Wrap Text
Voluntary Operational and Financial Update for the First Quarter, ending 31 May 2025, of the 2026 Financial Year
SPEAR REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2015/407237/06)
Share code: SEA
ISIN: ZAE000228995
LEI: 378900F76170CCB33C50
Approved as a REIT by the JSE
("Spear" or "the Company")
VOLUNTARY OPERATIONAL AND FINANCIAL UPDATE FOR THE FIRST QUARTER, ENDING 31 MAY 2025, OF THE 2026 FINANCIAL YEAR
1. SA SALIENT FEATURES
Spear is pleased to provide a high-level operational and financial update for the three months ending
31 May 2025 ("Q1") of the financial year ending 28 February 2026 ("FY26").
FY2026 Q1 FY2025 Q1 Variance
Distributable income per share * cents 23.13 21.88 5.74%
Distribution per share * cents 21.98 20.78 5.74%
Pay-out ratio assumed % 95.00 95.00
Total distributable income R'000 74,238 57,046 30.14%
Revenue excluding smoothing R'000 191,240 160,989 18.79%
Basic earnings per share cents 23.20 19.33 20.02%
Headline earnings per share cents 23.18 20.17 14.92%
Interest cover ratio Times 3.40 2.88 -
* Distributable income per share and distribution per share is disclosed to assist investors to compare
comparable information to the prior period and does not constitute a dividend declaration for the
period under review.
FY2026 Q1 FY2025
SA REIT Cost to Income % 44.09 44.37
SA REIT Administrative cost to income % 6.97 6.78
Loan to value % 26.18 27.00
Tangible net asset value per share R 12.43 12.20
Weighted average cost of debt % 9.01 9.08
Weighted average cost of variable debt % 9.11 9.29
Weighted average cost of fixed debt % 8.97 9.01
Fixed debt ratio % 79.90 77.53
Weighted Average expiry of debt Months 25.69 25.97
Weighted average fixed expiry Months 23.40 20.39
Number of net shares in issue '000 320,388 320,400
Commerc- Develop-
Industrial Retail FY26 Total FY25 Total
ial ment Land
Number of
14 17 8 - 39 39
properties
Value of
properties 2,154,646 2,349,023 978,977 72,361 5,555,007 5,532,267
(R'000)
Value % 39% 42% 18% 1% 100% -
Property
revenue excl
76,033 79,189 36,006 - 191,228 681,704
smoothing
(R'000)
Revenue % 39.76% 41.41% 18.83% 0.00% 100% -
Property cost
to income 37.58% 36.38% 35.94% 36.83%
ratio
GLA m² 304,310 127,548 55,560 - 487,418 487,418
GLA % 62.43% 26.17% 11.40% 0.00% 100%
Vacant area
9,212 10,958 4,307 - 24,476 14,634
m²
Vacancy per
3.03% 8.59% 7.75% 0.00% - -
sector %
Vacancy on
1.89% 2.25% 0.88% 0.00% 5.02% 3.00%
total GLA %
Weighted
average in-
7.38% 7.23% 7.37% 0.00% 7.28% 7.27%
force
escalation %
Weighted
average lease
23.14 25.27 23.44 - 24.18 24.58
expiry
(months)
2. CEO COMMENTARY
Quarter 1 (Q1) of FY2026 has delivered strategy aligned financial performance by the core portfolio despite
some transient vacancy creep during the period due to active asset management and sustainability driven
interventions. Despite real estate fundamentals being at its strongest in the Western Cape, the South African
low economic growth environment weighs down the full potential of what can be achieved within the region
from a real estate and economic activity perspective. Macroeconomic pressures continue to weigh on
sentiment, compounded by increasing global geopolitical volatility. However, a recent positive development
was the South African Reserve Bank's 25-basis point interest rate cut on 29 May 2025, supported by lower-
than-expected inflation data. Encouragingly, further monetary easing may be possible later in FY2026,
should inflation remain contained. A weaker US dollar has helped shield South Africa from imported inflation,
although recent tensions in the Middle East may have inflationary consequences in the months ahead.
