Attacq achieves good growth in results amidst very tough local and international business climate

Posted On Tuesday, 13 September 2016 09:47 Published by
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Attacq Limited today posted its annual results for the year ended 30 June 2016.

Attacq_CEO_Morne_Wilken

The year was a highlight year for Attacq and the company showed healthy results, despite a very challenging local climate and volatile international market conditions. 

Attacq Chief Executive Officer Morné Wilken confirmed the company’s vision to be the premier property fund in South Africa that delivers exceptional, sustainable capital growth through creative local and international real estate developments and investments. “Our pursuit of our vision is to invest in quality real estate, develop great properties and grow a strong rental portfolio in South Africa, as well as other emerging and developed markets,” explains Wilken.

Attacq achieved a 15.3% growth in Adjusted NAVPS to R21.89 per share for the full year, with the compound annual growth rate in Adjusted NAVPS being 29.4% since inception. Attacq’s total asset value grew by 18.6% to R27.6 billion, since June 2015 when it stood at R23.3 billion. The international portion of Attacq’s assets showed positive growth both in value and percentage contribution to the overall net asset value with international assets increasing by 34.5% to R5.9 billion. The Waterfall bulk that has been completed increased by 49.5% to a total of 410 000m2. Attacq also performed well with an increase in net rental income of 17.2% to R1.1 million and this includes only two months of rental income from Mall of Africa, which was completed at the end of April. Vacancies reduced from 4.0% in June 2015 to only 2.4% in June 2016. The development profit made in the period from Mall of Africa is approximately R580 million and around R178 million from other developments.

The super-regional Mall of Africa in Waterfall City (80% owned by Attacq) opened on 28 April 2016 with more than 123 000 visitors on opening day. The 131 000m2 mall is already trading above expectation and it is important to note that only two months of trading contributed to Attacq’s June 2016 results. “The mall has been designed to allow for an expansion of 25 000m2 and we look forward to significant value upliftment in years to come,” says Wilken.

The Mall of Arica was named the winner of the coveted Spectrum Award for the best retail development during the South African Council of Shopping Centre’s Retail Design and Development Awards (RDDA) at their 20th annual shopping centre congress held in Sandton. It is recognised that the Mall of Africa is rapidly becoming an icon of the retail real estate development landscape. “We believe the Mall of Africa remains an attractive tipping point for Waterfall City to take up its role as South Africa’s corporate consolidation destination and the new HQ powerhouse,” says Wilken.

“Attacq is a South African fund with a quality diversified portfolio and development pipeline. Attacq has enjoyed healthy income growth from its core portfolio with particularly favourable performance from the South African retail and industrial portfolios,” states Wilken.  

As part of growing the Attacq brand, the company unveiled its newly refreshed brand during the period. This was a key highlight in developing brand clarity and engaging well with all stakeholders. “The brand refresh was a salient step in rolling out the fully integrated Attacq marketing communication and stakeholder engagement strategy that was adopted early in 2016,” states Wilken. “The roll-out of the Attacq marketing strategy includes a comprehensive array of engagement tools to effectively communicate this with the market,” states Wilken.

“Waterfall remains the jewel in the Attacq crown as a catalyst for regional growth. We are very positive about the way ahead. Following the catalytic momentum created by the opening of the Mall of Africa, Waterfall City is rapidly becoming the favoured destination for beneficial corporate consolidation. Projections show that the Mall of Africa alone will attract more than 15 million people per year,” says Wilken. “Based on studies by Urban Studies, the projected growth in office space is expected to be almost 30% per annum until 2020. The opening of the 26-storey PwC Tower will accelerate this growth even further,” he continues.

If the past and the development of other cities are used as comparative case studies,  the future of Waterfall City is bright. Wilken explains: “Sandton City was built in 1972 and, 44 years later, Sandton is a developed city with 4.5million m2 of developed space in total. Gateway Centre today one of the best performing malls in the country and a catalyst for business growth in the Umhlanga Ridge area. Canal Walk in Cape Town is not only one of the best performing malls in the country, but was also the impetus for significant commercial development that led to Century City,” states Wilken.

“One must note that Waterfall, with Waterfall City as its nucleus, is in the centre of Gauteng as the economic hub of the country. It is the ideal infill development between Johannesburg and Pretoria with excellent access and infrastructure,” he says. “Tighter economic realities call for corporate consolidation. Companies can reap real significant benefit from consolidation to Waterfall City, through reduction of rented space, use of green technologies, culture gains and having a more efficient workforce all located centrally in the province,” says Wilken.

Waterfall City is starting to sell itself, as people see all that is happening around the Mall of Africa, the 1.3ha central Waterfall Park and the commercial development in the area. In addition to its commercial benefits, Waterfall also boasts the best industrial location with excellent logistical access. More than 27 000 jobs will be created in Waterfall during construction and around 60 000 people will work there during the operational phase. “Attacq, as the leading visionary regional business force, is proud to invest in, develop and grow Waterfall and Waterfall City as a world class city destination,” states Wilken.

Along its strategy of invest, develop and grow Attacq has made significant strides. New partnerships were formed in South Africa with Sanlam, Equites, Zenprop, Barrow and with Artisan in the UK and Atterbury Europe in Europe to invest in exciting development opportunities across Waterfall and beyond.

“We appointed a head of developments to drive our internalised development management after cancelling Atterbury’s exclusive development right in Waterfall,” states Wilken. Attacq has completed 8 buildings in South Africa, adding 127 198m2 of primary GLA to its portfolio.

