Spear Reit Ltd. · JSE:SEA
Spear Reit — FY2021 Earnings Presentation
43 slides from Spear Reit's earnings presentation, May 14, 2021
Slide 1: Provisional Reviewed Condensed Consolidated Financial Results
PROVISIONAL REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2021 PRESENTATION: 14 MAY 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. I MPACT OF C OV I D - 19 3. F Y 202 1 S A L I E NT D E TA I L S 4. F I N AN C I A L P E R F OR M A NCE F Y2021 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 EV E LOP M
Slide 3: Introduction and Environmental Update
INTRODUCTION AND 1. ENVIRONMENTAL UPDATE EMAIL QUESTIONS TO INFO@SPEARPROP.CO.ZA Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 3
Slide 4: Mission Statement and Strategy
1 / INTRODUCTION AND ENVIRONMENTAL UPDATE / MISSION STATEMENT AND STRATEGY 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. No.2 Estuaries, Century City S T R ATEGY S TR
Slide 5: Impact of Covid-19
2. IMPACT OF COVID-19 Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 5
Slide 6: FY2021 Operating Scenario
2 / IMPACT OF COVID-19 / FY2021 OPERATING SCEN ARIO F Y2021 H I G H - ROA D OP E RAT ING S CEN ARIO – ACH IEVE D STATUS QUO Challenging trading conditions persist Funders remain aligned with Spear’s strategies ±86% of total budget collected set in December 2019* Spear sufficiently capitalised to mee
Slide 7: FY2021 Salient Details
3. FY2021 SALIENT DE TAILS Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 7
Slide 8: Portfolio Snapshot
3 / FY2021 SALIENT DE TAILS / PORTFOLIO SN APSHOT ASSE TS 32 NUMBER OF PROPERTIES R4.5BN 7.46% R139M R9 816/M2 ASSET VALUE ASSET VALUE AVERAGE AVERAGE PROPERTY GROWTH PROPERTY VALUE VALUATION (FY2020) 6.81% LE T TING AVERAGE IN-FORCE 453 458M2 93.84% 27 MONTHS R96.23/M2/PM ESCALATIONS GLA OCCUPANCY
Slide 9: Portfolio Snapshot: Distribution and Debt
3 / FY2021 SALIENT DE TAILS / PORTFOLIO SN APSHOT 29.36 CENTS DISTRIBU TION 73.38 FINAL DPS DECLARED FOR 6 MONTHS ENDED DIPS 58.70 CENTS 80% 39.82% 5.48% 28 FEBRUARY 2021 FY2021 DPS FY2021 PAYOUT RATIO SA REIT COST-TO- SA REIT ADMIN INCOME RATIO COST-TO-INCOME TANGIB LE NE T ASSE T VALUE (TN AV ) R1
Slide 10: Collections (as at 30 April 2021)
3 / FY2021 SALIENT DE TAILS / COLLECTIONS (AS AT 30 APRIL 2021) Year-to-date collections in line with management’s high-road scenario plan Billings reflect revenue after all credits and deferments including recoveries (excluding VAT) Original budget reflects pre-Covid-19 operating revenue including
Slide 11: Exclusions, Credits and Deferrals
3 / FY2021 SALIENT DE TAILS / EXCLUSIONS, CREDITS AND DEFERRALS (EXCLUDING UTILITIES) % of budget Amount (rentable area only) NOT ES Classification R’000 % 1 Zero income provided for in FY2021 revised budgets for hospitality. R1.84 million rental has been received year-to-date. Hospitality1 (28 810)
Slide 12: Financial Performance FY2021
FIN ANCI AL PERFORM ANCE 4. FY2021 Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 12
Slide 13: Summary Income Statement
4 / FIN ANCI AL PERFORM ANCE FY2021 / SUMM ARY INCOME STATEMENT Group Reviewed Audited Year ended Year ended February 2021 February 2020 CONSOLIDATED STATEMENT OF R’000 R’000 COMPREHENSIVE INCOME Contractual rental income Tenant recoveries 377 846 120 284 381 836 114 462 Straight-line rental income
Slide 14: Distribution Reconciliation
4 / FIN ANCI AL PERFORM ANCE FY2021 / DISTRIBUTION RECONCILI ATION RECONCILIATION BETWEEN EARNINGS AND Year ended February 2021 DISTRIBUTABLE EARNINGS SA REIT funds from operations (SA REIT FFO) per share Profit or loss per IFRS Statement of Comprehensive Income (SOCI) R’000 FOR THE YEAR ENDED 28 FE
Slide 15: Summary Balance Sheet
