Spear REIT acquires Watergate Centre in Cape Town for $27 million

Spear REIT Limited, a regionally focused Real Estate Investment Trust (REIT) listed on the Johannesburg Stock Exchange (JSE), has agreed to acquire the Watergate Centre, a convenience retail shopping hub in Cape Town’s Mitchells Plain, for R442 million ($26.98 million), reinforcing its strategy of expanding income-generating assets in South Africa’s Western Cape.

The acquisition, concluded on April 17, 2026, involves the purchase of the retail property and its rental enterprise from MPW Cape Properties as a going concern, with transfer expected around August 2026, subject to regulatory approvals.

Strengthening retail footprint in Western Cape

The Watergate Centre is a 19,642-square-meter retail complex strategically positioned along key transport routes, serving a densely populated catchment area. Anchored by major tenants including Shoprite and Brights Hardware, the mall also hosts national brands such as Clicks, Pep, Ackermans, Mr Price, KFC, Capitec Bank, and Zone Fitness.

The asset is fully let, with strong grocery and essential retail tenants driving consistent footfall and underpinning stable rental income. National retailers contribute the bulk of gross rental, supporting a resilient income profile aligned with Spear’s focus on defensive, convenience-led retail assets.

Unlocking stable income and growth potential

Spear expects the acquisition to deliver immediate cash flow, with a forecast distributable profit of R833,613 ($50,905) for the initial seven-month period ending February 2027, rising to R2.62 million ($159,975) for the 2028 financial year.

The property offers a purchase yield of 8.37%, with average annual rental escalations of 6.7%. While the weighted average lease duration stands at 1.86 years, the company sees this as an opportunity to actively renew leases and enhance rental terms, given the strong performance of existing tenants.

Strategic capital deployment and financing

The transaction will be funded through a mix of debt and internal cash resources, with a targeted loan-to-value ratio of 50%. Spear will settle the purchase consideration upon transfer of ownership, backed by a bank guarantee.

The deal remains subject to approval by competition authorities under South Africa’s Competition Act, with completion expected once all conditions are met.

Expanding a resilient retail portfolio

The acquisition underscores Spear’s continued focus on high-quality retail assets in prime Western Cape nodes, particularly those offering stable, necessity-driven income streams. With limited competing retail in the area and strong consumer demand, the Watergate Centre is positioned as a key convenience destination with long-term growth potential.