During Q1 FY2026, the core portfolio continued to deliver robust operating performance in line with
management's strategy despite some vacancy creep, with the overall portfolio occupancy for Q1 being 95%.
The vacancy creep is attributable to the strategic pursuit of higher rental rates on renewals, a move that has
seen success elsewhere in the portfolio, as well as a temporary vacancy linked to a sustainability-focused
capital expenditure project at Mega Park in Bellville South that accounts for 1% of the increased vacancy.
The project timeline to return this temporary vacancy to the market is set to be by the end of Q3 FY2026.
Management is confident that occupancy rates will move back to between 95.5% - 97% by the end of the
first half of FY2026. Given the constraint in supply within the region, emphasis has been placed on securing
longer lease terms and higher escalation rates during renewal negotiations. These efforts are beginning to
yield positive outcomes, with consistently improving escalation rates being achieved. This aligns with the
Group's asset and property management strategy and serves as a key lever to mitigate against operating
cost increases.
Despite the marginal vacancy rate uptick and the short-term sustainability-related vacancy, the core portfolio
has met its financial objectives from a DIPS (Distributable Income Per Share) perspective in Q1 FY2026.
On 22nd May 2025 management guided to a DIPS growth forecast of 4% to 6% for FY2026 compared to
FY2025.
We pleased to report that the Group is tracking slightly above the midpoint of this range, delivering 5.75%
DIPS growth in Q1 FY2026 relative to the prior comparative period.
3. OPERATIONAL UPDATE FOR THE THREE MONTHS ENDING 31 MAY 2025
Sectoral Update:
Industrial:
Spear's industrial portfolio has demonstrated consistent performance during the quarter maintaining a
98.11% occupancy rate and robust in force escalation rate of 7.38%. Spear's industrial portfolio offers a
fully diversified sub-sectoral product mix ranging from warehousing, logistics parks, urban logistics and
manufacturing facilities. The industrial portfolio maintained a strong rental collection profile during the
quarter of 99%. Solar installation on industrial properties generated R4.14 million of revenue and a net
operating income of R2.60 million. 6 new systems are being installed which are expected to be completed
and operational in FY2026 Q3.
Retail:
Spear's retail portfolio has delivered consistent operational performance given its convenience,
destination and medical retail focus during the quarter maintaining a 99.1% occupancy rate and robust
in-force escalation rate of 7.37%. None of Spear's retail assets are reliant on local or international tourism
and are all located in areas with excellent public transport infrastructure and sufficient parking. The retail
portfolio maintained a strong rental collection profile during the quarter of 98%. Solar installation on retail
properties generated R2.26 million of revenue and a net operating income of R2.01 million. 2 new
systems are being installed which are expected to be completed and operational in FY2026 Q3.
Commercial:
Spear's commercial portfolio has maintained its recover trajectory as management diligently focus on
improving key performance metrics across the commercial portfolio. The commercial portfolio delivered
a 97.7% occupancy rate for the quarter with an in-force escalation rate of 7.23%. Whilst the occupancy
rate may have printed a slight decline during the quarter the key take away is that the quarterly revenue
metrics around the commercial portfolio have maintained its positive trajectory due to renewal revenue
being at higher levels than expiring revenue for the quarter. The commercial portfolio maintained a
strong rental collection profile during the quarter of 97%. Solar installation on Commercial properties
generated R1.00 million of revenue and a net operating income of R0.54 million. 3 new systems are being
installed which are expected to be completed and operational in FY2026 Q3.
Letting activity
During the quarter 75 236m2 of gross lettable area came up for renewal and relet at a closing gross rental
of R 5.34 million and an average closing gross rental of R 71.03/m 2. In the same period new lets and
renewals of 72 894m2 were concluded at an opening gross rental of R 5.31 million with an opening gross
rental of R 72.94/m2 printing a positive rental reversion for the core portfolio for Q1 FY2026 of 2.68%.
Post Q1 FY2026 letting activity and renewal activity has been consistent and will provide additional
impetus to the above letting activity during Q1.
