Should all the conditions precedent for the transaction be met, Spear REIT, which invests exclusively in the Western Cape, will take ownership of the 13 properties. The portfolio comprises six office properties, five industrial facilities and two specialist/retail properties, with the majority of the portfolio value being in office properties.

The selling price has been agreed at a small discount to book value, which is expected for this type of portfolio sale.

Commenting on the announcement, Spear CEO Quintin Rossi stated, “This new portfolio acquisition marks the achievement of a key strategic objective by Spear (subject to certain approvals) as we take hold of this transformative and accretive transaction. This will add value both in income and asset quality to the existing Spear portfolio, increasing our diversified portfolio by 16% to 502 000m2 (Liberty Life GLA excluded) of high-quality Western Cape-only real estate assets. It is a true testament to the execution of one of the key pillars of our investment strategy.”

Emira’s capacity to successfully trade out of assets underscores its astute capital allocation and value creation capabilities.

Geoff Jennett, CEO of Emira Property Fund, comments, “The growing demand for investment property in the Western Cape presented an exciting liquidity opportunity for Emira because our regional holdings there are smaller and not something we want to add to at the current pricing levels. We are alive to market opportunities and agile in responding to prospects that further our strategic ambitions.”

The proceeds of the agreed transaction will boost Emira’s war chest, placing it in a strong position to take advantage of strategic investment opportunities. It will also further reduce Emira’s exposure to the South African office sector, which is still grappling with recovery given the new ways of working post-pandemic and the country’s anaemic economic growth.

The deal carefully considers the consistency of management experience and expertise, and the knowledgeable Emira team directly responsible for managing that portfolio of properties will join Spear.

“We have no doubt that these properties will be in good hands at Spear and our people will find a good home with them. With its specialist Western Cape focus, we are confident that Spear will achieve great value from these assets. This transaction is mutually beneficial for Emira and Spear and we believe it is a win-win for all involved,” says Jennett.

The acquired portfolio comprises of 93 491m2 of industrial, medical and life science-focused retail and commercial assets, located across prime nodes in the Cape Metropole. The new portfolio segmentation based on a gross lettable area comprises 51% industrial, 40% commercial and 9% retail assets. One of the notable industrial assets is the fully occupied Northpoint Logistics Park situated in the sought-after R300 Brackenfell industrial precinct with a gross lettable area of 16 000m2 of modern warehousing solutions.

The new acquisition increases Spear’s asset base to 40 properties, with a combined value of R 5,4bn (excluding the disposal of the R 400 million Liberty Life building awaiting transfer out of the Spear portfolio). The portfolio remains strongly underpinned by high-quality industrial assets which will account for 59% of the expanded portfolio’s gross lettable area once the announced portfolio acquisition transfers to Spear.

Spear’s CFO Christiaan Barnard commented, “We have financed the new acquisition through a combination of available equity and debt, utilising disposal proceeds and funds from our recent R 313,5 million private placement, which concluded in February this year. A debt package has been secured with Spear’s funders which will see the Spear loan-to-value post implementation of the new portfolio remain at the lower end of its strategic band of between 38% - 43%”.

Spear CIO Kim Pfaff-Karg said, “Securing a portfolio of this quality, asset composition and size within the Western Cape was not an easy task. Our deal team remained focused on property fundamentals throughout our negotiations, and we were very fortunate to secure this high-quality portfolio from an equally reputable counterparty”. The acquired portfolio has an impressive 95% occupancy rate, 26 months weighted average lease expiry and just under 7% annualised in-force escalation rate. The average valuation per square meter is R 12 258/m2. Spear will acquire the portfolio on an initial yield of 10,1% adding to the overall group profitability, once stabilised into the Spear portfolio.