Spear Reit Ltd. · JSE:SEA
Spear Reit — H1 FY2022 Earnings Presentation
41 slides from Spear Reit's earnings presentation, Oct 26, 2021
Slide 1: Unaudited Consolidated Interim Results
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2021 PRESENTATION: 26 OCTOBER 2021
Slide 2: Table of Contents
TABLE OF CONTENTS I NT R OD U CTI ON A N D 1. EN V I R ON M E NTA L U P DAT E 2. S P EA R − C OV I D - 19 A N D BE YOND 3. HY 2022 S A L I E NT D E TA I LS 4. F I N AN C I A L P E R F OR M A NCE HY2022 5. P ORT F OL I O OV E RV I E W 6. S ECTOR A L P E R F OR M A N CE D EV ELOP M E NT A N D 7. R ED
Slide 3: Introduction and Environmental Update
INTRODUCTION AND 1. ENVIRONMENTAL UPDATE EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 3
Slide 4: Mission Statement and Strategy
1 / INTRODUCTION AND ENVIRONMENTAL UPDATE / MISSION STATEMENT AND STRATEGY STR ATE G IC HIG HLIG HTS A ND FOC US S T RAT E G Y AC H I E V E D Continuous and successful navigation of Covid-19 operating environment Improved collections = increased payout ratio Maintained income statement consistency w
Slide 5: Spear - Covid-19 and Beyond
SPEAR − 2. COVID-19 AND BEYOND Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 5
Slide 6: HY2022 Operating Snapshot
2 / SPEAR − COVID-19 AND BEYOND / HY2022 OPERATING SN APSHOT − INTERIMS UPDATE HY 2022 OPE RAT I N G S N A PSHOT STATUS QUO Challenging trading conditions persist Funders remain aligned with Spear’s strategies • Commercial Spear sufficiently capitalised to meet short- and long-term • Hospitality com
Slide 7: HY2022 Salient Details
3. HY2022 SALIENT DE TAILS Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 7
Slide 8: Portfolio Snapshot
3 / HY2022 SALIENT DE TAILS / PORTFOLIO SN APSHOT ASSE TS 32 NUMBER OF PROPERTIES R4.55BN 1.25% R140.7M R9 563/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY GROWTH PROPERTY VALUE VALUATION (FY2021) 6.44% LE T TING AVERAGE IN-FORCE 470 881M2 92.79% 27 MONTHS R95.32/M2/PM ESCALATIONS GLA OCCUPAN
Slide 9: Portfolio Snapshot: Distribution, TNAV and Debt
3 / HY2022 SALIENT DE TAILS / PORTFOLIO SN APSHOT 12.66% DISTRIBU TION (85%) 38.89 DPS GROWTH CENTS DIPS 33.06 CENTS 85% 43.13% 6.86% HY2022 DPS HY2022 PAYOUT RATIO SA REIT COST-TO- SA REIT ADMIN INCOME RATIO COST-TO-INCOME TANGIB LE NE T ASSE T VALUE (TN AV ) 6.03% LIKE-FOR-LIKE (80%) R11.94 R11.61
Slide 10: Collections
3 / HY2022 SALIENT DE TAILS / COLLECTIONS (AS AT 30 SEPTEMBER 2021) Year-to-date collections have been in line with management’s forecast Billings reflect revenue after all credits and deferments including recoveries Budget set in January 2021 Tenant arrears as at the end of the reporting period amo
Slide 11: Financial Performance HY2022
FIN ANCI AL PERFORM ANCE 4. HY2022 Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 11
Slide 12: Summary Income Statement
4 / FIN ANCI AL PERFORM ANCE HY2022 / SUMM ARY INCOME STATEMENT Group Unaudited Unaudited Six months ended Six months ended August 2021 August 2020 CONSOLIDATED STATEMENT OF R’000 R’000 COMPREHENSIVE INCOME Contractual rental income Tenant recoveries 204 343 66 221 182 533 57 833 Straight-line renta
Slide 13: Distribution Reconciliation
4 / FIN ANCI AL PERFORM ANCE HY2022 / DISTRIBUTION RECONCILI ATION RECONCILIATION BETWEEN EARNINGS AND SA REIT FUNDS FROM OPERATIONS (SA REIT FFO) PER SHARE DISTRIBUTABLE EARNINGS Year ended Year ended August August FOR THE SIX MONTHS ENDED 31 AUGUST 2021 2021 2020 R’000 R’000 Profit or loss per IFR
Slide 14: Summary Balance Sheet
4 / FIN ANCI AL PERFORM ANCE HY2022 / SUMM ARY BAL ANCE SHEE T Group Unaudited Unaudited Audited CONSOLIDATED STATEMENT OF Six months ended August 2021 Six months ended August 2020 Year ended February 2021 FINANCIAL POSITION ASSETS R’000 R’000 R’000 Non-current assets 4 564 293 4 525 614 4 508 736 A
Slide 15: TNAV Bridge
4 / FIN ANCI AL PERFORM ANCE HY2022 / TN AV BRIDGE R11.94 R11.50 R11.61 R0.45 R0.38 R0.01 14 12 (R0.33) (R0.29) (R0.04) (R0.07) Profit for the Treasury IFRS 2 10 year share expense for (excl fair value recognition future CSP adjustment) 8 FY2022 interim Rands Distribution Fair value Fair value paid
Slide 16: Funding
4 / FIN ANCI AL PERFORM ANCE HY2022 / FUNDING 45.91% WEIGHTED 7.01% FUNDERS AVERAGE COST OF FUNDING MATURITY LTV FUNDING 25BPS R34m FY2022 2% TOTAL R1.2bn R0.96bn R241m FY2023 11% GROSS DEBT Fixed debt 55.16% Cost Variable debt 44.84% Cost DEBT EXPIRY R1.04bn FY2024 48% 8.34% 5.62% R2.16bn R405m R2.