4 / FIN ANCI AL PERFORM ANCE FY2021 / SUMM ARY BAL ANCE SHEE T Group Year ended Year ended CONSOLIDATED STATEMENT OF February 2021 February 2020 FINANCIAL POSITION ASSETS R’000 R’000 Non-current assets 4 508 736 4 253 814 AS AT 28 FEBRUARY 2021 Current assets 75 151 48 152 TOTAL ASSETS 4 583 887 4 3
Slide 16: TNAV Bridge
4 / FIN ANCI AL PERFORM ANCE FY2021 / TN AV BRIDGE R12.17 R0.77 R0.16 R11.50 14 R11.21 R0.06 12 Profit for the (R0.74) DRIP issue (R0.52) year (R0.40) Nov 2020 IFRS 2 (R0.29) 10 (excl fair value expense adjustment) Distributions 8 Fair value Rands paid Jun and adjustment Treasury Nov 2020 FY2021 fin
Slide 17: Funding
4 / FIN ANCI AL PERFORM ANCE FY2021 / FUNDING 45.81% 7.26% FUNDERS AVERAGE COST OF FUNDING MATURITY LTV FUNDING 149BPS R1.2bn R0.9bn R1.05bn FY2024 50% Fixed debt 56.5% Variable debt 43.5% DEBT EXPIRY TOTAL Cost Cost R407m FY2022 19% GROSS DEBT 8.66% 5.66% R2.1BN 28-month R355m FY2025 17% R2.1BN Wei
Slide 18: Balance Sheet and Funding Update
4 / FIN ANCI AL PERFORM ANCE FY2021 / BAL ANCE SHEE T AND FUNDING UPDATE Agreement has been reached to relax the strictest bank covenants for the 2021 and 2022 R85M financial periods. GROSS DEBT SETTLED FY2021 50% 55% 45.81% LT V OLD NEW CURRENT LTV COVENANT COVENANT 2 1.75 2.11 I CR TIMES TIMES TIM
Slide 19: Portfolio Overview
5. PORTFOLIO OVERVIEW Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 19
Slide 20: Top Properties by Value
5 / PORTFOLIO OVERVIEW / TOP 5 PROPERTIES BY VALUE R2.05BN 177 703M2 39.19% TOTAL VALUE TOTAL GLA PORTFOLIO GLA LIBERTY LIFE BUILDING MEGA PARK 2 LONG STREET SABLE SQUARE NORTHGATE PARK CENTURY CITY BELVILLE CAPE TOWN CENTURY CITY BROOKLYN VALUE (R’000) VALUE (R’000) VALUE (R’000) VALUE (R’000) VALU
Slide 21: 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 R4.50BN R498M 453 458M2 R2.24bn Commercial 50% R241m Commercial 48% 243 162m2 Industrial 54% R1.15bn Industrial 26% R164m Industrial 33% 141 867m Commercial
Slide 22: 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 23: 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 28 FEBRUARY 2021 TENANT PROFILES TOTAL GLA 453 458M2 NUMBER OF TENANTS VACANCY 27 949M2 = 6.16% 425 509M2 OCCUPIED 395 (Due to aggressive letting and success
Slide 24: Lease Expiry by GLA
5 / PORTFOLIO OVERVIEW / LEASE EXPIRY BY GL A LEASE EXPIRY PROFILE BASED ON GLA AS AT 28 FEBRUARY 2021 Total Total Total Total Total Total Total 6% 1% 18% 13% 20% 15% 27% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 14% Average 0% Vacant Monthly Expires Expires Expires Expires Expires 03/2021 03/2022 03
Slide 25: Valuations
5 / PORTFOLIO OVERVIEW / VALUATIONS Industrial Commercial Retail Hospitality Total Average discount rate (%) 13.98 14.00 13.88 13.63 13.95 Average capitalisation rate (%) 8.98 9.00 8.88 8.63 8.95 Average exit capitalisation rate (%) 9.33 9.29 9.13 9.13 9.25 Average prior year exit capitalisation rat
Slide 26: Sustainability Update: Sable Square Solar Project
5 / PORTFOLIO OVERVIEW / SUSTAIN ABILIT Y UPDATE PROJECT SOLAR SAVINGS VS ACTUAL SAVINGS CASE STUDY SABLE SQUARE SHOPPING CENTRE, MILNERTON 8 Rand ('000 000) 6 4 2 0 1 2 3 Year Cumulative actual savings Cumulative projected savings Capex 808 KWP 2 450 26 95% 105% SYSTEM SIZE PANELS INVERTERS AVERAGE
Slide 27: Sustainability Update (Continued)
5 / PORTFOLIO OVERVIEW / SUSTAIN ABILIT Y UPDATE (CONTINUED) REST OF PORTFOLIO STATISTICS CURRENT MONTHLY BUILDING ENERGY (KWH) CONSUMPTION 500 Lockdown started 32 9 28% 72% 375 PROPERTIES PROPERTIES PORTFOLIO PROPERTIES WITH SOLAR PENETRATION WITHOUT SOLAR WITH SOLAR Rand (′000) 3 970 KWP 2 425 488
Slide 28: Sectoral Performance
6. SECTORAL PERFORM ANCE Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 28
