Emira sells R1.1bn Western Cape portfolio to Spear Reit

Emira Property Fund, which counts fellow JSE-listed Castleview Property Fund as its major shareholder, on Monday announced a R1.146 billion deal to sell “basically all its wholly owned Cape Town properties” to Spear Reit in somewhat of a surprise move.

“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 group said in a statement.

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The move comes as Cape Town has seen a boom in its commercial property market post-Covid, attracting both local and foreign investment.

However, the office property market nationally is still seen in a negative light, with double-digit vacancy rates.

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Emira said the “sizeable R1.1 billion transaction will create significant and immediate liquidity” for the group to pursue its strategy.

Its share price traded around 3% firmer on Monday, following the announcement, which will see the property counter reducing its office exposure further.

The Bryanston-headquartered group is currently invested in the SA and USA markets. Locally, it has a diversified portfolio of retail, office, industrial and residential property assets, while in the US it invests in retail convenience centres.

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“The selling price has been agreed at a small discount to book value, which is expected for this type of portfolio sale. Emira’s capacity to successfully trade out of assets underscores its astute capital allocation and value creation capabilities,” the group added in its statement.

“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,” said Emira CEO Geoff Jennett.

“We are alive to market opportunities and agile in responding to prospects that further our strategic ambitions.

“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,” added Jennett.

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“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 group further pointed out.

Spear, the only regionally focused Reit (real estate investment trust) listed on the JSE, said the acquisition consists of a diversified portfolio situated exclusively in the Western Cape, which highlights Spear’s focused strategy of solely investing in the province.

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It noted that the deal will be classified as a category one transaction for Spear, necessitating shareholder approval.

Commenting on the deal, Spear CEO Quintin Rossi said: “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 space 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.”

Spear Property, Emira Property Fund, Northpoint Logistics Park,

Northpoint Logistics Park, situated in Brackenfell, is part of the overall acquisition. Image: Supplied

According to Spear, Western Cape real estate fundamentals have remained strong across the industrial, retail, commercial (office), and residential sectors as the region manifests counter-cyclical economic and investment activity compared to the rest of SA.

The group said its strategy to solely invest in the province has “served Spear well”.

The acquired portfolio comprises 93 491 m2 of industrial, medical and life science-focused retail and commercial (office) assets, located across prime nodes in the Cape Metropole.

“We have financed the new acquisition through a combination of available equity and debt, utilising disposal proceeds and funds from our recent R313.5 million private placement, which concluded in February this year,” said Spear CFO Christiaan Barnard.

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Spear’s shares were over 4% down in afternoon trade.

Roy Walsh

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