May 22 2025 17:39
Spear Reit Limited (SEA:SJ), the Western Cape-focused Real Estate Investment Trust (Reit), achieved stellar results for the financial year to end-February 2025. The group has cemented itself as a leading mid-cap Reit and the top Western Cape landlord.
Amid South Africa’s challenging macroeconomic landscape, Spear has demonstrated resilience, achieving significant milestones in asset value growth, financial and operational performance. The group has grown in leaps and strides since its formation in 2011 and its initial listing on thew JSE’s AltX in 2016.
Spear achieved distributable income per share (DPS) growth of 3.08% aligning with the mid-range of management’s guidance for the year. Spear’s net asset value (NAV) per share increased 3.57% to R12.20. Spear successfully completed the acquisition of 13 prime real estate assets within the Western Cape, valued at R1.15bn at acquisition date. The transaction was completed ahead of schedule and under budget. This strategic acquisition expanded Spear’s asset base and positioned the company for long-term growth.
Spear’s portfolio grew 19.54% from R4.6bn billion in the 2024 financial year to R5.5bn in the 2025 financial year, highlighting the effectiveness of the company’s active management strategy. Spear’s market capitalisation increased R1bn, reaching a total of R3.3bn at year-end, a testament to strong investor confidence and future growth prospects.
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The company saw an improvement in its occupancy rates, which increased by 388 basis points to 97% across its core portfolio by the end of the 2025 financial year compared with the 2024 financial year. This increase was driven by strong leasing momentum and tenant demand surpassing supply.
Spear achieved a positive rental reversion of 4.18% across its portfolio in the reporting period, a clear indicator of the company’s ability to drive value through hands-on asset management. Spear maintained a robust balance sheet primed for growth, with a 27.09% loan-to-value (LTV) ratio and an Interest Coverage Ratio (ICR) exceeding three times. An LTV measures the health of a group’s balance sheet.
“The 2025 financial year has been transformative for Spear. Despite a challenging macroeconomic environment, we have shown resilience through our disciplined portfolio management and strategic acquisitions. The completion of the R1.15bn acquisition ahead of schedule and under budget is a testament to our team’s commitment to operational excellence and long-term value creation. We are confident that these initiatives will continue to position Spear on a firm foundation to achieve the long-term strategy of the business,” said CEO Quintin Rossi.
Chief Investment Officer Kim Pfaff-Karg further highlighted the company’s investment and long-term vision.
“Looking ahead, we remain committed to expanding our portfolio within the Western Cape, South Africa’s highest performing property market. Our strategic objective is to grow our asset base to R15bn over the next 7 to 10 years, while maintaining our disciplined value investment approach to continuously build a robust and defensive portfolio,” she said.
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Chief Financial Officer Christiaan Barnard said the group had achieved pleasing financial results.
“We are pleased to report a 12.21% increase in group revenue compared with the 2024 financial year, driven by the successful integration of the Western Cape Portfolio acquisition. This, combined with strong rental collections of 98.59%, demonstrates the stability and resilience of our income streams,” he said.
“Our distributable income per share (DIPS) increased by 3.08% to 85.55 cents for the year, while the total distribution per share (DPS) also grew by 3.06% to 81.27 cents. This was made possible through proactive and hands-on financial management and effective debt portfolio management, including the refinancing of debt at more favourable terms,” he said.
Spear maintained an annualised payout ratio of 95%, strongly conveying its commitment to returning value to shareholders while maintaining sufficient financial flexibility for continued growth.
Spear’s acquisition of a new Western Cape Portfolio for R1.15bn from Emira Property Fund in October 2024 marked a transformative milestone, adding 13 prime real estate assets, including industrial, retail, commercial, and mixed-use properties. Notably, it introduced medical and life sciences retail assets for the first time, broadening Spear’s investment horizons, Rossi said.
The transaction delivered an initial yield of 9.46%, which increased to 10.1% after factoring in a once-off transaction fee. This acquisition further enhanced Spear’s geographical diversification, with a strong focus on the Cape Town Metropole.
