Spear Reit Ltd. · JSE:SEA
Spear Reit — H1 2023 Earnings Presentation
41 slides from Spear Reit's earnings presentation, Oct 21, 2022
Slide 1: Unaudited Consolidated Interim Results for the six months ended 31 August 2022
PROPERTY ~— PEOPLE ~ PLANET Unaudited Consolidated Interim Results FOR THE SIX MONTHS ENDED 31 AUGUST 2022 PRESENTATION: 21 OCTOBER 2022 SPEAR REIT LIMITED
Slide 2: Table of Contents
TABLE OF CONTENTS INTRODUCTION AND 1. ENVIRONMENTAL UPDATE 2. HY2023 SALIENT DETAILS 3. FINANCIAL PERFORMANCE HY2023 4. PORTFOLIO OVERVIEW 5. SECTORAL PERFORMANCE HY2023 DEVELOPMENT PROJECTS AND 6. ACQUISITIONS 7. OUTLOOK 8. GUIDANCE 9. QUESTIONS MWEB Head Office, Bellville UNAUDITED CONSOLIDATED IN
Slide 3: Introduction and Environmental Update
01 INTRODUCTION AND ENVIRONMENTAL UPDATE EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA Mega Park, Bellville UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 33
Slide 4: The Western Cape Eco-System: Underpinning the Spear Investment Case
1. INTRODUCTION AND ENVIRONMENTAL UPDATE THE WESTERN CAPE ECO-SYSTEM: UNDERPINNING THE SPEAR INVESTMENT CASE June 2021 – Moody’s revised June 2022 – Ratings Afrika’s City of Cape Town has a City of Cape Town is the The Western Cape economy is 90% of the 30 municipalities City of Cape Town’s rating t
Slide 5: Mission Statement and HY2023 Operating Environment
1. INTRODUCTION AND ENVIRONMENTAL UPDATE MISSION STATEMENT To be the leading Western Cape-focused REIT and to consistently grow distribution per share ahead of inflation and within the top quartile of our peer group. HY2023 OPERATING ENVIRONMENT – DIPS GROWTH OF 6.09% AND DPS GROWTH OF 12.33% Wester
Slide 6: HY2023 Salient Details
02 HY2023 SALIENT DETAILS Liberty Life Building, Century City UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 66
Slide 7: Portfolio Snapshot: Assets
2. HY2023 SALIENT DETAILS PORTFOLIO SNAPSHOT 30 ASSETS NUMBER OF PROPERTIES R4.48BN 0.12% R148M R10 003/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY INCREASE PROPERTY VALUE VALUATION (FY2022) LETTING 6.34% AVG IN-FORCE ESCALATIONS 443 155M2 93.53% 27 MONTHS R101.64/M2/PM GLA OCCUPANCY WALE AV
Slide 8: Portfolio Snapshot: Distribution, TNAV and Debt
2. HY2023 SALIENT DETAILS PORTFOLIO SNAPSHOT DISTRIBUTION 41.26 DIPS CENTS 37.14 90% 43.71% 6.61% 6.09% HY2023 CENTS HY2023 PAYOUT SA REIT COST-TO- SA REIT ADMIN DIPS GROWTH DPS HY2023 RATIO INCOME RATIO COST-TO-INCOME HY2023 TANGIBLE NET ASSET VALUE (TNAV) R11.36 TNAV 0.53% R10.99 TNAV INCREASE TNA
Slide 9: HY2023 YTD Total Collections
2. HY2023 SALIENT DETAILS HY2023 YTD TOTAL COLLECTIONS (AS AT 10 OCTOBER 2022) 95% R289 906 R282 825 97.56% 96% COLLECTED 98% TO BILLED YTD BILLED (R’000) COLLECTED (R’000) COLLECTED TO PER SECTOR BILLED Collections included billings for August 2022 96% Year-to-date collections have been in line wit
Slide 10: Financial Performance HY2023
03 FINANCIAL PERFORMANCE HY2023 Northgate Park, Brooklyn UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 10 10
