Spear Reit has expanded its Western Cape portfolio to R8.8 billion after buying four new properties worth R1.4 billion in the first half of 2027. The JSE-listed real estate investment trust reported distributable income per share of 47.29c, beating its own full-year guidance of 6% to 8% after only six months. Spear raised its full-year growth forecast to 9% to 11% and declared an interim dividend of 44.92c per share.

Acquisitions drive growth and guidance

Revenue rose 28.14% to R494.9 million, excluding straight-lining adjustments. This increase reflects the pace of Spear’s acquisition activity. The four new properties transferred into the portfolio during the half included the Santam Precinct in Tygervalley, a premium office building with 28,488 square metres, and Watergate Centre in Mitchells Plain, a 19,681 square metre convenience shopping centre.

These assets were bought at a blended yield of 8.99%, which is above Spear’s weighted average cost of capital. CEO Quintin Rossi said the deals add to earnings from the first day. Because the properties transferred into the portfolio at the very end of the reporting period, they contributed little to the interim results. Their full benefit will appear in the second half of the year.

The expansion was funded largely with equity. In April, Spear raised R1 billion in an accelerated bookbuild that was oversubscribed. Shareholders also reinvested their dividends, keeping another R108 million in the business. This strategy has produced one of the strongest balance sheets in the sector. Spear’s LTV of 21.91% sits well below the 35% to 40% range that many fund managers consider risky.

Keillen Ndovu, a property analyst, noted that Spear’s balance sheet is the strongest in the industry, with the lowest loan-to-value ratio and the highest interest cover ratio. The company’s solid performance reflects its focus on the Western Cape and proactive management. The group’s growing size also brought it into the FTSE/JSE All Property and SA Reit indices in March, which should widen its pool of institutional investors.

About 63% of Spear’s lettable area consists of industrial property, which remains the company’s core business. Industrial occupancy stands at 98.22%, with industrial vacancy at just 1.78%, and renewals and new leases were signed at rentals 13.49% higher than before. According to Rossi, demand for industrial property in the Western Cape remains strong, driven by the province’s growing reputation as a hub for industry. Landlords with modern warehouses in areas like Blackheath, Montague Gardens, and Brackenfell have significant pricing power.

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Spear’s overall portfolio has seen a 7.98% positive rental reversion, indicating that the company is signing new leases and renewing existing ones at rates almost 8% higher than before. This achievement is noteworthy in the current economic environment. The retail and commercial sectors are also holding up, with vacancy rates of 3.24% and 8.04%, respectively.

Renewable energy adds income

Spear is also building its own space. Projects under way include:

• GTX Industrial Park, George: a multi-let industrial park next to George Airport
• Mambos Storage & Home, Blackheath: a national distribution centre
• Century City: about 25,000m² of commercially zoned land bought for around R53m, with development plans in progress

Investing in George takes Spear beyond greater Cape Town into the fast-growing Garden Route.

Spear’s renewable energy program is expanding, with solar installations now present on 29 properties, totaling 18.4 megawatts of capacity. The solar plants generated 6.16 million kWh of electricity in the period, up from 3.55 million kWh the previous year, and earned around R19.45 million in revenue. An additional 1.2-megawatt installation is planned at the newly acquired Watergate Centre. The solar program provides Spear with a growing, inflation-linked income stream and helps tenants reduce their electricity costs.

Risks and future outlook

Management highlighted rising municipal charges, higher electricity costs and interest rates as risks. The South African Reserve Bank raised the repo rate by 25 basis points to 7.25% in September. This adds to the pressure on tenants and investors. However, Spear’s low gearing means it is less exposed to higher rates than most of its peers.

These results cement Spear’s position as one of the top performers on the JSE property board. The company achieved its target of 6% to 8% growth for the year in just six months. With R1.4 billion worth of newly acquired properties and a development pipeline that will add new space over the next year, Spear is well-positioned for continued growth.