Spear REIT continues to show robust growth with increased income and portfolio expansions

Spear REIT's distributable income increased by a commendable 5.21% to 43.78 cents for the six months ending August 31, 2025, after a period of notable property acquisitions.

The growth in revenue has been even more pronounced, with a 27.47% surge to R395.36 million, and a big reduction in loan-to-value, which fell from 27.09% to 13.85%. The performance highlights a robust operational strategy and keen market positioning in the competitive South African real estate sector.

“Robust rental collections, growing letting activity, tenant retention, and hands-on financial, debtors and vacancy management remain the key building blocks for the entire Spear team,” said CEO Quintin Rossi.

Occupancy rates stood resiliently at 95.03%, which was credited to successful marketing and letting initiatives within Spear’s core portfolio, setting a firm foundation for ongoing growth. During the period, Spear successfully acquired real estate assets valued at R1.074 billion at an attractive average yield of 9.54%, exceeding their weighted average cost of capital.

The company is the only regionally specialised Real Estate Investment Trust (REIT) on the JSE and it is focused on the Western Cape. Portfolio diversification plays a key role in mitigating risks; the assets encompass industrial, convenience retail, commercial, and mixed-use developments, all chosen for their ability to deliver sustainable cash flows.

The industrial segment represents 62% of the total gross lettable area (GLA). This segment encompasses logistics, urban logistics, warehousing, and multi-let industrial parks, ensuring a defensive income stream aligned with the Western Cape’s economic strengths. The firm has actively maintained a development pipeline, expecting to add further value with projects like the GTX Development in George and Bravo Park extension in Blackheath.

In the rhe retail portfolio, by introducing medical retail assets and concentrating on high-growth residential and commuter nodes, Spear has insulated itself from the fluctuations typically associated with tourist-dependent retail sectors.

“None of Spear's retail assets are dependent on local or international tourism,” said Rossi.

The decline in interest rates and the effects of two-pot withdrawals had positive impacts on Spear’s tenants as consumer demand returns. Spear’s tenants reported positive trading conditions as footfall levels were strong and basket sizes remain in line with tenant expectations particularly within the apparel segment.

The transfer date for the new assets was set for between October 2025 and January 2026. The asset composition of the new properties is made up of two multi-let industrial parks located in Paarl and Elsies River Industria, with the third being a convenience and commuter retail asset in Wynberg with a collective GLA of 137 090 square metres. The assets were acquired at no premium to market vaue.

The Cape Town office market was seeing increased demand, bolstered by a restrained supply of high-quality office space and a return-to-office momentum, which has positively influenced occupancy rates. Ongoing trends of semigration to the Cape region contribute to this demand, revealing opportunities for rental growth within Spear’s commercial portfolio, said Rossi.

The hands-on approach to asset and property management also resulted in a low vacancy rate—just 4.97%—significantly below national averages. Further, the company's solid fundamentals position it well for future growth, with management projecting a full-year growth rate of between 4% to 6% for distributable income per share, while maintaining a payout ratio of 95%.

Post the implementation of the acquisitions, Spear’s assets under ownership will increase to R6.6bn and the GLA of its portfolio will increase to circa 624 407 square metres.

BUSINESS REPORT