Spear REIT reaps the benefits from its ‘Western Cape only’ growth strategy

Quintin Rossi, CEO of Spear REIT Limited.

Spear REIT marked its sixth reporting period since its debut on the JSE with a 16.36% growth in distribution per share for its 2022 financial year. The company reported a trend towards a pre-Covid-19 rental collection profile of 98% rental collected versus billed, resulting in its pay-out ratio increasing to 88% for the full year, generating a total distribution per share of 68.25 cents.

The collective focus, proximity and successful execution of our operating strategy has been the foundation upon which we have delivered the FY22 results. With immense pride and humility, we celebrate the 16.36% growth in distribution per share for FY22”, said Group CEO, Quintin Rossi.

Spear’s current assets under ownership are valued at R4.48 billion, an increase of 221% since listing in 2016 with the average property value increasing by 2.68% in FY22. Currently, its portfolio consists of 31 Western Cape assets, the top five (by value) equate to 48% of the total portfolio value and are spread across industrial, convenience retail and commercial real estate in the Cape Metropole.

The company has begun its exit from its hospitality assets with the disposal of the Double Tree by Hilton Hotel in February 2022, contributing to the group achieving a reduction in its loan-to-value (LTV) from 46% during the first half of the 2022 financial year to its current rate of 39%.

The REIT achieved an approximate 94% portfolio occupancy and similar tenant retention rates throughout the reporting period.

Group revenue increased by 11.19% from 2021, largely owing to fewer tenant support measures, consistently improving cash flow and strong core portfolio performance.

One of the hallmarks of Spear since inception was our ability to unlock value through active and hands-on asset management of the core portfolio. The unimaginable and unpredictable confrontation that the world endured due to Covid-19 and its residual effects sowed loss and devastation but has also resulted in strengthening the core competencies within our business operations”, commented Rossi.

Sticking to its ‘Western Cape only’ growth strategy, Spear’s focus is to increase its investment in industrial warehousing, logistics and convenience retail assets that will complement the already defensive core portfolio that is underpinned by strong lease covenants and high-quality tenants.

Rossi has set an ambitious growth plan in place which will see Spear’s assets under ownership increase by a further R11 billion by 2028.

Navigating the next financial year will not be easy, however, we are starting to see green shoots emerging as the travel, tourism, hospitality and services sector show a notable recovery together with general economic activity starting to materially improve and a return to office momentum picking up in the final six months of FY22,” he concluded.