RDC PROPERTIES STUCK WITH VACANT SPACES

RIt should be borne in mind that the Tower portfolio was acquired at a significant discount, which provides us with some flexibility in considering the future use of certain properties and or their disposal

DC Properties considers disposal of some properties as it recorded increase in vacancies during the past two years due to the impact of the pandemic, and the work from home strategies adopted by large office users as well as the economic slowdown.

The company recorded an overall vacancy rate of 12.6 percent in 2021 and the most affected properties are the South African market which reached an all-time high of 16 percent in the last quarter of 2021, representing available space of 3 000 000 m2.

For his part, in the company’s 2021 annual report, RDC Properties Chief Executive Officer, Jacopo Pari said the vacancy rate of 12 percent is below the South African national average for offices of 16 percent in the last quarter of 2021 but never the less remains a key focus for management, as they are embarking on optimising and repurposing distressed assets. He said in addition, whilst the Tower portfolio arrived with negligible vacancies in its Western Cape and Croatia holdings, there are significant vacancies in the Gauteng office portfolio, a region hardest hit by effects of the pandemic. “It should be borne in mind that the Tower portfolio was acquired at a significant discount, which provides us with some flexibility in considering the future use of certain properties and or their disposal.” Capitalgro Chairman, Gary Fisher pointed out that the portfolio has continued to be hampered by vacancies, notwithstanding 25 new leases and an additional 13 renewals having been concluded during 2021. Our vacancy factor of 13.9 percent of Gross Lettable Area, inclusive of the committed space at Westlake, is a key metric in the portfolio’s underperformance. He highlighted that whilst ratios tell a story, the reality is that the construction boom of 2007-2017 has contributed significantly to the glut of available office space. “This will correct over time – the development activity is substantially the lowest it has been since 1995, with some 68 000m2 under construction (compared to the heady heights of 3 500 000m 2 in 2015), almost all of which is taking place in Johannesburg. The Cape Town Metro vacancy ratio of 13.6 percent, whilst below the national average, nevertheless highlights the competitive nature of a tenant driven market.” However, in Botswana market, RDC properties experienced resilient business operation as collections for the year stood at 96 percent, including some P8.5million of rental converted to long term loans to assist tenants with liquidity and enable them to trade out of this crisis. RDC Properties Group Chairman, Guido Giachetti said the hospitality assets were under continued pressure and underperformed through the lockdowns and travel restrictions. “Encouragingly our key leisure asset, Chobe Marina Lodge, enjoyed good trading conditions through Q4 2021. The Protea Hotel by Marriot, Masa Square faced challenging trading conditions and a prolonged recovery.” He said the hospitality teams are working tirelessly to contain costs, maintain standards and protect the value of these key assets, while upgrading the premises and the offerings to intercept the new travelers.