Capital Raise June 2018

Transcription

1 June 2018

2 Table of Contents 1. Spear REIT at a Glance Appendix: Top 10 Assets 2. FY2018 Highlights 10. Questions & Answers 3. Financial Performance 9. Outlook 4. Group Structure & Directors 8. : Timing & Process 5. Portfolio Overview 7. Distribution Forecast FY New Acquisitions June

3 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 1. Spear REIT at a Glance June

4 Spear REIT at a Glance Active Asset Management JSE listing 11 November 2016 Western Cape-focused real estate investor Successful tenant retention programme = High occupancy Value creation through active asset management Portfolio Value R3.1 billion Average Escalation 8.38% Rentable Area (GLA) m 2 WALE 30 months Number Of Properties 31 Gearing (LTV) 38.48% Occupancy Rate 98.1% Average Property Value R94 million [2017: R57 million] Average Property Value Per m 2 R9 665/m 2 June

5 2. FY2018 Highlights June

6 Highlights 2018 Financial Year Exceeded full year distribution forecast by 1.95% TNAV per share growth of 15.4% 117% asset growth in core portfolio 68% growth in market capitalisation Distribution Per Share Tangible Net Asset Value Per Share Investment Property d Shares in Issue Gearing (LTV) Significant Transactions cents 1.95% over revised forecast 15.4% to R11.57 (R11.15 post distribution) to R3.1 billion from R1.5 billion R461 million during period % from % R1.35 billion in new acquisitions during period June

7 3. Financial Performance June

8 Summary Income Statement Consolidated Statement of Comprehensive Income Reporting periods are not comparable Spear Reit Limited and its Subsidiaries for the period ended 28 February 2018 Group Audited Year ended 28 February 2018 R 000 Group Audited 4 months ended 28 February 2017 R 000 Total revenue Property operating and management expenses (87 422) (16 294) Net property-related income Administrative expenses (17 530) (4 558) Net operating profit Fair value adjustment Investment properties Depreciation and amortisation (441) (4) Formation and listing cost (314) (1 873) Share-based payment expense (455) (3 939) Profit from operations Net Finance costs (76 044) (16 662) Finance costs (82 297) (20 487) Finance income Profit before taxation Taxation (695) Profit/(Loss) for the year Attributable to: Equity owners of the parent Non-controlling interest Total comprehensive income for the year Distribution per share (cents) June

9 Summary Balance Sheet Consolidated Statement of Financial Position Group Audited Feb 2018 R 000 Group Audited Feb 2017 R 000 Reporting periods are not comparable Spear Reit Limited and its Subsidiaries for the period ended 28 February 2018 ASSETS Non-current assets Current assets TOTAL ASSETS EQUITY AND LIABILITIES Total attributable to owners Non-controlling interest Shareholders' interest Non-current liabilities Current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Number of ordinary shares in issue Gearing ratio (%) Tangible net asset value per share (Cents) June

10 Funding Funding Maturity Management successfully refinanced R691 million of borrowings and agreed new terms at year end with an expiry in February 2021 at a rate of prime less 1.30% R152 million 13% R100 million 8% LTV 38.48% R1 205 bn Total Borrowings R1.205 billion Average Cost of Funding 9.25% 0.40% R953 million 79% Hedged Funding 57.58% FY2019 FY2020 FY2021 June

11 4. Group Structure & Directors June

12 Group Structure 3Directly held Assets Spear REIT Limited Directly Assets 22held Spear HoldCo Subsidiary Companies DoubleTree by Hilton Hotel, Cape Town at Upper Eastside incl. retail and commercial Sable Square Pembury Retirement Complex 15 on Orange Hotel by Marriott As at 28 February 2018 and no post Balance Sheet transactions included No. 2 Long Street June

13 Executive Management Role Changes Quintin Rossi (37) INCOMING CHIEF EXECUTIVE OFFICER Co-founder of Spear Committees: Executive, Investment, Audit & Risk, Social & Ethics Mike Flax (53) EXECUTIVE DEPUTY CHAIRMAN Co-founder of Spear Committees: Executive, Investment, Audit & Risk June