Slide 17: Balance Sheet and Funding Update
4 / FIN ANCI AL PERFORM ANCE HY2022 / BAL ANCE SHEE T AND FUNDING UPDATE Agreement has been reached to relax the strictest bank covenants for the 2021 and 2022 financial period. COVENANTS AUG 2021 FEB 2021 Interim FY2021 INTERIM PERIOD Months Months Weighted average variable expiry 31 30 55% 45.81%
Slide 18: Portfolio Overview
5. PORTFOLIO OVERVIEW Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 18
Slide 19: Top Properties by Value
5 / PORTFOLIO OVERVIEW / TOP 5 PROPERTIES BY VALUE R2.09BN 177 713M2 37.74% TOTAL VALUE TOTAL GLA PORTFOLIO GLA SABLE SQUARE MEGA PARK LIBERTY LIFE BUILDING 2 LONG STREET NORTHGATE PARK BELVILLE CENTURY CITY CAPE TOWN SHOPPING CENTRE BROOKLYN CENTURY CITY VALUE (R’000) VALUE (R’000) VALUE (R’000) VA
Slide 20: Sectoral Split by Value, Revenue and GLA
5 / PORTFOLIO OVERVIEW / SECTORAL SPLIT BY VALUE, REVENUE AND GL A PROPERTY REVENUE VALUE OF PROPERTIES EXCLUDING SMOOTHING GROSS LETTABLE AREA R4.55bn R271m 470 881m2 R2.25bn Commercial 50% R128m Commercial 47% 133 879m2 Commercial 28% R1.24bn Industrial 27% R90m Industrial 33% 260 229m2 Industrial
Slide 21: Letting Activity
5 / PORTFOLIO OVERVIEW / LE T TING ACTIVIT Y L E T T I N G ACTIVIT Y F OR T HE P E R 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 rental reversion GLAm2 R’000 R/m² GLAm2 R’0
Slide 22: Tenant and Vacancy Profile
5 / PORTFOLIO OVERVIEW / TEN ANT AND VACANCY PROFILE ANALYSIS OF THE PROPERTY PORTFOLIO ANALYSIS OF THE PROPERTY PORTFOLIO IN RESPECT OF AS AT 31 AUGUST 2021 TENANT PROFILES TOTAL GLA 470 881M2 NUMBER OF TENANTS VACANCY 33 932M2 = 7.21% 436 949M2 OCCUPIED 408 (Due to aggressive letting and successfu
Slide 23: Lease Expiry by GLA
5 / PORTFOLIO OVERVIEW / LEASE EXPIRY BY GL A LEASE EXPIRY PROFILE BASED ON GLA AS AT 31 AUGUST 2021 Total Total Total Total Total Total Total 7% 2% 13% 19% 16% 14% 29% 100% 90% 80% 70% 60% 50% 40% 30% 14% 20% 10% Average 0% Vacant Monthly Expiries Expiries Expiries Expiries Expiries 09/2021 09/2022
Slide 24: Valuations
5 / PORTFOLIO OVERVIEW / VALUATIONS Industrial Commercial Retail Hospitality Total Average discount rate (%) 12.88 13.21 12.88 Note 1 & 2 12.99 Average capitalisation rate (%) 8.88 9.21 8.88 8.99 Average exit capitalisation rate (%) 9.38 9.71 9.38 9.49 Average prior year exit capitalisation rate (%)
Slide 25: Sustainability Update
5 / PORTFOLIO OVERVIEW / SUSTAIN ABILIT Y UPDATE REST OF PORTFOLIO STATISTICS STATUS QUO SUMMARY OF SOLAR PV NUMBER OF % OF AVERAGE SOLAR PROPERTIES PORTFOLIO PENETRATION WITH SOLAR RATE CURRENT: 9 CURRENT: 28% CURRENT: 28% FUTURE: 9 FUTURE: 34% FUTURE: 30% TOTAL: 18 TOTAL: 63% TOTAL: 29% 32 2 816 7
Slide 26: Sectoral Performance
6. SECTORAL PERFORM ANCE Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 26
Slide 27: Retail
6 / SECTORAL PERFORM ANCE / RE TAIL RETAIL (48 695M2 GLA) All retail assets are classified as convenience retail Strong performance from convenience retail portfolio as tenants’ T/0s improve Retail portfolio occupancy: 93.37% Collections: 96% Spear provided credits and deferments to retail tenants t
Slide 28: Commercial
