Financial Results Presentation - Spear Properties · Final distribution (R'000) 84 416 Number of shares for the period 188 888 709 Final distribution per share (cents) 44.69 ... R426.7

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.


2 Spear to Date


Spear to Date

Asset value: R3.37 billion



Market cap: R1.82 billion




Market cap: R942 million

List on the JSE 11/11/2016

Period end 28/02/2017


Interim period 31/08/2018



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%


3 Highlights FY 2019


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


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


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%


4Financial Performance FY 2019


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


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


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


Summary Balance Sheet

Consolidated and separate statement of financial positionfor the year ended 28 February 2019


R’000


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


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


5Active Asset & Capital Management


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


6 Portfolio Overview


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%


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


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.


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


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


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


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


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


78 on Edward



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


Marine Place - Paarden Island



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


7 Subsequent Transactions


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


8 Outlook


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


9 Thank You & questions?


Documents

Financial Results Presentation - Spear Properties · Final distribution (R'000) 84 416 Number of shares for the period 188 888 709 Final distribution per share (cents) 44.69 ... R426.7