Progress continues to be made in achieving the Group’s key priorities for FY2024 set out in the HY2024 interim results. In line with our strategic objectives, the acquisition of Table Bay Mall was implemented on 28 March 2024, increasing the Group’s exposure and footprint in the Western Cape, and internal approvals have been obtained to expand Somerset Mall by an additional 5 400m2 of GLA. The risks associated with the Group’s investments in Nigeria remain elevated, however, progress is being made with the disposal of the Group’s investments in sub-Saharan Africa (“SSA”), as noted below.
The Group’s operational performance continued to improve steadily over the period, with all portfolios showing improvements in key trading metrics. These improved trading metrics are attributed to the repositioning strategy in South Africa (“SA”), the good tenant mix and increased footfall across the SA and Eastern Europe (“EE”) portfolios, and improved asset management in the SSA portfolio.

Click here to view the full article as a PDF.

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Located in the heart of southern Johannesburg in the affluent suburb of Aspen Hills, the 68,168sqm Mall of the South offers optimal exposure and convenient access from two main arterial roads, Kliprivier Drive and Swartkoppies Road, that border the mall.
“Mall of the South, with a varied retail offering of 160 stores as it stands, is a key asset that is situated in a node where it is the dominant retail offering,” says Nashil Chotoki, National Asset Manager at Redefine. “It’s an asset that is accretive for our portfolio, from an investment return perspective.”

Chotoki adds that future residential development within the node will further improve MOTS’s performance and dominance.

Redefine is investing R38 million in capital expenditure to develop available bulk land for two fast-food drive-throughs that will supplement the mall’s existing fast-food offering, as well as a tyre fitment centre.

In conjunction with the drive-throughs, Redefine has engaged the taxi associations and relevant local authorities, such as the Gauteng Department of Transport and the Johannesburg Roads Agency, to construct a taxi rank on the mall’s premises.
Currently, commuting customers are dropped off on Swartkoppies Road and walk to access the mall. The new plan allows for customers to be dropped off inside the mall’s perimeter after the taxi rank is moved, improving access and providing a more convenient option for commuter shoppers.

Chotoki says the expected completion of the taxi rank relocation is dependent on the Gauteng Department of Transport’s approval.

Redefine has taken advantage of the opportunity provided by Game leaving MOTS with the addition of Shoprite which officially opened in May 2024. This is in keeping with its strategic focus on increasing its exposure to the essential services category, which is currently experiencing growth and capturing the most consumer spend.

According to Chotoki, this reconfiguration will draw in a different kind of customer that is looking for value and essential offerings, increasing foot traffic in the mall. “The relocation of the taxi rank contributes to the success of enabling the value offering,” he continues.
Redefine is also working with existing retailer Incredible Connection, a reputable retailer backed by Pepkor, to enlarge the store space to cater to the electronics gap left by Game’s vacancy.

“We are continuously lowering our exposure to and right-sizing underperforming tenants as part of ongoing leasing strategies. We’re also introducing new retailers that are entering the market to MOTS’s tenant mix.”
The remaining R7 million capital expenditure will be used to consolidate the fast-food offering into a single food court, as well as expand the existing restaurant area onto an expansive outdoor deck that aims to improve the overall ambience and dining experience. As it stands, food outlets are scattered across the premises.

Redefine is working to switch the entire mall to backup power integrated into the current solar PV plant to lessen reliance on municipal services and guarantee consistent operation of the asset. This integration will lower operating expenses and diesel consumption while also limiting business disruption.

MOTS has one of the largest solar PV plants in the Redefine portfolio at 5.2MwP, which provides approximately 25% of annual energy requirements.

“MOTS continues to see strong demand and high levels of footfall, which is consistent with the rest of the malls in our retail portfolio. This confirms that South African consumers still value the physical shopping experience.”
Around 34% of shoppers sit in the high-income category and, therefore, contribute to a higher basket of spend, comparatively. Following the value-focused adjustments and addition of a value-focused offering, Redefine hopes to make the mall’s offering more diverse and inclusive to all income levels.

Mall of the South’s current valuation (R1.8bn) is in line with its purchase value. According to Chotoki, the planned additional capital expenditure will increase the asset’s value even more.

