Spear REIT has acquired a portfolio of 13 commercial properties from Emira Property Fund valued at R 1.15 billion.
The acquisition by the JSE’s only regionally focused REIT consists of a diversified portfolio in the Western Cape, which is in line with Spear’s strategy of solely investing in the province.
Emira said yesterday that the disposal was part of its strategy to recycle capital, and the proceeds would be used to recycle debt and fund new acquisitions.
Emira CEO Geoff Jennet said the selling price had been agreed at a small discount to book value, which was expected for this type of portfolio sale. “Emira’s capacity to successfully trade out of assets underscores its astute capital allocation and value creation capabilities,” he said.
“The proceeds of the transaction will boost Emira’s war chest,” said Jennett.
“This portfolio acquisition marks a key strategic objective by Spear as we take hold of this transformative and accretive transaction. This will add value both in income and asset quality to the existing Spear portfolio, increasing our portfolio by 16% to 502 000 square metres (Liberty Life GLA excluded) of high-quality Western Cape-only real estate assets,” Spear CEO Quintin Rossi said.
He said their strategy had served Spear well and was evident in its rate of return to shareholders and the consistent operating performance.
Western Cape real estate fundamentals have remained strong across the industrial, retail, commercial and residential sectors, as the region manifests counter-cyclical economic and investment activity compared to the rest of South Africa.
The portfolio comprises 93 491 square metres of industrial, medical and life science-focused retail and commercial assets, located in the Cape Metropole.
In terms of gross lettable area, there are 51% industrial, 40% commercial and 9% retail assets in the portfolio. A notable industrial asset is fully occupied Northpoint Logistics Park, in the R300 Brackenfell industrial precinct, with a lettable area of 16 000 square metres of modern warehousing solutions.
The acquisition would increase Spear’s asset base to 40 properties, with a combined value of R5.4bn (excluding the disposal of the R 400m Liberty Life building awaiting transfer out of the Spear portfolio).
Post the transaction, Emira’s South African portfolio of commercial and residential assets would reduce from R12.3bn to R11.2bn, while its US equity investments would remain at R2.8bn.
Once the acquisition transfers to Spear, its portfolio would remain underpinned by industrial assets, which will account for 59% of the expanded portfolio’s gross lettable area.
Spear chief financial offier Christiaan Barnard said they financed the acquisition with equity and debt, using disposal proceeds from their recent R 313.5m private placement.
A debt package had been secured with Spear’s funders that would see Spear’s loan-to-value post the deal remain at the lower end of its target of 38% - 43%”.
Spear chief investment officer Kim Pfaff-Karg said: “Securing a portfolio of this quality, asset composition and size within the Western Cape was not an easy task. The acquired portfolio has a 95% occupancy rate, 26 months weighted average lease expiry and just under 7% annualised in-force escalation rate. Spear will acquire the portfolio on an initial yield of 10.1%.”
At Spear’s pre-close presentation for its 2024 financial year, it said DIPS (distributable income per share) for the year was expected to be between 0% - 1.5% higher than in 2023. Spear’s annual results for 2024 would be released on May 22.
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