JSE-listed township and rural retail-focused property fund Exemplar REITail is continuing with its expansion plans in the face of the Covid-19 pandemic.
The Pretoria-based group, which on Friday posted a “healthy set of interim results” for its half-year ended August 31, also announced the acquisition of a majority 50.1% stake in the new Mall of Tembisa.
Set to open later this month (November), the 44 809m2 shopping centre is valued at more than R1.4 billion, with Exemplar’s stake valued at R726 million.
Exemplar is a tightly held real estate investment trust (Reit), largely controlled by the McCormick family. It has a current market capitalisation of more than R3.1 billion.
While the Mall of Tembisa acquisition is a related party transaction with its development partners McCormick Property Development Proprietary Limited (MPD), the fund also revealed plans for construction to start on another greenfields retail development – Mount Frere Mall in the Eastern Cape.
“The final quarter of the year holds a number of opportunities for us,” says Exemplar CEO Jason McCormick.
“While the [Mall of Tembisa] deal is still subject to JSE and Competition Commission approval, we are confident that this will be a phenomenal addition to the Exemplar portfolio.”
He adds that the Mount Frere Mall development “marks the evolution of Exemplar’s acquisition strategy”.
“While our initial strategy was to only acquire completed, income-producing properties, this project sees our involvement from the development stage, with the view to delivering greater returns for our shareholders.”
The fund’s continued expansion comes as rural and township malls are performing better than urban and super-regional centres.
This is despite Covid-19’s impact on the economy and broader retail sector.
According to its JSE Sens statement on the Mall of Tembisa deal, the total purchase consideration for the stake is just over R78.5 million. This will be settled through the issue of 7 262 921 new ordinary Exemplar shares to MPD.
“Exemplar has entered into an agreement with MPD to acquire 50.1% of the issued shares in Devco [Mall of Tembisa Pty Ltd], in addition to the claims on loan account in excess of R632 592 052 which MPD has against Devco, for the consideration [the ‘acquisition’], and with effect from 20 November 2020 [the ‘effective date’],” it notes.
Exemplar declared an interim dividend of 35.96 cents per share on Friday. This is despite what it noted as a “challenging year that has seen the retail sector facing unprecedented headwinds”.
Its dividend per share (DPS) for the half-year included net asset value per share growth of 10.82 cents. However, DPS fell 7.81 cents or 17.8% against its comparative interim period.
The group paying an interim dividend is noteworthy, considering that most of its JSE-listed peers are deferring dividend payouts to the end of their financial years or opting for a payout ratio.
“While these are not the results we anticipated, we are still immensely proud of what the company has achieved in this difficult economic environment,” says McCormick.
“No one could have predicted the challenges we would have to face in 2020 but we have managed to maintain the growth of the portfolio and ensure the job security of our employees.”
Exemplar, which currently owns a portfolio of 22 retail assets across five provinces, provided rental assistance to the value of R28.5 million during the period. In addition, it has provided for “doubtful debt” of R12.3 million to cover potential tenant arrears.
“These extraordinary amounts have reduced profit and distributions by R40.8 million,” the group points out in its results presentation.
The rental relief and bad debts provision equated to 12.55 cent per share. “The current distribution would have been 10.8% up on the corresponding prior year distribution,” the presentation adds.