SA Corporate Real Estate renews its focus in a changing market
CAPE TOWN - SA CORPORATE Real Estate (SA Corp) distributed 17.93 cents per share for the year to December 31, 2020, less than half the 38.04 cents of the previous year after property valuations and net property income fell through the Covid-19 pandemic.
Property valuations fell by -60.33 cents or 8 percent. Chief executive Rory Mackey said in a presentation yesterday the property sector was in a period of “immense change” and it would be naive to expect it to revert to what it was prior to the pandemic.
SA Corp’s portfolio of industrial, retail, commercial and residential buildings consists of 188 properties valued at R16bn, a 50 percent joint venture in three Zambian properties of R879.6m, an 80 percent joint venture in The Falls Lifestyle Estate worth R141.8m and listed investments of R112.8m.
Full year distributable income fell to R601.14 million versus R959.97m in 2019. Total property revenue amounted to R2.1bn (R2.3bn), with the like-for-like portfolio, excluding disposals, developments and acquisitions in 2019 and 2020, amounting to R1.4bn versus R1.5bn in 2019.
Contracted and executed disposals came to R1.6bn. Loan to value was comfortable at 38.6 percent, versus 36.6 percent in 2019. Net asset value per share was 401 cents versus 477 cents in 2019.
Mackey said medium-term strategy was to focus the retail portfolio on defensive convenience offerings, to consolidate the industrial portfolio, to divest from three remaining commercial properties, and to establish a quality residential portfolio.
The sale of inferior industrial properties had been contracted for R970.5m, thereby strengthening the portfolio with a greater focus on logistics - these properties have become sought after investments because of their role in the fast growing online economy.
More than R500m of lesser quality residential assets were identified for sale, of which R147.1m had already been contracted for sale.
Other areas of focus included strengthening the management team, adopting conservative valuations, reducing gearing and maintaining a strong balance sheet, and focusing on collections.
In the final quarter of 2020, collections in the South African portfolio improved to 105 percent of billings after falling to 75 percent over the initial lockdown period. Total relief to tenants amounted to R87.4m. Arrears had increased to 10.6 percent of revenue from 4 percent in 2019.
Vacancies in the mainly inner-city apartment portfolio increased to 15.4 percent from 8.2 percent in 2019, but so far in the new year, new leases were more than double notices given, although it might take time to substantially reduce vacancies, said Mackey.
No guidance was provided in the uncertain economic environment.