SA assets are helping Resilient bounce back in 2019
The property company is surviving the weakest SA retail environment in years
Property company Resilient Reit will be wary of buying SA commercial property, which could hinder the steady progress of its local portfolio.
The company, which is recovering from a difficult 2018, has seen a market-beating performance from its local assets in 2019, CEO Des de Beer said at a results presentation on Tuesday.
Resilient owns a portfolio of 28 SA retail centres worth about R24bn, which are outperforming some of its peers' local portfolios.
Its board declared a final dividend of 267.4c per share for the six months to June. Together with the 263.66c per share declared for the interim period, the total dividend for the 2019 financial year was 531.06c per share. This was 6.08% lower than the 565.44c per share declared for the year to June 2018.
De Beer said Resilient was in a position where it could acquire assets but it would look offshore instead of in SA, where weak economic conditions were expected to continue for a while.
2018 was a year Resilient would want to forget to forget. The same goes for the three other property groups, which were part of the informal Resilient stable, including commuter retail and industrial property owner Fortress, Eastern European mall landlord Nepi Rockcastle and general European shopping centre owner Lighthouse Capital.
The companies were pooled together by analysts because of share cross-holdings, common founders and directors.
In January 2018, all four companies' share prices came under pressure as short-sellers and fund managers sold shares. Some asset managers also released reports in which they said the four companies' market values and dividends had been inflated through related party deals and share price manipulation.
The Financial Sector Conduct Authority (FSCA) has been investigating the allegations against Resilient for more than a year. The FSCA found no insider trading in Resilient's shares but it is still investigating if there was market manipulation in the company's shares and if false, misleading or deceptive statements relating to Resilient were published by the company or by third parties.
Resilient has since removed its cross shareholding with Fortress from which it would normally receive dividends, thereby weakening its overall group dividend.
But its assets are performing well. Resilient's local malls, which are located across seven provinces in SA — Gauteng, Northern Cape, Eastern Cape, Limpopo, KwaZulu-Natal, North West and Mpumalanga — achieved average sales growth of 5%. Its malls in Mpumalanga did the best with 9.3% sales growth. The worst performers were in Gauteng, with 2.2% growth.
This was still better than the likes of Hyprop, whose sales growth or trading density growth per square metre was -0.6% in the six months to December 2018.
Liberty Two Degrees, the owner of stakes in Sandton City, Eastgate, Nelson Mandela Mall and Melrose Arch among others, could not beat Resilient either, with its portfolio only managing 3.3% trading density growth in the six months to June.
Resilient's vacancies are also low, at 1.8% at the end of June.
Stanlib senior portfolio manager Nesi Chetty said Resilient had also managed its balance sheet well, and had a low loan-to-value (LTV) of 26.8%.
"Resilient are not hard-pressed to do any deals currently. Their retail centres are performing well in a tough market. Certainly the low loan-to-value does give them a bit of headroom to look at yield-accretive opportunities both locally and offshore," Chetty said.
"I think their attention in the short term may be to focus on offshore markets where some retail companies are trading at significant discounts to net asset value," he said.
Jay Padayatchi, an executive director at Meago Asset Managers, said there were not many funds with viable domestic assets that would complement Resilient's local portfolio.
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