Attacq slashes debt, but still no dividends

Latest property counter not to declare an interim dividend, together with the likes of Hyprop and Fortress.
CFO Raj Nana says the key focus for Attacq over the last 18 months has been to reduce debt and strengthen its balance sheet. Image: Supplied

JSE-listed real estate investment trust (Reit) Attacq has slashed its debt by 15.4% to R8.6 billion and increased distributable income per share by 33.6% for its half-year ended December 31 2021. But the group is still not declaring dividends.

This is reflected in its latest interim results, published on Monday.

Attacq did not declare dividends for its full-year to the end of June 2021, due to the Covid-19 financial fall-out and trade restrictions, which saw the group and most of its peers being forced to offer millions of rands in rental relief to hard-hit tenants.

Read:
Mall of Africa owner Attacq declares no dividend, but will retain Reit status
Attacq to add R500m micro apartments development to Waterfall City mix

The group is continuing to take a cautious approach, opting not to pay out an interim dividend and instead bolstering its balance sheet. This is despite the recovery in distributable income.

Attacq last paid out an interim dividend of 45 cents a share for its half-year ended December 2019, which was effectively “pre-Covid”.

“The board of directors has elected to take a conservative approach to capital management and has therefore resolved not to declare an interim dividend for the six months ended 31 December 2021,” Attacq said in its short-form interim results Sens statement.

Reasons

Attacq CEO Jackie van Niekerk told Moneyweb during a results presentation that the conservative move is due to “ongoing global economic uncertainty” and also aimed at “ensuring long-term sustainability” for the group.

However, Attacq CFO Raj Nana intimated that the group is looking to pay out some sort of dividend at year-end. He said during the presentation that Reits can pay out their dividends within four months of a group’s year-end in order to retain their Reit status.

Waterfall City, Mall of Africa, Attacq

Waterfall City in Gauteng, Attacq’s flagship property and development which is anchored by the Mall of Africa. Image: Supplied

Attacq is not the only SA Reit to withhold an interim dividend in the latest reporting season.

Last week both Hyprop and Fortress announced they would not declare interim dividends. However, industry majors Growthpoint and Resilient continue to pay half-year dividends.

Read: Growthpoint ups interim dividends

Reducing debt

Nana stressed that the key focus of the group over the last 18 months was to reduce its debt and focus on its capital structure in order to bring down its gearing or loan-to-value (LTV) ratio below the 40% mark.

This was one of the key positive features of the group’s latest results, with Attacq reporting that it had cut its LTV ratio down to 38% at the end of its latest half year (December 2021), from 46.3% at the end of its comparative half year (December 2020).

“Our improved gearing is attributable to the group’s total interest-bearing borrowings declining 15.4% to R8.6 billion, compared to R10.2 billion during the comparative period,” said Nana.

“The group maintained a strong liquidity position of R1.8 billion as proceeds from disposals executed during the period under review were deployed to pay down and reduce debt,” he added.

Nana pointed out that Attacq had in fact sold more than R2.8 billion in assets over the last 18 months to bring down its debt and LTV in the face of the Covid-19 storm.

Most of this was realised through Attacq’s significant sell-down of its major stake in European-focused MAS Real Estate. Pre-Covid, the group held more than 20% in MAS, but currently Attacq’s stake stands at around 6.5%.

Read:
Waterfall City developer Attacq has now sold over R1.2bn in MAS
The PIC is on the commercial property acquisition trail
Debt strain forces Attacq to sell further R388m MAS stake

Van Niekerk and Nana reiterated during the results presentation that the group does not plan to sell further stakes in MAS anytime soon, especially since MAS has returned to paying out dividends.

Nana said the notable increase in Attacq’s distributable income per share to 28.2 cents (excluding profit earned from the sale of residential units at Waterfall City of 9.35 cents per share) was mainly driven by the dividend received from its investment in MAS, valued R46.1 million.

Listen: Attacq’s former chief development officer Giles Pendleton speaks about the roll-out of the Waterfall City development

“It proves that our decision to hold the remaining 6.5% in MAS was a prudent one, as the investment delivered capital growth and dividend income for the reporting period.”

Analyst’s comments

Commenting on property counters such as Attacq and Hyprop not declaring interim dividends, Reitway Global chief investment officer Garreth Elston said it makes sense considering that many Reits are still under pressure even in 2022.

“We have not been too surprised by the reality of several SA Reits remaining under financial pressure that has resulted in them not paying interim distributions,” he said.

“The reality on the ground is that South African businesses and consumers remain under pressure, and the increases in inflation plus the increases in interest rates do not bode well for any real improvements.”

Another property sector analyst (who did not want to be named) said that in Fortress’s case, the group’s non-payment of an interim dividend is “obviously linked to the resolution which was proposed and not passed” on March 18. This resolution related to proposed changes to the group’s A and B share structure.

“In the other Reits that are not paying interim dividends, I think it’s partly linked to managing liquidity and balance sheets, especially in light of there still being uncertainty and heightened volatility in the markets,” he added.

“There is no [JSE] requirement for Reits to make interim payments … My sense is that the lower-leveraged companies will continue to declare interim divis as the market will mostly likely prefer this, but perhaps it is a gradual transition to lower adoration of interim divis,” he said.

Listen to Attacq’s CFO speaking to Fifi Peters on its interim results: 

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How can the likes of Attacq, like all the other REITS be a REIT if it does not distribute dividends???

REIT no more.

Like all the other REITS that own regional retail malls, with 70% of their tenants being the worst ESG offenders on the planet – fast fashion, Attacq cannot claim to be anywhere close to being a sustainable developer. If it wants to ‘eye green projects’ it needs to eliminate tenancy to ESG offenders. or risk being labeled a sustainability hypocrite.

End of comments.

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