Property group Safari Investments, which owns eight malls in towns and semiurban areas, improved its profitability in the year to end-March, as SA exited a hard lockdown and tenants started to pay their full rent again.
Safari, a real estate investment trust (Reit), reported on Wednesday that its total comprehensive income increased by 149% to R267.5m in the reporting period from R107.6m in the year to end-March 2020.
While a number of Reits suffered losses in their 2020 and 2021 financial years, Safari has managed to maintain its profitability.
The company, which owns assets in SA and Namibia, said a number of its tenants had been able to reopen as hard lockdown restrictions were lifted.
Its malls include mostly township and semiurban shopping centres that serve working-class South Africans. These malls have been tenacious in 2020 and 2021 because most of their tenants sold essential goods during the hard lockdown. While some SA consumers cut their spending on non-discretionary items in 2021, most lower-end customers are still buying their essential products, Safari said.
In terms of Reit legislation, at least 75% of distributable earnings must be distributed in each financial year. During 2021, Safari declared a total distribution of R121.2m. This was 19% lower than the R149.2m declared in dividends for the financial year to end-March 2020.
The strong results come at a time that Safari, like many other property funds, is looking to expand its asset base.
Safari, which has a property portfolio worth R3.4bn and a market capitalisation of R1.3bn, has been a takeover target since early 2019 when Fairvest Property Holdings first said it was keen to merge with it. Unlisted mall owner ComProp, which is part of Futuregrowth Asset Management, also made a cash offer.
With both deals having failed to go ahead, Steven Herring, the CEO of Heriot Reit, told Business Day in early June that he was interested in buying out the fund. Heriot already owns more than 16% of Safari.
Heriot Reit, a diversified listed property fund founded in 1998, owns assets worth R4.6bn. These include 19 industrial properties valued at R1.68bn and 12 retail centres worth R2.3bn in townships and rural areas that focus on the mass market.
It also owns seven office properties, including Heriot’s head office located in the mixed-use precinct of Melrose Arch in Johannesburg.
“It’s challenging taking over other Reits as different shareholders have different opinions on value. There is a group of Safari shareholders who have unrealistic expectations on price. We are considering buying a 51% stake in Safari and taking control of that entity,” Herring said.
Safari CEO Dirk Engelbrecht was unavailable for comment.
Safari said in a statement on Wednesday that it would remain focused on refining its portfolio to ensure that it generates sustainable income from its assets.
It would continue to manage its assets so that they were defensive in tough trading conditions. “The company will achieve this through continued hands-on management, repositioning assets and disposing of assets not within its strategic focus,” it said.
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