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Highlights

• Dividend and returns: Final dividend of 56.81 cents declared, with a total return of 13.3% (distribution and net tangible asset value growth per share)
• Financial performance: Rental income up 14.8%, occupancy up 10 700m² and net investment property value up 8.8% to R11.3 billion
• Portfolio growth: Added 12 properties, representing 72 500m² GLA, with the total portfolio, including developments, now exceeding 650 000m² GLA
• Strategic partnerships: Entered third-party management agreement with Hines post year end, expanding managed properties to 23
• Balance sheet management: Successful debt auction raised R500 million below price guidance post year end, with a loan-to-value ratio of 31.4% and 85% of net debt subject to interest rate hedging at year end
• Environmental sustainability: Expanded solar PV roll-out, investing R42 million during the year and reducing carbon footprint by 19%
• Future outlook: Confident in business model’s resilience, forecasting distributable income per share of 122 to 126 cents for FY25

Stor-Age CEO Gavin Lucas comments, “We are pleased with our robust performance in FY24, driven by gains in occupancy, rental rates and strategic expansions. While SA demonstrated exceptional growth, the UK performance was steady and resilient, after three incredibly strong years. Our excellent strategic, financial and operational position in both markets remains intact. Looking ahead, we continue to focus on growth opportunities while maintaining a conservative capital structure.”

Since Stor-Age listed on the JSE in 2015, the property portfolio has grown from 24 properties to 103, and the value of the portfolio, including properties managed in JV partnerships, has increased from R1.3 billion to R17.3 billion2.

The company has continued its focus on driving an increase in both rental income and occupancy across the portfolio. Total occupancy across both markets increased by 10 700m2 during the year, while rental income grew by 14.8%.

In South Africa, building on the strong performance in FY23, same-store rental income increased by 12.7% year-on-year and occupancy in the portfolio grew by 8 700m2 compared to the prior year.

In the UK, despite a transitioning macro environment with high interest rates and inflationary pressures, the company’s trading performance remained resilient. Average rental rates increased by 4.7% and while the average occupancy over the period was 1.6% lower, occupancy at year end was up 2 000m2.

Stor-Age made excellent strategic progress opening or acquiring 12 trading properties (SA 4; UK 8), adding 72 500m2 GLA on full fit-out. In South Africa this includes properties in Bryanston and Morningside in Johannesburg, and in Paarden Eiland and Pinelands in Cape Town. In the UK, the company concluded the acquisition of the four-store Easistore portfolio in the south east of England, and completed the developments of properties in Bath, Heathrow, West Bromwich and Canterbury. Each of these properties were acquired or developed in joint venture (JV) partnerships with leading institutional and private equity partners.

Comments Lucas, “We continue to work with our existing JV partners, and engage with new partners, to consider opportunities for future acquisition, development and redevelopment. This allows us to allocate capital across a number of opportunities, and to mitigate the financial impact of the lease-up. We remain confident that the long-term return profile on invested capital through our JV partnerships will be value-accretive as new developments lease up to mature occupancy levels.”

Another key focus has been the growth of the company’s third-party management offering. Currently a total of 23 properties are operating on this platform, 17 of which are in the UK. This includes a three-property portfolio in Kent, in the southeast of England, which was acquired post year end by Hines, a privately owned global real estate investment, development and management firm with a presence in 30 countries and $94.6 billion of assets under management. Comments Lucas, “The management contract concluded with Hines in May this year further supports the high regard with which Storage King is regarded in the UK self storage market, reaffirming the high quality and sophistication of our operating platform.” This third-party offering allows the company to generate additional revenue with minimal capital investment by leveraging its operating infrastructure.

Stor-Age has continued its focus on environmental sustainability, further expanding its solar PV roll-out strategy across the South African and UK portfolios. To date, the company has invested R63.5 million into renewable energy, generating over 6.0 million kWh of solar power. Currently, 58% of the portfolio has solar capacity, helping it achieve a 19% reduction in its total scope 1, 2 and 3 carbon footprint during the year.

Stor-Age is forecasting its distributable income per share to be approximately 122 to 126 cents for FY25.

The share closed on Friday at R13.50.

¹ As at 31 May 2024. Includes properties held in JVs and managed by the group
² As at 31 March 2024

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Laurence Rapp, CEO of Vukile Property Fund, comments, “This year of outperformance is a testament to our clear strategic direction and unwavering focus on execution which positions us exceptionally well to capitalise on opportunities. This sterling set of results is underscored by Vukile’s astute asset selection, sustained strong operational results, and balance sheet strength supported by robust credit metrics and deep liquidity. Our South African portfolio is delivering positive numbers, and our Spanish assets are achieving market-leading performance. Vukile is a resoundingly strong, sustainable business.”

Coming off the back of an exceptionally strong year, Vukile confirmed it is on track to deliver further growth for shareholders for the year ending 31 March 2025, with expected FFO per share growth between 2% and 4% and DPS growth between 4% and 6%.

Vukile’s portfolio of retail property assets valued at R40.2 billion is strategically diversified across South Africa and Spain through its 99.5% held Madrid-listed subsidiary Castellana Properties Socimi. A significant 61% of Vukile’s assets are in Spain, and 50% of its earnings are generated in Euros.

