Johannesburg - Pivotal, the development-focused listed property fund, is making steady progress with its diversification strategy, which is aimed at increasing the property fund’s international investment exposure.
The fund last month entered into a share sale agreement and a co-investors agreement with listed Redefine Properties to acquire about 6.06 percent of Echo Prime Properties for e31.07 million (R545.39m). This follows Redefine in March concluding an agreement to acquire 75 percent plus one share of the issued share capital of Echo, which owned a portfolio of 18 properties in Poland, for e1.2 billion.
Read: Pivotal set to co-invest with Redefine
In the year to February, Pivotal entered into an agreement with Mara Delta Property Holdings, previously Delta Africa, to incorporate its rest of Africa investments into Mara Delta and invest up to R370m in the company. During the year Pivotal completed its first investment into Mara Delta by way of a subscription of about 2 million shares in Mara Delta at a cost of $3.41m (R53.52m).
Jackie van Niekerk, the chief executive of Pivotal, said yesterday that they were excited about the Echo transaction as part of the fund’s diversification strategy.
Van Niekerk said Echo had in-country knowledge and the portfolio comprised prime shopping centres and offices with solid property fundamentals. She said the effective date of the transaction was May 31.
Sluggish growth
Van Niekerk said the Mara Delta Property Holdings transaction also gave Pivotal the benefits of diversification of risk through its ownership of a spread of quality income producing investments and quality development opportunities.
She said Pivotal anticipated that sluggish economic growth in South Africa and internationally, coupled with high volatility in financial markets, would continue.
“Our risk mitigation by way of conservative borrowing and interest rate hedging policies, quality income producing assets and development pipeline, as well as an increasing international investment exposure, places Pivotal in a strong position to weather the storm in these uncertain times.”
Pivotal yesterday reported a 24 percent growth in net asset value a share to R22.80, excluding deferred tax in the year to February, from R18.40 in the previous year.
Net rental income increased to R739.2m from R472.1m. Headline earnings a share grew by 125.5 percent to 106c from 47c.
Pivotal attributed the growth in its net asset value a share to the revaluation of the income producing properties, fair value adjustments on developments and financial instruments, an increase in net working capital and gains on foreign currency translation.
Pivotal’s directly owned property portfolio was valued at R11.3bn at end-February and its indirectly held assets at R1.2bn. It has borrowings of R5.8bn, which represents 45.8 percent of the property portfolio value including its indirect property investments.
The fund acquired properties and strategic land for development valued at R494m and also concluded the purchase of a 37.1 percent share in the Oando Wings Office development currently under construction in Nigeria, its first asset in the rest of Africa.
Van Niekerk said Pivotal had a secure long-term development pipeline that was further bolstered with the acquisition of additional development land to the value of R494m.
“The conversion of our secured pipeline to current development commenced at Loftus Park mixed-used development phase one, Kyalami Corner shopping centre phase one, Hill on Empire building A, as well as the redevelopment at Wonderboom Junction,” she said.
Shares in declined 5.71 percent to close at R16.50.
BUSINESS REPORT