September 4 2026 14:35
CAPE TOWN, SOUTH AFRICA
Western Cape-focused real estate investment trust Spear REIT is heading into the second half of its financial year with earnings tracking at the upper end of guidance, supported by strong overall operational and financial performance. This was revealed this week at a market briefing by the Cape-invested listed group.
The group secured R1.4bn in acquisitions, raised R1bn in equity and delivered strong rental growth in the six months to July, it said.
Spear reaffirmed its target of growing it 2027 financial year distribution per share (DIPS) by 6% to 8% compared with the 2026 financial year, while maintaining a 95% payout ratio. Its performance was underpinned by positive rental reversions of 6.78%, weighted average lease escalations of 6.92%, occupancy of 96.37% and cash collections of approximately 99% across the core portfolio. Revenue increased 28.29% year to date, while net operating income rose 29.41%.
“The first half has demonstrated the resilience of our portfolio and the strength of our Western Cape strategy. We have continued to grow through acquisitions while maintaining strong operational metrics and a conservative balance sheet. We enter the second half with considerable momentum and a clear pipeline for further value creation,” said CEO Quintin Rossi.
Spear’s growth drive included two transactions during the period: Watergate Centre in Mitchells Plain and 1 Sportica Crescent in Tygervalley. Acquired for a combined R1.402bn, both properties have recently transferred, adding 48,169m² to the portfolio at an average acquisition yield of 8.99%.
Watergate Centre, acquired for R442m, is a 19,681m² convenience centre anchored by national retailers including Shoprite, Capitec, PEP and Mr Price. It offers an initial yield to shareholders of 8.37%, with a 24-month weighted average lease expiry (WAULT) and 6.70% in-force escalation.
The R960m 1 Sportica Crescent transaction adds 28,488m² of prime commercial space in Tygervalley. The property is fully occupied, carries a 28-month WAULT and offers an initial yield to shareholders of 9.67%. Both transactions are expected to be earnings accretive, with their contribution not yet included in current DIPS guidance. Spear intends to update shareholders when it reports its half-year results.
Spear’s balance sheet remains well positioned for further growth, it said. At the end of July, loan-to-value stood at 7.48%, with interest cover at 6.02 times and approximately R800m in liquidity available, net of acquisition allocations.
The group raised R1bn through an accelerated bookbuild in April, followed by a further R108m through its dividend reinvestment programme in June.
“The capital raise has given Spear the flexibility to pursue growth without compromising the strength of the balance sheet. Our focus remains firmly on acquisitions and developments that are earnings accretive and aligned with our Western Cape strategy,” said Christiaan Barnard, CFO of Spear REIT.
Spear’s industrial portfolio continues to perform strongly, with occupancy of 97.98% and rental reversions of 14.32%. Retail occupancy was 97.17%, with reversions of 7.88%, while commercial occupancy stood at 90.24%, with reversions of 4.26%.
Spear invested R140m in new industrial developments during the period. A new 10-year lease with Mambos Storage & Home has been concluded for a 7,150m² warehouse, while further industrial development opportunities are progressing in George and Blackheath.
Renewable energy is also a meaningful contributor to portfolio income. By July, Spear had solar infrastructure across 28 assets, generating more than 5.17 million kWh year to date, up from 2.90-million kWh in the comparable period. Solar penetration increased to 20.20%, from 14.16% a year earlier, with the portfolio contributing R14.79m in net operating income. The Watergate acquisition adds a further 1.2MW solar installation.
Spear also sold Hamilton & Chiappini House for R107m, achieving a 33% premium to its original acquisition price in 2024 and unlocking approximately 5c per share in net asset value. The proceeds are being redirected into acquisitions and developments.
Meanwhile, a commercial land parcel in Century City has been secured for a new office precinct, with estimated total development costs of approximately R950m.
At July 2026, Spear’s portfolio stood at R7.1bn in asset value, comprising 40 Western Cape properties and approximately 625,610m² of gross lettable area. Following the subsequent transfer of Watergate Centre and the Santam Precinct, the portfolio has increased to approximately R8.4bn and 670,000m² of real estate assets.
Management believed the Western Cape continues to offer strong property fundamentals across South Africa’s major real estate subsectors, with Spear’s regional focus supporting portfolio performance through the volatility of the past six months.
“With low gearing, positive rental growth and further acquisitions and developments in the pipeline, Spear enters the second half of FY2027 with continued growth momentum,” the group said.
alistair@propertyflash.co.za
