Spear REIT Limited has reported that its overall portfolio occupancy rates have increased by 200 basis points from its FY2024 yearend of 93% to a year-to-date HY2025 occupancy rate of 95%, attributed to a strong leasing momentum, particularly in the office segment.
The Group’s letting activity for the period displayed a positive rental reversion profile of 4.51% with just under 50 000m2 of lettable area either being renewed or let in the period while maintaining a robust escalation profile of 7.47%.
Recently speaking at Spear REIT’s HY2025 pre-close presentation, CEO Quintin Rossi said that despite the tougher trading environment, green shoots were accelerating in the Western Cape following the recent positive elections and the subsequent formation of the Government of National Unity (GNU) – “The GNU has turned out to be positive for SA Inc., and equally good for business.”
Furthermore, 155 days without load shedding has brought new life to the general market, as the operational continuity created has improved levels of certainty for tenants and businesses alike. “We have noted an acceleration of tenant commitments that saw 9000 m2 of office space being taken up in the six months from March to the end of August 2024,” he added.
The higher interest rate environment and unavoidable operating cost creep have resulted in a slight dip in Spear’s operational performance profitability however, Rossi is confident that the interest rate tapering cycle will commence in September 2024, noting that this will have a positive impact on the Group’s finance cost line item.
Cash collection profiles displayed consistency with 95.17% of rentals collected for the period and general receivables well managed despite the tougher economic cycle. Management has maintained a proposed payout ratio of 95% for HY2025.
On a year-to-date basis, Spear displayed a robust balance sheet of 25% loan-to-value (LTV) and an interest cover ratio (ICR) of just under three times post the disposal of the Liberty Life building and 142 Edward Street for a combined value of R443 million during the first quarter of FY2025.
The Group further advised via SENS that it had sold its 100 Fairway Close Office Park to the City of Cape Town for R160 million, with disposal proceeds being recycled into assets within the industrial and convenience retail sub-sectors. The acquisition of the Western Cape Emira portfolio for R1.146 billion is now unconditional. Spear is in the process of implementing the transaction that will expand its Western Cape portfolio by 93 500m², bringing the total to 502 000m². This portfolio will include high-quality industrial, medical, retail, and well-established office assets, expected to deliver an initial yield of approximately 10.1%.
“Spear’s management team remains confident that the vast majority of our FY2025 strategic objectives will continue to be achieved, resulting in a positive outlook for the year ahead. Management is firm in its view that DIPS growth will be achieved for FY2025 and will provide full-year guidance at its HY2025 results presentation in October this year,” he concluded.
