Anchor Stockbrokers, a leading equity research firm, has initiated coverage on Cape Town-focused Spear REIT, with the view that its focus on the city and strong financial performance makes it an attractive investment opportunity in the current market.
Lwando Ngubentombi, an equity research analyst at Anchor said: "We find Spear's focus attractive given the population, employment and economic growth, scarcity of land, low supply of new commercial property, and vacancy/reversion trends. Even though half the rent has come from the office sector, it has outperformed every diversified REIT we cover in SA since its listing. We like the focus on affordable properties where the land value provides a meaningful underpin and has supported rental growth."
Nesi Chetty, head of property at Stanlib, said investors appreciated the appeal of a niche-focused retail and industrial fund in the Western Cape.
He said vacancies were low across the portfolio, with ongoing evidence of strong leasing activity in the current operating environment.
"The management team at Spear has done an excellent job of growing assets and delivering consistent distribution growth since listing. They have been active in the market, utilising asset disposals and share buybacks to unlock value. Additionally, they have a strong balance sheet, with a loan-to-value ratio at 36%, and minimal refinancing requirements this year, thanks to their robust debt maturity profile," he said.
Chetty said valuations on Spear’s properties appear conservative. While real estate fundamentals in their market continued to shift, Spear was experiencing strong growth in net operating income.
"We maintain that it remains an attractive investment for shareholders seeking long-term income yield and growth," he said.
Spear REIT’s portfolio consists of 28 strategically located properties across Cape Town's key commercial nodes.
BUSINESS REPORT