Slide 11: Consolidated Statement of Comprehensive Income
3. FINANCIAL PERFORMANCE HY2023 GROUP UNAUDITED UNAUDITED SIX MONTHS ENDED SIX MONTHS ENDED CONSOLIDATED STATEMENT OF AUGUST 2022 R’000 AUGUST 2021 R’000 COMPREHENSIVE INCOME Contractual rental income 214 974 204 343 Tenant recoveries 73 914 66 221 For the six months ended 31 August 2022 Straight-li
Slide 12: Reconciliation Between Earnings and Distributable Earnings
3. FINANCIAL PERFORMANCE HY2023 SA REIT FUNDS FROM OPERATIONS (SA REIT FFO) AUGUST 2022 AUGUST 2021 PER SHARE R’000 R’000 RECONCILIATION BETWEEN EARNINGS AND Profit or loss per IFRS Statement of Comprehensive Income DISTRIBUTABLE EARNINGS attributable to the parent Adjusted for: 98 503 69 801 Accoun
Slide 13: Consolidated Statement of Financial Position
3. FINANCIAL PERFORMANCE HY2023 Group CONSOLIDATED STATEMENT OF UNAUDITED SIX MONTHS ENDED AUDITED YEAR ENDED FINANCIAL POSITION AUGUST 2022 R’000 FEBRUARY 2022 R’000 ASSETS As at 31 August 2022 Non-current assets 4 404 638 4 413 384 Current assets 136 225 117 089 TOTAL ASSETS 4 540 863 4 530 473 SP
Slide 14: TNAV Bridge
3. FINANCIAL PERFORMANCE HY2023 TNAV BRIDGE R11.36 14 R11.30 R0.41 R10.99 R0.02 R0.02 R0.02 12 Profit for the Fair value Acquisition IFRS 2 (R0.37) (R0.35) (R0.05) 10 year (excl adjustment of Treasury Expense for fair value and shares future CSP adjustment) impairments Rands 8 FY2022 final Issue of
Slide 15: Funders
3. FINANCIAL PERFORMANCE HY2023 38.69% 7.79% FUNDERS AVERAGE FUNDING MATURITY COST OF LOAN-TO-VALUE FUNDING Group debt profile 47BPS 25% FY2025 TOTAL NET Variable DEBT EXPIRY DEBT debt R1.77bn Fixed debt 32% 56% 21-month weighted 68% R1.77bn Cost FY2024 average maturity 19% Cost 8.34% 7% FY2026 Weig
Slide 16: Balance Sheet and Funding Update
3. FINANCIAL PERFORMANCE HY2023 BALANCE SHEET AND FUNDING UPDATE Group covenants COVENANTS HY2023 R250M LIQUIDITY AVAILABILITY LTV 50% 38.69% R610M DEBT REFINANCE NEGOTIATIONS UNDERWAY 2.00 2.54 ICR TIMES TIMES R50M DEBT SETTLED Blackheath DC, Blackheath UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR
Slide 17: Balance Sheet and Funding Update: SA REIT LTV Forecast
3. FINANCIAL PERFORMANCE HY2023 BALANCE SHEET AND FUNDING UPDATE SA REIT LTV FORECAST GAT Phase 1 GAT Phase 2 HY2023 The Island bulk bulk Blackheath interim DPS acquisition infrastructure infrastructure redevelopment 50 40.73% 0.10% 0.26% 2.50% 38.69% 1.94% 1.40% 45 40 (2.98%) 35 (1.18%) Percentage
Slide 18: Portfolio Overview
04 PORTFOLIO OVERVIEW Northgate Park, Brooklyn UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 18 18
Slide 19: Top Properties by Value
4. PORTFOLIO OVERVIEW R2.13BN 177 824M2 40.13% 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 20: Sectoral Split by Value, Revenue and GLA
4. PORTFOLIO OVERVIEW SECTORAL SPLIT BY VALUE, REVENUE AND GLA Value of properties Property revenue Gross lettable area Number of properties Portfolio occupancy 1% 15% 11% 16% 6 4% 95% 84% 29% 6% 1 13 R4.48bn 49% R290m 443 155m2 30 47% 94% 29% 97% 98% 32% 10 56% 6% Industrial Commercial Retail Hospi