14 Board of Directors Executive Quintin Rossi CEO Mike Flax Executive Deputy Chairman Christiaan Barnard CFO non- Executive Abu Varachhia Chairman Jalal Allie Lead Independent Non-executive Brain Goldberg Independent Nonexecutive Niclas Kjellström- Matseke Independent Nonexecutive Sean McCarthy Non-executive June

15 5. Portfolio Overview June

16 Portfolio Overview Active Asset Management Western Cape 98% of assets Number of properties 31 Portfolio value R3.1 billion Average property rental rate R91/m 2 Average property valuation per m 2 R9 665/m 2 In force escalations 8.38% Cost to income ratio (Net) 18.51% June

17 Acquisitions & Disposals Acquisitions: The Group acquired the following properties during the year ending 28 February 2018: Transfer date Acquisition Value R 000 Debt Funding R 000 Acquisition Yield % 142 Edward Street, Tygervalley 1-Mar Selective House, Tygervalley 14-Mar on Orange, Cape Town 12-Jun Long Street, Cape Town 22-Jun Mega Park Industrial Estate, Bellville 28-Jul Virgin Active George, George 8-Aug Tyger Manor, Tygervalley 11-Oct Mweb Head Office, Bellville 18-Jan Disposals: The Group disposed of the following properties during the year ending 28 February 2018: Transfer date Disposal Value R 000 Book Value R 000 Premium Book Value % Disposal Yield % 12 Sandown Road, West Beach 21-Feb Sandown Road, West Beach 21-Feb Bree Street, Cape Town 1-Jun Tyger Manor, Tygervalley 1-Jul June

18 Top 5 Properties by Value Total Value R Total GLA Portfolio m % Mega Park Industrial Estate, Bellville South 2 Long Street, Cape Town Sable Square, Milnerton 15 on Orange, Cape Town Upper Eastside, Woodstock Value (Rm) Value (Rm) Value (Rm) Value (Rm) Value (Rm) Sector Industrial Sector Commercial Sector Mixed Use Sector Hospitality Sector Mixed Use GLA (m 2 ) m 2 GLA (m 2 ) m 2 GLA (m 2 ) m 2 GLA (m 2 ) m 2 GLA (m 2 ) m 2 Total Value (%) 13.59% Total Value (%) 13.35% Total Value (%) 11.43% Total Value (%) 9.76% Total Value (%) 9.65% Valuation (R/m 2 ) Valuation (R/m 2 ) Valuation (R/m 2 ) Valuation (R/m 2 ) Valuation (R/m 2 ) June

19 Sectoral Split by Revenue & GLA Revenue (Rm) R294 million For the year ended 28 February 2018 GLA (m 2 ) % Residential Retail Hospitality 2% Residential 9% Hospitality 12% 23% Commercial 30% Industrial 24% Commercial 38% Retail 12% Industrial 47% (Rm) Industrial R Commercial R Retail R Hospitality R Residential R7 205 (m 2 ) Industrial m 2 Commercial m 2 Retail m 2 Hospitality m 2 Residential 8 000m 2 June

20 Lease Expiry by GLA Lease Expiry Profile based on GLA as at 28 February % 90% 80% 70% 60% 50% 40% Average 30% 26% 20% 10% 0% Vacant Monthly Industrial Expires 3/2018 to 2/2019 Commercial June 2018 Expires 3/2019 to 2/2020 Retail Expires 3/2020 to 2/2021 Hospitality Expires 3/2021 to 2/2022 Residential Expires 3/2022 onwards Total 20

21 Top 10 Tenants by GLA FY2018 : m 2 = 42.86% of Fund 25K/m 2 20K/m 2 15K/m 2 10K/m 2 5K/m 2 0K/m 2 Consol Glass Liquor Runners Distell Limited Nampak Limited African Pride Imperial Cargo Multi Room Management MWEB Tanker Services Pembury Retirement Lodge June

