Spear Reit, the Western Cape real estate investment trust, has agreed to buy The Island, a modern warehousing complex located in Paarden Eiland, Cape Town. Spear is building an asset presence in Paarden Eiland, a fast-growing commercial and industrial area.
Spear, a JSE-listed group will pay R185m for the asset which it is buying from Inospace, the flexible industrial parks company run by Rael Levitt. Inospace have become last mile industrial park specialists.
The acquisition is in line with Spear’s strategy to increase portfolio exposure to high quality industrial real estate with a focus on logistics, urban logistics and bulk warehousing within the Cape Town Metropole. Spear CEO Quintin Rossi said Spear will expand more into industrial assets, which already make up nearly 60% of their assets by gross lettable area.
The Island, which is 100% occupied, is one of only a hand full of large-scale modern warehousing complexes with roof heights ranging from 11m to 14m under eaves, located in Paarden Eiland, Cape Town, Rossi said.
Paarden Eiland is within 10 minutes’ drive of the Cape Town CBD offering a compelling accommodation solution to urban logistics firms, large box destination-based service providers and engineering services serving the Cape Town Metropole, in addition to shipping ports, Rossi said.
As supply chains and logistics services are redesigned as a result of the global pandemic and the adoption of a China plus one strategy, urban logistics parks have become attractive investment opportunities in South Africa. The Western Cape real estate sector has shown incredible resilience coming out of the Covid-19 pandemic and this latest acquisition by Spear Reit has been well timed, Rossi explained.
“The acquisition is in line with Spear’s stated strategy to continuously increase portfolio exposure to high quality industrial real estate with a focus on logistics, urban logistics and bulk warehousing within the Cape Town Metropole as a key driver of Spear’s focussed but not rushed growth plans. The Island acquisition is a natural fit into the Spear portfolio,” said Rossi.
Spear’s current assets under ownership are valued at R4.48bn; an increase of 221% since listing in 2016. Currently the Spear portfolio consists of 30 Western Cape assets, the top five, by value equate to 48% of the total portfolio value and are spread across industrial, convenience retail and commercial real estate in the Cape Metropole.
Rossi said the acquisition of the property further bolsters Spear’s high quality industrial portfolio and “will meaningfully contribute to the ongoing sustainable and consistent cashflows generated across the Western Cape portfolio. Spear’s current industrial portfolio occupancy sits at 98% across 247 047m2.
Spear’s Chief Financial Officer Christiaan Barnard said the acquisition would be funded via proceeds realised from recent non-core disposals and bank debt.
“The acquisition is accretive to the overall Spear portfolio from the transfer date delivering an initial yield to the fund of 9.75%. The Island acquisition has given management a great capital recycling opportunity into a larger, strategy aligned and high quality industrial asset,” he said.
Spear Reit are set to announce their interim results for its 2023 financial year on October 21 2022.