Tokai sale may point to business as usual
The JSE’s real-estate sector has been plagued by fallout from the Covid-19 pandemic. Tenants, most notably some large retail enterprises, are looking for (hopefully only) short-term rental relief.
So it’s somewhat reassuring to see a transaction that suggests parts of the property sector are still going about their business in these tremulous times.
Retail property owner Fairvest earlier this week detailed proposals to sell its Tokai Junction retail node in Cape Town’s southern suburbs for R190m.
The company said the sale of Tokai Junction spoke to its focus on value extraction and conservative financial management. Fairvest’s loan to value (LTV) ratio sat at a comfortable 34.0% at the end of December.
In the prevailing circumstances, the proposed sale might be seen as a precautionary effort to deleverage the balance sheet in case the effects of Covid-19 linger longer.
But it seems Fairvest will make a decent return on Tokai Junction, having acquired the property for just R85m in 2012.
In fact, Fairvest, at the end of 2019, tagged a net asset value of R176m to the property, which generated solid audited taxed profit of R14m in the year to endJune 2019.
Interestingly, the buyer for Tokai Junction is FPG Property, a Cape Town-based real estate group that has enduring empowerment group Brimstone as a significant shareholder.
It looks like a good deal for both parties. Hopefully, final deliberations will proceed unhindered by the extraordinary events that are unfolding.
ANGLO AMERICAN
In the resources industry there is a term “licence to mine”, which goes beyond the regulatory approval and touches on one of the most sensitive aspects of the industry, securing community support for operations.
Mining by its nature is disruptive. Setting aside the environmental aspects of mining, sustainable community support is arguably the most fundamentally important aspect for any company to secure. In SA and other countries, communities feeling affronted, neglected or taken advantage of can bring operations to a standstill.
So when a company the size and importance of Anglo American outlines its efforts to contribute towards the fight against the spread of the Covid-19 pandemic, the realisation is that the announcement is more than just a bit of corporate feel-good fluff — it runs to the very core of the business.
Anglo spoke of the R2.4bn it was spending every week in SA on salaries, goods and services. It’s a difficult number to judge because its subsidiary, Kumba Iron Ore, is continuing exports, albeit at reduced levels, and its coal mines are in restricted operation.
Its platinum group metals (PGM) subsidiary, Anglo American Platinum, has limited output coming from its opencast Mogalakwena mine, but no refined metals because a key plant is under repair and will be back to work by May 25.
Other mines around the world remain in production, affected to varying degrees, and Anglo is using its infrastructure to supply protective gear, facilities and ventilators.
At this time of companies being good citizens, there is also a hard-nosed underlying business strategy with a clear-eyed view to a world after the virus, when community support will be more important than ever.