Capital Raise June 2018 Table of Contents 1. Spear REIT at a Glance - - PowerPoint PPT Presentation
Capital Raise June 2018 Table of Contents 1. Spear REIT at a Glance Appendix: 2. FY2018 Highlights Top 10 Assets 10. Questions 3. Financial Performance & Answers 9. Outlook 4. Group Structure & Directors 8. Capital Raise: 5. Portfolio
Timing & Process
& Answers
Appendix: Top 10 Assets
& Directors
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“To be the leading Western Cape-focused REIT and to consistently grow our distribution per share ahead of infmation and within the top quartile of
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Active Asset Management
Portfolio Value R3.1 billion Rentable Area (GLA) 324 245m2 Number Of Properties 31 Occupancy Rate 98.1% Average Escalation 8.38% WALE 30 months Gearing (LTV) 38.48% Average Property Value R94 million [2017: R57 million] Average Property Value Per m2 R9 665/m2
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Distribution Per Share Tangible Net Asset Value Per Share Investment Property Capital Raised Shares in Issue Gearing (LTV) Signifjcant Transactions 78.50 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 165 190 689 65% from 98 226 952 38.48% R1.35 billion in new acquisitions during period
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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 316 595 61 262 Property operating and management expenses (87 422) (16 294) Net property-related income 229 173 44 968 Administrative expenses (17 530) (4 558) Net operating profjt 211 643 40 410 Fair value adjustment – Investment properties 252 535 40 553 Depreciation and amortisation (441) (4) Formation and listing cost (314) (1 873) Share-based payment expense (455) (3 939) Profjt from operations 462 968 75 147 Net Finance costs (76 044) (16 662) – Finance costs (82 297) (20 487) – Finance income 6 253 3 825 Profjt before taxation 386 924 58 485 Taxation (695) 6 846 Profjt/(Loss) for the year 386 229 65 331 Attributable to: Equity owners of the parent 383 186 65 331 Non-controlling interest 3 043 – Total comprehensive income for the year 386 229 65 331 Distribution per share (cents) 78.50 23.51
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Consolidated Statement of Financial Position
Reporting periods are not comparable
Spear REIT Limited and its Subsidiaries for the period ended 28 February 2018
Group Audited Feb 2018 R’000 Group Audited Feb 2017 R’000 ASSETS Non-current assets 2 975 850 1 452 376 Current assets 251 488 41 136 TOTAL ASSETS 3 227 338 1 493 512 EQUITY AND LIABILITIES Total attributable to owners 1 917 318 986 808 Non-controlling interest 54 155
1 971 473 986 808 Non-current liabilities 1 053 434 478 453 Current liabilities 202 431 28 251 TOTAL LIABILITIES 1 255 865 506 704 TOTAL EQUITY AND LIABILITIES 3 227 338 1 493 512 Number of ordinary shares in issue 165 190 689 98 226 952 Gearing ratio (%) 38.48 33.09 Tangible net asset value per share (Cents) 1 157 1 003
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Funding Maturity LTV – 38.48% Total Borrowings – R1.205 billion Average Cost of Funding – 9.25% 0.40% Hedged Funding – 57.58%
R100 million
R152 million
R953 million FY2019 FY2020 FY2021
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%
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As at 28 February 2018 and no post Balance Sheet transactions included
DoubleTree by Hilton Hotel, Cape Town at Upper Eastside incl. retail and commercial Sable Square Pembury Retirement Complex 15 on Orange Hotel by Marriott
Directly held Assets
Subsidiary Companies
Directly held Assets
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INCOMING CHIEF EXECUTIVE OFFICER Co-founder of Spear Committees: Executive, Investment, Audit & Risk, Social & Ethics
EXECUTIVE DEPUTY CHAIRMAN Co-founder of Spear Committees: Executive, Investment, Audit & Risk
