Western Cape property fund gets R458 million boost

The real estate investment trust (REIT) Spear has raised R458 million through successful vendor consideration placement.

Spear, a REIT focused on investing in real estate within the Western Cape region, announced on Monday that it had successfully completed an equity capital raise of R457.75 million via a vendor consideration placement. 

This announcement follows the recent unconditional status of the acquisition of the Emira Western Cape portfolio, adding further impetus to its Western Cape-only-focused growth strategy.

The vendor consideration placement will allow the issuance of 50,302,197 new shares to public shareholders at an issue price of R9.10 per share. 

This equity placement was completed at a 1% discount to Spear’s 30-day volume-weighted average price, being R9.19 per share before 13 September 2024. 

The listing and issuance of the new shares are expected to commence at market open on Monday, 23 September 2024.

Spear REIT CEO Quintin Rossi siad, “Spear has remained laser-focused on building a high-quality, regionally centred real estate portfolio that consistently generates sustainable cashflows and profitability.” 

“The proceeds of Spear’s vendor consideration placement will be put to work to generate a mission-statement-aligned return for all stakeholders after the implementation of the new portfolio acquisition along with seeking out attractive portfolio growth opportunities within the region.”

The Western Cape has stood out as the most desirable real estate investment and development market in South Africa as provincial and municipal investment fundamentals outpace the rest of the country.

This has resulted in improved economic activity, which bodes well for real estate valuations and rates of return.

Spear is on the cusp of implementing its R1.15 billion acquisition of a 13-asset Western Cape-only portfolio from the Emira Property Fund, which will see its assets under ownership increase to R5.3 billion. 

The acquired assets constitute a diversified portfolio of 93,500 m² comprising high-quality industrial, medical retail and commercial offices in attractive and well-established Cape Town nodes. 

Following the new portfolio acquisition, Spear’s management will continue to seek incremental investment and development opportunities and explore diversified portfolio options within the Western Cape.

The proceeds of the vendor consideration placement will be used to settle short-term debt obligations and replenish the revolving credit facility emanating from its Category 1 transaction once implemented.

Spear’s loan-to-value following the vendor consideration placement and the implementation of the new portfolio acquisition by the end of October 2024 will be between 33% and 34%. 

Beyond the transfer date of the new portfolio acquisition, Spear’s strong balance sheet will provide sufficient headroom for transactional opportunities for management to act as and when the need arises.  

“Management remains optimistic that its growth strategy through acquisitions and developments, including a clear and implementable renewable energy and water continuity strategy, will enable Spear to grow its portfolio value in an income-accretive manner within the Western Cape towards becoming a meaningful mid-cap SA REIT,” the company said.