Spear CEO on what lies ahead for SA’s commercial property market amid COVID-19

The commercial property market in South Africa has been severely impacted by the COVID-19 pandemic, leading to a decline in revenue for many companies in the sector. Spear, a Real Estate Investment Trust based in the Western Cape, recently announced a reduced dividend of 29.34 cents per share for the six months ending in August. In light of these challenges, the CEO of Spear, Quintin Rossi, shared insights on the company's strategic plans and balance sheet actions in a recent interview with CNBC Africa. Rossi discussed the dividend reinvestment plan that the company has put in place for shareholders who elect not to take the interim dividend. This plan allows shareholders to reinvest their dividends back into Spear at a marginal discount, with the proceeds intended to strengthen the company's balance sheet. He emphasized the importance of balance sheet actions in the current environment, noting that options such as asset sales, debt reduction, and capital raising are crucial for financial resilience. Despite the tough economic climate, Rossi expressed confidence in Spear's cash and liquidity position, stating that the management team, which owns 34% of the company, will participate in the dividend reinvestment program. He also mentioned ongoing discussions with large shareholders who support the company's strategic initiatives. In the event that some shareholders opt out of the reinvestment program, Rossi outlined plans to utilize funds from a disposal currently underway to reduce debts and align the company's loan-to-value ratio with its strategic objectives. Another key point of discussion was Spear's decision to exit the hospitality sector due to poor returns amidst the pandemic. Rossi highlighted the company's focus on commercial, retail, and national assets that provide fixed income investments, as opposed to variable income from the hospitality portfolio. While acknowledging the potential resurgence of travel and tourism following the introduction of a COVID-19 vaccine, Rossi indicated that Spear remains committed to its strategic realignment and will gradually exit the hospitality sector over the next 18 to 24 months. With regards to the Western Cape's status as a prime destination for foreign nationals, Rossi mentioned that Spear would capitalize on market opportunities as they arise post-vaccine. The company's long-term vision is centered around maximizing returns from commercial properties and enhancing its portfolio of income-generating assets. Amidst uncertainties in the market, Rossi emphasized the importance of prudent financial measures and strategic decision-making to navigate the challenges brought about by the ongoing pandemic. In conclusion, Spear's CEO Quintin Rossi remains optimistic about the company's resilience and ability to adapt to the evolving landscape of the commercial property market in South Africa. By implementing sound financial strategies and focusing on core assets, Spear aims to position itself for long-term growth and stability in the face of unprecedented challenges.