Pivotal Fund is stepping up the pace of development

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New and carefully planned developments will play an increasingly important part in The Pivotal Fund's coming years, says the MD Jackie van Nieker. New and carefully planned developments will play an increasingly important part in The Pivotal Fund's coming years, says the MD Jackie van Nieker.

Pivotal Fund's strategy of growing its property portfolio through property development is already paying off so well, Chief Executive Jackie van Nieker said.

The fund, which recently announced its financial results ending 29 February 2016, has a development pipeline of 674,000m².

Chief Executive Jackie van Niekerk said: “Our focus remains on creating sustainable value for our investors by focusing on consistent growth through our extensive development pipeline, international investments and proactive management. Pivotal has a secure long-term development pipeline that was further bolstered with the acquisition of additional development land to the value of R494m,”

“The conversion of our secured pipeline to current development commenced at Loftus Park mixeduse development phase one, Kyalami Corner shopping centre phase one, Hill on Empire building ‘A’, as well as the redevelopment at Wonderboom Junction shopping centre,” she said.

During the reporting period, the company grew its net asset value per share 23.19% to R22.80, ahead of market expectations.

Closing 5.71% lower at R16.50, the company’s share price is trading at a significant discount to net asset value and some fund managers have deemed it to be a buy, saying it offers value.

“The growth in our NAV per share was attributable to the revaluation of the income-producing properties, fair value adjustments on current developments and financial instruments, an increase in net working capital, and gains on foreign currency translation,” said financial director Aaron Suckerman at the release of financial results for the year to February.

Pivotal’s market capitalisation was about R5bn when it listed and is now nearly R6bn. Its total assets increased 33%, growing to R13.8bn over the financial year.

Pivotal also attained R1.2bn worth of international assets, having had no offshore exposure previously, as it looked to diversify against risk. Post financial year-end, the fund has exposure to various African countries, and eastern Europe’s fastest growing economy, Poland.

As at February 29 this year, Pivotal’s combined property portfolio was valued at R11.3bn and R1.2bn for directly and indirectly held assets respectively. Pivotal has also concluded the purchase of its first asset held directly in the rest of Africa, being a 37.1% share in the Oando Wings Office development being built in Nigeria.

The fund also entered into an agreement with Mara Delta Property Holdings Limited, previously Delta Africa to incorporate its rest of Africa investments into Mara Delta and to invest up to R370 million in the company.

Pivotal is 45.8% geared, with R5.8bn worth of borrowings.

Suckerman said the company was well-insulated against economic risk. “We believe we are wellpositioned to weather the current economic and political uncertainty by derisking our current development pipeline.”

This was done “through preletting activity, development contracts which are fixed so we are not exposed to currency fluctuations, and cash flows that are underpinned by quality incomeproducing assets which account for 74% of our property portfolio.”

Listed property analyst Lawrence Koikoi said Pivotal was an attractive NAV play.

“Pivotal delivered good sets of results, with strong NAV growth above guidance. It is encouraging to see that the company is diversifying into offshore, given slow growth in SA, while also maintaining a quality portfolio in SA.

“Their South African office and retail vacancies are (among) the lowest in the sector at 2.2% and 2.0%, respectively. There seems to be value in the share price currently, if such good performance is maintained,” he said.

Post year end Pivotal entered into a share sale agreement and a co-investors agreement with Redefine Properties Limited which will result in Pivotal acquiring approximately 6.06% of Echo Prime Properties B.V. (“Echo”) for a consideration of €31.07 million.

Echo owns a €1.18 billion portfolio of prime shopping centres and offices across Poland. The effective date of the transaction will be 31 May 2016.


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