Property Flash


October 24 2023

Spear Reit, the JSE-listed landlord which owns properties solely in the Western Cape, has managed to grow its dividend yet again while many of its peers have battled in recent months.

Spear reported in its financial results for the six months to end-August, that while its distributable income per share fell 1.19% to 40.77 cents per share, from 41.26 cents per share in the prior corresponding period, its distribution or dividend per share increased 3.21% to 38.33 cents per share. This was based on a 94% pay-out ratio, from 37.14 cents per share in the prior corresponding period, based on a 90% pay-out ratio.

Real estate investment trusts (Reits) like Spear are required to pay a minimum of 75% of their distributable income as a dividend each financial year. Many of those who invest in these funds do so because they want to earn consistent income returns. Reit dispensation was adopted in late 2013. It was followed by a listings boom and these property companies found it relatively easy to raise capital during this time. But in 2017, the good times ended amid the Resilient stable crisis. Resilient Reit and other groups which it had relationships with saw their shares sold down. There was also a contagion effect with other Reits losing value. This was even though the authorities did not find the stable guilty of wrongdoing. From then on, property funds needed to work hard again to attract investors.

Then during the Covid-19 pandemic, Reits again battled and many paid out partial dividends if any dividend at all.

Now in 2023, a number of property funds have seen their dividends shrink as they battle high interest rates which are making finance costs far more expensive. But Spear, which was listed on November 11 2016, is still achieving dividend growth. The group is led by CEO Quintin Rossi. Rossi took over from the current non-executive deputy chairman, Mike Flax.

Spear’s portfolio includes 28 industrial, retail and office assets. The group likes to invest in a variety of property types. Rossi said Spear has benefitted from owning properties in growing nodes like Paarden Eiland. The properties are underpinned by strong lease covenants and highly rated tenants, Rossi said.

He said that Spear’s tail assets which could be sold at attractive prices to refine the fund’s portfolio were worth R500m.

“We are not under pressure to dispose of assets,” said Rossi.

Currently Spear is a diversified fund. Rossi said that ideally the group’s assets would be 25% retail, 35% industrial, 30% commercial and 10% other in time.

Spear’s portfolio value increased 5.85% from R4.22bn in February to R4.46bn.

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