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Resilient considering the rationale of being listed

By Thabang Mokopanele

Resilient Reit has called into question the merits of being listed on the JSE, saying it was considering going private as it was “no longer a given” that being on the local bourse gives firms, in particular property firms, greater access to capital.

“With its advisers, Resilient is evaluating its listing on the JSE and all alternatives with the objective of maintaining high standards of governance and reporting, but with greater efficiency and focus on investor interests, with a view to reducing volatility for investors,” it said on Friday in its interim results to end-June.

“Resilient now intends to engage with its shareholders and to take their views into account in its evaluations.”

The real estate investment trust, which owns 27 retail centres in SA, is the latest company to consider leaving the local bourse, heightening a growing trend of firms delisting. The JSE has about 314 listed firms now, down from more than 800 in the 1990s.

A shrivelled stock market has wider implications for savers because it means a smaller universe from which pension funds can choose to prudently guard against risk. Pension funds are compelled by law to invest a big portion of their clients’ money in domestic stocks.

Liliane Barnard, CEO of Metope Investment Managers, said Resilient joins a host of companies across the world juggling wild gyrations in equity markets with what is best for shareholders. “Issuers globally are shying away from listed markets due to the volatility seen in the recent past, and the effect this has on returns to shareholders, which impedes companies’ ability to raise fresh capital,” said Barnard.

Volatility is good for exchange operators such as the JSE, which makes more money the more times investors trade on its systems.

Barnard said until there was a move away from the reliance on volatility for profitability and the secondary importance placed on adequately protecting investors and issuers, listed companies will seek alternative service providers or capital markets. She said that as long as service providers did not recognise there was a conflict of interest between themselves and their clients, and that in the long term this behaviour contributed to slowing economic growth, affecting jobs, wealth and the tax base, “we will see these forces continue to play out in various markets”.

Resilient’s decision to review its listing comes just over three years after the capital markets watchdog, the Financial Sector Conduct Authority, cleared it of allegations of publishing misleading financial statements. The allegations sent the property sector into turmoil in 2017. Barnard said the consequence of the JSE not providing timeous clarification on the unfounded allegations about Resilient had a profound effect, not only on the company, but also on the listed property sector.

If the decision is made to take the company private, it would rob investors of a R21bn-plus company with a strategy to invest in dominant retail centres with a minimum of three anchor tenants and let predominantly to national retailers.

The landlord focuses on regions with strong economic fundamentals, either with mineral resources or export-quality agricultural products, while also investing indirectly offshore.

Its SA portfolio has a total gross lettable area of 1.2-million square metres and includes Irene Village Mall, Jabulani Mall and The Grove in Gauteng.

The company upped its dividend 3.5% year on year to 234.05c a share, amounting to a payout of R878.9m.

The effect of the Covid-19 pandemic has subsided and the group cut discounts to leisure-focused tenants.

New rental agreements were agreed with SA’s largest cinema chain, Ster-Kinekor, and similar ones were proposed to its competitor, NuMetro. “Following the release of a number of blockbuster films, the performance of the cinemas has been encouraging,” Resilient said.

The group said in March that it was seeing a greater percentage of spending going towards groceries in its shopping centres, amid waning interest in department stores.

Over the next three years, the company would spend R1.1bn on select mall extensions.