Resilient reaffirms 5% dividend growth forecast for 2020
The mall owner is trying to invest more capital abroad
Resilient Reit, the shopping centre landlord worth nearly R27bn, is selling six South African assets and focusing its capital offshore because its local tenants are battling to meet rentals and their customers are struggling.
The company, which was embroiled in a share manipulation scandal in 2018, said it believed eastern Europe was a less risky market and that its strategy was to continue increasing its offshore exposure while maintaining its conservative gearing and hedging policies.
The group, which has a market capitalisation of about R26.8bn, made the announcement in a pre-close statement on the JSE’s Sens on Monday.
It said its strategy was to continue increasing its offshore exposure, while maintaining its conservative gearing and hedging policies.
Resilient has also confirmed its guidance of about 5% growth in dividends per share for its 2020 financial year to June.
Evan Robins, a fund manager at Old Mutual Investment Group, said he was surprised that Resilient was selling assets given that the company's loan-to-value was under 30%.
“They don’t have a large amount of debt relative to their peers and yet they are letting go of some assets. We don’t know what is on the market yet so I think the sector will welcome more information about the six assets they say they are selling,” he said.
In 2018, the group along with companies in its stable — Nepi Rockcastle, Fortress and Lighthouse Capital — were embroiled in allegations of share manipulation that resulted in a loss of more than R100bn of their market value. The companies had the same directors and cross-ownership.
Some asset and hedge-fund managers released reports in which they alleged the companies’ share prices and profits had been manipulated by insider trading and related party deals.
The Financial Sector Conduct Authority (FSCA), the financial market regulator, investigated the allegations in 2018 and 2019 and cleared the four companies.
The FSCA said its market abuse investigation stemmed from allegations that Resilient and its peers may have published false, misleading or deceptive statements, promises or forecasts. This included when Resilient restated its 2013-2017 financial statements.
Fortress and Resilient restructured a BEE scheme following market criticism. Resilient and Fortress had been declaring income from these trusts as distributable.
Negative equity in the trusts necessitated a restructuring. The share price declines in early 2018 created the negative equity in the trusts and so Fortress and Resilient limited the distribution to the cash received from the trusts. Fortress no longer has exposure to these trusts and has established a new empowerment structure.
The FSCA said at the beginning of November that it had concluded its market abuse investigation into Resilient and found that the company did not contravene the financial markets act. Earlier in the year it cleared the other three members of the Resilient stable.
Only one investigation around the four companies is outstanding.
“The FSCA has confirmed that the investigation of allegations relating to manipulation of the Resilient share price by market participants is ongoing, is not into the affairs of Resilient and is anticipated to be finalised early in 2020,” Resilient said.
Correction: December 11 2019
A previous version of this article said that Fortress controlled the Siyakha Trusts and had not consolidated them into its books. It did not control the trusts but funded the trusts.