The success of the Western Cape can be attributed to its accountable and effective administration. The region consistently exemplifies strong governance, with the City of Cape Town receiving top honours in both the 2024 Municipal Financial Sustainability Index and the Governance Performance Index (GPI). This commitment to transparency and integrity has fostered a stable environment for investment and growth.
The Western Cape Provincial Government and local authorities have made significant strides in driving economic development, with substantial investments in infrastructure, job creation, and energy security. These initiatives have not only enhanced the region’s appeal to investors but have also strengthened its resilience amidst challenging economic times.
Spear’s commitment to its Environmental, Social, and Governance (ESG) policy continues to gain momentum with its PV solar rollout. As of FY2025, Spear has successfully installed solar PV systems across 38% of its portfolio, with plans to increase this to 64% by the end of the 2026 financial year. Spear’s total commissioned solar capacity now exceeds 9.4MW, generating an impressive 10.1MW across its portfolio.
The company is actively investigating energy-wheeling projects, aimed at facilitating the transfer of electricity between its owned assets. These initiatives are expected to mitigate rising electricity costs while significantly bolstering energy security across Spear’s portfolio.
“The Spear team has demonstrated their ability to asset manage favourable operational outcomes, drive solid portfolio performance through proactive and early engagement leasing strategies and strategic asset management. Our leasing teams have capitalised on improved market conditions, leading to improved occupancy rates and tenant retention across the portfolio. Additionally, our proactive approach in enhancing our rental income and optimising operational efficiencies contributes to our stable financial metrics and positions us well for sustained growth,” said Chief Operating Officer, Cliff Toerien.
In a strategic step to strengthen its leadership, Spear announced the appointment of Joan Solms, a highly regarded property and finance expert, as a non-executive director to its board of directors, effective April 1 2025. This appointment reflects the company’s commitment to strengthening its governance and leveraging top-tier expertise to drive continued growth.
Looking to the 2026 financial year, Spear expressed confidence in the strength of its portfolio and its ability to generate consistent and predictable returns. The company’s continued focused strategy on the Western Cape positions it well for further growth, with a pipeline of both greenfield and brownfield developments.
Post the reporting period, Spear announced the acquisition of Berg River Business Park in Paarl for R182.15m. The 30,000m² multi-let industrial park, located in the Paarl Industrial node, will be acquired through a Section 42 asset-for-share transaction and is expected to deliver an initial yield of 9.35%. The acquisition aligns with Spear’s Western Cape-focused strategy and marks the Reit’s first entry into the Paarl real estate market.
Spear’s management forecast a growth in Distributable Income per Share (DIPS) for the 2026 financial year of between 4% and 6%, subject to certain qualifications, while maintaining a dividend payout ratio of 95%.
“We are confident that our unwavering strategic focus on the Western Cape, together with our initiative-taking approach to portfolio management, will continue to generate and drive sustainable value for our shareholders in the years ahead. This will result in consistent asset value growth and sustainable, credible and predictable financial and operational performance,” Rossi said.
Head of Property at STANLIB, Nesi Chetty commended the results.
“Spear delivered strong results for the financial year end Feb 2025. They maintained their payout ratio at 95% and continue to produce sustainable growth in distribution per share at 81.2 cents. This is from a sizeable portfolio of R 5.5bn,” said Chetty.
“Operationally the underlying Spear portfolio is very strong with rent reversions at 4.1% and average escalations around 7.2%. Occupancy rates in spear are high at 97% which shows well they have done on the tenanting side. The fund focus continues to be in the high growth western cape market. There recent acquisition of a portfolio of R1.2bn of assets from Emira will allow spear to continue to entrench a dominant position in the Western Cape,” he said.
Spear is attractive to investors given it conservatively positioned balance sheet with LTV at 27% and sufficient liquidity headroom at R 600m, Chetty said.
“The 5-year annualised return of 12.5% which is very impressive notwithstanding the volatility in the SA market. Spear has delivered a 27% total return over the 12-month period. It will be very positive for Spear once they are included in the All Property Index (ALPI) benchmark as they can potentially broaden their shareholder universe as well. We like the defensive characteristics of the income and the attractive forward DIPS yield of 9.4%,” he said.
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