Primarily located in townships and rural areas, Vukile’s defensive domestic portfolio of high-quality shopping centres achieved like-for-like retail net operating income growth of 5.4%. Retail property valuations increased by 5.8% on a like-for-like basis. The demand for space in Vukile’s shopping centres remains exceptionally strong. Active leasing reduced already low retail portfolio vacancies to a mere 1.9%.

Rental growth continued its rebound with positive reversions of 2.9%, with 87.0% of leases signed producing stable or growing rentals. Tenant retention increased to 94% of gross lettable area. The portfolio achieved trading density growth of 2.4%, led by township and rural shopping centres and those in the Gauteng, Western Cape and North West provinces.

Rapp notes, “Amid a persistently challenging market in South Africa, Vukile’s portfolio, categorised by nodal dominance and needs-based retail, has truly come into its own. Our sharp focus on resilient, community-anchored assets has proven to be a winning formula and yielded excellent results, even in a sluggish local economy.”

Environmental, social and governance (ESG) priorities are imperative for Vukile. In South Africa, Vukile made significant strides in executing its environmental commitment through its solar power programme. It began the financial year with an installed rooftop PV capacity of 14.9 MWp and expanded that capacity to 21.6 MWp, and a further 11MWp is under construction for completion in FY25.

The Castellana portfolio, which is 95% let to top-tier international and national retail tenants, achieved a 1.4% increase in portfolio value and a fantastic 11% normalised net operating income growth, with record footfalls and sales. Visitors were up 5.5% and tenant sales grew by 6.4%. With a mere 1.1% vacancy, the portfolio has the highest occupancy rate in its market. It achieved a very impressive 9.7% rental growth on leases signed.

In Spain, Castellana received EPRA gold awards for its sustainability and financial indicator reporting for the second and third consecutive year, respectively. It achieved 4 out of 5 stars on the Global Real Estate Sustainability Benchmark (GRESB) rating, and 100% of its properties are currently BREEAM-certified and aligned with the EU taxonomy for sustainable activities.

During the year, Castellana acquired a further 3% shareholding in Lar España, increasing its stake to 28.7% to take advantage of the significant discount to net tangible assets reflected in the share price. Lar España reported strong results, with performance measures surpassing industry standards. The significant appreciation in Lar España’s share price confirms it is an exceptional and highly profitable investment for Castellana. At current levels, the shares have gained over €40 million in value relative to the entry purchase price, which translates to a gain of some 30%, while the Lar España share price still reflects a considerable discount.

Vukile has a demonstrable record of identifying mispriced assets, capitalising on opportunities, and building thriving businesses, and is consistently exploring deals in line with its capital allocation and growth strategy. Post year-end, Vukile exited its full stake in Fairvest, which has been an excellent investment for the company. It also successfully took transfer of a 50% share in Mall of Mthatha (formerly BT Ngebs City shopping centre), for R400 million, which Vukile will upgrade with its partners Flanagan & Gerard Property Group.

“Vukile is steadfast in its commitment to disciplined capital allocation. We’ll only pursue opportunities that offer clear strategic alignment and financial upside,” says Rapp.

It has explored various domestic opportunities; however, in most cases, the pricing doesn’t make economic sense. In Europe, Vukile is seeing attractively priced assets, signalling a unique window of opportunity to deploy capital into high-quality assets at attractive prices. While withdrawing its non-binding indicative proposal to the Board of Capital & Regional, it is still actively pursuing various prospects, including entering discussions to acquire direct retail assets in Spain and in neighbouring Portugal.

Vukile has a strong balance sheet, and during the year, GCR reaffirmed Vukile’s corporate long-term credit rating of AA(ZA), with a stable outlook. Only 4.4% of debt is due to expire in FY25. Vukile secured R1.1 billion of funding through an innovative green loan and sustainability-linked loan post year-end. Its interest cover ratio is 2.3 times, and LTV reduced to 40.7%. Vukile has a powerful liquidity position with significant available cash balances of R2.4 billion and undrawn debt facilities of R2.9 billion.

“We’re seeing a significant increase in deal flow in the sector. However, the biggest challenge the industry — and Vukile — faces is accessing capital at a cost that makes deals accretive. With our strong liquidity position, we are well positioned to execute our growth strategy and remain a consumer-focused retail real estate business,” explains Rapp.

Rapp concludes, “June 2024 marks Vukile’s 20th anniversary since first listing on the JSE. Today, it is well established as a 100% focused retail REIT with strong operational metrics, clear strategic direction and significant geographic diversification off which to launch its next phase of growth. We have consistently and significantly outperformed the SAPY index, and, as we move forward, Vukile remains committed to our scalable consumer-led model that creates value for all our stakeholders.”

