JSE-listed Attacq, which is developing Waterfall City, has achieved a resilient performance for the six months ended December 31, 2022, reporting higher distributable income, while also attracting blue-chip clients and forging key investment partnerships.
Attacq’s performance included growth against all key metrics.
A dividend of 29c apiece was declared for the interim period, equating to a payout ratio of 80.8%.
Distributable income per share increased by 27.3% to 35.9c, while occupancy and collection rates remain high at 92% and 101.3%, respectively.
Attacq says its performance was particularly resilient against the backdrop of South Africa's low-growth environment, characterised by record unemployment, poor business confidence levels and a generally weakening economy exacerbated by the country’s energy crisis.
Speaking to Engineering News, CFO Raj Nana says that the group benefitted from its ability to mitigate loadshedding at retail and other properties with generators; as well as the high quality of its office portfolio, which is well understood by the market.
However, there were considerable costs associated with the former in the interim period, with Nana indicating diesel cost of about R28-million, and Attacq recovering roughly 65% of this from clients. The group is now pursuing initiatives given that generators are unsustainable in the long term, as they drive up occupancy costs, impact Attacq's bottom line, and are not environment-friendly.
This includes reducing energy consumption and reliance on generators through several initiatives, including retrofitting lights, installing generator management systems to shut down generators after hours for specific buildings and adding about 2.3 MW of rooftop photovoltaic (PV) systems, with a further about 4.7 MW of rooftop PV systems in planning, as well as battery backups for buildings and precincts.
The Waterfall precinct continues to see development activity, which, in the period under review, totalled 53 697m2 of gross lettable area, with a total cost at completion of R915.4-million.
Another significant milestone highlighted was the recently announced transaction, in terms of which the Government Employees Pension Fund (GEPF) intends to make a R2.8-billion strategic investment into Waterfall City.
The landmark transaction with GEPF is set to further de-leverage Attacq’s balance sheet, optimise the group’s capital structure and fund the continued development of Waterfall City.
Once implemented, Attacq will see its gearing reduce considerably, providing the balance sheet capacity to develop out Waterfall City. Attacq’s capital structure will also be optimised, resulting in a reduced cost of capital, thereby enhancing returns for Attacq’s shareholders, Nana outlines.
He informs that with this transaction having been approved by the Public Investment Corporation and the GEPF board, the next steps will entail signing of legal agreements and an Attacq shareholder vote. Attacq is hopeful that it would close on the transaction before it releases its full year results in September, Nana notes.
“Our sustained growth and success can be attributed to our continued dedication to our strategy, which has equipped us to address the rapidly changing environment in which we operate. Our results indicate that we are on track in delivering on our purposeful strategy focused on creating smart, safe and sustainable community spaces, while enhancing the experience of our clients and shoppers within our office, retail and industrial hubs,” Attacq CEO Jackie van Niekerk says.
Attacq says it demonstrated the underlying quality of its diverse portfolio, which resulted in an increase in the use of its collaboration hubs as more businesses returned to the office.
The group’s retail-experience hubs also performed well, with the weighted average trading densities of the portfolio having grown by 14.7%. In particular, the Mall of Africa’s trading density was notable at 22.8%.
Prior to the end of the six months under review, Attacq successfully refinanced R1.1-billion of existing debt at a weighted average reduction in margin of 64 basis points.
“For the interim period, amid tough economic conditions, through our focused approach, we delivered a 27.3% increase in distributable income per share with a strong performance from our key strategic node, Waterfall City, which grew by 49.9%.
“The balance sheet remains healthy with a gearing ratio of 38% and available liquidity of R1.4-billion. We are also pleased to have declared a dividend of 29c a share,” Nana says.
Attacq asserts that its investment case remains compelling, with its portfolio having proven its resilience in withstanding considerable headwinds, including increased energy and water disruptions and shortages, and rising inflation and interest rates.
Looking ahead, these headwinds are likely to restrict economic growth and, therefore, impact the real estate market in general, the group points out.
The landmark GEPF transaction is expected to considerably strengthen the group’s capital structure and assist in mitigating the impact of the weakened macroeconomic backdrop.
The portfolio is expected to continue to generate income growth and given the current capital structure, prudent interest rate hedging and available funding and liquidity, the group’s full-year distributable income per share guidance of between 8% and 10% growth and a payout ratio of 80% remain unchanged.