February 20 2024
Spear, the real estate investment trust (Reit) focused on the Western Cape of SA completed a private placement, and raised R313.5m.
Spear, led by CEO, Quintin Rossi, listed almost a decade ago to appeal to investors who wanted exposure that was focussed on Cape Town and its economy. Spear’s share price has grown around 64% over the past three years, closing at R8.50 on Tuesday, while it has provided steady dividend payouts. Its market capitalisation sits at around R2bn and its owns properties worth around R4.46bn.
In accordance with the private placement, a total of 37,553,852 the new shares would be issued to public shareholders at an issue price of R8.35 per share. This issuance reflects a premium of 0.36% to the volume-weighted average traded price of Spear shares over the 30 trading days immediately before February 6 2024.
The listing and issuance of the new Spear shares occurred at 09:00 a.m. on Friday, February 16 2024.
The recent strong growth in Spear’s share price and the resilience shown by the Western Cape economic landscape provided an opportune stage for the company to implement the placement. In the immediate term, the proceeds will be used to settle certain variable rate debt obligations, enabling Spear to pursue prospects aligned with its growth strategy in a value-accretive manner, Rossi said.
“We consider it a privilege that our shareholders and new investors have entrusted us with capital to deploy into our debt portfolio and Spear’s growth strategy. The Western Cape focus has allowed Spear to maintain and build a high-quality diversified South African real estate portfolio underpinned by strong lease covenants in prime locations whilst providing shareholders with a mission statement aligned return on investment,” said Rossi.
“The provincial macroeconomic ecosystem is of such a nature that investment opportunities can be pursued across the Western Cape due to reliable infrastructure, ongoing infrastructure investment, and the growth in nodal developments due to the increasingly larger impact of semigration. To this end, Spear will continue to diligently seek out piecemeal incremental investment & development opportunities in addition to diversified portfolio opportunities within the province and in line with its capital allocation strategy,” he said.
The reduction of Spear’s debt levels through the private placement will create increased headroom and capacity, enabling management to implement its strategy to grow Spear’s Western Cape property portfolio and pursue acquisition opportunities within the Cape Town Metropolitan area, particularly in industrial and retail assets.
Spear’s loan-to-value (LTV) following the private placement will be within a range of 33% to 34%. This range excludes the disposal and anticipated transfer of the Liberty Life building in Century City, which will further reduce its loan-to-value metrics. LTV is used as a measure of a Reit’s balance street health. Fund managers tend to want LTVs to sit below 40% in SA.
Rossi said Spear’s business strategy of being a fully internally managed REIT focusing on a singular region allowed for focused asset management opportunities across its current portfolio assets and its acquisition and development pipeline.
Management remained optimistic that its targeted growth strategy through acquisitions and developments, which includes a clear and implementable renewable energy and water continuity strategy, will enable Spear to expand its portfolio within the Western Cape by more than R1bn in value and with a further 100,000 m² or more of gross lettable area in the near future.
Spear remains the only regionally focused Reit on the JSE. The portfolio consists of 28 assets spread across the commercial, industrial, and retail sectors.
247@propertyflash.co.za
