Spear REIT, the Cape-based regional property company, lifted its interim distribution per share (DPS) by 3.21% to 38.33 cents for the six months to August 31 on a higher, 94% payout ratio.
CEO Quintin Rossi said the results demonstrated their aim to deliver consistent income and value to shareholders. The payout ratio had risen from 90% in the first half of the 2023 financial year.
Loan-to-value was 39.58%. Its 28 properties were 94.19% occupied, up 2%, while year to date collections stood at 98.36%.
The investment property value increased by 5.85% to R4.46 billion, from R4.22bn reported as at February 28, 2023.
The share price fell 3.2% to R7.26 yesterday afternoon, with the price slightly lower than R7.70 on the same day a year ago.
Rossi said their exclusive focus on the Western Cape was a key to outperforming a challenged REIT sector.
“The first half tested our resilience, cost controls, and asset management skills. We consider ourselves fortunate to have 100% of our real estate assets in the Western Cape, where cautious optimism prevails due to the positive effects of semigration, localisation, and international investment boosting real estate markets, although not making it immune to trading headwinds,” said Rossi.
Confirming the semigration trend, Census 2022 results revealed a 27% surge in population growth in the Western Cape over the past decade.
Rossi said their hands-on asset management approach had also been pivotal in navigating the real estate environment.
A significant competitive advantage was a reliance on the City of Cape Town for electrical supply. With 93% of its assets powered by the city’s grid, the company successfully shielded its tenants from the deeper challenges of load shedding, he said.
Leasing metrics improved in the first half. Notably, No.1 Waterhouse and the Bloemhof Building reached full occupancy, with the Liberty Life Building securing fully let status post the half year.
Spear’s current portfolio consists of 28 assets, and the industrial sector exposure is at 60% of gross lettable area. Numerous property surveys show the industrial property sector to be the more buoyant at present compared with retail and office property market sectors.
Following a rezoning of agricultural land for industrial use, Spear was also leading the development of GTX Industrial Park in George.
Phase 1 of the Airport Business Park/GTX Park commenced on October 2. GTX Park will offer industrial solutions, catering to logistics, warehousing, agri-logistics, last-mile delivery, and airport-related services. The total capital investment for phases 1 and 2 was estimated at R400m.
“The SA REIT sector continues to trade at deep discounts to net asset value, which may persist as attractive government bond yields attract investor preference. The road ahead for REITs will be challenging as the sector recovers from the impact of Covid-19, load shedding, reduced payout ratios, and challenging economic conditions,” said Rossi.
BUSINESS REPORT