Spring Real Estate Investment Trust · HKEX:1426

Spring Real Estate Investment Trust — FY2017 Earnings Presentation

25 slides from Spring Real Estate Investment Trust's earnings presentation, Mar 21, 2018

  1. Slide 1: Final Results 2017 Presentation

    Final Results 2017 Presentation 21 March 2018

  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 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 2

  4. Slide 4: Overview of FY 2017

    OVERVIEW OF FY 2017  Spring REIT will pay a final distribution of HK 11.6 cents. Total distribution for the Reporting Year amounts to HK 21.1 cents per Unit (2016: HK23.0 cents per Unit).  Revenue and net property income increased 1.7% and 0.4% YoY respectively in USD terms, thanks to the consiste

  5. Slide 5: Agenda

    AGENDA 1 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 4

  6. Slide 6: FY2017 Results Summary

    FY2017 RESULTS SUMMARY  Both growth at the CCP Property and the maiden contribution of the UK Portfolio offset the adverse effects of the 2016 B2V reform, real estate tax change and a weak RMB/USD exchange rate.  Total cash interest expenses remained largely unchanged as margin reduction exercise

  7. Slide 7: Financial Performance: Total Revenue

    FINANCIAL PERFORMANCE: TOTAL REVENUE Top-line underpinned by solid operation at CCP Property, also UK acquisition • Excluding certain external factors, i.e. RMB depreciation and effect from B2V Tax Reform, adjusted CCP Property revenue +1.3% yoy on the back of moderate improvements in passing rent •

  8. Slide 8: Financial Performance: Net Property Income

    FINANCIAL PERFORMANCE: NET PROPERTY INCOME Adjusted NPI also grew inline with revenue • Results supported by healthy PRC leasing operation and contribution from UK Properties since July 2017 • Excluding certain external factors, i.e. RMB decline and Real Estate Tax Change in Beijing, adjusted CCP NP

  9. Slide 9: Debt Profile

    DEBT PROFILE  New equity was raised in April 2017 primarily for partial loan repayment, reducing outstanding USD loan to US$450 mn at end-2017.  Spring REIT negotiated a reduction in the interest margin from 2.75% to 1.65% for its USD loan, effective 27 Jun 2017. This represents an interest saving

  10. Slide 10: Agenda

    AGENDA 1 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 9

  11. Slide 11: Leasing Market Condition

    LEASING MARKET CONDITION Beijing Overall Beijing CBD Beijing Overall – Supply, Absorption, Occupancy Beijing CBD – Supply, Absorption, Occupancy (sqm, GFA) (sqm, GFA) 95% 95% 97% 97% 96% 95% 96% 95% 95% 91% 93% 100% 94% 100% 88% 91% 1,500,000 950,000 88% 74% 72% 80% 74% 80% 1,200,000 750,000 60% 60%

  12. Slide 12: Future Grade-A Office Supply

    FUTURE GRADE-A OFFICE SUPPLY Beijing CBD to see more supply in 2018-19 Grade-A office supply by year (sqm, GFA) 1,000,000 903,294 900,000 New Supply in CBD 725,000 800,000 700,000 Financial Street 600,000 East 2nd Ring Road 500,000 400,000 East Chang'an Avenue 300,000 139,621 200,000 Others* 100,000

  13. Slide 13: Comparison of Grade-A Office Markets Across China

    COMPARISON OF GRADE-A OFFICE MARKETS ACROSS CHINA  Beijing has highest office occupancy of 93%  Low new supply in the next 4 years, only 6.0% p.a. of existing stock (vs avg. 18.6% p.a. of other selected cities) Office GFA 2H 2017 Stock New Supply 2018 - 2021 1H 2017 Occupancy rate (RHS) (‘000 sqm)

  14. Slide 14: CCP Property Operations Summary

    CCP PROPERTY OPERATIONS SUMMARY  Rental income has increased by 4.8% yoy.  Operating expenses increased in line with revenue growth, except leasing commission & others 2H 2016 Change 1H 2017 Change 2H 2017 RMB mn RMB mn RMB mn Revenues - Rental income 233.70 +1.8% 237.81 +3.0% 244.99 - Car park an

  15. Slide 15: Leasing Performance

    LEASING PERFORMANCE Solid performance despite growing CBD supply in the pipeline Net Average Passing Rents Average Occupancy Rates (RMB per sqm per month) (%) 94% 94% 93% 94% 95% 334 337 343 357 346 354 359 274 215 179 191 2010 2011 2012 2013 2014 2015 2016 2017 2H 1H 2H 2016 2017 2H 2016 1H 2017 2H

  16. Slide 16: Tenant Base

    TENANT BASE Diverse and high quality tenant mix Tenants by Industry Top 5 Tenants % of total leased Tenants As % of leased office GFA GFA (As of 31 December 2017) Epson 5.8% Business center Education/ Delsk 4.8% and others media/sports/ Technology Condé Nast 4.7% 23.7% Real estate/ Energy/ retail/ r

  17. Slide 17: Expiring Lease Profile

    EXPIRING LEASE PROFILE  Average lease expiry of existing leases (in GFA terms) as of 31 December 2017 was 814 days.  Good progress on negotiations with upcoming expiries. 450 381 356 352 400 342 350 300 250 200 31% 29% 150 22% 18% 100 50 0 2018 2019 2020 2021 & beyond Expiring leases as a % of lea

  18. Slide 18: Cost Structure of CCP Property

    COST STRUCTURE OF CCP PROPERTY Approximately 95% of property expenses are revenue-linked or fixed FY2017  Withholding tax Others Property management fee – 10% of revenues received from rental operations  Other taxes 5% 8% – Under construction and maintenance tax and education surcharge – Stamp dut

  19. Slide 19: Agenda

    AGENDA 1 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 18

  20. Slide 20: Location of the properties

    Location of the properties 19

  21. Slide 21: The UK Acquisition and Operation Summary

    THE UK ACQUISITION AND OPERATION SUMMARY Long-term, quality cash flow backed by guarantee, with upward-only revisions 2H 2017 GBP Revenues - Rental income 2,058,626 Expenditure - Head rents on leasehold properties (53,135) - Property management fees (32,400) Net Property Income 1,973,091 Portfolio H

  22. Slide 22: Agenda

    AGENDA 1 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 21

  23. Slide 23: Poll Results of the Extraordinary General Meeting

    POLL RESULTS OF THE EXTRAORDINARY GENERAL MEETING The PAG Unitholders issued a letter requesting the Board to convene an EGM to vote on the resolutions below: 1. Removal of the Manager 2. Internalisation of the REIT management function 3. Appointment of a PAG representative to the board of any manag

  24. Slide 24: Agenda

    AGENDA 1 1 KEY MESSAGES 2 FY 2017 RESULTS 3 CCP OPERATION REVIEW 4 KWIK FIT ACQUISITION 2 5 EGM NOV 17 3 6 OUTLOOK & STRATEGY 23

  25. Slide 25: Outlook & Strategic Priorities

    OUTLOOK & STRATEGIC PRIORITIES Outlook in 2018  The real estate tax change in Beijing in 2H 2016 represents a permanent increase in tax burden, and has a rebasing effect to our Beijing operation.  Meanwhile, our underlying operations have continued to improve, and our new UK investment portfolio h

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