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Abu Varachhia
Chairman
Jalal Allie
Lead Independent Non-executive
Quintin Rossi
CEO
NON- ExECUTIVE ExECUTIVE
Brain Goldberg
Independent Non- executive
Mike Flax
Executive Deputy Chairman
Niclas Kjellström- Matseke
Independent Non- executive
Christiaan Barnard
CFO
Sean McCarthy
Non-executive
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Western Cape 98% of assets Number of properties 31 Portfolio value R3.1 billion Average property rental rate R91/m2 Average property valuation per m2 R9 665/m2 In force escalations 8.38% Cost to income ratio (Net) 18.51%
Active Asset Management
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Acquisitions: The Group acquired the following properties during the year ending 28 February 2018: Disposals: The Group disposed of 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-17 41 200 23 200 9.70 Selective House, Tygervalley 14-Mar-17 13 200 13 200 9.92 15 on Orange, Cape Town 12-Jun-17 298 000 175 000 9.55 2 Long Street, Cape Town 22-Jun-17 389 000 220 000 9.32 Mega Park Industrial Estate, Bellville 28-Jul-17 379 157 224 000 9.30 Virgin Active George, George 8-Aug-17 22 000 12 000 9.22 Tyger Manor, Tygervalley 11-Oct-17 59 600 26 800 9.31 MWEB Head Offjce, Bellville 18-Jan-18 145 000 65 250 9.60 1 347 157 759 450 9.49 Transfer date Disposal Value R’000 Book Value R’000 Premium Book Value % Disposal Yield % 12 Sandown Road, West Beach 21-Feb-18 5 739 4 600 25 8.00 08 Sandown Road, West Beach 21-Feb-18 10 478 8 544 23 8.00 142 Bree Street, Cape Town 1-Jun-18 150 000 73 800 103 3.00 Tyger Manor, Tygervalley 1-Jul-18 75 000 61 000 23 8.00 241 217 147 944 6.75
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Value (Rm) Sector GLA (m2) Valuation (R/m2) Total Value (%) 305 914 Hospitality 16 727m2 9.76% 18 289 Value (Rm) Sector GLA (m2) Valuation (R/m2) Total Value (%) 302 298 Mixed Use 18 521m2 9.65% 16 322 Value (Rm) Sector GLA (m2) Valuation (R/m2) Total Value (%) 358 300 Mixed Use 30 934m2 11.43% 11 583 Value (Rm) Sector GLA (m2) Valuation (R/m2) Total Value (%) 418 400 Commercial 24 822m2 13.35% 16 856
Mega Park Industrial Estate, Bellville South
Value (Rm)
Total Value
Total GLA
Portfolio
Sector GLA (m2) Valuation (R/m2) Total Value (%)
2 Long Street, Cape Town Sable Square, Milnerton 15 on Orange, Cape Town Upper Eastside, Woodstock
426 000 Industrial 86 091m2 13.59% 4 948
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Revenue (Rm)
GLA (m2)
Residential
Commercial
Retail
Industrial
Hospitality
Residential
Hospitality
Industrial
Retail
Commercial
For the year ended 28 February 2018
(Rm) Industrial 152 514m2 Commercial 97 060m2 Retail 38 606m2 Hospitality 28 065m2 Residential 8 000m2 (m2) Industrial R70 326 Commercial R111 986 Retail R67 868 Hospitality R36 935 Residential R7 205
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100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Vacant Monthly Expires 3/2018 to 2/2019 Expires 3/2019 to 2/2020 Expires 3/2020 to 2/2021 Expires 3/2021 to 2/2022 Expires 3/2022
Lease Expiry Profjle based on GLA as at 28 February 2018
Industrial Commercial Retail Hospitality Residential Total
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Consol Glass Liquor Runners Distell Limited Nampak Limited African Pride Imperial Cargo Multi Room Management MWEB Tanker Services Pembury Retirement Lodge
25K/m2 20K/m2 15K/m2 10K/m2 0K/m2 5K/m2
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(Due to aggressive letting & successful tenant retention programmes) Analysis of the Property Portfolio as at 28 February 2018 Analysis of property portfolio in respect of tenant profjles Large national and international tenants, large listed tenants, government and major franchisees. National tenants, smaller listed tenants, franchisees, medium to large professional fjrms. Other
Offices
Number of Tenants 192 Based on GLA
Number of Tenants 116
