Spear REIT, which focuses its property investment on the Western Cape, lifted distributable income per share by 6.09% to 41.26c per share, in the six months to August 31, 2022.
The distribution per share increased by 12.33% to 37.14c, based on a 90% payout ratio, from 33.06c per share in the prior corresponding period, when the payout ratio was 85%.
CEO Quintin Rossi said in a statement on Friday that the management team had warded off inflationary pressures, interest rate hikes, operating ‘cost-creep’ and general trading challenges, and defended the net property income line successfully.
Interim collections stood at 97.56%, as measured at October 10, 2022.
Management had successfully renewed or re-let 62 821m² at a negative reversion of 4.08%.
The portfolio occupancy rate was at 93.53% as at 31 August, 2022, and 100% Western Cape based. Investment property value increased by 0.12% to R4.48 billion, from R4.48bn reported as at 28 February, 2022.
Loan-to-value improved to 38.69%, from 39.05% as at February 28, 2022.
Spear was on track to achieve guidance as communicated to the market for the financial year ending February 28, 2023 — distributable income per share was expected to grow between 5% and 7% in the 2023 financial year.
In the interim period, revenue increased by 2.48% to R294m, while revenue (excluding smoothing) increased 6.95% to R289.788m.
The hospitality assets and the only remaining holding in this sector, 15 on Orange, was held for sale and was currently let on a fixed-income, triple net lease agreement to The Capital Hotels & Apartment Group, with zero exposure to variable income. Rossi said he expected Spear to be fully divested out of the hospitality sector by the 2024 financial year.
Meanwhile, Property Flash reported last week that Spear had added to its portfolio with the purchase of The Island for R185m, a modern complex in the Paarden Island commercial and industrial area in Cape Town.
Spear bought the asset from Inospace, the flexible industrial parks business run by Rael Levitt.
The acquisition was in line with Spear’s strategy to increase exposure to high quality industrial real estate with a focus on logistics, urban logistics and bulk warehousing within the Cape Town metropole. Industrial assets already make up nearly 60% of Spear’s assets by gross lettable area.
The Island, 100% occupied by local and international tenants, is one of only a few large-scale modern warehousing complexes with roof heights ranging from 11m to 14m under eaves, located in Paarden Eiland, Cape Town. The acquisition was funded via proceeds from recent non-core disposals and bank debt.
Moody’s revised the City of Cape Town’s rating to “investment grade with a stable outlook”, with Ratings Afrika announcing the City as the only metro still considered financially stable.
Rossi said this underpinned Spear’s outlook that the Western Cape was poised to outperform the rest of the South African economy and drive development as job and income growth in the region surpasses other provinces.
Spear’s share price was unchanged at R7.50 on Friday afternoon.
BUSINESS REPORT