Retail landlord Resilient Reit has managed to declare an interim dividend for the six months to end-December, unlike many of its peers, thanks to a strong performance from its national tenants, who derive most of their revenue from selling essential goods and services.
Resilient owns a portfolio valued at R24bn, largely comprises retail centres with a minimum of three anchor tenants, and lets predominantly to national retailers such as Shoprite, Pick n Pay and Foschini.
A number of its malls in towns such as Witbank, Richards Bay, Burgersfort and Mafikeng were not especially hard hit by the Covid-19 lockdown since their tenants’ main revenue was from sales of essential goods and services. Its centres include Secunda Mall, Irene Village Mall and The Grove Mall.
The group, led by CEO Des de Beer, declared an interim dividend of 202.70c a share for the reporting period, which represented a 24.4% decrease from the 267.96c a share for the six months to December 2019, a period prior to the pandemic.
Meanwhile, the group’s listed investments contributed R123m less towards the distributable earnings for the six months to end-December, compared with that for December 2019.
Resilient owns shares in East European mall owner Nepi Rockcastle and European landlord Lighthouse Capital.
“The operational performances of Nepi Rockcastle and Lighthouse were impacted by Covid-related restrictions imposed in the markets in which they operate,” it said in its results announcement.
Nepi Rockcastle also reduced its dividend payout ratio, meaning Resilient received a smaller dividend from the company than usual.
Peter Clark, a portfolio manager at Ninety One, said Resilient’s results were strong, showing both the defensive and growth attributes of the directly owned retail portfolio — the good performance largely attributed to a focus on non-discretionary consumption.
“The indirect offshore investments were the largest drag on earnings, as expected, given the lower dividends received from Nepi Rockcastle and Lighthouse. Lighthouse presents both the biggest risk but also the biggest opportunity with its exposure to Hammerson, a deeply discounted UK retail company,” he said.
Resilient has one of the stronger balance sheets in the listed sector with a loan-to-value (LTV) of 33.7% as at the end of December 2020. Many JSE-listed property funds are trying to sell assets to bring down their LTV levels.
LTV measures the value of a company’s debt relative to its assets. Fund managers prefer LTVs to be between 35% and 40%, as a ratio higher than that could imply financial distress.
An executive director at Meago Asset Management, Jay Padayatchi, said Resilient had room to manoeuvre during the rest of 2021 and could sell some of its local assets or invest further in offshore listed securities.
“The defensiveness of the Resilient portfolio is of no surprise, with positive rental reversions and high collection rates separating Resilient from its peer group. Further, the balance sheet has been conservatively managed with low gearing levels positioning it for flexibility,” he said.
In February, Resilient said via the JSE’s stock exchange news service (Sens) that it was in talks with the Public Investment Corporation, the manager of government employees’ pension savings, over the possible sale of some of its retail centres that had been selected for a R5.7bn portfolio.
The seven properties up for sale include Brits Mall and Jabulani Mall. Resilient could sell all or a combination of these assets.
Resilient said it was likely to continue to manage these assets for a defined period. The company has declined to comment further.
Ahmed Motara, a listed property analyst at Stanlib, said that operationally, average rental renewal growth of 2.5% for renewals and new leases spoke to the strength in Resilient’s underlying property portfolio.
“The key question is going to be the return on investment that Resilient is targeting from the divestiture of part of its SA portfolio, and how those proceeds will be deployed possibly via Lighthouse or directly through Resilient,” he said.
With a market capitalisation of R17.3bn, Resilient is the fifth-largest property fund listed on the JSE. Its shares lost 2.22% on Tuesday to close at R42.35.
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