6 / SECTORAL PERFORM ANCE / COMMERCI AL COMMERCIAL (133 879M2 GLA) All Spear’s commercial assets are located in highly attractive and established office nodes in Cape Town Subdued demand continues to have an impact on the sector Office portfolio occupancy: 85.15% Collections: 98% Spear provided cred
Slide 29: Industrial
6 / SECTORAL PERFORM ANCE / INDUSTRI AL INDUSTRIAL (260 229M2 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: 95.84% Collections: 97% Spear provided no credits and d
Slide 30: Hospitality
6 / SECTORAL PERFORM ANCE / HOSPITALIT Y HOSPITALITY (28 078M2 GLA) 15 ON ORANGE: EARNINGS CONTRIBUTION D OUBLE TREE BY HILTON, CAPE TOWN Improved trading since alert level adjustments Management focus − Disposal of hotel − Alternative use Marginal tourism inflow anticipated for balance of year as S
Slide 31: General Business Update: Continuity Risks (All Sectors)
6 / SECTORAL PERFORM ANCE / ALL SECTORS GE NE R AL B U SIN ESS U PDAT E: C ONTI N U IT Y RISKS ( A L L S ECTORS ) Trading conditions remain tough, however, increased demand for Spear rental properties persists Industrial and Retail sectors showing most resilience Office sector vacancy creep, but has
Slide 32: Development and Redevelopment Projects
DEVELOPM ENT AND 7. REDEVELOPMENT PROJECTS Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 32
Slide 33: 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: 30 238M2 SECTOR: INDUSTRIAL REDEVELOPMENT COST: R44.4M YIELD ACHIEVED: 9.03% STATUS: LEASE COMMENC
Slide 34: 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: 2 000M2 COMPLETE ROOF AND SOLA
Slide 35: 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 36: Outlook and Guidance
8. OUTLOOK AND GUIDANCE Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 36
Slide 37: Outlook
8 / OUTLOOK AND GUIDANCE / OUTLOOK OUTLOOK The focus is to maintain interim period momentum and performance The trading environment will remain tough, however, Spear’s portfolio segmentation, asset locations and strong lease covenants will continue to bode well for Spear The core portfolio will cont
Slide 38: Outlook (Continued)
8 / OUTLOOK AND GUIDANCE / OUTLOOK (CONTINUED) OUTLOOK (CONTINUED) The vaccine rollout momentum and red list removal has positioned SA towards recovery Tenant collections moving closer and closer back towards pre- Covid-19 levels Spear remains well capitalised with sufficient liquidity and cash avai
Slide 39: Prospects and Guidance
8 / OUTLOOK AND GUIDANCE / PROSPECTS AND GUIDANCE GUIDANCE Spear will maintain its high-quality portfolio of Western Cape assets Spear’s strategic growth objectives will be focused around modern logistics/industrial, convenience retail and data centre assets Privately held Western Cape-only real est
Slide 40: Prospects and Guidance (Continued)
8 / OUTLOOK AND GUIDANCE / PROSPECTS AND GUIDANCE (CONTINUED) GUIDANCE The guidance is based on the following assumptions: Continuous recovery of the macroeconomic environment post- Management’s portfolio focus will remain well targeted, obsessive and results- pandemic orientated. Spear’s proximity
Slide 41: Thank You - Questions
9. QU E S T ION S T H ANK YOU QU ES T I ON S ? EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA LIVE Q&A WITH CEO AFTER PRESENTATION Unaudited Consolidated Interim Results / For the six months ended 31 August 2021 41