International investments increased by 34% to R5.8 billion.

15% of Attacq’s total assets are in developed markets. Attacq’s investment in developed markets focuses on investments in MAS and in Cyprus. “The current international market is a challenging one and we have seen its influence in the performance of the MAS Real Estate and our African investments,” says Wilken. “Our investments in Serbia and Cyprus have stood us in good stead and we have enjoyed healthy development profits from other developments,” explains Wilken.

Attacq held 41.4% in MAS at year end. The investment is equity accounted and the value was R2.71 billion at year end. During this financial year the Karoo agterskot shares vested and Attacq thereafter also sold R200 million worth of MAS shares at R22 per share. The market value of our investment as at 30 June was R2.9 billion, which is R200 million higher than our book value. MAS had traditionally only focused on Germany, Switzerland and the UK, but has now expanded its focus to include the higher growth markets in Central and Eastern Europe. MAS have teamed up with Martin Slabbert and Victor Semionov to form Prime Kapital, in which MAS have a 40% shareholding. This new vehicle will drive MAS’ CEE strategy, with Martin and Victor possessing an excellent track record in the CEE markets over the last 8 years. MAS was admitted into the JSE’s SAPY index in December 2015 and has seen a marked increase in its share liquidity as a result. Its distribution per share has increased by 34% and the rental income has increased by a healthy 63%. R1.2 billion has been raised for further MAS expansion. MAS remains a strategic investment for Attacq.

Attacq holds a 48% share in Atterbury Cyprus that in turn holds 99.7% of Shacolas Emporium Park and 99.5% of the Mall of Engomi. These two malls jointly attract 6.5 million shoppers per year. Both these centres are trading well in the Cypriot economy that has recently emerged from a downturn. These Cyprus investments has given Attacq a 16% growth in Euro terms and 36% in Rands.

6% of Attacq’s total assets are in emerging markets. In emerging markets, Attacq’s strategy focuses on joint ventures with partners with local expertise while bringing investment and property skills to its investments in larger or metropolitan areas. Six operational malls in Serbia and one more Serbian mall under construction, counts amongst the international emerging market investments.

As part of its emerging markets strategy, Attacq holds a 25% shareholding in Atterbury Serbia, which acquired a 33% shareholding in an existing portfolio of seven properties developed by MPC Properties of which one still under construction. The value of the total portfolio after the completion of Shoppi Subotica in October 2016 will be approximately R3,8 billion. An additional 17% was acquired in portfolio by Atterbury Serbia post year end, which increases Attacq’s effective shareholding in the portfolio to 12,5%. The prime portfolio asset is the Ušće Shopping Centre, Serbia’s largest mall. In addition, Atterbury Serbia and MPC have contributed a further €40 million in equity to undertake retail developments. Opportunities for the deployment of these funds have already been identified.

Attacq has investments in five operational malls across Africa. “We look forward to future growth in this regard as currently we feel that this area of Attacq has under-traded somewhat,” says Wilken.

“Operational excellence is a priority at Attacq,” states Wilken. Attacq evaluates the performance of its assets on an ongoing basis and in the period recycled R1.3 billion of capital through the sale of assets including The Club development in Pretoria, its investments in Mauritius, The Pavilion in Birmingham, its 50% share in Great Westerford, Geelhoutboom, R200 million of MAS shares and the remaining 10% shareholding in Atterbury,” states Wilken.

Attacq continues to grow its business responsibly and vacancies have reduced from 4.0% in June 2015 to 2.4% in June 2016. Total operating costs are just 0.5% of gross assets; illustrating how effective the company is being managed. Attacq also received the MSCI Award for best performing office portfolio based on a 3-year annualised total return to December 2015.

Attacq recognises the importance of the development of non-GLA income and with this in mind supports the Launchlab incubator programme with Nedbank and the University of Stellenbosch. This initiative seeks new opportunities in the retail sector with the opportunity for Attacq to participate in viable business that sprout from the initiative.

Attacq develops beyond its own bottom line and embraces its role as custodian of both the environment and the people across its business footprint. Attacq has made a CSI contribution of R6.5 million in the period with R1.5 million for socio-economic development and R4.8 million towards enterprise and supplier development. Attacq funded 11 tertiary bursaries through the Atterbury Trust. “We are proud of our investment in various development initiatives, like the Columba Trust, Bright Kids Foundation, Bana ba Rona Early Childhood Development Centre, the Property Point enterprise development programme, our investment in the CEO SleepOut to fight homelessness and poverty and the Attacq the Future initiative,” says Wilken.

Attacq has adopted a robust environmental policy for its Waterfall developments and already has 8 green-rated buildings of which one was awarded the prestigious Gold LEED Award. As part of the environmental approach, Attacq has implemented a robust waste management and recycling projects for all buildings in its portfolio.

Wilken remains upbeat about the business future and identified a number of opportunities, including greater use of green technologies and the leverage of joint venture relationships for greater mutual benefit. He stressed that an investment in Attacq is a strong one due to its high quality South African portfolio, its Waterfall development pipeline for the next 15-20 years and its diversified investments with 21% of its assets in hard currency markets.

In his concluding future view, Wilken foresees slower South African growth, due to political uncertainty in the country. He also identifies local services and utilities supply coupled with pressure on resources as potential business risks for the country, while uncertainty caused by Brexit and the USA elections, will in his view, have an impact on Attacq’s offshore markets.         

 

 

 

 

Last modified on Tuesday, 13 September 2016 09:59

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