION (FY2020) 7.25% LE T TING AVERAGE IN-FORCE 453 016M2 91.2% 28 MONTHS R89.33/M2/PM ESCALATIONS GLA OC
Slide 10: Portfolio Snapshot: Distribution, TNAV and Debt
3 / INTERIM SALIENT DE TAILS FY2021 / PORTFOLIO SN APSHOT 29.34 D I STRI B U TI ON CENTS FY2021 80% 39.14% 5.65% INTERIM PAY-OUT RATIO SA REIT SA REIT ADMIN DISTRIBUTION COST-TO-INCOME COST-TO-INCOME RATIO RATIO TANGI B L E NE T ASSE T VALUE (TN AV ) R11.75 0.98% -3.45% R11.46 TNAV INCREASE TNAV DEC
Slide 11: Collections (as at 15 October 2020)
3 / INTERIM SALIENT DE TAILS FY2021 / COLLECTIONS (AS AT 15 OCTOBER 2020) ear-to-date collections under the circumstances have been satisfactory and in line with Y enant arrears as at the end of the interim period amounted to R13.5 million, decreasing T management’s high road scenario plan from R16.
Slide 12: Exclusions, Credits and Deferrals; Collections vs. Billed
3 / INTERIM SALIENT DE TAILS FY2021 / EXCLUSIONS, CREDITS AND DEFERRALS (EXCLUDING UTILITIES) (AS AT 15 OCTOBER 2020) Spear has 442 tenants with 196 tenants provided with Covid-19-related relief. Interim 96.90% August 2020 % of YTD budget Classification (R‘000) (rentable area only) COLLECTIONS Hospi
Slide 13: Interim Financial Performance FY2021
INTERIM FIN ANCI AL 4 / PERFORM ANCE FY2021 Liberty Life, Century City / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 13
Slide 14: Consolidated Statement of Comprehensive Income
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / SUMM ARY INCOME STATEMENT Group Unaudited Unaudited Audited Six months ended Six months ended Year ended CONSOLIDATED STATEMENT OF August 2020 R’000 August 2019 R’000 February 2020 R’000 COMPREHENSIVE INCOME Property revenue 253 985 250 566 519 710 Other
Slide 15: Distribution Reconciliation
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / DISTRIBUTION RECONCILI ATION Year ended August 2020 SA REIT funds from operations (SA REIT FFO) per share R’000 Profit or loss per IFRS Statement of Comprehensive Income (SOCI) RECONCILIATION BETWEEN EARNINGS AND attributable to the parent (1 203) DISTRI
Slide 16: Consolidated Statement of Financial Position
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / SUMM ARY BAL ANCE SHEE T Group CONSOLIDATED STATEMENT OF Unaudited Unaudited Audited FINANCIAL POSITION Six months ended August 2020 Six months ended August 2019 Year ended February 2020 ASSETS R’000 R’000 R’000 AS AT 31 AUGUST 2020 Non-current assets 4
Slide 17: TNAV Bridge
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / TN AV BRIDGE R12.17 R0.40 R11.75 R0.05 R0.03 14 R11.46 12 Profit for (R0.47) Prior period IFRS 2 R0.02) the year (R0.41) treasury expense (R0.29) 10 (excluding correction fair value adjustments) Distributions Treasury 8 Fair value shares Rands paid adjus
Slide 18: Funding
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / FUNDING 7.56% 45.36% FUNDERS AVERAGE COST OF FUNDING MATURITY FUNDING LTV 119BPS 69.9% FY2024 TOTAL GROSS DEBT Cost 40% R828m 30.1% R2.09BN 8.72% Months 22 DEBT EXPIRY Cost FY2023 5.67% 14% R2.09BN Fixed debt R297m Months R1.46bn 25 FY2025 Variable debt
Slide 19: LTV Sensitivity and Reduction Roadmap
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / LT V SENSITIVIT Y AND REDUCTION ROADM AP LTV FORECAST TO YEAR-END NOT ES 1 Disposal agreed at R30 million net. Long form agreement signed and awaiting completion of conditions precedent 50 2 Offer received of R280 million gross for AUG 15 on Orange hotel
