Financial Results Presentation for the year ended 28 February 2019
Table of Contents
7 8 96
PortfolioOverview
SubsequentTransactions
Outlook Questions
1 2 3 4 5
Welcome& Introduction
Spearto Date
HighlightsFY 2019
FinancialPerformance
FY 2019
Active Asset& Capital
Management
Financial Results Presentationfor the year ended 28 February 2019
Welcome & Introduction
1
Financial Results Presentationfor the year ended 28 February 2019 1
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.
Financial Results Presentationfor the year ended 28 February 2019 2
2 Spear to Date
Financial Results Presentationfor the year ended 28 February 2019 3
Spear to Date
Asset value: R3.37 billion
Asset value: R3.13 billion
Asset value: R1.45 billion
Market cap: R1.82 billion
Market cap: R1.98 billion
Asset value: R3.81 billion
Market cap: R1.58 billion
Market cap: R942 million
List on the JSE 11/11/2016
Period end 28/02/2017
Period end 28/02/2018
Interim period 31/08/2018
Period end 28/02/2019
Asset value: R1.4 billion
Market cap: R800 million
% Growth % Growth % Growth % Growth
Asset value:3.6%
Asset value:116%
Asset value:7.6%
Asset value:12.95%
Market cap:15%
Market cap:68%
Market cap:14.5%
Market cap:9.17%
Financial Results Presentationfor the year ended 28 February 2019 4
3 Highlights FY 2019
Financial Results Presentationfor the year ended 28 February 2019 5
Assets
Capital
30Number of properties
R1.98 bnMarket Cap
R3.8 bnAsset Value
25.07%Market Cap growth
21.62%Asset Value Growth
R152.8 mCapital raised
R127 mAverage property value
R82.5mAcquisition issues
R9 465/m2
Average property valuation
188 mShares in issue
Highlights 2019 Financial Year - Portfolio Snapshot
Letting
8.07%Average in-force
escalations
402 652 m2
GLA
98%Occupancy
30 monthsWALE
R85 /m2/pmAverage rental including rates
Financial Results Presentationfor the year ended 28 February 2019 6
Distribution
Tangible net asset value (TNAV)
86.42 centsDistribution
per share
R12.12TNAV
10.09%FY2019 Distribution growth
4.7%TNAV growth
R11.67TNAV net distribution
41.73 centsFY2019 Interim distribution
4.6%TNAV net distribution growth
44.69 centsFY2019 Final distribution
21.59%Net Cost to Income
Highlights 2019 Financial Year - Financial Performance
Debt
39.58%LTV
64.5%Fixed debt ratio
25 monthsAverage debt expiry
9.01%Average cost of debt
9.05%Average fixed cost of debt
Financial Results Presentationfor the year ended 28 February 2019 7
Spear Total ReturnSEA vs SAPY
Total return (TR) Annualised
Spear (TR)
SAPY (TR)
90%
100%
110%
120%
130%
140%
10-N
ov-1
6
10-D
ec-
16
10-J
an-1
7
10-F
eb
-17
10-F
eb
-18
10-M
ar-1
7
10-M
ar-1
8
10-A
pr-
17
10-A
pr-
18
10-M
ay-1
7
10-M
ay-1
8
10-J
un
-17
10-J
un
-18
10-J
ul-
17
10-J
ul-
18
10-A
ug
-17
10-A
ug
-18
10-S
ep
-17
10-S
ep
-18
10-O
ct-1
7
10-O
ct-1
8
10-N
ov-1
7
10-N
ov-1
8
10-D
ec-
17
10-D
ec-
18
10-J
an-1
8
150%
80%
SEA Indexed Total Return
SAPY Indexed Total Return
10-J
an-1
9
10-F
eb
-19
Assumptions: Invested in 1 000 SEA shares at listing at R9.00 per share and reinvested all your dividends in SEA at the closing price on the payment date of each dividend.
