SA Corporate Real Estate is a diversified owner of industrial, retail, commercial and residential buildings located primarily in SA’s large metropolitan areas, with a secondary node in Zambia.
The company said in its most recently released results that it had grown its dividends 4.4% in the six months to June. The company declared a dividend of 22.38c/share, from 21.44c/share for the corresponding period in 2016.
The six-month performance was affected by nonrecurring income, resulting mainly from a recovery of written-off bad debt and increased vacancies in the company’s residential portfolio.
SA Corporate was initially weighted towards retail and industrial nodes, but it has invested in residential real estate in recent years. Net property income increased 13.8% during the reporting period.
Its residential property pipeline is particularly exciting. Last year SA Corporate and developer Calgro M3 formed a joint initiative through Afhco, a wholly owned subsidiary of SA Corporate, and Hizoscape, a wholly owned subsidiary of Calgro M3, renamed Calgro Real Estate.
Calgro M3 MD Wikus Lategan expects Calgro Real Estate to be worth about R15bn in the next five years. He puts the housing shortfall in metropolitan areas at close to 2m units.
"Despite government’s commitment to closing the gap, spending on infrastructure for housing development is under pressure," he says. "This joint initiative will help government improve living conditions for ordinary South Africans."
SA Corporate CEO Rory Mackey says the Afhco brand has entrenched itself as a dominant, trusted residential rental brand of choice that provides quality and affordable accommodation in the Johannesburg inner city.
Mackey has done a good job, says Craig Smith, head of research at Anchor Stockbrokers. "He is close to his portfolio and a good deal maker. The residential portfolio has, however, come under a bit of strain over the past six months, but in the long term it’s still an attractive sector."
Kelly Hook, an investment analyst at Metope Investment Managers, says SA Corporate continues to deliver solid performances on its traditional portfolio. "The retail portfolio in particular performs well. The company continues to look for avenues to strengthen and diversify its income streams, including an investment into the self-storage sector."
As far as mid-cap property groups go, SA Corporate stands out as one that will grow carefully in SA and reward investors with healthy dividends. It owns 50% of two retail assets and an office park in Zambia.
For the company’s 2017 financial full year, distribution growth of about 6% is expected. This is at the lower end of guidance given at the beginning of the year.
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