Slide 20: Disposals
4 / INTERIM FIN ANCI AL PERFORM ANCE FY2021 / DISPOSALS In line with management’s less-is-more strategy to focus on assets valued WHY OU R R OADM AP I S SO U N D : at R100 million and above the following non-core asset disposal updates are listed below: Value Net Yield Timeframe:18-24 months Propert
Slide 21: Portfolio Overview
PORTFOLIO 5 / OVERVIEW 100 Fairway Close, Parow / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 21
Slide 22: Top Properties by Value
5 / PORTFOLIO OVERVIEW / R2.03BN 177 749M2 46% TOP 5 PROPERTIES BY VALUE PORTFOLIO TOTAL VALUE TOTAL GLA GLA MEGA PARK SABLE SQUARE 2 LONG STREET LIBERTY LIFE NORTHGATE PARK BELVILLE CENTURY CITY CAPE TOWN CENTURY CITY BROOKLYN VALUE (R’000) VALUE (R’000) VALUE (R’000) VALUE (R’000) VALUE (R’000) 43
Slide 23: Sectoral Split by Value, Revenue and GLA
5 / PORTFOLIO OVERVIEW / SECTORAL SPLIT BY VALUE, REVENUE & GL A / INTERIM PERIOD R449m R39m R6m 27 606m2 (1%) (2%) (6%) (10%) R40m 44 967m2 R1.14bn (16%) (10%) R658m (26%) R82m TOTAL (15%) TOTAL REVENUE (34%) VALUE OF PROPERTY SPLIT PROPERTIES BY SECTOR 243 158m2 BY GLA (EXCL. LEASE SMOOTHING) (54%
Slide 24: Letting Activity
5 / PORTFOLIO OVERVIEW / LE T TING ACTIVIT Y T HE TABL E BE LO W REFL ECTS T HE L E T T I NG ACTI V IT Y FOR THE I NTER I M PER I OD: Gross rental Expiries and Gross rental Average gross Renewals/ at renewals/ Average gross Average rental cancellations at expiry expiry rental new lets new lets new r
Slide 25: Tenant and Vacancy Profile
5 / PORTFOLIO OVERVIEW / TEN ANT AND VACANCY PROFILE ANALYSIS OF THE PROPERTY PORTFOLIO AN ANALYSIS OF THE PROPERTY PORTFOLIO IN RESPECT OF AS AT 31 AUGUST 2020 TENANT PROFILES IS PROVIDED BELOW TOTAL GLA NUMBER OF TENANTS VACANCY 39 920M2 = 8.81% 453 016 442 (Due to aggressive letting and successfu
Slide 26: Lease Expiry by GLA
5 / PORTFOLIO OVERVIEW / LEASE EXPIRY BY GL A / L EAS E EX P I RY P R O FI L E B AS ED O N GL A AS AT 3 1 AU GU S T 2020 Total Total Total Total Total Total Total 9% 2% 16% 15% 18% 10% 30% 100% 90% 80% 70% 60% 50% 40% 30% 20% 18% 10% Average 0% Vacant Monthly Expiries Expiries Expiries Expiries Expi
Slide 27: Valuations
5 / PORTFOLIO OVERVIEW / VALUATIONS Development Industrial Commercial Retail Hospitality land Total Average value per property (excluding land) (R’000) 114 100 155 000 109 739 224 472 – 138 074 Average value per square metre (R) 4 692 15 806 14 643 16 263 – 9 753 Average discount rate (%) 14.15 14.0
Slide 28: Sustainability Update: Renewable Energy
5 / PORTFOLIO OVERVIEW / SUSTAIN ABILIT Y UPDATE RISK MANAGEMENT Seven new sites will begin construction RENEWABLE ENERGY within 4–6 weeks of lockdown lifting, adding another 1 300 kWp of solar to Six contracts out of 16 properties have solar under the portfolio and a further 2 million kWh. construc
Slide 29: Sectoral Performance
6 / SECTORAL PERFORM ANCE 15 on Orange, Cape Town / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 29
Slide 30: Retail
6 / SECTORAL PERFORM ANCE RE TAIL RE TAIL (44 967M 2 GL A) All retail assets are classified as convenience retail Retail portfolio occupancy: 91.65% Collections have been 88.32% versus revenue billed for the period to date Spear provided credits and deferments to retail tenants to the following valu
