RDC erects memories across Africa
BG KOOBONYE RAMOKOPELWA,
Brick by brick, RDC Limited, the BSE listed property group has mounted assets in 8 countries in Africa. Despite setbacks brought by the COVID- 19 pandemic, the homegrown group is buoyant. In fact, the RDC is gunning for more property landmarks in the continent. In this candid interview, CEO Jacopo Pari tells Staffer, why it is worthwhile to put on a Penny on the company.
BOTSWANA GUARDIAN: How is RDC surviving the COVID- 19 pandemic, which has affected most, if not all, sectors of the economy in Botswana and beyond?
JACOPO PARI: I am pleased to report a year in which our senior management, both in Botswana and South Africa, maintained a considered and calm attitude during this unprecedented crisis. During the year under review, all our business units maintained a close contact with tenants, financing partners and all of our stakeholders. The dedication and hard work of the employees of our hotels, supported by shareholders, has protected and safeguarded our hospitality operations.
The immediate concerns for the Group were the preservation of value and liquidity, keeping tenants and visitors safe and complying with the new Governments’ health protocols, as well as availing at subsidized rates, our hospitality premises for the quarantine of the returning Citizens. We will continue to prioritize the health and safety of our staff and tenants in the face of the pandemic and work with our communities to mitigate the impacts of Covid- 19.
Overall, the year to 31 December 2020 was a year characterized by the pandemic. Some of the major impacts to our group included a hard lockdown which impacted mainly on the tourism/ recreational sector within the portfolio. Our blue- chip commercial tenants proved resilient. The impact has been mitigated in different ways in the jurisdictions where we operate in. Our exposure to small retail/ commercial units is limited so the impact has mainly been on hospitality. Our cash flows have been tested and the group has demonstrated its strong balance sheet and managed to retain value in this exceptional environment.
GUARDIAN: RDC Limited owns some properties which are exposed to the hard- hit tourism sector. How are you managing this impact?
PARI: The dedication and hard work of the employees of our hotels, supported by shareholders, has protected and safeguarded our hospitality operations while providing additional subsidies, over and above those from governments, to staff and management during the worst of the period. A well- diversified portfolio has proven to be resilient under the prevailing circumstances and we took advantage of the low occupancy of Chobe Marina Lodge to complete a revamp of the Lodge, which now boasts newly renovated and revitalized facilities. The Group’s prudent regional and sectoral expansion has set a strong basis for continued growth and we stand ready to take advantage of the inevitable rebound in the market.
Our Protea Hotel by Marriott Masa Square Hotel was one of the first hotels in Botswana to partner with Government as a quarantine site at the advent of the pandemic in Botswana. Chobe Marina Lodge followed as soon as the need became apparent in the Kasane area too. Through this partnership, we played our role as a good corporate citizen and lived up to our commitment to making a positive impact in society, even within the midst of a pandemic. This enabled us not only to play our part in fighting the Covid- 19 scourge, but kept our doors open and thus provided a sense of hope and purpose to our staff and the community alike.
GUARDIAN: How are RDC properties performing in Botswana amidst lockdowns, economic growth challenges, reduced disposable income, among others?
PARI: The year 2020 was defined by the outbreak of the Covid- 19 pandemic which posed a significant challenge to the economic environment. Botswana’s economy contracted by an estimated 7.9percent against a 3.0percent growth in 2019, as the Covid- 19 lockdowns and other movement restrictions constrained economic activity. Notwithstanding some signs of recovery, it is apparent that the effects of the pandemic will endure for longer than originally anticipated and as a result, some companies and industries will have to adapt to survive and ultimately, to recover. Our prompt evaluation of the effects of the global pandemic on our industry and Group of companies, our cash flow generating capabilities as well as the Group’s limited gearing, lines of credit available and cash reserves have all helped us to weather the storm. The Group’s prudent regional and sectoral expansion has set a strong basis for continued growth. Currently, we are active in 6 countries: Botswana ( 22 properties), South Africa ( 8 properties, 1 development project), Mozambique ( 2 properties and 1 development project), Madagascar ( 1 property), USA ( 1 property investment, 1 development investment) and Namibia ( 3 projects)
The Group’s rental income is predominately denominated in BWP and ZAR, with part of its revenue from rental and investments in EUR and USD which have so far proven to be a good mix to mitigating the fluctuations of foreign exchange rate and reduction of currency risk.
