PRE-CLOSE INVESTORS’ PRESENTATION AND TRADING UPDATE INTERIM PERIOD 31 AUGUST 2020 / 28 AUGUST 2020
TABLE OF CONTENTS INTRODUCTION AND 1. ENVIRONMENTAL UPDATE 2. IMPACT OF COVID-19 ON SPEAR 3. PORTFOLIO UPDATE 4. SECTORAL PERFORMANCE 5. OUTLOOK AND PROSPECTS QUESTIONS 6. / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 2
1 / INTRODUCTION AND ENVIRONMENTAL UPDATE EMAIL QUESTIONS TO INFO@SPEARPROP .CO.ZA / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 3
1 / INTRODUCTION AND ENVIRONMENTAL UPDATE / MISSION STATEMENT AND STRATEGY STRATEGY SHORT TERM Adapted to Covid-19 operating environment Capital preservation and liquidity management Maintained income statement consistency and strong rental collections to date Letting of vacant space and quick turnaround times High level of tenant retention through active asset management Reduce controllable expenses Disposal of non-core assets MISSION STATEMENT MEDIUM TO LONG TERM To be the leading Western Cape-focused Narrow asset ownership to commercial, convenience retail and industrial REIT and to consistently grow our Maintain distribution payment strategy distribution per share ahead of inflation and Prudent recycling of capital within the top quartile of our peer group. Reduce gearing ratio in line with strategy Conservative debt hedged profjle Maintain high portfolio occupancy levels / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 4
2 / IMPACT OF COVID-19 ON SPEAR / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 5
2 / IMPACT OF COVID-19 ON SPEAR / LOCKDOWN OPERATING PERCENTAGES – REVENUE BASED ON RENTABLE AREA LOCKDOWN OPERATING PERCENTAGES – REVENUE-BASED ON RENTABLE AREA The percentages below illustrate the monthly revenue contributed to the group under the various lockdown levels: May 2020 August 2020 LEVEL 5 20% 20% LEVEL 4 50% 50% 86% LEVEL 3 93% LEVEL 2 91% 99% LEVEL 1 100% 100% * The above levels are based on tenants allowed on premises per regulations and do not take into account tenants that could operate from home / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 6
2 / IMPACT OF COVID-19 ON SPEAR / FY2021 OPERATING SCENARIOS – UPDATED TO AUGUST 2020 FROM MAY 2020 FY2021 OPERATING SCENARIOS – UPDATED TO AUGUST 2020 FROM MAY 2020 LOW ROAD HIGH ROAD 85% of total budget collected* 60% of FY2021 budget collected Spear profjtable and on track to stabilise income generation Spear breakeven point Balance sheet and income statement remain robust and meeting covenants** Liquidity availability has remained suffjcient to absorb various rental credits and deferrals and in addition to covering operating expenditure and interest: MIDDLE ROAD • no going-concern risk identifjed 61% - 71% of total budget collected • R180 million in cash availability Spear moving towards profjt and accumulation of cash reserves • zero funders assistance measures initiated Funders remain aligned with Spear strategies Spear suffjciently capitalised to meet short- and long-term commitments * Zero hospitality income included in various scenario plans ** Strictest covenant 50% LTV and 2 times ICR and being met / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 7
3 / PORTFOLIO UPDATE / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 8
3 / PORTFOLIO UPDATE / PORTFOLIO SNAPSHOT 32 7.23% 100% AVERAGE NUMBER OF IN-FORCE WESTERN CAPE PROPERTIES ESCALATIONS ASSETS LETTING R4.5 BN 453 319 M 2 28 MONTHS ASSET VALUE GLA WALE R91.10/ M 2 / PM 91.40% AVERAGE RENTAL OCCUPANCY INCLUDING RATES / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 9
3 / PORTFOLIO UPDATE / COLLECTIONS Trading environment remains extremely challenging Spear’s hands-on approach and regional focus paying off YTD collections under the circumstances have been satisfactory and inline with management’s planning scenarios Billing reflects revenue after all credits and deferments including recoveries Original budget reflects pre-Covid-19 operating revenue including hotels and recoveries (set in December 2019) Zero hospitality income in billings recovered (factored into various scenario plans) Tenant arrears as at 26 August 2020 = R16.1 million (and reducing) Below excludes VAT March April May June July Aug* Total MTD Original budget (including utilities and hotels) (Rands) 44 653 849 44 001 509 44 320 065 44 601 273 46 676 767 48 408 522 272 661 985 Billed (including utilities, excluding hotels) (Rands) 41 333 448 39 524 308 37 026 221 35 231 057 41 510 667 44 192 574 238 818 275 Collected vs original budget (%) 91.60 87.87 81.58 75.26 80.15 74.34 81.67 Collected vs billings (%) 98.95 97.83 97.65 95.28 90.12 81.43 93.25 * August 2020 included utility recoveries billed that are only due month-end and considered collectable and will increase collected vs billed and original budget for August to 85.55% and 78.10% respectively and increasing / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 10 year to date to 94.01% and 82.34% respectively.
