Spear Reit, the JSE-listed property fund which invests solely in the Western Cape, has sold an office building which houses Liberty Life in Century City, for R400m to banking group, Capitec. The building was sold at a disposal yield of 9.57%.
Spear is increasing its portfolio exposure to retail and industrial assets and therefore selling some of its offices. Spear bought the Liberty Life building in 2019 for R375m. It has a gross lettable area of more than 18,000m2 and weighted average net rental of more than R200/m2. Spear’s CEO Quintin Rossi, said his company would settle the R375m debt attributable to the property. Further R1m will be spent on sale costs and the company will retain about R24m in cash for reinvestment into the fund.
“While Spear’s retention of certain multi-let commercial office assets remains part of its overall strategy, post the implementation of the disposal, the revenue contribution of the commercial office sector assets within the portfolio will be aligned to that of the revenue contribution of the industrial sector assets within the portfolio, being approximately 40% each, with the balance being from the retail sector assets within the portfolio,” Spear said in a statement.
The net disposal consideration represents an 8.70% discount to Spear’s latest reported book value of the property, after deducting all transaction costs. Spear said this discount was reasonable and acceptable to its board, given the strategic benefits of the disposal.
Spear owns property worth R4.48bn, which includes 30 industrial, commercial, retail and mixed-use assets in the Western Cape.
The sale of the Liberty Life building will reduce Spear’s loan-to-value (LTV) by about 500 basis point to 34%-36%.
Rossi said Spear would continue to look for acquisition opportunities. The fund recently bought the 21,000m2 Island Urban Logistics Park in Paarden Eiland for R185m from the largest last-mile logistics owner and operator, Inospace.
alistair@propertyflash.co.za