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Spear REIT (SEA: SJ), the only regionally focused REIT listed on the JSE, announced its FY2024 results. Since listing on the JSE, as a specialist REIT eight years ago, Spear has steadily grown its asset value to R4.62 billion, with a diversified portfolio of industrial, commercial, retail, and mixed-use assets totalling 426 542m² of gross lettable area (GLA). In FY2024, Spear has achieved a significant milestone as it marked the first year in which its annual gross revenue surpassed R 600 million, driven by a 5.92% increase in group revenue for the year.

Spear announced a full year distributable income per share (DIPS) of 82.99 cents and a total distribution per share (DPS) of 78.86 cents, which represents a growth of 1.04% and 3.80% respectively from the prior financial year. With cash collections remaining consistent and robust at 98.92% for FY2024, the board approved and 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, equating to an annualised average payout ratio of 95% for FY2024.

Sticking firm to their Western Cape-only strategy, Spear’s results indicate an against-the- trend, weathering of the storm. The listed property sector continues to face challenges due to South Africa’s sluggish economic climate, persistent loadshedding, albeit in a hiatus, higher-for-longer interest rate environment and the more gradual return-to-office trend.

During the presentation of the results, CEO Quintin Rossi emphasised the importance of Spear’s Western Cape specialisation, stating, “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.”

 

Highlights

Highlighting the company’s achievements for FY2024, Rossi pointed out the strategic objectives reached.

The acquisition of The Island Urban Logistics Park on the 9^th of May 2023, for R 185 million at an initial yield of 9,75% which is aligned with Spear’s strategic objectives to continuously increase portfolio exposure to high-quality industrial real estate with a focus on logistics, urban logistics and bulk warehousing within the Cape Town Metropole. Since acquisition, the property has yielded 10.17% for FY2024 again demonstrating Spear’s active asset management style and ability to find value. The Island acquisition bolstered Spear’s already high-quality industrial portfolio and will meaningfully contribute to the sustainable cashflows generated across the balance of the 100% Western Cape portfolio.

During Q4 of FY2024, two new PV solar installations were completed: an extension of Mega Park and Sable Square, which added 2MW to Spear’s PV solar portfolio. Management has adopted a three-pronged approach to Spear’s PV Solar rollout, including a combination of capital expenditure installations, roof rental installations with long-dated lease agreements, and instalment sale installations.

To date, more than 55% of the current Spear portfolio has PV solar installed. The commissioned capacity generated 7.4MW in FY2024 and is forecast to generate just under 8MW of electrical supply, providing up to 24% of Spear’s total future energy demands.

Spear initiated Phase 1 bulk infrastructure works on GTX Park in George. GTX Park is located within the greater 1,2 ha Airport Business Park precinct of George, neighbouring the George Airport.

February 2024 Capital Raise: On the 7^th of February 2024, Spear announced the completion of a private placement and raised R313,5 million worth of new equity.

On the 28^th of March 2024, Spear entered into acquisition agreements with Emira Property Fund Limited to acquire 13 Western Cape fund-quality real estate assets. The acquisition of this portfolio aligns with Spear’s investment strategy providing an opportunity to meaningfully increase its market share within the Western Cape, with a complementary high quality diversified property portfolio comprising industrial, retail, mixed-use and commercial assets, enhancing its value to R 5.4 billion and expanding its gross leasable area (GLA) to 502,000m².

Spear’s tangible net asset value (TNAV) per share increased by 2.79% to R11.79 (compared to R 11.47 in FY2023) for FY2024. This increase is primarily attributed to upwards portfolio fair value adjustments at year-end. The core portfolio has shown welcomed asset value growth from growing cashflows and improvements in general real estate fundamentals in the Western Cape, with a like-for-like total of R 153 million increase in portfolio fair value adjustments in FY2024.

Another notable highlight is that Spear exhibits one of the most favourable rental reversion profiles among listed property companies in terms of operational performance with a negative 0.37% rental reversion profile for the diversified portfolio during FY2024.

Sectoral performance
Commenting on the portfolio diversification, Rossi said, “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.

In FY2024, Spear’s industrial portfolio demonstrated resilience and growth, with robust occupancy rates of 97.03% and strategic acquisitions like The Island Urban Logistics Park, driving expansion. 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 signalling positive momentum for Spear’s office portfolio.

While the Western Cape demonstrates resilience within a challenging macroeconomic climate, the upcoming general elections on the 29^th of May 2024 marks a significant juncture in South Africa’s political landscape. As many business leaders navigate through economic uncertainties, including muted growth and persistent challenges, Spear’s focus remains on mitigating negative impacts and fostering growth opportunities. “Despite the hurdles, we anticipate our portfolio to chart a growth path in the year ahead, driven by strategic resilience and prudent management.” said Rossi.

