April 3 2024 21:07
Spear Reit (SEA:SJ), the only regionally focused real estate investment trust listed on the JSE has acquired a real estate portfolio from diversified Emira Property Fund Limited worth R 1.146bn. The acquisition, which consists of a diversified portfolio situated exclusively in the Western Cape, is part of Spear’s focused strategy of solely investing in this province.
Western Cape real estate fundamentals have remained strong across the industrial, retail, commercial, and residential sectors as the region manifests counter-cyclical economic and investment activity compared to the rest of South Africa, Spear said..
Spear CEO Quintin Rossi said: “This new portfolio acquisition marks the achievement of a key strategic objective by Spear, subject to certain approvals, as we take hold of this transformative and accretive transaction. This will add value both in income and asset quality to the existing Spear portfolio, increasing our diversified portfolio by 16% to 502 000m2 (Liberty Life gross lettable area excluded) of high-quality Western Cape-only real estate assets. It is a true testament to the execution of one of the key pillars of our investment strategy.”
The acquired portfolio comprises of 93 491m2 of industrial, medical and life science-focused retail and commercial assets, located across prime nodes in the Cape metropole. The new portfolio segmentation based on a gross lettable area comprises 51% industrial, 40% commercial and 9% retail assets. One of the notable industrial assets is the fully occupied Northpoint Logistics Park situated in the R300 Brackenfell industrial precinct with a gross lettable area of 16 000m2 of modern warehousing solutions.
The new acquisition increases Spear’s asset base to 40 properties, with a combined value of R 5.4bn (excluding the disposal of a R 400m Liberty Life building awaiting transfer out of the Spear portfolio). The portfolio is underpinned by industrial assets which will account for 59% of the expanded portfolio’s gross lettable area once the announced portfolio acquisition transfers to Spear.
Spear’s CFO Christiaan Barnard said the group financed the new acquisition through a combination of available equity and debt, utilising disposal proceeds and funds from a recent R 313.5m private placement, which concluded in February this year. A debt package was secured with Spear’s funders which will see the Spear loan-to-value post implementation of the new portfolio remain at the lower end of its strategic band of between 38% and 43%.
Spear’s chief investment officer, Kim Pfaff-Karg said: “Securing a portfolio of this quality, asset composition and size within the Western Cape was not an easy task. Our deal team remained focused on property fundamentals throughout our negotiations, and we were very fortunate to secure this high-quality portfolio from an equally reputable counterparty.”
The acquired portfolio has a 95% occupancy rate, 26 months weighted average lease expiry and just under 7% annualised in-force escalation rate. The average valuation per square meter is R 12 258/m2. Spear will acquire the portfolio on an initial yield of 10.1% adding to the overall group profitability, once stabilised into the Spear portfolio.
Rossi said the new portfolio will, subject to shareholder and regulatory approvals, transfer into the current Spear portfolio before the end of 2024.
Spear’s financial year (FY) 2024 pre-close presentation provided guidance on its financial performance for the balance of FY2024 which would see its distributable income per share for the year to be between 0% – 1.5% higher than FY2023. Spear’s FY2024 annual results will be released on May 22 2024.
Northpoint Logistics Park
alistair@propertyflash.co.za
