Western Cape-focused Spear REIT has published its FY2024 results, achieving a significant milestone by marking the first year in which its annual gross revenue surpassed R600 million, driven by a 5.92% increase in group revenue during FY2024.
The REIT declared a full year distributable income per share (DIPS) of 82.99 cents and a total distribution per share (DPS) of 78.86 cents, representing growth of 1.04% and 3.80% respectively from the prior financial year. With cash collections remaining consistent at 98.92% during the reporting period, its Board declared a final DPS of 40.53 cents based on a payout ratio for the final six months of the year, amounting to 96% of DIPS and equating to an annualised average payout ratio of 95%.
Spear’s tangible net asset value (NAV) per share increased by 2.79% to R11.79 (FY2023: R11.47). This increase is primarily attributed to upwards portfolio fair value adjustments at yearend. Its core portfolio has shown asset value growth from increasing cash flows and improvements in general real estate fundamentals in the Western Cape with a like-for-like total of R153 million increase in portfolio fair value adjustments in FY2024. The Group reported a negative 0.37% rental reversion.
CEO of Spear REIT, Quintin Rossi, emphasises the importance of the Group’s Western Cape specialisation: “This has been one of the key enablers in achieving our strong financial performance during FY2024. Our highly motivated and focused asset and property management team has also played a significant role, generating value across our core portfolio by following the hallmark of Spear’s active management approach.”
During the reporting period, the REIT announced the completion of a private placement by raising R313.5 million worth of new equity and in late March 2024, it entered into acquisition agreements with Emira Property Fund to acquire 13 Western Cape assets comprising industrial, retail, mixed-use, and commercial which enhanced its value to R5.4 billion and increased its gross lettable area (GLA) to 502 000m2.
The REIT also initiated Phase 1 bulk infrastructure works on GTX Park in George which is located within the greater 1.2 hectare Airport Business Park precinct, neighbouring the George Airport.
“Real estate is the business of local markets, and we believe that a concentrated and localised approach provides relief from several of the headwinds being faced in the real estate sector in South Africa. In our focused regional approach, we have the ability and skill set to continue to invest, develop, and redevelop across four key asset types: industrial, retail, commercial, and mixed-use,” comments Rossi.
Spear’s industrial portfolio demonstrated resilience and growth, with occupancy rates of 97.03% and strategic acquisitions like The Island Urban Logistics Park, driving expansion.
Its acquisition of The Island Urban Logistics Park in May 2023, for R185 million at an initial yield of 9.75%, has yielded 10.17% for FY2024.
Similarly, high occupancy rates of 95.54% and positive rental reversion rates in the retail sector underscored stable performance, supported by a defensive positioning strategy and a significant proportion of long-term national tenants. Despite challenges, the commercial sector saw post-period improvements, with occupancy levels at 84.37% and successful relets signaling positive momentum for Spear’s office portfolio.
Management anticipates a net operating income (NOI) growth at property level in the year ahead, the extent of distributable income growth in the form of a forecast compared to FY2024 now is difficult to quantify given the higher-for-longer interest rate environment, operating cost creep, and the impact of load-shedding in South Africa in the year ahead. Management will endeavor to provide an update on its FY2025 DIPS guidance at HY2025.
Spear’s loan-to-value (LTV) decreased to 31.60% during FY2024 (FY2023: 36.30%).
“To navigate market pressures and counteract the absence of real growth stimuli, Spear remains committed to maximising value in the current subdued trading climate. While mindful of the challenges ahead, we maintain cautious optimism that FY2025 will align with our mission statement, delivering favourable outcomes for our stakeholders. We are perfectly positioned to seize growth opportunities as they arise and remain confident in our ability to adapt and thrive in an evolving economic landscape,” concludes Rossi.
