Resilient Reit — which offers investors exposure to 27 South African shopping centres and 11 malls across France, Spain and Portugal — is the latest among several JSE-listed property stocks that have delivered better than expected results for the December reporting period.
Last week, the real estate investment trust reported an 8.4% increase in dividend payouts for the year to December, ahead of its guidance of 5.4%-6.6%.
Resilient, which was co-founded in the early 2000s by industry stalwart Des de Beer, recently retired, was one of the early movers into underserved rural and township retail markets.
Its South African investment strategy has changed little since, as it continues to focus on owning the dominant retail offering in nonmetropolitan areas.
“We have stuck to our knitting,’’ says Resilient CEO Johann Kriek, an approach that has paid off judging by the strong operational metrics achieved in the company’s local portfolio last year.
The latter includes malls in several mining and agricultural towns such as Rustenburg, Klerksdorp, Mahikeng, Kathu, Tzaneng and Mbombela.
Comparable net property income was up 7.5% last year (excluding Mahikeng Mall, which was extended). The vacancy rate remained below 2%, while rentals increased by 6.1% (renewals and new leases signed).
Kriek sees little opportunity to build more malls that fit Resilient’s investment strategy, given South Africa’s high level of retail saturation.
But he believes there’s still plenty of value to be unlocked by sweating the company’s existing assets through redevelopments, extensions and retenanting initiatives.
He says buying behaviour continues to evolve, which means landlords need to adapt to shifting retail patterns.
While Resilient hasn’t changed its South African strategy, it has shifted its offshore investment focus
“We spend a lot of time engaging with retailers to help us analyse sales data and we continue to implement asset management initiatives to improve the tenant mix, flow, and access to our centres.’’
While Resilient hasn’t changed its South African strategy, it has shifted its offshore investment focus. In the past two to three years, the group has rotated out of Eastern Europe (via Nepi Rockcastle) into Western Europe. Last year, it also exited its loss-making Nigerian business.
The upshot is that Resilient’s offshore interests now include a portfolio of five directly owned shopping centres in France and Spain held in partnership with JSE-listed rand-hedge play Lighthouse Properties. It also has a sizeable 30.4% stake in Lighthouse (see graph).
Though the French malls have taken longer than expected to deliver on initial income growth predictions, mainly due to political instability and a weak economy, Kriek says the portfolio has turned the corner.
Net property income, driven by the opening of new tenants, increased 14.3% last year while sales and foot count were up 1.8% and 3.3% respectively.
Meanwhile, Lighthouse continues to make impressive strides to grow its Iberian footprint. Last year, the company embarked on an aggressive acquisition trail.
It sold its shares in UK-based mall owner Hammerson to help fund four regional malls in Spain and Portugal, which contributed to a 46% increase in distributable income for the year to December. However, dividends per share dropped 5% due to a dilutive R1bn capital raise in September.
Earlier this month, a fifth acquisition was added to the tally, Alcalá Magna, a major retail destination in Alcalá de Henares, a rapidly expanding satellite city on the outskirts of Madrid.
That means that Lighthouse’s Iberian asset value would have almost doubled since December 2023, from €642m to €1.24bn.
CEO Justin Muller says he hopes to close another deal in the second quarter, which will take Lighthouse’s Iberian exposure to 86% of total assets.
Muller notes that Spain emerged as the fastest-growing economy in the eurozone last year, with GDP expanding 3.2%. Portugal achieved GDP growth of 1.9%, slightly ahead of forecasts of 1.8%.
Like-for-like retail sales in the Iberian portfolio were up 9.1% over the same time, more than double the region’s inflation rate, while foot count grew 5%. The vacancy rate in both countries remained below 1%.
Though Muller expects continued robust sales and foot count growth in Lighthouse’s Iberian portfolio in 2025, he says the company will slow down on acquisitions as opportunities to buy quality retail assets at good prices diminish.
Resilient and Lighthouse expect similar dividend growth of 5.5% and 5% respectively for 2025. Both continue to pay out 100% of distributable profits to shareholders.
While Lighthouse’s share price has remained fairly flat over the past 12 months, Resilient is up 22%, placing it among the sector’s top performers. But how much upside is left?
Naeem Tilly, portfolio manager and head of research at Sesfikile Capital, says Resilient warrants a premium rating given that it has one of the highest-quality local portfolios in the listed property sector.
In addition, the executive team’s hands-on active management approach ensures that the portfolio remains dominant in its respective catchment areas.
He adds that Lighthouse’s growth, driven largely by accretive acquisitions in Spain, will continue to contribute positively to Resilient’s bottom line.
Still, Tilly believes Resilient’s current valuation, at a share price of about R58 and a distribution yield of 8.4%, is “stretched” relative to peers such as Hyprop Investments and Vukile Property Fund. Vukile is the only other JSE-listed property stock besides Resilient and Lighthouse with retail exposure in Iberia.
Garreth Elston, MD of equity research firm Golden Section Capital, has a similar view. He says Resilient appears fully priced at current levels.
However, he says, given decent earnings growth expectations of 5.5% for 2025, off an already high 2024 base, there is potential for further share price upside.
Elston adds that while Resilient’s Iberian exposure should continue to underpin growth, the French assets remain a cause for concern.
“Lighthouse and Resilient will have their work cut out to drive growth in France, and it will be important to get this right to deliver the results the market is expecting.”
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