SPEAR REIT delivered a stand-out performance among locally listed real estate investment trusts after lifting its annual distribution by 16 percent per share for the 2002 financial year.
REITS have so far this year mainly reported mid to low single-digit growth in distributions to shareholders due to the tough environment, in particular the oversupply of office space, structural changes in retail shopping, both of which were exacerbated through the Covid-19 pandemic and low economic growth.
Spear chief executive Quintin Rossi said in a telephone interview that their success was due to their strategy of holding a diversified portfolio in the Western Cape.
He said semigration trends, good governance and good infrastructure in the province, and the fact that the region did not have a large overhang of existing property such as in Gauteng, had aided the property investment environment in the province. There were also few new builds under way in the Cape Metropolitan area at present, he said.
Another factor that drove results was that their management was “on the ground” and close to the properties and tenants, said Rossi.
The pre-Covid rental collection profile of 98 percent collected through the year versus billed resulted in the payout ratio increasing to 88 percent, generating a total distribution per share of 68.25 cents.
Rossi said they had an ambitious growth plan, which will see assets under ownership increase by some R11 billion by 2028.
“Navigating the next financial year will not be easy. However, we are starting to see green shoots as the travel, tourism, hospitality and services sector show a notable recovery, together with general economic activity starting to materially improve and a return to office momentum picking up,” he said..
Spear’s assets under ownership were valued at R4.48bn, an increase of 221 percent since listing in 2016, with the average property value increasing by 2.68 percent in the 2022 year.
The portfolio consists of 31 Western Cape assets, the top five by value equate to 48 percent of the total value and are spread across industrial, convenience retail and commercial real estate in the Cape Metropole.
Spear has begun its exit from its hospitality assets, with the disposal of the Double Tree by the Hilton Hotel in February 2022, contributing to the group achieving a forecast reduction in loan to value well in advance of initial guidance.
Spear’s loan to value fell to 39 percent from 46 percent in the first half of the 2022..
Throughout the year portfolio occupancy was about 94 percent. and tenant retention rates were similar.
Revenue increased 11.19 percent from 2021, largely owing to fewer tenant support measures, consistently improving cash flows and a strong core portfolio performance.
“The unimaginable and unpredictable confrontation that the world endured due to Covid-19 and its residual effects sowed loss and devastation but it has also resulted in strengthening the core competencies within our business operations,” said Rossi.
edward,[email protected]
BUSINESS REPORT