Spear REIT, which has a portfolio of commercial properties in the Western Cape, lifted its distribution per share by 3.14% to 39.53 cents in the six months to August 31, the results showed yesterday.
Distributable income per share increased 2.06% to 41.61 cent per share. The payout ratio was 95% of distributable income versus 94% previously. Total distributable income increased 22.24% to R111.22 million.
Despite the challenging trading environment and high interest rates, Spear management said they were optimistic that operating conditions would not remain deeply challenging forever, as very encouraging prospects of economic growth, contracting government bond yields and economic growth had started to emerge across the macro-economic landscape of South Africa.
Loan-to-value was lower at 23.93% versus 31.60 previously. Tangible net asset value per share was R11.74 (R11.78).
Spear’s management remained focused on navigating the challenging trading environment and building on the rising tide of tenant activity year-to-date to actively drive down portfolio vacancies, in particular within Spear's commercial portfolio.
“South Africa has been free of load shedding for the past 200 days plus, which has bolstered the sense of renewed optimism in the investment community, which has led to tenant commitments that were on the fence less than a year ago. Spear has benefited and will continue to benefit from its Western Cape only focus,” its management said.
Positive leasing momentum was a hallmark of the interim period and in excess of 9 000 square metres of commercial office vacancies were let, reinforcing the letting demand that had returned to the office market within the Western Cape, as Spear’s commercial office occupancy rates increased by 616 basis points.
Top-line revenue growth was showing positive signs of strengthening as portfolio vacancy rates contracted, in-force escalations remained strong and positive rental reversions were achieved on a portfolio level, for the half year.
This was despite the impact of cost creep brought on by the interest rate environment, increased repairs and maintenance due to record breaking rain falls and severe weather conditions from June 2023 – end August 2023, the absorption of the City of Cape Town winter electricity tariff regime and the absorption of material increases in asset insurance and South African Special Risks Insurance Association (SASRIA) costs.
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