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Geoff Jennett, CEO of Emira Property Fund, attributes the positive performance to successfully unlocking value from investments, a strong balance sheet and the added advantage of various liquidity-strengthening capital recycling initiatives.

Jennett reports, “Our twelve-month financial period can’t be directly compared to the previous nine-month year, but even so, it is crystal clear that our strategy is paying off, and the numbers are headed in the right direction. Both our SA and US portfolios delivered pleasing operational performances, notwithstanding local and global challenges. Our leasing success and low SA commercial vacancies – down from 4.7% to 4.1% over the year – and high and stable residential occupancy of 97.4%, are positive proof of a portfolio that’s attractive, competitive, flexible and built to deliver sustainable value.”

 He adds that Emira expects to deliver marginally higher distributable income for its current financial year to 31 March 2025. This is despite ongoing low-growth expectations for South Africa, persistently high interest rates and general market uncertainty.

Emira’s diversified portfolio is balanced to deliver stability and sustainability through different cycles with a mix of assets across sectors and geographies and through direct property holdings and indirect property investments with specialist third-party co-investors.

During the year, Emira made significant strides in strategic capital recycling that has noticeably reshaped its portfolio and extended its established track record of successful deal-making. It finalised the scheme of arrangement for the residential specialist Transcend Property Fund in a takeover that boosted its exposure to the defensive residential property sector and sold its share of the lower LSM  retail-focused Enyuka Property Fund. It also concluded various direct non-core property disposals, including two industrial properties at sale prices significantly above book value. Sales of R596.0m were transferred during the year, and a further substantial R2.4bn is due to transfer in the next six to twelve months, including Emira’s post year-end sale of 13 office and industrial properties in the Western Cape to Spear REIT.

“Our capital recycling creates capacity and flexibility for Emira, demonstrating the effectiveness of our diversified strategy to seize opportunities with better growth prospects that align more closely with our long-term strategic objectives. Emira has several levers at our disposal, all of which are working well and enable us to pivot towards opportunities that ensure we are stable, have lower risk and are attractive to the market. This year, we have established a particularly strong liquidity position, which will be further bolstered by the R2.4bn of proceeds from upcoming transfers,” notes Jennett.

Emira’s directly held portfolio consists of 90 properties located in South Africa worth R12.1bn, which are split between the commercial – retail, office, industrial – and residential sectors. Emira now holds 19% of its assets in indirect property investment in equity investments in 12 US-based grocery-anchored open air shopping centres, for which Emira has unanimous voting rights on all major decisions. Its partnership with The Rainier Companies in the stable US economy serves as a strong defence against current global economic challenges and subdued growth in South Africa.

Its direct commercial portfolio is split between urban retail (43% of directly held SA portfolio value), office (24%) and industrial (14%). All sector vacancies are well below the applicable benchmarks, reinforcing Emira’s effective leasing strategies.

Its 17-property strong directly held retail portfolio of primarily grocery-anchored neighbourhood centres catering to their communities is trading well with improved metrics. The total weighted average rental reversion lifted from -5.5% to -0.5%. Vacancies were a low 3.9%, tenant retention was stable at 88.7%, and the weighted average lease expiry (WALE) was steady at 3.2 years.

Despite depressed fundamentals in the office sector, Emira’s portfolio of 20 mainly P- and A-grade office properties saw key operational metrics move in a positive direction. Improved office vacancies moved down from 12.5% to 10.9%. The total weighted average rental reversion lifted from -14.8% to -6.3%. Tenant retention was 59.1% and the WALE was maintained at 2.7 years.

Emira’s diversified industrial portfolio of 32 properties enjoyed strong demand and delivered defensive performance. The portfolio is near full occupancy, with vacancies decreasing from 2.1% to 0.7%. Emira leveraged the robust demand when negotiating lease terms, and rental reversions improved from -6.5% to -4.8%. Tenant retention increased to 84.6%, and the WALE improved to 2.1 years.

Residential rental assets increased from one to 21 properties over the year – or 19% of Emira’s directly held SA portfolio – and include The Bolton in Rosebank, Johannesburg, and 20 properties from Transcend. The portfolio of 3,775 units is split between Gauteng’s (87% by value) and Cape Town’s (13%) high-demand areas. With a 2.6% vacancy, excluding units held for sale, the portfolio is achieving rental growth, as demand for rental accommodation rose in response to the elevated cost of owning property due to higher interest rates.

