Attacq Limited – developer of the expansive Waterfall City precinct in Gauteng and once the biggest shareholder in European-focused MAS Real Estate – has had no option but to sell a further MAS stake in a deal worth just under R388 million to bring down the group’s burgeoning overall loan-to-value (LTV) or gearing level.
The group announced the sale last week to PKM Development Limited, just days before Attacq brings out its latest financial results for the half-year to the end of December 2020, expected on Tuesday morning.
It comes less than three months after Attacq sold a R500 million stake in MAS to a group owned by the Oppenheimer family.
This means Attacq has slashed its MAS stake by almost half in the few months. Before the sales, Attacq had a 20.7% stake in MAS, which was valued at around R1.9 billion and made it the biggest single shareholder in the Isle of Man-based group.
The sales come in the face of the ongoing Covid-19 economic fallout, which has seen big devaluations of Attacq’s South African portfolio, as well as its rest of Africa and MAS investments.
These devaluations have contributed to the group’s LTV ratio hitting 45.7% at the end of its last financial year (ending June 2020).
However, with Attacq revealing in a pre-close presentation in early December that it had received an increase in its bank covenant levels from 49.2% to 60%, the group’s LTV may well have worsened.
With Covid-19 also causing headaches for Attacq’s planned disposal of its remaining, poor-performing rest of Africa assets (owned jointly with Hyprop), the group seems to have been forced to sell down its MAS investment by more than R880 million in order to bring down its overall debt and LTV ratio.
Attacq made no mention of plans to sell its stakes in MAS during its last financial results announcement (for the full year ending June 2020).
Listed property sector analysts and fund managers, who prefer LTV levels below 40%, will be keenly watching where Attacq’s latest LTV stands when the group releases it interim results.
At its pre-close, Attacq said the group’s interest-bearing debt by the end of September 2020 stood at just under R11.2 billion.
The group’s main South African property portfolio is valued at more than R20 billion.
However, its market capitalisation on Friday was just under R4.8 billion. This shows that the company is trading at a massive discount to its net asset value.
Attacq’s share price lost just over 2.6% on Friday, closing at R6.35.
However, the stock is up more than 30% since the start of the year and almost 4.3% firmer over the last 12 months.
The real estate investment trust (Reit) is not expected to pay out interim dividends for the six-months ending 31 December 2020, as per previous Sens updates on the JSE.
In its latest trading update published earlier in March, Attacq advised the market that distributable income per share (Dips) for the interim period will be between 55% and 60% lower than the Dips for the six months ended 31 December 2019.
The group listed the following as reasons for the expected decline in its Dips:
- South African Portfolio – a decline of between 19.5% and 24.5%, mainly due to discounts provided to support tenants impacted by Covid-19 (prior period income: R238.3 million)
- Developments at Waterfall – a decline of between 5.5% and 10.5%, mainly due to an increase in holding costs on the Waterfall leasehold land (prior period income: (R17.3 million)
- Investment in MAS – a decline of between 114% and 119%, mainly due to not receiving a dividend during the interim period (prior period income: R117.1 million); and,
- Rest of Africa retail investments – a decline of 100%, due to not receiving any cash income from the company’s investments into the rest of Africa (prior period income: R12.1 million).
The Reit noted, however, that its available liquidity “was in excess of R1.3 billion” as at 31 December 2020. This comprised R1 billion in cash and R310 million of undrawn committed liquidity facilities with banks.