Outlook
In the upcoming fiscal year, while the trading environment is expected to pose challenges, particularly with consumers facing heightened living costs, the potential onset of an interest rate tapering cycle in the latter half of 2024 brings a glimmer of optimism for both the South African economy and the real estate sector. Lower financing expenses, coupled with stronger portfolio escalations, are poised to bolster Spear’s profitability.  Management expects there to be 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 at this point in time is difficult to quantify given in particular 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 endeavour to provide an update on its FY2025 DIPS guidance at HY2025.

Rossi concluded that a strategic and cost-conscious approach would be key in FY2025, “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.”

Burstone Group, a fully integrated international real estate business, today announced full-year (FY24) results in line with guidance, reporting strong operational performances across its geographical businesses, despite earnings pressure from a persistently high interest rate environment.

• The Group delivered a solid second half performance with distributable earnings per share (“DIPS”) increasing by 7.4%.
• Full year (FY24) DIPS increased by 1.0% to 105.67cps (March 23: 104.64cps).

The results for the year ended 31 March 2024 were underpinned by solid operational performances from the South African and European businesses, with like-for-like Net Operating Income (NOI) up 1.5% and 6.2% (in Euros), respectively. The positive results were, as expected, negatively impacted with an increase in interest rates resulting in a c.R66 million increase in funding costs over the period. During the financial year the business successfully delivered on several of its strategic initiatives and is already benefiting from synergies created by the internalisation, integration of its business and its enhanced international footprint:

• The annualised net management fee saving resulting from the internalisation was R80 million (8% higher than the forecast at the time of the transaction).
• Successful rebranding across South Africa and Europe as the Burstone Group.
• Delivery of several cost saving initiatives including c.€2.1 million corporate savings in Europe, with further synergies expected in the financial year ending 31 March 2025. (“FY25”).
• A new management mandate to manage a c.€170 million portfolio in Germany with the opportunity to co-invest in the future.

Andrew Wooler, CEO of Burstone Group said: “As we’ve transitioned into a fully integrated international real estate business, our team has delivered on what we set out to do. Despite the challenging operating environment, our regional operations have performed well, reporting pleasing operational results. We are already seeing benefits of the
internalisation and we believe our new structure has set us up to deliver on our capital light strategy and to further expand our fund management strategies across all regions.”

Balance sheet is robust

Burstone’s balance sheet remains robust with the Group proactively managing its refinancing and interest rate risk. The Group is actively engaging in the refinancing of its Group and PEL debt, with completion of the refinancings targeted for Q2 FY25.

• De-gearing of the Group balance sheet remains a core focus in the near term with a planned reduction in LTV from 44% to between 37% and 40% within the next 12 months.
• Further c.R1.2 billion to R1.4 billion of assets identified for sale in South Africa (with R400 million already under contract).
• Pursuing a pipeline of European asset sales of c.€150 million to €250 million, with c.€90 million under offer and at pricing in line with book values.
• This in addition to the c.R1.3 billion of South African assets that were sold over the past financial year at a 1.5% premium to book.

Said Wooler: “We believe in disciplined capital allocation and continued capital rotation to meet risk-adjusted targets. We seek to deploy capital into the best international/local opportunities that will support our longer-term strategic plan and continue to create shareholder value. We remain focused on internally generating capital through select asset disposals to support our planned reduction in LTV from 37% to 40% over the next 12 months. We are confident that we can execute on this disposal plan. We will consistently invest for the future whilst continuing to create internal capital.”

South Africa outlook
The South African macroeconomic backdrop remains muted, and the property sector faces many challenges, including rising municipal costs and an energy crisis which contributes to an increasing cost of occupation. Nevertheless, the South African portfolio has stabilised and is performing to expectations. The focus remains on maintaining the quality and relevance of the portfolio and accelerating the capital recycling programme.

Pan-European Logistics (PEL) portfolio
Given sector dynamics, growth in contracted rent is expected to continue within the PEL platform with base NOI expected to grow between 3% and 4% over the next 12 months. In addition, positive earnings growth will be supported by embedded cost savings initiatives. The Group has already extracted cost savings of €2.1 million in the European platform with further savings expected in FY25.

Australia
The Irongate business has performed well, and the business continues working with its core investor base, while continually engaging with new capital partners to explore a strong pipeline of new opportunities. We expect an increase in the contribution to earnings from the Irongate JV.

