Heriot is the suitor which Safari needs to succeed in 2023 and beyond
Heriot Reit, the property group founded in 1998 remains on a mission to buy out Safari Investments and make the retail landlord into a greater success. Since 2020, Heriot has built up an impressive stake in Safari. Heriot’s CEO Steven Herring says Safari now owns well-located retail centres which will align strategically with Heriot’s asset base.
Herring explains that Heriot has a strategic plan in place to take Safari to a higher level of performance. The plan includes re-letting a hospital that Safari owns. The previous tenant went bankrupt. Heriot also wants to help Safari to sell certain non-core assets, including Mnandi Mall which is too small an asset for a listed fund to own. It recently sold Platz am Meer in Swakopmund, Namibia. Platz am Meer didn’t fit into Safari’s investment strategy of owning malls in semi-urban areas, townships and other underserviced areas.
Then Safari will be able to pay dividends to its shareholders again.
Herring says he is confident that Safari can sell these assets at close to book value despite a challenging market. He also says that should Heriot succeed in taking over Safari, they will help to grow Safari’s portfolio through various strategies including developing land in Lynwood, Pretoria.
“We have a strong young team at Safari and we are excited about a partnership. Heriot’s team will continue to encourage Safari’s young talent and to steer it in the right direction,” says Herring.
Heriot has made cash offer of R5.60 per Safari share, which it doesn’t already own, which makes sense for Safari’s variation of investors. The offer expires on Friday December 9.
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 underperformed and battled to get momentum into its share price. After other companies tried and saw their takeover efforts thwarted, Heriot remains ready to take the reins. Heriot has already improved corporate governance at Safari and will enhance the capacity of the company to grow and generate returns for its investors.
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 is non-executive chairman at Safari. Heriot Investments and its related parties: Heriot Reit and Reya Gola Investments have a 37.49% stake in Safari.
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