October 22 2026 17:10
WESTERN CAPE, SOUTH AFRICA
JSE-listed Spear Reit, the only real estate investment trust (Reit) on the JSE that invests only in the Western Cape, has delivered another set of guidance-beating results. It has also raised its forecast for the full year.
On Thursday the group reported distributable income per share (DIPS) of 47.29c for the six months to 31 August 2026, up 8.02% on the prior comparable period. That puts it above the top of its own full-year guidance range of 6% to 8% after only half a year.
Spear has now raised its full-year DIPS growth guidance for the 2027 financial year to between 9% and 11%.
The board declared an interim dividend of 44.92c per share, reflecting a 95% payout ratio, which the group says it will continue to target.
“Strong occupancy, rental growth and collections have supported earnings,” said CEO Quintin Rossi.
he said Spear was in its best financial position since it was listed a decade ago.
The key numbers
- Distributable income per share: up 8.02% to 47.29c
- Interim dividend: 44.92c per share (95% payout)
- Revenue: up 28.14% to R494.9m (excluding straight-lining)
- Net operating income: up 27.80%
- Tangible net asset value: R13.33 per share
- Loan-to-value (LTV): 21.91%
- Occupancy: 96.60%
- Cash collections: 99.23%
- Rental reversions: positive 7.98%
- Portfolio: 44 properties worth about R8.8bn, totalling more than 674,000m²
- FY2027 DIPS growth guidance: raised to 9% to 11%, from 6% to 8%
The jump in revenue reflects how quickly Spear has been buying. During the half it transferred four new properties into its portfolio, worth R1.402bn in total and adding 48,169m² of Western Cape space. The group says they were bought at a blended yield of 8.99%, which is above its weighted average cost of capital. In other words, the deals should add to earnings from day one, Rossi explained.
The two biggest additions are:
- Santam Precinct, Tygervalley: 28,488m² of premium office space let to financial services giants Santam and Sanlam
- Watergate Centre, Mitchells Plain: a 19,681m² convenience shopping centre serving the surrounding residential communities
These properties transferred in late August, at the very end of the reporting period, so they contributed almost nothing to these interim earnings. Their full benefit only starts to show in the second half, which is one reason Spear has been able to lift its full-year guidance so sharply.
The expansion was funded largely with equity. In April Spear raised R1bn in an accelerated bookbuild that was oversubscribed several times, as Property Flash reported at the time. Shareholders also reinvested their dividends, which kept another R108m in the business.
The result is one of the strongest balance sheets in the sector. Spear’s LTV of 21.91% sits well below the 35% to 40% range at which most fund managers start to get uncomfortable. That leaves plenty of room to keep buying without stretching the group.
Spear’s growing size also brought it into the FTSE/JSE All Property and SA Reit indices in March, which should widen its pool of institutional investors.
Keillen Ndovu, a property analyst, said Spear’s solid performance reflected its focus on the strong Western Cape region, supported by proactive management.
“The earnings growth outlook is top-quartile. The balance sheet is also strong, with the lowest loan-to-value (LTV) ratio (22%) and the highest interest cover ratio (ICR) of 6,3 times in the sector. They have also been on a growth path, raising new equity to fund acquisitions,” he said.
Industrial keeps carrying the fund
Industrial property remains the core of Spear’s business, making up about 63% of its lettable area. The sector is performing exceptionally well. Industrial occupancy stands at 98.22%, with industrial vacancy at just 1.78%, and renewals and new leases were signed at rentals 13.49% higher than before.
“Demand for well-located industrial property in the Western Cape remains encouraging,” Rossi said.
That matches what the wider market has been saying for months. The Western Cape has become one of the country’s strongest industrial markets, driven by people and businesses moving to the province, growth in e-commerce and logistics, and a shortage of well-located land. Landlords with modern warehouses in nodes such as Blackheath, Montague Gardens and Brackenfell have strong pricing power.
The other sectors are also holding up. Retail vacancy is 3.24%. Commercial (office) vacancy is higher at 8.04%, but that is low for South African offices, and it is likely to improve as the fully let Santam Precinct is added to the portfolio.
Across the whole portfolio, rental reversions were 7.98% positive. That means Spear is renewing and re-letting space at rentals almost 8% higher than before, which few South African landlords can say in the current environment.
The one figure moving the wrong way is costs. Spear’s SA Reit administrative cost-to-income ratio rose to 7.27% from 6.39%. That still compares well with the sector, however.
Spear is also building its own new space. Projects under way include:
- GTX Industrial Park, George: a multi-let industrial park next to George Airport, with the first 5,500m² due in March 2027
- Mambos Storage & Home, Blackheath: a R90m, 7,150m² national distribution centre backed by a 10-year lease, due for completion in July 2027
- Century City: about 25,000m² of commercially zoned land bought for around R53m, with development plans in progress
- Organic industrial pipeline: about 12,650m² of further industrial space worth around R140m over the next 12 months
Investing in George takes Spear beyond greater Cape Town into the fast-growing Garden Route, where the population and business base have grown strongly in recent years.
Solar adds another income stream
Rossi stressed in a results presentation on Friday that Spear’s renewable energy programme continues to grow. It now has solar installations on 29 properties with 18.4MW of total capacity, and a medium-term target of 20MW.
The solar plants generated 6.16-million kWh in the period, up from 3.55 million kWh a year earlier, and brought in about R19.45m in revenue. A further 1.2MW installation is planned at the newly acquired Watergate Centre.
Solar gives Spear a growing, inflation-linked income stream. It also helps tenants cut electricity costs and makes the buildings more attractive to them.
The outlook
Spear’s revised guidance assumes current trends in leasing, collections and costs broadly continue, that the new acquisitions perform as expected, that there is no loadshedding for the rest of the year and that no major tenants fail.
Management highlighted rising municipal charges, higher electricity costs and interest rates as risks. The South African Reserve Bank raised the repo rate by 25 basis points to 7.25% in September, adding to the pressure. However, Spear’s low gearing means it is less exposed to higher rates than most of its peers.
“Our priority is to build on the momentum achieved in the first half,” said Rossi.
These results confirm Spear as one of the standout performers on the JSE property board. The group set itself a target of 6% to 8% growth for the year and reached it in six months. It is going into the second half with R1.4bn of newly acquired, income-producing properties that have barely started contributing, an LTV below 22% and a development pipeline that adds new space over the next year.
Rossi wants to grow Spear so that its assets are worth around R15bn and its market capitalisation is about R10bn in the next few years, making it a “meaningful mid-cap” company, Rossi said.
Spear’s strategy is simple. They stick to one province, focus on industrial property, keep debt low and buy assets that add to earnings. Spear has to keep finding acquisitions at yields above its cost of capital. Competition for good Western Cape assets is fierce, and pricing will tighten.