Dividend Payout
The Board has resolved to apply a payout ratio of 75% for the six months ending 31 March 2024 declaring a dividend of 40.95cps (March 23: 48.32cps). The payout ratio was 95% for the first six months of the year, resulting in the total dividend payout ratio for FY24 of 85%, and a full-year dividend of 89.46cps (March 23: 99.41cps). The Group will apply a 75% payout ratio going forward and will continue to assess the appropriateness of this payout policy in light of the Group’s long-term strategy and after considering its LTV position, capex funding requirements and any potential taxation impacts.

Prospects and guidance
The strategic focus of the Group over the past year has been on its repositioning from a property investment business into an integrated international real estate fund and asset management company. Burstone’s longer-term focus will be the roll out of a capital light fund management model through continued investment in several growth opportunities, supporting our asset and geographic diversification with a material impact on earnings expected in the medium to longer-term.

Redefine Properties, South Africa’s leading real-estate investment trust (REIT), has concluded its acquisition of a holding in Pan Africa Shopping Centre in Alexandra.

Andrew König, Chief executive officer at Redefine, says the addition of the centre to the company’s portfolio demonstrates confidence in South Africa’s retail property sector. “As Pan Africa and other recent acquisitions demonstrate, Redefine views its retail portfolio as a key driver for sustained long term growth, both in terms of the company and national socioeconomic development,” he adds.

Located on the corner of 3^rd Street and Watt Street in Alexandra, Gauteng, Pan Africa Shopping Centre boasts a current GLA size of 15 775sqm and serves as a cornerstone of the community of Alexandra and surrounding areas. The easy-to-navigate, double-level centre is home to a wide range of national and independent retailers, as well as fast food outlets. Notably, the centre was a first of its kind in South Africa as it was built with fully integrated public transport, which included a taxi facility.

Currently, Pan Africa Shopping Centre is undergoing a multi-phase upgrade and expansion process that will see the centre’s lettable area increase to over 25 000sqm, featuring bigger spaces for existing retailers such as Truworths and Mr Price Group, as well as new additions such as W Edit, Pick n Pay Clothing and Sportscene. The expansion is scheduled to be completed in October this year.

ESG credentials of the centre will be enhanced through the inclusion of solar, propel air toilets and energy efficient lighting. The centre will also have full back up power and water to ensure retailer’s trade will not be affected by disruptions.

“Pan Africa represents a step forward in expanding our local portfolio and is an example of our commitment to facilitating a quality communal shopping experience for all South Africans. Going to your local centre, should be an exercise in comfort, safety and convenience, the defining attributes of any mass retail space,” König explains.

Redefine’s purchase of Pan Africa Shopping Centre comes on the heels of the company’s full acquisition of the Mall of the South – one of South Africa’s largest retail properties located in Johannesburg South – from previous co-owner RMB Investment and Advisory (RMBIA).

“Retail accounts for more than 40% of Redefine’s asset platform in South Africa. In alignment with our retail strategy and capital allocation plan, these acquisitions show we are looking to the future, to develop and manage properties that speak to a corporate vision and identity characterised by excellence, diversity, and versatility,” König concludes.

According to Redefine’s results for the interim period ended 29 February 2024, the company’s local portfolio has largely stabilised, with signs of improvement across most operating metrics. In that period, Redefine completed 379 147sqm of leases, with new deals accounting for 42% and renewals making up the balance. In addition, renewal reversion rates improved from -6.7% at August 2023 to -6.0% at February 2024, demonstrating the quality of Redefine property assets.

Dipula Income Fund (JSE: DIB) delivered a healthy set of results for the six months to 29 February 2024, reporting improved operational and financial metrics, as well as strategic gains in a period that marked the first phase of its new solar photovoltaic initiative roll-out.

Dipula is a prominent, diversified, South Africa-invested REIT that owns a R9.8 billion portfolio of 166 retail, office, industrial and residential rental assets countrywide. Convenience, rural and township retail centres produce 64% of its portfolio income, with 61% of its rental income generated in Gauteng.

Izak Petersen, CEO of Dipula, comments, “This is a good set of results in which Dipula delivered top-line growth, albeit at relatively modest levels — a solid achievement given the background of elevated inflation, interest rates at their peak, and double-digit electricity tariff increases.”

Dipula’s revenue grew by 9%, and its net property income increased by a credible 6%, highlighting efficient operations supported by rental growth. While rental income remained under  pressure, with some rentals still reverting to market due to the persistent tough conditions in the office sector, Dipula showed a 2% increase in rental income. The net income growth was supported by Dipula’s tight check on expenses, which increased modestly relative to inflation levels. Dipula’s net asset value increased by 2% to R6bn.

