RDC Properties, a Botswana Stock Exchange listed property group delivered robust performance amidst difficult trading environment for the property market as businesses shut down due to COVID-19 pandemic economic catastrophes.
On Wednesday the group released its unaudited consolidated summarised financial results for the period ended June 2021.
The company reported sound and satisfactory figures, mirroring resilience of the portfolio and the strong base from which the Group is further diversifying through the proposed acquisition of Tower Property Fund Limited, a South African property investment outfit.
RDC Directors revealed on Wednesday that the company benefited from both the strengthening rand and new acquisitions resulting in a 6% increase in the investment portfolio to P2.35 billion.
Revenue for the period reached P72.5 million , an increase of 17% mainly due to the positive impact of the acquisitions in Capitalgro, a South Africa Western Cape based property company.
RDC acquired a controlling stake in Capitalgro in 2019 through an investment of R50.9 million, securing a 34.85% controlling stake in the issued share capital of Capitalgro, Capitalgro is listed on the Johannesburg Stock Exchange.
RDC then invested additional R120 million into Capitalgro raising its stake to 63% in the company. This additional investment enabled Capitalgro’s acquisition of the AAA rated, five-star certified commercial building known as ‘The Edge’ still in South Africa.
Capitalgro acquisition has been held for the full period compared with the prior period and the resultant profit from operations of P45M has increased by 9%, despite the reduced impact of foreign exchange.
The surplus arising on investments relates to the Groups USA assets. Returns on US assets The Research Court are cash backed while The Manning will be realised on completion.
The profit for the period is therefore up by 19%, demonstrating the resilience of the RDC portfolio and robustness of the company ‘s diversification strategy.
Another RDC investment in South Africa is the hospitality portfolio asset , the Radisson RED Hotel Rosebank in Johannesburg.
The hotel which has been under construction has been completed and has opened its doors to widespread accolade from the sector.
The property was acquired by the RDC post the reporting date in July 2020.The 222-room hotel is in a pre-opening stage with full operation to commence from October 2021.
The project was completed on budget at R405M, the property is funded in part by a loan from Nedbank of R200m.
The value of the hotel is expected to increase substantially when assessed by an independent valuer at year end.
In Botswana the commercial, retail, industrial and residential portfolio has performed largely in line with budget.
The leasing activity is taking traction, with some 40 leases being either renewed or entered afresh in the period.
The hospitality, leisure and entertainment sector along with the company ‘s food retailers are still seeing a depressed trading environment and have not yet experienced the much anticipated and needed rebound.
Commenting on the financials RDC Properties Executive Chairman Guido Giachetti pinned the company’ s growth opportunities in Botswana on the lifting of State of Emergency.
“We expect to see a pick up as soon as the State of Public Emergency and its restrictions are lifted and a normalization in Q2/Q3 2022.”he said.
He explained that the reporting period results are underpinned by strong collection numbers as the tenants most affected by the restrictions have agreed to a restructuring of their debt.
The Capitalgro portfolio in Cape Town has performed in line with expectations with some reduction in revenue largely relating to the transitional negative effect on rentals caused by the Westlake Lifestyle Centre redevelopment project.
This project will see the conversion of the property to a convenience centre anchored by a high-spec, new generation Checkers retail store.
Letting activity has shown some recovery with 18 new leases and renewals concluded in the period, significantly amongst them is PSG who is the anchor office tenant of the Edge Property.
The 108 Albert Rd Joint Venture development is nearing completion and the building, whilst not yet fully let, has attracted several quality bio-tech tenants.
A R70m term facility has been signed with FNB which will allow for both the completion of the project and for the Group to release working capital invested to date.
The JV is also working to secure a smaller adjacent property to ensure the availability of parking for the primary property.
In the United States the Group completed the second tranche of The Manning in July 2020, completing the Group’s investment program for the USA.
The Research Court Asset continues to perform well with low vacancy and strong demand underpinning an 8% yield, realised monthly.
The Manning development continues with US$81.5m of sales committed and only 11 units remaining, and the project remains on target with an expected realisation date of Mid-2022.
On the 30th of March 2021 the Group completed the acquisition of the Xiquelene property in Maputo,Mozambique for a consideration of circa P14m.
“We have obtained all the relevant authorizations from the local authorities and we should be in a position to start the phased refurbishment, amounting to circa P7m worth of investment in the short term” Executive Chairman Guido Giachetti explained.
The development of the phase 1 Zimpeto property continues with the petrol station and line shops due for completion by the end of 2021.
Guido Giachetti explained explained that Xai Xai Shopping Centre is starting to attract Line Shop tenants, “but the business environment in Mozambique is subdued due to the terroristic threat in the north of the Country as well as the economic effects of the pandemic” he said.
From a Group debt perspective, the term debt to portfolio value ratio, net of cash & cash equivalents, is now at 32.4%.
The recovering of the rand in relation to June 2020 has result in an unrealized translation difference of P16m, a reversal of the prior years impact of the Rands sudden devaluation.
With regards to Towe Property Fund Limited RDC said there have been several cautionary announcements published on the BSE and the JSE with respect to the proposed acquisition by the Group via a scheme of arrangement or general offer, of the shares in Tower
Property Fund Limited, a JSE listed REIT of circa R4,2bn in total asset value.The transaction has respective (RDCP and Tower) shareholder support by way of rrevocable letters of commitment to vote in favour of the proposed offer, and will be funded by way of a rights issue to raise the required equity of R885m and Rand denominated debt of R400m to meet the offer price of R1,285m including costs.
Tower has a quality portfolio of 42 properties spread across Cape Town, Johannesburg, Durban and Croatia in Eastern Europe.
The deal is expected to be Net Asset Value and earnings accretive for RDCP shareholders and will usher in a new growth era for the business.