3 / PORTFOLIO UPDATE / EXCLUSIONS, CREDITS AND DEFERRALS (EXCLUDING UTILITIES) 93.25% Spear has 419 tenants with 196 tenants provided with Covid-19 related relief. COLLECTIONS VS. BILLED % of YTD budget Classifjcation YTD amount (rentable area only) Hospitality (12 314 291) * 5.95 Credit (10 397 333) ** 5.02 Deferral (5 129 657) *** 2.48 Stopped billing (1 152 532) **** 0.56 Variance to budget (28 803 742) 14.00 * Per May 2020 results presentation zero income forecast for hospitality ** Internal assumptions are that this number will not increase signifjcantly over balance of FY2021 *** R1.3 million of deferrals already billed and collected in August 2020 **** Worst-case scenario this amount increases to R2.4 million for FY2021 / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 11
3 / PORTFOLIO UPDATE / TENANT LETTING ACTIVITY Expiries and Average gross Renewals/ Gross rental Average gross Average rental cancellations Gross rental expiry rental new lets at renewals/ new rental reversion GLA at expiry R/m² GLA new lets R/m² % Commercial 13 899 1 895 882 136.41 9 170 1 448 829 158.00 15.83 Industrial 73 565 2 901 840 39.45 55 676 2 142 064 38.47 -2.46 Retail 5 697 669 805 117.58 5 156 474 608 92.05 -21.71 93 160 5 467 527 97.81 70 002 4 065 502 96.17 -1.67* 130 000m² coming up for renewal in FY2021, with a total of 93 160m² which has either been renewed or relet 30 000m² under negotiation with two existing blue-chip listed tenants Commercial positive reversion is due to No.1 Waterhouse relet at 30% above rental guarantee which expired June 2020 * Relates to two retail tenants. In line with management’s expectations and budgets. / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 12
3 / PORTFOLIO UPDATE / NON-CORE DISPOSALS In line with management’s less-is-more strategy to focus on assets valued at R100 million and above the following non-core asset disposal updates are listed below: R148.8 MILLION OF DISPOSALS CONCLUDED OR Value Net Yield UNDERWAY Property R’000 % Status 10 Mill Street 55 800 9.5 Sold and transferred Value Net Property R’000 Yield Status 12 Pickwick 30 000 9.57 Under DD 142 Edward 42 000 9.50 Under DD Island Business Park 21 000 10.00 Under negotiation 93 000 * Once all disposals have been concluded and transferred net proceeds of R148.8 million will be available. * All proceeds from non-core disposals to be deployed into Spear’s debt facilities. / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 13
4 / SECTORAL PERFORMANCE Sector-wide the impact of Covid-19 has been felt in varying degrees. The resilience of the Spear portfolio has been displayed in the level of collections set out earlier in the presentation along with the following sectoral performance update. / Pre-Close Investors’ Presentation and Trading Update / Interim Period 31 August 2020 / 14
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