JSE-listed real estate investment trust (Reit) Emira and its wholly owned subsidiaries have agreed to dispose of 13 predominantly industrial and office properties situated in the Western Cape to Spear Reit for R1.15-billion in cash.

On March 28,  Spear entered into two inter-conditional sale of rental enterprise agreements with Emira Property Fund in terms of which Spear will buy the Western Cape property portfolio, comprising various properties and the rental enterprises conducted by the sellers on the properties as going concerns, in one indivisible transaction.

The transaction forms part of Emira's strategy to recycle capital and the net proceeds of the transaction will initially be used to reduce Emira's debt and, subsequently, to fund new acquisitions in accordance with Emira's investment policy.

Spear says the acquisition of the properties provides it with a strategic opportunity to meaningfully increase its market share within the Western Cape, with a “complementary high-quality diversified property portfolio” comprising industrial, retail, mixed-use and commercial assets.

In addition, it also offers Spear an entry point into long-dated-medical- and life sciences-related facilities.

“The acquisition not only facilitates revenue and long-term growth prospects for Spear, but also creates operating efficiencies, enabling Spear – being a fully internally managed Reit – to increase operating profit margins and drive sustained profitability, by leveraging combined expertise and resources to reduce costs through economies of scale.

“The acquisition of the [properties] enables Spear to materially scale its current property portfolio, in a real estate market that would otherwise be challenging to scale through piece-meal acquisitions or organic growth, given the current market conditions and the strong real estate fundamentals in the Western Cape,” says Spear.

The acquisition will increase Spear's assets under ownership from 29 to 40 high-quality real estate assets and will enhance Spear's portfolio diversification and geographical spread of assets within the Western Cape.

Spear says the acquisition of the properties is aligned with its investment strategy from an income, asset value growth, asset type and geographical perspective.

Further, Spear will implement its photovoltaic (PV) solar strategy across the newly acquired properties and will invest about R20-million across the 13 properties to reduce the overall reliance on fossil fuel-generated electricity supply.

To date, in excess of 60% of the current Spear portfolio has PV solar installed, with the commissioned capacity generating just under 8 MW of PV solar electrical supply, supplying up to 25% of Spear's total energy demands.

“Management is confident that the planned PV solar installations at the [newly acquired properties], once implemented, will increase the total installed and commissioned PV solar capacity to in excess of 10 MW across the enlarged Spear portfolio,” says Spear.