Attacq banks on malls for capital growth

Property fund Attacq is confident it will achieve stronger capital growth when its major expansion projects including The Mall of Africa and the second phase of Waterfall City, kick into gear.

Attacq will open the R4.8bn shopping centre The Mall of Africa in the Waterfall City precinct next month, and is hoping it will perform well, provide upside to its share price, and support the group’s overall net asset value (NAV).

Attacq CEO Morne Wilken said: “Mall of Africa will act as a strong catalyst for demand for premises in the surrounding Waterfall City, which has a further 663,815m² of bulk available for development.”

“Waterfall City is seen as one of the most significant South African commercial developments of the decade.

“Once the mall is online it will help to generate strong returns out of the city, attracting people who work or live in Waterfall or nearby, boosting our overall net asset value and rewarding shareholders,” said Wilken.

But Evan Robins, listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said Attacq’s net asset value could come under pressure after The Mall of Africa is opened.

“The Mall of Africa opens at the end of April, and after this, there is less high-octane fuel to drive NAV growth and they will have to work harder to develop the Waterfall node in the face of a tough economy. The node, nevertheless, has great potential.”

Another analyst also warned that funds with large development pipelines were under pressure to find tenants.

Ian Anderson, chief investment officer at Grindrod Asset Management, said there were concerns about the prospects of companies with large development pipelines, given the sustained weak economic backdrop, and lack of demand for space from tenants.

Since listing on the JSE at R17 in October 2013, Attacq’s share price growth has been sluggish. But it rose 4.08% on Tuesday after it reported interim results showing it had achieved adjusted net asset value per share growth of 27.6% year-on-year in the six months to December.

The shares closed at R18.63.

Total assets grew 16.4% year-on-year to R27.1bn during the half-year, and net rental income increased 25.5% year-on-year to R531m. Attacq’s asset growth has been steady, having listed with R13.35bn worth of assets.

Waterfall’s development pipeline will be rolled out over the next 10-15 years. Attacq’s overall group development pipeline has an estimated capital cost of R4.5bn and an estimated value on completion of R6bn, meaning it would earn a development profit of R1.5bn.

Attacq also expanded aggressively offshore in the reporting period, as it looked to diversify against the weak rand and a slow growing economy. In June last year, when the asset value was R23.3bn, 18% of the assets were offshore in hard international currency. This had grown to 25% of the R27.1bn asset base by the end of December.

“We realise that we must diversify as a capital growth fund with a strong development pipeline, but also have investments in property assets offshore in this economic climate more than ever.

“This is why we have made investments in central and eastern Europe, including five malls which are operational in Serbia with two under construction in the country, and two malls in Cyprus. We also have exposure to Ikeja City Mall, a centre in Nigeria, through our investment in Atterbury Africa,” Wilken said.