JSE-listed Pivotal Property Fund grew its net asset value a share by 25.3% to R18.40 in the financial year ended February 28, compared with a net asset value a share of R14.69 the year before, owing to an aggressive growth strategy.

Speaking to Engineering News Online in a telephone interview on Wednesday, CEO Jackie van Niekerk said the group was planning to build on its record R6.4-billion property acquisitions in the last year, which expanded its portfolio to 40 properties valued at R9.3-billion.

“We are most definitely looking to add. We have quite an extensive pipeline of construction going.” Pivotal currently boasted a R600-million current and future development pipeline, including the remaining 80% of its Alice Lane development, in Sandton.

Alice Lane Building 2, with a total floor area of 16 000 m^2, was completed in November 2014. The R511-million building was fully let to Sanlam/Santam on a 12-year lease.

Alice Lane Building 3 was currently under construction and set for completion in early 2017. It would have a total floor area of 35 000 m², of which 22 000 m² had been let to legal firm Bowman Gilfillan on a 12-year lease.

Pivotal, which listed on the local bourse in December, added income-producing properties valued at R2.9-billion, including the Goldfields Mall, in Welkom, and the Lakeview office park, in Constantia Kloof, to its portfolio in the year under review.

Further, Pivotal had entered into a memorandum of understanding to acquire a 37.1% shareholding in a development in Lagos, Nigeria, valued at $104-million, subject to certain conditions precedent being met.

During the year, Pivotal’s strategic development pipeline also increased to 445 000 m2 with an estimated value of R5.7-billion, on completion.

The acquisitions were funded through a combination of new shares issued prior to listing, additional borrowings, a R200-million rights offer and a R1-billion placement raised at listing on the JSE.

Meanwhile, the fund renegotiated debt facilities totaling over R3-billion, resulting in a reduction in the overall weighted average cost of debt to 9.4%. Its current loan-to-value was 47%, with 87% of borrowings fixed for an average period of five years.

Pivotal FD Aaron Suckerman added that the company’s financial results were driven by underlying growth in its income-producing properties of 6.5% on a like-for-like basis, as well as the start of its new developments.

OUTLOOK
Van Niekerk highlighted that A-grade and premium-grade portfolios “really showed resilience” over the last year.

“In the office market, we have seen a stagnation in terms of the trends changing and how [it] has slowed down in development growth. So definitely, there is a bit of a slower market and the [increase] in interest rates also suppresses the market outlook,” she said.

Asked whether the company would operate in the residential property sector, Van Niekerk noted that it was not entirely off the board, but that the company would not focus on this area in the medium term.

“However, some of our schemes would be mixed-use developments [and] we would [contract] a specialist in the field of residential properties to develop that for us. We like to stick to what we are good at,” she added.

Notwithstanding the challenging economic environment, Pivotal would strive to maintain above-average growth in net asset value. “We are pleased with the returns the portfolio has delivered over the last year. We acknowledge, however, that it is owed to the culmination of several key developments,” the fund said in a statement.

Pivotal would also remain focused on creating long-term value for its stakeholders through the successful completion of its existing developments and the ongoing roll-out of its development pipeline of secured development of 333 000 m² and potential future development pipeline of 112 000 m², which were situated in prime locations throughout South Africa.

“We feel that the results we have achieved over the last five years have shown our record of how we have locked tenants and also the development roll-out [of the company],” Van Niekerk added.

The fund also recorded stable vacancies, with vacancies in its industrial portfolio at 0%. Van Niekerk explained that this was owing to the portfolio being fairly small, with only three properties, and having long-term tenants. “Our office market [which had vacancies of 1.03%] has also been very stable with tenant retention,” she noted.