34%
-6%
13.69%
-2.79%
Financial Results Presentationfor the year ended 28 February 2019 8
4Financial Performance FY 2019
Financial Results Presentationfor the year ended 28 February 2019 9
Summary Income Statement
Consolidated and separate statement of comprehensive incomefor the year ended 28 February 2019
Spear REIT Limited and its subsidiaries
Group Audited Feb-19
R’000
Group Audited Feb-18
R’000
Property revenue 426 122 304 055 Other income 8 607 12 540 Total revenue 434 729 316 595 Property operating and management expenses (139 200) (87 422)Net property-related income 295 529 229 173 Administrative expenses (22 668) (17 530)Net property operating profit 272 861 211 643 Fair value adjustment — Investment properties 111 702 252 535 Depreciation (2 943) (441)Annual listing fees (261) (314)Share-based payment expense (6 456) (455)Profit from operations 374 903 462 968 Net finance cost (100 111) (76 044) - Finance costs (109 202) (82 297) - Finance income 9 091 6 253 Profit before taxation 274 792 386 924 Taxation (245) (695)Profit for the year 274 547 386 229 Attributable to:
Equity owners of the parent 270 389 383 186 Non-controlling interest 4 158 3 043 Total comprehensive income for the year 274 547 386 229
Distribution per share (cents) 86.42 78.50Interest cover ratio (times) 2.65 2.56
Financial Results Presentationfor the year ended 28 February 2019 10
Distribution Reconciliation
Reconciliation between earnings and distributable earningsfor the year ended 28 February 2019
* Interim distribution was declared 18 October 2018 and paid 12 November 2018
R’000
Earnings (profit attributable to owners of the parent) 270 389 Adjusted for:
Fair value adjustments to investment properties (111 702)Straight-lining of leases adjustment (7 812)Equity-settled share-based payment reserve 6 456 Antecedent dividend 4 443 Total distribution 161 774
Interim distribution * (R'000) 77 358 Number of shares for the period 185 388 709 Interim distribution per share (cents) 41.73
Final distribution (R'000) 84 416 Number of shares for the period 188 888 709 Final distribution per share (cents) 44.69 YTD distribution cents total Cents
Interim distribution 41.73Final distribution 44.69YTD distribution cents total 86.42
Distributable Reconciliation
Financial Results Presentationfor the year ended 28 February 2019 11
Summary Balance Sheet
Consolidated and separate statement of financial positionfor the year ended 28 February 2019
Group Audited Feb-19
R’000
Group Audited Feb-18
R’000
ASSETS Non-current assets 3 808 427 2 975 850 Current assets 108 291 251 488 Total assets 3 916 718 3 227 338 EQUITY AND LIABILITIES
Total attributable to owners 2 295 532 1 917 318 Non-controlling interest 54 155 54 155 Shareholders' interest 2 349 687 1 971 473 Non-current liabilities 1 335 853 1 053 434 Current liabilities 231 178 202 431 Total liabilities 1 567 031 1 255 865 Total equity and liabilities 3 916 718 3 227 338
Number of ordinary shares in issue 188 888 709 165 190 689 Gearing ratio (%) 39.58 38.48Tangible net asset value per share (Rands) 12.12 11.57 Tangible net asset value per share net of distribution (Rands) 11.67 11.16
Spear REIT Limited and its subsidiaries
Financial Results Presentationfor the year ended 28 February 2019 12
FundingFunding Maturity
R983 m R513 m
R186 m
R539 m R667 m
R156 m
Fixed FY2021
FY2020
Variable FY2022
FY2023
64.57% 34%
12%
35.43% 44%
10%
R1.522 bn R1.522 bn25-month average
maturity
LTV 39.58%
Average Cost of Funding 9.01% 24 BPS
Cost 9.05%
Cost 9%
26 months
