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London-listed specialist property real estate investment trust (Reit) Capital & Regional, with market capitalisation of some £469.5-million, has announced its intention to list on the JSE’s Retail Reit board.
The company cited local investment appetite in its £1-billion portfolio of town-centre community shopping centres in the UK as central to its listing rationale.
“We’ve had a strong South African investor base since 2009, when we did a capital raising. Several South Africans took an about 25% stake in the business and have subsequently increased this to around 30%. We’ve found these to be very fruitful relationships.
“Last year’s capital raise added several other South Africans to the register and we think there’s an apetite for investment in the kind of portfolio we offer,” CFO Charles Staveley told Engineering News Online during a telephonic interview on Monday.
He added that it was more appealing for a South African investor to invest through the Johannesburg bourse than the LSE, given the country’s rigid exchange control restrictions, describing the South African property market as “sophisticated”.
“Local market players already feel comfortable investing funds in offshore prospects. The listing is really [a response] to investor demands in South Africa and it benefits our existing shareholders by allowing greater liquidity and a greater pool of investors.
“We’re hopeful that there’s good demand,” he remarked, adding that the company would list on the Johannesburg bourse on October 7.
Pursuant to the secondary listing and to ensure that sufficient scrip was available on the JSE, certain existing shareholders had agreed to migrate their shareholding in the company to the South African share register.
Staveley cautioned, however, that the market should not expect the Reit to use this listing as a launchpad to expand its portfolio of properties into South Africa or elsewhere on the continent.
“In the past, we’ve bought property [outside of the UK], for example, in Germany, but we want to focus on UK-based shopping centres. We have no experience in managing property in South Africa ourselves. . .whereas our existing South African investors have done so.
“We have no intention of investing in the South African market. This is a purely UK-dominant shopping centre [proposition],” he held.
Capital & Regional’s portfolio comprised six wholly owned shopping centres, collectively known as the group’s mall portfolio, and 20% and 50% joint venture interests in two further centres located in the towns of Redditch and Ipswich respectively.
Staveley asserted that the Reit offered exposure to a high-quality portfolio of strong assets, which were typically dominant in their immediate catchment, and an attractive dividend yield.
In addition, through its in-house property and asset management team, the company sought to generate significant income and net asset-value growth from asset management initiatives. This included an ongoing £65-million capital expenditure programme across the mall assets – expected to deliver income returns of at least 10%, driving income and capital growth for investors.
The foreign inward listing was also expected to improve the depth and spread of the shareholder base of the company, thereby improving liquidity and tradability of shares, providing investors with an additional market for share trading, enhancing the group’s public profile and providing it with an additional platform to raise equity funding to pursue future growth and investment opportunities.
Following its conversion to a UK Reit, Staveley explained that the company’s dividend policy was to distribute at least 90% of the operating profit garnered by its mall division, half of which would be paid as an interim dividend and the remainder as a final dividend.
On this basis, Capital & Regional declared an interim dividend of 1.5p for the six months ended June and expected a 2015 total dividend of at least 3p apiece.
The company outlined in a prelisting statement on Monday that shares listed on the JSE pursuant to the secondary listing would, however, be ex-dividend and not entitled to the 2015 interim dividend.
Expanding on future strategy, Staveley outlined that income growth and asset repositioning were likely to be the primary drivers of further net asset-value growth in future, driving the group’s strategy to grow its core portfolio of dominant community shopping centres and acquire or recycle capital into schemes where it could deliver attractive returns through repositioning.