Property Flash


Spear Reit, the Western Cape focused property fund, has concluded the disposal of its final hospitality asset, the Cape Town hotel: 15 on Orange as it focuses on owning industrial business parks and specialised offices and retail centres.

The R246m deal marks Spear’s exit from hotels. 15 on Orange was acquired by the Capital Hotels and Apartments group, led by Marc Wachsberger.

Spear CEO Quintin Rossi said: “It has been our strategy, as announced in 2019, to exit the hospitality sector and our disciplined approach to stay on course has been achieved with the successful sale of this property.”

“Spear’s portfolio composition, will now be fully aligned with management’s strategic objectives of owning only fixed income producing Western Cape assets, comprising industrial, retail, commercial and mixed-use properties,” he said.

The disposal consideration represented a 7% discount to the call option price of R265m, as agreed in terms of an option agreement. The discount was acceptable to Spear’s board of directors, given the fact that the sale would be implemented prior to the expiry of the period within which the call option could have been exercised.

There is no related debt to be settled as a result of the sale and the full disposal consideration will be received by, and be available to Spear. The disposal yield on the asset is 8.1%.

Rossi said management’s proven ability to redeploy capital through sound and strategic capital allocation meant the proceeds would be put to work in the balance sheet.

The sale will reduce the group loan-to-value (LTV) by 335 basis points and the forecasted Spear group LTV, following the sale, will be 36.8% firmly positioning the balance sheet to take advantage of growth opportunities as and when they present themselves, said Rossi.

LTVs are used to measure the financial health of a property fund. An LTV of less than 40% is desirable for most fund managers in SA.

Spear is the only regionally focussed real estate investment trust listed on the JSE with a sole investment mandate of investing into high quality industrial, retail, commercial and mixed – use real estate within the Western Cape.

The effects of semigration and the superior municipal infrastructure of the Western Cape province makes Spear’s investment philosophy an attractive opportunity for investors seeking indirect real estate exposure in South Africa’s top real estate investment locations, said Rossi.

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