22 Tenant & Vacancy Profile Analysis of the Property Portfolio as at 28 February 2018 Analysis of property portfolio in respect of tenant profiles Total Vacancy 6 334m 2 = 1.95% (Due to aggressive letting & successful tenant retention programmes) Total 100% Number of tenants 395 Offices 6 334m 2 Based on GLA 29% 49% 22% Number of Tenants 116 Number of Tenants 192 Number of Tenants 87 Other Large national and international tenants, large listed tenants, government and major franchisees. National tenants, smaller listed tenants, franchisees, medium to large professional firms. June

23 Risk Management Water Continuity Portfolio water requirements: Spear water continuity storage capacity: Water continuity investment: Capital deployed to date: Water use & transport licences 2.6 million litres/week 1.07 million litres R7 million R2 million In process 1 x l Water Tanker Truck 31 Assets Current boreholes: 2 Current well points 3 Boreholes to be actioned l water tanker truck 1 2 x RO Plants in process 107 x l Tanks 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 June

24 Risk Management (continued) Renewable Energy Assets earmarked for Phase 1 rollout: 6 Combined system size: 2,33MWh Renewable energy investment: Average payback period R24 million 4.5 years HOW SOLAR PANELS WORK SUNLIGHT LIGHTBULB Benefits of renewable energy: Reduction of energy costs by approx. 30% Less reliance on fossil fuel generated supply (best investment choice amongst other RE options) Supply cost hedged against massive Eskom increases PANEL EXCITED ELECTRONS DIRECT CURRENT (-) LAYER DIODE (+) LAYER INVERTER ALTERNATING CURRENT Reduction of group carbon footprint including low maintenance & operation costs Strong business & 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 June

25 Developments & Redevelopment Projects Organic Portfolio Growth Sable Square - Phase 1 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton GLA added: 3 431m 2 Sector: Mixed Use Development cost: R Completion yield: 9.8% Status: Completed June

26 Developments & Redevelopment Projects Organic Portfolio Growth Sable Square - Phase 2 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton Planned GLA to be added: m 2 Sector: Retail & Residential Development cost: R Target yield: 10% Status: Target Commencement FY2019 Architect s Impression June

27 Developments & Redevelopment Projects Organic Portfolio Growth 78 on Edward Physical address: 78 Edward Street, Tygervalley GLA added: 3 500m 2 Sector: Mixed Use Development cost: R Target yield: 9% Status: Completion in FY2019 Architect s Impression June

28 Developments & Redevelopment Projects Organic Portfolio Growth Marine Place - Paarden Eiland Physical address: Marine Drive, Paarden Eiland GLA to be developed: m 2 Sector: Mixed Use Development cost: R Target yield: 10% Status: Target Commencement TBA Architect s Impression June

29 6. New Acquisitions June

30 Island Business Park, Paarden Eiland, Cape Town Physical address: No. 8 Section Street, Paarden Eiland GLA: 2 322m 2 Sector: Mixed Use Acquisition price: R Acquisition yield: 10% Strategic Acquisition: Part of Paarden Eiland Development Strategy June

31 Blackheath Park, Blackheath, Cape Town Main tenants: Pioneer Fishing, ZTE / Bollare & Namaqua Wines Physical address: Cnr Range & Station Road, Blackheath GLA: m 2 Sector: Industrial Acquisition price: R Acquisition yield: 10.43% WALE: 28 months June

32 Old Mutual Private Wealth, Century City, Cape Town Main tenant: Old Mutual Private Wealth, Estuaries Physical address: No. 2 Oxbox Crescent, Century City GLA: 4 199m 2 Sector: Commercial Acquisition price: R Acquisition yield: 9.22% WALE: 52 months June

33 7. Distribution Forecast FY2019 June

34 Distribution Forecast FY % distribution growth for 2019 financial year Between 85.6 cents to 86.4 cents Growth supported by organic portfolio improvements Growth supported by accretive acquisitions The growth is premised upon the following assumptions: That a relatively stable macroeconomic environment will prevail That lease renewals are concluded as per the company forecast That no major tenant failures will take place and improved hospitality trading conditions That tenants will successfully absorb rising costs associated with utility consumption charges and municipal rates That the Western Cape experiences a wet winter that breaks the current drought June

