Western Cape-focused Spear Reit says the real estate market in the region has shown consistent resilience, with rising semigration providing opportunities to expand its portfolio.
Semigration — the movement of people from one province or city to another — accelerated during the Covid-19 pandemic due to remote working. Some businesses also semigrated to other regions, with the Western Cape benefiting the most.
“We see potential to expand the Spear investment portfolio, with numerous nodes being established within the Western Cape as semigration drives development growth,” Spear CEO Quintin Rossi said during a pre-close investor presentation for the year to end-August.
He said the company would recycle capital into strategy-aligned assets, seeking income-enhancing opportunities through investment into high-quality industrial warehousing, logistics and retail properties.
Rossi said being close to its assets remained a key pillar of Spear’s operating strategy, which resulted in enhanced market opportunities.
“Management remains committed to further unlock net asset value for shareholders through the development and redevelopment of embedded portfolio bulk rights,” said Rossi.
JSE-listed Spear has 30 assets in its home province, predominantly in Cape Town. Its portfolio includes industrial, commercial, retail and mixed-use, with a total value of R4.47bn.
Rossi said that though the operating environment remained challenging, industrial and retail remained resilient. Within its retail portfolio, occupancy levels were above 92%, with rental collections at 95%.
He said convenience and destination venues had 41% of national retailers, and because there is no reliance on the local or international tourism market, these centres have traded well despite inflationary pressures.
“Big retailers are increasing their market share, with new brands requiring additional space, especially in the convenience retail market.”
Spear is experiencing high demand for multi-let industrial parks. During the reporting period, it sold two assets in this sector and initiated the R74m redevelopment of Blackheath Park for Bravo Brands, which has outgrown its current premises within the Spear portfolio.
On hospitality, he said there had been a notable increase in international travellers, led by US markets, as well as an uptick in demand for meetings and conferences creating further demand for accommodation.
He said leasing activity has resulted in more than 85% occupancy levels in the office portfolio, adding that many national and international companies choose Cape Town as a preferred office location. Spear signed a new 10-year lease at No 2 Long Street for DHL’s Sub-Saharan Africa regional office. The company sold Island Business Park for R22.5m at a net premium to book value of 5%.
In the past nine months Spear achieved R179m in sales of noncore assets. At the end of July, its gearing levels reached 38.96%, with R245m in cash facilities.
“Spear’s core portfolio remains defensive, underpinned by strong lease covenants in highly desirable locations within the Western Cape,” said Rossi.
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