Overall, the commercial portfolio benefited from R168.2m in tactical upgrades, including various sustainability-driven initiatives, reconfigurations and refurbishments. Emira also invested R25.3m into its residential portfolio, mainly to focus on making buildings more resource-efficient and backing this up with EDGE certifications, as well as enhancing lighting and safety at properties during power cuts.

“Deteriorating municipal infrastructure remains a concern, as our properties and the entire real estate sector rely heavily on it. Difficulties with electricity, water, and other essential services with rising associated costs make it tough for Emira and our tenants to operate effectively. In response to these challenges, Emira has fast-tracked projects to harness solar power, save water, and install backup systems so that when services fail, our tenants can keep their lights on, their doors open, and their businesses thriving. We also remain committed to saving energy at our buildings, thereby reducing tenants’ operating costs. Emira’s ESG strategy and our environmental action set our properties apart and make them an excellent choice for any business,” notes Jennett.

Emira’s 12 equity investments in US grocery-anchored dominant value-oriented power centres total R2.8bn (USD147.1m). The US economy remains on a stable footing with GDP growth of 3.4% for the quarter ending 31 December 2023 and 1.6% for the quarter ending 31 March 2024, coupled with low unemployment. This environment supports Emira’s investment in US open-air centres focused on popular value and needs-based retail in robust markets.

Sound property fundamentals and a high-quality tenant base supported US portfolio vacancies of a low 3.6%, with positive rental reversions of 5.8% and a consolidated WALE of portfolio 5.0 years. It delivered a solid performance, adding R222.6m to Emira’s distributable income.

Emira’s balance sheet remains healthy, with a more than adequate 2.3x interest cover ratio and a loan-to-value ratio that decreased from 44% to 42.4%. It reported unutilised debt facilities of R1bn and cash on hand of R180.8m. Emira has a strong and diversified financial foundation, with support from major South African banks and the proven ability to access the debt capital markets. During the year, GCR affirmed Emira’s corporate long-term credit rating of A(ZA) and corporate short-term rating of A1(ZA), with a stable outlook.

Jennett concludes, “By creating the ability and flexibility to recycle capital we are able to reallocate resources to diversify our investments in those with better growth prospects. This solid set of results and our expected marginal increase in distributable income for FY25 reinforce Emira’s consistent track record of reliable performance. We will continue to focus on Emira’s strategic direction, operational excellence and portfolio-enhancing capital recycling.”

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Spear announced a full year distributable income per share (DIPS) of 82.99 cents and a total distribution per share (DPS) of 78.86 cents, which represents a growth of 1.04% and 3.80% respectively from the prior financial year. With cash collections remaining consistent and robust at 98.92% for FY2024, the board approved and declared a final DPS of 40.53 cents based on a payout ratio for the final six months of the year, amounting to 96% of DIPS, equating to an annualised average payout ratio of 95% for FY2024.

Sticking firm to their Western Cape-only strategy, Spear’s results indicate an against-the- trend, weathering of the storm. The listed property sector continues to face challenges due to South Africa’s sluggish economic climate, persistent loadshedding, albeit in a hiatus, higher-for-longer interest rate environment and the more gradual return-to-office trend.

During the presentation of the results, CEO Quintin Rossi emphasised the importance of Spear’s Western Cape specialisation, stating, “This has been one of the key enablers in achieving our strong financial performance during FY2024. Our highly motivated and focused asset and property management team has also played a significant role, generating value across our core portfolio by following the hallmark of Spear’s active management approach.”

Highlights

Highlighting the company’s achievements for FY2024, Rossi pointed out the strategic objectives reached.

The acquisition of The Island Urban Logistics Park on the 9^th of May 2023, for R 185 million at an initial yield of 9,75% which is aligned with Spear’s strategic objectives to continuously increase portfolio exposure to high-quality industrial real estate with a focus on logistics, urban logistics and bulk warehousing within the Cape Town Metropole. Since acquisition, the property has yielded 10.17% for FY2024 again demonstrating Spear’s active asset management style and ability to find value. The Island acquisition bolstered Spear’s already high-quality industrial portfolio and will meaningfully contribute to the sustainable cashflows generated across the balance of the 100% Western Cape portfolio.

During Q4 of FY2024, two new PV solar installations were completed: an extension of Mega Park and Sable Square, which added 2MW to Spear’s PV solar portfolio. Management has adopted a three-pronged approach to Spear’s PV Solar rollout, including a combination of capital expenditure installations, roof rental installations with long-dated lease agreements, and instalment sale installations.

To date, more than 55% of the current Spear portfolio has PV solar installed. The commissioned capacity generated 7.4MW in FY2024 and is forecast to generate just under 8MW of electrical supply, providing up to 24% of Spear’s total future energy demands.

