Safari Investments will list on the Johannesburg Stock Exchange (JSE) Main Board as a Real Estate Investment Trust (REIT) on 7 April, becoming the 29th listed REIT member according to the REITs website.
Thabong Shopping Centre in Sebokeng with a GLA of 27 645 square metres has been trading since 2007. The centre is fully let with a balanced tenant mix and a Super Spar occupying more than 4 000 square metres as the anchor retailer. View it here.
Furthermore, the website notes that it has six non-REIT listed members and four listed international REIT members including Capital & Counties Properties PLC, New Europe Property Inc and Redefine International P.L.C.
The listing of Safari shares will be implemented together with a capital raising of approximately R315 million to R400 million, through the private placement of new ordinary shares in Safari with selected eligible investors.
The net proceeds of the offer will be used to settle all debt and free up existing facilities of approximately R600 million that will support the company’s project pipeline.
Founded by Francois Marais (also the chief executive officer), approximately 14 years ago, and over time, it became a unique platform for smaller investors to participate in quality, high growth retail property assets mainly in high growth township areas, including prominent nodes such as Mamelodi, Atteridgeville, Sebokeng and Heidelberg. It is also in the process of developing a new regional destination centre in Swakopmund, Namibia.
“The listing of Safari provides potential investors with a unique opportunity to invest in a retail portfolio consisting of high quality, high growth assets based in high growth township areas that offers a community retail focus with a strong financial position and an attractive pipeline of projects,” says Marais.
Safari is well positioned for organic growth and greenfield development.
According tom Marais, based on demand and commitments from national tenants, the company currently has over R1 billion of projects under consideration and these include the addition of approximately 45 000 square metres of retail space by way of further developments in Atteridgeville and Sebokeng and the greenfield development in Namibia.
Read the pre-listing documents here.
Property portfolio
Safari’s property portfolio comprises four well-established and strategically located retail properties situated mainly in high growth township areas and has been independently valued at approximately R1.276 billion with a 100 percent retail portfolio at a total GLA and NLA of 124 925 square metres and 97 529 percent.
Denlyn Centre in Mamelodi has a GLA of approximately 42 200 square metres, which includes a recent 19 000 square metre expansion and became the preferred shopping centre for the community over its ten years of trading. View it here.
It includes Denlyn Centre in Mamelodi with GLA of approximately 42 200 square metres, which includes a recent 19 000 square metre expansion and became the preferred shopping centre for the community over its ten years of trading.
Atlyn Centre in Atteridgeville has been trading since 2006 - it provides a premier shopping destination for the residents of Atteridgeville.
Thabong Shopping Centre in Sebokeng with a GLA of 27 645 square metres has been trading since 2007. The centre is fully let with a balanced tenant mix and a Super Spar occupying more than 4 000 square metres as the anchor retailer.
The focus at Thabong is on maintaining, expanding and continuously attracting the right tenant mix for the market, thereby establishing Thabong as an area regional shopping centre and the preferred shopping node in Sebokeng.
The Victorian centre in Heidelberg was recently transferred to Safari. It has a GLA of 15 400 square metres and is a well-established community centre, having traded for 16 years.
It is anchored by Pick n Pay, with key tenants being Mr Price, Total Sports and CNA. National retailers comprise approximately 95 percent of the tenants.
Safari’s net asset value, revenue and operating profit have increased by more than 20 percent per annum in the preceding three years.
Francois Marais, chief executive officer, founded Safari 14 years ago. He is an architect in practice since 1965 and has been involved with project implementation and management in the property industry in the following categories: educational institutions, health facilities and all facets of commercial projects. In 1990 he launched a division for project development, and has as a property developer completed a private hospital, office buildings, residential units, and since 1995 focused on retail development with his involvement in the implementation of commercial projects to a value of approximately R2 billion to date.
Trading densities are significantly higher than the industry norm and rentals per square metre lower than the industry norm. These key factors are supported by favourable turnover and rental escalation agreements that will positively impact the future value of the portfolio and distributions to shareholders.
Safari’s portfolio was funded and developed by approximately 150 shareholders with a wide range of skills including architects, engineers, property developers, accountants and medical doctors.
Listed property and Safari listing
Speaking to Property24.com ahead of the listing, Craig Smith, STANLIB property analyst, says Safari has an enviable portfolio of dominant shopping centres that are located in high growth township areas.
The portfolio is mostly concentrated in the Gauteng node. Safari’s flagship asset is the 42 000 square metre Denlyn Mall in Mamelodi.
Overall vacancy rate is negligible and the company has meaningful expansion plans at a number of their shopping centres.
“The expansions will be driven by tenant demand and this is likely to be very strong given the high trading densities across the Safari portfolio of shopping centres.
“It is also comforting to know that the Safari management team know these assets intimately as they have been managing the portfolio for a number of years,” says Smith.
On listed property, Smith says the sector delivered a total return of 1.8 percent for the first quarter of 2014 noting that the return was ahead of bonds (0.9 percent) and cash (1.3 percent) but behind equities (4.3 percent).
Furthermore, he points out that the first quarter was a busy reporting period for the listed sector with the likes of Growthpoint, Hyprop, Capital and Resilient reporting pleasing results during this period.
In fact most companies that reported during this period delivered distributions ahead of analyst’s forecasts, says Smith.
The Victorian centre in Heidelberg was recently transferred to Safari. It has a GLA of 15 400 square metres and is a well-established community centre, having traded for 16 years. View it here.
However, the direct property market performed satisfactorily in 2013 delivering a total return of 15.3 percent as measured by IPD.
“Property fundamentals on a forward looking basis remain intact and we expect the listed sector to deliver distribution growth of around 8 percent over the next 12 months.”
Smith notes that the office sector remains a concern as there is substantial supply of new office space being introduced to the market at a time when there is already a fairly high national office vacancy level and sluggish economy.
Asked about consolidations in the listed sector, he says this has already started shaping up with the announcement of numerous proposed transactions such as the Acucap and Sycom merger.
“We are generally supportive of this trend as it will become increasingly difficult for smaller companies to grow their portfolios through yield enhancing acquisitions in an increasing interest rate environment.
“Consolidation will lead to fewer but larger companies with stronger balance sheets in general,” he says.
Asked why it took so long to list, Zach Engelbrecht Safari chief financial officer says from inception, Safari has always had a long-term view on property investments and indicated to their shareholders that 2014 will be a year that dividends would be distributed to them.
Engelbrecht explains that previously the portfolio was too small to justify being a listed company.
Atlyn Centre in Atteridgeville has been trading since 2006 - it provides a premier shopping destination for the residents of Atteridgeville. View it here.
“Now is a good time to list and especially because the REIT in the listed property sector makes sense for existing shareholders and it is also more attractive for listed funds to invest in the company.”
He says the added benefit is that Safari had the opportunity to raise funds and grow its portfolio hence having strategic partners such as Stanlib, Grindrod, Public Investment Corporation and Women’s Development Business for example as they are a perfect fit going forward.
On township retail property, he says they focus on strategically located nodes, for example, Mamelodi in Pretoria, their retail centres are located on main roads in the cities which cut down on transport costs giving consumers more money to spend on things they really need and want.
Engelbrecht points out that Safari service the people’s needs in the towns they move in, besides, the fact that they have zero vacancy levels at their centres, their above average trading densities make Safari believe that retail is a clever property sector in which good returns can be made when all the fundamentals are in place.
“We have confidence in the retail property market and believe there is still room for growth and opportunities particularly in the townships,” adds Engelbrecht. - Denise Mhlanga
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