Alice Lane development in Sandton
The Pivotal Fund – one of a select few capital growth and development focused property counters – today reported outstanding net asset value growth in its first year as a JSE-listed company.
Pivotal is differentiated from Real Estate Investment Trusts (REITs) in the listed property sector as it focuses on creating sustainable value for its investors by achieving above average growth in the capital value of its portfolio through an extensive development pipeline and active management of its existing portfolio. (REITS are distribution focused).
The Fund reported a 25.3% growth in net asset value per share to R18.40 for the financial year ending 28 February 2015 (2014: R14.69).
Pivotal Chief Executive, Jackie van Niekerk commented: “We are very pleased with the growth that the portfolio has delivered over the past year.
“These results were driven by the culmination of several key developments as well as acquisition activity, following our successful listing on the JSE in December last year where we raised R1 billion by way of a private placement.”
During the year under review, the Fund acquired properties to the value of R6.4 billion, including income-producing properties valued at R2.9 billion such as the Goldfields Mall in Welkom and Lakeview Office Park in Constantia Kloof and a R600 million current and future development pipeline which includes the remaining 80% of the Alice Lane development in Sandton.
In addition, Pivotal has entered into a memorandum of understanding to acquire a 37.1% shareholding in a development in Lagos, Nigeria valued at US$104 million, subject to certain conditions precedent being met.
These acquisitions increased Pivotal’s portfolio of A-grade retail and commercial offices to 40 assets, independently valued at R9.3 billion at year end.
Pivotal’s strategic development pipeline increased to 445 000 m2 with an estimated value of R5.7 billion on completion. It should be noted that Pivotal’s policy is to value properties under development (including land) at cost until the fair value can reliably be measured. At that point the cost plus the present value of the development margin is recognised on a percentage completed basis.
The acquisitions were funded by a combination of new shares issued prior to listing, additional borrowings, a R200 million rights offer and the R1 billion placement raised at listing on the JSE.
During the year under review, Pivotal renegotiated debt facilities totaling over R3 billion, resulting in a reduction in the overall weighted average cost of debt to 9.4% (2014: 10.2%). The Fund’s current loan-to-value is 47% with 87% of borrowings fixed for an average period of five years.
Jackie van Niekerk concluded: “As a development fund we strive to maintain an above average compounded growth rate. Our portfolio consists of premium assets which are continuously maintained and enhanced, resulting in exceptionally low vacancies and long lease terms.
“Notwithstanding these defensive attributes, property development by its very nature is a longer-term play and growth in respect of specific years can vary to an extent. Our focus is on long-term value creation through the successful completion of existing developments and the on-going roll-out of our 445 000m2 development pipeline, which is situated in prime locations across the country.”