Slide 21: Sectoral Split by Sector: Commercial
4. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Commercial Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 36% 35% 35% 88% 84% 5% 3% 7% 51% 7% R2.19bn 10% R134 958 130 494m2 84% 9% 85% 21% 21% 19% 15% 13% 100% 13% 16% 18% 17% 81% Century City CBD Tyger Valley Brooklyn Parow Woodstock UNA
Slide 22: Sectoral Split by Sector: Industrial
4. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Industrial Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 100% 50% R1.29bn 50% 55% R91 288 45% 48% 247 047m2 52% 98% 96% Manufacturing Logistics UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 22 22
Slide 23: Sectoral Split by Sector: Retail
4. PORTFOLIO OVERVIEW SECTORAL SPLIT BY SECTOR Retail Value Revenue (R'000) Gross lettable area (m2) Occupancy (%) 20% 18% 95% 40% R0.68bn R45 408 48 951m2 95% 60% 80% 95% 82% Convenience retail Destination retail UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 23
Slide 24: Letting Activity
4. PORTFOLIO OVERVIEW LETTING ACTIVITY The table below reflects the letting activity for the period ended 31 August 2022: 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 revers
Slide 25: Vacancy Profile and Subsequent Net Letting Activity
4. PORTFOLIO OVERVIEW VACANCY PROFILE SUBSEQUENT NET LETTING ACTIVITY POST HY2023 Analysis of the property portfolio as at 31 August 2022 GLA of leases concluded post interim period (m2) TOTAL POST INTERIM PERIOD NET LETTING HAS BEEN CONCLUDED TO VACANCY 28 685M2 = 6.47% REDUCE VACANCY TO 6.01% (Due
Slide 26: Lease Expiry by GLA
4. PORTFOLIO OVERVIEW LEASE EXPIRY BY GLA Lease expiry profile based on GLA as at 31 August 2022 Total Total Total Total Total Total Total 7% 1% 25% 18% 12% 5% 32% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 14% Average 0% Vacant Monthly Expiries Expiries Expiries Expiries Expiries 09/2022 09/2023 09/2
Slide 27: Valuation Assumptions
4. PORTFOLIO OVERVIEW VALUATION ASSUMPTIONS Industrial Commercial Retail Hospitality Total HY2023 Total 2022 Average discount rate (%) 13.05 13.17 12.88 Note 1 13.03 13.5 Average capitalisation rate (%) 9.05 9.17 8.88 9.03 9.03 Average exit capitalisation rate (%) 9.55 9.67 9.38 9.53 9.30 Average pr
Slide 28: Sustainability Update: Summary of Solar PV
4. PORTFOLIO OVERVIEW SUSTAINABILITY UPDATE: SUMMARY OF SOLAR PV kWh (`000) Production vs Target NUMBER OF AVERAGE SOLAR % OF PORTFOLIO PROPERTIES WITH PENETRATION RATE 8 000 SOLAR 6 054 5 376 CURRENT: 50% CURRENT: 22% 5 485 FUTURE: 3% 7 000 4 873 CURRENT: 15 FUTURE: 27% FUTURE: 1 TOTAL: 53% Forecas
Slide 29: Sectoral Performance HY2023
05 SECTORAL PERFORMANCE HY2023 No.2 Estuaries, Century City UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 29 29
Slide 30: Operating Environment Recovering Amid Macro Challenges
5. SECTORAL PERFORMANCE HY2023 OPERATING ENVIRONMENT RECOVERING AMID MACRO CHALLENGES RETAIL (48 951M2 GLA) COMMERCIAL (130 494M2 GLA) INDUSTRIAL (247 047M2 GLA) Trading has been consistent with positive tenant Letting activity yielding positive results across Robust performance, well located and ve