35 8. : Timing & Process June

36 : Timing & Process Our objective is to generate sustainable and growing income as a specialised REIT. Amount to be raised Placing price Revised FY2019 forward yield Opening of private placement Closing of private placement Notification of allotments Issue of shares R150 million to R300 million R R % 28 May June June June 2018 June

37 : Timing & Process Key Features of the Western Cape-focused real estate investor 117% asset growth in core portfolio 68% growth in market capitalisation 9-11% distribution growth for FY2019 Investment Rationale Investment & development pipeline of R2 billion Management has a proven track record to execute its investment strategy in the Cape market Disciplined growth to enhance investor returns & liquidity Fund value increased by 117% in prior financial year Benefits of Growth Enhancing portfolio income with accretive acquisitions Better liquidity in the shares, resulting from larger market cap and broader investor universe Economies of scale Improved portfolio diversification 9-11% distribution growth for 2019 financial year June

38 Anticipated Shareholding Post Active Asset Managers Strong management & shareholder alignment High percentage of free float Management lock-in agreements in place Before Shares % Held Abu Varachhia Mike Flax Sean McCarthy Quintin Rossi Brian Goldberg Niclas Kjellström-Matseke Christiaan Barnard Jalal Allie Public Post Shares % Held Abu Varachhia Mike Flax Sean McCarthy Quintin Rossi Brian Goldberg Niclas Kjellström-Matseke Christiaan Barnard Jalal Allie Public Based on R300 million raised at R10.20 June

39 Use of Proceeds Capital Deployment Acquisitions R 000 Capital Requirements Total acquisition cost Bank debt settled Maximum capital raise Less: Antecedent dividend (10 294) Less: Equity raise fees (3 750) Net proceeds to Spear Cash reserve funding June

40 9. Outlook June

41 Use of Proceeds Regionally Specialised Cape Town SA s highest growth area Diversification across all property sectors Favourable economic & property fundamentals High Quality Real Estate Portfolio Active Asset Management Portfolio value R3.1 billion GLA of m 2 Occupancy rate 98.1% Cost to income ratio net 18.51% Fully internally managed fund Led by industry veterans with successful track record Proximity to assets is excellent Substantial shareholding by directors Capital Structure LTV 38.48% Anticipated market capitalisation R1.9 billion post capital raise TNAV per share R11.57 (pre-distribution) FY2019 Guidance & Prospects Revised distribution FY2019 9% - 11% higher than the FY2018 final distribution of cents Growth supported by accretive acquisitions and organic portfolio improvements Realisation of undeveloped portfolio bulk June

42 10. Questions & Answers June

43 Appendix: Top 10 Assets June 2018

44 Mega Park Industrial Estate, Bellville South Physical address: Cnr Pieter Barlow and Mill Roads, Bellville, Cape Town Value (R 000): R Sector: Industrial Zoning: Industrial GLA: m 2 Wale: 24 Top 10 Assets Tenants: Consol Glass, Tuffy Manufacturing, Imperial Group, Storage Town June 2018

45 2 Long Street, Cape Town Physical address: 2 Long Street, Cape Town Value (R 000): R Sector: Commercial Zoning: General Business 1 GLA: m 2 Wale: 23 Top 10 Assets Tenants: SAMSA, Sturrock Grindrod, Fairheads, Harambee June 2018

46 Sable Square, Milnerton Physical address: Cnr Bosmansdam and Ratanga Roads, Milnerton Value (R 000): R Sector: Retail Zoning: General Business 1 GLA: m 2 Wale: 41 Top 10 Assets Tenants: Pick n Pay, Spur, Clicks, China Town, Baby City June 2018

47 15 on Orange, Cape Town Physical address: Cnr Grey Pass and Orange Street, Cape Town Value (R 000): R Sector: Hospitality Zoning: Mixed Use GLA: m 2 Wale: 72 Top 10 Assets Tenants: African Pride Hotel June 2018

48 Upper Eastside, Woodstock Physical address: 31 Brickfield Road, Woodstock, Cape Town Value (R 000): R Sector: Hospitality Zoning: Mixed use GLA: m 2 Wale: 20 Top 10 Assets Tenants: DoubleTree by Hilton and Conference Centre, Shanduka Black Umbrella, Aegis Media, STA Travel June 2018

