Spear REIT Limited has reported an interim distribution for the first half of the 2019 financial year of 41.73 cents per share (2018: 36.95 cents).
CEO of Spear REIT Limited, Quintin Rossi comments:
“Spear has performed in line with management’s forecasts for the interim period amidst tough trading conditions. he strong contractual underpin of the portfolio, as well as active asset, financial and debtor’s management resulted in Spear’s solid performance for the reporting period.”
Rossi says that the company will remain focused on building strong cash flows and growing its distribution per share by acquiring assets that are accretive to the bottom line, containing costs and actioning enhancements that improve the overall quality and net income of the core portfolio.
The group added more than R347 million in new acquisition to its portfolio during the interim period with asset value increasing to R3.37 billion. The current property portfolio consists of thirty-three high quality Western Cape assets with a gross lettable area of 376 757 square meters and an average value of R102 million per asset (FY2018: R94 million). The portfolio’s income stream is underpinned by average contractual escalations of 8.04%. The company’s Weighted Average Lease Expiry increased by three months over the interim period to thirty-six months.
Spear’s net asset value per share increased by 0.5% from 11.57 per share to R11.63 per share. Active balance sheet management saw the group reducing gearing to 36% from 38% in the previous period due to a reduction in liabilities and restructuring efforts.
“There are no near-term refinancing concerns on the debt portfolio of the company,” says Rossi. “Spear remains well placed to achieve its forecasted distribution targets and navigate the challenging economic climate. Management is of the view that green shoots have started to emerge pointing to a recovery of the hospitality and tourism sector in the Western Cape”.
- The guidance has assumed that over the course of the next six months;
- A relatively stable macro-economic environment will prevail;
- Lease renewals are concluded as per the company forecast;
- No major tenant failures will take place;
- Trading conditions continue to improve in the tourism sector directly relating to hotel occupancies
and room rates.
- Tenants will successfully absorb rising costs associated with municipal rates.
Any changes in the above assumptions may affect management’s forecast. The forecast has not been reviewed or audited by Spear’s independent external auditors
Rossi concludes saying that Spear will remain an attractive Western Cape focused pure property investment business with a well-diversified, defensive and stable core property portfolio.
“Management remains confident that demand for its high-quality rental properties across the various sectors within the Western Cape will continue given its tenant centric approach and hands-on asset management skills”.