Slide 31: Hospitality, General Business and Portfolio Update
5. SECTORAL PERFORMANCE HY2023 HOSPITALITY (16 663M2 GLA) GENERAL BUSINESS AND PORTFOLIO UPDATE 15 on Orange delivering 100% fixed net income to Spear Operating environment is improving but remains challenging Hotel operator continues to invest own capital in further property Industrial and Retail p
Slide 32: Development Projects and Acquisitions
06 DEVELOPMENT PROJECTS AND ACQUISITIONS UCD Terminal, Parow UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 32 32
Slide 33: Organic Value Addition: Bravo Park
6. DEVELOPMENT PROJECTS AND ACQUISITIONS ORGANIC VALUE ADDITION BRAVO PARK 50% REDEVELOPMENT PHYSICAL ADDRESS: RANGE ROAD, BLACKHEATH LEASE PERIOD: 10 YEARS GLA DEVELOPED: 16 000M2 SECTOR: INDUSTRIAL REDEVELOPMENT COST: R74M YIELD: 9.81% STATUS: REDEVELOPMENT COMMENCEMENT UNAUDITED CONSOLIDATED INTE
Slide 34: Acquisitive Growth: The Island
6. DEVELOPMENT PROJECTS AND ACQUISITIONS ACQUISITIVE GROWTH THE ISLAND PHYSICAL ADDRESS: PAARDEN EILAND WALE: 29 MONTHS GLA: 21 774M2 SECTOR: INDUSTRIAL/URBAN LOGISTICS ACQUISITION COST: R185M INITIAL YIELD: 9.75% ANTICIPATED TRANSFER: FEBRUARY 2023 UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE S
Slide 35: Development Growth: George Aerotropolis
6. DEVELOPMENT PROJECTS AND ACQUISITIONS DEVELOPMENT GROWTH GEORGE AEROTROPOLIS PHYSICAL ADDRESS: R404 AIRPORT ROAD, GEORGE LEASE PERIOD: VARIOUS GLA DEVELOPED: ± 35 000M2 SECTOR: INDUSTRIAL — WAREHOUSING, COLD STORAGE AND URBAN LOGISTICS DEVELOPMENT COST: R300M (EXCL. LAND) TARGET YIELD: 9% STATUS:
Slide 36: Development Growth: Marine Place
6. 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: 9.25% STATUS: TARGET COMMENCEMENT TBA UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MO
Slide 37: Outlook
07 OUTLOOK MWEB Head Office, N1 City UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 37 37
Slide 38: Outlook
7. OUTLOOK OUTLOOK The Western Cape real estate sector has shown consistent resilience Management remains committed to further grow NAV for across property types YTD shareholders through the development and redevelopment of embedded portfolio bulk rights Good governance across provincial and metropo
Slide 39: Guidance
08 GUIDANCE 1 Waterhouse Place, Century City UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 39 39
Slide 40: Guidance
8. GUIDANCE ASSETS GUIDANCE Maintain Western Cape focus in line with strategy, recycle capital into strategy-aligned assets, seeking out CONSISTENT income-enhancement opportunities through investment into high-quality real estate assets OBSESSIVE TENANTS FOCUS Proximity to portfolio assets remains a
Slide 41: Thank You
9. QUESTIONS THANK YOU QUESTIONS? Email questions to info@spearprop.co.za Live Q&A with CEO and CFO after presentation Century City, Cape Town UNAUDITED CONSOLIDATED INTERIM RESULTS / FOR THE SIX MONTHS ENDED 31 AUGUST 2022 41 41