49 Mweb Head Office, Bellville Physical address: 100 Fairway Close, Parow Value (R 000): R Sector: Commercial Zoning: General Business 1 GLA: m 2 Wale: 25 Top 10 Assets Tenants: Mweb Head Office June 2018

50 Distell DC, Parow Physical address: 1 Beacon Way, cnr Jan van Riebeeck Drive, Parow Value (R 000): R Sector: Industrial Zoning: General Business 1 GLA: m 2 Wale: 40 Top 10 Assets Tenants: Distell Distribution Centre June 2018

51 Blackheath DC, Blackheath Physical address: Cnr Range and Anfield Road, Blackheath Value (R 000): R Sector: Industrial Zoning: General Business 1 GLA: m 2 Wale: 38 Top 10 Assets Tenants: Liquor Runners, Elzea Snacks June 2018

52 Manhattan Plaza, Tygervalley Physical address: 100 Edward Street, Bellville Value (R 000): R Sector: Commercial Zoning: Secondary Business GLA: 4 931m 2 Wale: 24 Top 10 Assets Tenants: Clickatell, Hyundai, NBC Consult, DDP Valuers June 2018

53 Viking Business Park, Epping Physical address: Cnr Viking Way & Showground Avenue, Epping Value (R 000): R Sector: Retail Zoning: Commercial C1 GLA: 9 320m 2 Wale: 36 Top 10 Assets Tenants: Pick n Pay, Standard Bank, First National Bank June 2018

54 Disclaimer The information contained in this presentation has been prepared by Spear REIT Limited ( Spear ) for information purposes only for the purpose of providing information to invited investors with regard to Spear. This presentation does not constitute, envisage or represent an offer to the public, as envisaged in the Companies Act, No. 71 of 2008, as amended ( Companies Act ), nor does it constitute a prospectus registered in terms of the Companies Act. This presentation is being made available only to and is directed at persons who fall within any of the categories envisaged in section 96(1)(a) of the Companies Act or who wish to subscribe for placement shares, the subscription cost of which exceeds R1 million per single addressee acting as principal (as contemplated in section 96(1)(b) of the Companies Act) (all such persons together being referred to as Relevant Persons ). Any investment activity to which this presentation relates will only be available to and will only be engaged with Relevant Persons. Spear has expressed its own views in the presentation and these may change. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. The information in this presentation has not been independently verified and is subject to change. In particular, some of the financial information herein has not been audited or reviewed. No reliance may be placed for any purpose whatsoever on the information, representations or opinions contained in this presentation, and no liability is accepted for any such information, representations or opinions by either Spear or PSG Capital Proprietary Limited ( PSG Capital ). This presentation does not constitute either advice or a recommendation regarding any securities. Any person who is in any doubt about the subject matter of this presentation should consult their advisors or any duly authorised person. None of Spear, PSG Capital or any other person makes any guarantee, representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this presentation, and none of Spear, PSG Capital or any other person accepts any responsibility or liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. Forecast risk warning: This presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding Spear s intentions, beliefs or current expectations concerning, among other things, Spear s results of operations, financial condition, liquidity, prospects, growth, strategies, and the sectors in which Spear intends to operate. By their nature, forward-looking statements involve risks and uncertainties. You are cautioned that forward s looking statements are not guarantees of future performance and that Spear s actual results of operations, financial condition and the development of the sectors in which Spear intends to operate may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. No representation, express or implied, is made that any changes to the information herein will be provided to you. Neither this presentation nor its contents may be distributed, published or reproduced, in whole or in part, by you or any other person for any purpose. In particular, neither this presentation nor any copy of it may be distributed or transmitted in or into the United States of America, Canada, Australia or Japan or in any other country where such distribution may lead to a breach of law or regulatory requirements, or transmitted, distributed or sent to or by any national, resident or citizen of such countries. The distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. Any such distribution could result in a violation of the law of such jurisdiction. June 2018

55 THANK YOU