Property Flash


Finally, Safari Investments’ long-suffering investors will be rewarded handsomely with a liquidity event and enhanced management, when Heriot takes over the retail centre owner. Heriot’s cash offer of R5.60 per Safari share makes sense for Safari’s variation of investors.

Safari was incorporated in 2000 and listed on the JSE in 2014, when its founders looked to benefit from its real estate investment (Reit) status.

Property developers and landlords wanted to become Reits in order to get access to capital during a real estate listings boom. Pension and other fund managers were eager to invest in real estate companies and were attracted to the Reit dispensation.

In terms of SA’s corporate law, each Reit is required to pay out a minimum of 75% of its distributable income as a dividend each year. Most South African Reits paid out 100% of their income as a dividend and were judged on their ability to grow dividends.

Investors would therefore enjoy growing dividends every financial year and the management teams of the Reits themselves were happy as these dividends were taxed in the hands of the shareholders.

But Safari has under-performed with its share price falling 14.29% over the past five years. After other companies tried and saw their takeover efforts thwarted, Heriot is ready to take the reins. Heriot has already improved corporate governance at Safari and will enhance the capacity of the Reit to develop or acquire assets.

Steven Herring founded Heriot in 1998 and gradually developed a portfolio over the next 20-plus years. In 2003, Herring put a team of professionals together and started constructing retail shopping centres, focusing on CBDs, rural and township areas. 

He listed Heriot as a Reit on the AltX of the JSE in 2017 and has grown its asset base through the development and acquisition of yield-enhancing assets that offer consistent long-term rental income growth. Today, Heriot’s diversified portfolio of retail, industrial, office and specialised properties in SA is valued at R4.625bn.  

Heriot’s portfolio includes impressive township-based retail centres. It owns half of Tsakane Mall in Brakpan, Score Itsoseng in the North West Province, Shoprite Fish Hoek centre in Cape Town, and Birch Acres Mall in Tembisa, as well as a number of other centres.

The fund first indicated that it recognised value in Safari when it invested in them in 2020, just before the hard lockdown.

Since then, Heriot has gradually built its stake in Safari. Heriot Properties is the offeror in the Safari takeover and is a wholly-owned subsidiary of Heriot. It and two concert parties, Heriot Investments Proprietary Limited and Reya Gola Investments Proprietary Limited, hold 102 851 903 shares in Safari, being 33.1% of all shares in issue

Heriot’s CEO Steven Herring also joined Safari’s board and is now its non-executive chairman.

In the past, some dissenting blocks of shareholders shot down takeover offers. Some of these people were Safari executives who were involved in related-party deals.

Should Heriot’s takeover offer succeed, it intends to keep Safari’s existing management onboard. Three of Safari’s assets are up for sale: a hospital in Soweto which is vacant as its tenant went bankrupt, Mnandi Mall in Atteridgeville, Pretoria and Platz Mall in Swakopmund, Namibia. These three assets are worth R400m combined.  

Safari’s company performance has improved since SA got through the worst of the Covid-19 pandemic. The Reit will pay out all of its distributable income as dividends in its 2022 financial year, versus the 91% of distributable income it paid in its 2021 financial year.

The company expects distributable income to grow between 2% and 6%, as South Africans battle through a high inflationary environment.

A combined Heriot and Safari would have an asset base worth R8.5bn and a market capitalisation of R5bn, making it one of the mid cap property stocks on the JSE.

For investors seeking a liquid property stock with growth potential and defensive assets, Heriot Reit may start to stand out among the rest of SA’s real estate stocks. 

Picture: Platz am Meer, Namibia

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