Property Flash


JSE-listed Resilient Reit, the company that refuses to be interviewed by Alistair Anderson, the editor of Property Flash, disappointed in the year to end-December 2022, as its dividend fell 3.2% year-on-year.

The company’s board declared a dividend of 203.98 centres per share for the six-month period to end-December 2022. The total dividend for 2022 of 438.03 cents per share was 3.2% lower than the 452.73 cents per share for the previous 12-month period.

Resilient distributed 170 554 201 Lighthouse shares to its shareholders in May 2022. As such, no dividends from these shares were included in distributable earnings for 2022. Had Resilient retained these shares, the dividend would have been 3.8% higher than the comparable dividend, it said. But the results are disappointing in how Resilient should be pulling off dividend growth that is at least in line with prevailing consumer price inflation rates which sit at about 7%. Yes, loadshedding skewed its numbers but given that the fund is diversified beyond South Africa, into the UK and France, for example, one would expect more. Resilient’s South African assets are retail centres which dominate their respective catchment areas. Its 27 retail centres have a gross lettable area of 1.2-million square metres. These South African malls are worth about R26.2bn.

Resilient also has direct exposure to properties in France and Nigeria, valued at R1.8bn and R1.4bn respectively. The directly held South African, French and Nigerian assets are worth about account for 86% of Resilient’s asset base. Then, as much as 13.7% of its base is comprised of stakes in JSE-listed Lighthouse Properties and Hammerson plc. Lighthouse also owns a stake in Hammerson plc as well as directly owns malls in Portugal, France, Spain and Slovenia. Hammerson owns malls in the UK and Western Europe. Overall, Resilient’s asset base is worth R33bn.

In the year to end-December 2022, comparable sales growth of 9.4% was achieved from Resilient’s SA portfolio, compared with the year to end-December 2021.

Sales growth was enhanced through right-sizing, relocations and other tenant-focused initiatives.

Resilient said in a statement that it did not receive the full benefit of its strong trading performance because of the considerable costs associated with electricity loadshedding. The increased level of loadshedding resulted in additional diesel costs of R11.7m, as well as approximately R6.5m in additional maintenance costs relating to air conditioning and other electrical equipment. Without battery or full generator support, solar installations could not operate during periods of loadshedding.

Retail Property Investments SAS (RPI) owns four regional malls in France.

Resilient increased its interest in RPI from 25% to 40% at a cost of €34.5m (R579.7m) effective from August 31 2022.

The distributable earnings from the French portfolio were lower than forecast.

This portfolio was more severely impacted by COVID-19 restrictions than many other European countries with retail sales negatively affected. As a result, greater rental concessions and discounts were granted, Resilient said.

Advisory group Jones Lang LaSalle (JLL) advised Resilient that it was significantly reducing its operations in South Africa and was therefore no longer performing portfolio valuations. Resilient’s board then selected Quadrant Properties to perform South African valuations at December 2022.

“Resilient’s share of the positive revaluation of its South African properties was 4,2% or R1.02bn,” it said.

The French portfolio was valued by JLL and the Nigerian portfolio by CBRE Excellerate. Resilient’s share of the positive revaluation of the French portfolio was €3.2m and $3m for the Nigerian portfolio.

In terms of transforming how Resilient powered its assets, the group said it was continuing with its accelerated roll-out of solar installations. The previous regulatory restrictions and approval requirements were overridden by the President of South AFRICA, facilitating this acceleration.

The current installed capacity of 32.2MWp would increase to 43.5MWp by the end of April 2023 and to 57.2MWp by December 2023. At December 2022, Resilient produced 14.6% of its electricity consumption which would increase to 19% by the end of April 2023 and to approximately 25% by December 2023.

Resilient’s board was confident that Resilient would achieve its previous target to produce over 50% of its total electricity consumption by 2027.

Loadshedding limited the positive effects of solar installations without battery or full generator support. Two battery installations by separate companies were trialled and were operating within expectations, the company said.

Resilient’s malls all have backup generators, however, from both an environmental and cost perspective, these are only used when no other alternatives are available.

Resilient said in a statement that it would continue to address structural changes affecting retail properties, including right-sizing department stores and increasing exposure to grocery retailers.

Energy supply and cost had become a major variable in forecasting net operating income. Resilient was making strong progress in its solar and battery strategy which would increase certainty and price stability for its energy requirements, and that of its tenants. The distribution that Resilient would receive from its listed investments, particularly Hammerson, was uncertain, it said.

“Under these circumstances, distribution guidance is deferred. Resilient will, however, maintain its payout ratio at 100%,” it said.

But head of listed property funds at Stanlib, Nesi Chetty said Hammerson was tied to the UK market’s recovery.

“That portfolio should be slimmed down more. They sold some assets but should be doing more. Hammerson’s cost base is also inflated. Overall net costs should be coming down more aggressively as they have sold assets,” he said.

Property Flash has tried to interview Resilient but to no avail.

Resilient’s CEO and founder, Des de Beer, has refused to speak to Alistair Anderson since he covered the Resilient property scandal between 2017 and 2018. During this time, Resilient Reit was part of a stable, along with Fortress Reit, Lighthouse Properties which was then named Greenbay Properties and Nepi Rockcastle. These funds were accused by certain investment managers and analysts, of, among other things using related party transactions to inflate profits and dividends, as well as of manipulating share prices. They shared common directors and De Beer had had a hand in the formation of all four companies.

Fortress and Resilient had cross ownership structures in place and used charity trusts to manage their employee incentive share scheme. Fund managers freaked out and disinvested from the stable. Contagion effects saw investors flee listed property, and the sector lost more than R100bn of its value. Bearing in mind that fund managers largely invest pension money in listed property funds, and we can see that pensioners saw their wealth take a severe knock.

The stable was eventually cleared of any wrongdoing by the Financial Sector Conduct Authority, but it was clear that Resilient and its associates had used cross shareholdings and an array of financial engineering techniques, which were legal but not necessarily ethical to boost asset values and returns. The crossholdings were removed.

De Beer said Anderson wrote “smut” with respect to his group and never spoke to him again, blocking his cell phone number and ignoring his emails. His former financial director, Nick Hanekom, also refused to be interviewed by Anderson and his secretary, Ashleigh Egan also tried to limit Anderson’s access to Resilient.

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