South32’s transfer of coal assets to Sereti expected at month end
SA CORPORATE Real Estate (SA Corp) distributed 17.93 cents per share for the year to December 31, 2020, less than half the 38.04c of the previous year after property valuations and net property income fell through the Covid-19 pandemic. Property valuations fell by -60.33c or 8 percent.
Chief executive Rory Mackey said in a presentation yesterday that the property sector was in a period of “immense change” and it would be naive to expect it to revert to what it was prior to the pandemic.
SA Corp’s portfolio of industrial, retail, commercial and residential buildings consists of 188 properties valued at R16 billion, a 50 percent joint venture in three Zambian properties of R879.6 million, an 80 percent joint venture in The Falls Lifestyle Estate worth R141.8m and listed investments of R112.8m.
Full year distributable income fell to R601.14m versus R959.97m in 2019. Total property revenue amounted to R2.1bn (R2.3bn in 2019), with the likefor-like portfolio, excluding disposals, developments and acquisitions in 2019 and 2020, amounting to R1.4bn versus R1.5bn in 2019.
Contracted and executed disposals came to R1.6bn. Loan to value was comfortable at 38.6 percent, versus 36.6 percent in 2019. Net asset value per share was 401c versus 477c in 2019.
Mackey said medium-term strategy was to focus the retail portfolio on
THE ENTRANCE to the Hayfields Mall. SA Corp chief executive Rory Mackey said yesterday that the property sector was in a period of “immense change” and it would be naive to expect it to revert to what it was prior to the pandemic. | Supplied
defensive convenience offerings, to consolidate the industrial portfolio, to divest from three remaining commercial properties, and to establish a quality residential portfolio.
The sale of inferior industrial properties had been contracted for R970.5m, thereby strengthening the portfolio with a greater focus on logistics – these properties have become sought-after investments because of their role in the fast-growing online economy.
More than R500m of lesser quality residential assets were identified for sale, of which R147.1m had already been contracted for sale. Other areas of focus included strengthening the management team, adopting conservative valuations, reducing gearing and maintaining a strong balance sheet, and focusing on collections.
In the final quarter of 2020, collections in the South African portfolio improved to 105 percent of billings after falling to 75 percent over the initial lockdown period. Total relief to tenants amounted to R87.4m. Arrears had increased to 10.6 percent of revenue from 4 percent in 2019.
Vacancies in the mainly innercity apartment portfolio increased to 15.4 percent from 8.2 percent in 2019, but so far in the new year, new leases were more than double notices given, although it might take time to substantially reduce vacancies, said Mackey.
No guidance was provided in the uncertain economic environment.
SA Corp’s share price closed 4.21 percent higher at R1.98 on the JSE yesterday.
SOUTH32, the Australia-headquartered mining company, expects to settle the sale of its South African coal assets to Seriti Resources by the end of the month. South32 told shareholders yesterday in a note that the transfer of its shareholding in South African Energy Coal (SAEC) to Seriti was now expected at the end of the March quarter.
“Work is progressing between South32, Seriti and Eskom to finalise arrangements that will underpin the sustainability of the SAECl business under the ownership of Seriti and allow for the satisfaction of the final material conditions to the transaction,” said South32.
South32 is scheduled to update the market at the conclusion of this work. In August 2019, Seriti announced it had entered into exclusive negotiations regarding the acquisition of the SAEC business.
SAEC is located in the Mpumalanga coalfields and includes four collieries – Khutala Colliery, Klipspruit Colliery, Middelburg Colliery and Wolvekrans Colliery – as well as three processing plants, producing energy coal for the domestic and export market.
At the time of the transaction, South32 chief executive Graham Kerr said the group had run an exhaustive and competitive process, and it believed Seriti, as an established operator, was ideally positioned to unlock the potential of SAEC’s domestic and export operations, including its significant untapped resource base.
“The sale of our interest in SAEC will enable the business to continue to operate safely and sustainably into the future for the benefit of its employees, customers and local communities, consistent with South Africa’s transformation agenda.
“For South32, this marks an important milestone as we continue to reshape our portfolio. Completion of this transaction will substantially reduce our capital intensity, strengthen our balance sheet and will improve the group’s operating margin,” Kerr said.
As part of the transaction, Seriti was expected to make an upfront payment of R100 million to acquire South32’s shares in SAEC.
The purchase price included a deferred consideration component, where South32 would receive 49 percent of the free cash flow generated by SAEC for a period commencing at the date of completion to March 2024, with payment capped at a maximum of R1.5 billion a year.
Commenting on the transaction at the time, Seriti chief executive Mike Teke said the SAEC acquisition would enable the group to offer further secured long-term coal supply solutions to Eskom as a demonstrable commitment to support South Africa’s energy needs. “The combination of our energy coal businesses will realise further operational and technical efficiencies, enabling us to better service our customers by offering competitive energy solutions.” Teke said.
South32’s shares closed 1.41 percent higher at R32.45 on the JSE yesterday.