The Pivotal Fund reports positive interim results

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Pivotal Fund Limited CEO, Jackie van Niekerk says the results emphasise our strategic objective of generating sustainable total returns from our portfolio of investments through capital growth. Pivotal Fund Limited CEO, Jackie van Niekerk says the results emphasise our strategic objective of generating sustainable total returns from our portfolio of investments through capital growth.

The Pivotal Fund Limited on Monday reported positive results for the six months to August, with a 17.35% increase in net asset value per share to R23.00, excluding deferred tax (“NAVPS”) year-on-year.

The company currently has borrowings of R7.4 billion which represents gearing of 51.3% of the current property portfolio value.

At 31 August, the average cost of funding decreased to 9.04%, from 9. 6% at 29 February 2016. Interest rates have been fixed in respect of 81% of borrowings for an average period of 3.5 years.

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Pivotal’s Chief Executive, Jackie van Niekerk said the results emphasise our strategic objective of generating sustainable total returns from our portfolio of investments through capital growth, unlocking development margin on quality developments and growth from our offshore investments.
 
In August, a joint announcement was published on SENS, advising that Pivotal and Redefine Properties Limited have entered into an agreement in terms of which Redefine has offered to acquire all of Pivotal’s issued shares from Pivotal shareholders.

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Following the successful implementation of the transaction, Pivotal shareholders will hold 138.54 Redefine shares and 9.38 Echo Polsa Properties N.V. (“EPP”) shares for every 100 Pivotal shares held prior to the implementation thereof.

Stanlib’s head of listed property funds, Keillen Ndlovu said Pivotal achieved good growth in NAV year on year of 17.35%, however the six months growth of 0.88%, appears muted due current economic headwinds in South Africa and in Nigeria.

“Vacancies for office and retail remained low for the six month at 2.4% and 2.3% respectively and this is probably amongst the lowest in the sectors signalling the high quality of portfolio that Pivotal possess.

However Pivotal continues to trade at a discount to NAV driven by non-REIT status, declining SA pipeline in the weak economy and also the takeover price by Redefine based on the proposed swap ratio,” Ndlovu said.

Notwithstanding the delivery to date of above average growth in net asset value, Pivotal, as a development focused business, faces a number of external challenges with a stagnant domestic economy and an uncertain political landscape. Whilst Pivotal’s completed portfolio is expected to continue to perform satisfactorily, development activity is expected to remain constrained, affecting development returns in the short to medium-term. Consequently, net asset value growth will be limited as a result of the market impact whilst the current economic conditions remain difficult.

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As an alternative to the current development orientated structure of Pivotal, the proposed deal offers Pivotal shareholders the opportunity to convert to a REIT structure and receive Redefine and EPP shares, benefiting shareholders through bi-annual income distributions, exposure to foreign currency earnings, enhanced liquidity as well as continued exposure to Pivotal’s existing portfolio of A-grade properties.

“We believe that this transaction offers our investors exposure to one of the largest REITs in the JSE’s listed property index with an entrepreneurial management team focused on delivering sustained value to its stakeholders,” Niekerk said.

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“Looking ahead, we remain focused on managing the value extracted from our income producing portfolio through active asset management. Our A-grade development portfolio in sought after areas is performing well with the construction of Alice Lane Building 3 on track to be completed in Q2 2017 and phase 1 of the Loftus Park mixed-use development in Pretoria in Q4 2017,” concluded Van Niekerk.

Read more on:

Listed Property / REITs  |  Redefine Properties  |  Keillen Ndlovu  |  Pivotal Fund Ltd  |  Jackie van Niekerk  |  Echo Polska Properties (EPP)