Real estate investment trust (Reit) Attacq experienced a decline in distributable earnings during the last six months of the financial year ended June 30, mainly as a result of tenant rent relief measures to help tenants through the worst of the Covid-19 lockdown.
The company was also hit by a lower collection rate from the South African portfolio as a result of the Covid-19 lockdown restrictions.
Attacq CEO Melt Hamman explains that a high level of tenant relief measures consisted of discounts and deferrals, with Attacq’s core distributable earnings declining by 10.5%, to 73.1c a share.
As such, the company has taken the decision not to declare a final dividend to preserve liquidity.
“A number of our peers are postponing dividends but we have made the decision not to declare,” he says.
Attacq in March, however, declared and paid an interim dividend of 45c a share, representing a 90.4% payout ratio.
In this regard, Hamman points out that, going forward, the concept of payout ratios for the next couple of years will “definitely be a key point for discussion”, just as it has been for the past 18 to 24 months.
Despite this decision, the company has satisfied all Reit regulatory requirements, including the minimum 75% payout ratio.
However, Attacq also reports that the negative impact was countered by increased net operating income growth from the newly completed buildings in Waterfall, a 13.7% increase in the dividends received from the MAS investment, as well as cash interest received from the rest of Africa investments.
He says the past several months have been challenging for the Reit industry, as well as the overall economy. However, Hamman also notes that Attacq started the 2020 financial year with great momentum, resulting in a strong financial performance in the interim period ended December 31, 2019.
“We believe that our quality South African portfolio and our business model is grounded on the right foundations; however, we have to optimise our capital structure by improving our gearing ratio.”
During the period, Attacq’s diversified South African portfolio, with a 50:50 split between retail and non-retail properties, had a satisfactory performance against the subdued economic backdrop.
Net profit from property operations, excluding the International Financial Reporting Standards (IFRS) adjustment for straight-line leasing and the net proceeds from the sale of sectional title units, increased by 10.8% to R1.4-billion.
The company reports that this increase was assisted by the completion of eight new buildings in the Waterfall precinct.
Rental income of R2.2-billion was generated for the year, representing an increase of 7.4% after taking into account rental discounts, bad debt that was written off and expected credit losses, but offset by additional rental income from buildings completed over the past 24 months.
Attacq’s portfolio occupancy rate remained stable at 93.6%, compared with 93.8% at June 30, 2019.
The vacancies mainly relate to 2 Eglin Road, Sunninghill, which has subsequently been sold, Brooklyn Bridge Office Park and a newly completed speculative building in the Ingress development. Post year-end, an additional space of 4 667 m2 was filled.
In terms of assisting tenants during the Covid-19 pandemic, Attacq COO Jackie van Niekerk explains that Attacq developed and implemented its vision for client engagement, with its process incorporating behaviours such as Attacq listening, collaborating, offering a multichannel approach and innovating.
“This client-centric approach stood Attacq in good stead as the lockdown period affected clients’ businesses. This shift in mindset has ensured greater collaboration and partnership with our clients and instilled a culture of proactiveness and innovation across colleagues and client portfolios.”
Meanwhile, accounting for the current levels of uncertainty relating to the economy and its impact on the property sector, Attacq’s board reports that it does not deem it appropriate to provide guidance for the 2021 financial year.
“Attacq remains focused on delivering sustainable income and capital growth by investing in real estate and developments in South Africa. Through the support of our exceptional team and the commitment to offering our clients remarkable experiences, I believe we can set Attacq apart from our peers and continue to drive long-term sustainability within the property sector,” concludes Hamman.