Shopping mall owner Resilient will pay out an increased dividend for its half-year to December as its malls in mining and agricultural towns continue to thrive and it boasts a vacancy rate of just over 2%.
The real estate investment trust’s (Reit) dividend of R2.26 per share is up 11.3% compared with the same period previously.
In SA, Reits must pay at least 75% of their taxable earnings to investors as a dividend, in a structure that allows Reits to avoid paying corporate tax, which is instead paid by investors, who benefit from regular dividend payouts.
Even as mall vacancy rates are low, Resilient’s half-year results reveal that some property owners are under increasing pressure, battling to increase rents when leases come up for renewal.
As leases ended and were renewed, Resilient — headed by CEO Des de Beer — hiked rental rates by 0.1%. New tenants replacing outgoing ones agreed to pay up to 11.2% more in rent, resulting in the overall rental rates rising by 2.8%.
Resilient has 27 malls, which are mostly in mining or farming areas in seven provinces, with a focus on stores that sell groceries and essential goods. Its centres have anchor tenants such as Woolworths Food, Pick n Pay and Clicks.
The focus on essentials rather than discretionary retail gives Resilient a defensive nature, even as consumers cut back on spending.
Resilient said it “continues to benefit from dominant shopping centres serving markets exposed to export commodities. These include mining and high-value agricultural products in which SA is internationally competitive.”
But tenants cannot afford higher rentals as they face rising electricity and municipal rates costs, product inflation and a cash-strapped consumer.
Its rental payments were almost 93% up to date. Resilient continued to give discounts to some stores, particularly those it described as leisure brands that struggled with low demand in 2020 and 2021 because of the pandemic.
Financial Mail previously reported that in 2020, the Reit sector provided rental relief worth an enormous R3.5bn to keep tenants afloat during the hard lockdowns, when many had to shut their doors. Listed property valuations were simultaneously written down by an average 10%-20%.
With electricity costs rising, many malls are adding solar panels. Resilient produces enough electricity to power 7.5% of its consumption, which will increase to 14.2% by the end of 2022.
The results report how clothing chain Edgars, which has been on the brink of collapse several times, is improving under its new owner Retail-ability. Turnover at Edgars stores in Resilient-owned malls was up by an average of 22%. Resilient says nine Edgars stores were downsized and two underperforming stores closed with one more set to be shuttered, but all additional space has been filled.
Looting in the July unrest affected two of the group’s properties, Jabulani Mall in Soweto and a section of Mams Mall in Mamelodi near Pretoria. Retail sales in these centres declined by 22.3% and 1.6%, respectively.
Resilient received an insurance payout of R13.7m, which included R3.3m for property damage, R9.3m for loss of rental and R1.1m towards additional security costs. It says it has an outstanding insurance claim related to the riots worth R3m.
Resilient has a 41.4% stake in European mall owner Lighthouse, but some shareholders have said they would rather hold Lighthouse shares directly instead of through Resilient. It has committed to distributing Lighthouse shares to Resilient shareholders at a ratio of 0.48 Lighthouse shares for each Resilient share held, subject to exchange controls. This will reduce its Lighthouse holding to about 30%.
It reduced its stake in European mall owner NEPI Rock-castle in the reporting period in line with its “policy to only hold interests in companies over which it has significant influence”.
Resilient’s share price rose 0.26% to R57.90 on Thursday, giving it a market capitalisation of R20.9bn.
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