GUARDIAN: Amidst all the uncertainty that currently engulfs us, what opportunities lie ahead for the group?
Pari: The strength and support of our unitholders and the depth of our management team has enabled us to apply our minds to different opportunities emerging from the ‘ once in a lifetime’ dislocation of the property sector. The Board of Directors has considered various cross- border acquisitions, which after the conclusion of negotiations and the successful fulfilment of all condition precedent, will contribute positively to our enterprise for many years to come. The afore- mentioned acquisitions are intended to enhance the existing portfolio and are a continuation of the Company’s strategy of portfolio and geographic diversification.
RDC is pleased to announce a potential transaction which, on successful conclusion thereof, will result in the acquisition of all, or the majority, of the shares not already owned by RDC in Tower Property Fund Limited, and the delisting of Tower from the Johannesburg Stock Exchange. The deal has been supported by RDC shareholders at a recent extraordinary meeting, and a rights offer has been launched in order to fund the acquisition. Furthermore, the majority of Tower shareholders have irrevocably committed to supporting the offer. The potential transaction represents an attractive qualitative and quantitative opportunity for RDC to transition into the next phase of its growth strategy. The acquisition of the Tower portfolio
of some 42 properties situated in SA ( Cape Town/ Jhb/ KZN) and Europe ( Croatia) with a total asset valued at R4,2 billion will be yield and net asset value accretive to RDC shareholders. It will furthermore substantially increase the RDC market capitalisation, arguably establishing RDC as the leading property company in Botswana by portfolio size and geographical diversification. The strengthening of the company’s sectoral and geographic diversification is in line with current strategy and the operational synergies will enhance management efficiency and supplement its skillset.
GUARDIAN: It will appear that the group is having some interesting investments and strong returns in South Africa, a country which has experienced socio- economic challenges lately. Kindly take us through your investments in the country?
PARI: The Group owns 8 properties in South Africa with a total of 123 active tenants and a total GLA of 54,682 square meters.
Ever so often in our line of business, a project comes along that not only brings the very best of teams together, but becomes a beacon of optimism and inspiration, and presents a unique opportunity to refresh and to re- energize. The newly opened Radisson Red Johannesburg Rosebank Hotel has been that for all of us at RDC Properties, and it is a proud moment for us to be celebrating this milestone.
The Radisson RED brand and ethos were perfectly aligned to ours and we believed it would bring some diversity to our hospitality portfolio. RED embodied what we needed in a partner – fresh, innovative, cutting edge and bold, but even more than that; honest, authentic, consistent, drawing its inspiration from People. That is consistent with who we are, as RDC Properties.
Our vision for this property, strategically situated in the up- and- coming area of Johannesburg, Rosebank, is for it to be a unique home away from home for the bold and the savvy, to create employment opportunities for the community at large, and for it to contribute significantly to the distinctive culture of this part of the city. This is in line with our purpose of owning and managing strategic property assets that add value to the communities we serve.
At any given time, Radisson RED is home to an assortment of beautiful art pieces, that can be enjoyed by our guests from all walks of life. Through a collaboration with local artists, the property is a platform for the artists to showcase their work on rotation, and gives established as well as upcoming local artists an opportunity for their work to shine. We have The Capitalgro Portfolio which produced a total return of 4.3percent for the 2020 year which compares favourably against an All- property Index’s average return of minus 35.5percent for the same period. We also have recent acquisitions within Voortrekker Road and Caxton Street. Voortrekker Road is occupied by Capita, a multinational BPO company listed on the London Stock Exchange. Caxton St is occupied by Rhino Africa Safaris, a market leader in the travel agency industry. They fortunately remitted their rental under the review period, a testimony to their financial strength and reserves. Additionally, there is the 108 Albert Road, Woodstock, Cape Town property. The re- development of the 108 Albert Road property in Woodstock, Cape Town began post lockdown and is due to be completed in the 4th quarter of 2021. Earmarked to house biotech tenants in an Innovation Centre, the concept of the Cape Health Innovation Campus has gained traction and interest within the industry and it was recently featured in an international investment conference hosted by President Cyril Ramaphosa.
