High yield fo­cus in­tact

Sec­ondary space pay­ing off for Ves­ta­cor off­shoot

Finweek English Edition - - COMPANIES&MARKETS - JOAN MULLER joanm@fin­media24.com

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

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