Power outages will undo any growth in the like-for-like net property income (NPI) of SA Corporate Real Estate, if record-high levels of load-shedding continue, the company warned on Friday.
The Reit, valued at R5.1bn on the JSE, said in its latest annual results it expects like-for-like net property income growth of 4%-5% in 2023, but noted that if load-shedding continues at the same rate as lately, the extra cost would cause a 3%-4% contraction.
Net property income is the rental income a portfolio generates minus operating expenses.
“Assuming load-shedding is similar to that experienced of late, the additional cost in this regard in 2023 compared with 2022 is estimated to be R10m-R20m,” the company said in its results for the year to end-December.
“The increase in interest rates over those in 2022 as well as the dilutionary impact of disposals is expected to have a substantial impact, reducing distributable income for 2023 and resulting in negative growth of a high single-digit percent for the 2023 year,” it added.
CEO Rory Mackey said in the results presentation the estimate of R10m-R20m is based on stages 4-6 load-shedding.
More than nine out of 10 of the company’s retail shopping centres have solar power. An extra 1,885kWp was added to the existing 11,212kWp in 2022. More is planned in 2023.
Capital expenditure
“However, when it comes to very substantial capital investments, for example in batteries such that the PV (photovoltaic) can be used during those times [of load-shedding], our present feasibilities indicate that it would be unwise to go to those type of lengths given the capital expenditure involved,” Mackey said.
SA Corporate Real Estate has a diversified portfolio mostly in SA’s major cities and a 50% stake in a joint venture in Zambia. Its portfolio of 157 properties, with a gross lettable area (GLA) of 1,350,666m², about the size of 190 soccer pitches, is valued at R15.2bn.
The company’s distributable income increased 5.5% to R674.76m or 26.83c per share. At a payout ratio of 90%, a distribution of 24.15c per share was declared.
Total net property income improved 2.5% to R1.17bn and the like-for-like portfolio 6.7%.
In terms of vacancies, total vacancies improved by 6.5 percentage points to 6.5% and one percentage point in the traditional portfolio to 2.3%. Trading densities in the retail portfolio grew 5.9%.
Headline earnings per share, a common profit measure in SA that excludes certain items, fell 36.7% to R770.8m.
Last week it was announced that Indluplace was set to become the latest company to delist from the JSE, with a R1bn merger with SA Corporate on the cards.
SA Corporate has proposed acquiring the entire issued ordinary share of Indluplace, saying the deal provides Indluplace shareholders with a liquidity event through a cash offer for their shares.
It said the mooted deal will also enable it to grow its portfolio in the residential sector and further its strategy of creating a larger, more diversified residential property portfolio.
Update: March 19 2023
This story has been updated with new information.
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