Spear REIT LTD Archives

Spear REIT Provides HY2026 Pre-Close Update: Strong Operational Delivery, Portfolio Growth and Balance Sheet Resilience

Spear REIT has issued its pre-close update for the half year ending 31 August 2025 (“HY2026”), highlighting steady performance across its portfolio, continued growth through acquisitions and further investment into sustainability initiatives. The company stated that despite a challenging operating environment, results remain firmly on track with guidance currently tracking slightly higher than the midpoint of its market guidance for FY2026, supported by consistent operational execution and disciplined financial management.

Highlights

Distributable Income Per Share (DIPS) Tracker: DIPS tracking at 36.77 cents year to July, with distribution per share (DPS) to shareholders at 34.93 cents per share (95% payout ratio).
Operations: rent reversions across the combined portfolio were just under flat as tenant retention and rental preservation are prioritised; escalation rates nudged higher to 7.31% (from 7.27%); portfolio occupancy stable at 95% and expected to improve to 96–97% by period-end; cash collections remain strong at 98.45%.
Acquisitions: R1.08 billion invested into prime Western Cape properties (137,090m²) at an initial yield of 9.54%, adding quality scale to the portfolio.
Balance sheet: loan-to-value ratio at 14.26% pre-acquisition; interest cover ratio at 3.84x; liquidity of R400 million after commitments, maintaining ample flexibility.
Sustainability: solar coverage to grow to 67% of the portfolio, with 11 more systems under construction and recent acquisitions expected to lift this to around 70%.
Current portfolio profile: asset base of R5.58 billion, 487,317m² of gross lettable area, and 39 high-quality Western Cape assets.

Sector performance for the year to July 2025 underlines the portfolio’s resilience. Retail centres delivered 91.7% occupancy and like-for-like income growth of 12.2%, with strong rental uplifts of 13.7% driven by demand in convenience and destination formats, while larger apparel retailers increased their presence. The Commercial portfolio recorded 92.2% occupancy, with solid income growth of 7.0% despite negative rental reversions, cushioned by over 16,000m² of space successfully renewed and re-let.

Industrial assets continued to show strength with 96.6% occupancy and positive rental reversions, even as income was temporarily impacted by a sustainability-linked vacancy at Mega Park. Expansion plans in Blackheath and George are progressing toward final approvals.

Key milestones during the period included a R749 million equity raise in June 2025 to support Spear’s asset growth plans and PV solar rollout strategy. During the period, management has successfully reduced borrowing costs and driven strong leasing momentum, which has improved the weighted average lease expiry and escalation metrics of the core portfolio. The pending integration of three new acquisitions — Berg River Business Park in Paarl, Consani Industrial Park in Elsies River, and Maynard Mall in Wynberg — is set to add 137,000m² to the portfolio and lift asset valuations to approximately R6.65 billion.

During the pre-close presentation, CEO Quintin Rossi commented:
“The first half of FY2026 reflects our team’s consistent execution in driving rental cashflows, managing risk, and growing our Western Cape-focused portfolio. While trading conditions remain tough, our strong balance sheet, recent acquisitions, and ongoing solar rollout position us to capture further growth and deliver sustainable returns to our shareholders.”

Spear also anticipates its inclusion in the JSE All-Property Index in March 2026, subject to confirmation, which would broaden its investor universe within the listed property sector and result in improved liquidity and greater market visibility.

Looking ahead, Spear reaffirmed its guidance for the full year, with distributable income per share expected to grow between 4% and 6% compared to FY2025, underpinned by disciplined asset management, selective acquisitions and a resilient Western Cape-focused portfolio.

Spear reports strong FY2025 results with record growth and strategic acquisitions

Spear REIT Limited (SEA:SJ), the Western Cape-focused Real Estate Investment Trust (REIT), has announced its results for the financial year ended 28 February 2025.

Amid South Africa’s challenging macroeconomic landscape, Spear has demonstrated resilience, achieving significant milestones in asset value growth, financial and operational performance.

FY2025 Highlights:

Distributable income per share (DIPS): Spear achieved DIPS growth of 3,08% aligning with the mid-range of management’s guidance for the year.
Net asset value per share (NAV) growth: Spear NAV per share increased by 3.57% to R12.20.
Completion of R1.15 billion transaction: Spear successfully completed the acquisition of 13 prime real estate assets within the Western Cape, valued at R1.15 billion at acquisition date. The transaction was completed ahead of schedule and under budget. This strategic acquisition expanded Spear’s asset base and positioned the company for long-term growth.
Asset value growth: The portfolio grew by 19.54% from R4.6 billion in FY2024 to R5.5 billion in FY2025, highlighting the effectiveness of the company’s active management strategy.
Market capitalisation: Spear’s market capitalisation increased by R1 billion, reaching a total of R3.3 billion at year-end, a testament to strong investor confidence and future growth prospects.
Occupancy rate: The company saw an improvement in its occupancy rates, which increased by 388 basis points to 97% across its core portfolio by the end of FY2025 compared to FY2024. This increase was driven by strong leasing momentum and tenant demand surpassing supply.
Rental reversion: Spear achieved a positive rental reversion of 4.18% across its portfolio in FY2025, a clear indicator of the company’s ability to drive value through hands-on asset management.
Loan to value (LTV) ratio: Spear continues to maintain a robust balance sheet primed for growth, with a 27.09% LTV ratio and an Interest Coverage Ratio (ICR) exceeding three times.

