Spear REIT Disposes Its R400m Century City Office Block
Spear REIT Disposes Its R400m Century City Office Block. Spear REIT has announced that it has entered into a sale of rental enterprise agreement, in terms of which Spear will dispose of the property known means Erf 6281 Montague Gardens, held by Spear with all improvements thereon, and the rental enterprise conducted by Spear on the Property, as a going concern, for a disposal consideration of R400,000,000.
The property, which forms part of Spear’s commercial office portfolio, was acquired by Spear in 2019, prior to the onset of the Covid-19 pandemic. In the wake of the global pandemic and its residual effects on global and local corporate office accommodation and the way in which some large corporates engage with and manage their office space requirements, management has, with the full support of the Spear board of directors, agreed to dispose of the property. The Disposal creates portfolio rebalancing opportunities, with a clear and focussed investment bias towards industrial warehousing, logistics and retail assets within the Western Cape.
The form and function of commercial office space has changed. Large corporates have adopted a hybrid in-office and work-from-home model which has an impact on longerterm office space requirements by some large corporate office users. The work-from-home narrative is not a one-size-fits-all solution, but changes in work force dynamics and the cost of losing human capital, has forced some businesses to reconsider and design how and where their workforce operates from. This has resulted in original space requirements needing to be augmented to cater for a post Covid-19 commercial office sector. Management believes that, given the augmentations that has taken place in the commercial office eco-system generally, and the general messaging from larger corporates, the Disposal gives effect to its portfolio rebalancing strategy, riskmanagement strategy and capital recycling strategy.
Following a strategic review of Spear’s total portfolio, management determined that both the value percentile and revenue percentile which the commercial office portfolio contributes to the overall portfolio are misaligned with its strategy and in need of mitigation and rebalancing as the office sector demand augmentations play out. Management has clearly communicated its focussed strategy of increasing portfolio exposure to industrial and retail assets within the Western Cape, as two key pillars of Spear’s growth strategy. This strategy will continue to enhance the defensive characteristics of the underlying Spear portfolio.
