Photo by: Duane Daws
Capital growth fund Attacq lifted its net asset value per share (NAVPS) by 5.1% to R15.52 apiece in the six months ended December 31, 2014, after raising R640-million in cash from shareholders by way of a vendor placement to fund the acquisition of the Attacq Waterfall Investment Company (AWIC) in December.
As part of Attacq's strategy to manage the entire Waterfall pipeline, its key asset, and to take full control of the strategic planning of Waterfall, including the roll-out of its infrastructure, Attacq became the sole shareholder of AWIC, in which Atterbury Property Holdings previously held an 18.75% effective shareholding through its wholly-owned Atterbury Waterfall City (AWC) subsidiary.
The total purchase consideration for Atterbury's stake was R655.1-million.
“The AWIC transaction enables Attacq to accelerate the unlocking of value in respect of the Waterfall development rights by working on an unrestricted basis with Atterbury and other developers.
“This strategy was formulated jointly with Atterbury, which is increasing its deployment of development capacity in other markets including central and eastern Europe, a direction which supports Attacq's diversification strategy,” the company outlined in a results statement on Monday.
As part of the AWIC transaction, Attacq secured a preemptive right in respect of all material developments to be undertaken by Atterbury, locally and internationally, thus ensuring Attacq's continued access to Atterbury's development pipeline.
In return for this right, the disposal by AWC of its shareholding in AWIC and the amendments to Atterbury's exclusive development rights, Attacq reduced its shareholding in Atterbury from 25% to 10% for R83-million.
Over the period under review, Attacq also acquired a 25% noncontrolling interest in Lynnaur, the owner of the Aurecon building in Pretoria, for R50-million.
“The acquisition of these noncontrolling interests took place at a premium to the accounting NAV of each entity, resulting in the acquisition of noncontrolling interest reserve increasing by R113.9-million,” the company outlined.
Meanwhile, as part of the AWIC restructure, AWIC disposed of a 20% undivided share in the Waterfall City’s Mall of Africa for R318-million to Atterbury, which, prior to the restructure, held an 18.75% indirect stake in the Mall of Africa through its shareholding in AWIC.
An “agterskot” amount was payable to Attacq on the additional 1.25% stake in the Mall of Africa acquired by Atterbury. The amount would be determined with reference to the market value of the mall one year after its opening.
During the period, Attacq and Hyprop Investments also restructured 50% of Manda Hill Mall, in Zambia, under AttAfrica Limited, with the remaining 50% held directly by Hyprop.
Attacq's 12.43% shareholding was disposed of in July for R110.4-million.
RENTAL PERFORMANCE
Looking to the fund's rental portfolio, net rental income, including straight-line lease income adjustments, increased by 78% compared with the prior year’s comparable six months.
“This large increase is driven by the roll-out of the Waterfall pipeline. [However], a like-for-like comparison of net rental income is of limited use due to the internalisation of the asset management function during the prior comparable reporting period as well as a result of changes in the property portfolio.
“Four properties were disposed of, one property was acquired and a further 14 properties under development were completed since December 2013,” said the group.
Overall portfolio vacancies, measured in terms of primary gross lettable area increased by 14 300 m2 in the period under review, while, on a like-for-like basis, vacancies decreased by 2 369 m2.
The balance of the increase, being 16 669 m2, related primarily to Newtown Junction, The Majestic, Lynnwood Bridge Phase III and Waterfall Lifestyle, all of which came into operation during the period.
“Subsequent to December 21, 4 877 m2 of the vacant space in these properties was taken up,” Attacq noted.
It added that a “significant” reduction in operating and other expenses was owing to a loss of R68.1-million included in the December 2013 period realised on the disposal of Attacq's investment in the merged Karoo I and Karoo II funds in return for a then 23.4% stake in property investment group MAS Real Estate.
Attacq would share in any realised upside on the Karoo assets directly by way of an “agterskot” mechanism and indirectly through its increased shareholding in MAS.
WATERFALL FOCUS
Attacq said the delivery of the Waterfall pipeline remained its primary focus.
During the year ended December 31, 14 buildings were completed and Waterfall's secured pipeline of projects planned or under way totalled 237 685 m2.
Developable bulk remaining for development totals 1.4-million square metres, being 78.3% of total available bulk.
Meanwhile, with its three operational malls and a further two malls under development, AttAfrica would provide Attacq with increasing exposure to the “African growth story”.
Moreover, through Attacq's investment in MAS, exposure was obtained to the developed property markets of the UK, Germany and Switzerland.
“MAS has been acquisitive in Germany and the UK in deploying the proceeds of its 2014 capital raise in income-producing properties at attractive returns,” the company outlined.