24 months
Financial Results Presentationfor the year ended 28 February 2019 13
5Active Asset & Capital Management
Financial Results Presentationfor the year ended 28 February 2019 14
Active Asset & Capital Management - Acquisitions & Disposals
142 Bree Street
R150 m3% yield
Cash reservesR109 m
8.6% yield
5 non-core assets
Tyger Manor
R75 m8% yield
No. 2 Estuaries
R98 m9.22% yield
Island Business Park
R24 m9.31% yield
Blackheath Park
R110.5 m10.43% yield
Northgate Park
R313 m9.26% yield
(balance in debt funding)
Talana Close
R52.8 m9.16% yield
R48 m R26 m
DISPOSED
FY18DISPOSED
DISPOSED
ACquIRED
ACquIRED ACquIREDACquIRED
ACquIREDDEBT SETTLED DEBT SETTLED
R118 mR34 m
CAPITAL RAISED
CAPITAL RAISED
No. 1 Waterhouse Place
R114.5 m 12.2% yield
ACquIRED
Financial Results Presentationfor the year ended 28 February 2019 15
6 Portfolio Overview
Financial Results Presentationfor the year ended 28 February 2019 16
Value (R’000)
441 022
Sector
Industrial
GLA (m2)
86 095
Total Value (%)
11.58%
Valuation (R/m2)
5 123
Value (R’000) 426 034
Sector
Commercial
GLA (m2)
25 115
Total Value (%)
11.18%
Valuation (R/m2)
16 963
Value (R’000) 416 400
Sector
Mixed Use
GLA (m2)
31 100
Total Value (%)
10.93%
Valuation (R/m2)
13 389
Value (R’000) 322 139
Sector
Mixed Use
GLA (m2)
18 761
Total Value (%)
8.46%
Valuation (R/m2)
17 171
Value (R’000) 314 302
Sector
Commercial
GLA (m2)
17 002
Total Value (%)
8.25%
Valuation (R/m2)
18 486
Top 5 Properties by Value
Mega Park, Bellville
2 Long Street, Cape Town
Sable Square, Century City
UES DoubleTree by Hilton, Woodstock
Northgate Park, Brooklyn
Total Value R1.92 bn
Total GLA 178 073 m2
Portfolio 50.39%
Financial Results Presentationfor the year ended 28 February 2019 17
Sectoral split by GLA, Value & Revenuefor the period ended 28 February 2019
124 497 m2
34 648 m2
28 153 m2
207 354 m2
8 000 m2
Commercial
Retail
Hospitality
Industrial
Residential
31%
9%
7%
51%
2%
R559 m
R77.6 m
R505 m
R44.1 m
R74 m
R4.2 mR8.6 m
R956 m
R124.5 m
Retail
Retail
Hospitality
Hospitality
Residential
Non-propertyResidential
Industrial
Industrial
15%
18%
13%
10%
2%
1%2%
25%
29%
R1.7 bn
R167.7 m
Commercial
Commercial
45%
40%
R426.7 mTotal Revenue %
by Sector
R3.8 bnProperty split
by Value
402 652 m2
Property split by GLA
Financial Results Presentationfor the year ended 28 February 2019 18
Letting Activity
Expiries andcancellations
GLAGross rental
at expiry
Gross expiry rentalR/m²
Renewals/New lets
GLA
Gross rental at renewal /
New Let
Grossnew
rental R/m²
Rental reversion
%
Commercial 17 409 2 378 813 137 20 487 3 016 016 147 7.74
Industrial 68 930 2 483 248 36 69 433 2 708 842 39 8.29
Retail 5 020 392 901 78 6 639 563 408 85 8.4391 359 5 254 961 84 96 560 6 288 265 90 8.03
Spear began the period with an opening vacancy of 6 334m² and with 91 359m² expiring during the year. Management has successfully renewed and re-let 96 560m2 at a positive reversion of 8.03%.
The table below reflects the letting activity of the period:
Spear’s lease expiry profile remains defensive with a WALE of 30 months.
Spear’s asset and property management team has a hands-on approach to tenant retentions and actions tenant engagements well in advance of expiry to ensure business continuity and risk management for the business.
Financial Results Presentationfor the year ended 28 February 2019 19
Tenant & Vacancy Profile
Large national and international tenants, large listed tenants, government
and major franchisees.National tenants, smaller
listed tenants, franchisees, medium to large professional
firms.
