High yield focus intact
Secondary space paying off for Vestacor offshoot
NEW KID on the JSE’s real estate block – Vividend Income Fund – appears to be making steady progress in bulking up its portfolio with smaller, high-yielding properties. The fund listed on 18 November last year with only two Johannesburg properties in its portfolio, worth collectively around R190m: West Rand shopping centre Clearwater Crossing and an office block in Owl Street, Millpark.
Vividend CEO Ari Jacobson says management has since done deals to acquire another eight properties for around R700m, which include retail properties Rynfield Shopping Centre (Benoni, on the East Rand) and the Beaufort West Shopping Centre (Western Cape), plus office blocks in Pietermaritzburg, Tyrwhitt Avenue (Rosebank, Johannesburg) and Beyers Naudé Road (Blackheath, Johannesburg).
Jacobson says there’s still plenty of good quality stock coming to the market in the R30m to R100m price range at attractive yields of between 10,5% and 11%. The big listed funds are sellers of those assets for structural reasons and small, private players can’t afford to buy in the current market, where bank loans are tight. Says Jacobson: “Clearly, we’re playing in the right space.”
Jacobson is confident assets can be grown to around R2,5bn over the next two years. However, a major frustration is the lengthy delays to get properties cleared through Cipro and the Deeds Office. “It takes forever for acquisitions to be transferred, which has a negative effect on net rentals generated by the portfolio.” Jacobson says that’s fortunately been offset by higher interest earned on money market investments over the interim period.
Vividend’s recently announced maiden interim distribution per linked unit of 9,96c for the six months to end-February this year is in line with forecasts made in its prospectus. More encouraging is the fact that no reversions, vacancies or defaults were experienced over the sixmonth period.
Jacobson says the fund is on track to deliver a forward yield of 10,5% to 11% over its next financial year (12 months to end-August 2012), which is considerably higher than the current 12-month forward yield of around 8,6% offered by the sector as a whole. Says Jacobson: “Vividend isn’t a short-term capital growth play but will deliver above market income returns over the longer term.”
Vividend is the brainchild of (among others) Bruce Rubenstein, CEO of venture capitalist Vestacor, which owns stakes in Retail Africa as well as retailers Stuttafords, Look & Listen and WM Spilhaus. Vividend is backed by an interesting bunch of asset managers, including prominent value investor and founder of Regarding Capital Management (RE:CM) Piet Viljoen. Element Investment Managers and British-based Credo Group, which invest primarily in property in Britain and Europe on behalf of high net worth SA investors, are other major shareholders.
ARI JACOBSON Clearly, we’re playing in the right space