Number of Tenants 87
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Assets
Tanks
Water Tanker Truck
Plants in process
Portfolio water requirements: 2.6 million litres/week Spear water continuity storage capacity: 1.07 million litres Water continuity investment: R7 million Capital deployed to date: R2 million Water use & 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 ofg (where possible), supplied hand sanitisers Tap aerators installed to reduce water fmows Use of pre-diluted cleaning chemicals Use of grey water to clean where possible
Water Continuity
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INVERTER LIGHTBULB SUNLIGHT
HOW SOLAR PANELS WORK
DIRECT CURRENT ALTERNATING CURRENT PANEL ExCITED ELECTRONS (-) LAYER (+) LAYER DIODE
Assets earmarked for Phase 1 rollout: 6 Combined system size: 2,33MWh Renewable energy investment: R24 million Average payback period 4.5 years Benefjts 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 Reduction of group carbon footprint including low maintenance & operation costs Strong business & investment case to roll out in favourable tarifg areas from R0.72c p/kWh – R 1,30 p/kWh Assists with green-star-rating process and aligns with Spear’s sustainability goals
Renewable Energy
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Organic Portfolio Growth
Sable Square - Phase 1 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton GLA added: 3 431m2 Sector: Mixed Use Development cost: R50 000 000 Completion yield: 9.8% Status: Completed
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Organic Portfolio Growth
Sable Square - Phase 2 Physical address: Cnr Bosmansdam Rd & Ratanga Rd, Milnerton Planned GLA to be added: 12 000m2 Sector: Retail & Residential Development cost: R200 000 000 Target yield: 10% Status: Target Commencement FY2019
Architect’s Impression
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Organic Portfolio Growth
78 on Edward Physical address: 78 Edward Street, Tygervalley GLA added: 3 500m2 Sector: Mixed Use Development cost: R110 000 000 Target yield: 9% Status: Completion in FY2019
Architect’s Impression
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Organic Portfolio Growth
Marine Place - Paarden Eiland Physical address: Marine Drive, Paarden Eiland GLA to be developed: 52 000m2 Sector: Mixed Use Development cost: R1 700 000 000 Target yield: 10% Status: Target Commencement TBA
Architect’s Impression
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Island Business Park, Paarden Eiland, Cape Town
Physical address:
GLA: 2 322m2 Sector: Mixed Use Acquisition price: R24 000 000 Acquisition yield: 10% Strategic Acquisition: Part of Paarden Eiland Development Strategy
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Blackheath Park, Blackheath, Cape Town
Main tenants: Pioneer Fishing, ZTE / Bollare & Namaqua Wines Physical address: Cnr Range & Station Road, Blackheath GLA: 37 333 m2 Sector: Industrial Acquisition price: R110 500 000 Acquisition yield: 10.43% WALE: 28 months
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Old Mutual Private Wealth, Century City, Cape Town
Main tenant: Old Mutual Private Wealth, Estuaries Physical address:
GLA: 4 199m2 Sector: Commercial Acquisition price: R98 000 000 Acquisition yield: 9.22% WALE: 52 months
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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
9 – 11% distribution growth for 2019 fjnancial 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:
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Amount to be raised Placing price Revised FY2019 forward yield Opening of private placement Closing of private placement Notifjcation of allotments Issue of shares R150 million to R300 million R10.00 - R10.20 8.6% 28 May 2018 1 June 2018 4 June 2018 11 June 2018
Our objective is to generate sustainable and growing income as a specialised REIT.