Higher interest rates, however, worked against Dipula’s gains, resulting in a decrease in interim distributable earnings per share of 3%. The declared dividends amounted to 90% of distributable earnings.

Dipula concluded R105m of new leases during the period with renewals worth R845m and achieved a tenant retention ratio of 89%, keeping its buildings well occupied while strategically doubling the lease expiry profile of its office real estate portfolio from 1.5 years to three years.

Vacancies improved from 10% to a pleasing 8% during the period. In Dipula’s substantial retail portfolio, vacancies reduced from 9% to 6%. In its office portfolio, which accounts for only 15% of its gross income exposure, vacancies decreased from 27% to 23%. Vacancies in the industrial portfolio remained low at 5% compared to 4% in the prior period. The average vacancy in Dipula’s residential portfolio of 716 units for the six months was 6%, and it recorded rental growth of between 2% and 8% across its different properties.

“We believe that our residential assets offer great quality accommodation for tenants at extremely competitive rentals, especially in the ongoing tough operating environment in South Africa,” reports Petersen.

Dipula awarded a contract for 5.3kWp of solar projects at nine of its properties in the first phase of its solar roll-out. Dipula is investing R50m in this phase of its installation, which is anticipated to be completed before the end of August 2024.

“Before the end of this financial year, we expect to increase our solar power capacity more than fourfold, from the current 1.6kWp to 7kWp in total. Then, we plan on trebling this number in the next 24 to 36 months,” says Petersen.

Dipula’s interim results demonstrate a robust balance sheet with a favourable liquidity position. The company concluded its debt syndication, which extended its weighted average debt term to four years. Its debt levels remained stable at R3.7bn, with 61% hedged and no major facilities expiring in the next four years. Gearing decreased over the period to a healthy 36.3% from 36.9%.

Dipula anticipates stable conditions for the rest of its financial year to August 2024, with improved performance in 2025 as it completes various capital projects.

Petersen concludes, “A reduction in interest rates would boost performance going forward. Our rentals have room for improvement and will respond well to any uptick in the trading environment. Dipula will continue to drive stakeholder value with our focused, prudent approach to capital allocation while maintaining our strong balance sheet and working to further reduce vacancies and run efficient operations.”

In line with its strategic roadmap, the Group continues to focus on its core precincts with the super-regional Mall of Africa being the anchor retail destination in Waterfall City.

Attacq Limited (“Attacq”), the JSE-listed Real Estate Investment Trust (REIT) and strategic development partner in Waterfall City, today announces that its 70% held subsidiary, AWIC, has acquired the remaining 20% stake in Mall of Africa from the Atterbury Group. AWIC currently holds an 80% stake in the asset.

The Mall of Africa is one of South Africa’s leading super regional malls across all performance metrics, and anchors Waterfall City, a growing, large scale mixed-use precinct encompassing residential, logistics and collaboration hubs as well as two strongly performing hotels, all of which provide high volumes of quality foot traffic to the mall.

As of 31 December 2023, the mall’s compounded annual trading density growth over the past three years was 16.1% whilst its rent to turnover ratio was healthy at 7.5%. Going forward, the mall also stands to benefit from the continued densification of Waterfall City as AWIC rolls out its development pipeline of residential, logistics and collaboration hubs.

Attacq CEO, Jackie van Niekerk, comments: “We are delighted to announce this transaction as the Mall of Africa is undoubtedly one of Attacq’s flagship retail assets. As Waterfall City continues to densify, sole ownership of the mall will allow control over the asset in influencing growth and trade, and we aim for Mall of Africa to remain one of SA’s top-performing super-regional malls.

Furthermore, in March we indicated to the market during our interim results presentation that we would look to acquire key assets after disposing of the Group’s MAS shares and this transaction demonstrates our commitment to delivering against what we had promised.”

The iconic Mall of Africa recently celebrated its eighth birthday and opened its doors in 2016 as South Africa’s largest shopping mall ever built in a single phase, with over 130 000m2 of fully occupied retail space, and features leading international apparel brands and national favourites. The mall is also home to Attacq’s SOOK Space, an on-demand leasing solution aimed at small business enterprise needs and emerging entrepreneurs.

Recently, Attacq announced the opening of six brand new rooftop Padel courts in September, adding an additional lifestyle element to the asset that includes the Waterfall Park and also features Bounce indoor trampoline park aimed at the younger demographic.