Developers of Waterfall City, Attacq Limited, concluded its financial year ended 30 June 2021 with an increase of 22.5% in distributable income from its South African operations.
The company’s liquidity improved to R1.7 billion at yearend, with group gearing decreasing to 43.3%.
The solid financial and operational performance was supported by a well-considered capital structure improvement programme and its disposal strategy.
With a high-quality South African real estate portfolio consisting of ‘retail-experience hubs’, ‘collaboration hubs’ (office and mixed-use), ‘logistics hubs’ (light industrial) and hotels, the company reported R2.8 billion of capital recycling to date and the proceeds from the disposals of the Deloitte head office, Massbuild distribution centre and the Amrod building, as well as its shares in MAS Real Estate, will be utilised in reducing interest-bearing debt and to improve its capital structure.
“It has been another year of flux for the real estate sector in South Africa – and across the globe. The Covid-19 pandemic continues to impact businesses and people alike, bringing with it a need for flexibility, forward-thinking and the imperative to understand client and customer challenges more deeply than ever before. While Attacq has remained focused on delivering on the financial and operational strategy, and we are extremely gratified to see this flow through in company performance. It is our team’s ability to roll with the punches and adapt at pace that has helped us keep moving forward so steadily”, commented Attaq CEO, Jackie van Niekerk.
While group distributable income reduced by 35.9% and no dividend has been declared for the 2021 financial year, the portfolio performed well against market expectations. Like-for-like rental income decreased by 0.5% (2020: decreased 4.8%); property expenses, excluding cost of sales of sectional-title units, decreased by 1.5% (2020: increased 2.6%) to R757.0 million (2020: R768.7 million); and net operating income on a like-for-like basis increased by 1.4% (2020: increased 4.2%). Furthermore, the completed portfolio maintained high collection rates and occupancy levels despite lockdown restrictions, and new high-quality clients were successfully secured for Waterfall City.
Attacq’s strong South African performance ensures it is well placed to weather an environment still being disrupted by the pandemic, technology innovations and shifting customer behaviours.
These innovations are something the company has been tracking closely for many years, using data to inform investment, product, and innovation decisions as it seeks to leverage the intersect between technology and people. With lockdown accelerating the shift by shoppers from in-store transaction-focused behaviour to online shopping, Attacq’s ability to augment customer engagement through an increasingly experiential proposition has been key to its successful shopper, resident, and tenant acquisition (and retention) strategies.
“The ability not just to embrace change, but to optimise for it is imperative for any business seeking sustainability in our dynamic environment. All over the world, consumer behaviour evolves as people demand more from their brands and their communities. The pandemic has seen a seismic shift in the need for connectedness in safe spaces – and Attacq has responded by creating retail-experience hubs. Here, we provide an optimised client mix – a space where people connect and benefit from on-demand services, collection points, and loyalty rewards,” adds van Niekerk.
The Mall of Africa completed its first five-year lease cycle at the end of April 2021 and management took the opportunity to optimise the tenant-mix by introducing 20 new brands, which included new-concept stores for HiFi Corporation and Clicks Baby, as well as Ted Baker, Hugo Red, and Nando’s, some of which were as a direct result of shopper requests.
Following the success of the luxury residential development, Ellipse Waterfall, and both buyers’ and clients’ interest in a precinct offering smart, safe, and sustainable community spaces in established nodes, Attacq has expanded the residential offering of Waterfall City by launching its latest residential development, The Mix. Sales achieved to date for The Mix surpassed expectations, despite being launched during Covid-19. Post year-end, Attacq welcomed their first apartment residents to the city, following the transfer of 196 Ellipse Waterfall units.
CFO, Raj Nana comments, “Our proactive financial strategy, including debt reduction initiatives, will continue to improve our gearing position – a key strategic focus over the past 18 months. Improved debt levels certainly aid our investment case and strengthen our capital position.”
Waterfall City continues to attract quality clients, resulting in a total 38 087m² effective GLA of new developments underway since year end. This included Vantage’s new data centre (11 785m²) and Cotton On’s head office and distribution centre (20 786m²).
While partial lockdown restrictions have been eased, they continue to bring a level of uncertainty into the operating environment. In addition, it is the unknowns around the vaccination roll out and the timing of the opening of the economy that prolong the need to proceed with prudence. Accordingly, the board has resolved not to provide guidance for the financial year ending 30 June 2022. Attacq is, however, seeing signs of improvement in the real estate sector and specifically in their business drivers.
Van Niekerk concludes, “Attacq’s approach of embracing and adapting to business disruption has built resilience into the portfolio and its prospects. We continue to seek enhanced prospects to strengthen our capital structure and create sustainable value for all – and we look forward to a new year of ambitious, exciting opportunities.”