Slide 29: Retail
6 / SECTORAL PERFORM ANCE / RE TAIL RETAIL (40 351M2 GLA) All retail assets are classified as convenience retail Retail portfolio occupancy: 91.66% Collections have been 95.58% versus revenue billed for the period to date Spear provided credits and deferments to retail tenants to the following value
Slide 30: Commercial
6 / SECTORAL PERFORM ANCE / COMMERCI AL COMMERCIAL (141 867M2 GLA) All Spear’s commercial assets are located in highly attractive and established office nodes in Cape Town Office portfolio occupancy: 86.96% Collections have been 96.70% versus revenue billed for the period to date Spear provided cred
Slide 31: Industrial
6 / SECTORAL PERFORM ANCE / INDUSTRI AL INDUSTRIAL (243 162M2 GLA) Spear’s industrial portfolio has been exceptionally resilient during the year with a number of new lets and relets taking place in a very challenging market Industrial portfolio occupancy: 97.60% Collections have been 97.70% versus r
Slide 32: Hospitality
6 / SECTORAL PERFORM ANCE / HOSPITALIT Y Sector hardest hit by the impact of Covid-19 Management has eliminated hospitality income from its FY2021 forecasts HOSPITALITY (28 078M2 GLA) FY2020 hospitality income comprised ±7% of total group revenue (total group revenue FY2020: R503 million) D OUBLE TR
Slide 33: General Business Update (All Sectors)
6 / SECTORAL PERFORM ANCE / ALL SECTORS GE NE R AL B U SIN ESS U PDAT E ( A L L S E CTORS) General trading conditions remain tough, with early signs of increased demand for Spear’s rental properties Industrial and retail sectors showing most resilience, with strong rental demand Office sector vacanc
Slide 34: Development and Redevelopment Projects
DEVELOPM ENT AND 7. REDEVELOPMENT PROJECTS Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 34
Slide 35: 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 YIELD ACHIEVED: 9.03% STATUS: LEASE COMMENC
Slide 36: 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: ESTIMATED COMPLETION OCTOBER 2
Slide 37: 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 Provisional Reviewed Condensed Consolidated Financ
Slide 38: Outlook and Guidance
8. OUTLOOK AND GUIDANCE Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 38
Slide 39: Outlook
8 / OUTLOOK AND GUIDANCE / OUTLOOK OUTLOOK Macroeconomic conditions will remain difficult to navigate as the global and local economy adjusts to the impact of the last year Spear’s core portfolio remains high quality and defensive, and we are well positioned to navigate the current trading environme
Slide 40: Outlook (Continued)
8 / OUTLOOK AND GUIDANCE / OUTLOOK (CONTINUED) Management will continue to actively dispose of earmarked assets within the portfolio in line with our strategy The portfolio will continue to display resilience and fortitude Spear has since inception maintained high occupancy rates, with the FY2021 pe
Slide 41: Guidance
8 / OUTLOOK AND GUIDANCE / GUIDANCE GUIDANCE It remains difficult to predict the longer-term economic effects the pandemic will have Management’s guidance for FY2022 is a distribution per share growth of 6% – 8%. Spear’s on the broader real estate sector. Given the benefit of hindsight we can see th
Slide 42: Guidance (Continued)
8 / OUTLOOK AND GUIDANCE / GUIDANCE (CONTINUED) Management’s focus will remain on its core business, which is to let space, retain tenants, manage expenses and grow its income base as best as possible within a very tough trading environment. Management will remain as accessible as ever, with regular
Slide 43: 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 Provisional Reviewed Condensed Consolidated Financial Results / For the year ended 28 February 2021 43