Safari Investments, a retail-focused Real estate investment trust (Reit) says leasing activities have resulted in further vacancy reductions across its malls.
For the six months ended September, vacancies decreased to 2.23% from 2.91% in 2022, occupancies were recorded at 97.8% while reversions recorded more than 6.68% on lease renewals.
“We remain confident in the strength of the tenant base and the portfolio’s ability to continue generating sustainable growth and earnings,” said the company on Thursday.
The company continues to focus on portfolio optimisation through refurbishments and relooking at its tenant mix. Projects include the completion of the refurbishment of phase 3 of Victorian Village in Heidelberg, with a new tenant mix. The second and third phases were valued at R56m.
Safari will soon finish the R43.9m refurbishment and water project of Denlyn in Mamelodi, while SuperSpar in Thabong mall in Sebokeng was replaced with a new Shoprite and Shoprite Liquor together with other line shops.
The company said the planning of the 13,000m2 mixed-use development in Lynnwood Pretoria East was under way, with strong interest from major national tenants.
Safari’s portfolio mainly comprises dominant shopping centres underpinned by national tenants with long-term contractual leases.
Its assets include Denlyn in Mamelodi, Pretoria, Atlyn in Mnandi and Nkomo Village in Atteridgeville, Pretoria, Thabong in Sebokeng, Victorian Village in Heidelberg, Thornhill in Polokwane and Platz am Meer in Swakopmund, Namibia. Safari also owns bulk reserve held for future development or expansion of existing properties.
During the reporting period, operating expenses increased with the SA Reit cost-to-income ratio rising from 38% to 41%. The company said this was due to the internalisation of electricity billing, which changed the categorisation of electricity expenses and its corresponding recoveries from tenants.
Municipal electricity invoices are categorised under expenses while the recovery of these costs from tenants is contained in revenue, leading to a skewed reflection should the two periods be compared line by line.
Additionally, the company said the effects of high international insurance cover Safari had taken out from October 1 2022 to September 30 after Sasria insurance cover was limited to R500m per one insured entity, contributed to increased operating expenses. Previously, cover was limited to R1.5bn per one insured entity. High diesel costs and generator maintenance also contributed to increased costs.
Operating profit increased 8.15% to R149.9m from R138.6m and finance costs rose 26% due to increased interest rates over the past 12 months.
Headline earnings per share fell 13.8% to 32.68c from 37.93c and distribution per share decreased by 9.09% to 30c from 33c in 2022.
Management remains confident in its ability to drive sustainable value creation for shareholders driven by a high-quality property portfolio despite a challenging environment.
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