Slide 31: Commercial
6 / SECTORAL PERFORM ANCE COMMERCI AL COMMERCI AL (137 285M 2 GL A) All Spear’s commercial assets are located in highly attractive and established office nodes in Cape Town Office portfolio occupancy: 91.07% Collections have been 95.70% versus revenue billed for the period to date Spear provided cre
Slide 32: Industrial
6 / SECTORAL PERFORM ANCE INDUSTRI AL INDUSTRI AL (243 158M 2 GL A) Spear’s industrial portfolio has been exceptionally resilient during the interim period with a number of new lets and relets taking place in a very challenging market Industrial portfolio occupancy: 90.26%* (6.65% of vacancy relates
Slide 33: Hospitality
6 / SECTORAL PERFORM ANCE HOSPITALIT Y HOSPITALIT Y (27 606M 2 GL A) Sector hardest hit by the impact of Covid-19 15 O N O R AN G E HOT E L , C AP E TO WN Management has eliminated hospitality income from its FY2021 forecasts FY2020 hospitality comprised ±7% of group revenue 15 on Orange Hotel under
Slide 34: General Business Continuity Risks (All Sectors)
6 / SECTORAL PERFORM ANCE ALL SE CTORS GEN ER AL B U SINE SS CONTINUIT Y RISKS (ALL SECTORS) Tenant cost of occupancy continues (local authority charges) to rise well ahead of inflation Any new government restrictions that may limit tenant operations Major market or tenant failures Civil disobedienc
Slide 35: Development and Redevelopment Projects
DEVELOPMENT AND 7 / REDEVELOPMENT PROJECTS Sable Square, Century City / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 35
Slide 36: 1 Beacon Way
7 / DEVELOPMENT AND REDEVELOPMENT PROJECTS ORGANIC VALUE ADDITION 1 BEACON WAY PHYSICAL ADDRESS: 1 BEACON WAY, BELLVILLE LEASE PERIOD: 10 YEARS TENANT: NOVAMARINE (STURROCK GRINDROD) GLA REDEVELOPED: 16 170m2 SECTOR: INDUSTRIAL REDEVELOPMENT COST: R44.4M TARGET YIELD: 9.04% STATUS: TARGET COMPLETION
Slide 37: Nampak Warehouse
7 / DEVELOPMENT AND REDEVELOPMENT PROJECTS 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: TARGET COMPLETION DECEMBER 2021
Slide 38: Marine Place
7 / DEVELOPMENT AND REDEVELOPMENT PROJECTS ORGANIC VALUE GROW TH MARINE PLACE 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 / Unaudited Consolidated Interim Results / for the s
Slide 39: Outlook and Prospects
8 / OUTLOOK AND PROSPECTS 2 Long Street, Cape Town / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 39
Slide 40: Outlook
8 / OUTLOOK AND PROSPECTS OUTLOOK Macroeconomic conditions will remain very difficult to navigate Management will remain client-centric and focused on sustainable cash flows as lease renewals and filling of The recessionary environment may possibly impact income and growth vacant space remain priori
Slide 41: Prospects and Guidance
8 / OUTLOOK AND PROSPECTS PROSPECTS MANAGEMENT WISHES TO PROVIDE GUIDANCE AS FOLLOWS: P ROS P E CTS Remain in full compliance with all qualifying Regular cash flow analysis to stress test the cash AN D G U I DAN CE requirements to remain a JSE-listed REIT and will continue to be a distribution payin
Slide 42: Thank You
TH AN K YOU QU E STIONS? EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA LIVE Q&A WITH CEO AFTER PRESENTATION 2 Long Street, Cape Town / Unaudited Consolidated Interim Results / for the six months ended 31 August 2020 / 42