Resilient Reit could be the first South African real estate group to invest in the US or Canada, as it seeks more growth opportunities offshore.
Resilient, which is the sixth largest JSE-listed real estate investment trust (Reit) with a market capitalisation of about R47bn, has put its expansion plans in Nigeria on hold, wanting to reallocate resources from there to a different market.
It already invests in Europe through holdings in various listed companies.
"We have been unable to spend the money which we raised in Nigeria. The economic policies related to currency control are not conducive to investing for us.
"Nigeria is on ice in our portfolio for the time being. We are looking to move our efforts elsewhere," said MD Des de Beer, speaking after the release of the companies financial results for the six months to December.
Although De Beer would not be drawn on exactly which market Resilient would invest in next, he said the group already had a presence in Europe and Africa was not currently attractive. "We are evaluating a significant opportunity in a market we haven’t invested in before."
There is speculation in the market that the company
would seek an investment in the US or Canada.
Garreth Elston, portfolio manager at Alternative Real Estate Capital Management, said the US and Canada would
be well suited markets for Resilient and other large South African Reits.
Resilient owns shares in Greenbay Properties, New Europe Property Investments (Nepi), Rockcastle Global Real Estate and Hammerson, all of which have exposure to European shopping centres.
The company has said it wants half of its overall assets to be property in SA, where it has plans to extend Irene Mall and Mams Mall, and the rest to be investments in companies that own offshore property.
De Beer said while some real estate markets in certain African countries were performing better than Nigeria, Resilient was "highly selective" in what it chose to buy and wanted to own "dominant and not secondary shopping centres".
The US and Canadian Reit markets stand out because they are highly sophisticated with American Reit legislation having been developed in 1960.
The US and Canadian Reit markets stand out because they are highly sophisticated with American Reit legislation having been developed in 1960. At the end of 2016, the US Reit market was worth about $1-trillion by market capitalisation.
Stanlib’s head of listed property funds, Keillen Ndlovu, has a lot of confidence in US Reits. In a report published last month, Ndlovu said the Stanlib team had allocated 59% of its global property fund to the US, 2% to Canada, 4% to Germany, 8% to the UK and 7% to Australia. The chief investment officer at Bridge Fund Managers, Ian Anderson, said Resilient might need to use significant debt to fund another offshore expansion.
"They don’t have the same low cost of capital that they did a while ago, so doing large deals offshore is not as easy any more, or they would have to take on a lot more debt," he said.
Resilient grew its dividend per share 16.2% in the six months to December 2016, compared with the comparable period a year before, according to its interim financial results.
Resilient declared a dividend of 270.22c per share for the interim period compared with 232.46c per share in the comparable prior period.
"The growth was achieved due to a solid performance by the South African property portfolio and continued outperformance by the listed holdings," De Beer said.
Resilient’s South African malls performed particularly well. "Retail sales growth in the first four months of the interim period was pedestrian, however, the November and December performances were better, with November benefiting from the Black Friday promotions," Resilient said.