GUARDIAN: What are some of the major projects that the company has embarked upon and how important are they to your esteemed unit holders?
PARI: The potential acquisition by RDC of the Tower Property Fund Limited – this transformative and bold acquisition was initiated in Q4 2020 and as described above will substantially change RDC profile and reach. The opening of the iconic Radisson Red Rosebank, will strengthen the group positioning in the most prominent node in Johannesburg. The completion of 108 Albert Road, Woodstock, Cape Town will prove once again, the Group’s ability in creating developments that add value to the communities we serve – this will be the first biotechnology hub in RSA and could lead to many extensions as the sector grows.
GAURDIAN: How important are the group’s risk management processes and systems amid disasters such as the current pandemic?
PARI: I am pleased to report that the Company enjoys strong leadership at board level with relevant expertise ranging from sector and regional experience to company strategy and financial knowledge. The Board is able to play an oversight role in organizational changes that have an impact on operational and strategic decisions. The Board is also able to lead the value creation process by appreciating the inseparable nature of strategy, risk and opportunity, resulting in performance and sustainable investments.
RDC leadership is guided by very strong set of values, all decisions and actions are tested against the pledge to act with integrity, accountability, inclusiveness, respect and empathy, acting with a strong entrepreneurial spirit and nurturing competencies within the Group. The RDC purpose of owning and managing strategic property assets that add value to the communities we serve, drives our strategy. The quality of leadership demonstrated by our senior managers both in Botswana and in South Africa has reinforced my conviction that the integration of management teams with such extensive experience and professional and ethical qualities will provide us with a solid footing for the future.
GUARDIAN: How much is RDC intending to spend on new projects in the medium term?
PARI: The pipeline projects already being referred to above total R4,3bn in acquisitions. This is expected to deliver strong, sustainable cashflow for the Group, and will position RDC as a multinational property business of stature, as well as providing a solid platform for future growth. It is exciting times for the Company as we embrace the challenge of our times as well as the opportunity it brings.
As per the Cautionaries published, RDC Properties Limited is conducting negotiations, still in progress, for a cross- border acquisition in Zambia which, if successfully concluded, may have an impact on the value of the Company’s Linked Units. The acquisition is intended to enhance the existing portfolio and is a continuation of the Company’s strategy of portfolio and geographic diversification.
GUARDIAN: Explain to us the concept of business sustainability within RDC operations.
PARI: Our long- term objective remains focused on accumulating and developing a quality portfolio of strategic assets, with rental and capital growth and with a regional focus and diversified income stream. Our strategy has 4 main areas. Firstly, we plan to selectively acquire and develop a Southern African portfolio ( Botswana, Mozambique, Madagascar, and South Africa), augmented by hard currency assets in Europe and the USA. We are also seeking to diversify our portfolio by region, sector and currency. RDC is also balancing its portfolio growth between acquisition and development to strike a balance capital and income generation. At RDC, we also pride ourselves to be very conscious of the environment in which we operate, striving to be sustainable at all levels. The Green Star ratings of our Edge Building in Belleville ( Cape Town) and of the Red Radisson in Rosebank ( Johannesburg) are testimony to our values.
GUARDIAN: Take us through your corporate social investment initiatives in Botswana and other countries where you have operations?
PARI: Our people lined up together with the first responder Health Workers and worked tirelessly in setting up the first protocols for reducing the risk of spreading the pandemic while accommodating guests in isolation. It was a stunning effort which has culminated in zero cases within the guests and staff and praised by Government and the families of the returning citizens who felt their loved ones were protected and taken care of in a very safe manner. In total 2500 returning citizens and 450 Health workers were housed at the Lodge and Hotel enjoying our treats while undergoing the hardship of being isolated. Subsequently, we have yearly CSI initiatives: Ngwapa primary school reception class, Ngwapa primary school year- end prize giving, Sefhare Hospital, and Masa Carols by candle light.