Spear initiated Phase 1 bulk infrastructure works on GTX Park in George. GTX Park is located within the greater 1,2 ha Airport Business Park precinct of George, neighbouring the George Airport.

February 2024 Capital Raise: On the 7^th of February 2024, Spear announced the completion of a private placement and raised R313,5 million worth of new equity.

On the 28^th of March 2024, Spear entered into acquisition agreements with Emira Property Fund Limited to acquire 13 Western Cape fund-quality real estate assets. The acquisition of this portfolio aligns with Spear’s investment strategy providing an opportunity to meaningfully increase its market share within the Western Cape, with a complementary high quality diversified property portfolio comprising industrial, retail, mixed-use and commercial assets, enhancing its value to R 5.4 billion and expanding its gross leasable area (GLA) to 502,000m².

Spear’s tangible net asset value (TNAV) per share increased by 2.79% to R11.79 (compared to R 11.47 in FY2023) for FY2024. This increase is primarily attributed to upwards portfolio fair value adjustments at year-end. The core portfolio has shown welcomed asset value growth from growing cashflows and improvements in general real estate fundamentals in the Western Cape, with a like-for-like total of R 153 million increase in portfolio fair value adjustments in FY2024.

Another notable highlight is that Spear exhibits one of the most favourable rental reversion profiles among listed property companies in terms of operational performance with a negative 0.37% rental reversion profile for the diversified portfolio during FY2024.

Sectoral performance
Commenting on the portfolio diversification, Rossi said, “Real estate is the business of local markets, and we believe that a concentrated and localised approach provides relief from several of the headwinds being faced in the real estate sector in South Africa. In our focused regional approach, we have the ability and skill set to continue to invest, develop, and redevelop across four key asset types: industrial, retail, commercial, and mixed-use.

In FY2024, Spear’s industrial portfolio demonstrated resilience and growth, with robust occupancy rates of 97.03% and strategic acquisitions like The Island Urban Logistics Park, driving expansion. Similarly, high occupancy rates of 95.54% and positive rental reversion rates in the retail sector underscored stable performance, supported by a defensive positioning strategy and a significant proportion of long-term national tenants. Despite challenges, the commercial sector saw post-period improvements, with occupancy levels at 84.37% and successful relets signalling positive momentum for Spear’s office portfolio.

While the Western Cape demonstrates resilience within a challenging macroeconomic climate, the upcoming general elections on the 29^th of May 2024 marks a significant juncture in South Africa’s political landscape. As many business leaders navigate through economic uncertainties, including muted growth and persistent challenges, Spear’s focus remains on mitigating negative impacts and fostering growth opportunities. “Despite the hurdles, we anticipate our portfolio to chart a growth path in the year ahead, driven by strategic resilience and prudent management.” said Rossi.

Outlook
In the upcoming fiscal year, while the trading environment is expected to pose challenges, particularly with consumers facing heightened living costs, the potential onset of an interest rate tapering cycle in the latter half of 2024 brings a glimmer of optimism for both the South African economy and the real estate sector. Lower financing expenses, coupled with stronger portfolio escalations, are poised to bolster Spear’s profitability.  Management expects there to be net operating income (NOI) growth at property level in the year ahead, the extent of distributable income growth in the form of a forecast compared to FY2024 at this point in time is difficult to quantify given in particular the higher-for-longer interest rate environment, operating cost creep, and the impact of load-shedding in South Africa in the year ahead.  Management will endeavour to provide an update on its FY2025 DIPS guidance at HY2025.

Rossi concluded that a strategic and cost-conscious approach would be key in FY2025, “To navigate market pressures and counteract the absence of real growth stimuli, Spear remains committed to maximising value in the current subdued trading climate. While mindful of the challenges ahead, we maintain cautious optimism that FY2025 will align with our mission statement, delivering favourable outcomes for our stakeholders. We are perfectly positioned to seize growth opportunities as they arise and remain confident in our ability to adapt and thrive in an evolving economic landscape.”

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• The Group delivered a solid second half performance with distributable earnings per share (“DIPS”) increasing by 7.4%.
• Full year (FY24) DIPS increased by 1.0% to 105.67cps (March 23: 104.64cps).

The results for the year ended 31 March 2024 were underpinned by solid operational performances from the South African and European businesses, with like-for-like Net Operating Income (NOI) up 1.5% and 6.2% (in Euros), respectively. The positive results were, as expected, negatively impacted with an increase in interest rates resulting in a c.R66 million increase in funding costs over the period. During the financial year the business successfully delivered on several of its strategic initiatives and is already benefiting from synergies created by the internalisation, integration of its business and its enhanced international footprint:

• The annualised net management fee saving resulting from the internalisation was R80 million (8% higher than the forecast at the time of the transaction).
• Successful rebranding across South Africa and Europe as the Burstone Group.
• Delivery of several cost saving initiatives including c.€2.1 million corporate savings in Europe, with further synergies expected in the financial year ending 31 March 2025. (“FY25”).
• A new management mandate to manage a c.€170 million portfolio in Germany with the opportunity to co-invest in the future.