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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 fjnancial year 9 -11% distribution growth for 2019 fjnancial year 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 diversifjcation
Key Features of the Capital Raise
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Active Asset Managers
Before Capital Raise Shares % Held Abu Varachhia 20 984 992 12.70 Mike Flax 20 807 264 12.60 Sean McCarthy 15 222 222 9.21 Quintin Rossi 7 642 664 4.63 Brian Goldberg 1 300 000 0.79 Niclas Kjellström-Matseke 625 000 0.38 Christiaan Barnard 123 600 0.07 Jalal Allie 100 000 0.06 Public 98 384 947 59.56 165 190 689 100.00 Post Capital Raise Shares % Held Abu Varachhia 20 984 992 10.61 Mike Flax 20 807 264 10.52 Sean McCarthy 15 222 222 7.70 Quintin Rossi 7 642 664 3.86 Brian Goldberg 1 300 000 0.66 Niclas Kjellström-Matseke 625 000 0.32 Christiaan Barnard 123 600 0.06 Jalal Allie 100 000 0.05 Public 130 946 711 66.22 197 752 453 100.00
Based on R300 million raised at R10.20
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Capital Deployment Acquisitions R’000 Capital Requirements Total acquisition cost 200 000 Bank debt settled 100 000 300 000 Maximum capital raise 300 000 Less: Antecedent dividend (10 294) Less: Equity raise fees (3 750) Net proceeds to Spear 285 956 Cash reserve funding 14 044
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Regionally Specialised High Quality Real Estate Portfolio Active Asset Management Capital Structure FY2019 Guidance & Prospects
Cape Town – SA’s highest growth area Diversifjcation across all property sectors Favourable economic & property fundamentals Portfolio value R3.1 billion GLA of 324 245m2 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 LTV 38.48% Anticipated market capitalisation R1.9 billion post capital raise TNAV per share R11.57 (pre-distribution) Revised distribution FY2019 9% - 11% higher than the FY2018 fjnal distribution of 78.50 cents Growth supported by accretive acquisitions and organic portfolio improvements Realisation of undeveloped portfolio bulk
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Mega Park Industrial Estate, Bellville South
Physical address: Cnr Pieter Barlow and Mill Roads, Bellville, Cape Town Value (R‘000): R426 000 Sector: Industrial Zoning: Industrial GLA: 86 091m2 WALE: 24 Tenants: Consol Glass, Tufgy Manufacturing, Imperial Group, Storage Town
Top 10 Assets
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2 Long Street, Cape Town
Physical address: 2 Long Street, Cape Town Value (R‘000): R418 400 Sector: Commercial Zoning: General Business 1 GLA: 24 822m2 WALE: 23 Tenants: SAMSA, Sturrock Grindrod, Fairheads, Harambee
Top 10 Assets
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Sable Square, Milnerton
Physical address: Cnr Bosmansdam and Ratanga Roads, Milnerton Value (R‘000): R358 300 Sector: Retail Zoning: General Business 1 GLA: 30 934m2 WALE: 41 Tenants: Pick n Pay, Spur, Clicks, China Town, Baby City
Top 10 Assets
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15 on Orange, Cape Town
Physical address: Cnr Grey Pass and Orange Street, Cape Town Value (R‘000): R305 914 Sector: Hospitality Zoning: Mixed Use GLA: 16 727m2 WALE: 72 Tenants: African Pride Hotel
Top 10 Assets
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Upper Eastside, Woodstock
Physical address: 31 Brickfjeld Road, Woodstock, Cape Town Value (R‘000): R302 298.16 Sector: Hospitality Zoning: Mixed use GLA: 18 521m2 WALE: 20 Tenants: DoubleTree by Hilton and Conference Centre, Shanduka Black Umbrella, Aegis Media, STA Travel
Top 10 Assets
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MWEB Head Offjce, Bellville
Physical address: 100 Fairway Close, Parow Value (R‘000): R148 263 Sector: Commercial Zoning: General Business 1 GLA: 11 196m2 WALE: 25 Tenants: MWEB Head Offjce
Top 10 Assets
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Distell DC, Parow
Physical address: 1 Beacon Way, cnr Jan van Riebeeck Drive, Parow Value (R‘000): R87 632 Sector: Industrial Zoning: General Business 1 GLA: 16 170m2 WALE: 40 Tenants: Distell Distribution Centre
Top 10 Assets
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Blackheath DC, Blackheath
Physical address: Cnr Range and Anfjeld Road, Blackheath Value (R‘000): R86 055 Sector: Industrial Zoning: General Business 1 GLA: 22 315m2 WALE: 38 Tenants: Liquor Runners, Elzea Snacks
Top 10 Assets
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Manhattan Plaza, Tygervalley
Physical address: 100 Edward Street, Bellville Value (R‘000): R81 848 Sector: Commercial Zoning: Secondary Business GLA: 4 931m2 WALE: 24 Tenants: Clickatell, Hyundai, NBC Consult, DDP Valuers
Top 10 Assets
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Viking Business Park, Epping
Physical address: Cnr Viking Way & Showground Avenue, Epping Value (R‘000): R77 354 Sector: Retail Zoning: Commercial C1 GLA: 9 320m2 WALE: 36 Tenants: Pick n Pay, Standard Bank, First National Bank
Top 10 Assets
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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 ofger 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 verifjed and is subject to change. In particular, some of the fjnancial 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, fjnancial 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, fjnancial condition and the development of the sectors in which Spear intends to operate may difger 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.
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