A WHOLE LOT MORE IN STORE - JSE MAGAZINE

A WHOLE LOT MORE IN STORE

Investors can now gain access to a sought-after retail portfolio, focused on high- growth townships, following Safari Investment’s listing on the JSE

Safari Investments RSA Limited (Safari) became the latest REIT listing on the JSE, bringing to the market a retail portfolio focused on a premier portfolio of properties in areas including prominent nodes such as Mamelodi, Atteridgeville and Sebokeng.

The company listed on 7 April 2014 and was implemented together with a capital raising of R360 million through the private placement of new ordinary shares in Safari with new investors. The net proceeds will be used to settle all debt and free up existing facilities of approximately R600 million that will support the company’s future projects.

History
Founded in 2000 by private investors, Safari has created a platform for smaller investors to participate in quality retail property assets, which now forms part of the investment plan of its approximately 150 current shareholders.

The founding shareholders were critical to the success of the company, and brought an excellent combination of skills, including architects, engineers, property developers, accountants and medical doctors. In early 2013, Safari shareholders made a strategic decision to diversify its sources of funding and take advantage of the favourable legal and tax framework given to qualifying property entities in terms of REIT legislation.

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Focus
Safari’s primary investment focus is on quality income-producing properties through investments and developments in retail centres held directly or indirectly. The company’s development arm covers greenfield developments of land into retail centres and brownfield developments through refurbishments, upgrades or other improvements to existing retail buildings. All properties in the Safari portfolio were developed by Safari Developments.

Safari has a strong focus on previously disadvantaged communities and under-resourced areas where it establishes, develops and promotes quality assets that uplift and benefit communities by providing a desirable and high-end shopping experience closer to where they live. This significantly reduces com- muting time and cost associated with travelling to regional centres. The approach also targets the problem of limited tradability of retail properties in these areas, resulting in significantly improved opportunities for communities where its properties are located. Safari’s portfolio provides stable income and balance-sheet strength, to secure and fund high-growth opportunities within its developments. To minimise financial risk, Safari follows a staggered development approach.

Assets
Safari’s property portfolio comprises four well-established and strategically located retail properties independently valued at approximately R1.3 billion, with a total gross lettable area (GLA) of some 125 000 m2. The property portfolio is 100% retail based and focused on high quality retail centres in affluent townships across Gauteng, in Mamelodi, Atteridgeville and Sebokeng. Safari has spent some R40 million on revamps over the past two years. The fourth centre is located in Heidelberg and was recently added to the portfolio. Internationally, Safari is busy developing a new regional destination centre in Swakopmund, Namibia.

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Denlyn Centre
Denlyn Centre in Mamelodi, also known as the Mamelodi Crossing Shopping Centre, has been trading for 10 years. During this time it became the preferred shopping centre for the community. The centre’s dominant market position is underpinned by its prime location at the entrance to Mamelodi and is adjacent to the Denneboom train station and commuters’ hub of Mamelodi. The centre has a GLA of some 42 200 m2, which includes a recent 19 000 mexpansion. Safari recently added trading space for national tenants at the centre and greater focus was placed on the aesthetics and comfort facilities to ensure a longer dwelling time. The centre’s 102 shops are fully let and anchored by Shoprite. The national representation is at 91% and includes all the major banks, the Edcon Group, Foschini, Mr Price and the JD Group.

Atlyn Centre
Atlyn Centre, located in Atteridgeville, has been trading since 2006. The centre is located on one of the main routes into the township, providing a locational advantage. The recently expanded and upgraded centre is a premier destination for the residents of Atteridgeville as well as surrounding areas. The national tenants account for around 91%, including Shoprite, all the major banks, the Edcon Group, Foschini, Truworths, Clicks, Mr Price and a number of fast food outlets, most of which have five-year leases. The current vacancies rate is 0%.

Safari is developing a small centre of about 10 000 madjacent to Atlyn, and Pick n Pay will be the retail anchor. This should occur in the 2015/2016 financial year. The centre will be joined to the larger Atlyn centre to enhance the environmental appeal of the node.

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Thabong Shopping Centre
Thabong Shopping Centre is located in Sebokeng. This centre used to be a smaller community centre, which started trading in 2007 and currently serves as a regional centre. It is situated within the major business district and is adjacent to the main hospital.

Thabong is built on a 10 ha piece of land and has potential for expansion. An approximate 13 500 m2 GLA extention is expected to be occupied by new additional anchor tenants towards the first quarter of 2015, bringing the centre to a GLA of more than 41 100 m2. Thabong is anchored by Spar, with the Foschini Group, JD Group, Lewis Group and Pep Stores as other key national tenants. The proportion of national retailers of around 80% is slightly less than Safari’s larger centres. The extension is, however, being designed specifically to accommodate new national retailers that include Pick n Pay, Edgars and Woolworths.

The Victorian Centre
The Victorian Centre in Heidelberg was recently brought into the Safari portfolio. It is a well established community centre and has traded for 16 years. The centre is anchored by Pick n Pay, and includes retailers such as Mr Price, Totalsports and CNA. National retailers comprise approximately 95% of the tenants.

Prospects
Based on demand and commitments from national tenants, Safari currently has over R1 billion in projects under consideration, including an additional 45 000 m2 in retail space in Atteridgeville and Sebokeng and the greenfield development in Namibia.

Safari’s net asset value, revenue and operating profit have increased by more than 20% per annum in the preceding three years. The retail centres have zero vacancies and the weighted average lease expiry profile is greater than six years.

Trading densities are significantly higher and rentals per square metre lower than the industry norm. These key factors are supported by favourable turnover and rental escalation agreements that will positively impact the future value of the portfolio and distributions to shareholders.

420 Friesland Ave, Lynnwood, 0081,
Pretoria, SA
Tel: +27 (0)12 365 1881
Fax: +27 (0)12 365 3701
[email protected]
safari-investments.com