Speaking at the results presentation, Chief Executive Officer Quintin Rossi, commented on the strategic achievements of the year. “FY2025 has been transformative for Spear. Despite a challenging macroeconomic environment, we have shown resilience through our disciplined portfolio management and strategic acquisitions. The completion of the R1.15 billion acquisition ahead of schedule and under budget is a testament to our team’s commitment to operational excellence and long-term value creation. We are confident that these initiatives will continue to position Spear on a firm foundation to achieve the long-term strategy of the business.”

Chief Investment Officer Kim Pfaff-Karg further highlighted the company’s investment and long-term vision. “Looking ahead, we remain committed to expanding our portfolio within the Western Cape, South Africa’s highest performing property market. Our strategic objective is to grow our asset base to R15 billion over the next 7 to 10 years, while maintaining our disciplined value investment approach to continuously build a robust and defensive portfolio.”

Chief Financial Officer Christiaan Barnard provided an in-depth overview of the company’s financial performance. “We are pleased to report a 12.21% increase in group revenue compared to FY2024, driven by the successful integration of the Western Cape Portfolio acquisition. This, combined with strong rental collections of 98.59%, demonstrates the stability and resilience of our income streams.” Our distributable income per share (DIPS) increased by 3.08% to 85.55 cents for the year, while the total distribution per share (DPS) also grew by 3.06% to 81.27 cents. This was made possible through proactive and hands-on financial management and effective debt portfolio management, including the refinancing of debt at more favourable terms.”

Spear maintained an annualised payout ratio of 95%, strongly conveying its commitment to returning value to shareholders while maintaining sufficient financial flexibility for continued growth.

Spear’s acquisition of the new Western Cape Portfolio for R1.15 billion in October 2024 marked a transformative milestone, adding 13 prime real estate assets, including industrial, retail, commercial, and mixed-use properties. Notably, it introduced medical and life sciences retail assets for the first time, broadening Spear’s investment horizons.

The transaction delivered an initial yield of 9.46%, which increased to 10.1% after factoring in a once-off transaction fee. This acquisition further enhanced Spear’s geographical diversification, with a strong focus on the Cape Town Metropole.

The success of the Western Cape can be attributed to its accountable and effective administration. The region consistently exemplifies strong governance, with the City of Cape Town receiving top honours in both the 2024 Municipal Financial Sustainability Index and the Governance Performance Index (GPI). This commitment to transparency and integrity has fostered a stable environment for investment and growth.

Additionally, the Western Cape Provincial Government and local authorities have made significant strides in driving economic development, with substantial investments in infrastructure, job creation, and energy security. These initiatives have not only enhanced the region’s appeal to investors but have also strengthened its resilience amidst challenging economic times.

Spear’s commitment to its Environmental, Social, and Governance (ESG) policy continues to gain momentum with its PV solar rollout. As of FY2025, Spear has successfully installed solar PV systems across 38% of its portfolio, with plans to increase this to 64% by the end of FY2026. Spear’s total commissioned solar capacity now exceeds 9.4MW, generating an impressive 10.1MW across its portfolio.

The company is actively investigating energy-wheeling projects, aimed at facilitating the transfer of electricity between its owned assets. These initiatives are expected to mitigate rising electricity costs while significantly bolstering energy security across Spear’s portfolio.

Chief Operating Officer, Cliff Toerien commended the invaluable contributions of the Spear team in driving the company’s success throughout the financial year. “The Spear team has demonstrated their ability to asset manage favourable operational outcomes, drive solid portfolio performance through proactive and early engagement leasing strategies and strategic asset management. Our leasing teams have capitalised on improved market conditions, leading to improved occupancy rates and tenant retention across the portfolio. Additionally, our proactive approach in enhancing our rental income and optimising operational efficiencies contributes to our stable financial metrics and positions us well for sustained growth.”

In a strategic step to further strengthen its leadership, Spear recently announced the appointment of Joan Solms, a highly regarded property and finance expert, as a non-executive director to its Board of Directors, effective1 April 2025. This appointment reflects the company’s commitment to strengthening its governance and leveraging top-tier expertise to drive continued growth.

Outlook for FY2026

Looking to FY2026, Spear expressed confidence in the strength of its portfolio and its ability to generate consistent and predictable returns. The company’s continued focused strategy on the Western Cape positions it well for further growth, with a pipeline of both greenfield and brownfield developments.

In a separate announcement released via SENS on 21 May 2025, Spear announced the acquisition of Berg River Business Park in Paarl for R182.15 million. The 30,000m² multi-let industrial park, located in the Paarl Industrial node, will be acquired through a Section 42 asset-for-share transaction and is expected to deliver an initial yield of 9.35%. The acquisition aligns with Spear’s Western Cape-focused strategy and marks the REIT’s first entry into the Paarl real estate market.

Spear’s management forecasts a 4% to 6% growth in Distributable Income per Share (DIPS) for FY2026 subject to certain qualifications, while maintaining a dividend payout ratio of 95%.

“We are confident that our unwavering strategic focus on the Western Cape, together with our initiative-taking approach to portfolio management, will continue to generate and drive sustainable value for our shareholders in the years ahead. This will result in consistent asset value growth and sustainable, credible and predictable financial and operational performance,” Rossi concluded.