SPREADING ITS WINGS

Pivotal Property Fund takes its first steps to diversify its portfolio globally

PIVOTAL Property Fund, the capital growth and property development company that listed its R7.8 billion property portfolio on the JSE in December, has taken the first steps to diversify its portfolio by investing in selected international markets.

Jackie van Niekerk, the chief executive of Pivotal, said yesterday that the fund planned to acquire a 37.1 percent shareholding in an office development in Lagos, Nigeria valued at $104 million (R1bn).

Van Niekerk said the investment was in the 27 000 square metre Victoria Island office development.

The other shareholders were RMB Westport Real Estate Development Fund and the oil and gas company Oando, a tenant, she said.

Van Niekerk said Pivotal in the medium term would not seek to increase its shareholding, but rather seek other partnerships.

She said the focus of the offshore diversification of Pivotal’s portfolio would predominantly be in east and west Africa, but the fund was also seeking opportunities outside the African continent.

However, Van Niekerk said it was too early to identify specific countries outside South Africa where Pivotal might acquire assets and “for now, the diversification is into Africa”.

Target

Van Niekerk said the target currently was for Pivotal to ultimately have 15 percent of its gross assets by value in Africa, but stressed that this was dependent on the available opportunities and the return on these opportunities.

Pivotal has a strategic partnership with property development and management group Abland and other developers.

Aaron Suckerman, the financial director at Pivotal, said the focus would be on greenfields development because it allowed Pivotal to be in control of its own destiny, rather than chasing yieldenhancing acquisitions with other property funds. It also enabled the property fund to create assets at cost.

Suckerman said this also gave Pivotal the ability to earn a development margin on the total cost of completion, which added significantly to the growth. He said Pivotal would like to increase the percentage of industrial property in its portfolio to about 20 percent and was comfortable with 40 percent in retail and offices.

Pivotal grew its new asset value a share 25.3 percent to R18.40 in the year to February from R14.69 in the previous year.

Van Niekerk said Pivotal was very pleased with the growth the portfolio had delivered over the past year.

She said the results were driven by the culmination of several key developments and acquisition activity following Pivotal’s successful listing, during which it had raised R1bn by way of a private placement.

During the year under review, the fund acquired properties to the value of R6.4bn, including incomeproducing properties valued at R2.9bn such as the Goldfields Mall in Welkom and Lakeview Office Park in Constantia Kloof, and a R600m current and future development pipeline that includes the remaining 80 percent of the Alice Lane development in Sandton.

These acquisitions increased Pivotal’s portfolio of A-grade retail and commercial offices to 40 assets, which were independently valued at R9.3bn at year end.

Van Niekerk added that Pivotal’s strategic development pipeline increased to 445 000m with an estimated value of R5.7bn on completion.

“As a development fund we strive to maintain an above average compounded growth rate. Our portfolio consists of premium assets, which are continuously maintained and enhanced, resulting in exceptionally low vacancies and long lease terms.”

Shares in Pivotal Property Fund rose 0.2 percent to R24.45.