JSE-listed real estate investment trust (Reit) Attacq says its diversification strategy of creating smart, safe and sustainable community spaces, such as its Waterfall City, is redefining the future of real estate.
Attacq’s Waterfall City model has proved to be a success with many businesses and people moving into the precinct that comprises Mall of Africa, a Netcare hospital, a Curro school, new office developments, and various mixed-use and residential developments.
“The diversification strategy is about harnessing adjacent revenue streams or businesses that can enhance our existing portfolio, and also makes sense from an environmental perspective,” CEO Jackie van Niekerk told Business Day after the company's earnings presentation on Tuesday.
Van Niekerk said there were numerous green projects aimed at improving the efficiency of the company’s buildings and reducing the costs for tenants by going green.
Attacq is switching to solar energy at its properties and a number of its shopping malls already use photovoltaic technology.
The company is finalising a power purchase agreement with a solar farm in the Northern Cape which will supply solar-generated energy to the Eskom grid. In Waterfall City, Attacq will be credited for the energy generated which will potentially accounts for 60% of its energy requirement there.
“This is a significant commitment from our side which makes sense from a cost reduction perspective and gives Waterfall City credibility of being a smart safe and sustainable city,” said Van Niekerk.
She said municipal bills accounted for 70% of tenants’ costs, and green initiatives were an obvious cost saver. These savings will be passed on to tenants, enabling them to reduce their occupational costs, and that made for a strong business case to attract and retain tenants, she said.
For the six months’ ending December 31, Attacq reduced Covid-19 rental discounts by 84% to R8.5m, showing the benefits of the relaxation of lockdown restrictions. It reduced total interest-bearing borrowings 15.4% to R8.6bn after the sale of the Deloitte head office.
Group loan-to-value decreased to 38.0% from 43.3%, while net asset value per share increased 6.8% to R16.83. Total distributable income per share increased 34% to 28c after Attacq received dividends from MAS Real Estate, the property investment company with interests in Central and Eastern Europe.
Debt reduction has been a priority for the company since the start of the pandemic, which threw a curveball at the property industry, including tenants who battled to pay rent.
Attacq CFO Raj Nana said property expenses, excluding the cost of sales of sectional-title units, increased 14.8% to R433.5m compared to R377.8m in December 2020. This was mainly driven by bad debt write-offs, provision for bad debts and municipal charges.
Nana said the disposal of noncore assets resulted in reduced interest-bearing debt and an improved net asset value, further showcasing Attacq’s strong financial position.
“The last two years were about optimising our capital structure through debt reduction initiatives, while ensuring our existing Waterfall City and the rest of SA portfolio continue to perform well,” said Nana.
Attacq’s retail portfolio benefited from improved trading densities. Trading density measures the efficiency of a shopping centre, and it is the ratio between overall sales and the size of the mall over a month.
The 12-month weighted average trading density for the total portfolio rose 8.7%, with Mall of Africa increasing 14.9%, Garden Route Mall 10% and Lynnwood Bridge Retail 9%.
Nana said in the light of the ongoing global economic uncertainty, the board had elected to continue taking a conservative approach to capital management and has resolved not to declare an interim dividend.
Van Niekerk says that despite the solid results, the short to medium term will continue to be challenging, given weak economic growth and global uncertainty.
“Attacq will remain prudent in development rollouts and capital allocation, and also look to partner with like-minded investors to unlock development opportunities in Waterfall City,” Van Niekerk said.
mhlangad@businesslive.co.za and mahlangua@businesslive.co.za
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