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Waterfall City developer Attacq beats dividend forecast

The only listed property fund to post double-digit dividend growth in current reporting cycle.
Deloitte Africa’s new R1.4bn head office, the latest addition to Gauteng's booming Waterfall node. Image: Supplied

JSE-listed real estate investment trust (Reit) Attacq reported a sector-topping performance on Tuesday for its half-year to the end of December 2019, with dividend per share (DPS) growth of 11.1%.

While the double-digit growth comes off a low base, the fact that it also beat its dividend guidance for the interim period saw Attacq’s share price surge more than 6% by the JSE’s close on Tuesday. The group declared a dividend of 45 cents per share for the period.

Attacq, which is the master developer driving the multi-billion-rand Waterfall City precinct in Gauteng and a majority shareholder in Mall of Africa, had forecast DPS growth of between 8% and 10% for its half-year.

Now the group is forecasting full-year dividend growth at the upper end of its target. Attacq CEO Melt Hamman sounded confident at the group’s results presentation that it will deliver double-digit growth of 10% for its 2020 financial year to June.

Attacq CEO Melt Hamman, speaking during the group’s interim results presentation at the JSE on Tuesday. Image: Supplied

“This is an excellent set of results and that’s what we are going to focus on … We know about all the bad news related to the economy, but Attacq clearly defied market conditions on the back of the strength of our Waterfall City development,” he told Moneyweb.

Read: Rosebank and Waterfall surpass Sandton in office construction activity

“Attacq’s core distributable earnings per share increased by 23.9% to 49.8 cents per share. However, we decided to declare a dividend of 45 cents per share and retain the balance to fund capital expenditure … This equates to a payout ratio of around 90% for the period,” he added.

Hamman pointed out that the group also excelled on several other key operating metrics, with overall retail trading density growth of 5.7%, its overall SA property portfolio having a 94% occupancy level, rental escalations of 7.2%, and collections at 98.8%. Rental reversions, however, was down 7.5%.

Attacq chief operating officer Jackie van Niekerk said the group’s flagship property, Mall of Africa, delivered impressive performance with trading density growth of 10.1% and footfall increasing by almost a million shoppers to 16.4 million annually.

“The growth comes as a result of the densification of Waterfall City, but also through new retailers at Mall of Africa such as Pick n Pay, Pep, Dealz, Exclusive Books and Yuppiechef among others. The mall is 98.8% occupied from a letting perspective,” she added.

Just last week, Liberty Two Degrees, which runs the competing Sandton City shopping centre, reported trading density growth of 9%. However, with Sandton City being an established centre attracting some 24 million shoppers annually, its trading density now stands at almost R5 000 a square metre.

Read: Sandton City delivers for Liberty Two Degrees

Even with the growth at Mall of Africa, its trading density came in at just under R3 300 a square metre to the end of December 2019.

The Waterfall precinct remains a key driver in Attacq’s core business. During the period, six buildings spanning some 18 642m² of new space were completed. Another six buildings are currently under construction, including the high-rise Ellipse Waterfall residential development and City Lodge’s new 168-room Courtyard Hotel adjacent to Mall of Africa.

Deloitte’s landmark new head office building, developed by Atterbury but co-owned as a 50/50 joint venture with Attacq, reached practical completion on January 31. The six-storey, 42 500m² office building will welcome about 3 200 new employees as of April 1, further boosting the Waterfall node and footfall to Mall of Africa.

Listen: Louis van der Watt on 25 years in property

Commenting on Attacq’s results, Craig Smith of Anchor Stockbrokers says what stands out is the strong performance of Mall of Africa. He notes that trading density growth across Attacq’s retail portfolio has been pleasing, but was largely attributed to the group’s 131 000m² super-regional mall anchoring Waterfall City.

“This supports the fact that the Waterfall node is starting to reach critical density,” he adds. “Further office developments under construction should continue to support footfall and retail spend within the node, specifically activity during the week.

“There is a substantial development pipeline and management is going to have to manage the company’s capital structure in order to roll out further developments at Waterfall.”

Read: SA Reit sector worst performing asset class again in 2019

Keillen Ndlovu, head of listed property funds at Stanlib, said Attacq has bucked the trend and is the top-performing SA Reit from a DPS growth outlook perspective.

“It is a well-managed fund with new buildings, long leases, low vacancies and lower debt levels compared to the market. Most importantly, the key asset, Mall of Africa, continues to do better and better,” he noted.

Listen to Nompu Siziba’s interview with Attacq CFO Raj Nana:

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45c dividend but share price fell 500c in past year. Am I missing something?

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