Adjusted NAVPS increased by 3.2% from R21.89 to R22.59 and NAVPS by 3.2% from R19.23 to R19.84 year-on-year. Attacq’s portfolio comprises a quality South African operational portfolio, its Waterfall development portfolio, strategic investment in MAS and retail investments in the rest of Africa.
“This year has been a transition year of consolidation and repositioning for Attacq. We have revisited our strategy, took cognizance of lessons learned, internalised our development team, cleaned up our portfolio and entered the 2018 financial year with a focused approach. The business model has been simplified, creating the platform for future growth centred on our four value drivers namely our quality South African portfolio, strategic investment in MAS, Waterfall development pipeline, which is Attacq’s unique value proposition, and our retail investments in the rest of Africa. We are excited about our conversion to a REIT and believe our revised strategy is well positioned to unlock considerable value to shareholders in future.”
“The growth in our net asset value per share was negatively impacted by the strong Rand, marked-to-market losses on our interest rate swaps and impairments on certain investments in the rest of Africa and Central Europe. This was countered by growth in our quality South African portfolio, the completion of a further 4 properties in Waterfall and the strategic investment in MAS,” commented Morné Wilken, CEO of Attacq.
Attacq has a diverse South African portfolio across sectors with 58.6% in retail, 33.8% in office and mixed-use, 5.2% in light industrial and 2.4% in the hotel sector. At the end of the reporting period, the current weighted average lease expiry profile was marginally lower at 6.4 years compared to 6.7 years in 2016. Overall portfolio vacancies, measured in terms of primary gross lettable area (“PGLA”), increased by 4 690 m² to 3.0%. After year end 4 431 m² of PGLA was let, reducing vacancies as a percentage of total PGLA to 2.4%.
During the year four newly developed buildings were added to the portfolio, increasing the value of the existing South African operational portfolio to R18.1 billion from R17.1 billion.
Net rental income, including straight-line lease income adjustments, increased by 17.9% to R1.3 billion. A year-on-year comparison of the net rental income is however less meaningful, due to the four buildings that were completed during the current year and the inclusion of the Mall’s operational results for only two months in the previous financial year.
“The disposal of our Serbia and Cyprus investments, the shareholding in Nova Eventis post year end as well as some mature, non-core assets in South Africa formed part of our repositioning. The proceeds from the disposals were used to reduce our debt in preparation for our REIT conversion,” stated Wilken.
Gearing, calculated as total interest-bearing debt less cash on hand as a percentage of total assets, improved from 39.9% to 37.1% year-on-year. The weighted average cost of funding remained flat over the last 12 months at 9.2% (2016: 9.2%).
“At year end 90.8% of our debt was fixed by way of fixed interest rate loans and interest rate swaps across debt providers. Our interest rate hedging policy remains conservative and forms part of our risk mitigation strategy. We have also embarked on a process of amending our existing debt facilities to interest only facilities. We believe we are well positioned to navigate the current uncertain macro-economic and political environment,” said Melt Hamman, CFO of Attacq.
Waterfall’s location and ease of access create an attractive value proposition for the creation of a new city in the centre of Gauteng, i.e. Waterfall City, an integrated city that works, as well as the Waterfall Logistics Hub – Gauteng’s logistic hub of choice. Attacq has approximately 1 million m² of remaining developable bulk in the Waterfall area. This bulk is ungeared and 608 000 m² is already serviced and ready for the value accretive roll out of commercial, residential and industrial developments.
The Waterfall development portfolio value increased by R202.9 million to R3.6 billion, comprising 13.0% of total gross assets.
“Waterfall is the ideal location for corporate consolidation due to its central location and ease of access to the rest of Gauteng. Waterfall City is anchored by the Mall of Africa and it is evident that Waterfall is becoming the centre of gravity for many retailers.”
“The Mall performed well during its first full year of trading. It has created over 4 000 permanent jobs and has generated an average monthly trading density of R2 564 m² during the financial year. During the reporting period, we focused on right-sizing the Mall and plan to introduce a number of new tenants, including international brands, over the coming months. Our active asset management continues and our aim is to enhance our entertainment offering further increasing dwelling time at the Mall,” said Wilken.
As at 30 June 2017, Attacq’s shareholding in MAS was 30.6% down from 41.4% as at 30 June 2016, mainly due to a MAS capital raising in March 2017 in which Attacq did not participate. The market value of Attacq’s investment, using the 30 June 2017 MAS share price of R23.50, equates to R3.5 billion representing an annual pre-tax capital growth of 18.9%. During the financial year Attacq received a R105.3 million dividend from MAS which represents a 3.6% income return, based on the June 2016 market value.
Said Wilken, “Our strategic, long-term investment in MAS is an important platform, further diversifying our overall portfolio. We expect to benefit from MAS’ revised strategy of focusing on distributable income growth underpinned by acquiring, developing and effectively managing its diversified portfolio of high-quality property investments in western, central and eastern Europe.”
The conservative value of Attacq’s rest of Africa retail investments was R1.2 billion (2016: R1.4 billion), comprising 4.5% (2016: 4.9%) of total gross assets. The net reduction over the year was due to Rand appreciation and further impairments. Attacq is currently not looking at increasing its investments in the rest of Africa.
Attacq is targeting a maiden dividend payment from its income-producing assets, namely the existing quality operational portfolio and MAS investment, of 73 cents per share for the year ended 30 June 2018, with a 20% growth per annum in its distributions for the next three years.
The guidance is based on assumptions which include the expected roll-out of the current and budgeted development portfolio, MAS achieving its distribution targets, the required positioning to become a REIT and no unforeseen circumstances such as major corporate tenant failures or macro-economic instability.
“Our valuation is the sum of the parts comprising income and capital returns through our quality South African portfolio and investment in MAS, as well as capital returns through our Waterfall development and retail investments in the rest of Africa, offering a unique total return value proposition as a company that will develop and own a City,” concluded Wilken.