Other
51%204 Tenants
1 410 m2
Hospitality
1 462 m2
Retail
2 689 m2
Offices
2 432 m2
Industrial
28%111 Tenants
21%84 Tenants
Based on GLABased on GLA
Based on GLA
Total
100%Total vacancy
7 992 m2 = 1.98%(Due to aggressive letting and successful tenant retention programmes)
Number of tenants
399
An analysis of the property portfolio in respect of tenant profiles is provided below
Analysis of the property portfolio as at 28 February 2019
Financial Results Presentationfor the year ended 28 February 2019 20
23% Average
Lease Expiry by GLALease Expiry Profile based on GLA as at 28 February 2019
10%
20%
30%
40%
50%
60%
Vacant
Total
13%
Total
0%
Total
2%
Total
31%
Monthly * Expires3/2019 - 2/2020
* Includes No. 2 Estuaries * Pembury disposed after year end
Expires3/2020 - 2/2021
* Expires3/2021 - 2/2022
Expires3/2022 - 2/2023
Expires3/2023 onwards
70%
80%
90%
100%
0%
Total
18%
Total
8%
Total
28%
Retail Hospitality ResidentialIndustrial Commercial
Financial Results Presentationfor the year ended 28 February 2019 21
Top Tenants by GLAFY2019: 144 347m2 = 35.85% of Fund
Consol Liquor Runners
Distell Nampak 15 on Orange
Autograph Collection
Lindsay Manufacturing
Imperial Multi Room Management
MWEB Auction Nation
0 k/m2
5 k/m2
10 k/m2
15 k/m2
20 k/m2
25 k/m2
Financial Results Presentationfor the year ended 28 February 2019 22
Risk ManagementSustainability update
Water continuity investment R7 million
Capital deployed to date R2 million
Water use and transport licences In process
Current boreholes 2
Current well points 3
Boreholes to be actioned 4
16 000l water tanker truck 1
Water savings initiatives:
Implemented waterless urinals
Taps switched off (where possible), supplied hand sanitisers
Tap aerators installed to reduce water flows
use of pre-diluted cleaning chemicals
use of grey water to clean where possible
Assets earmarked for Phase 1 rollout 12
Combined system size 4.2 MWh
Renewable energy investment R49 million
Average payback period 4.5 years
Benefits of renewable energy:
Reduction of energy costs by approximately 30%
Less reliance on fossil fuel-generated supply (best investment choice amongst other RE options)
Supply cost hedged against massive Eskom increases
Reduction of group carbon footprint including low maintenance and operation costs
Strong business and investment case to roll-out in favourable tariff areas from R0.72c p/kWh – R 1,30 p/kWh
Assists with green-star-rating process and aligns with Spear’s sustainability goals
Water continuity
Renewable energy
Financial Results Presentationfor the year ended 28 February 2019 23
Sable Square - Phase 2
Organic Portfolio Growth
Development & Redevelopment Projects
Physical address:
Cnr Bosmansdam and Ratanga Roads, Milnerton
Planned GLA to be added:
12 000 m2
Sector:
Retail & Residential
Development cost:
R200 m
Target yield:
10%
Status:
Target commencement FY2019
Financial Results Presentationfor the year ended 28 February 2019 24
78 on Edward
Organic Portfolio Growth
Development & Redevelopment Projects
Physical address:
78 Edward Street, Tyger Valley
GLA added:
3 500 m2
Sector:
Mixed use
Development cost:
R89 m
Target yield:
9%
Status:
Final completion q2 FY2020
Financial Results Presentationfor the year ended 28 February 2019 25
Marine Place - Paarden Island
Organic Portfolio Growth
Development & Redevelopment Projects
Physical address:
Marine Drive, Paarden Island
GLA to be developed:
52 000 m2
Sector:
Mixed use
Development cost:
R1.4 bn
Target yield:
10%
Status:
Target commencement TBA
Financial Results Presentationfor the year ended 28 February 2019 26
7 Subsequent Transactions
Financial Results Presentationfor the year ended 28 February 2019 27
Radnor Road
Main tenant:
Super Group Consumer
Physical address:
20 Radnor Road
GLA:
12 880 m2
Sector:
Industrial - Logistics
Acquisition price:
R112 m
Acquisition yield:
9.10%
WALE:
38 months
Financial Results Presentationfor the year ended 28 February 2019 28
8 Outlook
Financial Results Presentationfor the year ended 28 February 2019 29
Outlook
Fully internally managed fund
Led by industry veterans with successful track record
Substantial shareholding by directors - 35,5%
Proximity to assets is excellent
Distribution for FY20 to be 6% - 8% higher than FY19 distribution
per share
Growth supported by accretive acquisitions and organic portfolio
improvements
Realisation of underdeveloped portfolio bulk. ± 150 000m2
Portfolio value R 3,8 billion
GLA of 402 652m2
Occupancy rate 98%
In-force Escalations 8,07%
High quality Real Estate Portfolio
Active Asset Management
FY 2020 Guidance
Financial Results Presentationfor the year ended 28 February 2019 30
9 Thank You & questions?
Financial Results Presentationfor the year ended 28 February 2019 31