Building Sector Area Term Start Gross Rent Esc
Steelpark Industrial 1,179.75m² 3 Years Aug 2025 R70/m² 8.5%
Waterside Commercial 407.18m² 3 Years Aug 2025 R170/m² 9.5%
Place
2 Long Commercial 387.00m² 2.5 Aug 2025 R140/m² 8.0%
Years
1 Waterhouse Commercial 188.17m² 3 Years Sept 2025 R215/m² 8.0%
Sable Square Retail 675m² 5 Years Aug 2025 R197.88/m² 8.0%
(530m² Current) + 6% T/O
2 Long Commercial 278.77m² 2 Yrs 4 June 2025 R150/m² 8.0%
months
2 Long Commercial 62.00m² 1 Year June 2025 R145.16/m² 8.0%
Acquisitions and disposals
ACQUISITIONS
Property Name Purchase Consideration Expected Transfer Date Initial Yield
Berg River Business Park R182.15 million September 2025 9.35%
Group funding
Fixed debt ratio at period end is 79.90%, marginally above the group's strategic band of between 65% -
75% hedged. Post the distribution payment in June the hedged ratio is estimated to be +-73%.
Weighted average fixed cost reduced from FY25 as a result of taking advantage of favourable blend and
extend options available on current SWAP's lowering the base rate and extending the maturity date.
Covenants
Covenant 31 May 2025
Loan-to-value 50% 26.18%
Interest cover ratio 2 times 3.40 times
Cash Collections and availability
Cash collection for the period is 98.52% tracking ahead of the FY2025 Q1 (97.12%) collections. At period
end the group has R736 million of cash availability in undrawn facilities. R200 million of the available
cash facilities has been earmarked for capital projects including R30 million for new solar projects that
commenced in Q2.
The LTV and cash availability as at 31 May 2025 is prior to the R749 million capital raise concluded on
17 June 2025. Including the capital raise the group LTV is between 16% - 18% providing the group with
sufficient capacity for accretive acquisitions.
4. OUTLOOK
Despite the challenging market conditions, management are satisfied that Quarter 1 of FY2026 has delivered
strategy aligned financial performance in line with its market guidance despite short term vacancy creep as
portfolio enhancements are initiated and improved key performance indicators are etched out across the
core portfolio. Management is laser focused on building on the success of Q1 FY2026 throughout the
financial year with the intention of delivering forecast aligned financial and operational performance for the
balance of FY2026. As communicated to the market, management remain focused on five key strategic
priorities for FY2026:
(1) Portfolio growth and optimisation, through the acquisition of yield-enhancing Western Cape assets
aligned with Spear's investment criteria;
(2) Prudent capital management, ensuring financial discipline and long-term value creation;
(3) Reinforced shareholder alignment through transparent stewardship and personal investment;
(4) Sustainable growth via asset enhancement, effective debt management, human capital
development, and ESG rollout; and
(5) A tenant-centric approach focused on vacancy compression, high tenant retention rates and rental
sustainability.
Spear remains on track with its FY2026 market guidance of DIPS growth of 4% - 6% compared to FY2025
subject to the following qualifications:
o No loadshedding occurs for the remainder of FY2026.
o Vacancies are reduced in accordance with management's forecast.
o Lease renewals are successfully concluded as per management's projections.
o No major tenant failures occur during the period.
o Tenants continue to successfully absorb rising costs associated with utility charges, municipal rates
and other expenses.
o No civil unrest arises in Cape Town, the Western Cape, or South Africa.
Any changes in the above assumptions may affect management's forecast for the year ending28 February
2026.
The information and opinions contained above are recorded and expressed in good faith and are based on
reliable information provided to management. No representation, warranty, undertaking or guarantee of
whatsoever nature is made or given with regard to the accuracy and/or completeness of such information
and/or the correctness of such opinions.
The FY2026 Q1 financial information contained in this announcement has not been audited or reviewed by
the external auditors of the Company.
Cape Town
30 June 2025
Sponsor
PSG Capital
Date: 30-06-2025 03:00:00
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