Spear maintains buying energy

Spear Reit, the AltX-listed Western Cape region-specific property group, is set to acquire the five-star 15 on Orange Hotel in Cape Town and certain retail sections for nearly R300m, as it looks to continue its aggressive acquisition strategy since listing late in 2016.

CEO Mike Flax said the acquisition was in line with Spear’s strategy to invest into high-quality assets in the Western Cape and to increase its exposure to Cape Town’s hospitality sector, which continued to perform strongly given a healthy tourism market.

“This hotel has performed very well in the past couple of years having been built about four years ago.

“There is a 15-year management contract in place with Marriott International and we feel that we are acquiring an excellent asset for our portfolio. The deal also includes convenience retail assets,” said Flax.

Spear entered into a subscription agreement and a share purchase agreement to subscribe for and acquire 100% of the share capital of Blend Property 15 from Blend Property 17 and Platinum Hospitality Corporation. Blend Property 15 and Blend Property 17 are vehicles created by Blend Property Group. Spear bought the hotel and some attached convenience retail properties.

The consideration for the acquisition was an effective amount of R298m, plus or minus any working capital adjustments. It would be funded through a combination of loan funding and new equity that would be raised through a vendor consideration placement.

Spear listed in November 2016. It has a market capitalisation of R962m and assets worth about R1.5bn.

After the 15 on Orange transaction and a transaction to acquire a building on Long Street, which was announced earlier this week, Spear’s assets will be worth R2.2bn.

Flax said Spear could grow its assets to about R7bn in the medium term.