Load-shedding weighs on Resilient
JSE-listed and retail-focused Resilient Reit recorded retail sales growth of 9.4% for the period ended December, driven by the rightsizing of tenant stores, relocations and other tenant-focused initiatives.
However, Resilient did not reap the full benefits of the strong trading performance during the reporting period as a result of increased costs associated with load-shedding.
“Additional diesel costs amounted to R11.7m with about R6m in additional maintenance costs relating to air conditioning and other electrical equipment,” the company said.
The real estate investment trust owns 27 assets in SA, where its strategy is to invest in dominant retail centres with a minimum of three anchor tenants, with others predominantly national retailers.
It holds a 40% stake in France Retail Property Investments, which owns four regional malls, and a 3.96% stake in JSE-listed Hammerson.
The company said loadshedding had limited the positive effects of solar installations without battery or full generator support. Resilient will accelerate the rollout of solar installations from installed capacity which peaks at 32.2MW to 43.52MW by the end of April 2023, and to 57.22MW by December 2023.
At the end of December, Resilient produced 14.6% of its own electricity, with this expected to rise to 19% in April, and about 25% by December 2023. The company is targeting production of more than 50% of its own electricity by 2027.
“Energy supply and cost has become a major variable in forecasting net operating income,” said the company. In a changing consumer environment, it continues to deal with structural changes affecting retail properties. These include rightsizing department stores, increasing exposure to grocery retailers as well as introducing relevant retail brands to its malls. “We are mindful of the challenging economic environment, hence will focus on investing in dominant retail centres with a high percentage of corporate tenants.”
During the reporting period, the SA portfolio recorded net property income growth of 6% excluding Covid-19 rental discounts granted in the prior year.
Vacancies fell to 1.7% following new leasing activity including the new Spar at Mams Mall.
In August 2022, Resilient increased its offshore stake in RPL from 25% to 40% at a cost of R579.7m.
Resilient said due to Covid-19 restrictions in Europe, greater rental concessions and discounts to tenants were granted.
This portfolio recorded a drop in retail sales resulting in a lower-than-expected distributable earnings forecast. Net operating income is forecast to be €8m (Resilient’s share) for the 2023 financial year and is expected to grow at 15%-20% annually during the 2024 and 2025 financial years.
For the interim period, Resilient declared a dividend of 203.98c per share. At the close on Thursday, its share price was down 0.50% to R48.07.