Andrew Wooler, CEO of Burstone Group said: “As we’ve transitioned into a fully integrated international real estate business, our team has delivered on what we set out to do. Despite the challenging operating environment, our regional operations have performed well, reporting pleasing operational results. We are already seeing benefits of the
internalisation and we believe our new structure has set us up to deliver on our capital light strategy and to further expand our fund management strategies across all regions.”

Balance sheet is robust

Burstone’s balance sheet remains robust with the Group proactively managing its refinancing and interest rate risk. The Group is actively engaging in the refinancing of its Group and PEL debt, with completion of the refinancings targeted for Q2 FY25.

• De-gearing of the Group balance sheet remains a core focus in the near term with a planned reduction in LTV from 44% to between 37% and 40% within the next 12 months.
• Further c.R1.2 billion to R1.4 billion of assets identified for sale in South Africa (with R400 million already under contract).
• Pursuing a pipeline of European asset sales of c.€150 million to €250 million, with c.€90 million under offer and at pricing in line with book values.
• This in addition to the c.R1.3 billion of South African assets that were sold over the past financial year at a 1.5% premium to book.

Said Wooler: “We believe in disciplined capital allocation and continued capital rotation to meet risk-adjusted targets. We seek to deploy capital into the best international/local opportunities that will support our longer-term strategic plan and continue to create shareholder value. We remain focused on internally generating capital through select asset disposals to support our planned reduction in LTV from 37% to 40% over the next 12 months. We are confident that we can execute on this disposal plan. We will consistently invest for the future whilst continuing to create internal capital.”

South Africa outlook
The South African macroeconomic backdrop remains muted, and the property sector faces many challenges, including rising municipal costs and an energy crisis which contributes to an increasing cost of occupation. Nevertheless, the South African portfolio has stabilised and is performing to expectations. The focus remains on maintaining the quality and relevance of the portfolio and accelerating the capital recycling programme.

Pan-European Logistics (PEL) portfolio
Given sector dynamics, growth in contracted rent is expected to continue within the PEL platform with base NOI expected to grow between 3% and 4% over the next 12 months. In addition, positive earnings growth will be supported by embedded cost savings initiatives. The Group has already extracted cost savings of €2.1 million in the European platform with further savings expected in FY25.

Australia
The Irongate business has performed well, and the business continues working with its core investor base, while continually engaging with new capital partners to explore a strong pipeline of new opportunities. We expect an increase in the contribution to earnings from the Irongate JV.

Dividend Payout
The Board has resolved to apply a payout ratio of 75% for the six months ending 31 March 2024 declaring a dividend of 40.95cps (March 23: 48.32cps). The payout ratio was 95% for the first six months of the year, resulting in the total dividend payout ratio for FY24 of 85%, and a full-year dividend of 89.46cps (March 23: 99.41cps). The Group will apply a 75% payout ratio going forward and will continue to assess the appropriateness of this payout policy in light of the Group’s long-term strategy and after considering its LTV position, capex funding requirements and any potential taxation impacts.

Prospects and guidance
The strategic focus of the Group over the past year has been on its repositioning from a property investment business into an integrated international real estate fund and asset management company. Burstone’s longer-term focus will be the roll out of a capital light fund management model through continued investment in several growth opportunities, supporting our asset and geographic diversification with a material impact on earnings expected in the medium to longer-term.

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Andrew König, Chief executive officer at Redefine, says the addition of the centre to the company’s portfolio demonstrates confidence in South Africa’s retail property sector. “As Pan Africa and other recent acquisitions demonstrate, Redefine views its retail portfolio as a key driver for sustained long term growth, both in terms of the company and national socioeconomic development,” he adds.

Located on the corner of 3^rd Street and Watt Street in Alexandra, Gauteng, Pan Africa Shopping Centre boasts a current GLA size of 15 775sqm and serves as a cornerstone of the community of Alexandra and surrounding areas. The easy-to-navigate, double-level centre is home to a wide range of national and independent retailers, as well as fast food outlets. Notably, the centre was a first of its kind in South Africa as it was built with fully integrated public transport, which included a taxi facility.

Currently, Pan Africa Shopping Centre is undergoing a multi-phase upgrade and expansion process that will see the centre’s lettable area increase to over 25 000sqm, featuring bigger spaces for existing retailers such as Truworths and Mr Price Group, as well as new additions such as W Edit, Pick n Pay Clothing and Sportscene. The expansion is scheduled to be completed in October this year.

ESG credentials of the centre will be enhanced through the inclusion of solar, propel air toilets and energy efficient lighting. The centre will also have full back up power and water to ensure retailer’s trade will not be affected by disruptions.

“Pan Africa represents a step forward in expanding our local portfolio and is an example of our commitment to facilitating a quality communal shopping experience for all South Africans. Going to your local centre, should be an exercise in comfort, safety and convenience, the defining attributes of any mass retail space,” König explains.

Redefine’s purchase of Pan Africa Shopping Centre comes on the heels of the company’s full acquisition of the Mall of the South – one of South Africa’s largest retail properties located in Johannesburg South – from previous co-owner RMB Investment and Advisory (RMBIA).

“Retail accounts for more than 40% of Redefine’s asset platform in South Africa. In alignment with our retail strategy and capital allocation plan, these acquisitions show we are looking to the future, to develop and manage properties that speak to a corporate vision and identity characterised by excellence, diversity, and versatility,” König concludes.

According to Redefine’s results for the interim period ended 29 February 2024, the company’s local portfolio has largely stabilised, with signs of improvement across most operating metrics. In that period, Redefine completed 379 147sqm of leases, with new deals accounting for 42% and renewals making up the balance. In addition, renewal reversion rates improved from -6.7% at August 2023 to -6.0% at February 2024, demonstrating the quality of Redefine property assets.

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Dipula is a prominent, diversified, South Africa-invested REIT that owns a R9.8 billion portfolio of 166 retail, office, industrial and residential rental assets countrywide. Convenience, rural and township retail centres produce 64% of its portfolio income, with 61% of its rental income generated in Gauteng.

Izak Petersen, CEO of Dipula, comments, “This is a good set of results in which Dipula delivered top-line growth, albeit at relatively modest levels — a solid achievement given the background of elevated inflation, interest rates at their peak, and double-digit electricity tariff increases.”

Dipula’s revenue grew by 9%, and its net property income increased by a credible 6%, highlighting efficient operations supported by rental growth. While rental income remained under  pressure, with some rentals still reverting to market due to the persistent tough conditions in the office sector, Dipula showed a 2% increase in rental income. The net income growth was supported by Dipula’s tight check on expenses, which increased modestly relative to inflation levels. Dipula’s net asset value increased by 2% to R6bn.

Higher interest rates, however, worked against Dipula’s gains, resulting in a decrease in interim distributable earnings per share of 3%. The declared dividends amounted to 90% of distributable earnings.

Dipula concluded R105m of new leases during the period with renewals worth R845m and achieved a tenant retention ratio of 89%, keeping its buildings well occupied while strategically doubling the lease expiry profile of its office real estate portfolio from 1.5 years to three years.

Vacancies improved from 10% to a pleasing 8% during the period. In Dipula’s substantial retail portfolio, vacancies reduced from 9% to 6%. In its office portfolio, which accounts for only 15% of its gross income exposure, vacancies decreased from 27% to 23%. Vacancies in the industrial portfolio remained low at 5% compared to 4% in the prior period. The average vacancy in Dipula’s residential portfolio of 716 units for the six months was 6%, and it recorded rental growth of between 2% and 8% across its different properties.

“We believe that our residential assets offer great quality accommodation for tenants at extremely competitive rentals, especially in the ongoing tough operating environment in South Africa,” reports Petersen.

Dipula awarded a contract for 5.3kWp of solar projects at nine of its properties in the first phase of its solar roll-out. Dipula is investing R50m in this phase of its installation, which is anticipated to be completed before the end of August 2024.

“Before the end of this financial year, we expect to increase our solar power capacity more than fourfold, from the current 1.6kWp to 7kWp in total. Then, we plan on trebling this number in the next 24 to 36 months,” says Petersen.

Dipula’s interim results demonstrate a robust balance sheet with a favourable liquidity position. The company concluded its debt syndication, which extended its weighted average debt term to four years. Its debt levels remained stable at R3.7bn, with 61% hedged and no major facilities expiring in the next four years. Gearing decreased over the period to a healthy 36.3% from 36.9%.

Dipula anticipates stable conditions for the rest of its financial year to August 2024, with improved performance in 2025 as it completes various capital projects.

Petersen concludes, “A reduction in interest rates would boost performance going forward. Our rentals have room for improvement and will respond well to any uptick in the trading environment. Dipula will continue to drive stakeholder value with our focused, prudent approach to capital allocation while maintaining our strong balance sheet and working to further reduce vacancies and run efficient operations.”

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